EXHIBIT 4.3
REGISTRATION RIGHTS AGREEMENT
(SERIES A CONVERTIBLE PREFERRED STOCK) (SERIES B CONVERTIBLE PREFERRED STOCK)
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of September
16, 2002, by and among Zix Corporation, a Texas corporation, with its
headquarters located at 0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000 XX00, Xxxxxx,
Xxxxx 00000 (the "COMPANY"), and each of the undersigned (the "INVESTORS").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among
the parties hereto of even date herewith (the "SECURITIES PURCHASE AGREEMENT"),
the Company has agreed, upon the terms and subject to the conditions contained
therein, to issue and sell to the Investors (i) shares of its Series A
Convertible Preferred Stock and its Series B Convertible Preferred Stock (the
"PREFERRED SHARES"), that are convertible into shares of the Company's common
stock, par value $0.01 per share (the "COMMON STOCK"), upon the terms and
subject to the limitations and conditions set forth in the Statements of
Designations filed with the Texas Secretary of State with respect to the
Preferred Shares; and (ii) warrants (the "WARRANTS") to acquire seven hundred
nine thousand five hundred twenty-eight (709,528) shares of Common Stock, upon
the terms and conditions and subject to the limitations and conditions set forth
in the Warrants, dated of even date herewith, issued pursuant to the Securities
Purchase Agreement; and
B. To induce the Investors to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 ACT"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Investors hereby agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. As used in this Agreement, the following terms shall have
the following meanings:
(a) "INVESTORS" means the Investors and any transferee or
assignee who agrees to become bound by the provisions of this Agreement
in accordance with Section 9 hereof.
(b) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a Registration Statement
or Statements in compliance with the 1933 Act
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and pursuant to Rule 415 under the 1933 Act or any successor rule
providing for offering securities on a continuous basis ("RULE 415"),
and the declaration or ordering of effectiveness of such Registration
Statement by the United States Securities and Exchange Commission (the
"SEC").
(c) "REGISTRABLE SECURITIES" means (A) the Conversion Common
(as defined in the Securities Purchase Agreement) and (B) any shares of
capital stock issued or issuable as a dividend on or in exchange for or
otherwise with respect to the Conversion Common.
(d) "REGISTRATION STATEMENT(s)" means a registration
statement(s) of the Company under the 1933 Act.
Section 1.2. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Securities Purchase
Agreement.
ARTICLE II.
REGISTRATION
Section 2.1. MANDATORY REGISTRATION. The Company shall prepare, and, on
or prior to the date (the "FILING DATE") that is thirty (30) calendar days after
the Closing, file with the SEC a Registration Statement on Form S-3 (or, if Form
S-3 is not then available, on such form of Registration Statement as is then
available to effect a registration of the Registrable Securities, subject to the
consent of the holders of a majority-in-interest of the Registrable Securities,
which consent will not be unreasonably withheld, conditioned or delayed)
covering the resale of the Registrable Securities, which Registration Statement,
to the extent allowable under the 1933 Act and the rules and regulations
promulgated thereunder (including Rule 416), shall state that such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon conversion of or otherwise pursuant to the
Preferred Shares and exercise of or otherwise pursuant to the Warrants (a) to
prevent dilution resulting from stock splits, stock dividends or similar
transactions or (b) by reason of changes in the exercise price of the Warrants
in accordance with the terms thereof. The number of shares of Common Stock
initially included in such Registration Statement shall be two million seven
hundred thirty-two thousand two hundred ninety-three (2,732,293), representing
the aggregate number of Conversion Common Shares initially issuable upon
conversion of the Preferred Shares and upon exercise of the Warrants. The
Registration Statement shall be provided to and subject to the approval of
(which approval will not be unreasonably withheld, conditioned or delayed) the
Investors and their counsel prior to its filing or other submission. The Company
shall use all commercially reasonable efforts to obtain effectiveness of the
Registration Statement as soon as practicable, but in any event not later than
the 105th day after the Closing (the "REGISTRATION DEADLINE").
Section 2.2. UNDERWRITTEN OFFERING. If any offering pursuant to a
Registration Statement pursuant to Section 2.1 hereof involves an underwritten
offering, the Investors who hold a majority
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in interest of the Registrable Securities subject to such underwritten offering
shall have the right to select one legal counsel and the right to select the
investment banker or bankers and manager or managers to administer the offering
(subject to the approval of the Company, which approval shall not be
unreasonably withheld, conditioned or delayed). In the event that any Investors
elect not to participate in such underwritten offering, the Registration
Statement covering all of the Registrable Securities shall contain appropriate
plans of distribution reasonably satisfactory to the Investors participating in
such underwritten offering and the Investors electing not to participate in such
underwritten offering (including, without limitation, the ability of
non-participating Investors to sell from time to time at any time during the
effectiveness of such Registration Statement).
Section 2.3. PIGGY-BACK REGISTRATIONS. Subject to the last sentence of
this Section 2.3, if at any time prior to the expiration of the Registration
Period (as defined in Section 3.1 below), the Company shall determine to file
with the SEC a Registration Statement relating to an offering for its own
account or the account of others under the 1933 Act of any of its equity
securities (other than (a) pursuant to that certain Registration Rights
Agreement, dated the date hereof, by and among the Company and certain
purchasers of Convertible Notes of the Company and (b) offerings on Form S-4 or
Form S-8 or their then equivalents relating to equity securities to be issued
solely in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans), the Company shall send to each Investor who is entitled to registration
rights under this Section 2.3 written notice of such determination and, if
within fifteen (15) calendar days after the effective date of such notice, such
Investor shall so request in writing, the Company shall include in such
Registration Statement all or any part of the Registrable Securities such
Investor requests to be registered, except that if, in connection with any
underwritten public offering for the account of the Company the managing
underwriter(s) thereof shall impose a limitation on the number of shares of
Common Stock which may be included in the Registration Statement because, in
such underwriter(s)' judgment, marketing or other factors dictate such
limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Registrable Securities with respect to which such Investor has
requested inclusion hereunder as the underwriter shall permit. Any exclusion of
Registrable Securities shall be made pro rata among the Investors seeking to
include Registrable Securities in proportion to the number of Registrable
Securities sought to be included by such Investors; provided, however, that the
Company shall not exclude any Registrable Securities unless the Company has
first excluded all outstanding securities, the holders of which are not entitled
by contract to inclusion of such securities in such Registration Statement or
are not entitled to pro rata inclusion with the Registrable Securities; and
provided, further, however, that, after giving effect to the immediately
preceding proviso, any exclusion of Registrable Securities shall be made pro
rata with holders of other securities having the contractual right to include
such securities in the Registration Statement, other than the holders of
securities that are making the demand for registration with respect to which the
piggy-back registration rights are being exercised. No right to registration of
Registrable Securities under this Section 2.3 shall be construed to limit any
registration required under Section 2.1 hereof. If an offering in connection
with which an Investor is entitled to registration under this Section 2.3 is an
underwritten offering, then each Investor whose Registrable Securities are
included in such Registration Statement shall, unless otherwise agreed by
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the Company, offer and sell such Registrable Securities in an underwritten
offering using the same underwriter or underwriters and, subject to the
provisions of this Agreement, on the same terms and conditions as other shares
of Common Stock included in such underwritten offering. Notwithstanding anything
to the contrary set forth herein, the registration rights of the Investors
pursuant to this Section 2.3 shall only be available in the event the Company
fails to timely file, obtain effectiveness or maintain effectiveness of any
Registration Statement to be filed pursuant to Section 2.1 in accordance with
the terms of this Agreement.
Section 2.4. SHORT FORM REGISTRATION RIGHTS. In addition to the rights
contained in Section 2.1 and Section 2.3, at any time following the nine (9)
month anniversary of this Agreement, Xxxxxx X. Xxxxxxx ("XXXXXXX") will have the
right to request registration of up to one million three hundred thirty-three
thousand three hundred and thirty-three (1,333,333) shares of Common Stock and
A.R. Xxxxxxx, Jr. ("XXXXXXX" and, together with Xxxxxxx, the "ADDITIONAL
REGISTRANTS") will have the right to request registration of up to six hundred
sixty-six thousand six hundred and sixty-seven (666,667) shares of Common Stock
(such two million (2,000,000) shares of Common Stock, collectively, the
"ADDITIONAL REGISTRABLE SECURITIES") on Form S-3 (or, if Form S-3 is not then
available, on such form of Registration Statement as is then available to effect
a registration of the Additional Registrable Securities, subject to the consent
of the Additional Registrants, which consent will not be unreasonably withheld,
conditioned or delayed) covering the resale of the Additional Registrable
Securities (an "ADDITIONAL REGISTRATION STATEMENT"). The Company will not be
required to effect more than one (1) Additional Registration Statement. A
request for an Additional Registration Statement may be made by either
Additional Registrant and must be in a written notice delivered to the Company
and the other Additional Registrant, return receipt requested, and must state
the number of shares of Additional Registrable Securities that such Additional
Registrant proposes to dispose of and the intended method of distribution of
such shares. The other Additional Registrant will promptly, but in no event more
than fifteen (15) business days following his actual receipt of such request for
an Additional Registration Statement, give written notice to the Company and the
Additional Registrant as to whether such Additional Registrant intends to
participate in such Additional Registration Statement and, if so, setting forth
the number of Additional Registrable Securities such Additional Registrant
proposes to dispose of and the intended method of distribution of such shares.
The Additional Registration Statement shall be prepared by the Company promptly
following the first Additional Registrant's request and provided to and subject
to the approval, which approval will not be unreasonably withheld, conditioned
or delayed, of the Additional Registrants and their respective counsel prior to
its filing or other submission. The Company shall use all commercially
reasonable efforts to obtain effectiveness of the Additional Registration
Statement as soon as practicable and keep the Additional Registration Statement
effective pursuant to Rule 415 at all times until such date as is the earlier of
(a) the date on which all of the Additional Registrable Securities have been
sold and (b) the date on which the Additional Registrable Securities (in the
opinion of Company's counsel) may be immediately sold to the public without
registration or restriction (including without limitation as to volume by each
holder thereof) under the 1933 Act (the "ADDITIONAL REGISTRATION PERIOD"). The
Additional Registration Statement (including any amendments or supplements
thereto and prospectuses contained therein) shall not contain any untrue
statement of a material fact or omit to state a material
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fact required to be stated therein, or necessary to make the statements therein
not misleading. The Additional Registrable Securities will be treated as
"Registrable Securities," and the Additional Registration Statement will be
treated as a "Registration Statement," for all purposes of this Agreement,
except pursuant to Section 2.1, Section 2.2, Section 2.3, Section 3.1, Article
IX, Section 11.13 and any other section to the extent that it applies to an
underwritten offering, which articles and sections will not be applicable to any
registration pursuant to this Section 2.4.
Section 2.5. ELIGIBILITY FOR FORM S-3. The Company represents and
warrants that, to the best of its knowledge, it meets the registrant eligibility
and transaction requirements for the use of Form S-3 for registration of the
sale by the Investors and the Company shall file all reports required to be
filed by the Company with the SEC in a timely manner so as to maintain such
eligibility for the use of Form S-3.
ARTICLE III.
OBLIGATIONS OF THE COMPANY
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
Section 3.1. The Company shall prepare promptly, and file with the SEC
as soon as practicable after the Closing (but in no event later than the Filing
Date), a Registration Statement with respect to the number of Registrable
Securities provided in Section 2.1, and thereafter use its commercially
reasonable efforts to cause such Registration Statement relating to Registrable
Securities to become effective as soon as possible after such filing, (but in no
event later than the Registration Deadline), and keep the Registration Statement
effective pursuant to Rule 415 at all times until such date as is the earlier of
(a) the date on which all of the Registrable Securities have been sold and (b)
the date on which the Registrable Securities (in the opinion of Company's
counsel) may be immediately sold to the public without registration or
restriction (including without limitation as to volume by each holder thereof)
under the 1933 Act (together with the Additional Registration Period, the
"REGISTRATION PERIOD"), which Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein not misleading.
Section 3.2. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statements and the prospectus used in connection with the
Registration Statements as may be necessary to keep the Registration Statements
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by the Registration
Statements.
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Section 3.3. The Company shall furnish to each Investor whose
Registrable Securities are included in a Registration Statement and its legal
counsel (a) promptly after the same is prepared and publicly distributed, filed
with the SEC, or received by the Company, one copy of each Registration
Statement and any amendment thereto, each preliminary prospectus and prospectus
and each amendment or supplement thereto, and (b) such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor. The Company will immediately notify each Investor of the
effectiveness of each Registration Statement or any post-effective amendment.
The Company will promptly respond to any and all comments received from the SEC,
with a view towards causing each Registration Statement or any amendment thereto
to be declared effective by the SEC as soon as practicable and shall file an
acceleration request as soon as practicable following the resolution or
clearance of all SEC comments or, if applicable, following notification by the
SEC that any such Registration Statement or any amendment thereto will not be
subject to review.
Section 3.4. The Company shall use reasonable efforts to (a) register
and qualify the Registrable Securities covered by the Registration Statements
under such other securities or "BLUE SKY" laws of such jurisdictions in the
United States as each Investor may reasonably request, if an exemption from such
securities or blue sky laws is not otherwise available, (b) prepare and file in
those jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (c) take such
other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (d)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (i) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3.4, (ii) subject itself
to general taxation in any such jurisdiction, (iii) file a general consent to
service of process in any such jurisdiction, or (iv) make any change in its
charter or bylaws, which in each case the Board of Directors of the Company
determines to be contrary to the best interests of the Company and its
shareholders.
Section 3.5. In the event Investors who hold a majority-in-interest of
the Registrable Securities being offered in the offering select underwriters for
the offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.
Section 3.6. As promptly as practicable after becoming aware of such
event, the Company shall notify each Investor of the happening of any event, of
which the Company has knowledge, as a result of which the prospectus included in
any Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its
commercially reasonable efforts promptly to prepare a supplement or amendment to
any Registration Statement to correct such
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untrue statement or omission, and deliver such number of copies of such
supplement or amendment to each Investor as such Investor may reasonably
request; provided that, for not more than fifteen (15) consecutive trading days
(or a total of not more than thirty (30) trading days in any twelve (12) month
period), the Company may delay the disclosure of material non-public information
concerning the Company (as well as prospectus or Registration Statement
updating) the disclosure of which at the time is not, in the good faith opinion
of the Company, in the best interests of the Company (an "ALLOWED DELAY");
provided, further, that the Company shall promptly (a) notify the Investors in
writing of the existence of (but in no event, without the prior written consent
of an Investor, shall the Company disclose to such Investor any of the facts or
circumstances regarding) material non-public information giving rise to an
Allowed Delay and (b) advise the Investors in writing to cease all sales under
such Registration Statement until the end of the Allowed Delay. Upon expiration
of the Allowed Delay, the Company shall again be bound by the first sentence of
this Section 3.6 with respect to the information giving rise thereto.
Section 3.7. The Company shall use its commercially reasonable efforts
to prevent the issuance of any stop order or other suspension of effectiveness
of any Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest possible moment and to notify each
Investor who holds Registrable Securities being sold (or, in the event of an
underwritten offering, the managing underwriters) of the issuance of such order
and the resolution thereof.
Section 3.8. The Company shall permit a single firm of counsel
designated by the holders of a majority-in-interest of the Registrable
Securities to review such Registration Statement, and all amendments and
supplements thereto (as well as all requests for acceleration or effectiveness
thereof (collectively, the "REGISTRATION DOCUMENTS")) at least four (4) business
days prior to their filing with the SEC, and not file (or send) any Registration
Documents in a form to which such counsel reasonably objects and will not
request acceleration of such Registration Statement without prior notice to such
counsel. The sections of such Registration Statement covering information with
respect to the Investors, the Investor's beneficial ownership of securities of
the Company or the Investors intended method of disposition of Registrable
Securities shall conform to the information provided to the Company by each of
the Investors.
Section 3.9. The Company shall (a) cause all the Registrable Securities
covered by the Registration Statement to be listed on each national securities
exchange on which securities of the same class or series issued by the Company
are then listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange, or (b) to the extent the securities
of the same class or series are not then listed or permitted to be listed on a
national securities exchange, secure the designation and quotation of all the
Registrable Securities covered by the Registration Statement on Nasdaq or, if
not eligible for Nasdaq on the Nasdaq SmallCap.
Section 3.10. The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
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Section 3.11. At the request of the holders of a majority-in-interest
of the Registrable Securities, the Company shall prepare and file with the SEC
such amendments (including post-effective amendments) and supplements to a
Registration Statement and any prospectus used in connection with the
Registration Statement as may be necessary in order to change the plan of
distribution set forth in such Registration Statement.
Section 3.12. The Company shall not, and shall not agree to, allow the
holders of any securities of the Company to include any of their securities in
any Registration Statement under Section 2.1 or Section 2.4 hereof or any
amendment or supplement thereto under Section 3.2 hereof without the consent of
the holders of a majority-in-interest of the Registrable Securities or the
Additional Registrable Securities, as the case may be. In addition, the Company
shall not offer any securities for its own account or the account of others in
any Registration Statement under Section 2.1 or Section 2.4 hereof or any
amendment or supplement thereto under Section 3.2 hereof without the consent of
the holders of a majority-in- interest of the Registrable Securities or the
Additional Registrable Securities, as the case may be.
Section 3.13. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Investors of Registrable
Securities pursuant to a Registration Statement.
Section 3.14. The Company shall comply with all applicable laws related
to a Registration Statement and offering and sale of securities and all
applicable rules and regulations of governmental authorities in connection
therewith (including without limitation the 1933 Act and the 1934 Act (as
defined below) and the rules and regulations promulgated by the SEC).
ARTICLE IV.
OBLIGATIONS OF THE INVESTORS
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
Section 4.1. It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least ten (10)
days prior to the first anticipated filing date of the Registration Statement,
the Company shall notify each Investor of the information the Company requires
from each such Investor.
Section 4.2. Each Investor, by such Investor's execution of this
Agreement, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the
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preparation and filing of the Registration Statements hereunder, unless such
Investor has notified the Company in writing of such Investor's election to
exclude all of such Investor's Registrable Securities from the Registration
Statements.
Section 4.3. If the services of an underwriter are engaged, each
Investor agrees to enter into and perform such Investor's obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from such Registration Statement.
Section 4.4. Each Investor agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section 3.6
or 3.7, such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3.6 or 3.7 and, if so directed by the
Company, such Investor shall deliver to the Company or destroy all copies in
such Investor's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.
Section 4.5. No Investor may participate in any underwritten
registration hereunder unless such Investor (a) agrees to sell such Investor's
Registrable Securities on the basis provided in any underwriting arrangements in
usual and customary form entered into by the Company, (b) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (c) agrees to pay its pro rata share of all underwriting
discounts and commissions and any expenses in excess of those payable by the
Company pursuant to Section 5 below.
Section 4.6. The Investors shall comply with all applicable laws
related to a Registration Statement and offering and sale of securities and all
applicable rules and regulations of governmental authorities in connection
therewith (including without limitation the 1933 Act and the 1934 Act (as
defined below) and the rules and regulations promulgated by the SEC).
ARTICLE V.
EXPENSES OF REGISTRATION
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualification fees, printers and accounting fees, the
fees and disbursements of legal counsel for the Company, and the reasonable fees
and disbursements of one legal counsel for all holders of Registrable
Securities, selected by the Investors pursuant to Sections 2.2 and 3.8 hereof,
shall be borne by the Company.
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ARTICLE VI.
INDEMNIFICATION
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
Section 6.1. To the extent permitted by law, the Company will
indemnify, hold harmless and defend (a) each Investor who holds such Registrable
Securities, (b) the directors, officers, partners, employees, agents and each
person who controls any Investor within the meaning of the 1933 Act or the
Securities Exchange Act of 1934, as amended (the "1934 ACT"), if any, (c) any
underwriter (as defined in the 0000 Xxx) for the Investors, and (d) the
directors, officers, partners, employees and each person who controls any such
underwriter within the meaning of the 1933 Act or the 1934 Act, if any (each, an
"INDEMNIFIED PERSON"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "CLAIMS") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading; (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading; or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities (the matters in the foregoing clauses (i) through (iii)
being, collectively, "VIOLATIONS"). Subject to the restrictions set forth in
Section 6.3 with respect to the number of legal counsel, the Company shall
reimburse the Indemnified Person, promptly as such expenses are incurred and are
due and payable, for any reasonable legal fees or other reasonable expenses
incurred by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6.1: (A) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified Person
or underwriter for such Indemnified Person expressly for use in connection with
the preparation of such Registration Statement or any such amendment thereof or
supplement thereto; (B) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld; and (C) with respect
to any preliminary prospectus, shall not inure to the benefit of any Indemnified
Person if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented, such corrected prospectus was timely made
available by the Company pursuant to Section 3.3 hereof, and the Indemnified
Person was promptly advised in writing not to use the incorrect prospectus prior
to the
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use giving rise to a Violation and such Indemnified Person, notwithstanding such
advice, used it. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Indemnified Person and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9.
Section 6.2. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6.1, the Company, each of its directors, each of its
officers who signs the Registration Statement, each person, if any, who controls
the Company within the meaning of the 1933 Act or the 1934 Act, any underwriter
and any other shareholder selling securities pursuant to the Registration
Statement or any of its directors or officers or any person who controls such
shareholder or underwriter within the meaning of the 1933 Act or the 1934 Act
(collectively and together with an Indemnified Person, an "INDEMNIFIED PARTY"),
against any Claim to which any of them may become subject, under the 1933 Act,
the 1934 Act or otherwise, insofar as such Claim arises out of or is based upon
any Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by such Investor expressly for use in connection with
such Registration Statement; and subject to Section 6.3, such Investor will
reimburse any legal or other expenses (promptly as such expenses are incurred
and are due and payable) reasonably incurred by them in connection with
investigating or defending any such Claim; provided, however, that the indemnity
agreement contained in this Section 6.2 shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of such Investor, which consent shall not be unreasonably withheld;
provided, further, however, that the Investor shall be liable under this
Agreement (including this Section 6.2 and Section 7) for only that amount as
does not exceed the net proceeds to such Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party and shall survive the transfer of the
Registrable Securities by the Investors pursuant to Section 9. Notwithstanding
anything to the contrary contained herein, the indemnification agreement
contained in this Section 6.2 with respect to any preliminary prospectus shall
not inure to the benefit of any Indemnified Party if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented, and the
Indemnified Party was promptly advised in writing not to use the incorrect
information prior to the use giving rise to a Violation and such Indemnified
Party, notwithstanding such advice, used it.
Section 6.3. Promptly after receipt by an Indemnified Party under this
Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
selected by the indemnifying party and reasonably satisfactory to the
Indemnified Party, as the case may be; provided, however, that an Indemnified
Party shall have the
11
right to retain its own counsel with the fees and expenses to be paid by the
indemnifying party, if, in the reasonable opinion of counsel retained by the
indemnifying party, the representation by such counsel of the Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Party and any other party
represented by such counsel in such proceeding. The indemnifying party shall pay
for only one separate legal counsel for the Indemnified Parties, as applicable,
and such legal counsel shall be selected by Investors holding a
majority-in-interest of the Registrable Securities included in the Registration
Statement to which the Claim relates, if the Investors are entitled to
indemnification hereunder, or the Company, if the Company is entitled to
indemnification hereunder, as applicable. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is actually prejudiced in its ability to defend such action.
The indemnification required by this Section 6 shall be made by periodic
payments of the amount thereof during the course of the investigation or
defense, as such expense, loss, damage or liability is incurred and is due and
payable.
ARTICLE VII.
CONTRIBUTION
To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(a) no contribution shall be made under circumstances where the indemnifying
party would not have been liable for indemnification under the fault standards
set forth in Section 6, (b) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 0000
Xxx) shall be entitled to contribution from any seller of Registrable Securities
who was not guilty of such fraudulent misrepresentation, and (c) contribution
(together with any indemnification or other obligations under this Agreement) by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.
ARTICLE VIII.
REPORTS UNDER THE 1934 ACT
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144;
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(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act
so long as the Company remains subject to such requirements and the
filing of such reports and other documents is required for the
applicable provisions of Rule 144; and
(c) furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, such information as may
be reasonably requested to permit such Investor to sell such securities
pursuant to Rule 144 without registration.
ARTICLE IX.
ASSIGNMENT OF REGISTRATION RIGHTS
The rights under this Agreement shall be automatically assignable by
the Investors to any transferee of all or any portion of Registrable Securities
if: (a) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (b) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (i) the
name and address of such transferee or assignee, and (ii) the securities with
respect to which such registration rights are being transferred or assigned, (c)
following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (d) at or before the time the Company receives
the written notice contemplated by clause (b) of this sentence, the transferee
or assignee agrees in writing with the Company to be bound by all of the
provisions contained herein, and (e) such transferee shall be an "ACCREDITED
INVESTOR" as that term defined in Rule 501 of Regulation D promulgated under the
1933 Act.
ARTICLE X.
AMENDMENT OF REGISTRATION RIGHTS
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company, and
Investors who hold a majority interest of the Registrable Securities. Any
amendment or waiver effected in accordance with this Section 10 shall be binding
upon each Investor and the Company.
ARTICLE XI.
MISCELLANEOUS
Section 11.1. A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
13
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.
Section 11.2. Any notices required or permitted to be given under the
terms hereof shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile and shall be effective five (5)
calendar days after being placed in the mail, if mailed by regular United States
mail, or upon receipt, if delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile, in each case addressed
to a party. The addresses and facsimile numbers for such communications shall
be:
If to the Company:
Zix Corporation
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxx 0000 LB36
Xxxxxx, Xxxxx 00000
Attention: General Counsel
Facsimile: (000) 000-0000
With copy to:
Xxxxxx & Xxxx LLP
000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000
If to an Investor: to the address and facsimile number set forth immediately
below such Investor's name on Schedule A or Schedule B, as applicable, to the
Securities Purchase Agreement.
Section 11.3. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, shall not operate as a waiver thereof.
Section 11.4. GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REFERENCE TO
THE PRINCIPLES OF CONFLICT OF LAWS OR ANY OTHER PRINCIPLE THAT COULD RESULT IN
THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.
Section 11.5. This Agreement and the Securities Purchase Agreement
(including all schedules and exhibits thereto) constitute the entire agreement
among the parties hereto with respect
14
to the subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement and the Securities Purchase Agreement supersede all
prior agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof.
Section 11.6. Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
Section 11.7. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
Section 11.8. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.
Section 11.9. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
Section 11.10. Except as otherwise provided herein, all consents and
other determinations to be made by the Investors pursuant to this Agreement
shall be made by Investors holding a majority of the Registrable Securities,
determined as if the all of the Preferred Shares then outstanding have been
converted into Registrable Securities.
Section 11.11. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules
of strict construction will be applied against any party.
Section 11.12. In the event that any provision of this Agreement is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.
Section 11.13. The initial number of Registrable Securities included in
any Registration Statement and each increase to the number of Registrable
Securities included therein shall be allocated pro rata among the Investors
based on the number of Registrable Securities held by each Investor at the time
of such establishment or increase, as the case may be. In the event an Investor
shall sell or otherwise transfer any of such holder's Registrable Securities,
each transferee shall be allocated a pro rata portion of the number of
Registrable Securities included in a Registration
15
Statement for such transferor. For the avoidance of doubt, the number of
Registrable Securities held by an Investor shall be determined as if all
Preferred Shares and Warrants then outstanding and held by an Investor were
converted into or exercised for Registrable Securities.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Company and the undersigned Investors have
caused this Agreement to be duly executed as of the date first above written.
COMPANY
Zix Corporation, a Texas corporation
/s/ Xxxxxx X. Xxxxxxxx
----------------------------------------------
By: Xxxxxx X. Xxxxxxxx
Title: S.V.P.
INVESTORS
/s/ Xxxx X. Xxxx /s/ Xxxxxxxxx Xxxx
---------------------------------------------- -----------------------------------------------
Xxxx X. Xxxx Xxxxxxxxx Xxxx
/s/ Xxxxx X. Xxxx /s/ Xxxxxx X. Xxxxxxx
---------------------------------------------- -----------------------------------------------
Xxxxx X. Xxxx Xxxxxx X. Xxxxxxx
SANTIG LTD., a Texas limited partnership WHITE ROCK CAPITAL
By: Xxxxxxx Management Corp,
its general partner
/s/ Xxxxx X. Xxxxxx /s/ Xxx Xxxxxx
---------------------------------------------- -----------------------------------------------
By: Xxxxx X. Xxxxxx By: Xxx Xxxxxx
Title: Executive Vice President Title: President
1988 Spendthrift Trust
/s/ Xxxxx X. Xxxxxx
----------------------------------------------
By: Xxxxx X. Xxxxxx
Title: Trustee
/s/ A.R. Xxxxxxx, Jr.
----------------------------------------------
A.R. Xxxxxxx, Jr.
17
