EXHIBIT 4.2
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED
WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF
APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
WARRANT TO PURCHASE COMMON STOCK
OF
ZIX CORPORATION, a Texas corporation
(void after September 18, 2006)
This Warrant to Purchase Common Stock (this "Warrant") is issued as of
September 18, 2002 (the "Issue Date") and certifies that, for value received,
the Holder hereof (as defined below) is entitled to purchase the Warrant Stock
(as defined below) from Zix Corporation, a Texas corporation (the "Company"),
during the Exercise Period (as defined below), upon payment of the Exercise
Price (as defined below) and otherwise in accordance with the terms and subject
to the conditions set forth herein.
1. Definitions. As used in this Warrant, the following terms have the
meanings ascribed to them below:
(a) "Agreement" means the Securities Purchase Agreement, dated as
of the date hereof, by and among the Company and the investors
listed on Schedule A and Schedule B thereto.
(b) "Board" means the Board of Directors of the Company.
(c) "Common Stock" means the Common Stock, par value $0.01 per
share, of the Company.
(d) "Equity Security" means (i) Common Stock, (ii) any right or
option to purchase Common Stock, (iii) any obligation or
security convertible into or exchangeable for Common Stock and
(iv) any right or option to purchase any obligation or
security convertible into or exchangeable for Common Stock.
(e) "Exempt Issuance" means any issuance of Equity Securities (i)
pursuant to any employee benefit plan of the Company in effect
on the Issue Date; (ii) to officers, directors, employees or
consultants of the Company pursuant to the grant or exercise
of options that are granted pursuant to any employee benefit
plan approved by the shareholders of the Company after the
Issue Date to the extent that such issuance, together will all
other issuances to which this clause (ii) has
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been applied, will not result in the issuance or potential
issuance of more than 4,000,000 shares of Common Stock (as
adjusted for any recapitalizations, stock splits or
combinations of the Common Stock or stock dividends on the
Common Stock to the extent paid in shares of Common Stock);
(iii) upon the conversion, exchange or exercise of any right,
option, obligation or security outstanding on the Issue Date,
provided that the terms of any such right, option, obligation
or security are not amended or otherwise altered on or after
the Issue Date; (iv) in connection with the sale and issuance
of shares of Series A Preferred, shares of Series B Preferred
and Senior Convertible Notes on the Issue Date (including (A)
the issuance of warrants to the initial purchasers of Series A
Preferred, Series B Preferred and Senior Convertible Notes and
(B) the conversion, redemption, exchange or exercise of such
Series A Preferred, Series B Preferred, Senior Convertible
Notes and warrants in accordance with their respective terms),
provided that the terms of any such securities are not amended
or otherwise altered on or after the Issue Date; (v) in
connection with any stock subdivision or stock dividend
described in Section 5(a) or any Recapitalization Event (as
defined in Section 5(c)); (vi) (A) to suppliers, customers or
strategic partners of the Company investing in connection with
a commercial relationship with the Company, the primary
purpose of which is not to raise capital, and (B) as
consideration for mergers or consolidations or acquisitions of
businesses or their tangible or intangible assets, other than
transactions in which cash or cash equivalents represent a
majority of the assets acquired, provided that the aggregate
number of shares of Common Stock that may be issued or
potentially issued under this clause (vi) may not exceed
400,000 shares (as adjusted for any recapitalizations, stock
splits or combinations of the Common Stock or stock dividends
on the Common Stock to the extent paid in shares of Common
Stock); (vii) in connection with leases; and (viii) to former
employees in satisfaction of severance obligations of the
Company.
(f) "Exercise Period" means the period commencing on the six (6)
month anniversary of the Issue Date and ending at 5:00 p.m.,
local time in Dallas, Texas, on September 18, 2006.
(g) "Exercise Price" means $4.51 per share of Warrant Stock,
subject to adjustment as described in Section 5 below.
(h) "Holder" means each person or other legal entity who validly
holds this Warrant (or any portion thereof) for so long as
this Warrant (or any portion thereof) is so held by them, the
initial Holder being [VARIES BY HOLDER].
(i) "Market Price" means $3.92 per share of Warrant Stock, subject
to adjustment as described in Section 5(a) below.
(j) "Senior Convertible Notes" means those certain Convertible
Notes, convertible into shares of Common Stock under certain
circumstances, issued on the Issue Date.
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(k) "Series A Preferred" means the Series A Convertible Preferred
Stock, par value $1.00 per share, of the Company.
(l) "Series B Preferred" means the Series B Convertible Preferred
Stock, par value $1.00 per share, of the Company.
(m) "Warrant Stock" means [VARIES BY HOLDER] shares of Common
Stock, subject to adjustment as described in Section 5 below.
2. Exercise of Warrant.
(a) Availability of Exercise. This Warrant may be exercised only
during the Exercise Period. During the Exercise Period, this
Warrant may be exercised by the Holder at any time, and from
time to time, to purchase all, or any portion, of the shares
of Warrant Stock for which this Warrant has not previously
been exercised. This Warrant will expire, and be of no further
force and effect, at the end of the Exercise Period without
regard to whether the Holder has purchased all of the shares
of Warrant Stock for which this Warrant is initially
exercisable.
(b) Procedure for Exercise. Whenever the Holder desires to
exercise this Warrant for the purchase of any or all of the
shares of the Warrant Stock, the Holder must deliver to the
Company, at its principal office, (i) this Warrant, (ii) a
Notice of Exercise, in the form attached hereto as Attachment
1, duly completed and executed by the Holder, (iii) an
Investor Representation Statement in form and substance
reasonably satisfactory to the Company and covering the
matters set forth in Section 3.2 through Section 3.10,
inclusive, of the Agreement, unless the Warrant Stock is then
registered for resale under the Securities Act of 1933, as
amended, and (iv) payment in full of the Exercise Price in
cash, wire transfer or by certified check for the shares of
Warrant Stock being purchased. An exercise of this Warrant
will be deemed effective immediately prior to the close of
business on the date on which all required deliveries have
been made and, thereafter, the Holder, or its duly-appointed
nominee, will be treated for all purposes as the holder of
record of the shares of Warrant Stock purchased pursuant to
such exercise.
(c) Deliveries by the Company. As promptly as practicable after an
exercise of this Warrant, but in any event within three (3)
business days thereafter, the Company will issue and deliver
to the Holder, or its duly-appointed nominee, a certificate or
certificates for the number of full shares of Warrant Stock
issuable upon such exercise. If this Warrant is exercised for
less than the total number of shares of Warrant Stock then
issuable upon exercise, the Company will also execute and
deliver to the Holder a new warrant, dated the Issue Date,
evidencing the right of the Holder to purchase the balance of
the Warrant Stock purchasable hereunder on the same terms and
conditions as set forth herein.
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3. Cashless Exercise / Conversion.
(a) Right to Convert. At any time during the Exercise Period that
the Warrant Stock is not registered and available for resale
pursuant to a registration statement in accordance with the
Registration Rights Agreement (as defined in the Agreement),
including during an Allowed Delay (as defined in the
Registration Rights Agreement), the Holder may convert all or
any portion of this Warrant that is then exercisable into
Warrant Stock pursuant to this Section 3, in lieu of
exercising this Warrant pursuant to Section 2.
(b) Procedure for Conversion. Whenever the Holder desires to
convert this Warrant into shares of Warrant Stock pursuant to
this Section 3, the Holder must deliver to the Company, at its
principal office, (i) this Warrant and (ii) a Notice of
Conversion, in the form attached hereto as Attachment 2, duly
completed and executed by the Holder, specifying the portion
of the Warrant to be converted. The portion of this Warrant
that is converted will be immediately canceled. This Warrant,
to the extent converted, will be deemed to have been converted
immediately prior to the close of business on the date on
which all required deliveries have been made and, thereafter,
the Holder, or its duly-appointed nominee, will be treated for
all purposes as the holder of record of the shares of Warrant
Stock issuable pursuant to such conversion.
(c) Conversion Formula. The number of shares of Warrant Stock to
be issued to the Holder upon any conversion of this Warrant
pursuant to this Section 3 will be computed using the
following formula:
X = (P)(Y)(A-B)/A
Where X = the number of shares of Warrant Stock to be issued to
the Holder for the portion of the Warrant being
converted.
P = the portion of the Warrant being converted expressed
as a decimal.
Y = the total number of shares of Warrant Stock issuable
upon exercise of the Warrant in full.
A = the Fair Market Value of one share of Warrant Stock
as of the last business day immediately prior to the
date the notice of conversion is received by the
Company.
B = the Exercise Price on the date of conversion.
(d) Deliveries by the Company. As promptly as practicable after a
conversion of this Warrant, but in any event within three (3)
business days thereafter, the Company will issue and deliver
to the Holder, or its duly-appointed nominee, a certificate or
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certificates for the number of full shares of Warrant Stock
issuable upon such conversion. If the Warrant is converted for
less than the total number of shares of Warrant Stock then
issuable upon exercise, the Company will also execute and
deliver to the Holder a new warrant, dated the Issue Date,
evidencing the right of the Holder to purchase the balance of
the Warrant Stock purchasable hereunder on the same terms and
conditions set forth herein.
4. Fractional Shares. No fractional shares of Warrant Stock will be
issuable upon the exercise or conversion of this Warrant and the number
of shares of Warrant Stock issued upon any exercise or conversion will
be rounded down to the nearest whole share. Instead of issuing any
fractional shares of Warrant Stock that would otherwise be issuable
upon any exercise or conversion of this Warrant, the Company will pay a
cash amount in respect of such fractional interest equal to the
fractional interest multiplied by the Exercise Price on the date of
exercise or conversion.
5. Adjustments and Notices.
(a) Subdivision, Stock Dividends or Combinations. If the Company
subdivides the outstanding shares of Common Stock or issues a
dividend in the form of Common Stock with respect to Common
Stock, the Exercise Price and the Market Price in effect
immediately prior to such subdivision or the issuance of such
dividend will each be proportionately decreased, and the
number of shares of Warrant Stock purchasable upon the full
exercise of this Warrant immediately prior to such subdivision
or issuance of dividend will be proportionately increased,
effective at the close of business on the date of such
subdivision or dividend. If the Company combines the
outstanding shares of Common Stock, the Exercise Price and
Market Price in effect immediately prior to such combination
will each be proportionately increased, and the number of
shares of Warrant Stock purchasable upon the full exercise of
this Warrant immediately prior to such combination will be
proportionately decreased, effective at the close of business
on the date of such combination. This Section 5(a) will
similarly apply to successive subdivisions, dividends in
Common Stock and combinations.
(b) Discount Sale of Capital Stock. If the Company issues Common
Stock, any right or option to purchase Common Stock, or any
obligation or any shares of stock convertible into or
exchangeable for Common Stock, other than in an Exempt
Issuance, for a consideration per share of Common Stock (or
per share of Common Stock into which such right, option,
obligation or stock is exercisable, convertible or
exchangeable) that is less than the Exercise Price in effect
immediately prior to the time of such issuance, then,
immediately upon such issuance, the Exercise Price will be the
greater of the Market Price or the price, calculated to the
nearest cent, obtained by dividing:
(i) an amount equal to the sum of (A) the
then-existing Exercise Price multiplied by
the number of shares of Common Stock
outstanding immediately prior to such
issuance (assuming the full exercise of
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all options, rights and warrants then
exercisable for Company securities, the full
exercise of this Warrant and the full
conversion or exchange of all other
obligations or securities that are then
convertible or exchangeable for Common Stock
at the rate of conversion or exchange then
in effect) and (B) an amount equal to the
aggregate consideration received by the
Company upon such issuance;
by
(ii) the number of shares of Common Stock
outstanding immediately after such issuance
(assuming the full exercise of all options,
rights and warrants then exercisable for
Company securities, the full exercise of
this Warrant and the full conversion or
exchange of all other obligations or
securities that are then convertible or
exchangeable for Common Stock at the rate of
conversion or exchange then in effect).
This Section 5(b) will similarly apply to successive such
issuances.
(c) Reclassification, Exchange, Substitution, etc. If any capital
reorganization, reclassification, exchange, substitution or
other similar event results in a change of the rights,
preferences or other terms of the Common Stock (other than a
change in par value or a change resulting from a stock
dividend or a subdivision or combination of shares) (any of
the foregoing, a "Recapitalization Event"), the Company must,
as a condition to such event, execute and deliver to the
Holder a new warrant so that the Holder will have the right to
receive, at an aggregate exercise price equal to the aggregate
Exercise Price payable upon the full exercise of the
unexercised portion of this Warrant, and in lieu of the
Warrant Stock theretofore issuable upon the full exercise of
this Warrant, the kind and amount of shares of stock, other
securities, money and property that would have been receivable
by the Holder upon such event had the Holder exercised this
Warrant in full immediately prior to the effective time of
such event. Such new warrant will provide for adjustments that
are as nearly equivalent as may be practicable to the
adjustments provided for in this Section 5.
(d) Merger. As a condition precedent to the consummation of any
merger or consolidation involving the Company in which the
Company is not the surviving corporation, the successor or
purchasing corporation must execute and deliver to the Holder
a new warrant so that the Holder will have the right to
receive, at an aggregate exercise price equal to the aggregate
Exercise Price payable upon the full exercise of the
unexercised portion of this Warrant, and in lieu of the
Warrant Stock theretofore issuable upon the full exercise of
this Warrant, the kind and amount of shares of stock, other
securities, money and property that would have been receivable
by the Holder pursuant to such merger or consolidation had the
Holder exercised this Warrant in full immediately prior to the
effective time of
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such merger or consolidation. If all holders of Common Stock
do not receive the same kind and amount of consideration
pursuant to such merger or consolidation, the Holder will have
the right to choose the kind and amount of consideration for
which the new warrant will be exercisable from among the
combinations of kind and amount of consideration offered to
any holder of Common Stock pursuant to such merger or
consolidation. Such new warrant will provide for adjustments
that are as nearly equivalent as may be practicable to the
adjustments provided for in this Section 5.
(e) No Impairment. The Company will not, by amendment of its
Articles of Incorporation or through a reorganization,
transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the
terms to be observed or performed under this Warrant by the
Company, but must at all times in good faith assist in
carrying out of all the provisions of this Warrant and in
taking all such action as may be necessary or appropriate to
protect the Holder's rights under this Warrant against
impairment; provided, however, that this Section 5(e) will not
apply to the issuance by the Company of the Senior Convertible
Notes, shares of Series A Preferred, shares of Series B
Preferred or warrants issued to the purchasers of the Senior
Convertible Notes, Series A Preferred and Series B Preferred.
If the Company takes any action other than as described above
that adversely affects the Holder's rights under this Warrant,
the Exercise Price will be adjusted downward in an equitable
manner.
(f) Notice. The Company will give the Holder written notice of any
event described in this Section 5 as soon as the Company has
actual knowledge of such event but in no event later than the
effective time of such event or such earlier time as may be
otherwise required pursuant to this Section 5. Such notice
will provide a brief summary of the event (including a
reference to the subsection of this Section 5 that describes
such event) and the Holder's rights as a result thereof and
will set forth, as and if applicable, the Exercise Price as
adjusted, the increased or decreased number of shares of
Warrant Stock purchasable upon the exercise of this Warrant,
and reasonable detail regarding the method of calculation of
each.
6. Miscellaneous.
(a) No Shareholder Rights. This Warrant, by itself, as
distinguished from any shares of Warrant Stock purchased
hereunder, will not entitle the Holder to any of the rights of
a shareholder of the Company.
(b) Reservation of Warrant Stock. At all times prior to the end of
the Exercise Period, the Company will reserve from its
authorized and unissued Common Stock a sufficient number of
shares to provide for the issuance of all shares of Warrant
Stock that may then be issued upon full exercise of this
Warrant. Issuance of this Warrant will constitute full
authority to the Company's officers who are charged with the
duty of executing stock certificates to execute and issue the
necessary
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certificates for shares of Warrant Stock issuable upon the
exercise or conversion of this Warrant.
(c) Transfer of Warrant. This Warrant may be transferred or
assigned, in whole or in part, by the Holder provided that
such transfer or assignment is in compliance with any
restrictive legend set forth hereon. Such transfer will be
effected without charge to the Holder upon surrender of this
Warrant with a properly executed assignment to the Company, at
its principal office, and, thereafter, the Company will issue
a new warrant registered in the name of the transferee. If
this Warrant is being transferred in part, the Company will
issue new warrants, in each case evidencing the right to
purchase the appropriate number of shares of Warrant Stock,
registered in the names of the Holder and the transferee, as
applicable. Upon any transfer of all or any part of this
Warrant to any transferee, such transferee will be deemed the
"Holder" of such warrant, to the extent transferred, as such
term is used herein and will be deemed the owner hereof for
all purposes. Each Holder, by taking or holding this Warrant,
consents and agrees to be bound by the provisions of this
Warrant and consents and agrees that (i) this Warrant, when
endorsed in blank, will be deemed negotiable, (ii) the bearer
of this Warrant, when this Warrant is so endorsed, may be
treated by the Company (at the Company's option) and all other
persons dealing with this Warrant, any notice to the contrary
notwithstanding, as the absolute owner hereof for all
purposes, including the person entitled to exercise all rights
represented by this Warrant and to transfer this Warrant on
the books of the Company; provided, however, that until any
transfer of this Warrant is made on the books of the Company,
the Company may treat the registered Holder as the owner of
this Warrant for all purposes.
(d) Transfer Taxes. Neither this Warrant, nor any portion hereof,
may be transferred or assigned, and no Warrant Stock issued
upon exercise or conversion of this Warrant will be issued in
a name other than the name of the Holder, unless the Company
has been paid the amount of transfer taxes or charges incident
thereto, if any.
(e) Loss, Theft, Destruction or Mutilation of Warrant. Upon
receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this
Warrant, and (i) in case of loss, theft or destruction, of
indemnity reasonably satisfactory to the Company and upon
reimbursement of the Company of all reasonable expenses
incidental thereto, and (ii) if mutilated, upon surrender and
cancellation of this Warrant, the Company will make and
deliver a new Warrant of like tenor (but with no additional
rights or obligations) and dated as of such cancellation, in
lieu of this Warrant.
(f) Headings. The headings in this Warrant are for purposes of
convenience and reference only, and will not be deemed to
constitute a part hereof.
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(g) Saturdays, Sundays, Holidays, etc. If the last or appointed
day for the taking of any action or the expiration of any
right required or granted herein is a Saturday, Sunday or
legal holiday in the State of Texas, then such action may be
taken or such right may be exercised on the next succeeding
day that is not a Saturday, Sunday or legal holiday in the
State of Texas.
(h) Amendment and Waiver. Neither this Warrant nor any term hereof
may be changed or waived orally, but only by an instrument in
writing signed by the Company and the Holder.
(i) Notices. All notices and other communications from the Company
to the Holder will be delivered personally or mailed by first
class mail, postage prepaid, to the address furnished to the
Company in writing by the last Holder of this Warrant who
furnished an address to the Company in writing, and if mailed
will be deemed given five days after deposit in the United
States mail.
(j) 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.
ISSUED: September 18, 2002
ZIX CORPORATION
By:
-------------------------------
Title:
----------------------------
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ATTACHMENT 1
NOTICE OF EXERCISE
TO: Zix Corporation
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxx 0000, XX 36
Xxxxxx, Xxxxx 00000-0000
1. The undersigned hereby elects to purchase ___________________ shares
of the Common Stock, par value $0.01 per share, of Zix Corporation pursuant to
the terms of the attached Warrant, and tenders herewith payment of the purchase
price in full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
-----------------------------
(Name)
-----------------------------
(Address)
----------------------------------- -----------------------------------
(Date) (Name of Warrant Holder)
By:
--------------------------------
Title:
-----------------------------
(Title and signature of
authorized person)
ATTACHMENT 2
NOTICE OF CONVERSION
TO: Zix Corporation
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxx 0000, XX 36
Xxxxxx, Xxxxx 00000-0000
1. The undersigned hereby elects to acquire ____________________ shares
of the Common Stock, par value $0.01 per share, of Zix Corporation pursuant to
the terms of the attached Warrant, by conversion of __________ percent ( __%) of
the Warrant.
2. Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
-----------------------------
(Name)
-----------------------------
(Address)
----------------------------------- -----------------------------------
(Date) (Name of Warrant Holder)
By:
--------------------------------
Title:
-----------------------------
(Title and signature of
authorized person)
