SECURITIES PURCHASE AGREEMENT
Exhibit
4.1
This Securities Purchase Agreement (this “Agreement”) is made and entered into as of August 9,
2005 (the “Execution Date”), by and among Zix Corporation, a Texas corporation (the “Company”), and
each of the purchasers listed on Schedule A attached hereto (collectively, the “Purchasers”
and individually, a “Purchaser”).
(i) Subject to the terms and conditions of this Agreement, each Purchaser, severally and not
jointly, agrees to purchase, and the Company agrees to sell to each Purchaser, at the Closing (as
defined below), that number of Units (including the Firm Units and Excess Units, each as defined
below) set forth opposite such Purchaser’s name on Schedule A attached hereto. The
purchase price of each Unit shall be $2.50 (the “Per Unit Price”), except in the case of each Unit
purchased by a director or officer of the Company which shall be $2.99 (the “Insider Per Unit
Price”) and each shall be payable as hereafter set forth.
(ii) Notwithstanding anything to the contrary in this Agreement, on the Closing Date, no more
than 6,302,318 Units representing 6,302,318 shares of Common Stock (the “Firm Shares”) and
associated Warrants (the “Firm Warrants”, and together with the Firm Shares, the “Firm Units”)
shall be issued to the Purchasers prior to the Company obtaining shareholder approval to issue to
the Purchasers the shares of Common Stock in excess of the Firm Units in accordance with the
requirements of NASDAQ Rule 4350(i) and Section 5(d) hereto (the “Shareholder Approval”). Prior to
obtaining the Shareholder Approval, the Units to be purchased by the Purchasers (including the
Warrants thereto) representing Purchased Shares in excess of the Firm Units (the “Excess Units”)
shall not be issued to the Purchasers and instead the proceeds in respect of such Excess Units (the
“Excess Funds”) shall be deposited into escrow, in accordance with the terms of an escrow
agreement, substantially in the form of Exhibit D hereto (the “Escrow Agreement”). The
Excess Funds shall accrue interest from and including the day following the Closing Date to and
excluding the date of release in accordance with the terms of the Escrow Agreement at a rate of
7.0% per annum (computed on the basis of a 365-day year). If the Company obtains the Shareholder
Approval prior to the Shareholder Approval Date (as defined below), the Excess Funds shall be
released to the Company in accordance with the Escrow Agreement, and the Excess Units shall be
issued to each of the Purchasers in the amounts set forth on Schedule A hereto, along with
such Purchaser’s pro rata share of accrued interest on the Excess Funds to such date, which shall
be payable in cash. If the Company does not obtain the Shareholder Approval prior to the
Shareholder Approval Date (as defined below), the Excess Funds shall be returned to each of the
Purchasers in accordance with the terms of the Escrow Agreement, along with such Purchaser’s pro
rata share of accrued interest on the Excess Funds to such date. If the Excess Funds accrue
earnings or interest in escrow at a rate less than the rate required by this Section
1(b)(ii), the Company shall promptly pay to the Purchasers any shortfall amount.
2. CLOSING. The purchase and sale of the Purchased Securities shall take place at the
offices of Xxxxx Xxxxx L.L.P., 0000 Xxxx Xxxxxx, Xxxxxx, Xxxxx 00000, at 2:00 p.m. Dallas, Texas
time, on August 9, 2005, or at such other time and place as the Company and Purchasers
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representing a majority of the Purchased Securities to be purchased, mutually agree upon
(which time and place are referred to in this Agreement as the “Closing”). At the Closing, against
delivery of full payment for the Purchased Securities sold hereunder by wire transfer of
immediately available funds in accordance with the Company’s instructions; the Company shall issue
and deliver to each Purchaser (i) one or more stock certificates registered in the name of each
Purchaser (or in such nominee name(s) as designated by such Purchaser in the Stock Certificate and
Warrant Questionnaire, attached hereto as Appendix I (the “Stock Certificate
Questionnaire”), representing the number of Firm Shares set forth opposite the appropriate
Purchaser’s name on Schedule A hereto, and bearing the legend set forth in Section
4(k)(i) herein and (ii) the number of Firm Warrants set forth opposite the appropriate
Purchaser’s name on Schedule A hereto, and bearing the legend set forth in Section
4(k)(ii) ; provided, however, that the Company may furnish to each Purchaser a facsimile copy
of the warrant representing the Firm Warrant and of the stock certificate(s) representing the Firm
Shares purchased by such Purchaser no later than the next Business Day following the Closing Date,
with the original warrant and original stock certificate(s) to be delivered to such Purchaser by
overnight courier no later than the third (3rd) Business Day following the Closing Date. Closing
documents, other than the warrants representing the Firm Warrants and the stock certificates
representing the Firm Shares, may be delivered by facsimile on the Closing Date, with original
signature pages subsequently sent by overnight courier.
For purposes of this Agreement, “Closing Date” means the date of the Closing, and “Business
Day” means any day except Saturday, Sunday and any day which shall be a federal legal holiday or a
day on which banking institutions in the State of New York are authorized or required by law or
other governmental action to close.
3. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE COMPANY. The Company
hereby represents and warrants to each Purchaser that, except as set forth in the SEC Documents (as
defined below) and in the Disclosure Letter attached hereto as Exhibit B (the “Disclosure
Letter”):
(i) The authorized capital stock of the Company consists of 175,000,000 shares of Common
Stock, $.01 par value per share, and 10,000,000 shares of preferred stock, par value $1.00 per
share (“Preferred Stock”).
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(ii) As of June 30, 2005, the issued and outstanding capital stock of the Company consisted of
32,424,929 shares of Common Stock and no shares of Preferred Stock. The shares of issued and
outstanding capital stock of the Company have been duly authorized and validly issued, are fully
paid and nonassessable and have not been issued in violation of or are not otherwise subject to any
preemptive or other similar rights.
(iii) As of June 30, 2005, the Company had 10,110,617 shares of Common Stock reserved for
issuance upon exercise of options granted under the Company’s stock option plans.
(iv) As of June 30, 2005, the Company had outstanding options for 8,211,325 shares of Common
Stock.
(v) As of June 30, 2005, the Company had 3,755,370 issued and outstanding warrants for the
purchase of shares of Common Stock.
With the exception of the foregoing in this Section 3(b), there are no outstanding
subscriptions, options, warrants, convertible or exchangeable securities or other rights to
purchase shares of Common Stock or other securities of the Company, or rights that would trigger
any anti-dilution or similar adjustments to any securities of the Company, granted to or by the
Company, and there are no commitments, plans or arrangements to issue any shares of Common Stock or
any security convertible into or exchangeable for Common Stock.
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(i) any declaration, setting aside or payment of any dividend or other distribution of the
assets of the Company with respect to any shares of capital stock of the Company or any repurchase,
redemption or other acquisition by the Company or any Subsidiary of the Company of any outstanding
shares of the Company’s capital stock;
(ii) any damage, destruction or loss to the Company’s or any Subsidiary’s business or assets,
whether or not covered by insurance, except for such occurrences, individually and collectively,
that have not had, and would not reasonably be expected to have, a Material Adverse Effect;
(iii) any waiver by the Company or any Subsidiary of a valuable right or of a material debt
owed to it, except for such waivers, individually and collectively, that have not had, and would
not reasonably be expected to have, a Material Adverse Effect;
(iv) any material change or amendment to, or any waiver of any material right under a material
contract or arrangement by which the Company, any Subsidiary or any of their assets or properties
is bound or subject;
(v) any transaction between the Company or any Subsidiary, on the one hand, and any of its
officers or directors, on the other hand, that would be required to be disclosed pursuant to Item
404(a), (b) or (c) of Regulation S-K of the SEC;
(vi) any change by the Company in its accounting principles, methods or practices or in the
manner in which it keeps its accounting books and records, except any such change required by a
change in GAAP or by the SEC; or
(vii) any other event or condition, either individually or collectively, that has had, or
would be reasonably likely to have, a Material Adverse Effect.
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to offers or sales of the Purchased Securities. For purposes of this Agreement, “Person”
means an individual or corporation, trust, incorporated or unincorporated association, joint
venture, limited liability company, joint stock company, government (or an agency or subdivision
thereof) or other entity of any kind.
For purposes of this Agreement, an “Affiliate” of any specified Person means any other Person
directly or indirectly controlling, controlled by or under direct or indirect common control with
such specified Person. For purposes of this definition, “control” means the power to direct the
management and policies of such person or firm, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise.
4. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE PURCHASERS. Each
Purchaser, severally and not jointly, hereby represents and warrants to the Company, and agrees
that:
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enforceable in accordance with its terms, except (i) as may be limited by (1) applicable
bankruptcy, insolvency, reorganization or other laws of general application relating to or
affecting the enforcement of creditors’ rights generally and (2) the effect of rules of law
governing the availability of equitable remedies and (ii) as rights to indemnity or contribution
may be limited under federal or state securities laws or by principles of public policy thereunder.
(g) Accredited Purchaser Status. Such Purchaser is an “accredited investor” within
the meaning of Regulation D promulgated under the Securities Act.
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from the Company regarding the terms and conditions of the sale of the Purchased Securities
and the business, properties, prospects and financial condition of the Company and to obtain any
additional information requested and has received and considered all information it deems relevant
to make an informed decision to purchase the Purchased Securities.
(i) Such Purchaser understands that the Purchased Securities and the Warrant Shares have not
been registered under the Securities Act and will not sell, offer to sell, assign, pledge,
hypothecate or otherwise transfer any of the Purchased Securities or the Warrant Shares (except as
permitted in Section 4(k) below) unless (A) pursuant to an effective registration statement
under the Securities Act, (B) such Purchaser provides a reasonably acceptable legal opinion to the
Company, to the effect that a sale, assignment, pledge, hypothecation or other transfer of the
Purchased Securities or the Warrant Shares, as the case may be, may be made without registration
under the Securities Act and the transferee agrees to be bound by the terms and conditions of this
Agreement, (C) such Purchaser provides the Company a “no action” letter from the SEC to the effect
that the transfer of the Purchased Securities or the Warrant Shares, as the case may be, without
registration will not result in a recommendation by the Staff of the SEC that enforcement action by
taken with respect thereto, (D) such Purchaser provides the Company with reasonable assurances (in
the form of seller and broker representation letters) that the Purchased Securities or the Warrant
Shares, as the case may be, can be sold pursuant to Rule 144 promulgated under the Securities Act
(“Rule 144”), (E) such Purchaser provides the Company with reasonable assurances (in the form of
seller representation letters) that the Purchased Securities or the Warrant Shares, as the case may
be, can be sold pursuant to Rule 144(k) promulgated under the Securities Act following the
applicable holding period or (F) pursuant to any other exception contained in the Securities Act
provided that the Purchaser provides a reasonably acceptable legal opinion to the Company.
Notwithstanding anything to the contrary contained in this Agreement, including but not limited to
in Section 5(c)(i) below, such Purchaser may transfer the Purchased Securities or the
Warrant Shares to its Affiliates provided that (X) such Purchaser provides the Company with a
reasonably acceptable legal opinion, (Y) such Affiliate is an “accredited investor” within the
meaning of Regulation D and (Z) each such Affiliate agrees to be bound by the terms and conditions
of this Agreement, and in particular, confirms to the Company that all of the representations set
forth in Section 4 of this Agreement are true and correct as to such Affiliate as of the
date of the transfer to such Affiliate.
(ii) Prior to any proposed transfer pursuant to clause (B), (C), (D), (E) or (F) in
Section 4(j)(i) above, such Purchaser shall give written notice to the Company of such
Purchaser’s intention to effect such transfer. Each such notice shall describe the manner and
circumstances of the proposed transfer in sufficient detail, and shall be accompanied by the
applicable legal opinion, “no action” letter or seller and broker representation letters.
(iii) Notwithstanding the foregoing provisions of this Section 4(j), no registration
statement, legal opinion or “no action” letter shall be necessary for a transfer of the Purchased
Securities or the Warrant Shares (A) by a Purchaser that is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date of this Agreement,
(B) by a Purchaser that is a limited liability company to a member of such limited
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liability company, (C) by a Purchaser that is a partnership or limited liability company to
the estate of any partner, retired partner, or member thereof or (D) by any partner or member of a
Purchaser that is a partnership or limited liability company by gift, will or intestate succession
to such partner or member’s spouse or to the siblings, lineal descendants, ancestors of such
partner or member or his or her spouse.
(i) Such Purchaser agrees that, to the extent necessary, the certificates for the Purchased
Shares and the Warrant Shares shall bear the following legend:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”) OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR
TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SECURITIES IS
EFFECTIVE UNDER THE SECURITIES ACT OR (II) THE TRANSACTION IS EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT AND, IF THE COMPANY REQUESTS, AN
OPINION SATISFACTORY TO THE COMPANY TO SUCH EFFECT HAS BEEN RENDERED BY
COUNSEL.”
Certificates evidencing the Purchased Shares and the Warrant Shares shall not contain any
legend, (i) while a registration statement (including the Registration Statement) covering the
resale of such security is effective under the Securities Act, (ii) following any sale of such
Purchased Shares or the Warrant Shares pursuant to Rule 144, (iii) if such Purchased Shares or the
Warrant Shares are eligible for sale under Rule 144(k) or (iv) if such legend is not required under
applicable requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the SEC). The Company shall cause its counsel to issue a
legal opinion to the Company’s transfer agent promptly after the date on which the Registration
Statement is declared effective (the “Effective Date”) if such legal opinion is required by the
Company’s transfer agent to effect the removal of the legend hereunder. If all or any portion of a
Purchased Warrant is exercised at a time when there is an effective registration statement to cover
the resale of the Warrant Shares, such Warrant Shares shall be issued free of all legends. The
Company agrees that following the Effective Date or at such time as such legend is no longer
required under this Section 4(k), it will, no later than five (5) Business Days following
the delivery by a Purchaser to the Company or to the Company’s transfer agent of a certificate
representing Purchased Shares or the Warrant Shares, as the case may be, issued with a restrictive
legend, deliver or cause to be delivered to such Purchaser a certificate representing such
Purchased Shares or the Warrant Shares, as the case may be, that is free from all restrictive and
other legends. The Company may not make any notation on its records or give instructions to any
transfer agent of the Company that enlarge the restrictions on transfer set forth in Section
4(j) or this Section 4(k).
Each Purchaser, severally and not jointly with the other Purchasers, agrees that the removal
of the restrictive legend from certificates representing the Purchased Shares or the
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Warrant Shares as set forth in this Section 4(k) is predicated upon such Purchaser’s
covenant that such Purchaser only will sell any Purchased Shares or Warrant Shares pursuant to
either the registration requirements of the Securities Act, including any applicable prospectus
delivery requirements, or an exemption therefrom.
In addition, such Purchaser agrees that the Company may place stop transfer orders with its
transfer agent with respect to such certificates in order to implement the restrictions on transfer
set forth in this Agreement. The appropriate portion of the legend and the stop transfer orders
will be removed promptly upon delivery to the Company of such satisfactory evidence as reasonably
may be required by the Company that such legend or stop transfer orders are not required to ensure
compliance with the Securities Act.
(ii) Such Purchaser agrees that the Purchased Warrants shall bear the following legend:
“THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”) OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR
TRANSFERRED UNLESS (I) A REGISTRATION STATEMENT COVERING SUCH SECURITIES IS
EFFECTIVE UNDER THE SECURITIES ACT OR (II) THE TRANSACTION IS EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT AND, IF THE COMPANY REQUESTS, AN
OPINION SATISFACTORY TO THE COMPANY TO SUCH EFFECT HAS BEEN RENDERED BY
COUNSEL.”
(m) Restrictions on Short Sales. Neither such Purchaser nor any Affiliate of such
Purchaser which (i) had knowledge of the transactions contemplated hereby, (ii) has or shares
discretion relating to such Purchaser’s investments or trading or information concerning such
Purchaser’s investments, including in respect of the Purchased Securities, or (iii) is subject to
such Purchaser’s review or input concerning such Affiliate’s investments or trading, has or will,
directly or indirectly, during the period beginning on the date on which X.X. Xxxxxxxxx, Towbin,
financial advisor to the Company, first contacted such Purchaser regarding the transactions
contemplated by this Agreement until the time of the filing of the Current Report of Form 8-K
required by Section 9(m), engage in (1) any “short sales” (as such term is defined in Rule
3b-3 promulgated under the Exchange Act) of the Common Stock, including, without limitation, the
maintaining of any short position with respect to, establishing or maintaining a “put equivalent
position” (within the meaning of Rule 16a-1(h) under the Exchange Act) with respect to, entering
into any swap, derivative transaction or other arrangement (whether any such
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transaction is to be settled by delivery of Common Stock, other securities, cash or other
consideration) that transfers to another, in whole or in part, any economic consequences or
ownership, or otherwise dispose of, any of the Purchased Securities or the Warrant Shares by such
Purchaser or (2) any hedging transaction which establishes a net short position with respect to the
Purchased Securities (clauses (1) and (2) together, a “Short Sale”); except for (A) Short Sales by
such Purchaser or Affiliate of such Purchaser which was, prior to the date on which such Purchaser
was first contacted by X.X. Xxxxxxxxx, Towbin regarding the transactions contemplated by this
Agreement, a market maker for the Common Stock, provided that such Short Sales are in the ordinary
course of business of such Purchaser or Affiliate of such Purchaser and are in compliance with the
Securities Act, the rules and regulations of the Securities Act and such other securities laws as
may be applicable, (B) Short Sales by such Purchaser or an Affiliate of such Purchaser which by
virtue of the procedures of such Purchaser are made without knowledge of the transactions
contemplated by this Agreement or (C) Short Sales by the Purchaser or an Affiliate of such
Purchaser to the extent that such Purchaser or Affiliate of such Purchaser is acting in the
capacity of a broker-dealer executing unsolicited third-party transactions.
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(a) Form D Filing; Registration of the Purchased Securities and Warrant Shares. The
Company hereby agrees that it shall:
(i) file in a timely manner a Form D relating to the sale of the Purchased Securities under
this Agreement, pursuant to Regulation D;
(ii) prepare and file with the SEC as soon as practicable and in no event later than thirty
(30) days following the Closing Date the (“Required Filing Date”), a registration statement on Form
S-3 or such other form that is available to the Company under the Securities Act (the “Registration
Statement”), to enable the resale of the Purchased Shares and the Warrant Shares (together with any
shares of Common Stock issued as a dividend or other distribution with respect to, or in exchange
for, or in replacement of, the Purchased Shares or the Warrant Shares, the “Registrable Shares”) by
the Purchasers from time to time. The Company shall use its commercially reasonable efforts to
cause the Registration Statement (x) to be declared effective as promptly as possible after filing,
but in any event, no later than the 120th day following the Closing Date (the “Required Effective
Date”), and (y) to remain continuously effective until the earlier of (1) the second anniversary of
the effective date of the Registration Statement, (2) the date on which all Registrable Shares
purchased by the Purchasers pursuant to this Agreement have been sold thereunder or (3) the date on
which the Registrable Shares become eligible for resale pursuant to Rule 144(k) promulgated under
the Securities Act (the “Registration Period”); provided, however, that if any Purchaser is an
“affiliate” of the Company (as defined in Rule 144(a)(1) of the Securities Act) on the second
anniversary of the effective date of the Registration Statement, the applicable time period for
purposes of clause (1) above shall be the third anniversary of the effective date of the
Registration Statement. If the Company receives notification from the SEC that the Registration
Statement will receive no action or review from the SEC, then the Company will use its commercially
reasonable efforts to cause the Registration Statement to become effective within five (5) Business
Days after such SEC notification;
(iii) prepare and file with the SEC such amendments (including post-effective amendments) and
supplements to the Registration Statement and the Prospectus (as defined below) used in connection
therewith as may be necessary to keep the Registration Statement effective at all times until the
end of the Registration Period;
(iv) furnish to the Purchasers, with respect to the Registrable Shares registered under the
Registration Statement, such reasonable number of copies of any prospectus in conformity with the
requirements of the Securities Act and such other documents as the Purchasers may reasonably
request in writing, in order to facilitate the public sale or other disposition of all or any of
the Registrable Shares by the Purchasers;
(v) use its commercially reasonable efforts to file documents required of the Company for
normal blue sky clearance in states specified in writing by the Purchasers; provided, however, that
the Company shall not be required to qualify to do business or consent to service of process in any
jurisdiction in which it is not now so qualified or has not so consented;
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(vi) promptly notify the Purchasers in writing of the effectiveness of the Registration
Statement on the same day the Registration Statement has been declared effective;
(vii) promptly notify the Purchasers in writing of the existence of any fact or the happening
of any event, during the Registration Period (but not as to the substance of any such fact or
event), that makes any statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto, or any document incorporated by reference therein
untrue, or that requires the making of any additions to or changes in the Registration Statement or
the Prospectus in order to make such statements not misleading; provided, however, that no notice
by the Company shall be required pursuant to this subsection (vii) in the event that the Company
either contemporaneously files a prospectus supplement to update the Prospectus or, if applicable,
a Current Report on Form 8-K or other appropriate Exchange Act report that is incorporated by
reference into the Registration Statement, which, in either case, contains the requisite
information with respect to such material event that results in such Registration Statement no
longer containing any such untrue or misleading statements;
(viii) furnish to each Purchaser upon written request, from the date of this Agreement until
the end of the Registration Period, one copy of its periodic reports filed with the SEC pursuant to
the Exchange Act and the rules and regulations promulgated thereunder; and
(ix) bear all expenses in connection with the procedures described in paragraphs (i) through
(viii) of this Section 5(a) and the registration of the Registrable Shares pursuant to the
Registration Statement, other than fees and expenses, if any, of legal counsel or other advisers to
the Purchasers or underwriting discounts, brokerage fees and commissions incurred by the
Purchasers, if any.
It shall be a condition precedent to the obligations of the Company to take any action
pursuant to this Section 5(a) with respect to Registrable Shares held by a Purchaser that
such Purchaser shall timely furnish to the Company a completed Registration Statement Questionnaire
on or before the Closing Date and such other written information regarding such Purchaser, the
Registrable Shares to be sold by such Purchaser and the intended method of disposition of the
Registrable Shares as the Company may deem necessary or advisable to effect the registration of the
Registrable Shares. The Purchasers shall update such information as and when necessary by written
notice to the Company.
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first day following the Required Filing Date or Required Effective Date, as the case
may be, until, but excluding, the actual filing date or the date the SEC declares the Registration
Statement effective, as the case may be. Such liquidated damages shall be payable in cash within
ten (10) days of the end of each one (1) month anniversary of the Required Filing Date or Required
Effective Date, as the case may be.
(i) The Purchasers agree that they will not offer to sell or make any sale, assignment,
pledge, hypothecation or other transfer with respect to the Registrable Shares that would
constitute a sale within the meaning of the Securities Act except pursuant to either (1) the
Registration Statement in the manner described in the “Plan of Distribution” therein, (2) Rule 144
of the Securities Act or (3) any other exemption from registration under the Securities Act, and
that they will promptly notify the Company of any changes in the information set forth in the
Registration Statement after it is prepared regarding the Purchaser or its plan of distribution to
the extent required by applicable law.
(ii) In addition to any suspension rights under paragraph (iii) below, upon the happening of
any pending corporate development, public filing with the SEC or similar event that, in the good
faith judgment of the Board of Directors, renders it advisable to suspend the use of the Prospectus
or upon the reasonable request by an underwriter in connection with an underwritten public offering
of the Company’s securities, the Company may suspend use of the Prospectus on written notice to
each Purchaser (which notice will not disclose the content of any material non-public information
and will indicate the date of the beginning and end of the intended period of suspension, if
known), in which case each Purchaser shall discontinue any disposition of Registrable Shares
covered by the Registration Statement or Prospectus until copies of a supplemented or amended
Prospectus are distributed to the Purchasers or until the Purchasers are advised in writing by the
Company that sales of Registrable Shares under the applicable Prospectus may be resumed and have
received copies of any additional or
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supplemental filings that are incorporated or deemed incorporated by reference in any such
Prospectus. Any such suspension under this paragraph (ii) shall not exceed sixty (60) days in any
one hundred-eighty (180) day period or ninety (90) days in any twelve-month period. The suspension
and notice thereof described in this Section 5(c)(ii) shall be held by each Purchaser in
strictest confidence and shall not be disclosed by such Purchaser.
(iii) Subject to paragraph (iv) below, in the event of: (1) any request by the SEC or any
other federal or state governmental authority during the Registration Period for amendments or
supplements to a Registration Statement or related prospectus or for additional information; (2)
the issuance by the SEC or any other federal or state governmental authority of any stop order
suspending the effectiveness of a Registration Statement or the initiation of any proceedings for
that purpose; (3) the receipt by the Company of any notification with respect to the suspension of
the qualification or exemption from qualification of any of the Registrable Shares for sale in any
jurisdiction or the initiation of any proceeding for such purpose; or (4) any event or circumstance
which necessitates the making of any changes in the Registration Statement or Prospectus, or any
document incorporated or deemed to be incorporated therein by reference, so that, in the case of
the Registration Statement, it will not contain any untrue statement of a material fact or any
omission to state a material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the Prospectus, it will not contain any untrue
statement of a material fact or any omission to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances under which they
were made, not misleading, then the Company shall deliver a certificate in writing to the
Purchasers (the “Suspension Notice”) to the effect of the foregoing (which notice will not disclose
the content of any material non-public information and will indicate the date of the beginning and
end of the intended period of suspension, if known), and, upon receipt of such Suspension Notice,
the Purchasers will discontinue disposition of Registrable Shares covered by to the Registration
Statement or Prospectus (a “Suspension”) until the Purchasers’ receipt of copies of a supplemented
or amended Prospectus prepared and filed by the Company, or until the Purchasers are advised in
writing by the Company that the current Prospectus may be used and have received copies of any
additional or supplemental filings that are incorporated or deemed incorporated by reference in any
such prospectus. In the event of any Suspension, the Company will use its commercially reasonable
efforts to cause the use of the Prospectus so suspended to be resumed as soon as possible after
delivery of a Suspension Notice to the Purchasers. The Suspension and Suspension Notice described
in this Section 5(c)(iii) shall be held in strictest confidence by each Purchaser and shall
not be disclosed by such Purchaser.
(iv) Provided that a Suspension is not then in effect, the Purchasers may sell Registrable
Shares under the Registration Statement, provided that the selling Purchaser arranges for delivery
of a current Prospectus to the transferee of such Registrable Shares to the extent such delivery is
required by applicable law.
(v) In the event of a sale of Registrable Shares by a Purchaser, such Purchaser must also
deliver to the Company’s transfer agent, with a copy to the Company, a certificate of subsequent
sale reasonably satisfactory to the Company, so that ownership of the Registrable Shares may be
properly transferred. The Company will cooperate to facilitate the timely preparation and delivery
of certificates (unless otherwise required by applicable law) representing Registrable Shares sold.
-19-
(i) Indemnification by the Company. The Company agrees to indemnify and hold harmless
each of the Purchasers, their respective officers, directors, agents and employees, and each
person, if any, who controls any Purchaser within the meaning of the Securities Act, against any
losses, claims, damages, liabilities or expenses, joint or several, to which such Purchasers, such
officers, directors, agents or employees, or such controlling persons may become subject, under the
Securities Act, the Exchange Act or any other federal or state statutory law or regulation, or at
common law or otherwise (including in settlement of any litigation, if such settlement is effected
with the written consent of the Company, which consent shall not be unreasonably withheld), insofar
as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as
contemplated below) arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement, the Prospectus, or any amendment or
supplement to the Registration Statement or Prospectus, or arise out of or are based upon the
omission or alleged omission to state in any of them a material fact required to be stated therein
or necessary to make the statements in any of them, in light of the circumstances under which they
were made, not misleading, and will reimburse each Purchaser, each of its respective directors,
officers, agents and employees, and each such controlling person for any reasonable out-of-pocket
legal and other expenses incurred by such Purchaser, such directors, officers, agents or employees,
or such controlling persons in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action; provided, however, that the
Company will not be liable for any such case to the extent that any such loss, claim, damage,
liability, expense or action arises out of or is based upon (1) an untrue statement or alleged
untrue statement or omission or alleged
-20-
omission in the Registration Statement, the Prospectus or any amendment to or supplement of
the Registration Statement or the Prospectus made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of the Purchaser demanding such
indemnification expressly for use in the Registration Statement or the Prospectus, (2) the failure
of such Purchaser to comply with the covenants and agreements contained in this Agreement
respecting resale of the Purchased Securities or the Warrant Shares or (3) any untrue statement or
omission of a material fact required to make such statement not misleading in any Prospectus that
is corrected in any subsequent Prospectus that was delivered to such Purchaser before the pertinent
sale or sales by such Purchaser.
(1) Promptly after receipt by an indemnified party under this Section 5(e) of notice
of the threat or commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 5(e), promptly
notify the indemnifying party in writing of the claim and provide to the indemnifying
-21-
party copies of all written documents relating to such threatened or commenced action; but the
omission so to notify the indemnifying party will not relieve it from any liability which it may
have to any indemnified party for contribution or otherwise under the indemnity agreement contained
in this Section 5(e) or otherwise, to the extent it is not prejudiced as a result of such
failure.
(2) In case any such action is brought against any indemnified party and such indemnified
party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be
entitled to participate in, and, to the extent that it may wish, jointly with all other
indemnifying parties similarly notified, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party; provided, however, that if the defendants in any such
action include both the indemnified party and the indemnifying party and counsel to the indemnified
party shall have reasonably concluded that there may be a conflict between the positions of the
indemnifying party and the indemnified party in conducting the defense of any such action or that
there may be legal defenses available to it or other indemnified parties that are different from or
additional to those available to the indemnifying party, the indemnified party or parties shall
have the right to select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or parties. Upon
receipt of notice from the indemnifying party to such indemnified party of its election so to
assume the defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this Section 5(e) for
any legal or other expenses subsequently incurred by such indemnified party in connection with the
defense thereof unless:
a) the indemnified party shall have employed such counsel in connection with the assumption of
legal defenses in accordance with the proviso to the preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of more than one separate
counsel, reasonably approved by such indemnifying party, representing all of the indemnified
parties who are parties to such action); or
b) the indemnifying party shall not have employed counsel reasonably satisfactory to the
indemnified party to represent the indemnified party within a reasonable time after notice of
commencement of the action against the indemnified party,
in each of which cases the reasonable out-of-pocket fees and expenses of counsel for the
indemnified party shall be at the expense of the indemnifying party.
(1) in such proportion as is appropriate to reflect the relative faults of the Company and the
Purchasers in connection with the statements or omissions or
-22-
inaccuracies in the representations and warranties in this Agreement that resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant equitable
considerations, or
(2) if the allocation provided by clause (1) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative faults referred to in clause (1)
above but also the relative benefits received by the Company and the Purchasers from the sale of
the Purchased Securities.
The respective relative benefits received by the Company on the one hand and each Purchaser on
the other shall be deemed to be in the same proportion as the amount to which the consideration
paid by such Purchaser to the Company pursuant to this Agreement for the Registrable Shares
purchased by such Purchaser that were sold pursuant to the Registration Statement bears to the
difference (the “Difference”) between the amount such Purchaser paid for the Registrable Shares
that were sold pursuant to the Registration Statement and the amount received by such Purchaser
from such sale. The relative fault of the Company and each Purchaser shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to information supplied by the
Company or by such Purchaser and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and expenses referred to above shall
be deemed to include, subject to the limitations set forth in Section 5(e)(iii), any
reasonable legal or other fees or expenses incurred by such party in connection with investigating
or defending any such action or claim. The provisions set forth in Section 5(e)(iii) with
respect to the notice of the threat or commencement of any threat or action shall apply if a claim
for contribution is to be made under this Section 5(e)(iv); provided, however, that no
additional notice shall be required with respect to any threat or action for which notice has been
given under Section 5(e)(iii) for purposes of indemnification. The Company and each
Purchaser agree that it would not be just and equitable if contribution pursuant to this
Section 5(e)(iv) were determined solely by pro rata allocation (even if the Purchasers were
treated as one entity for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in this paragraph. Notwithstanding the
provisions of this Section 5(e)(iv), no Purchaser shall be required to contribute any
amount in excess of the amount by which the Difference exceeds the amount of any damages that such
Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement
or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person
who is not guilty of such fraudulent misrepresentation. The Purchasers’ obligations to contribute
pursuant to this Section 5(e)(iv) are several and not joint..
-23-
from the Escrow Agent, the Company will promptly provide notice of such removal or resignation to
the Purchasers. If the Escrow Agent is removed or resigns as Escrow Agent under the Escrow
Agreement, the Company agrees to appoint a nationally recognized banking or financial institution,
having a trust office in Houston, Texas or New York, New York, as the successor escrow agent under
the Escrow Agreement.
6. ADVISORY FEE. The Purchasers acknowledge that the Company intends to pay to X.X.
Xxxxxxxxx, Towbin, as financial advisor, a fee in respect of the sale of the Purchased Securities.
Each of the parties to this Agreement hereby represents that, on the basis of any actions and
agreements by it, there are no other brokers or finders entitled to compensation in connection with
the sale of the Purchased Securities to the Purchasers. The Company shall indemnify and hold
harmless the Purchasers from and against all fees, commission or other payments owing by the
Company to X.X. Xxxxxxxxx, Towbin or any other Person acting on behalf of the Company hereunder.
Each Purchaser shall, severally and not jointly, indemnify and hold harmless the Company from and
against all fees, commission or other payments owing by such Purchasers to any Person, other than
X.X. Xxxxxxxxx, Towbin, acting on behalf of the Purchasers hereunder.
7. CONDITIONS TO THE PURCHASERS’ OBLIGATIONS AT CLOSING. The obligations of the
Purchasers to consummate the transactions contemplated herein are subject to the fulfillment or
waiver, on or before the Closing, of each of the following conditions:
-24-
8. CONDITIONS TO THE COMPANY’S OBLIGATIONS AT CLOSING. The obligations of the Company
to consummate the transactions contemplated herein are subject to the fulfillment or waiver, on or
before the Closing, of each of the following conditions:
-25-
(b) Governing Law. This Agreement will be governed by and construed and enforced
under the internal laws of the State of New York, without reference to principles of conflict of
laws or choice of laws. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT
TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR
ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
-26-
If to the Company:
Zix Corporation
0000 X. Xxxxxxx Xxxxxx
Xxxxx 0000, XX00
Xxxxxx, Xxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxx, General Counsel
Facsimile: 214.515.7385
0000 X. Xxxxxxx Xxxxxx
Xxxxx 0000, XX00
Xxxxxx, Xxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxx, General Counsel
Facsimile: 214.515.7385
with a copy to:
Xxxxx Xxxxx L.L.P.
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attn: Xxxxx Xxxxxxx
Facsimile: 214.661.4419
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attn: Xxxxx Xxxxxxx
Facsimile: 214.661.4419
(g) Amendments and Waivers. This Agreement may be amended and the observance of any
term of this Agreement may be waived only with the written consent of the Company and the
Purchasers holding at least a majority of the total aggregate number of the Purchased Shares and
Warrant Shares then outstanding (excluding any shares then already sold
-27-
to the public pursuant to Rule 144 or otherwise); provided, however, that if the amendment or
waiver would materially change or adversely affect the rights or obligations of any Purchaser under
this Agreement, the written consent of the Company and each Purchaser holding Purchased Shares and
Warrant Shares (excluding any Purchased Shares or Warrant Shares sold to the public pursuant to
Rule 144 or otherwise) shall be required to effect such amendment or waiver. Any amendment
effected in accordance with this Section 9(g) will be binding upon the Purchasers, the
Company and their respective successors and assigns.
(m) 8-K Filing and Publicity. As soon as practicable following the execution of this
Agreement, but in no event later than 8:30 a.m., eastern time, on the day following the Execution
Date, the Company shall file a Current Report on Form 8-K with the SEC describing the terms of the
transactions contemplated by this Agreement and attaching this Agreement and the press release
referred to below as exhibits to such filing (the “8-K Filing” including all attachments). Neither
the Company nor any Purchaser shall issue any press releases or any other public statements (other
than any filings required pursuant to applicable securities laws) with respect to the transactions
contemplated by this Agreement; provided, however, that the Company shall be entitled, without the
prior approval of any Purchaser, to issue any press release
-28-
or make any other public disclosure (including a press release (concerning the offering of the
Purchased Securities) pursuant to Rule 135(c) under the Securities Act) with respect to such
transactions (i) in substantial conformity with the 8-K Filing and (ii) as is required by
applicable laws and regulations; and, provided further, that no such release may identify a
Purchaser unless such Purchaser has consented thereto in writing, or as required by law.
[Remainder of page intentionally left blank.]
-29-
ZIX CORPORATION |
||||
By: | /s/ Xxxx Xxxxxx | |||
Name: | Xxxx Xxxxxx | |||
Title: | Chief Financial Officer | |||
[PURCHASER SIGNATURE PAGES TO FOLLOW]
Signature Page to Securities Purchase Agreement
SIGNATURE PAGE TO
DATED AS OF AUGUST 9, 2005
BY AND AMONG
ZIX CORPORATION
AND EACH PURCHASER NAMED THEREIN
The undersigned hereby executes and delivers to Zix Corporation, the Securities Purchase
Agreement (the “Agreement”) to which this signature page is attached effective as of the date of
the Agreement, which Agreement and signature page, together with all counterparts of such Agreement
and signature pages of the other Purchasers named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
Number of Purchased Warrants Purchased : |
Total Number of Units Purchased: |
“Purchaser” |
Signature: |
Name: |
Title: |
Address: |
Telephone: |
Facsimile: |
E-mail: |
Tax ID Number: |
Signature Page to Securities Purchase Agreement
* | Denotes Purchaser purchasing at Insider Per Unit Price |
SCHEDULE
A — SCHEDULE OF PURCHASERS
APPENDIX I — STOCK CERTIFICATE AND WARRANT QUESTIONNAIRE
APPENDIX II — REGISTRATION STATEMENT/SUITABILITY QUESTIONNAIRE
EXHIBIT A — FORM OF WARRANT
EXHIBIT B — DISCLOSURE LETTER
EXHIBIT C — FORM OF OPINION
EXHIBIT D — FORM OF ESCROW AGREEMENT