EXHIBIT 4.1
SECURITIES PURCHASE AGREEMENT
SERIES A CONVERTIBLE PREFERRED STOCK
SERIES B CONVERTIBLE PREFERRED STOCK
COMMON STOCK WARRANTS
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
September 16, 2002, is made by and between Zix Corporation, a Texas corporation
(the "Company"), the investors listed on Schedule A to this Agreement (each, a
"Series A Investor" and, collectively, the "Series A Investors"), and the
investors listed on Schedule B to this Agreement (each, a "Series B Investor"
and, collectively, the "Series B Investors"). The Series A Investors and the
Series B Investors are sometimes collectively referred to in this Agreement as
the "Investors."
In consideration of the mutual representations, warranties, covenants
and agreements set forth in this Agreement, the Company and the Investors hereby
agree as follows:
ARTICLE I.
PURCHASE AND SALE OF CERTAIN SECURITIES
Section 1.1. Authorization of Preferred Stock. The Restated Articles of
Incorporation of the Company, filed with the Secretary of State of the State of
Texas on December 4, 2001 (as amended, the "Charter"), authorizes the Company to
issue 185,000,000 shares of its capital stock, divided into two classes: (a)
175,000,000 shares of Common Stock, par value $0.01 per share (the "Common
Stock"), and (b) 10,000,000 shares of Preferred Stock, par value $1.00 per share
(the "Preferred Stock"). The Charter authorizes the Board of Directors of the
Company (the "Board") to provide for the issuance of the Preferred Stock from
time to time in one or more series, to establish the number of shares to be
included in each series, and to fix the designations, powers, relative rights,
qualifications, preferences, limitations and restrictions of the shares of each
such series. Pursuant to a resolution duly adopted by the Board, the Company
will file, prior to the Closing (as defined in Section 7.1), with the Secretary
of State of the State of Texas, (i) a Statement of Designations of the Series A
Convertible Preferred Stock of Zix Corporation, in the form attached hereto as
Exhibit A (the "Series A Statement of Designations"), providing for the issuance
of a series of 819,886 shares of Preferred Stock designated as "Series A
Convertible Preferred Stock" (the "Series A Preferred"), having the powers,
relative rights, qualifications, preferences, limitations and restrictions as
set forth in the Series A Statement of Designations, and (ii) a Statement of
Designations of the Series B Convertible Preferred Stock of Zix Corporation in
the form attached hereto as Exhibit B (the "Series B Statement of
Designations"), providing for the issuance of a series of 1,304,815 shares of
Preferred Stock designated as "Series B Convertible Preferred Stock" (the
"Series B Preferred"), having the
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powers, relative rights, qualifications, preferences, limitations and
restrictions as set forth in the Series B Statement of Designations.
Section 1.2. Purchase and Sale of Series A Preferred. On the terms and
subject to the conditions set forth in this Agreement, at the Closing, the
Company will issue and sell to the Series A Investors, and the Series A
Investors will purchase from the Company, up to an aggregate of 819,886 shares
of the Series A Preferred for a purchase price of $3.92 per share. The number of
shares of Series A Preferred to be purchased by each Series A Investor and the
aggregate purchase price to be paid by each Series A Investor is set forth on
Schedule A.
Section 1.3. Purchase and Sale of Series B Preferred. On the terms and
subject to the conditions set forth in this Agreement, at the Closing, the
Company will issue and sell to the Series B Investors, and the Series B
Investors will purchase from the Company, up to an aggregate of 1,304,815 shares
of the Series B Preferred for a purchase price of $3.60 per share. The number of
shares of Series B Preferred to be purchased by each Series B Investor and the
aggregate purchase price to be paid by each Series B Investor is set forth on
Schedule B.
Section 1.4. Purchase and Sale of Warrants. On the terms and subject to
the conditions set forth in this Agreement, at the Closing, the Company will
issue and sell to the Series A Investors, and the Series A Investors will
purchase from the Company, warrants, in the form attached hereto as Exhibit C
(the "Warrants"), to purchase up to an aggregate of 288,244 shares of Common
Stock ("Warrant Shares") for a purchase price of $0.125 per Warrant Share. On
the terms and subject to the conditions set forth in this Agreement, at the
Closing, the Company will issue and sell to the Series B Investors, and the
Series B Investors will purchase from the Company, Warrants to purchase up to an
aggregate of 421,284 Warrant Shares for a purchase price of $0.125 per Warrant
Share. The number of Warrant Shares for which the Warrant issued and sold to
each Investor will be exercisable and the aggregate purchase price to be paid by
each Investor for the Warrant issued thereto is set forth on Schedule A or
Schedule B, as applicable.
Section 1.5. Separate Agreements. The Company's agreement with each
Investor is a separate agreement, and the sale of Warrants and shares of Series
A Preferred or Series B Preferred, as the case may be, to each Investor is a
separate sale.
Section 1.6. Use of Proceeds. The Company will use the proceeds from
the sale of the Series A Preferred, the Series B Preferred and the Warrants
(collectively, the "Securities") for working capital and other general corporate
purposes.
Section 1.7. Additional Financing Transaction. Simultaneously with the
Closing, the Company will enter into a financing transaction (the "Additional
Financing Transaction"), pursuant to which the Company will sell certain
convertible notes (the "Notes") and warrants (together with the Notes, the
"Additional Securities") for an aggregate purchase price of $8,000,000.
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ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As a material inducement to the Investors to enter into and perform
their respective obligations under this Agreement, the Company hereby represents
and warrants to the Investors that, except as set forth in the "Schedule of
Exceptions" attached hereto as Schedule C:
Section 2.1. Organization. The Company is a corporation, duly
organized, validly existing and in good standing under the laws of the State of
Texas. The Company is duly qualified or authorized to do business as a foreign
corporation, and is in good standing, under the laws of each other jurisdiction
where the failure to be so qualified or authorized would have a material adverse
effect on the properties, assets, financial condition, business or operations of
the Company. The Company has full corporate power and authority to own, lease
and operate its properties and to conduct its business as presently conducted.
Section 2.2. Enforceability. The Company has full corporate power and
authority to execute and deliver this Agreement, to perform its respective
obligations under this Agreement and to consummate the transactions contemplated
by this Agreement. The execution and delivery by the Company of this Agreement,
the performance by the Company of its obligations under this Agreement and the
consummation by the Company of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate action. This Agreement has
been duly and validly executed and delivered by the Company and constitutes the
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except (a) as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally, (b) as such enforceability may be limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies and (c) to the extent that the choice of law provisions contained in
this Agreement may be limited by applicable laws.
Section 2.3. No Conflicts. The execution and delivery by the Company of
this Agreement, the performance by the Company of its obligations under this
Agreement and the consummation by the Company of the transactions contemplated
by this Agreement do not, and will not,
(a) violate any provision of applicable law;
(b) violate any provision of the Charter or Bylaws of the
Company;
(c) require any consent, waiver, order, approval or
authorization of, registration, qualification, declaration or filing
with or notification to any government or governmental or regulatory
body thereof, whether federal, state, local or foreign, or any agency,
department or instrumentality thereof, or any court (each, a
"Governmental Authority"), or any self-regulatory organization to which
the Company or its securities are subject, or any other person or legal
entity, other than (i) filings under federal and state securities laws
and the filing of a Listing of Additional Shares with The Nasdaq
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Stock Market, and (ii) consents, waivers, approvals, authorizations,
declarations, filings or notifications that have been obtained or will
be obtained prior to the Closing;
(d) violate, conflict with, constitute a default under or
breach (whether with the passage of time, the giving of notice or
otherwise) any term, condition or provision of any (i) material
contract to which the Company is a party or by which it or any of its
assets or properties are bound or (ii) any order, injunction, judgment,
decree, ruling, writ, assessment or arbitration award by a Governmental
Authority of competent jurisdiction to which the Company or any of its
material assets or properties are subject; or
(e) result in the creation of any security interest, mortgage,
deed of trust, lien, charge or other encumbrance with respect to any
material asset or property of the Company.
Section 2.4. Capitalization.
(a) As of the date hereof, the authorized capital stock of the
Company consists of (i) 175,000,000 shares of Common Stock, of which as
of the date hereof, (A) 18,119,284 shares are issued and outstanding,
(B) 6,589,583 shares are issuable and reserved for issuance upon the
exercise of options granted pursuant to the Company's stock option,
restricted stock and stock purchase plans, (C) 1,267,797 shares are
reserved for issuance upon the exercise of options that are available
for grant pursuant to the Company's stock option, restricted stock and
stock purchase plans and (D) 3,235,279 shares are issuable and reserved
for issuance pursuant to securities (other than the Securities, the
Additional Securities and the options described in clause (B) and
clause (C) above) exercisable or exchangeable for, or convertible into,
shares of Common Stock and (ii) 10,000,000 shares of Preferred Stock,
$1.00 par value, of which as of the date hereof, without giving effect
to the transactions contemplated by this Agreement, no shares are
issued and outstanding. All of such outstanding or issuable shares have
been, or upon issuance will be, (x) validly issued and are, or will be,
fully paid and nonassessable and (y) issued in accordance with all
applicable federal and state securities laws.
(b) No shares of the Company's capital stock are subject to
preemptive rights or any other similar rights or any liens or
encumbrances suffered or permitted by the Company.
(c) Other than the Additional Securities, there are no
outstanding debt instruments for borrowed money issued by the Company.
(d) Other than the Securities and the Additional Securities,
there are no outstanding options, warrants, scrip, rights to subscribe
to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exercisable for, any shares of
capital stock of the Company, or contracts, commitments, understandings
or arrangements by which the Company is or may become bound to issue
additional shares of capital stock of the Company or options, warrants,
scrip, rights to subscribe to,
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calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exercisable for, any shares of
capital stock of the Company.
(e) There are no agreements or arrangements under which the
Company is obligated to register the sale of any of its securities
under the Securities Act of 1933, as amended (the "Securities Act"),
other than the Registration Rights Agreement (as defined in Section
4.2) and the registration rights agreement executed in connection with
the Additional Financing Transaction.
(f) Other than the Securities and the Additional Securities,
(i) there are no outstanding securities or instruments of the Company
that contain any redemption or similar provisions, and (ii) there are
no contracts, commitments, understandings or arrangements by which the
Company is or may become bound to redeem a security of the Company.
(g) There are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the
issuance of the Securities as described in this Agreement.
(h) The Company does not have any stock appreciation rights or
"phantom stock" plans or agreements or any similar plan or agreement.
(i) The Charter and Bylaws of the Company, as amended and as
in effect on the date hereof, are filed as exhibits to the SEC
Documents (as defined in Section 2.7).
(j) The Company is not a party to or subject to any agreement
or understanding (and, to the Company's knowledge, there is no
agreement or understanding) between any persons or entities that
affects or relates to the voting or giving of written consents (i) with
respect to any security of the Company or (ii) by a director of the
Company.
Section 2.5. Valid Issuance of Securities. The Series A Preferred has
the powers, relative rights, qualifications, preferences, limitations and
restrictions described in the Series A Statement of Designations. The Series B
Preferred has the powers, relative rights, qualifications, preferences,
limitations and restrictions described in the Series B Statement of
Designations. The issuance, sale and delivery of the Securities in accordance
with this Agreement, and the issuance and delivery of the shares of Common Stock
issuable upon conversion or exercise, as the case may be, of the Securities (the
"Conversion Common"), have been duly authorized by all necessary corporate
action on the part of the Company, and all shares of Series A Preferred, Series
B Preferred and Conversion Common have been duly reserved for issuance. The
shares of Series A Preferred and Series B Preferred purchased by the Investors
pursuant to this Agreement, when issued, sold and delivered against payment
therefor in accordance with the provisions of this Agreement, will be duly and
validly issued, fully paid and non-assessable, and will be free of restrictions
on transfer, other than restrictions on transfer under applicable state and
federal securities laws. The Conversion Common, when issued upon conversion of
the Series A Preferred in accordance with the Series A Statement of
Designations, or upon conversion of the Series B Preferred in accordance with
the Series B Statement of Designations, or upon exercise
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of the Warrants in accordance with the terms thereof, as applicable, will be
duly and validly issued, fully paid and non-assessable, and will be free of
restrictions on transfer, other than restrictions on transfer under applicable
state and federal securities laws.
Section 2.6. Securities Laws Compliance. Based in part on the
representations made by each of the Investors in Article III, (a) other than
filings under federal and state securities laws and the filing of a Listing of
Additional Shares with The Nasdaq Stock Market, no consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any Governmental Authority is required on the part of the Company
in connection with the offer, issuance, sale and delivery of the Securities (and
the Conversion Common issuable upon the conversion or exercise, as the case may
be, of the Securities) and (b) the offer, issuance, sale and delivery of the
Securities (and the Conversion Common issuable upon the conversion or exercise,
as the case may be, of the Securities) will be in compliance with the
registration requirements of applicable federal and state securities laws. The
Company covenants that neither the Company nor any authorized agent acting on
its behalf will take any action hereafter that would cause the loss of such
exemptions.
Section 2.7. SEC Filings. The Company has filed all forms, reports and
documents required to be filed by the Company with the United States Securities
and Exchange Commission (the "SEC") as of the date hereof. Each Investor has had
access to true and complete copies of the following materials (collectively, the
"SEC Documents"): (a) the Company's Annual Report on Form 10-K/A, for the year
ended December 31, 2001, (b) the Company's Quarterly Report on Form 10-Q/A, for
the quarterly period ended March 31, 2002 and the Company's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 2002, and (c) the Company's
definitive proxy statement for its annual meeting of stockholders held in 2002.
As of their respective dates, the SEC Documents complied in all material
respects with the applicable requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and the rules and regulations of the SEC
thereunder, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Since June 30, 2002, there has been no
material adverse change and no material adverse development in the business,
properties, assets, operations, results of operations, financial conditions or
prospects of the Company.
Section 2.8. Litigation. There is no action, suit, proceeding, inquiry
or investigation before or by any court, public board, government agency,
self-regulatory organization or body pending against or affecting the Company,
the Common Stock or any of the Company's officers or directors in their
capacities as such. To the knowledge of the Company there is no action, suit,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body threatened against or
affecting the Company, the Common Stock or any of the Company's officers or
directors in their capacities as such. To the knowledge of the Company, none of
the directors or officers of the Company have been involved in
securities-related litigation during the past five (5) years.
Section 2.9. Financial Statements. The financial statements of the
Company, including the notes thereto, included in the SEC Documents (the
"Financial Statements") present fairly, in all material respects, the
consolidated financial position of the Company as of their respective
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dates and the results of the Company's operations and cash flows for the
respective periods (subject, in the case of unaudited statements, to normal,
year-end adjustments), complied as to form in all material respects with United
States generally accepted accounting procedures ("GAAP") and with the published
rules and regulations of the SEC with respect thereto, and have been prepared in
accordance with GAAP applied on a basis consistent throughout the periods
indicated and consistent with each other (except as may be indicated in the
notes thereto). There has been no material change in the Company's accounting
policies except as described in the notes to the Financial Statements.
Section 2.10. Employee Relations. The Company is not involved in any
union labor dispute nor, to the knowledge of the Company, is any such dispute
threatened. None of the Company's employees is a member of a union that relates
to such employee's relationship with the Company, the Company is not a party to
a collective bargaining agreement, and the Company believes that its relations
with its employees are good. No executive officer (as defined in Rule 501(f) of
the Securities Act) has notified the Company that such officer intends to leave
the Company or otherwise terminate such officer's employment with the Company.
No executive officer, to the best knowledge of the Company, is, or is now
expected to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does not
subject the Company to any liability with respect to any of the foregoing
matters.
Section 2.11. Intellectual Property Rights. The Company owns or
possesses adequate rights or licenses to use all trademarks, trade names,
service marks, service ▇▇▇▇ registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights necessary
to conduct its business as now conducted and as presently proposed to be
conducted. None of the Company's trademarks, trade names, service marks, service
▇▇▇▇ registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental authorizations, trade secrets or
other intellectual property rights have expired or terminated, or are expected
to expire or terminate within two years from the date of this Agreement. The
Company does not have any knowledge of any infringement by the Company of
trademarks, trade names, service marks, service ▇▇▇▇ registrations, service
names, patents, patent rights, copyrights, inventions, licenses, trade secrets
or other intellectual property rights of others, or of any development of
similar or identical trade secrets or technical information by others. There is
no claim, action or proceeding being made or brought against, or to the
Company's knowledge, being threatened against, the Company regarding its
trademarks, trade names, service marks, service ▇▇▇▇ registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorization, trade secrets or other intellectual property rights,
or infringement of the intellectual property rights of others. The Company is
unaware of any facts or circumstances that might give rise to any of the
foregoing. The Company has taken reasonable security measures to protect the
secrecy, confidentiality and value of all of its intellectual properties. The
Company does not believe that it is or will be necessary to use any inventions
or works of authorship of its employees (or persons it currently intends to
hire) made outside of their employment by the Company.
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Section 2.12. Environmental Laws. The Company (a) is in compliance with
any and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (b) has received all permits, licenses or other
approvals required of it under applicable Environmental Laws to conduct its
businesses and (c) is in compliance with all terms and conditions of any such
permit, license or approval, except where, in each of the three foregoing cases,
the failure to so comply would not have, either individually or in the
aggregate, a material adverse effect on the properties, assets, financial
condition, business or operations of the Company.
Section 2.13. Permits. The Company has all written approvals, consents,
franchises, licenses, permits, certificates or other authorizations required by
applicable law ("Permits") necessary for the conduct of the Company's business,
as currently conducted, all such Permits are in full force and effect and the
Company is in compliance in all material respects with the requirements of all
such Permits. No loss or expiration of any Permit is pending, threatened or
reasonably foreseeable, other than expiration of Permits that may be renewed in
the ordinary course of business without lapsing.
Section 2.14. Title. The Company has good and marketable title in fee
simple to all real property and good and marketable title to all personal
property owned by it that is material to the business of the Company, in each
case free and clear of all liens, encumbrances and defects except such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company. Any real property
and facilities held under lease by the Company are held by it under valid,
subsisting and enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property and
facilities by the Company. The properties and assets of the Company owned or
leased by the Company constitute all of the real property, personal property and
interests in real and personal property that are related to or reasonably
necessary for the operation of the business of the Company, as currently
conducted.
Section 2.15. Placement Agent. The Company acknowledges that it has
engaged SoundView Technology Group as placement agent in connection with the
sale of the Securities, which placement agent may have formally or informally
engaged other agents on its behalf. The Company will be responsible for the
payment of any placement agent's fees or broker's commissions relating to or
arising out of the transactions contemplated hereby. The Company will pay, and
hold each Investor harmless against, any liability, loss or expense (including,
without limitation, attorneys' fees and out of pocket expenses) arising in
connection with any such claim.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor hereby represents and warrants, severally and not
jointly, to the Company that:
Section 3.1. Enforceability. Such Investor has full legal capacity,
power and authority to execute and deliver this Agreement, to perform his
respective obligations under this Agreement and to consummate the transactions
contemplated by this Agreement. This Agreement has been duly and validly
executed and delivered by such Investor and constitutes the legal, valid and
binding obligations of such Investor enforceable against him in accordance with
its terms, except (a) as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally, (b) as such
enforceability may be limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (c) to the extent
that the choice of law provisions contained in this Agreement may be limited by
applicable laws.
Section 3.2. Investment Intent. Such Investor is acquiring the
Securities (and the Conversion Common issuable upon the conversion or exercise,
as the case may be, of the Securities) for investment for such Investor's own
account, not as a nominee or agent, and not with a view to, or for resale in
connection with, any distribution or public offering thereof, as defined in the
Securities Act.
Section 3.3. Shares Not Registered. Such Investor understands and
acknowledges that the Securities sold pursuant to this Agreement will not be
registered under the Securities Act or qualified under any applicable blue sky
laws on the grounds that the offering and sale of securities contemplated by
this Agreement are exempt from registration under the Securities Act and exempt
from qualification pursuant to the applicable provisions of such blue sky laws,
and that the Company's reliance upon such exemptions is predicated upon such
Investor's representations set forth in this Agreement. Such Investor
acknowledges and understands that the Securities (and the Conversion Common
issuable upon the conversion or exercise, as the case may be, of the Securities)
must be held indefinitely unless it is subsequently registered under the
Securities Act and qualified under applicable blue sky laws or an exemption from
such registration and such qualification is available.
Section 3.4. Knowledge and Experience. Such Investor (a) has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of such Investor's prospective investment in the
Securities, (b) has the ability to bear the economic risks (including the risk
of total loss) of such Investor's prospective investment, (c) has been furnished
with and has had access to such information as such Investor has considered
necessary to make a determination as to the purchase of the Securities together
with such additional information as is necessary to verify the accuracy of the
information supplied and (d) has not been offered the Securities by any form of
advertisement, article, notice, or other communication published in any
newspaper, magazine, or similar media or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any such media. The
foregoing
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does not, however, limit or modify the representations or warranties of the
Company set forth in Article II or the right of each Investor to rely thereon.
Section 3.5. Accredited Investor. Such Investor is an "accredited
investor" within the meaning of Rule 501 promulgated by the Securities and
Exchange Commission ("SEC") under the Securities Act.
Section 3.6. Rule 144. Such Investor acknowledges that he is aware of
Rule 144 promulgated under the Securities Act, which permits limited public
resales of securities acquired in a non-public offering, subject to the
satisfaction of certain conditions. Such Investor understands that under Rule
144, except as otherwise provided by section (k) of that Rule, the conditions
include, among other things: the availability of certain current public
information about the issuer, the resale occurring not less than one year after
the Investor has purchased and paid for the securities to be sold and
limitations on the amount of securities to be sold and the manner of sale. Such
Investor acknowledges and understands that the Company may not be satisfying the
current public information requirement of Rule 144 at the time he wishes to sell
the Securities (or the Conversion Common issuable upon the conversion or
exercise, as the case may be, of the Securities), and that, in such event, he
may be precluded from selling such stock under such rule, even if the one year
minimum holding period of such Rule has been satisfied. Such Investor
acknowledges that in the event all of the requirements of Rule 144 are not met,
registration under the Securities Act, compliance with Regulation A promulgated
by the SEC pursuant to the Securities Act or an exemption from registration will
be required for any disposition of the Securities (and the Conversion Common
issuable upon the conversion or exercise, as the case may be, of the
Securities). Such Investor understands that, although Rule 144 is not exclusive,
the SEC has expressed its opinion that persons proposing to sell restricted
securities received in a private offering other than in a registered offering or
pursuant to Rule 144 will have a substantial burden of proof in establishing
that an exemption from registration is available for such offers or sales and
that such persons and the brokers who participate in the transactions do so at
their own risk.
Section 3.7. Holding Requirements. Such Investor understands that if
the Company does not have a registration statement covering the Securities (or,
as applicable, the Conversion Common issuable upon the conversion or exercise,
as the case may be, of the Securities) under the Securities Act, or a filing
pursuant to the exemption from registration under Regulation A of the Securities
Act covering the Securities (or, as applicable, the Conversion Common issuable
upon the conversion or exercise, as the case may be, of the Securities), in
effect when it desires to sell the Securities (or, as applicable, the Conversion
Common issuable upon the conversion or exercise, as the case may be, of the
Securities), such Investor may be required to hold the Securities and such
Conversion Common for an indeterminate period.
Section 3.8. No Solicitation. Such Investor knows of no public
solicitation or advertisement of an offer in connection with the proposed
issuance and sale of the Securities.
Section 3.9. Residency. The residency of such Investor is correctly set
forth on Schedule A or Schedule B, as the case may be.
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Section 3.10. Investor Counsel. Such Investor acknowledges that he has
had the opportunity to review this Agreement, the schedules attached hereto and
the transactions contemplated by this Agreement with his own legal counsel. Such
Investor is relying solely on such counsel and not on the Company or any of its
agents for legal advice with respect to this investment or the transactions
contemplated by this Agreement.
Section 3.11. Material Nonpublic Information. Such Investor
acknowledges that such Investor is aware of the provisions of Section 10(b) of
the Exchange Act and Rule 10b-5 promulgated by the SEC thereunder.
Section 3.12. Short Swing Profits. Such Investor acknowledges that such
Investor is aware of the provisions of Section 16(b) of the Exchange Act and
that any profit realized by an officer, director or beneficial holder of ten
percent or more of the outstanding capital stock of the Company from any
purchase and sale, or any sale and purchase, of the Company's equity securities
within a six (6) month period must be disgorged by such officer, director or
holder to the Company.
Section 3.13. Short Sales. During the period beginning ninety (90) days
prior to the date hereof and ending on the Closing date (or the date this
Agreement is terminated pursuant to Section 8.1), neither such Investor nor any
of its affiliates has engaged or will engage, directly or indirectly, in any
sales of Common Stock, including any "short sales" (as defined in Rule 3b-3
promulgated under the Exchange Act) of Common Stock or has established or will
establish an open "put equivalent position" (within the meaning of Rule 16a-1(h)
promulgated under the Exchange Act) with respect to the Common Stock. As of the
Closing, neither such Investor nor any of its affiliates has any short position
or put equivalent position.
ARTICLE IV.
CERTAIN AGREEMENTS AND COVENANTS
Section 4.1. Legends. Each Warrant and each certificate representing
shares of Series A Preferred, Series B Preferred or Conversion Common will bear
a legend substantially in the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE 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."
The foregoing legend will be removed from the certificates representing any
shares of Series A Preferred, Series B Preferred or Conversion Common, at the
request of the holder thereof, at such time as such shares become eligible for
resale without compliance with the registration or qualification provisions of
applicable federal and state securities laws.
11
Section 4.2. Registration of Conversion Common. The Company will
provide certain registration rights under the Securities Act to the Investors
with respect to the shares of Conversion Common pursuant to a Registration
Rights Agreement in the form attached hereto as Exhibit D (the "Registration
Rights Agreement").
Section 4.3. Shareholder Approval. As contemplated by Section
6(d)(vii)(E), Section 7(d)(ii) and Section 8(b) of the Series A Statement of
Designations and Section 8(b) of the Series B Statement of Designations, the
approval of the shareholders of the Company is required under Marketplace Rule
4350(i) of The Nasdaq Stock Market before the Company may issue Common Stock
upon certain conversions and redemptions of the Series A Preferred and the
Series B Preferred (the "Shareholder Approval"). The Company covenants that it
will (a) prepare and file with the SEC a proxy statement relating to the
Shareholder Approval on or before October 25, 2002, (b) use all reasonable
efforts to obtain the Shareholder Approval on or before February 28, 2003 and
(c) in any event, seek Shareholder Approval no later than the 2003 Annual
Meeting of Shareholders of the Company.
Section 4.4. Certain Trading Restrictions.
(a) Restrictions. So long as any of the Additional Securities
are outstanding, neither such Investor nor any of its affiliates will,
directly or indirectly, engage in any transaction constituting a "short
sale" (as defined in Rule 3b-3 promulgated under the Exchange Act) of
shares of Common Stock or establish an open "put equivalent position"
(within the meaning of Rule 16a-1(h) promulgated under the Exchange
Act) with respect to the Common Stock (each a "Short Sale"), except on
those days (each a "Permitted Day") on which the aggregate short
position (including aggregate open "put equivalent positions") with
respect to the Common Stock of such Investor and its affiliates prior
to giving effect to any Short Sales by such Investor or its affiliates
on such Permitted Day does not exceed such Investor's Permitted Share
Position (as defined below) on such Permitted Day; provided, however,
that such Investor and its affiliates will only be entitled to engage
in transactions that constitute Short Sales on a Permitted Day to the
extent that following such transaction, the aggregate short position
(including aggregate open "put equivalent positions") with respect to
the Common Stock of such Investor and its affiliates does not exceed
such Investor's Permitted Share Position.
(b) Exceptions. The restriction on Short Sales set forth in
Section 4.4(a) will not apply with respect to a Short Sale (and such
Short Sale will be excluded for purposes of determining compliance with
Section 4.4(a)) so long as such Investor or its affiliates delivers a
conversion notice pursuant to Section 5(a) of the Series A Statement of
Designations or Section 5(a) of the Series B Statement of Designations,
as the case may be, or is deemed to have exercised or converted a
Warrant pursuant to Section 2(b) or Section 3(b), as the case may be,
of the Warrant, in any such case on or before 11:59 p.m. (New York
time) on the business day following the day of such Short Sale and
entitling the Holder to receive a number of shares of Common Stock at
least equal to the number of shares of Common Stock sold or subject to
such Short Sale.
(c) Other Transactions Permitted. Subject to Section 4.4(a)
and applicable provisions of federal and state securities laws, the
Company acknowledges and agrees
12
that nothing in this Section 4.4 or elsewhere in this Agreement, the
Securities or the Registration Rights Agreement prohibits any Investor
(or any of its affiliates) from, and each Investor (and its affiliates)
is permitted to, engage, directly or indirectly, in hedging
transactions involving the Securities and the Common Stock (including,
without limitation, by way of short sales, purchases and sales of
options, swap transactions and synthetic transactions) at any time.
(d) Definition. For purposes of this Section 4.4, "Permitted
Share Position" means, with respect to any date of determination, the
number of shares of Common Stock issuable upon exercise of the Warrants
held by the applicable Investor and its affiliates (without regard to
any limitations on exercise) on such date.
Section 4.5. Subordination Agreement. In the event that the Company
elects to issue to any Series A Investor a Subordinated Note (as defined in the
Series A Statement of Designations) or elects to issue to any Series B Investor
a Subordinated Note (as defined in the Series B Statement of Designations), in
the circumstances and as provided in the Series A Statement of Designations and
the Series B Statement of Designations, as applicable, each such Investor agrees
to, and hereby covenants that it will, execute (as the "subordinated lender")
and deliver to the Company and each holder of Notes a Subordination Agreement,
in the form attached hereto as Exhibit E, at the time of the issuance of such
Subordinated Note.
ARTICLE V.
CONDITIONS PRECEDENT TO EACH INVESTOR'S OBLIGATIONS
The obligation of each Investor to consummate the purchase of the
Warrants and the shares of Series A Preferred or Series B Preferred, as the case
may be, to be purchased by such Investor hereunder at the Closing is, at the
option of such Investor, subject to the satisfaction of the following conditions
(any or all of which may be waived by such Investor at or prior to the Closing):
Section 5.1. Representations, Warranties and Covenants.
(a) All representations and warranties of the Company
contained in this Agreement and qualified by materiality must be true
and correct, and all representations and warranties of the Company
contained in this Agreement and not qualified by materiality must be
true and correct in all material respects, in each case at and as of
the Closing with the same effect as though those representations and
warranties had been made again at and as of the Closing, except to the
extent that certain of such representations and warranties are made as
of or through a specified date (which representations and warranties
must continue on the Closing to have been true and correct or true and
correct in all material respects, as applicable, as of or through the
specified date).
(b) The Company must have performed and complied, in all
material respects, with all obligations and covenants required by this
Agreement to be performed or complied with by it on or prior to the
Closing.
13
(c) Such Investor must have received a certificate, executed
by either the Chief Executive Officer or the General Counsel of the
Company, dated as of the Closing, certifying that the conditions set
forth in Section 5.1(a) and Section 5.1(b) have been satisfied.
Section 5.2. Secretary's Certificate. The Company must have delivered
to such Investor a secretary's certificate, dated as of the Closing, certifying
as to (a) the Charter, as in effect at the Closing, certified as of a date
within ten (10) days of the Closing, by the Secretary of State of the State of
Texas, (b) the Bylaws of the Company, as in effect at the Closing, and (c)
resolutions of the Board of Directors of the Company authorizing the
transactions contemplated by this Agreement.
Section 5.3. Certificates of Good Standing and Existence. The Company
must have delivered to such Investor certificates evidencing the existence and
good standing of the Company in the State of Texas, issued by the Secretary of
State of the State of Texas and the Texas Comptroller of Public Accounts, as
applicable, each as of a date within ten (10) days of the Closing.
Section 5.4. Litigation. No legal proceeding may have been instituted
by or before any federal or state court or other Governmental Authority that has
or may have the effect of making illegal, impeding or otherwise restraining or
prohibiting any of the transactions contemplated by this Agreement.
Section 5.5. Material Adverse Change. There must not have been a
material adverse change in the properties, assets, condition (financial or
otherwise), business, operations or prospects of the Company since June 30,
2002, other than the matters referred to in Section 2.7 of the Schedule of
Exceptions.
Section 5.6. Consents. All consents, approvals, orders or
authorizations of Governmental Authorities and other persons and legal entities
necessary for the consummation of the transactions contemplated by this
Agreement must have been obtained and all notices to Governmental Authorities
and other persons and legal entities necessary for the consummation of the
transactions contemplated by this Agreement must have been given.
Section 5.7. Nasdaq Assurance. The Company must have received
confirmation from The Nasdaq Stock Market that the issuance of shares of Series
B Preferred to one or more of the Series B Investors will not result in a
"change of control" for purposes of Marketplace Rule 4350(i)(1)(B) of The Nasdaq
Stock Market.
Section 5.8. Legal Opinion. Such Investor must have received the
opinion of ▇▇▇▇▇▇ & ▇▇▇▇ L.L.P., dated as of the Closing, in form, scope and
substance reasonably satisfactory to such Investor and in substantially the form
of Exhibit F attached hereto.
Section 5.9. Subordination Agreement. The form of Exhibit E
(Subordination Agreement) must be in form and substance reasonably satisfactory
to the Investors, the Company and the purchasers of Additional Securities.
14
Section 5.10. Closing Deliveries. The Company must have made each of
the Closing deliveries set forth in Section 7.3.
Section 5.11. Statements of Designations. The Company must have duly
filed the Series A Statement of Designations and the Series B Statement of
Designations with the Secretary of State of the State of Texas.
Section 5.12. Minimum Investment. The aggregate purchase price tendered
by all of the Investors and the purchasers in the Additional Financing
Transaction for the Securities and the Additional Securities must be not less
than $15,000,000.
Section 5.13. Additional Securities. The documents to be entered into
between the Company and the purchasers of the Additional Securities and relating
to the Additional Financing Transaction must be in form and substance reasonably
satisfactory to the Investors.
Section 5.14. Securities Laws Filings. The Company must have made all
filings under all applicable federal and state securities laws necessary to
consummate the issuance of the Securities pursuant to this Agreement in
compliance with such laws.
Section 5.15. Additional Matters. Such Investor must have received such
additional documents, instruments or items of information reasonably requested
by him in respect of any aspect or consequence of the transactions contemplated
by this Agreement. All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the transactions
contemplated by this Agreement or by the other agreements referred to in this
Agreement must be reasonably satisfactory in form and substance to such Investor
and his counsel.
ARTICLE VI.
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS
The obligations of the Company to consummate the sale and issuance of
the Warrants and the shares of Series A Preferred or Series B Preferred, as the
case may be, to be sold and issued to an Investor hereunder at the Closing is,
at the option of the Company, subject to the satisfaction of the following
conditions (any or all of which may be waived by the Company at or prior to the
Closing):
Section 6.1. Representations, Warranties and Covenants.
(a) All representations and warranties of such Investor
contained in this Agreement must be true and correct in all material
respects at and as of the Closing with the same effect as though those
representations and warranties had been made again and as of the
Closing.
(b) Such Investor must have performed and complied, in all
material respects, with all obligations and covenants required by this
Agreement to be performed or complied with by such Investor on or prior
to the Closing.
15
Section 6.2. Litigation. No legal proceeding may have been instituted
by or before any federal or state court or other Governmental Authority that has
or may have the effect of making illegal, impeding or otherwise restraining or
prohibiting any of the transactions contemplated by this Agreement.
Section 6.3. Nasdaq Assurance. The Company must have received
confirmation from The Nasdaq Stock Market that the issuance of shares of Series
B Preferred to one or more of the Series B Investors will not result in a
"change of control" for purposes of Marketplace Rule 4350(i)(1)(B) of The Nasdaq
Stock Market.
Section 6.4. Closing Deliveries. The Investor must have made each of
the Closing deliveries set forth in Section 7.4.
Section 6.5. Minimum Investment. The aggregate purchase price tendered
by all of the Investors and the purchasers in the Additional Financing
Transaction for the Securities and the Additional Securities must be not less
than $15,000,000.
Section 6.6. Additional Matters. The Company must have received such
additional documents, instruments or items of information reasonably requested
by it in respect of any aspect or consequence of the transactions contemplated
by this Agreement. All corporate and other proceedings, and all documents,
instruments and other legal matters in connection with the transactions
contemplated by this Agreement or by the other agreements referred to in this
Agreement must be reasonably satisfactory in form and substance to the Company
and its counsel.
ARTICLE VII.
CLOSING
Section 7.1. Closing. This Agreement will be executed by each of the
parties hereto at or before 2:59 p.m., Central Daylight Time, on the date first
written above. The closing of the transactions contemplated by this Agreement
(the "Closing") will take place at the principal executive office of the Company
at 3:00 p.m., Central Daylight Time on September 16, 2002, or at such other
place and at such other time and date as may be mutually agreed upon by the
Company and the Investors; provided, however, that if all of the conditions to
the obligations of the parties set forth in Article V and Article VI have not
been satisfied or waived on or before September 16, 2002, the Closing will take
place promptly following the time at which all such conditions have been
satisfied or waived.
Section 7.2. Proceedings at Closing. All proceedings to be taken and
all documents to be executed and delivered by all parties at the Closing will be
deemed to have been taken, executed and delivered simultaneously, and no
proceedings will be deemed taken nor any documents executed or delivered until
all have been taken, executed and delivered.
Section 7.3. Deliveries by the Company at the Closing. At the Closing,
the Company will deliver (or cause to be delivered) to each Investor (a) a
Warrant to purchase the number of shares of Common Stock set forth adjacent to
such Investor's name on Schedule A or Schedule
16
B, as the case may be, executed by an authorized officer of the Company, (b) the
Registration Rights Agreement, executed by an authorized officer of the Company,
and (c) a stock certificate or certificates, registered in such Investor's name
and executed by authorized officers of the Company, representing the aggregate
number of shares of Series A Preferred or Series B Preferred, as the case may
be, purchased by such Investor pursuant to this Agreement.
Section 7.4. Deliveries by the Investors at the Closing. At the
Closing, each Investor will deliver (or cause to be delivered) to the Company
(a) a counterpart signature page to the Registration Rights Agreement, executed
by such Investor, and (b) the aggregate purchase price payable to the Company
for the Warrants and the shares of Series A Preferred or Series B Preferred, as
the case may be, purchased by such Investor pursuant to this Agreement, by wire
transfer of immediately available funds in accordance with the Company's written
wiring instructions.
ARTICLE VIII.
TERMINATION
Section 8.1. Termination. This Agreement will terminate in the event
that (a) the Company and each Investor agree in writing to terminate this
Agreement or (b) the Closing does not occur on or before September 20, 2002.
Section 8.2. Effect of Termination. If this Agreement is terminated in
accordance with Section 8.1, and the transactions contemplated by this Agreement
are not consummated, this Agreement will become null and void and of no further
force and effect, except (a) for this Section 8.2 and (b) that the termination
of this Agreement for any cause will not relieve any party to this Agreement
from any liability that at the time of termination had already accrued to any
other party to this Agreement or that thereafter may accrue in respect of any
act or omission of such party prior to such termination.
ARTICLE IX.
MISCELLANEOUS
Section 9.1. Entire Agreement; Schedules. This Agreement (including the
Schedules and Exhibits to this Agreement) represents, and is intended to be, a
complete statement of all of the terms and the arrangements between the parties
to this Agreement with respect to the matters provided for in this Agreement,
supersedes any and all previous oral or written and all contemporaneous oral
agreements, understandings, negotiations and discussions between the parties to
this Agreement with respect to those matters. The Schedules and Exhibits to this
Agreement are hereby incorporated and made a part hereof and are an integral
part of this Agreement.
Section 9.2. Headings; References. The article and section headings of
this Agreement are for reference purposes only and are to be given no effect in
the construction or interpretation of this Agreement. Except as otherwise
specifically provided, any reference to any article,
17
section, exhibit or schedule will be deemed to refer to such article or section
of or exhibit or schedule to this Agreement.
Section 9.3. 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 9.4. Further Assurances. Each party to this Agreement hereby
covenants and agrees, without the necessity of any further consideration, to
execute and deliver any and all such further documents and take any and all such
other actions as may be necessary or appropriate to carry out the intent and
purposes of this Agreement and to consummate the transactions contemplated
hereby.
Section 9.5. Expenses. Other than the payment by the Company of up to
$30,000 for the reasonable fees and out-of-pocket expenses incurred by the
Series A Investors, collectively, in connection with the negotiation and
documentation of the transactions contemplated by this Agreement, and the
payment by the Company of up to $30,000 for the reasonable fees and
out-of-pocket expenses incurred by the Series B Investors, collectively, in
connection with the negotiation and documentation of the transactions
contemplated by this Agreement, each of the parties to this Agreement will bear
its or his own expenses (including, without limitation, fees and disbursements
of its counsel, accountants, financial advisors and other experts), incurred by
it in connection with the preparation, negotiation, execution, delivery and
performance of this Agreement, each of the other documents and instruments
executed in connection with or contemplated by this Agreement and the
consummation of the transactions contemplated by this Agreement.
Section 9.6. Notices. All notices and other communications under this
Agreement must be in writing and will be deemed given (a) when delivered
personally or by courier service, (b) on the fifth business day after being
mailed by certified mail, return receipt requested or (c) upon transmission and
confirmation of receipt by a facsimile operator if sent by facsimile, to the
parties at the following addresses or facsimile numbers (or to such other
address or facsimile number as such party may have specified by notice given to
the other party pursuant to this provision):
If to a Series A Investor, to the address set forth for such Series A
Investor on Schedule A
If to a Series B Investor, to the address set forth for such Series B
Investor on Schedule B
If to the Company: Zix Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
18
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Section 9.7. Severability. If any provision of this Agreement, as
applied to any party or to any circumstance, is held invalid, illegal or
unenforceable by any court of competent jurisdiction, (a) such provision, as
applied to such party or such circumstance, is hereby deemed modified to give
effect to the original written intent of the parties to the greatest extent
consistent with being valid and enforceable under applicable law, (b) the
application of such provision to any other party or to any other circumstance
will not be affected or impaired thereby and (c) the validity, legality and
enforceability of the remaining provisions of this Agreement will remain in full
force and effect.
Section 9.8. Binding Effect: No Assignment. This Agreement will be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns. Nothing in this Agreement will create or be
deemed to create any third party beneficiary rights in any person or other legal
entity not party to this Agreement. No assignment of this Agreement or of any
rights or obligations under this Agreement may be made by the Company (by
operation of law or otherwise) without the prior written consent of each of the
other parties to this Agreement and any attempted assignment without such
required consents will be void. The Securities and shares of the Conversion
Common may be transferred only in accordance with applicable law (including
state and federal securities laws).
Section 9.9. Amendments. This Agreement may be amended, supplemented or
modified, and any provision hereof may be waived, only by written instrument
making specific reference to this Agreement signed by each of the parties to
this Agreement. Except as otherwise provided in this Agreement, no action (other
than a waiver) taken pursuant to this Agreement, including, without limitation,
any investigation by or on behalf of any party, will be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, covenant or agreement contained in this Agreement. The waiver by any
party to this Agreement of a breach of any provision of this Agreement will not
operate or be construed as a further or continuing waiver of such breach or as a
waiver of any other or subsequent breach. Except as otherwise expressly provided
in this Agreement, no failure on the part of any party to exercise, and no delay
in exercising, any right, power or remedy under this Agreement will operate as a
waiver thereof, nor will any single or partial exercise of such right, power or
remedy by such party preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. All remedies under this Agreement
are cumulative and are not exclusive of any other remedies provided by
applicable law.
Section 9.10. Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
* * * REMAINDER OF PAGE INTENTIONALLY LEFT BLANK * * *
19
IN WITNESS WHEREOF, the parties to this Agreement have executed this
instrument as of the date and year first above written.
COMPANY
Zix Corporation, a Texas corporation
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------------
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: S.V.P.
SERIES A INVESTORS SERIES B INVESTORS
/s/ ▇▇▇▇ ▇. ▇▇▇▇ /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
---------------------------------------------- -----------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇ /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------------- -----------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
SANTIG LTD., a Texas limited partnership WHITE ROCK CAPITAL
By: ▇▇▇▇▇▇▇ Management Corp,
its general partner
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ /s/ ▇▇▇ ▇▇▇▇▇▇
---------------------------------------------- -----------------------------------------------
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: ▇▇▇ ▇▇▇▇▇▇
Title: Executive Vice President Title: President
1988 Spendthrift Trust
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------------
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Trustee
/s/ A.R. ▇▇▇▇▇▇▇, Jr.
----------------------------------------------
A.R. ▇▇▇▇▇▇▇, Jr.
20
SCHEDULE A
SERIES A INVESTORS
NAME, ADDRESS NO. OF SHARES OF SERIES A NO. OF WARRANT
& FAX NO. SERIES A PREFERRED PURCHASE PRICE WARRANT SHARES PURCHASE PRICE
------------- ------------------ -------------- -------------- --------------
SANTIG, LTD. 252,273 $988,913.62 88,691 $11,086.38
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
1988 Spendthrift Trust 126,136 $494,456.87 44,345 $5,543.13
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
A.R. ▇▇▇▇▇▇▇, Jr. 126,136 $494,456.87 44,345 $5,543.13
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇ ▇▇▇▇ 189,205 $741,685.25 66,518 $8,314.75
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇ 126,136 $494,456.87 44,345 $5,543.13
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
SCHEDULE B
SERIES B INVESTORS
NAME, ADDRESS NO. OF SHARES OF SERIES B NO. OF WARRANT
& FAX NO. SERIES B PREFERRED PURCHASE PRICE WARRANT SHARES PURCHASE PRICE
------------- ------------------ -------------- -------------- --------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇ 219,758 $791,130.87 70,953 $8,869.13
▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
White Rock Capital 137,349 $494,456.87 44,345 $5,543.13
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SCHEDULE C
SCHEDULE OF EXCEPTIONS
[AS ATTACHED]
Execution Version
SCHEDULE C TO
SECURITIES PURCHASE AGREEMENT
All capitalized terms used but not otherwise defined in this Schedule C
have the meanings given them in the
Securities Purchase Agreement by and among
Zix Corporation, a Texas corporation ("Company"), and each of the purchasers set
forth on the signature pages thereto (the "Buyers"), dated as of September 16,
2002 (the "Agreement"). Each of the disclosures set forth in this Schedule C are
made as an exception to or as required by the Agreement. Disclosure of any
matters in this Schedule C should not be construed as indicating that such
matter is necessarily required to be disclosed in order for any representation
or warranty in the Agreement to be true and correct to the extent required in
the Agreement. Disclosure of any matter in this Schedule C relating to (a) any
known or contingent liabilities; (b) the compliance or failure to comply with
any contracts or laws; and (c) any pending or threatened actions, or any
potential basis therefore, will not be deemed to be an admission or denial of
the matters relating thereto so disclosed or an assessment of the likelihood or
magnitude of the outcome thereof.
Execution Version
SECTION 2.4
CAPITALIZATION
(d)
1. There are options outstanding to employees, directors, and consultants
and former employees, directors, and consultants to purchase an
aggregate 6,589,583 shares of the Company's common stock at an average
exercise price per share of $8.75 (exercise prices range from $2.50 to
$73.75 per share), with expiration dates through 2012, of which
approximately 3,422,848 option shares are currently exercisable.
2. There are warrants outstanding held by approximately 68
persons/entities, who were investors in the Company's May 2000 equity
financing, to purchase an aggregate 3,055,557 shares of the Company's
common stock on the following terms:
a. 1,222,223 warrant shares with an exercise price of $12.00 per
share, expiration of 4/30/04, 100% exercisable.
b. 916,667 warrant shares with an exercise price of $57.60 per
share, expiration of 4/30/10, 100% exercisable.
c. 916,667 warrant shares with an exercise price of $7.00 per share,
expiration of 4/29/03, 100% exercisable.
3. There are options outstanding to former third party vendors to
purchase an aggregate 179,722 shares of the Company's common stock at
prices ranging from $7.94 to $80.00, with expiration dates through
2007.
4. The Convertible Notes (and related warrants) being issued on or about
the date of the securities issuance to which this schedule relates are
convertible into shares of the Company's common stock.
(e) OBLIGATIONS TO REGISTER SECURITIES
The following active Registration Statements were filed pursuant to
contractual or statutory registration rights obligations:
1. ▇▇▇▇▇▇▇▇ Investor Group
$12.00 Warrants to purchase 1,222,223 shares of common stock
Registration Statement on Form S-3 (No. 333-36556)
2. ▇▇▇▇▇▇▇▇ Investor Group
$57.60 Warrants to purchase 916,667 shares of common stock
Execution Version
Registration Statement on Form S-3 (No. 333-36556)
3. ▇▇▇▇▇▇▇▇ Investor Group
$7.00 Warrants to purchase 916,667 shares of common stock
Registration Statement on Form S-3 (No. 333-83934)
4. Tumbleweed Communications Corp.
116,833 shares of common stock [All shares sold.]
Registration Statement on Form S-3 (No. 333-89052)
5. Yahoo! Inc.
625,000 shares of common stock
Registration Statement on Form S-3 (No. 333-89056) [All shares sold.]
6. ▇▇▇▇▇ ▇▇▇▇▇▇
25,000 shares of common stock
Registration Statement on Form S-3 (No. 333-33708)
7. The Company has various registration statements on Form S-8 filed with
the SEC covering the option grants to employees and consultants,
referred to above.
8. The Company is in the process of preparing for filing registration
statement(s) with respect to 68,622 shares of its common stock to be
issued to two former employees in connection with their separation from
employment.
9. The Company is in the process of preparing for filing registration
statement(s) with respect to 104, 722 option shares, at exercise prices
ranging from $7.94 - $80.00 per share, and 5,000 restricted shares held
by various former consultants to the Company.
10. A former consultant holds options to acquire 50,000 shares, at an
exercise price of $25.00 per share, which are accompanied by demand
registration rights.
11. The Company is obligated to register the common stock shares into which
the Convertible Notes (and related warrants) referenced above are
convertible or exercisable.
Execution Version
SECTION 2.7
SEC FILINGS
The Company did not prevail in its recently concluded (July 2002) lawsuit, as
plaintiff, against Visa U.S.A., Inc. and Visa International Service Association,
Inc.
Execution Version
SECTION 2.8
LITIGATION
1. The Company recently received an informal telephone inquiry from the
Fort Worth SEC Enforcement Office relating to its accounting treatment
of an aggregate of $4.25 million of guaranteed payments (of which
$500,000 and $469,000, respectively, was recognized in 2001 and 2002)
due the Company from Entrust, Inc. pursuant to a Marketing and
Distribution Agreement, dated November 6, 2000, between the Company and
Entrust, Inc.
2. The Company's President and CEO, ▇▇▇▇ ▇. ▇▇▇▇, is a defendant (in his
capacity as a director and officer) in a securities related lawsuit,
which arose while he was an officer and director of Entrust, Inc.
Execution Version
SECTION 2.10
EMPLOYEE RELATIONS
The Company's former President and Chief Executive Officer and a director, ▇▇▇▇▇
▇. ▇▇▇▇, recently resigned from his position as "Founder" and as a director of
the Company.
Execution Version
SECTION 2.14
TITLE
The Company has pledged a $250,000 (plus accrued interest) certificate of
deposit to support a credit card processing agreement with Bank of America.