As filed with the Securities and Exchange Commission on November 6, 2002.
Registration No. 333-__________.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ZIX CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 75-2216818
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2711 N. HASKELL AVENUE
SUITE 2300, LB 36
DALLAS, TEXAS 75204-2960
(214) 370-2000
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
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STEVE M. YORK
CHIEF FINANCIAL OFFICER
2711 N. HASKELL AVENUE
SUITE 2300, LB 36
DALLAS, TEXAS 75204-2960
(214) 370-2000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Approximate date of commencement of proposed sale to the public: From
time-to-time after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 of the Securities
Act of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: [ ]
CALCULATION OF REGISTRATION FEE
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SHARES TO BE AGGREGATE PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE
------------------------- ---------- ---------------- ----------------- ------------
Common Stock,
$.01 par value 153,344 $4.05 $621,043.20 $57.14
(1) Estimated solely for the purpose of calculating the registration fee,
pursuant to Rule 457(c) under the Securities Act, based on the average of
the high and low prices of the common stock on The Nasdaq Stock Market on
October 31, 2002.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
The information in this prospectus is not complete and may be changed. The
selling shareholder may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities, and we are not soliciting
offers to buy these securities in any state where the offer or sale is not
permitted.
Subject to Completion
November 6, 2002
ZIX CORPORATION
153,344 SHARES
COMMON STOCK
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This prospectus relates to an offering of up to 153,344 shares of our
common stock, par value $.01 per share, that were acquired by the selling
shareholders in private transactions. Such shareholders are listed below under
the heading "Selling Shareholders."
The common stock being registered is being offered for the account of
the selling shareholders. We will not receive any proceeds from the sale of the
shares of common stock offered under this prospectus.
The selling shareholders may offer their shares of common stock in
transactions on The Nasdaq Stock Market (we refer to it as "Nasdaq"), in
negotiated transactions or through a combination of these methods of
distribution, at prevailing market prices, at privately negotiated prices or at
fixed prices that may be changed. Please see below under the heading "Plan of
Distribution."
Our common stock is quoted on Nasdaq and trades under the symbol
"ZIXI." On November 4, 2002, the closing price of our common stock, as reported
on Nasdaq, was $4.14 per share.
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THIS INVESTMENT IN SHARES OF OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.
YOU SHOULD PURCHASE SHARES ONLY IF YOU CAN AFFORD A LOSS OF ALL
OR A PORTION OF YOUR INVESTMENT.
PLEASE SEE BELOW UNDER THE HEADING "RISK FACTORS."
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR
ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS AND NOT ON
ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS. NEITHER ZIX CORPORATION NOR ANY
OF ITS REPRESENTATIVES HAS AUTHORIZED ANYONE TO PROVIDE PROSPECTIVE INVESTORS
WITH ANY INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS. FURTHERMORE, NO DEALER, SALESPERSON OR OTHER
PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO REPRESENT ANYTHING NOT
CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS. THIS PROSPECTUS IS
AN OFFER TO SELL ONLY THE SHARES OFFERED BY THIS PROSPECTUS, BUT ONLY UNDER THE
CIRCUMSTANCES AND IN JURISDICTIONS WHERE IT IS LAWFUL TO DO SO. THE INFORMATION
CONTAINED IN THIS PROSPECTUS IS CURRENT ONLY AS OF ITS DATE, REGARDLESS OF THE
TIME OF THE DELIVERY OF THIS PROSPECTUS OR ANY SALE OF SHARES OF OUR COMMON
STOCK OFFERED UNDER THIS PROSPECTUS.
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This prospectus is dated November __, 2002.
TABLE OF CONTENTS
Zix Corporation...................................................................................................1
Risk Factors......................................................................................................1
Note on Forward-Looking Statements and Risk Factors..............................................................12
Documents Incorporated by Reference..............................................................................12
Where You Can Get More Information...............................................................................13
Selling Shareholders.............................................................................................14
Plan of Distribution.............................................................................................15
Use of Proceeds..................................................................................................16
Legal Matters....................................................................................................16
Experts..........................................................................................................16
ZIX CORPORATION
We are a development-stage company and currently have no significant
revenues. Since January 1999, we have been developing and marketing products and
services that bring privacy, security and convenience to Internet users. We were
incorporated in Texas in 1988. Our executive offices are located at 2711 North
Haskell Avenue, Suite 2300, LB 36, Dallas, Texas 75204-2960, and our telephone
number is (214) 370-2000. Our Web site address is www.zixcorp.com. Information
contained on our Web site is not a part of this prospectus. In this prospectus,
"we," "us," "our," "Zix" and "ZixCorp" refer to Zix Corporation and its
subsidiaries unless the context otherwise requires.
RISK FACTORS
Before investing in our common stock offered by this prospectus, you
should carefully consider the following risks and uncertainties, in addition to
the other information contained or incorporated by reference in this prospectus.
Also, you should be aware that the risks and uncertainties described below are
not the only ones facing us. Additional risks and uncertainties that we do not
yet know of or that we currently think are immaterial may also impair our
business operations. If any of those risks or uncertainties or any of the risks
and uncertainties described below actually occur, our business, financial
condition, prospects or results of operations could be materially and adversely
affected. In that case, the trading price of the common stock offered in this
prospectus could decline, and you may lose all or part of your investment.
AS A DEVELOPMENT-STAGE COMPANY, WE HAVE NO SIGNIFICANT REVENUES, AND WE
CONTINUE TO USE SIGNIFICANT AMOUNTS OF CASH.
During 1998, we sold all of our operating businesses and, since 1999,
we have been developing and marketing products and services that bring privacy,
security and convenience to Internet users. Successful development of a
development-stage enterprise, particularly Internet-related businesses, is
costly and highly competitive. A development-stage enterprise involves risks and
uncertainties, and there are no assurances that we will be successful in our
efforts. We currently have no significant revenues and utilization of cash
resources continues at a substantial level.
THE MARKET MAY NOT BROADLY ACCEPT OUR PRODUCTS AND SERVICES, WHICH
WOULD PREVENT US FROM OPERATING PROFITABLY.
We must be able to achieve broad market acceptance for our products and
services in order to operate profitably. We have not yet been able to do this.
To our knowledge, there are currently no secure Internet communications
businesses similar to ours, that currently operate at the scale that we would
require, at our current expenditure levels and proposed pricing, to become
profitable. There is no assurance that our products and services will become
generally accepted or that they will be compatible with any standards that
become generally accepted, nor is there any assurance that enough paying users
will ultimately be obtained to enable us to operate profitably.
1
THOUGH WE HAVE ESTABLISHED STRATEGIC AND COLLABORATIVE RELATIONSHIPS
WITH SEVERAL STRATEGIC MARKETING PARTNERS, WE HAVE NOT REALIZED SIGNIFICANT
REVENUES FROM THESE RELATIONSHIPS AND MAY NOT IN THE FUTURE.
One of our primary business strategies has been to enter into strategic
or other similar collaborative relationships to reach a larger customer base
than we can reach through our direct sales and marketing efforts. To date, these
strategic and collaborative business relationships have not yielded any
significant revenues.
Assuming we are successful in entering into business relationships that
yield revenues, we will want to maintain these relationships and enter into
additional relationships to successfully execute our business plan. If we are
unable to do so, we will have to devote substantially more resources to the
distribution, sale and marketing of our products and services than we would
otherwise.
Furthermore, our ability to achieve future growth will also depend on
our ability to continue to establish direct seller channels and to develop
multiple distribution channels. Failure to enter into productive reseller
arrangements could harm our business.
COMPETITION IN THE SECURE E-MESSAGING DELIVERY BUSINESS IS EXPECTED TO
INCREASE, WHICH COULD CAUSE OUR BUSINESS TO FAIL.
Our solutions are targeted to the secure e-messaging delivery services
market. Although there are many large, well-funded participants in the
information technology (IT) security industry, none currently participate in the
secure e-messaging delivery services market. Our primary competitors in this
market are Tumbleweed Communications, Sigaba Corporation, Authentica, PostX and
CertifiedMail.com. We believe that the secure e-messaging delivery service
market is immature, and, for the most part, unpenetrated, unlike many segments
of the IT security industry - which are saturated. After several years of
infrastructure development and product development, we believe that we are the
only provider that has made the investments necessary to successfully penetrate
the relatively untapped secure e-messaging delivery services market. We do not
believe that our primary competitors have made the infrastructure and
development investments required to match our service offerings. Nevertheless,
others may, over time, make the necessary investments in infrastructure and
service offerings. These competitors may develop new technologies that are
perceived as being more secure, effective or cost efficient than our own. If we
are not successful in exploiting the technology advantage we believe we
currently hold, these competitors could successfully garner a significant share
of the market, to the exclusion of ZixCorp. Furthermore, increased competition
could result in pricing pressures, reduced margins or the failure of our
business to achieve or maintain market acceptance, any of which could harm our
business.
OUR INABILITY TO DEVELOP AND INTRODUCE NEW SECURE E-MESSAGING PRODUCTS
AND RELATED SERVICES AND TO IMPLEMENT TECHNOLOGICAL CHANGES COULD HARM OUR
BUSINESS.
The emerging nature of the Internet and the secure Internet e-messaging
business and their rapid evolution, require us continually to develop and
introduce new products and services and to improve the performance, features and
reliability of our existing products and services,
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particularly in response to competitive offerings. To date, we have achieved no
significant revenues from the sale of any of our products and related services.
We also have under development new feature sets for our current product
line and are considering new secure e-messaging products. The success of new or
enhanced products and services depends on several factors - primarily, market
acceptance. We may not succeed in developing and marketing new or enhanced
products and services that respond to competitive and technological developments
and changing customer needs. This could harm our business.
IF THE MARKET FOR SECURE INTERNET E-MESSAGING DOES NOT CONTINUE TO
GROW, DEMAND FOR OUR PRODUCTS AND SERVICES WILL BE ADVERSELY AFFECTED.
The market for secure Internet e-messaging is at an early stage of
development. Continued growth of the secure Internet e-messaging market will
depend to a large extent on the public recognizing the potential threat posed by
computer hackers and other unauthorized users. Failure of the secure e-messaging
market to grow could reduce demand for our products and services, which would
harm our business.
CAPACITY LIMITS ON OUR TECHNOLOGY AND NETWORK HARDWARE AND SOFTWARE MAY
BE DIFFICULT TO PROJECT, AND WE MAY NOT BE ABLE TO EXPAND AND UPGRADE OUR
SYSTEMS TO MEET INCREASED USE, WHICH WOULD RESULT IN REDUCED REVENUES.
While we have ample through-put capacity to handle our customers'
requirements for the medium term, at some point we may be required to expand and
upgrade our technology and network hardware and software. We may not be able to
accurately project the rate of increase in usage on our network. In addition, we
may not be able to expand and upgrade, in a timely manner, our systems and
network hardware and software capabilities to accommodate increased traffic on
our network. If we do not timely and appropriately expand and upgrade our
systems and network hardware and software, we may lose customers and revenues.
SECURITY INTERRUPTIONS TO OUR SECURE DATA CENTER COULD DISRUPT OUR
BUSINESS, AND ANY SECURITY BREACHES COULD EXPOSE US TO LIABILITY AND NEGATIVELY
IMPACT CUSTOMER DEMAND FOR OUR PRODUCTS AND SERVICES.
Our business depends on the uninterrupted operation of our secure data
center. We must protect this center from loss, damage or interruption caused by
fire, power loss, telecommunications failure or other events beyond our control.
Any damage or failure that causes interruptions in our secure data center
operations could materially harm our business, financial condition and results
of operations.
In addition, our ability to issue digitally-signed certified
time-stamps and public encryption codes in connection with our products and
services depends on the efficient operation of the Internet connections between
customers and our data center. We depend on Internet service providers
efficiently operating these connections. These providers have experienced
periodic operational problems or outages in the past. Any of these problems or
outages could adversely affect customer satisfaction.
3
Furthermore, it is critical that our facilities and infrastructure
remain secure and the market perceives them to be secure. Despite our
implementation of network security measures, our infrastructure may be
vulnerable to physical break-ins, computer viruses, attacks by hackers and
similar disruptions from unauthorized tampering with our computer systems. In
addition, we are vulnerable to coordinated attempts to overload our systems with
data, resulting in denial or reduction of service to some or all of our users
for a period of time. We do not carry insurance to compensate us for losses that
may occur as a result of any of these events; therefore, it is possible that we
may have to use additional resources to address these problems.
Messages sent through our ZixMail.net(TM) message portal will reside,
for a user-specified period of time, in our data center facilities. Also, since
we receive certain payments online for our ZixMail(TM) service, certain
confidential customer information is retained in our data center facilities. Any
physical or electronic break-ins or other security breaches or compromises of
this information could expose us to significant liability, and customers could
be reluctant to use our Internet-related products and services.
As was previously announced, we determined in June 2001 that credit
card databases at our independently operated subsidiary, Anacom Communications,
Inc. (we refer to it as "Anacom"), had been improperly accessed. As a result of
this improper access, we shut down the Anacom operations and Anacom ceased doing
business. The ZixMail and ZixMail.net systems and our secure data center
operations were entirely separate from the systems operated by Anacom. No
ZixCorp technologies or operations were involved in the incident, nor are the
Anacom technologies involved being used in our "Zix" family of secure
e-messaging products and services. Accordingly, we do not anticipate that this
breach will have any effect on the development and deployment of our secure
e-messaging products and related services. Although no claims have been asserted
against us with respect to this incident to date, claims could be asserted in
the future. We are unable to assess the amount of the liability, if any, to
Anacom or us, which may result from any claims that may be asserted.
WE MAY HAVE TO DEFEND OUR RIGHTS IN INTELLECTUAL PROPERTY THAT WE USE
IN OUR PRODUCTS AND SERVICES, WHICH COULD BE DISRUPTIVE AND EXPENSIVE TO OUR
BUSINESS.
We may have to defend our intellectual property rights or defend
against claims that we are infringing the rights of others. Intellectual
property litigation and controversies are disruptive and expensive. Infringement
claims could require us to develop non-infringing products or enter into royalty
or licensing arrangements. Royalty or licensing arrangements, if required, may
not be obtainable on terms acceptable to us. Our business could be significantly
harmed if we are not able to develop or license the necessary technology.
Furthermore, it is possible that others may independently develop substantially
equivalent intellectual property, thus enabling them to effectively compete
against us.
OUR PRODUCTS AND SERVICES COULD CONTAIN UNKNOWN DEFECTS OR ERRORS.
We subject our products and services to quality assurance testing prior
to product release. To date, we have not become aware after product release of
any defect or error that materially affects their functionality. Nevertheless,
our products and services could contain undetected defects or errors. This could
result in loss of or delay in revenues, failure to achieve market acceptance,
diversion of development resources, injury to our reputation, litigation claims,
4
increased insurance costs or increased service and warranty costs. Any of these
could prevent us from implementing our business model and achieving the revenues
we need to operate profitably.
PUBLIC KEY CRYPTOGRAPHY TECHNOLOGY IS SUBJECT TO RISKS.
Our products and services employ, and future products and services may
employ, public key cryptography technology. With public key cryptography
technology, a user has a public key and a private key, which are used to encrypt
and decrypt messages. The security afforded by this technology depends, in large
measure, on the integrity of a user's private key, which is dependent, in part,
on the application of certain mathematical principles. The integrity of a user's
private key is predicated on the assumption that it is difficult to
mathematically derive a user's private key from the user's related public key.
Should methods be developed that make it easier to derive a user's private key,
the security of encryption products using public key cryptography technology
would be reduced or eliminated and such products could become unmarketable. This
could require us to make significant changes to our products, which could damage
our reputation and otherwise hurt our business. Moreover, there have been public
reports of the successful decryption of certain encrypted messages. This, or
related, publicity could adversely affect public perception of the security
afforded by public key cryptography technology, which could harm our business.
WE DEPEND ON KEY PERSONNEL.
We depend on the performance of our senior management team - including
our chairman, president and chief executive officer, John A. Ryan, and his
direct reports and other key employees, particularly highly skilled technical
personnel. Our success also depends on our ability to attract, retain and
motivate these individuals. There is competition for these personnel, and we
face a tight employment market for the particular individuals we need to
attract. Other than Mr. Ryan, none of our employees have employment contracts
with us nor are there any agreements with members of our senior management team
or other key employees that prevent them from leaving ZixCorp at any time. In
addition, we do not maintain key person life insurance for any of our personnel.
The loss of the services of any of our key employees or our failure to attract,
retain and motivate key employees could harm our business.
WE COULD BE AFFECTED BY GOVERNMENT REGULATIONS.
Exports of software products using encryption technology are generally
restricted by the United States (we refer to it as the "U.S.") government.
Although we have obtained U.S. government approval to export our ZixMail product
to almost all countries in the world, the list of countries to which ZixMail
cannot be exported could be revised in the future. Furthermore, some foreign
countries impose restrictions on the use of encryption products, such as the
ZixMail product. Failure to obtain the required governmental approvals would
preclude the sale or use of the ZixMail product in international markets.
OUR STOCK PRICE MAY BE VOLATILE.
The market price of our common stock has fluctuated significantly in
the past and is likely to fluctuate in the future. Also, the market prices of
securities of other Internet-related
5
companies have been highly volatile and, as is well known, have generally
declined substantially and broadly.
FURTHER ISSUANCES OF EQUITY SECURITIES MAY BE DILUTIVE TO CURRENT
SHAREHOLDERS.
We recently completed a capital funding for $16,000,000 through the
issuance of $8,000,000 of notes and associated warrants, $3,250,000 of Series A
Convertible Preferred Stock and associated warrants and $4,750,000 of Series B
Convertible Preferred Stock and associated warrants. At the current conversion
rates, these securities are convertible and exercisable, in the aggregate, into
5,235,168 shares of our common stock (excluding accrued interest and dividends).
Furthermore, at some point in the foreseeable future we may determine to seek
additional capital funding. This capital funding could involve one or more types
of equity securities, including convertible debt, common or convertible
preferred stock and warrants to acquire common or preferred stock. Such equity
securities could be issued at or below the then-prevailing market price for our
common stock. In addition, we incentivize employees and attract new employees by
issuing options to purchase our shares of common stock. The interest of our
existing shareholders could be diluted by stock option issuances to employees
and any equity securities issued in a capital funding financing. Moreover, we
currently have on file registration statements covering the resale of securities
held by existing holders of our common stock, holders of warrants or options to
purchase shares of our common stock and the resale of the common stock
underlying the Series A Convertible Preferred Stock, Series B Convertible
Preferred Stock, secured convertible notes and associated warrants.
TERRORIST ATTACKS HAVE CONTRIBUTED TO ECONOMIC INSTABILITY IN THE U.S.;
CONTINUED TERRORIST ATTACKS, WAR OR OTHER CIVIL DISTURBANCES COULD LEAD TO
FURTHER ECONOMIC INSTABILITY AND DEPRESS OUR STOCK PRICE.
On September 11, 2001, the U.S. was the target of terrorist attacks of
unprecedented scope. These attacks caused instability in the global financial
markets and contributed to volatility in the stock prices of U.S.
publicly-traded companies. These attacks may lead to armed hostilities or to
further acts of terrorism and civil disturbances in the U.S. or elsewhere, which
may further contribute to economic instability in the U.S. and could harm our
business.
WE MAY HAVE LIABILITY FOR INDEMNIFICATION CLAIMS ARISING FROM THE SALE
OF OUR PREVIOUS BUSINESSES IN 1998 AND 1997.
We disposed of our previous operating businesses in 1998 and 1997. In
selling those businesses, we agreed to provide customary indemnification to the
purchasers of those businesses for breaches of representations and warranties,
covenants and other specified matters. Although we believe that we have
adequately provided for future costs associated with these indemnification
obligations, indemnifiable claims could exceed our estimates.
OUR DIRECTORS AND EXECUTIVE OFFICERS OWN A SUBSTANTIAL PERCENTAGE OF
OUR SECURITIES. THEIR OWNERSHIP COULD ALLOW THEM TO EXERCISE SIGNIFICANT CONTROL
OVER CORPORATE DECISIONS AND TO IMPLEMENT CORPORATE ACTS THAT ARE NOT IN THE
BEST INTERESTS OF OUR SHAREHOLDERS AS A GROUP.
Our directors and executive officers beneficially own shares of our
securities that represent approximately 19.9% of the combined voting power
eligible to vote on matters brought
6
before our shareholders, including the Series A Convertible Preferred Stock and
associated warrants acquired by Antonio R. Sanchez, Jr., a director and current
beneficial owner of 12.3% of our outstanding common stock and John A. Ryan, our
chairman, president and chief executive officer. The Series A Convertible
Preferred Stock requires us to obtain the consent of the holders of the Series A
Convertible Preferred Stock, voting separately as a class, before we may enter
into mergers or other business combination transactions. Therefore, our
directors and executive officers, if they acted together, could exert
substantial influence over matters requiring approval by our shareholders. These
matters would include the election of directors and, as noted above, the
approval of mergers or other business combination transactions. This
concentration of ownership and voting power may discourage or prevent someone
from acquiring our business.
A PRIVATE INVESTOR OWNS A LARGE PERCENTAGE OF OUR OUTSTANDING STOCK AND
COULD SIGNIFICANTLY INFLUENCE THE OUTCOME OF ACTIONS.
George W. Haywood, a private investor, beneficially owns approximately
25.4% of our outstanding common stock. Furthermore, it is important to note that
Mr. Haywood acquired shares of our Series B Convertible Preferred Stock. Mr.
Haywood's Series B Convertible Preferred Stock shares are only currently
convertible into 388,366 shares of our common stock. This limitation was
required in order for us to comply with certain Nasdaq Marketplace Rules (see
below under "We must comply with the listing requirements of Nasdaq or our
common stock and liquidity will decline."). In the absence of this Nasdaq
limitation, Mr. Haywood's Series B Convertible Preferred Stock would be
convertible into 902,579 shares of our common stock, and assuming our
shareholders vote to remove this limitation, his preferred stock will be
convertible into this amount of our shares of common stock. Furthermore, Mr.
Haywood holds warrants, which are convertible, beginning March 18, 2003, into
305,986 shares of our common stock. Under applicable state law, the consent of
the holders of the Series B Convertible Preferred Stock, voting separately as a
class, is required before we may enter into mergers or other business
combination transactions. Because of his large percentage ownership, Mr. Haywood
could significantly influence all matters requiring approval by our
shareholders, including the election of directors and, as noted above, the
approval of mergers or other business combination transactions. Mr. Haywood's
interests may not be aligned with the interests of our other shareholders.
OUR ISSUANCE OF THE PREFERRED STOCK, NOTES AND ASSOCIATED WARRANTS
COULD DILUTE THE INTERESTS OF OUR SHAREHOLDERS.
One-ninth of the shares of Series A Convertible Preferred Stock and
Series B Convertible Preferred Stock are to be redeemed at two-month intervals
beginning eight months after issuance. The redemption amounts payable to the
holders of Series A Convertible Preferred Stock and Series B Convertible
Preferred Stock are paid in shares of our common stock.
If the approval of our common shareholders is obtained, the value of
the common stock used to determine the number of shares of common stock to be
issued upon redemption of shares of Series A Convertible Preferred Stock at the
final redemption date (that is, two years after issuance) will be the lesser of
$3.92 per share and the market value of the common stock at the time of
redemption, based on a closing bid price average formula. If the market price of
the common stock declines, the number of shares of common stock issuable to the
holders of Series
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A Convertible Preferred Stock upon such final redemption will increase, perhaps
substantially. There is no "floor" on the market value calculation and,
therefore, there is no "ceiling" on the number of shares of common stock that
may be issuable by us upon the final Series A Convertible Preferred Stock
redemption. A substantial decline in the market price of the common stock would
result in significant dilution to the existing holders of common stock if the
Series A Convertible Preferred Stock shares are redeemed at a substantially
lower price. This effect will be magnified if one or more interim redemption
amounts is deferred to the final redemption date.
The value of the common stock used to determine the number of shares of
common stock to be issued upon redemption of shares of Series B Convertible
Preferred Stock will be the lesser of the Series B Conversion Price and 90% of
the market value of the common stock at the time of redemption, based on a
volume-weighted average formula. If the market price of the common stock
declines, the number of shares of common stock issuable to the holders of Series
B Convertible Preferred Stock upon such automatic redemptions will increase,
perhaps substantially. There is no "floor" on the market value calculation and,
therefore, there is no "ceiling" on the number of shares of common stock that
may be issuable by us upon a Series B Convertible Preferred Stock redemption. A
substantial decline in the market price of the common stock would result in
significant dilution to the existing holders of common stock if the Series B
Convertible Preferred Stock shares are redeemed at a substantially lower price.
The Series A Convertible Preferred Stock, the Series B Convertible
Preferred Stock and the notes are convertible by the holders into shares of
common stock at any time. The Series A Conversion Price is initially $4.12 per
share, the Series B Conversion Price is initially $3.78 per share and the Note
Conversion Price is initially $3.78 per share. The conversion prices could be
lowered, perhaps substantially, in a variety of circumstances. In the event we
issue, or are deemed to have issued, shares of common stock at a price per share
that is less than the conversion prices then in effect (other than certain
specified exempt issuances), the conversion prices and the number of shares
issuable upon conversion of the Series A Convertible Preferred Stock and the
Series B Convertible Preferred Stock are subject to weighted average
anti-dilution adjustment, and the conversion prices and number of shares
issuable upon conversion of the notes are subject to full anti-dilution
adjustment. The anti-dilution adjustments applicable to the shares of Series B
Convertible Preferred Stock, the notes and, following the approval of our common
shareholders, the shares of Series A Convertible Preferred Stock do (or would)
not have a "floor" that would limit reductions in the conversion price of such
shares and notes that may occur under certain circumstances. Correspondingly,
there is no "ceiling" on the number of shares of common stock that may be
issuable, under certain circumstances, following such anti-dilution adjustments.
We issued four-year warrants (first exercisable six months after issue)
to the purchasers of Series A Convertible Preferred Stock and Series B
Convertible Preferred Stock entitling the warrant holders to purchase an
aggregate of 709,528 shares of common stock at an exercise price of $4.51 per
share. The exercise price of these warrants is subject to weighted average
anti-dilution adjustment in the event we issue, or are deemed to have issued,
shares of common stock at a price per share that is less than the exercise price
then in effect (other than certain specified exempt issuances). The "floor" on
such anti-dilution adjustments is set at $3.92 per share.
We issued three-year warrants to the holders of the notes entitling the
warrant holders to purchase an aggregate of 386,473 shares of common stock at an
exercise price of $4.14 per
8
share. The number of shares of common stock for which these warrants are
exercisable and the exercise price of these warrants are subject to full
anti-dilution adjustment in the event we issue, or are deemed to have issued,
shares of common stock at a price per share that is less than the exercise price
then in effect (other than certain specified exempt issuances). The
anti-dilution adjustments applicable to these warrants do not have a "floor"
that would limit reductions in the exercise price of such shares that may occur
under certain circumstances, and there is no "ceiling" on the number of shares
of common stock that may be issuable, under certain circumstances, following
such anti-dilution adjustments.
The number of shares of common stock that may be issued by us upon the
conversion or redemption of the shares of Series A Convertible Preferred Stock
and Series B Convertible Preferred Stock, the conversion of the notes and the
exercise of the warrants issued to the purchasers of the notes may not exceed
3,623,856 prior to the approval of our common shareholders. Assuming we receive
the approval of our common shareholders, there will be no limitation on the
aggregate number of shares of common stock that may be issuable upon the
conversion, redemption or exercise of these securities. Based on the initial
conversion and exercise prices, which are, as described above, subject to
adjustment, the shares of Series A Convertible Preferred Stock and Series B
Convertible Preferred Stock, the notes and all of the warrants issued in the
transactions are convertible, redeemable and/or exercisable for an aggregate of
5,235,168 shares of common stock (28.7% of our current outstanding common stock
as of September 30, 2002). Notwithstanding the foregoing, no holder of the notes
or the associated warrants is entitled to convert the notes or exercise the
associated warrants to the extent that such conversion or exercise would result
in such person and its affiliates being the holders of more than 4.99% of the
shares of common stock outstanding after giving effect to the conversion or
exercise. This restriction does not prohibit a holder from converting or
exercising up to 4.99% of the shares then outstanding, then selling those shares
and later converting or exercising up to 4.99% again. Upon the effectiveness of
this registration statement and the registration statements relating to the
Series A Convertible Preferred Stock, Series B Convertible Preferred Stock,
notes and associated warrants, the underlying shares of common stock will be
eligible for immediate resale in the public market. The market price of our
securities could fall as a result of these resales.
STOCK SALES AND HEDGING ACTIVITIES COULD AFFECT OUR STOCK PRICE.
To the extent the holders convert, redeem and exercise, as applicable,
the Series A Convertible Preferred Stock, the Series B Convertible Preferred
Stock and/or the notes and then sell the shares of our common stock they
receive, our stock price may decrease due to the additional amount of shares
available in the market. The subsequent sales of these shares could encourage
short sales by our other shareholders and others that could place further
downward pressure on our stock price. This could lead to further increases in
the already large short position in our common stock (6,266,215 shares as of
September 13, 2002). Moreover, subject to applicable law and limitations as set
forth in the documents governing the transactions, the holders of the Series A
Convertible Preferred Stock, the Series B Convertible Preferred Stock and the
notes may hedge their positions in our stock by shorting our stock, which could
further adversely affect the stock price. Furthermore, the perception that the
holders of the Series A Convertible Preferred Stock, the Series B Convertible
Preferred Stock and/or the notes may sell our common stock "short" may cause
others to sell their shares as well. An increase in the volume of sales of our
common stock, whether short sales or not and whether the sales are by the
9
holders of Series A Convertible Preferred Stock, the Series B Convertible
Preferred Stock and the notes or others, could cause the market price of our
common stock to decline. The effect of these activities on our stock price could
increase the number of shares required to be issued on the next applicable
conversion, redemption or exercise of the Series A Convertible Preferred Stock
and the Series B Convertible Preferred Stock.
OUR FAILURE TO SATISFY OUR REGISTRATION AND LISTING OBLIGATIONS WITH
RESPECT TO OUR COMMON STOCK COULD RESULT IN ADVERSE CONSEQUENCES, INCLUDING THE
IMPOSITION OF CASH DAMAGES AND THE EARLY REDEMPTION OF THE NOTES AT A
SUBSTANTIAL PREMIUM.
We are required to maintain the effectiveness of the registration
statement covering the resale of the common stock underlying the Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, the notes and
the associated warrants, until the earlier of the date the underlying common
stock may be resold pursuant to Rule 144(k) under the Securities Act or the date
on which the sale of all the underlying common stock is completed, subject to
certain exceptions. We will be subject to various penalties for failing to meet
our registration obligations and the related listing obligations for the
underlying common stock, which include cash damages and the right of the note
holders to require us to redeem all or any portion of the outstanding principal
and accrued interest under the notes.
WE ARE OBLIGATED TO MAKE SIGNIFICANT PERIODIC PAYMENTS OF PRINCIPAL AND
INTEREST UNDER THE NOTES. WE MAY BE OBLIGATED TO ISSUE ADDITIONAL NOTES OR MAKE
CASH PAYMENTS UPON THE MANDATORY REDEMPTION OF OUR PREFERRED STOCK.
We are required to make six monthly principal payments of $500,000 each
(plus accrued and unpaid interest) beginning in January 2003 with a final
payment of $5,000,000 (plus accrued and unpaid interest) on October 1, 2003. In
addition, without the approval of our common shareholders, we will not be able
to effect the redemption of all shares of Series A Convertible Preferred Stock
and Series B Convertible Preferred Stock through the issuance of shares of
common stock and, consequently, we will be required to pay the balance of the
redemption amount in either cash or by the issuance of a note. Any notes issued
in payment of the redemption amount will have a one-year term and accrue
interest. As a development-stage company, we currently have no significant
revenues and utilization of cash resources continues at a substantial level.
Furthermore, if we default on any of our payment obligations under any financing
instrument, the holders of the applicable instruments will have all rights
available under the instruments, including acceleration, termination and, with
respect to the notes, enforcement of security interests. Under such
circumstances, our cash position, liquidity and ability to operate would be
severally impacted, and it is possible we would not be able to pay our debts as
they come due.
WE MUST COMPLY WITH THE LISTING REQUIREMENTS OF NASDAQ OR OUR COMMON
STOCK AND LIQUIDITY WILL DECLINE.
To remain listed for trading on Nasdaq, we must abide by the Nasdaq
Marketplace Rules regarding the issuance of "future priced securities." Nasdaq
rules, including its rules regarding future priced securities, prohibit an
issuer of listed securities from issuing 20% or more of its outstanding capital
stock at less than the greater of book value or then-current market value
without obtaining prior shareholder consent.
10
These rules apply to the Series A Convertible Preferred Stock because,
following the approval of our common shareholders, the "floor" on the
anti-dilution adjustment may be removed and the final redemption payment may be
made in shares of common stock based on a future market price of the common
stock. These rules also apply to the Series B Convertible Preferred Stock
because additional shares of our common stock are issuable upon redemption based
on a future price of the common stock and because the anti-dilution provisions
in the Series B Convertible Preferred Stock could result in conversion below the
current market price. These rules also apply to the notes and the warrants
issued to the note purchasers because the anti-dilution provisions in such
securities could result in conversion or exercise prices below the current
market price.
The number of shares of common stock issuable upon the conversion,
redemption or exercise of such securities exceeds 20% of the number of our
outstanding shares immediately prior to our sale of the Series A Convertible
Preferred Stock, Series B Convertible Preferred Stock, the notes and associated
warrants. We did not obtain shareholder consent prior to such sales, nor, based
on our interpretation of the Nasdaq Marketplace Rules and discussions with
Nasdaq staff members, did we believe that shareholder consent was required prior
to the closing of such sales. The documents relating to the sales contain
provisions that prohibit us from issuing a number of shares of common stock that
would equal or exceed 20% of our outstanding shares unless we obtain shareholder
approval prior to the issuance of shares above the 20% limit. However, if Nasdaq
disagrees with our interpretation of its rules, or if we fail to comply with
Nasdaq's other listing requirements, Nasdaq could delist our common stock from
Nasdaq.
If Nasdaq delisted our common stock, we would likely seek to list our
common stock for quotation on a regional stock exchange. However, if we are
unable to obtain listing or quotation on such market or exchange, trading of our
common stock would occur in the over-the-counter market on an electronic
bulletin board for unlisted securities or in what are commonly known as the
"pink sheet." As a result, an investor would find it more difficult to dispose
of, or to obtain accurate quotations for the price of, our common stock.
Consequently, broker-dealers may be less willing or able to sell and/or make a
market in our common stock. Finally, it may become more difficult for us to
raise funds through the sale of our securities.
WE MAY NOT BE ABLE TO OBTAIN ADDITIONAL FUNDING WHEN NEEDED, WHICH
COULD REDUCE OUR ABILITY TO FUND OR EXPAND OPERATIONS.
Our obligations under the Series A Convertible Preferred Stock, the
Series B Convertible Preferred Stock and the notes and the resale of the common
stock underlying the Series A Convertible Preferred Stock, the Series B
Convertible Preferred Stock, the notes or the warrants may negatively affect our
ability to obtain financing. Some potential investors may either refuse to offer
us any financing or will offer financing at unacceptable rates or unfavorable
terms. In addition to substantially all of our assets being pledged to secure
the notes, for so long as the notes are outstanding, in the event we incur any
new debt (including any notes issuable upon the redemption of Series A
Convertible Preferred Stock or Series B Convertible Preferred Stock), the lender
must first enter into a subordination agreement with the holders of the notes
under which the indebtedness owed to such lenders will be subordinated in full
to the notes. The subordination and prior lien position of the notes may
prohibit us from obtaining any future debt financing. If we are unable to obtain
financing on favorable terms, we may be unable to fund or expand our operations
or we may only be able to fund or expand our operations on terms that
11
adversely affect our financial condition. If we are unable to obtain financing
necessary to fund our operations, we may have to sell or liquidate all or a
portion of our business or significantly reduce our expenses, or a combination.
This could adversely affect our ability to effectively execute our business
plan.
WE MAY ENCOUNTER OTHER UNANTICIPATED RISKS AND UNCERTAINTIES IN THE
INTERNET MARKET OR IN DEVELOPING NEW PRODUCTS AND SERVICES, AND WE CANNOT ASSURE
YOU THAT WE WILL BE SUCCESSFUL IN RESPONDING TO ANY UNANTICIPATED RISKS OR
UNCERTAINTIES.
There are no assurances that we will be successful or that we will not
encounter other, and even unanticipated, risks. We discuss other operating,
financial or legal risks or uncertainties in our periodic filings with the
Securities and Exchange Commission (we refer to it as the "SEC"). We are, of
course, also subject to general economic risks.
NOTE ON FORWARD-LOOKING STATEMENTS AND RISK FACTORS
This document contains "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended (we refer to it as the "Exchange
Act"). All statements other than statements of historical fact are
"forward-looking statements" for purposes of federal and state securities laws,
including: any projections of earnings, revenues or other financial items; any
statements of the plans, strategies and objectives of management for future
operations; any statements concerning proposed new products, services or
developments; any statements regarding future economic conditions or
performance; any statements of belief; and any statements of assumptions
underlying any of the foregoing. Forward-looking statements may include the
words "may," "will," "estimate," "intend," "continue," "believe," "expect" or
"anticipate" and other similar words. Such forward-looking statements may be
contained in the "Risk Factors" section above, among other places.
Although we believe that the expectations reflected in any of our
forward-looking statements are reasonable, actual results could differ
materially from those projected or assumed in any of our forward-looking
statements. Our future financial condition and results of operations, as well as
any forward-looking statements, are subject to change and to inherent risks and
uncertainties, such as those disclosed in this document. We do not intend, and
undertake no obligation, to update any forward-looking statement.
DOCUMENTS INCORPORATED BY REFERENCE
We furnish our shareholders with annual reports containing audited
financial statements and other appropriate reports. We also file annual,
quarterly and special reports, proxy statements and other information with the
SEC. Instead of repeating information that we have already filed with the SEC,
we are allowed to "incorporate by reference" in this prospectus information
contained in those documents we have filed with the SEC. These documents are
considered to be part of this prospectus.
We incorporate by reference in this prospectus the documents listed
below and any future filings we make with the SEC under Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act until the selling shareholders sell all of the
shares of common stock offered by this prospectus:
12
o our Annual Report on Form 10-K/A, including audited financial
statements, for our fiscal year ended December 31, 2001;
o our Quarterly Report on Form 10-Q/A for the quarterly period ended
March 31, 2002;
o our Quarterly Report on Form 10-Q for the quarterly period ended June
30, 2002;
o our Current Report on Form 8-K dated September 20, 2002;
o all other reports we have filed pursuant to Section 13(a) or 15(d) of
the Exchange Act since the end of our fiscal year covered by the Annual
Report referred to above; and
o the description of our common stock contained in our registration
statement on Form 8-A, dated September 25, 1989, including any
amendment or report filed for the purpose of updating such description.
Any documents that we file with the SEC pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the
offering, will also be considered to be part of this prospectus and will
automatically update and supersede the information contained in this prospectus.
At your request, we will provide you, without charge, a copy of any of
the documents we have incorporated by reference into this prospectus but not
delivered with the prospectus (other than exhibits to such documents, unless
those exhibits are specifically incorporated by reference into the documents
that this prospectus incorporates). If you want more information, write or call:
Steve M. York
Senior Vice President and Chief Financial Officer
Zix Corporation
2711 North Haskell Avenue
Suite 2300, LB 36
Dallas, Texas 75204-2960
Telephone: (214) 370-2000
WHERE YOU CAN GET MORE INFORMATION
We are delivering this prospectus to you in accordance with the U.S.
securities laws. We have filed a registration statement with the SEC to register
the common stock that the selling shareholder is offering to you. This
prospectus is part of that registration statement. As allowed by the SEC's
rules, this prospectus does not contain all of the information that is included
in the registration statement.
You may obtain a copy of the registration statement, or a copy of any
other filing we have made with the SEC, directly from the SEC. You may either:
o read and copy any materials we have filed with the SEC at the
SEC's Public Reference Room maintained at 450 Fifth Street,
N.W., Washington, D.C. 20549,
13
as well as the following regional offices: 233 Broadway, New
York, New York 10279; and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511; or
o visit the SEC's Web site at www.sec.gov, which contains
reports, proxy statements, and other information regarding
issuers that file electronically.
You can obtain more information about the SEC's Public Reference Room
by calling the SEC at 1-800-SEC-0330.
SELLING SHAREHOLDERS
The shares of common stock to be sold pursuant to the offering under
this prospectus were acquired by the selling shareholders, as described below.
In March 2000, we issued options to acquire 37,500 shares of our common
stock to The Richards Group, an advertising agency, in connection with certain
advertising services they were providing us. Half of the options bear an
exercise price of $50 per share and half of the options bear an exercise price
of $80 per share. The options are fully vested and expire in March 2004. We also
issued to The Richards Group 5,000 shares of our common stock.
In January 2001, we issued a warrant to acquire 22,222 shares of our
common stock to Heidrick & Struggles, Inc., an executive search firm, in
connection with their assistance in locating a senior executive for our company.
The warrant exercise price is $7.94 per share. The warrant is fully vested and
expires in January 2004.
In March 2001, we issued options to acquire 20,000 shares of our common
stock to Gang, Tyre, Ramer & Brown, Inc., a Los Angeles based law firm, in
connection with certain services they agreed to provide us. The options exercise
price is $8 per share, and the options expire in March 2007. None of the options
are currently vested.
In September 2002, we issued 23,622 and 45,000 shares of our common
stock to James McGrath and John Pritchett, respectively, two former employees,
in connection with their separation from employment with our company, in lieu of
a cash severance payment to which they otherwise would have been entitled to
receive.
The table below sets forth information with respect to the selling
shareholders' beneficial ownership of our common stock immediately prior to this
offering and as adjusted to reflect the sale of the applicable number of shares
of common stock pursuant to this offering. All information with respect to the
selling shareholders' beneficial ownership in our common stock has been
furnished by the selling shareholders. No selling shareholder will own one
percent or more of our common stock following the offering.
14
BENEFICIAL OWNERSHIP PRIOR TO OFFERING BENEFICIAL OWNERSHIP AFTER OFFERING
-------------------------------------- -----------------------------------
NUMBER OF
SHARES TO BE
NAME OF SELLING NUMBER OF PERCENT OF REGISTERED FOR NUMBER OF SHARES PERCENT OF CLASS
SHAREHOLDER SHARES (1) CLASS (2) SALE HEREBY (3) (2)
--------------- ---------- ---------- -------------- ---------------- ----------------
The Richards Group 42,500(4) * 42,500 0 0%
Heidrick & Struggles, Inc. 22,222(5) * 22,222 0 0%
Gang, Tyre, Ramer & 20,000(6) * 20,000 0 0%
Brown, Inc.
James McGrath(7) 58,289(8) * 23,622 34,667 *
John W. Pritchett(9) 122,000(10) * 45,000 77,000 *
----------
* Less than 1%.
(1) The number of common shares beneficially owned has been calculated in
accordance with Rule 13d-3 under the Exchange Act, and the information
is not necessarily indicative of beneficial ownership for any other
purpose.
(2) Computed based on the 18,239,596 shares of our common stock outstanding
as of September 30, 2002.
(3) Assumes all of the shares of common stock offered under this prospectus
are sold. We are unable, however, to determine the exact number of
shares that will actually be sold or when or if these sales will occur.
(4) Includes 37,500 shares of our common stock that The Richards Group has
the right to acquire under outstanding stock options that are currently
exercisable.
(5) Includes 22,222 shares of our common stock that Heidrick & Struggles,
Inc. has the right to acquire under outstanding stock warrants that are
currently exercisable.
(6) Includes 20,000 shares of our common stock that Gang, Tyre, Ramer &
Brown, Inc. has the right to acquire under outstanding stock options
that are currently exercisable.
(7) Mr. McGrath was employed as Manager of Bank Card Alliances for our
subsidiary ZixCharge.com, Inc.
(8) Includes 34,667 shares of our common stock that Mr. McGrath has the
right to acquire under outstanding stock options that are currently
exercisable.
(9) Mr. Pritchett was employed as a Vice President of our subsidiary
ZixCharge.com, Inc.
(10) Includes 54,000 shares of our common stock that Mr. Pritchett has the
right to acquire under outstanding stock options that are currently
exercisable.
PLAN OF DISTRIBUTION
The shares of common stock being offered hereby are being registered to
permit public secondary trading of such shares by their holders from
time-to-time after the date of this prospectus. The sale of shares of our common
stock offered in this prospectus may be effected from time-to-time either
directly or by one or more broker-dealers or agents, in one or more transactions
(which may involve crosses or block transactions) on Nasdaq (or other national
securities exchange or quotation services on which the common stock may be
listed or quoted at the time of sale) or otherwise. Such common stock may also
be sold in one or more negotiated transactions or through a combination of such
methods of distribution, at the prevailing market prices, fixed prices (which
may be changed), varying prices determined at the time of sale or at negotiated
prices. The selling shareholders will act independently of us in making
decisions with respect to the timing, manner
15
and size of each sale. The selling shareholders may sell all, some or none of
the shares offered by this prospectus.
In the event one or more broker-dealers or agents agree to sell the
shares, they may do so by purchasing the shares as principals or by selling the
shares as agents for the selling shareholders. Any broker-dealer that does this
may receive compensation in the form of discounts, concessions or commissions
from the selling shareholders or the purchasers of the shares for which the
broker-dealer may act as agent or to whom they sell as principal, or both, which
compensation as to a particular broker-dealer may be in excess of customary
compensation. To our knowledge, the selling shareholders have not entered into
any agreement, arrangement or understanding with any particular broker-dealer or
market maker with respect to the shares offered hereby, nor do we know the
identity of any brokers or market makers that will participate in the offering.
In managing the selling shareholders' investments in us, the selling
shareholders could employ various methods involving hedging, short sales or
loans of the shares covered by this prospectus.
Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of the shares may not simultaneously engage in
market-making activities with respect to our common stock for the applicable
period under Regulation M of the Exchange Act prior to the commencement of the
distribution. In addition, the selling shareholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including, without limitation, Regulation M. These provisions may
limit the timing of purchases and sales of the shares by the selling
shareholders. All of the foregoing may affect the marketability of the shares.
In order to comply with certain states' securities laws, if applicable,
our common stock will be sold in jurisdictions only through registered or
licensed brokers or dealers. In some states, our common stock may not be sold
unless it has been registered or qualified for sale in such state or an
exemption from registration or qualification is available and is complied with.
USE OF PROCEEDS
We will not receive any of the proceeds from this offering; rather, the
selling shareholders will receive those proceeds directly.
LEGAL MATTERS
The validity of the stock offered hereby will be passed upon for us by
Ronald A. Woessner, our Senior Vice President, General Counsel and Secretary.
EXPERTS
The consolidated financial statements appearing in the Annual Report on
Form 10-K/A for our fiscal year ended December 31, 2001, referred to above under
the heading "Documents Incorporated by Reference", have been audited by Ernst &
Young LLP, our independent auditors, as set forth in their report thereon,
included therein, and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
16
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table indicates the estimated expenses to be incurred in
connection with the offering described in this registration statement, all of
which will be paid by us.
SEC registration fee $ 57.14
Accounting fees and expenses 2,500.00
Legal fees and expenses 1,000.00
Miscellaneous expenses 1,000.00
------------
Total $ 4,557.14
============
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by the Texas Business Corporation Act, our Restated
Articles of Incorporation provide that our directors shall not be personally
liable to us or our shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability for (i) any breach of the director's
duty of loyalty to us or our shareholders, (ii) any act or omission not in good
faith or which involves intentional misconduct or a knowing violation of law,
(iii) any transaction from which the director derived any improper personal
benefit, (iv) any act or omission where the liability of the director is
expressly provided for by statute, or (v) any act related to an unlawful stock
repurchase or payment of a dividend. In addition, our Restated Articles of
Incorporation and Restated Bylaws include certain provisions permitted by the
Texas Business Corporation Act whereby our directors, officers, employees and
agents generally are to be indemnified against certain liabilities to the
fullest extent authorized by the Texas Business Corporation Act. We maintain
insurance on behalf of our directors and executive officers insuring them
against any liability asserted against them in their capacities as directors or
officers or arising out of such status.
ITEM 16. EXHIBITS.
The Exhibits to this registration statement are listed in the Index to
Exhibits on page II-5 of this registration statement, which Index is
incorporated herein by reference.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a
II-1
fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement.
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3, Form S-8 or Form
F-3, and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
with or furnished to the Commission by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described in Item 6 or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of
II-2
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, State of Texas, on November 6, 2002.
ZIX CORPORATION
By: /s/ Steve M. York
------------------------------------------
Steve M. York
Senior Vice President, Chief Financial
Officer and Treasurer
II-3
POWER OF ATTORNEY
We, the undersigned officers and directors of Zix Corporation, hereby
severally constitute and appoint John A. Ryan and Steve M. York, and each of
them acting individually, as our true and lawful attorneys-in-fact and agents,
with full power of substitution, to sign for us and in our name, place and
stead, in any and all capacities, and to file with the Securities and Exchange
Commission under the Securities Act of 1933, the registration statement on Form
S-3 filed herewith and any and all amendments and supplemental registration
statements (including post-effective amendments) to the registration statement
and registration statements related to the same offering, and any and all
applications, instruments and other documents to be filed with the Securities
and Exchange Commission pertaining to the registration of the securities covered
hereby or the transactions contemplated herein.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on November 6, 2002.
Signature Title
--------- -----
/s/ John A. Ryan Chairman, President, Chief Executive Officer and Director
-------------------------------------------- (Principal Executive Officer)
John A. Ryan
/s/ Steve M. York Senior Vice President, Chief Financial Officer and
-------------------------------------------- Treasurer (Principal Financial and Accounting Officer)
Steve M. York
/s/ Michael E. Keane Director
--------------------------------------------
Michael E. Keane
/s/ James S. Marston Director
--------------------------------------------
James S. Marston
/s/ Antonio R. Sanchez, Jr. Director
--------------------------------------------
Antonio R. Sanchez, Jr.
/s/ Dr. Ben G. Streetman Director
--------------------------------------------
Dr. Ben G. Streetman
II-4
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
5.1* Opinion of Ronald A. Woessner.
23.1 Consent of Ronald A. Woessner (included in Exhibit 5.1).
23.2* Consent of Ernst & Young LLP.
24.1 Power of Attorney (included in Part II of this registration statement).
----------
* Filed electronically herewith.
II-5