<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                            SCHEDULE 14A INFORMATION

                    PROXY STATEMENT PURSUANT TO SECTION 14(A)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


Filed by Registrant        [X]

Filed by a Party other than the Registrant       [ ]

Check the appropriate box:

            [X]   Preliminary Proxy Statement

            [ ]   Definitive Proxy Statement

            [ ]   Definitive Additional Materials

            [ ]   Soliciting Material Pursuant to Rule 14a-12


                                 ZIX CORPORATION
                (Name of Registrant as Specified In Its Charter)

                          -----------------------------

    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

         [X]      No fee required.

         [ ]      Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
                  and 0-11.

         (1)      Title of each class of securities to which transaction
                  applies:

         (2)      Aggregate number of securities to which transactions applies:

         (3)      Per unit price or other underlying value of transaction
                  computed pursuant to Exchange Act Rule 0-11:(1)

         (4)      Proposed maximum aggregate value of transaction:

         (5)      Total fee paid:

         [ ]      Fee paid previously with preliminary materials

         [ ]      Check box if any part of the fee is offset as provided by
                  Exchange Act Rule 0-11(a)(2) and identify the filing for which
                  the offsetting fee was paid previously. Identify the previous
                  filing by registration statement number, or the Form or
                  Schedule and the date of its filing.

         (1)      Amount Previously Paid:
         (2)      Form, Schedule or Registration Statement No:
         (3)      Filing Party:
         (4)      Date Filed:

----------
         (1) Set forth the amount on which the filing fee is calculated and
state how it was determined.


<PAGE>
 
                                  ZIXCORP LOGO
                             ---------------------
 
                                ZIX CORPORATION
                           2711 NORTH HASKELL AVENUE
                               SUITE 2300, LB 36
                            DALLAS, TEXAS 75204-2960
                             ---------------------
 
                   NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
                TO BE HELD [            ], [            ], 2002
                             ---------------------
 
     We will hold a special shareholders' meeting on [          ], [          ],
2002,  at 9:00 a.m. (registration to begin  at 8:30 a.m.), Central time. We will
hold the meeting at [           ]. At  the meeting, we will ask you to  consider
and vote on the following proposals:
 
     - to  approve the issuance of our common stock at a price below the greater
       of the book  or market  value of  our common  stock (1)  to officers  and
       directors  of our company  and other holders of  our Series A Convertible
       Preferred Stock upon conversion or redemption of our Series A Convertible
       Preferred Stock and (2) in an amount equal to or greater than 20% of  our
       outstanding  common  stock immediately  prior  to the  issuance  of these
       securities  upon   the  conversion,   redemption  and/or   exercise,   as
       applicable,  of  our  Series  A  Convertible  Preferred  Stock,  Series B
       Convertible Preferred  Stock,  6.5%  Secured Convertible  Notes  and  the
       warrants  associated  with the  6.5% Secured  Convertible Notes,  in both
       cases, to comply with (A) our agreements with purchasers of the Series  A
       Convertible  Preferred Stock,  the Series B  Convertible Preferred Stock,
       the 6.5% Secured Convertible Notes  and the warrants associated with  the
       6.5%  Secured  Convertible Notes  and (B)  Marketplace  Rule 4350  of the
       Nasdaq National Market; and
 
     - to discuss and take action on any other business that is properly brought
       before the meeting or any adjournment thereof.
 
     If you were a shareholder at the close of business on  [          ],  2002,
you  are entitled to notice  of, and to vote at,  the meeting or any adjournment
thereof. The stock transfer books will not be closed.
 
     We would like you to attend the meeting, but understand that you may not be
able to  do  so. For  your  convenience, and  to  ensure that  your  shares  are
represented  and voted according to  your wishes, we have  enclosed a proxy card
for you to use. Please vote, sign and date the proxy card and return it to us as
soon as possible. We  have provided you with  a postage-paid envelope to  return
your  proxy card. If you attend the meeting,  you may revoke your proxy and vote
in person. We look forward to hearing from you.
 
                                         By Order of the Board of Directors,
 
                                         RONALD A. WOESSNER
                                         Senior Vice President, General
                                         Counsel & Secretary
 
Dallas, Texas
[          ], 2002
 
                            YOUR VOTE IS IMPORTANT.
       PLEASE VOTE EARLY EVEN IF YOU PLAN TO ATTEND THE SPECIAL MEETING.

<PAGE>
 
                               TABLE OF CONTENTS
 

<Table>
<Caption>
                                                              PAGE
                                                              ----
<S>                                                           <C>
QUESTIONS AND ANSWERS.......................................    1
PROPOSAL ONE: TO APPROVE THE ISSUANCE OF SHARES OF COMMON
  STOCK.....................................................    4
BACKGROUND AND REASONS FOR THE ISSUANCE OF THE SERIES A
  CONVERTIBLE PREFERRED STOCK, SERIES B CONVERTIBLE
  PREFERRED STOCK, THE NOTES AND THE WARRANTS ASSOCIATED
  WITH THE NOTES............................................    6
INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON....    7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
  MANAGEMENT................................................    8
POTENTIAL DILUTION AND MARKET CONSEQUENCES..................   10
TERMS OF THE SERIES A CONVERTIBLE PREFERRED STOCK, SERIES B
  CONVERTIBLE PREFERRED STOCK, THE NOTES AND THE WARRANTS...   12
WHERE YOU CAN FIND MORE INFORMATION.........................   20
BOARD OF DIRECTORS RECOMMENDATION...........................   20
DOCUMENTS INCORPORATED BY REFERENCE.........................   20
</Table>

 
                                        i

<PAGE>
 
                             QUESTIONS AND ANSWERS
 
WHY DID I RECEIVE THIS PROXY STATEMENT?
 
     On or about [          ], 2002, we will begin mailing this proxy  statement
and  accompanying proxy card to everyone who was a shareholder of our company at
the close of business on [          ], 2002. We prepared this proxy statement to
let our shareholders know  when and where we  will hold a special  shareholders'
meeting. This proxy statement:
 
     - includes  information about the matters that  will be discussed and voted
       on at the meeting, and
 
     - provides you with updated information about our company.
 
I MAY HAVE RECEIVED MORE THAN ONE PROXY STATEMENT. WHY?
 
     If you received  more than one  proxy statement, your  shares are  probably
registered  differently or are in more than  one account. Please vote each proxy
card that you received.
 
WHAT WILL OCCUR AT THE SPECIAL MEETING?
 
     First, we will  determine whether  enough shareholders are  present at  the
meeting to conduct business. A shareholder will be deemed to be "present" at the
meeting if the shareholder:
 
     - is present in person; or
 
     - is  not  present in  person  but has  voted by  proxy  card prior  to the
       meeting.
 
     All shareholders of record at the close of business on [           ],  2002
will  be entitled to vote on matters presented at the meeting or any adjournment
thereof. On the record date, there were [          ] shares of our common  stock
outstanding.  The holders of a majority, or [            ], of the shares of our
common stock entitled to vote at the meeting must be represented at the  meeting
in  person or by proxy to  have a quorum for the  transaction of business at the
meeting and to act on the matters specified in this proxy statement. If  holders
of fewer than [          ] shares are present at the meeting, we will adjourn or
reschedule  the meeting. Under our Articles  of Incorporation, for each share of
common stock that you owned at the close of business on [          ], 2002,  you
are  entitled  to one  vote on  all matters  brought before  the meeting  or any
adjournment thereof.
 
     A representative  of  Ernst  &  Young LLP,  our  independent  auditors,  is
expected  to  be  present  at  the  special  meeting  and  will  be  afforded an
opportunity to  make a  statement, if  such representative  so desires,  and  to
respond to appropriate questions.
 
     After  each proposal has been voted on  at the meeting, we will discuss and
take action on any other matter that is properly brought before the meeting. Our
transfer agent, Computershare Investor Services,  LLC, will count the votes  and
act as inspector of election.
 
     If enough shareholders are present at the meeting to conduct business, then
we  will vote  on the proposal  outlined in  this proxy statement  and any other
business that  is  properly brought  before  the meeting  and  any  adjournments
thereof.
 
     We know of no other matters that will be presented for consideration at the
special  meeting.  If, however,  other matters  or  proposals are  presented and
properly come before the meeting, the  proxy holders intend to vote all  proxies
in  accordance with their best  judgment in the interest  of Zix Corporation and
our shareholders.
 
HOW DO I VOTE IF I AM NOT PLANNING TO ATTEND THE SPECIAL MEETING?
 
     In addition  to  voting  in  person  at the  meeting,  you  may  mark  your
selections  on the enclosed  proxy card, date  and sign the  card and return the
card in the enclosed postage-paid envelope.
 
     Please understand that voting by any  means other than voting in person  at
the  meeting has the effect of appointing  John A. Ryan, our Chairman, President
and Chief Executive Officer, and Steve M. York, our
 
                                        1

<PAGE>
 
Senior Vice President, Chief Financial  Officer and Treasurer, as your  proxies.
They will be required to vote on the proposals described in this proxy statement
exactly  as you have voted. However, if any other matter requiring a shareholder
vote is properly  raised at  the meeting,  then Messrs.  Ryan and  York will  be
authorized to use their discretion to vote on such issues on your behalf.
 
     We encourage you to vote now even if you plan to attend the special meeting
in  person. If your shares are in a brokerage account, you may receive different
voting instructions from your broker.
 
     Where a shareholder has appropriately specified how a proxy is to be voted,
it will be  voted accordingly, and  where no  specific direction is  given on  a
properly executed proxy card, it will be voted FOR adoption of the proposals set
forth in this proxy statement.
 
WHAT IF I WANT TO CHANGE MY VOTE?
 
     You  may revoke  your vote  on a  proposal at  any time  before the special
meeting for any reason. To  revoke your proxy before  the meeting, write to  our
Secretary,  Ronald A. Woessner, at 2711 North Haskell Avenue, Suite 2300, LB 36,
Dallas, Texas 75204-2960. You may also come to the meeting and change your  vote
in writing.
 
HOW DO I RAISE AN ISSUE FOR DISCUSSION OR VOTE AT THE NEXT ANNUAL MEETING?
 
     If  you would like to submit a proposal to be included in next year's proxy
statement, you must submit  your proposal in  writing so that  we receive it  no
later  than February 10, 2003. We will  include your proposal in our next annual
proxy statement if it is a proposal that we would be required to include in  our
proxy  statement pursuant to the rules of the Securities and Exchange Commission
(we refer to it as the "SEC").  Under Rule 14a-8 of the Securities Exchange  Act
of  1934,  as  amended,  proposals  of  shareholders  must  conform  to  certain
requirements as  to form  and may  be  omitted from  the proxy  materials  under
certain  circumstances. To avoid unnecessary expenditures of time and money, you
are urged to  review this rule  and, if questions  arise, consult legal  counsel
prior  to  submitting a  proposal to  us.  Proposals should  be directed  to our
Secretary, Ronald A. Woessner, at our principal executive offices at 2711  North
Haskell Avenue, Suite 2300, LB 36, Dallas, Texas 75204-2960.
 
WHAT IF MY SHARES ARE IN A BROKERAGE ACCOUNT AND I DO NOT VOTE?
 
     If  your  shares are  in  a brokerage  account and  you  do not  vote, your
brokerage firm could:
 
     - vote your shares, if it is permitted by the rules of the NASD; or
 
     - leave your shares unvoted.
 
     Under applicable rules, brokers who hold shares in street name do not  have
the  authority to vote  on Proposal One without  receiving instructions from the
beneficial owner of the shares. If such brokers deliver a proxy with respect  to
this  special meeting  of the shareholders  and, because of  the rules described
above do not vote on Proposal One, referred to as "broker non-votes," the shares
represented by the  proxy will  count for purposes  of determining  if a  quorum
exists,  but will not be included in vote  totals and will have no effect on the
outcome with respect to Proposal One.
 
HOW ARE ABSTENTIONS TREATED?
 
     Any shareholder that  is present  at the meeting,  either in  person or  by
proxy,  but who  abstains from  voting, will  still be  counted for  purposes of
determining whether a quorum exists. An abstention would have the same effect as
a vote against the proposal. If you sign your proxy card but do not specify  how
you  want  to vote  on  a proposal,  then  your shares  will  be voted  FOR that
proposal.
 
WHAT VOTE IS NECESSARY TO APPROVE THE PROPOSAL?
 
     To approve the stock issuance (Proposal One), it is necessary to obtain the
affirmative vote of the shareholders (in person or by proxy) of our common stock
as of the record date representing a majority of the
 
                                        2

<PAGE>
 
total votes cast,  including abstentions,  at the  meeting. The  holders of  the
Series  A Convertible Preferred Stock have the  right to one vote for each share
of our common stock into which their Series A Convertible Preferred Stock  could
be  converted  on  the  record  date.  However,  the  holders  of  the  Series A
Convertible Preferred Stock have  agreed with us that  they will not vote  their
shares of Series A Convertible Preferred Stock with respect to Proposal One.
 
HOW MUCH WILL THIS SOLICITATION COST, AND WHO WILL PAY FOR IT?
 
     We  will bear the  cost of solicitation  of proxies, including  the cost of
preparing, printing and  mailing proxy  materials, and the  cost of  reimbursing
brokers for forwarding proxies and proxy statements to their principals. We have
engaged  Georgeson Shareholder to assist in  the solicitation of proxy materials
from shareholders  at  a  fee  of approximately  $5,500  plus  reimbursement  of
reasonable  out-of-pocket expenses. Proxies may  also be solicited without extra
compensation  by  our  officers  and   employees  by  telephone  or   otherwise.
Arrangements  may  also  be made  with  brokerage houses  and  other custodians,
nominees and fiduciaries for  the forwarding of  proxy solicitation material  to
beneficial  owners of shares of our common  stock, and we may reimburse them for
reasonable out-of-pocket expenses incurred by them.
 
WHERE CAN I FIND THE VOTING RESULTS OF THE SPECIAL MEETING?
 
     We will announce  the voting results  at the meeting  and will publish  the
results  in  a  current  report  on  Form  8-K  promptly  following  the special
shareholders' meeting. You can receive a copy by contacting either our  Investor
Relations   office  at  (214)   515-7357  or  the  SEC   at  (800)  SEC-0330  or
http://www.sec.gov.
 
                                        3

<PAGE>
 
                                 PROPOSAL ONE:
 
               TO APPROVE THE ISSUANCE OF SHARES OF COMMON STOCK
 
SEPTEMBER 2002 FINANCING TRANSACTIONS
 
     On September  18,  2002,  we  announced the  simultaneous  closing  of  two
financing  transactions pursuant to which we  received $16,000,000 in gross cash
proceeds.
 
     In the first transaction, we issued the following:
 
     - 819,886 shares of Series A  Convertible Preferred Stock, par value  $1.00
       per share;
 
     - 1,304,815 shares of Series B Convertible Preferred Stock, par value $1.00
       per share; and
 
     - warrants to purchase 709,528 shares of our common stock.
 
     Purchasers  of  the Series  A  Convertible Preferred  Stock  and associated
warrants include  John A.  Ryan,  our chairman,  president and  chief  executive
officer;  Antonio R. Sanchez,  Jr., a director  of our company;  SANTIG. Ltd., a
family limited  partnership for  which Mr.  Sanchez serves  as managing  general
partner;  the 1988 Spendthrift Trust,  a family trust of  which Mr. Sanchez is a
beneficiary; and David P. Cook, the  founder and a former executive officer  and
director  of  our  company.  Mr.  Ryan  purchased  189,205  shares  of  Series A
Convertible Preferred Stock and associated warrants to purchase an aggregate  of
66,518  shares  of our  common stock.  Mr. Sanchez  purchased 126,136  shares of
Series A  Convertible Preferred  Stock and  associated warrants  to purchase  an
aggregate  of 44,345 shares of our  common stock. SANTIG, Ltd. purchased 252,273
shares of  Series  A Convertible  Preferred  Stock and  associated  warrants  to
purchase an aggregate of 88,691 shares of our common stock. The 1988 Spendthrift
Trust  purchased  126,136 shares  of Series  A  Convertible Preferred  Stock and
associated warrants to  purchase an  aggregate of  44,345 shares  of our  common
stock. Mr. Cook purchased 126,136 shares of Series A Convertible Preferred Stock
and  associated warrants to purchase an aggregate of 44,345 shares of our common
stock. Purchasers of  the Series  B Convertible Preferred  Stock and  associated
warrants  include  George  W. Haywood,  a  25.4% beneficial  shareholder  of our
company, and an IRA for the benefit of Mr. Haywood. Mr. Haywood and the IRA  for
the  benefit of Mr. Haywood purchased an aggregate of 947,708 shares of Series B
Convertible Preferred Stock and associated warrants to purchase an aggregate  of
305,986  shares of  common stock.  The aggregate  cash proceeds  from this first
transaction were $8,000,000.
 
     In the second transaction, we issued:
 
     - 6.5% Secured Convertible Notes, in a principal amount of $8,000,000 and
 
     - warrants to purchase 386,473 shares of our common stock
 
to institutional investors not affiliated  with our company. The aggregate  cash
proceeds  from  this  second  transaction  were  $8,000,000.  The  6.5%  Secured
Convertible Notes  are  generally referred  to  as  the "notes"  in  this  proxy
statement.
 
     Subject to the limitations described below,
 
     - the  Series  A  Convertible  Preferred  Stock  and  Series  B Convertible
       Preferred Stock are initially convertible into an aggregate of  2,022,767
       shares of common stock and
 
     - the  notes  and  the warrants  associated  with the  notes  are initially
       convertible or  exercisable  into an  aggregate  of 2,502,875  shares  of
       common stock.
 
NEED FOR SHAREHOLDER APPROVAL
 
     Because  our common stock is  listed on the Nasdaq  National Market, we are
subject to Marketplace Rule  4350. Marketplace Rule 4350  requires us to  obtain
the  approval of  our shareholders  before issuing our  common stock  at a price
below the greater of our book price or  the market price of our common stock  to
officers  or directors or where the number of shares of common stock issuable is
equal to or greater than 20% of  our outstanding common stock. In our case,  the
relevant    threshold   was   the   market    price   of   our   common   stock.
 
                                        4

<PAGE>
 
The  common  stock  issuable  upon  conversion or  redemption  of  the  Series A
Convertible Preferred Stock  will be  issuable to  John A.  Ryan, our  chairman,
president  and chief executive  officer; Antonio R. Sanchez,  Jr., a director of
our company; SANTIG, Ltd.;  the 1988 Spendthrift Trust;  and David P. Cook,  our
founder and a former executive officer and director of our company. In addition,
the  conversion or redemption  provisions of the  Series A Convertible Preferred
Stock may cause  the underlying common  stock to be  issued at a  price that  is
below the market price of our common stock. The issuance of all of the shares of
common  stock which  are potentially  issuable under  the conversion, redemption
and/or exercise  provisions of  the Series  A Convertible  Preferred Stock,  the
Series B Convertible Preferred Stock, the notes and the warrants associated with
the  notes,  aggregating 4,525,642  shares  (exclusive of  accrued  interest and
dividends), would exceed the 20% threshold (3,623,856 shares). These conversion,
redemption and exercise provisions described above include:
 
     - the Series A Convertible Preferred Stock and the warrants associated with
       the notes each  contain antidilution  protections which  may cause  their
       conversion prices to drop below the market price;
 
     - the  Series B  Convertible Preferred Stock  and the  notes, which already
       have conversion  prices  below  the market  price,  contain  antidilution
       protections  which  could  cause  their conversion  prices  to  drop even
       further;
 
     - the final mandatory  redemption provisions  of the  Series A  Convertible
       Preferred  Stock require us to issue our common stock at a price equal to
       the lesser of $3.92 per share or the market price of our common stock  on
       the  date of the  final redemption of the  Series A Convertible Preferred
       Stock; and
 
     - the mandatory redemption provisions of the Series B Convertible Preferred
       Stock require us to issue our common stock at a price equal to the lesser
       of $3.78 per share or 90% of the market price of our common stock on  the
       date of any redemption.
 
     For purposes of the Nasdaq rules, the "market price" is $3.92 per share.
 
          For these reasons, pending shareholder approval, the holders of the
 
        - Series  A Convertible Preferred Stock  have agreed that the conversion
          price of the Series A Convertible Preferred Stock shall not drop below
          $3.92 per share,
 
        - Series  A  Convertible  Preferred  Stock  and  Series  B   Convertible
          Preferred  Stock have  agreed that the  aggregate number  of shares of
          common stock issuable upon the conversion or redemption of the  Series
          A Convertible Preferred Stock and Series B Convertible Preferred Stock
          shall not exceed 870,693 shares and
 
        - notes  and the warrants associated with the notes have agreed that the
          aggregate number of shares of common stock issuable upon conversion of
          the notes and exercise of the warrants associated with the notes shall
          not exceed 2,753,163 shares.
 
     The total  number  of  shares  of  common  stock  currently  issuable  upon
conversion,  redemption and/or exercise of all of these securities is 3,623,856,
or 19.99%  of  our  outstanding  common  stock  on  the  date  we  issued  these
securities.  The limitations described  in this paragraph  include any shares of
common stock that may be issuable in respect of antidilution adjustments to  the
conversion  or exercise prices of these securities  or an increase in the number
of shares issuable upon redemption  by reason of a drop  in the market price  of
our common stock.
 
     In  connection with  our issuance  of these  securities, we  agreed to seek
shareholder approval to issue our common stock at a price below the market price
($3.92 per share)
 
     - to the purchasers of  our Series A  Convertible Preferred stock:  Messrs.
       Ryan, Sanchez, and Cook and SANTIG, Ltd. and the 1988 Spendthrift Trust.
 
     - in an amount equal to or greater than 20% of our outstanding common stock
       upon   the  conversion,  redemption  and/or  exercise  of  the  Series  A
       Convertible Preferred Stock,  the Series B  Convertible Preferred  Stock,
       the notes and the warrants associated with the notes.
 
                                        5

<PAGE>
 
     The  primary reason  we believe  approval of  Proposal One  is in  the best
interest of our company  is that, after shareholder  approval, we will have  the
ability  to  issue our  common  stock in  lieu of  cash  upon the  conversion or
redemption of the  Series A  Convertible Preferred Stock,  Series B  Convertible
Preferred  Stock and the notes and upon  the exercise of the warrants associated
with the notes. This  will allow us  to conserve cash for  the operation of  our
business.
 
     Conversely,  if  we  have not  obtained  the shareholder  approval  of this
Proposal One and are  prohibited from issuing a  sufficient number of shares  of
common stock necessary to effect:
 
     - any  attempted optional conversion of the  notes by a holder, each holder
       of a note will have the right to  force us to redeem all or a portion  of
       the  principal amount outstanding thereunder that cannot be converted for
       a cash payment equal to 100% of the principal amount being redeemed, plus
       all accrued interest thereon;
 
     - any attempted  optional  exercise of  the  warrants associated  with  the
       notes,  a warrant holder will have the right to require us to make a cash
       payment with respect to the portion of the warrant sought to be exercised
       equal to  the  difference between  the  warrant exercise  price  and  the
       volume-weighted  average price of the common stock on the Nasdaq National
       Market as of the time of the attempted exercise;
 
     - any interim mandatory  redemption of the  Series A Convertible  Preferred
       Stock,  the shares of Series A Convertible Preferred Stock that cannot be
       redeemed by the issuance of common stock  must be redeemed by us in  cash
       (provided  that the notes have been paid in full) or through the issuance
       of a subordinated note, at our option. Each subordinated note will have a
       one-year term,  be unsecured,  bear interest  at 6.5%  per annum  and  be
       subordinated to the notes;
 
     - the  final  mandatory redemption  of the  Series A  Convertible Preferred
       Stock, the shares of Series A Convertible Preferred Stock that cannot  be
       redeemed  by the issuance of common stock must be redeemed by us in cash;
       and
 
     - any mandatory redemption of the Series B Convertible Preferred Stock, the
       shares of Series B Convertible Preferred Stock that cannot be redeemed by
       the issuance of  common stock must  be redeemed by  us in cash  (provided
       that  the notes  have been  paid in  full) or  through the  issuance of a
       subordinated note,  at our  option. Each  subordinated note  will have  a
       one-year  term,  be unsecured,  bear interest  at 6.5%  per annum  and be
       subordinated to the notes.
 
     If any one or more of the items described above were to occur, our  ability
to  fund our  operations would be  severely restricted  and we may  be forced to
significantly reduce our operations and expenses.
 
     Please note that  if we obtain  shareholder approval of  Proposal One,  the
number of shares of common stock we may issue upon conversion, redemption and/or
exercise  of  these securities  would  not be  limited by  the  20% cap.  If the
antidilution provisions of these securities take  effect or if the market  price
of  our common stock drops,  the number of shares  of common stock issuable upon
conversion, redemption  and/or  exercise  of  these  securities  could  increase
significantly,  thus resulting  in significant  dilution to  our existing common
stock shareholders. For a description of the potential dilutive effect of  these
securities,  see "Potential  Dilution and  Market Consequences"  on page  10 and
"Terms of  the  Series  A  Convertible Preferred  Stock,  Series  B  Convertible
Preferred Stock, the Notes and the Warrants" on page 12.
 
  OUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THIS PROPOSAL
                                      ONE.
 
            BACKGROUND AND REASONS FOR THE ISSUANCE OF THE SERIES A
       CONVERTIBLE PREFERRED STOCK, SERIES B CONVERTIBLE PREFERRED STOCK,
              THE NOTES AND THE WARRANTS ASSOCIATED WITH THE NOTES
 
     At  June 30, 2002, our principal source  of liquidity was a working capital
position of $6,713,000, including cash and marketable securities of $10,799,000,
and we had  no significant revenues.  In June  of 2002, we  forecasted that  our
existing  cash  and marketable  securities  combined with  scheduled installment
payments due  from resellers  and distributors  were sufficient  to sustain  our
estimated level of operating expenditures
 
                                        6

<PAGE>
 
through  the end of the first quarter of 2003 We had already taken steps in late
2001 and early 2002 to decrease our cash expenditure rate, including  reductions
in  our personnel. Also, in April 2002  we engaged SoundView Technology Group as
our investment  banker to  assist us  in seeking  additional funding.  SoundView
contacted a number of potential investors on our behalf and, subsequently, a New
York  based  investment manager  that  manages several  institutional investors,
agreed to  invest $8,000,000  in our  company, contingent  upon us  obtaining  a
minimum  $6,000,000  investment  from  other investors.  We  were  successful in
obtaining an $8,000,000 investment  from other investors,  and on September  18,
2002,  we announced the  simultaneous closing of  the sale of  the notes and the
associated warrants to the institutional investors and the sale of the Series  A
Convertible Preferred Stock and the Series B Convertible Preferred Stock and the
associated  warrants to  the other investors,  pursuant to which  we received an
aggregate of $16,000,000 in gross cash proceeds.
 
     As noted above, some  of our management  and existing investors  (including
Antonio  R.  Sanchez,  Jr.,  a  director  and  a  current  beneficial  owner  of
approximately 12.3% of our outstanding common stock; John A. Ryan, our chairman,
president and chief executive officer; David  P. Cook, our founder and a  former
executive  officer and director  of our company;  and George W.  Haywood, then a
23.9% beneficial shareholder of  our company) purchased shares  of our Series  A
Convertible Preferred Stock, Series B Convertible Preferred Stock and associated
warrants  pursuant  to the  financing transactions.  Their interests  were fully
disclosed to  and  known  by the  board  of  directors in  connection  with  its
deliberations regarding the issuance of the Series A Convertible Preferred Stock
and  the Series  B Convertible  Preferred Stock  and the  associated warrants. A
special committee of  disinterested directors, consisting  of Michael E.  Keane,
James  S. Marston and Dr. Ben G.  Streetman, reviewed the terms and approved the
issuance of  the notes,  the  Series A  Convertible  Preferred Stock,  Series  B
Convertible Preferred Stock and the associated warrants and recommended that the
full  board of directors approve the issuances of these securities. Mr. Ryan was
present at and participated in all the  meetings of the full board of  directors
where the terms of the notes, the Series A Convertible Preferred Stock, Series B
Convertible  Preferred  Stock  and  associated warrants  were  reviewed,  and he
participated in the meeting of the full board of directors where the issuance of
these securities was ultimately approved by the board. Mr. Cook was no longer  a
member  of our  board of  directors when  the issuance  of these  securities was
ultimately approved by  the board. The  terms and issuance  of these  securities
were unanimously approved by our board of directors, other than Mr. Sanchez, who
was  absent from  the meetings  and did  not participate  in any  of the board's
deliberations.
 
     Subject to the limitations described under the heading "Security Agreement"
on page 18,  we plan  to use  the $16,000,000 in  gross cash  proceeds from  the
issuance  of  the securities  for working  capital  and other  general corporate
purposes.
 
            INTERESTS OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
 
     The approval of Proposal One  will result in an  increase in the number  of
shares  of common stock beneficially held by Antonio R. Sanchez, Jr., a director
and a current beneficial owner of approximately 12.3% of our outstanding  common
stock;  John A. Ryan, our  chairman of the board,  president and chief executive
officer; David P. Cook, our founder and a former executive officer and director;
and George W.  Haywood, a  25.4% beneficial holder  of our  common stock.  After
giving  effect to the transactions described  under Proposal One and assuming no
adjustments to the conversion price of the Series A Convertible Preferred  Stock
or  Series B Convertible  Preferred Stock, Mr.  Sanchez may be  deemed to be the
beneficial owner of 2,475,616  shares of our common  stock, and Mr. Sanchez  may
acquire beneficial ownership of up to an additional 133,036 shares of our common
stock  upon the exercise of the warrants held  by him and SANTIG, Ltd.; Mr. Ryan
will beneficially own 902,692  shares of our common  stock and may  beneficially
acquire up to an additional 66,518 more common stock shares upon the exercise of
the  warrants he holds; Mr.  Cook will beneficially own  1,467,590 shares of our
common stock and may beneficially acquire up to an additional 44,345 more common
stock shares  upon the  exercise of  warrants  he holds;  and Mr.  Haywood  will
beneficially  own  5,237,552 shares  of our  common  stock and  may beneficially
acquire up to an additional 305,986  more common stock shares upon the  exercise
of the warrants he holds. The warrants described above are not exercisable until
March 18, 2003.
                                        7

<PAGE>
 
         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     Set forth below is information as of September 30, 2002 concerning:
 
     - each  shareholder known  by us  to beneficially own  more than  5% of our
       outstanding shares of common stock;
 
     - the shareholdings of each of  our directors and named executive  officers
       with respect to our common stock; and
 
     - the shareholdings of all directors and executive officers as a group with
       respect to our common stock.
 

<Table>
<Caption>
                                                             AMOUNT AND NATURE
                                                       OF BENEFICIAL OWNERSHIP(1)(2)
                                                 -----------------------------------------
                                                      NUMBER OF        PERCENTAGE OF TOTAL
                                                 COMMON STOCK SHARES   COMMON STOCK SHARES
BENEFICIAL OWNER                                 BENEFICIALLY OWNED      OUTSTANDING(3)
----------------                                 -------------------   -------------------
<S>                                              <C>                   <C>
David P. Cook(4)...............................       1,399,267               7.16%
George W. Haywood(5)...........................       4,723,339               25.4%
  c/o Cronin & Vris, LLP
  380 Madison Avenue, 24th Floor
  New York, New York 10017
Dennis F. Heathcote(6).........................          31,250                  *
Michael E. Keane(6)............................         112,455                  *
James S. Marston(6)............................         122,455                  *
Wael Mohammed(6)...............................          31,250                  *
Dan Nutkis(6)..................................          16,668                  *
David Robertson(6).............................          31,252                  *
John A. Ryan(7)................................         800,207               4.24%
Antonio R. Sanchez, Jr.(8).....................       2,270,648               12.3%
Dr. Ben G. Streetman(6)........................          62,147                  *
Ronald A. Woessner(9)..........................         176,524                  *
Steve M. York(10)..............................         172,274                  *
All directors and executive officers as a group
  (11 persons).................................       3,827,130               19.3%
</Table>

 
---------------
 
  *  Denotes ownership of less than 1%.
 
 (1) Reported  in accordance  with the  beneficial ownership  rules of  the SEC.
     Unless otherwise noted, each shareholder listed in the table has both  sole
     voting   and  sole  investment  power  over   the  common  stock  shown  as
     beneficially owned, subject to community property laws where applicable.
 
 (2) Unless otherwise noted, the  address for each beneficial  owner is c/o  Zix
     Corporation,  2711 North Haskell  Avenue, Suite 2300,  LB 36, Dallas, Texas
     75204-2960.
 
 (3) Percentages are based  on the total  number of shares  of our common  stock
     outstanding at September 30, 2002. Shares of our common stock that were not
     outstanding  but  could be  acquired upon  exercise of  an option  or other
     convertible security  within  60 days  of  September 30,  2002  are  deemed
     outstanding  for  the purpose  of computing  the percentage  of outstanding
     shares beneficially owned by a particular person. However, such shares  are
     not deemed to be outstanding for the purpose of computing the percentage of
     outstanding shares beneficially owned by any other person.
 
 (4) Includes  1,253,577 shares  that Mr.  Cook has  the right  to acquire under
     outstanding stock options  that are  currently exercisable  or that  become
     exercisable  within 60  days of  September 30,  2002. These  figures do not
     include the number of shares  of common stock that  may be issued upon  the
     conversion  or redemption of the Series  A Convertible Preferred Stock only
     after approval of Proposal One.
 
                                        8

<PAGE>
 
 (5) Includes (i) 41,500 shares that are owned by family members of Mr. Haywood,
     (ii)  115,000 shares owned jointly by Mr.  Haywood and a family member, and
     (iii) 388,366  shares of  common  stock that  are currently  issuable  upon
     conversion  of his  shares of Series  B Convertible  Preferred Stock. These
     figures do not include  the number of  shares of common  stock that may  be
     issued  upon  the  conversion or  redemption  of the  Series  B Convertible
     Preferred Stock only after approval of Proposal One.
 
 (6) This individual has  the right  to acquire these  shares under  outstanding
     stock  options that  are currently  exercisable or  that become exercisable
     within 60 days of September 30, 2002.
 
 (7) Includes 550,000  shares that  Mr.  Ryan has  the  right to  acquire  under
     outstanding  stock options  that are  currently exercisable  or that become
     exercisable within 60  days of  September 30,  2002; and  77,535 shares  of
     common  stock currently issuable upon conversion  of his shares of Series A
     Convertible Preferred Stock.  These figures  do not include  the number  of
     shares of common stock that may be issued upon the conversion or redemption
     of the Series A Convertible Preferred Stock only after approval of Proposal
     One.
 
 (8) Includes  (i) 1,633,025  shares held  by Mr.  Sanchez directly,  (ii) 9,375
     shares held by family members of  Mr. Sanchez, (iii) 91,123 shares held  by
     trusts  for which Mr. Sanchez serves as trustee or co-trustee, (iv) 262,100
     shares held by  SANTIG, Ltd., a  family limited partnership  for which  Mr.
     Sanchez  serves as managing general partner, (v) 119,955 shares that may be
     acquired by Mr. Sanchez within 60 days of September 30, 2002, upon exercise
     of outstanding options, and (vi) 155,070 shares of common stock that may be
     acquired by Mr. Sanchez  and SANTIG, Ltd. within  60 days of September  30,
     2002  upon  conversion  of  outstanding  shares  of  Series  A  Convertible
     Preferred Stock.  These figures  do not  include the  number of  shares  of
     common  stock that may be  issued upon the conversion  or redemption of the
     Series A Convertible Preferred Stock only after approval of Proposal One.
 
 (9) Includes 140,000 shares that  Mr. Woessner has the  right to acquire  under
     outstanding  stock options  that are  currently exercisable  or that become
     exercisable within 60 days  of September 30,  2002. Mr. Woessner  disclaims
     beneficial ownership with respect to 27,611 shares.
 
(10) Includes  141,500  shares that  Mr.  York has  the  right to  acquire under
     outstanding stock options  that are  currently exercisable  or that  become
     exercisable within 60 days of September 30, 2002.
 
     Also, set forth below is information as of September 30, 2002 concerning:
 
     - each  shareholder known  by us  to beneficially own  more than  5% of our
       Series A Convertible Preferred Stock;
 
     - the shareholdings of each of  our directors and named executive  officers
       with respect to our Series A Convertible Preferred Stock; and
 
     - the shareholdings of all directors and executive officers as a group with
       respect to our Series A Convertible Preferred Stock.
 

<Table>
<Caption>
                                                                 AMOUNT AND NATURE
                                                           OF BENEFICIAL OWNERSHIP(1)(2)
                                                      ----------------------------------------
                                                          NUMBER OF        PERCENTAGE OF TOTAL
                                                        CLASS A SHARES       CLASS A SHARES
BENEFICIAL OWNER                                      BENEFICIALLY OWNED     OUTSTANDING(3)
----------------                                      ------------------   -------------------
<S>                                                   <C>                  <C>
David P. Cook(4)....................................        71,809                  9.4%
Dennis F. Heathcote.................................           -0-                  -0-
Michael E. Keane....................................           -0-                  -0-
James S. Marston....................................           -0-                  -0-
Wael Mohammed.......................................           -0-                  -0-
Dan Nutkis..........................................           -0-                  -0-
David Robertson.....................................           -0-                  -0-
John A. Ryan........................................       189,205                 24.7%
SANTIG, Ltd.(5).....................................       252,273                 33.0%
</Table>

 
                                        9

<PAGE>
 

<Table>
<Caption>
                                                                 AMOUNT AND NATURE
                                                           OF BENEFICIAL OWNERSHIP(1)(2)
                                                      ----------------------------------------
                                                          NUMBER OF        PERCENTAGE OF TOTAL
                                                        CLASS A SHARES       CLASS A SHARES
BENEFICIAL OWNER                                      BENEFICIALLY OWNED     OUTSTANDING(3)
----------------                                      ------------------   -------------------
<S>                                                   <C>                  <C>
1988 Spendthrift Trust(6)...........................       126,136                 16.5%
Antonio R. Sanchez, Jr.(7)..........................       378,409                 49.4%
Dr. Ben G. Streetman................................           -0-                  -0-
Ronald A. Woessner..................................           -0-                  -0-
Steve M. York.......................................           -0-                  -0-
All directors and executive officers as a group (11
  persons)..........................................                               74.1%
</Table>

 
---------------
 
(1) Reported in  accordance with  the  beneficial ownership  rules of  the  SEC.
    Unless  otherwise noted, each shareholder listed  in the table has both sole
    voting and sole investment power over the common stock shown as beneficially
    owned, subject to community property  laws where applicable. No  information
    is  presented  with  respect to  our  Series B  Convertible  Preferred Stock
    because it  generally has  no voting  rights and  none of  our directors  or
    executive  officers own  any shares  of our  Series B  Convertible Preferred
    Stock.
 
(2) Unless otherwise noted,  the address for  each beneficial owner  is c/o  Zix
    Corporation,  2711 North  Haskell Avenue, Suite  2300, LB  36, Dallas, Texas
    75204-2960.
 
(3) Percentages are  based  on  the  total  number of  shares  of  our  Class  A
    Convertible Preferred shares outstanding at September 30, 2002.
 
(4) Mr.  Cook originally  purchased 126,136  shares of  our Class  A Convertible
    Preferred Stock, and immediately converted 54,327 shares into 51,690  shares
    of our common stock.
 
(5) SANTIG.  Ltd.  is a  family limited  partnership for  which Mr.  Sanchez was
    appointed managing general  partner in  June 2002.  Mr. Sanchez  has been  a
    general partner of SANTIG, Ltd. since April 1996.
 
(6) The  1988 Spendthrift  Trust is  a family  trust of  which Mr.  Sanchez is a
    beneficiary. Mr. Sanchez  has no  voting and/or dispositive  power over  the
    shares held by the 1988 Spendthrift Trust and disclaims beneficial ownership
    of such shares.
 
(7) Pursuant  to Rule 13d-3 under the Exchange Act, Mr. Sanchez may be deemed to
    be the beneficial owner of the shares held by SANTIG, Ltd.
 
                   POTENTIAL DILUTION AND MARKET CONSEQUENCES
 
     If Proposal One is approved, the  company will have the flexibility to  pay
the  redemption  amounts  payable  with  respect  to  the  Series  A Convertible
Preferred Stock and the  Series B Convertible Preferred  Stock in shares of  our
common stock. This is in contrast to paying the redemption amounts in cash or by
the issuance of a subordinated note, as applicable -- which we would be required
to  do in some circumstances if Proposal One is not approved. See "Proposal One:
To Approve  The  Issuance  of  Shares of  Common  Stock,  Need  for  Shareholder
Approval,"  above on page 4. To the extent the company uses shares of our common
stock, rather than  cash or  a subordinated  note, to  fulfill these  redemption
obligations, our existing shareholders could experience significant dilution.
 
     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 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 average formula. If the  market price of the common stock  declines,
the  number  of shares  of  common stock  issuable to  the  holders of  Series 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
 
                                        10

<PAGE>
 
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 $3.78 per share, referred to as 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 and the  warrants issued to the purchasers of the
notes are convertible or exercisable 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; and  the exercise  price of  the warrants
associated with  the notes  is  initially $4.14  per  share. The  conversion  or
exercise  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 or exercise
prices then  in effect  (other  than certain  specified exempt  issuances),  the
conversion and exercise 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
and  the  associated  warrants  are subject  to  full  anti-dilution adjustment.
Following the approval  of our common  shareholders, there would  be no  "floor"
that  would limit reductions in the conversion price or exercise prices of these
securities. 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.
 
     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  shareholders  to this  Proposal  One.
Assuming we receive the approval of our shareholders to this Proposal One, there
will be no limitation on the aggregate number of shares of common stock that may
be issuable upon the conversion, redemption and/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 the warrants issued  to
the  purchasers  of  the Series  A  Convertible  Preferred Stock,  the  Series B
Convertible Preferred Stock  and the  notes are  convertible, redeemable  and/or
exercisable  for an aggregate of 4,525,642  shares of common stock (exclusive of
accrued interest and dividends) (24.8%  of our current outstanding common  stock
as of September 30, 2002). Upon the effectiveness of the registration statements
relating  to  the Series  A Convertible  Preferred  Stock, Series  B Convertible
Preferred Stock and associated warrants  and the 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.
 
     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. Moreover,  subject to the  limitations described above,  applicable
law,  and 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
 
                                        11

<PAGE>
 
in  our stock by shorting our common 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 short our common stock 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  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,  redemption of  the  Series B
Convertible Preferred Stock and the final redemption at maturity of the Series A
Convertible Preferred Stock.
 
               TERMS OF THE SERIES A CONVERTIBLE PREFERRED STOCK,
                     SERIES B CONVERTIBLE PREFERRED STOCK,
                           THE NOTES AND THE WARRANTS
 
TERMS OF SERIES A CONVERTIBLE PREFERRED STOCK
 
     The Series A Convertible Preferred Stock  ranks senior to the common  stock
and  on  parity with  the Series  B  Convertible Preferred  Stock. The  Series A
Convertible Preferred  Stock accrues  per  annum dividends  of  6.5% and  has  a
preference  on liquidation (or deemed liquidation) equal to $3.92 per share plus
the amount of accumulated but unpaid dividends.
 
  CONVERSION
 
     The Series A Convertible Preferred Stock is convertible in whole or in part
into shares of common stock at the option of the holder at any time.
 
     The Series A Convertible Preferred Stock is convertible in whole or in part
into shares of common stock at our option if, following the effectiveness of the
registration statement  described  below  in  "Registration  Requirements,"  the
closing  price of the common stock on  the Nasdaq National Market is above $6.18
per share for each of the ten consecutive trading days immediately preceding our
notice of conversion. We must exercise our conversion rights with respect to the
Series A Convertible Preferred Stock  simultaneously and in the same  proportion
as  we exercise our conversion  rights with respect to  the Series B Convertible
Preferred Stock.
 
     The number of shares of common stock  to be issued upon conversion will  be
determined by dividing
 
          (1)   the  principal  amount  being   converted  plus  the  amount  of
     accumulated but unpaid dividends on such shares to be converted, by
 
          (2) the Series A Conversion Price in effect at the time of conversion.
 
     Initially, the "Series A  Conversion Price" is 105%  of the original  issue
price  of the  Series A  Convertible Preferred  Stock, or  $4.12 per  share. The
Series A Conversion Price and the number of shares of common stock issuable upon
conversion  of  the  Series  A  Convertible  Preferred  Stock  are  subject   to
proportional  adjustment upon the occurrence  of certain events, including stock
splits and  similar changes  affecting  the common  stock,  and are  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  Series  A Conversion  Price then  in effect  (other than  certain specified
exempt issuances). The Series A Conversion Price may not be adjusted pursuant to
the weighted average formula to a price that is less than $3.92 per share,  that
price  being the average of the closing bid  prices of common stock for the four
trading days  prior  to  the  execution of  the  securities  purchase  agreement
relating  to the Series  A Convertible Preferred  Stock and the  trading day the
binding agreement was executed, without  the prior approval of our  shareholders
in accordance with the Nasdaq Marketplace Rules.
 
     On  the date of issue,  the shares of Series  A Convertible Preferred Stock
were convertible into 780,086 shares of common stock.
 
                                        12

<PAGE>
 
  REDEMPTION
 
     The Series A Convertible Preferred Stock is subject to mandatory redemption
by our company, in  equal installments of 1/9  of the original aggregate  shares
issued, at two-month intervals beginning May 2003 and ending September 2004. The
redemption amount we are required to pay will be $3.92 per share to be redeemed,
plus all accrued and unpaid dividends on the redeemed shares.
 
     The  redemption  amount  payable on  any  interim redemption  date  will be
payable in shares of common  stock, valued at $3.92 per  share. If, on any  such
interim  redemption date, $3.92 is higher than the then-current five-day average
closing bid price of the common stock on Nasdaq, then each holder has the option
to defer the scheduled interim redemption of such holder's Series A  Convertible
Preferred  Stock until the next succeeding redemption date. If we are prohibited
from issuing a sufficient number of shares of common stock to effect any interim
redemption because  we  have  not  obtained the  approval  of  our  shareholders
described  below, the shares of Series A Convertible Preferred Stock that cannot
be redeemed by the issuance of common  stock must be redeemed by our company  in
cash (provided that the notes have been paid in full) or through the issuance of
a  subordinated note, at our option. Each subordinated note will have a one-year
term, be unsecured, bear interest at 6.5%  per annum and be subordinated to  the
notes.
 
     The redemption amount payable on the final redemption date (the twenty-four
month anniversary of issuance) will be payable, at our option, either in cash or
by  the issuance of  shares of common stock,  valued at the  lesser of $3.92 per
share or the then-current five day average closing bid price of the common stock
on Nasdaq. If the then-current five day average closing bid price of the  common
stock  on Nasdaq is less than $3.92 and we are prohibited from issuing shares of
common stock at less than $3.92 because we have not obtained the approval of our
shareholders described below, then we must pay the redemption amount in cash. If
we are prohibited  from issuing a  sufficient number of  shares of common  stock
(because we have already exhausted the 870,693 shares that may be issued without
shareholder approval) to effect the final redemption because it has not obtained
the  approval of our shareholders, the  shares of Series A Convertible Preferred
Stock that cannot be redeemed by the  issuance of common stock must be  redeemed
by our company in cash.
 
  VOTING
 
     The  holder of each share of Series  A Convertible Preferred Stock have the
right to  one vote  for each  share of  common stock  into which  such Series  A
Convertible  Preferred  Stock could  be  converted on  the  record date  and are
entitled to vote upon all  matters upon which holders  of common stock have  the
right  to vote.  In no  event, however,  may any  share of  Series A Convertible
Preferred Stock entitle the holder to a number of votes that is greater than the
number of votes the share would represent if it was then convertible into common
stock based on  a conversion price  of $3.92. The  consent of the  holders of  a
majority  of the shares  of Series A Convertible  Preferred Stock outstanding is
required before we  may take certain  actions, including the  redemption or  the
payment  of  dividends  on  the  common  stock.  The  holders  of  the  Series A
Convertible Preferred Stock have agreed that they will not vote their shares  of
Series  A Convertible  Preferred Stock in  connection with the  approval of this
Proposal One.
 
TERMS OF SERIES B CONVERTIBLE PREFERRED STOCK
 
     The Series B Convertible Preferred Stock  ranks senior to the common  stock
and  on  parity with  the Series  A  Convertible Preferred  Stock. The  Series B
Convertible Preferred  Stock accrues  per  annum dividends  of  6.5% and  has  a
preference  on liquidation (or deemed liquidation) equal to $3.60 per share plus
the amount of accumulated but unpaid dividends.
 
  CONVERSION
 
     The Series B Convertible Preferred Stock is convertible in whole or in part
into shares of common stock at the option of the holder at any time.
 
     The Series B Convertible Preferred Stock is convertible in whole or in part
into shares of common stock at our option if, following the effectiveness of the
registration statement described below under "Registration
 
                                        13

<PAGE>
 
Requirements," the closing price  of the common stock  on Nasdaq is above  $5.67
per share for each of the ten consecutive trading days immediately preceding our
notice of conversion. We must exercise our conversion rights with respect to the
Series  B Convertible Preferred Stock simultaneously  and in the same proportion
as we exercise our  conversion rights with respect  to the Series A  Convertible
Preferred Stock.
 
     The  number of shares of common stock  to be issued upon conversion will be
determined by dividing
 
          (1)  the  principal  amount  being   converted  plus  the  amount   of
     accumulated but unpaid dividends on such shares to be converted, by
 
          (2) the Series B Conversion Price in effect at the time of conversion.
 
     Initially,  the "Series B  Conversion Price" is 105%  of the original issue
price of  the Series  B Convertible  Preferred Stock,  or $3.78  per share.  The
Series B Conversion Price and the number of shares of common stock issuable upon
conversion   of  the  Series  B  Convertible  Preferred  Stock  are  subject  to
proportional adjustment upon the occurrence  of certain events, including  stock
splits  and  similar changes  affecting  the common  stock,  and are  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 Series  B Conversion  Price then  in effect  (other than  certain  specified
exempt issuances).
 
     On  the date of issue,  the shares of Series  B Convertible Preferred Stock
were convertible into 1,242,681 shares of common stock.
 
  REDEMPTION
 
     The Series B Convertible Preferred Stock is subject to mandatory redemption
by our company, in  equal installments of 1/9  of the original aggregate  shares
issued, at two-month intervals beginning May 2003 and ending September 2004. The
redemption  amount to  be paid  by our  company will  be $3.60  per share  to be
redeemed, plus all accrued and unpaid dividends on such redeemed shares.
 
     The redemption amount will be payable in shares of common stock, valued  at
the lesser of
 
          (1) the Series B Conversion Price then in effect or
 
          (2)  90% of the average of the daily volume-weighted average prices of
     the common  stock  on  Nasdaq  for  the  twenty  trading  days  immediately
     preceding the date of redemption.
 
     If  we are prohibited from issuing a  sufficient number of shares of common
stock to effect any interim redemption because we have not obtained the approval
of our  shareholders  described  below,  the  shares  of  Series  B  Convertible
Preferred  Stock that cannot be redeemed by the issuance of common stock must be
redeemed by our company in cash (provided that the notes have been paid in full)
or through the issuance of a subordinated note, at our option. Each subordinated
note will have a one-year  term, be unsecured, bear  interest at 6.5% per  annum
and be subordinated to the notes.
 
  VOTING
 
     The  shares of Series B Convertible  Preferred Stock have no voting rights,
except that the consent of the holders of  a majority of the shares of Series  B
outstanding  is  required  before we  may  take certain  actions,  including the
redemption or the payment of dividends on the common stock.
 
  LIMITATIONS ON SERIES A CONVERTIBLE PREFERRED STOCK AND SERIES B CONVERTIBLE
  PREFERRED STOCK SHARES WITHOUT SHAREHOLDER APPROVAL
 
     Unless we obtain the approval of this Proposal One, we may not take any  of
the  following actions with respect to  the Series A Convertible Preferred Stock
and the Series B Convertible Preferred Stock:
 
     - may not  issue  more  than  870,693  shares  of  common  stock  upon  the
       conversion  or  redemption of  shares of  Series A  Convertible Preferred
       Stock and Series B Convertible Preferred Stock; and
 
                                        14

<PAGE>
 
     - may not issue shares of common stock upon the conversion or redemption of
       shares  of Series  A Convertible Preferred  Stock at less  than $3.92 per
       share.
 
     Under  the  securities  purchase  agreement   relating  to  the  Series   A
Convertible  Preferred Stock  and Series B  Convertible Preferred  Stock, we are
obligated to:
 
     - prepare and file this proxy statement on or before October 25, 2002;
 
     - use all reasonable efforts to obtain the approval of our shareholders  to
       this Proposal One on or before February 28, 2003; and
 
     - in  any event, seek the approval of our shareholders to this Proposal One
       no later than our 2003 Annual Meeting of Shareholders.
 
  WARRANTS
 
     In connection with the sale of the Series A Convertible Preferred Stock and
Series B Convertible Preferred  Stock, we issued warrants  to the purchasers  of
the  Series A  Convertible Preferred  Stock and  Series B  Convertible Preferred
Stock to purchase in whole or in  part an aggregate of 709,528 shares of  common
stock at an exercise price of $4.51 per share. These warrants are exercisable at
any  time after  the six-month anniversary  of the  issue date and  prior to the
four-year anniversary of the  issue date. The number  of shares of common  stock
for  which  these  warrants are  exercisable  and  the exercise  price  of these
warrants are subject  to proportional  adjustment for stock  splits and  similar
changes affecting the common stock. The exercise price of these warrants is also
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)  except that the exercise  price may not be  adjusted pursuant to the
weighted average formula to a  price that is less than  the market value of  our
common  stock as of the  date of issuance of these  warrants (that is, $3.92 per
share).
 
  REGISTRATION REQUIREMENTS
 
     We also  entered into  with  the purchasers  of  the Series  A  Convertible
Preferred  Stock and Series B Convertible  Preferred Stock a registration rights
agreement, under which  we agreed  to prepare  and file  within 30  days of  the
closing  date  a registration  statement covering  the resale  of the  shares of
common stock  issuable  upon  the  conversion or  redemption  of  the  Series  A
Convertible  Preferred Stock  and Series B  Convertible Preferred  Stock and the
exercise of the associated warrants. We  filed the registration statements in  a
timely fashion, and they were declared effective by the SEC on October 24, 2002.
In  addition,  we  agreed to  prepare,  file  and seek  the  effectiveness  of a
registration statement  covering the  resale of  up to  an additional  2,000,000
shares  of  common stock  held by  Antonio R.  Sanchez, Jr.,  a director  of our
company, and George W. Haywood, and an affiliated entity, upon their request  no
sooner than nine months after the date of the agreement relating to the purchase
of  the Series A Convertible Preferred  Stock and Series B Convertible Preferred
Stock.
 
  TRADING RESTRICTIONS
 
     So long as  any of  the notes or  associated warrants  described below  are
outstanding,  a purchaser  of Series A  Convertible Preferred Stock  or Series B
Convertible Preferred Stock may not engage in a short sale or establish an  open
put  equivalent position with respect to a number of shares of common stock that
is greater than
 
          (1) the number  of shares  of common  stock for  which the  associated
     warrant  held  by  the purchaser  is  then exercisable  (without  regard to
     limitations on exercisability) plus
 
          (2) the number  of shares of  common stock issuable  to the  purchaser
     pursuant  to  a notice  of  conversion of  shares  of Series  A Convertible
     Preferred Stock or  Series B Convertible  Preferred Stock, or  a notice  of
     exercise  of an associated warrant, delivered to  us no later than the next
     succeeding business day.
 
                                        15

<PAGE>
 
TERMS OF THE NOTES
 
  INTEREST AND REPAYMENT TERMS
 
     The notes  bear interest  at the  rate of  6.5% per  annum. The  notes  are
payable  in  six  consecutive  monthly installments  of  $500,000  (plus accrued
interest) each beginning in January 2003 and a final payment of $5,000,000 (plus
accrued interest) in October 2003.
 
  PREPAYMENT
 
     We may prepay the notes at any time by the payment of 105% of the principal
amount being prepaid, plus all accrued interest thereon. Our right of to  prepay
the  notes is subject  to the satisfaction of  certain conditions, including the
listing of the  common stock on  Nasdaq, the effectiveness  of the  registration
statement described below in "Registration Requirements", and the absence of any
default  by us under the securities purchase agreement related to the notes, the
notes, the associated warrants and  the registration rights agreement  described
below. Our prepayment of the notes is also subject to the right of the holder to
convert  any portion of the notes for which we have given a notice of prepayment
into shares of common stock, in the manner described below.
 
  CONVERSION
 
     The  unpaid  principal  amount  and  accrued  interest  of  each  note   is
convertible in whole or in part into shares of common stock at the option of the
holder at any time.
 
     The   unpaid  principal  amount  and  accrued  interest  of  each  note  is
convertible in whole or in  part into shares of common  stock at our option  if,
following  the tenth  trading day  after the  effectiveness of  the registration
statement described below,  the weighted average  price of the  common stock  on
Nasdaq  is at  or above  $4.54 per  share for  the ten  consecutive trading days
immediately preceding our notice of conversion.  Our right to convert the  notes
is also subject to the satisfaction of certain conditions, including the listing
of  the common stock on Nasdaq,  the effectiveness of the registration statement
described below  and  the  absence of  any  default  by our  company  under  the
securities  purchase agreement relating to the  notes, the notes, the associated
warrants and the registration rights agreement described below. If following our
notice of conversion  the weighted average  price of the  common stock does  not
continue  to exceed the initial note conversion price of $3.78 per share through
the mandatory conversion  date, then a  pro-rata portion of  the selected  notes
will  be  required to  be converted  based on  the number  of days  the weighted
average price of the common stock did exceed the initial note conversion  price.
The  minimum principal  amount of  notes that  we may  convert is  the lesser of
$1,000,000 and the aggregate principal amount outstanding under the notes.
 
     The number of shares of common stock  to be issued upon conversion will  be
determined by dividing
 
          (1) the portion of the unpaid principal amount and accrued interest of
     the note being converted, by
 
          (2) the note conversion price in effect at the time of conversion.
 
     Initially,  the  "Note  Conversion  Price" is  $3.78  per  share.  The Note
Conversion Price  and  the  number  of shares  of  common  stock  issuable  upon
conversion  of the notes are subject to proportional adjustment for stock splits
and similar  changes  affecting  the  common  stock  and  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  Note
Conversion  Price then in effect (other than certain specified exempt issuances,
including any issuance of common stock upon the conversion or redemption of  the
Series  A  Convertible Preferred  Stock or  the  Series B  Convertible Preferred
Stock).
 
     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.
 
                                        16

<PAGE>
 
     In addition to the  redemption rights described below,  the holders of  the
notes  are entitled to receive from our  company substantial cash damages in the
event we fail to timely honor a notice of conversion tendered by a holder.
 
     On the date of issue, the  notes were convertible into 2,116,402 shares  of
common stock.
 
  FORCED REDEMPTION
 
     If  we are prohibited from issuing a  sufficient number of shares of common
stock to effect any attempted conversion of the notes by a holder because it has
not obtained the approval of our shareholders to this Proposal One, each  holder
of a note will have the right to redeem all or a portion of the principal amount
outstanding thereunder that cannot be converted for a cash payment equal to 100%
of the principal amount being redeemed, plus all accrued interest thereon.
 
     If  we fail  to have the  registration statement  described below effective
prior to the  fifth business  day preceding the  date of  any scheduled  payment
under  the notes (with the first scheduled  payment date being January 1, 2003),
each holder of a  note will have  the right to redeem  such holder's portion  of
such  scheduled payment, or any portion thereof, for a cash payment equal to the
principal amount being redeemed and all accrued interest thereon, divided by the
Note Conversion Price then in effect and multiplied by the daily volume-weighted
average price  of the  common stock  on Nasdaq  on the  trading day  immediately
preceding the date of such failure.
 
     Upon the occurrence of other "Triggering Events" (as defined in the notes),
each  holder of a  note will have  the right to  redeem all or  a portion of the
principal amount outstanding thereunder for a  cash payment that is the  greater
of
 
          (1)  125% of  the principal  amount being  redeemed, plus  all accrued
     interest thereon, and
 
          (2) the  principal  amount being  redeemed  and all  accrued  interest
     thereon, divided by the Note Conversion Price then in effect and multiplied
     by the daily volume-weighted average price of the common stock on Nasdaq on
     the trading day immediately preceding such Triggering Event.
 
     Other Triggering Events include, but are not limited to, our failure to
 
     - make a scheduled payment under the notes when due,
 
     - timely  honor a notice of conversion, to list the common stock underlying
       the notes and associated warrants for specified periods, and
 
     - to have the registration statement described below effective prior to the
       135th day following the issuance of the notes.
 
     Upon the occurrence  of a "Change  of Control" (as  defined in the  notes),
each  holder of a  note will have  the right to  redeem all or  a portion of the
principal amount outstanding thereunder for a  cash payment that is the  greater
of
 
          (1)  115% of  the principal  amount being  redeemed, plus  all accrued
     interest thereon, and
 
          (2) the  principal  amount being  redeemed  and all  accrued  interest
     thereon, divided by the Note Conversion Price then in effect and multiplied
     by  the average of  the daily volume-weighted average  prices of the common
     stock on Nasdaq for the five trading days immediately preceding the  notice
     of redemption.
 
  DEFAULTS AND REMEDIES
 
     The  notes  contain "Events  of  Default" (as  defined  in the  notes) that
include, but are not limited to,
 
     - our failure to make required cash payments under the notes when due,
 
     - our failure to abide by the cash maintenance requirements described below
       under "Security Agreement,"
 
                                        17

<PAGE>
 
     - the existence of certain insolvency or bankruptcy events, and
 
     - the existence of certain  defaults by or claims  against us in excess  of
       $100,000.
 
Upon  an Event of Default,  each holder of a note  is entitled to accelerate all
amounts due thereunder, to assess interest at a default rate and to exercise any
other right  or  remedy  available  under the  notes,  the  securities  purchase
agreement  relating  to the  notes  or applicable  law. If  we  fail to  pay any
accelerated amounts to  the holder  within five days,  the holder  may void  the
acceleration  and cause the Note  Conversion Price to be  reset to the lesser of
the Note Conversion Price  then in effect and  the lowest daily  volume-weighted
average  price of the common stock on Nasdaq during the period that acceleration
amounts were due and payable to the holder.
 
  SECURITY AGREEMENT
 
     We and an agent  for the purchasers  of the notes  entered into a  security
agreement,  pursuant to which  the notes have  been secured by  a first priority
lien in  virtually  all of  our  assets (including,  without  limitation,  cash,
accounts   receivable,  equipment  and  intangibles).  The  securities  purchase
agreement  relating  to  the  notes  requires  us  to  maintain  cash  and  cash
equivalents  in accounts  pledged under the  security agreement in  an amount at
least equal to  the lesser of  $5,000,000 and the  aggregate amount  outstanding
under  the notes. The  securities purchase agreement relating  to the notes also
places limitations on the amount of cash  that we can maintain in accounts  that
are not pledged under the security agreement.
 
  RESTRICTIONS ON OUR COMPANY
 
     The  terms  of the  notes strictly  prohibit additional  "Indebtedness" (as
defined in  the  notes)  that  may  be  incurred  by  us  while  the  notes  are
outstanding, as described in general terms below.
 
     Payments  of principal and  interest and other amounts  due under the notes
cannot be subordinated to any other obligations  of our company. For so long  as
the  notes are outstanding, in the event  we incur any debt (including any notes
issuable upon the redemption of shares  of Series A Convertible Preferred  Stock
or  Series B Convertible  Preferred Stock), the  lender must first  enter into a
subordination agreement  with purchasers  of  the notes  pursuant to  which  the
indebtedness owed to such lenders will be subordinated in full to the notes. The
form  of the subordination agreement will either  be in the form attached to our
current report on Form 8-K, dated September 20, 2002, as an exhibit or otherwise
will contain terms and conditions acceptable to the purchasers of the notes.
 
     While the notes are outstanding, we may not redeem or otherwise acquire any
of our  capital stock  (other  than pursuant  to the  terms  of the  notes,  the
warrants,  the Series A Convertible Preferred Stock and the Series B Convertible
Preferred Stock)  without  the  consent  of the  note  holders.  Generally,  any
permitted  redemption of the Series A Convertible Preferred Stock and the Series
B Convertible Preferred Stock may  only be paid in  shares of our common  stock.
The  note holders  are entitled to  receive any dividends  paid or distributions
made on the common stock to the same extent as though the holders had  converted
the notes in full into shares of common stock.
 
  VOTING
 
     The  notes do not entitle  their holders to any right  to vote with the our
shareholders.
 
  WARRANTS
 
     In connection  with  the sale  of  the notes,  we  issued warrants  to  the
purchasers  of the notes to purchase in whole or in part an aggregate of 386,473
shares of common stock at an exercise  price of $4.14 per share. These  warrants
are  exercisable at any  time prior to  the three-year anniversary  of the issue
date. The  number  of  shares of  common  stock  for which  these  warrants  are
exercisable and the exercise price of these warrants are subject to proportional
adjustment  for stock splits and similar  changes affecting the common stock and
are subject to full anti-dilution adjustment in  the event the 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
 
                                        18

<PAGE>
 
issuances,  including  any  issuance  of common  stock  upon  the  conversion or
redemption of  the  Series  A  Convertible  Preferred  Stock  or  the  Series  B
Convertible Preferred Stock).
 
     If  we are prohibited from issuing a  sufficient number of shares of common
stock in connection with any attempted exercise of the warrants because we  have
not  obtained the approval of our shareholders described below, a warrant holder
will have the  right to require  us to pay  a cash payment  with respect to  the
portion  of the warrant sought  to be exercised equal  to the difference between
the warrant exercise price and the  volume-weighted average price of the  common
stock on Nasdaq as of the time of the attempted exercise.
 
     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.
 
  LIMITATIONS ON NOTES WITHOUT SHAREHOLDER APPROVAL
 
     As  required by the Nasdaq Marketplace Rules, unless we obtain the approval
of this Proposal  One, we may  not issue  more than 2,753,163  shares of  common
stock  upon the conversion  or redemption of  the notes and  the exercise of the
associated warrants. Under  the securities  purchase agreement  relating to  the
notes, we are obligated to:
 
     - prepare  and file with the SEC this  proxy statement on or before October
       25, 2002;
 
     - use all reasonable efforts to obtain the approval of our shareholders  to
       this Proposal One on or before February 28, 2003; and
 
     - in  any event, seek the approval of our shareholders of this Proposal One
       no later than our 2003 Annual Meeting of Shareholders.
 
  REGISTRATION REQUIREMENTS
 
     We and  the purchasers  of the  notes entered  into a  registration  rights
agreement,  under which  we agreed  to prepare  and file  within 20  days of the
closing date a registration statement covering the resale of 110% of the  shares
of  common stock issuable upon  the conversion of the  notes and the exercise of
the associated warrants. We filed the registration statement in a timely fashion
and it was declared effective by the SEC on October 24, 2002.
 
     In  addition  to  the  redemption  rights  described  above  under  "Forced
Redemption,"  the  holders  of  the  notes  are  entitled  to  receive  from  us
substantial cash  damages  in  the  event  we  fail  to  file  the  registration
statement,  or have  the registration  statement declared  effective, within the
time limits set forth above or,  thereafter, to keep the registration  statement
effective for certain periods of time.
 
     The  foregoing  description of  the Series  A Convertible  Preferred Stock,
Series B Convertible Preferred Stock, the  notes and the associated warrants  is
qualified  by reference  to the documents  that are  filed as an  exhibit to our
Current Report  on Form  8-K,  dated September  20,  2002, and  incorporated  by
reference.
 
  TRADING RESTRICTIONS
 
     The  holders of the notes have also  agreed to the following limitations on
trading in connection with their purchase of the notes and associated  warrants.
So  long as a  holder holds any notes  or associated warrants, he  or it may not
engage in a short sale or establish an open put equivalent position with respect
to a number of shares of common stock that is great than:
 
     - the number of shares of common stock  for which the warrants held by  him
       or   it  are   then  exercisable   (without  regard   to  limitations  on
       exercisability); plus
 
                                        19

<PAGE>
 
     - the number of shares of common stock issuable to him or it under a notice
       of  conversion  of  the  notes  or notice  of  exercise  of  the warrants
       delivered to us no later than the next succeeding business day.
 
     These limitations terminate upon the occurrence of a "Triggering Event," an
"Event of Default," or the consummation  or public announcement of a "Change  of
Control," in each case, as such terms are defined in the notes.
 
                      WHERE YOU CAN FIND MORE INFORMATION
 
     The terms of the Series A Convertible Preferred Stock, Series B Convertible
Preferred  Stock, the  notes and  the associated  warrants are  complex and only
briefly summarized in this proxy statement.  If you would like more  information
concerning the rights, preferences and terms of these securities, please see the
documents filed as exhibits to our Current Report on Form 8-K filed with the SEC
on September 20, 2002.
 
     In  connection  with our  issuance of  the  Series A  Convertible Preferred
Stock, Series  B  Convertible Preferred  Stock,  the notes  and  the  associated
warrants,  we have filed registration statements on Form S-3 with the SEC, which
were declared  effective by  the SEC  on October  24, 2002.  These  registration
statements cover the resale of up to 5,666,490 shares of common stock that would
potentially  become issuable upon  the conversion or redemption  of the Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, the notes and
upon exercise of the associated warrants, and accrued interest and dividends. We
may be  required  from time  to  time to  register  additional shares  for  such
purposes due to declines in the trading price of our common stock.
 
                       BOARD OF DIRECTORS RECOMMENDATION
 
          THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL ONE.
 
                      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, prospectuses, 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  proxy  statement information
contained in those  documents we have  filed with the  SEC. These documents  are
considered to be part of this proxy statement.
 
     We  incorporate by reference  in this proxy  statement 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:
 
     - our Annual Report on Form 10-K/A, including audited financial statements,
       for our fiscal year ended December 31, 2001;
 
     - our  Quarterly Report on Form 10-Q/A for the quarterly period ended March
       31, 2002;
 
     - our Quarterly Report on Form 10-Q for the quarterly period ended June 30,
       2002;
 
     - our Current Report on Form 8-K dated September 20, 2002; and
 
     - 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.
 
     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 proxy statement  and will automatically
update and supersede the information contained in this proxy statement.
 
                                        20

<PAGE>
 
     At  your request, we will provide you, without charge, a copy of any of the
documents we have incorporated  by reference into this  proxy statement but  not
delivered  with  the proxy  statement (other  than  exhibits to  such documents,
unless those  exhibits  are  specifically incorporated  by  reference  into  the
documents that this proxy statement 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
 
     PLEASE DATE, SIGN AND RETURN THE PROXY CARD AT YOUR EARLIEST CONVENIENCE IN
THE  ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES.
WE WOULD APPRECIATE THE PROMPT  RETURN OF YOUR PROXY CARD,  AS IT WILL SAVE  THE
EXPENSE OF FURTHER MAILINGS.
 
                                          By Order of the Board of Directors,
 
                                          RONALD A. WOESSNER
                                          Senior Vice President, General
                                          Counsel & Secretary
 
Dallas, Texas
          , 2002
 
                                        21

<PAGE>

Proxy - Zix Corporation


        BOARD OF DIRECTORS PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
                       AT [_____________________________]
  9:00 A.M. (REGISTRATION AT 8:30 A.M.), CENTRAL TIME, [_________], [__], 2002


The undersigned shareholder of Zix Corporation hereby appoints John A. Ryan and
Steve M. York, or either of them, as proxies, each with full power of
substitution, to vote the shares of the undersigned at the above-stated special
meeting and at any postponement(s) or adjournment(s) thereof.

THIS PROXY IS SOLICITED ON BEHALF OF OUR BOARD OF DIRECTORS AND WILL BE VOTED
ACCORDING TO YOUR DIRECTIONS MADE ON THE REVERSE SIDE. IF YOU DO NOT VOTE ON
PROPOSAL 1 THIS PROXY WILL BE VOTED "FOR" THAT PROPOSAL. THE PROXY HOLDERS WILL
USE THEIR DISCRETION WITH RESPECT TO ANY OTHER MATTER THAT PROPERLY COMES BEFORE
THE MEETING OR ANY ADJOURNMENT THEREOF. THIS PROXY IS REVOCABLE AT ANY TIME
BEFORE IT IS EXERCISED.


         PLEASE VOTE, SIGN AND DATE ON THE REVERSE SIDE OF THIS PROXY CARD 
                  AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
                  (Continued and to be signed on reverse side.)



<PAGE>


Zix Corporation

Use a black pen. Print in CAPITAL letters inside the grey areas as shown in this
example.

                  [A/B/C]             [1/2/3]                [X]



Special Meeting Proxy Card



A. Issues

                  The Board of Directors recommends a vote FOR the following
resolution:


<Table>
<S>                                                            <C>              <C>               <C>
                                                                For             Against           Abstain
1.       To approve the issuance of our common stock at a      /   /             /   /              /   /
price below the greater of the book or market value of our
common stock (1) to officers and directors of our company
and other  holders of our Series A Convertible Preferred
Stock upon conversion or redemption of our Series A
Convertible Preferred Stock and (2) in an amount equal to
or greater than 20% of our outstanding common stock
immediately prior to the issuance of these securities upon
the conversion, redemption, and/or exercise, as
applicable, of our Series A Convertible Preferred Stock,
Series B Convertible Preferred Stock, 6.5% Secured
Convertible Notes and warrants associated with the 6.5%
Secured Convertible Notes, in both cases, for us to comply
with (A) our agreements with the purchasers of the Series
A Convertible Preferred Stock, Series B Convertible
Preferred Stock and 6.5% Secured Convertible Notes and (B)
Marketplace Rule 4350 of the Nasdaq National Market.
</Table>


B. Authorized Signatures - Sign Here - This section must be completed for your
instructions to be executed.

NOTE: This proxy will be voted in the discretion of the proxy holders on any
other business that properly comes before the meeting or any adjournment
thereof, hereby revoking any proxy or proxies given by the undersigned prior to
the date hereof.



<PAGE>


By executing this proxy, you acknowledge receipt of Zix Corporation's 2001
Annual Report, Notice of Special Meeting of Shareholders and Proxy Statement and
revoke any proxy or proxies given by you prior to the date hereof.

Please sign EXACTLY as your name(s) appear(s) on this proxy card. Joint owners
must EACH sign personally. When signing as attorney, trustee, executor,
administrator, guardian or corporate officer, please give your FULL title as
such. If a corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.


<Table>
<S>                                         <C>                                         <C>    
Signature 1                                 Signature 2                                 Date (dd/mm/yyyy)

------------------------------------        ------------------------------------        -----/-----/-------------
</Table>