According to a press release dated April 7, 2008, a settlement for Five Million Six Hundred Thousand Dollars ($5,600,000) has been proposed. A hearing will be held before the Honorable Ed Kinkeade in the United States District Court for the Northern District of Texas, Dallas Division, United States Courthouse, 1100 Commerce Street, Dallas, Texas 75242, at 10:00 a.m., on June 16, 2008 to determine whether: (1) the proposed settlement should be approved by the Court as fair, reasonable and adequate; (2) Co-Lead Counsel’s application for an award of attorneys’ fees and reimbursement of expenses should be approved; (3) the application of the Lead Plaintiffs for their reasonable costs and expenses (including lost wages) relating to their representation of the Class should be approved; and (4) the claims against Defendants should be dismissed with prejudice.
On September 26, 2006, the Court entered the Memorandum Opinion and Order signed by U.S. District Judge Ed Kinkeade denying the defendants' motion to dismiss the Consolidated Complaint. According to the Order, the Court finds that Plaintiff's complaint sufficiently alleges a Section 10(b) fraud claim against Defendants with the requisite particularity. Further, Plaintiff's complaint also sufficiently alleges a Section 20(a) claim against Defendants with the requisite notice. The defendants filed a motion for reconsideration of the Memorandum Opinion and Order was denied on February 25, 2007.
On January 27, 2006, the Court entered the Order dismissing the case without prejudice as to two individual defendants pursuant to the notice of voluntary dismissal filed by the lead plaintiffs.
As disclosed by the Company’s FORM 10-Q for the quarterly period ended June 30, 2006, beginning in early September 2004, several purported shareholder class action lawsuits were filed in the U.S. District Court for the Northern District of Texas against the Company and certain of its current and former officers and directors. These several class action lawsuits have been consolidated into one case. The Company has filed a motion to dismiss the consolidated lawsuits pursuant to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure and also pursuant to the Private Securities Litigation Reform Act.
The original complaint alleges that during the Class Period, defendants Zix and certain of its officers and directors disseminated materially false and misleading statements regarding the Company’s business and prospects. The defendants concealed from the investing public the following facts during the Class Period: (a) the Company was experiencing sluggish doctor adoption to e-prescribing; (b) the Company’s claim that it would achieve 1,000 deployed active doctors by the end of Q4 2003 was false and misleading because physicians would be required to reconfigure their patient data, obtain wireless coverage and implement a wireless LAN, which were severely undercutting physician acceptance and deployment; (c) the Company’s claim it had 4,000 deployments already on order was false because, at the time of claim, the physicians’ sites had not even been surveyed to evaluate wireless/LAN needs, all of which would drastically impact not only the timing of these “ordered” deployments but also whether these so-called ordered deployments would ever be truthfully ordered and deployed; and (d) new offerings from its Elron acquisition were delayed as a result of integration problems. As a result of the defendants’ false statements, Zix’s stock traded at inflated levels during the Class Period, increasing to as high as $17.33 on April 12, 2004, whereby the Company’s top officers and directors sold more than $4.6 million worth of their own shares and raised an additional $10 million through the conversion of warrants.
On May 4, 2004, the Company announced its results for Q1 2004, including larger loss than market expectations. On this news, the Company’s shares were sent into a freefall, tumbling 50% in the following trading days to below $7 per share.
NOTE: Zix is a global provider of e-messaging protection and transaction services.