AMENDED AND RESTATED SEVERANCE AGREEMENT
Exhibit 10.28
Execution Version
AMENDED AND RESTATED SEVERANCE AGREEMENT
THIS AMENDED AND RESTATED SEVERANCE AGREEMENT (this “Agreement”), dated December 18, 2008 is
entered into between Zix Corporation, a Texas corporation, with its principal executive offices in
Dallas, Texas (the “Company”), and Xxxxxx X. Xxxxxxxx, an individual currently residing in Plano,
Texas, who is currently employed as Senior Vice President and General Counsel of the Company
(“Employee”) and hereby amends and restates that certain severance agreement, dated February 25,
2002 between the parties.
Recitals
A. The Company and Employee have entered into a Severance Agreement, dated November 4, 1996,
and subsequent successors thereto (the “Severance Agreements”).
B. The Company and Employee desire to enter into this Severance Agreement, which will replace
the Severance Agreements.
C. In consideration of the Company’s agreements herein, Employee is willing to continue
working for the Company or an Affiliate, as applicable, on an “at-will” basis.
Terms and Conditions
In consideration of the recitals and the agreements herein and other good and valuable
consideration, the parties agree as follows:
1. Definitions.
1.1 An “Acquiring Person” shall mean any person (including any “person” as such term is used
in Sections 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) that, together with all Affiliates and Associates of such person, is the beneficial owner of
10% or more of the outstanding Common Stock. The term “Acquiring Person” shall not include the
Company, any subsidiary of the Company, any employee benefit plan of the Company or subsidiary of
the Company, or any person to the extent such person is holding Common Stock for or pursuant to the
terms of any such plan. For the purposes of this Agreement, a person who becomes an Acquiring
Person by acquiring beneficial ownership of 10% or more of the Common Stock at any time after
November 4, 1996 shall continue to be an Acquiring Person whether or not such person continues to
be the beneficial owner of 10% or more of the outstanding Common Stock.
1.2 “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act in effect on the date of
this Agreement.
1.3 The Company and its Affiliates shall have “Cause” to terminate Employee’s
employment upon (1) the intentional and continued failure by Employee to substantially perform
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Employee’s employment duties such intentional actions involving willful and deliberate malfeasance
or gross negligence in the performance of Employee’s duties (other than any such failure resulting
from Employee’s incapacity due to physical or mental illness), after written demand for substantial
performance is delivered by the Company or an Affiliate, as applicable, that specifically
identifies the manner (such demand not to be unreasonable) in which the Company or the Affiliate,
as applicable, believes Employee has not substantially performed Employee’s duties; or (2) the
willful engaging by Employee in misconduct that is materially injurious to the Company or employing
Affiliate, as applicable; or (3) the conviction of Employee of any felony or crime of moral
turpitude that is injurious to the Company; or (4) Employee attains the mandatory retirement age
specified in any applicable retirement plan of the Company or any successor-in-interest (but for
purposes of this clause (4), any such mandatory retirement age shall not be less than age 65). For
purposes of this definition no act, or failure to act, on Employee’s part shall be considered
“willful” unless done, or omitted to be done, by Employee not in good faith and without reasonable
belief that Employee’s action or omission was in the best interest of the Company or the applicable
Affiliate(s), or both, as applicable. Notwithstanding the foregoing, Employee shall not be deemed
to have been terminated for Cause without the following procedures having been adhered to: (a)
reasonable written notice to Employee, setting forth the reasons for the Company’s or the
Affiliate’s intention to terminate for Cause; (b) an opportunity for Employee, together with
Employee’s counsel, to be heard before the Zix Corporation Board of Directors; and (c) delivery to
Employee of a written Notice of Termination finding that, in the good faith opinion of the Zix
Corporation Board of Directors, Employee was guilty of conduct set forth above in clause (1), (2)
or (3) above, and specifying the particulars thereof in detail.
1.4 “Change in Control” shall mean the occurrence of any of the following events:
(i) The Company is merged, consolidated or reorganized into or with another corporation
or other legal person, other than an Affiliate, and as a result of such merger,
consolidation or reorganization less than 51% of the combined voting power to elect each
class of directors of the then outstanding securities of the remaining corporation or legal
person or its ultimate parent immediately after such transaction is owned, directly or
indirectly, in the aggregate by persons who were shareholders, directly or indirectly, of
the Company immediately prior to such merger, consolidation, or reorganization;
(ii) The Company sells all or substantially all of its assets to any other corporation
or other legal person, other than an Affiliate, and as a result of such sale less than 51%
of the combined voting power to elect each class of directors of the then outstanding
securities of such corporation or legal person or its ultimate parent immediately after such
transaction is owned, directly or indirectly, in the aggregate by persons who were
shareholders, directly or indirectly, of the Company immediately prior to such sale;
(iii) Any Acquiring Person has become the beneficial owner (as the term “beneficial
owner” is defined under Rule 13d-3 or any successor rule or regulation promulgated under the
Exchange Act) of securities which when added to any securities already owned by such person
would represent in the aggregate 35% or more of the then outstanding securities of the
Company which are entitled to vote to elect any class of directors;
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(iv) If at any time, the Continuing Directors then serving on the Board of Directors of
the Company cease for any reason to constitute at least a majority thereof;
(v) Any occurrence that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A or any successor rule or regulation promulgated under the
Exchange Act; or
(vi) Such other events that cause a change in control of the Company, as determined by
the Zix Corporation Board of Directors in its sole discretion.
1.5 “Change in Control Payment” shall mean two times the higher of (i) Employee’s annual base
salary in effect on the date of the Change in Control or (ii) Employee’s highest annual base salary
during the term of Employee’s employment with the Company.
1.6 A “Continuing Director” shall mean a director of the Company who (i) is not an Acquiring
Person or an Affiliate or Associate thereof, or a representative of an Acquiring Person or
nominated for election by an Acquiring Person, and (ii) was either a member of the Board of
Directors of the Company on the date of this Agreement or subsequently became a director of the
Company and whose initial election or initial nomination for election by the Company’s shareholders
was approved by a majority of the Continuing Directors then on the Board of Directors of the
Company.
1.7 “Disability” shall mean that the Employee is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment that can be expected
to result in death or can be expected to last for a continuous period of not less than 12 months.
1.8 “Good Reason” shall mean the occurrence of any of the following events:
(a) any material diminution in Employee’s duties that has not been cured within thirty
days after notice of such noncompliance has been given (within 30 days of the alleged
material diminution) by Employee to the Company or the employing Affiliate, as applicable. A
change in title or duties will not be considered to be a “material diminution” in duties if,
after such change, Employee is an officer of the Company; Employee’s reporting relationship
does not change or Employee reports to the Company’s Chief Executive Officer or Chief
Operating Officer; and a substantial portion of Employee’s duties are in Employee’s field of
professional training or experience.
(b) a reduction of more than 10% in Employee’s base salary (with the 10% being
cumulative over the term of Employee’s employment), but any percentage reduction that is
actually made is made against the Employee’s then current base salary).
EXAMPLE: assume Employee’s base salary is $100,000. The Company or Affiliate, as applicable,
is permitted to reduce Employee’s base salary by up to 10% ($10,000) without giving Employee
“Good Reason” to terminate employment. Any further salary reductions
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would constitute “Good
Reason” to terminate employment.
(c) any purported termination for Cause of Employee’s employment that is not effected
pursuant to the procedural requirements of Subsection 1.3.
(d) the location of Employee’s place of employment is moved more than 50 miles from its
current location.
1.9 “Notice of Termination” shall mean a notice that indicates the specific reasons for
termination and shall set forth in reasonable detail the facts and circumstances claimed to provide
a basis for termination of Employee’s employment.
1.10 “Person” shall mean an individual, a corporation, a partnership, an association, a
joint-stock company, a trust, an incorporated organization or a government or political subdivision
thereof.
1.11 “Severance Payment” shall mean an amount equal to 150% of Employee’s highest annual base
salary during the term of Employee’s employment with the Company; provided that, if the
event giving rise to the Severance Payment occurs on or before the 180th day following a Change in
Control (with the day immediately following the day of the occurrence of the Change in Control
being day “1”), then the amount of the Severance Payment shall be the greater of (i) the amount
provided for in this sentence or (ii) the amount provided for in Section 3 (as if Employee had
resigned from employment pursuant to Section 3).
2. Severance Payment. From and after the date hereof, upon the occurrence of any of the
following events the Company will pay to Employee the Severance Payment (in accordance with Section
4) and Employee’s options to acquire the Company’s stock shall become vested in full (regardless of
whether the options were granted before or are granted after the date of this Agreement):
| (a) | Employee’s employment with the Company and its Affiliates is terminated by the Company or the employing Affiliate, as applicable, other than for Cause; | ||
| (b) | Employee terminates his employment for Good Reason, subject to the notice and cure provisions noted below; or | ||
| (c) | Employee incurs a Disability. |
To terminate Employee’s employment other than for Cause pursuant to 2(a), the Company or the
employing Affiliate, as applicable, shall give Employee written notice of such termination. Such
notice shall be effective 90 days following the Employee’s receipt thereof.
Notwithstanding the preceding provisions, Employee shall not be permitted to resign
employment for a Good Reason event until (i) Employee has provided to the Company notice of the
existence of the good reason condition within 90 days of its initial existence and (ii) the Company
has not remedied the good reason condition within a period of 30 days from the
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Company’s receipt of
such notice. Following the satisfaction of (i) and (ii), Employee must
exercise his right to resign for Good Reason within 30 days (i.e., such Good Reason
resignation must occur within 150 days of the occurrence of the good reason event), with the day
immediately following the existence of the good reason condition being day “1.”
Employee shall not be entitled to more than one Severance Payment pursuant to this Agreement.
3. Change in Control Payment. If Employee resigns from employment (subject to the notice
and cure provisions noted below) with the Company and its Affiliates following a Change in Control
for a “Change in Control Good Reason,” as such term is defined below, the Company shall pay to
Employee the Change in Control Payment (in accordance with Section 4) and Employee’s options to
acquire the Company’s stock shall become vested in full (regardless of whether the options were
granted before or are granted after the date of this Agreement).
A “Change in Control Good Reason” shall mean (i) a material diminution in the Employee’s
authority, duties or responsibilities, (ii) a material diminution in the Employee’s base salary,
(iii) a material change in the geographic location at which the Employee must perform services,
(iv) a material diminution in the authority, duties, or responsibilities of the supervisor to whom
the Employee is required to report, including a requirement that the Employee report to a corporate
officer or employee instead of the board of directors (or similar governing body), (v) a material
diminution in the budget over which the Employee retains authority, or (vi) any other event that
constitutes a material breach by the Company of the agreement under which the Employee provides
services.
Notwithstanding the preceding provisions, Employee shall not be permitted to resign
employment for a “Change in Control Good Reason” until (a) Employee has provided to the Company
notice of the existence of the good reason condition within 90 days of its initial existence and
(b) the Company has not remedied the good reason condition within a period of 30 days from the
Company’s receipt of such notice. Following the satisfaction of (a) and (b), Employee must
exercise his right to resign for a Change in Control Good Reason within 60 days (i.e., such Change
in Control Good Reason resignation must occur within 180 days of the occurrence of the good reason
event), with the day immediately following the existence of the good reason condition being day
“1.”
4. Mode of Payment. The Severance Payment or Change in Control Payment, as applicable,
shall be paid in a lump sum (less applicable withholdings for taxes and other withholdings required
by applicable law) as soon as practicable but no later than 60 days of the occurrence of the
applicable event, subject to the Company’s receipt of a release in a form reasonably satisfactory
to the Company relating to employment matters. The Company will provide the form release to
Employee within 5 days of the date of the event giving rise to the payment. In the event that
Employee fails to execute a release within this 60 day period, he shall forfeit the Severance
Payment or Change in Control Payment, as applicable. The Company’s obligation to pay the Severance
Payment and the Change in Control Payment is absolute, and such payments shall not be mitigated or
offset by virtue of Employee obtaining new employment or failing to seek new employment.
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Employee shall be entitled to receive pursuant to this Agreement only one of the following
payments (a) the Severance Payment (Section 2), or (b) the Change in Control Payment (Section 3)
(i.e., not more than one of any such payments is payable pursuant to this Agreement).
5. General.
5.1 Dispute Resolution. The provisions of Exhibit A attached hereto shall
govern any disputes arising under this Agreement. Without limiting the generality of the
foregoing, if a dispute arises between the parties as to whether or not Employee has “Good Reason”
or “Change in Control Good Reason” to terminate employment, Employee is not required to resign from
employment with the Company or an Affiliate, as applicable, to “perfect” Employee’s right to make a
claim for the Severance Payment or Change In Control Payment, as applicable, although Employee may
resign from employment if Employee chooses. Such disputes shall be resolved in accordance with the
provisions of Exhibit A attached hereto. If the dispute is resolved in Employee’s favor
(regardless of whether pursuant to a legally binding settlement of such dispute, the Company’s
concession that the amount is payable or the Company being required to make such payment pursuant
to a final and nonappealable judgment or other binding decision) and it is determined that Employee
has “Good Reason” or “Change in Control Good Reason” to terminate employment, then Employee will be
required to terminate employment within 30 days thereof. Payment of the Severance Payment or
Change In Control Payment shall be made as soon as practicable following Employee’s termination of
employment but no later than 60 days thereafter, subject to the Company’s receipt of a release in a
form reasonably satisfactory to the Company relating to employment matters. In the event that
Employee fails to execute a release within this 60 day period, he shall forfeit the Severance
Payment or Change in Control Payment, as applicable.
5.2 Confidential Information. Employee and the Company acknowledge that Employee has,
or may have, previously executed a Confidentiality and Invention Agreement which is incorporated
herein by reference and shall survive Employee’s separation from employment in accordance with its
terms.
5.3 Notice. All notices and other communications provided for in this Agreement shall
be in writing and shall be deemed to have been received on the date delivered, if personally
delivered, or the date received after being mailed by United States registered or certified mail,
return receipt requested, postage prepaid, addressed to the applicable party at the address for
such party set forth below or at such other address as such party may designate by like notice:
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Employee:
Xxxxxx X. Xxxxxxxx
The Company:
5.4 Successors; Binding Agreement. This Agreement will be binding upon and inure to
the benefit of the parties hereto and any successors in interest to the Company following a Change
in Control. This Agreement and all rights of Employees hereunder shall inure to the benefit of and
be enforceable by Employee’s personal or legal representatives, executors, administrators,
successors, heirs, distributes, devisees and legatees.
5.5 Entire Agreement; Modifications. This Agreement embodies the entire agreement
between the parties with respect to the subject matter hereof and supersedes all prior agreements
(including the Severance Agreements) and understandings relating to the subject matter hereof.
Only an instrument in writing executed by both parties may amend this Agreement. No waiver by
either party hereto of, or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
5.6 Validity. The invalidity or unenforceability of any provision or provisions of
this Agreement shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
5.7 Enforcement Fees. In the event of a dispute arising under this Agreement, unless
otherwise agreed by the parties in writing, each party shall pay its own costs and expenses in
resolving the dispute.
5.8 Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas (excluding its conflict of laws rules).
5.9 409A Compliance. This Agreement, as amended, is intended to be exempt from and/or
comply with the requirements (and not otherwise be subject to the interest and penalty taxes of)
section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the regulations and
other guidance issued thereunder, and shall be interpreted in a manner consistent with that intent.
Notwithstanding the foregoing, in the event there is a failure under this
Agreement to comply with section 409A of the Code, the Company shall have the discretion to
accelerate any
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payment hereunder of “nonqualified deferred compensation” (within the meaning of
section 409A of the Code), but only to the extent of the amount required to be included in income
as a result of such failure.
| ZIX CORPORATION | ||||||
| /s/ Xxxxxxx X. Xxxxx | ||||||
| Xxxxxxx X. Xxxxx, Chairman & CEO | ||||||
| Date: | 12-22-08 | |||||
| EMPLOYEE: | ||||||
| /s/ Xxxxxx X. Xxxxxxxx | ||||||
| Date: | 12-18-08 | |||||
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EXHIBIT A
MUTUAL ALTERNATE DISPUTE RESOLUTION AGREEMENT
Zix Corporation and its majority-owned subsidiaries are individually and collectively referred
to in this Exhibit A as the “Company.”
A. Because this Exhibit A promotes arbitration as the exclusive final and binding
method of addressing claims covered herein, the Company and Employee agree to be bound by those
laws best promoting the enforceability of arbitration agreements in effect at any given time,
including the Federal Arbitration Act, federal common law, and any applicable state laws promoting
arbitration.
B. Except as otherwise provided in this Exhibit A, the Company and the Employee
consent and agree to the resolution, in the manner provided for in this Exhibit A, of all
claims or controversies brought by the Employee against the Company or any of the Company’s current
or former officers, directors, employees, or agents, or brought by the Company against the Employee
(“Claims”) for which a court otherwise would be authorized by law to grant relief, that are (1)
claims in any way arising out of, relating to, or associated with the Employee’s employment or
termination from employment with the Company or any adverse employment action by the Company or any
Company-provided benefits or compensation; (2) any other claims the Employee may have against the
Company, any benefit plans of the Company or any fiduciaries, administrators, and affiliates of any
benefit plan, or any of the Company’s current or former officers, directors, employees, or agents
in their capacity as such; or (3) any issue concerning the formation, applicability,
interpretation, or enforceability of this Exhibit A.
The Employee acknowledges that the Claims intended to be covered by this Exhibit A
include (but are not limited to) claims or controversies under or relating to: any federal, state,
or local constitution, law, or regulation prohibiting discrimination, harassment, retaliation,
discharge, or other adverse employment action; an alleged or actual contract; any Company policy or
benefit; entitlement to wages or other compensation; and any claim for personal, emotional,
physical, economic, or other injury.
C. The only claims otherwise within the definition of Claims that are not covered by this
Exhibit A are: (1) claims asserted in any administrative actions that the Employee is
permitted to pursue under applicable law that are not precluded by virtue of the Employee having
entered into this Exhibit A; (2) any claim by the Employee for benefits under a workers’
compensation insurance policy or for statutory unemployment compensation benefits; (3) any claim by
the Employee for benefits under a Company pension or benefit plan that provides its own
non-judicial final and binding dispute resolution procedure; (4) any claim by the Company for
injunctive relief, specific performance and/or damages for unfair competition, use or unauthorized
disclosure of confidential or proprietary information or trade secrets, use or ownership of
patents, trademarks, copyrights, know-how, and other intellectual property and applications with
respect to the foregoing; or (5) any claim arising under the Confidentiality and Invention Agreement signed by the
Employee in connection with employment with the Company.
| A-1 | RAW Initial |
D. The arbitration will be conducted in accordance with the provisions of this Exhibit
A and the National Rules for the Resolution of Employment Disputes of the American Arbitration
Association (“AAA”) in effect at the time the written notice of the Claim is received. A copy of
AAA’s current rules can be found at xxx.xxx.xxx. The arbitrator shall also have the authority to
determine a motion for summary disposition of a particular claim or issue, either by agreement of
all interested parties or at the request of one, provided all interested parties have reasonable
opportunity to respond. An arbitrator shall be selected in the manner provided for by the AAA,
except that the parties agree that the arbitrator shall (1) be an attorney licensed in the state
where the arbitration is being conducted and (2) have expertise in the area of employment law. The
arbitration will be held in Dallas County, Texas, the Company’s corporate headquarters.
E. The arbitrator shall follow the law applicable to the Claim, including but not limited to,
statutes of limitations, exhaustion of administrative remedies and burdens of proof, and shall have
the authority to award all remedies that would be available in a court of law. The arbitrator
shall issue a written decision that identifies the factual findings and principles of law upon
which any award is based. Such decision shall be final and binding on the parties, and a judgment
of any court having jurisdiction may be entered on the award.
F. The Employee understands that by agreeing to submit Claims to arbitration, he or she gives
up the right to seek a trial by court or jury and the right to an appeal from certain errors of the
decision maker and forgoes any and all related rights he or she may otherwise have under federal
and state laws. Any party who initiates litigation in violation of this Agreement will incur
liability to the person(s) sued for costs and attorneys’ fees incurred in defending the Claim and
enforcing the terms of this Exhibit A.
G. In the event any provision of this Exhibit A is found by an arbitrator, arbitration
organization, or court to be unenforceable, in whole or in part, the remaining provisions of this
Exhibit A shall nevertheless remain enforceable, and the unenforceable provisions shall, to
the extent permitted under applicable law, be modified so as to be enforceable to the maximum
extent possible under applicable law or, if not subject to modification, severed and excluded from
this Exhibit A. If a court, arbitrator, or arbitration organization determines that some
other aspect of the arbitration process contemplated by this Exhibit A, but not addressed
by the preceding sentence, would cause the Exhibit A to be invalid, unenforceable, or not
subject to administration by the arbitration organization because the Employee is adversely
effected in some manner, the Company shall be given the option to remedy the perceived defect in
such a manner that arbitration may proceed.
H. This Exhibit A shall survive the termination of Employee’s employment. This
Exhibit A can be modified only in a writing signed by Employee and an officer of Zix
Corporation that specifically states an intent to resolve or modify this Exhibit A.
| A-2 | RAW Initial |
I. EMPLOYEE ACKNOWLEDGES THAT HE HAS CAREFULLY READ THIS AGREEMENT; THAT HE HAS BEEN GIVEN THE
OPPORTUNITY TO DISCUSS THIS AGREEMENT WITH PRIVATE LEGAL COUNSEL AND HAS MADE USE OF THAT
OPPORTUNITY TO THE EXTENT HE WISHES TO DO SO; THAT HE UNDERSTANDS ITS TERMS; THAT ALL
UNDERSTANDINGS BETWEEN EMPLOYEE AND THE COMPANY RELATING TO THE SUBJECTS COVERED IN THIS
EXHIBIT A ARE CONTAINED IN THIS EXHIBIT A AND THAT HE HAS ENTERED INTO THIS
EXHIBIT A VOLUNTARILY AND NOT IN RELIANCE ON ANY PROMISES OR REPRESENTATIONS BY THE COMPANY
OTHER THAN THOSE CONTAINED IN THIS EXHIBIT A ITSELF.
| A-3 | RAW Initial |
