SEVERANCE AGREEMENT
Exhibit 10.1
Execution Version
Execution Version
THIS
SEVERANCE AGREEMENT (this “Agreement”), entered into as of
December 10, 2007, is made and
entered into between Zix Corporation, a Texas corporation (the “Company”), and Xxxxxxx X. Xxxxx
(“Employee”).
WHEREAS, Employee is currently employed by the Company;
WHEREAS, Employee is willing to continue working for the Company on an “at-will” basis;
NOW, THEREFORE, in consideration of the foregoing and of the respective covenants and
agreements of the parties herein contained, the parties agree as follows:
1. Definitions.
A. Acquiring Person. 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 Exchange Act that, together
with all Affiliates and Associates of such person, is 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 10% or more of the outstanding Common Stock. The term “Acquiring Person” shall
not include the Company, any majority-owned subsidiary of the Company, any employee benefit plan of
the Company or a majority-owned 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 the date of this Agreement 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.
B. Affiliate and Associate. “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.
C. Cause. “Cause” shall mean any of the following shall have occurred: (1) the
intentional and continued failure by Employee to substantially perform Employee’s employment
duties, such intentional action 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’s Board of Directors (hereinafter, referred to as the “Board”) that
specifically identifies the manner in which the Board of Directors believes Employee has not
substantially performed Employee’s duties and that is not cured within five business days after
notice thereof by the Company to Employee; (2) the intentional engaging by Employee in misconduct
that is materially injurious to the Company; (3) the conviction of Employee or a plea of nolo contendere, or the
substantial equivalent to either of the foregoing, of or with respect to, any felony;
(4) the
commission of acts by Employee of moral turpitude that are injurious to the Company; (5) a breach
by Employee of the “confidentiality and invention” agreement between the Company and Employee; (6)
a breach by Employee of Section 7 of this Agreement; or (7) a breach by Employee of the Company’s
“Code of Ethics for Senior Officers,” as currently in effect or amended from time-to-time. For
purposes of this definition, no act, or failure to act, on Employee’s part shall be considered
“intentional” unless done, or omitted to be done, by him not in good faith and without reasonable
belief that his action or omission was in, or not opposed to, the best interest of the Company.
Notwithstanding the foregoing, Employee shall not be deemed to have been terminated for Cause
without (1) reasonable written notice to Employee, setting forth the reasons for the Company’s
intention to terminate for Cause; (2) an opportunity for Employee, together with his counsel, to be
heard before the Board (or an authorized representative thereof); and (3) delivery to Employee of a
written notice of termination from the Board (or its authorized representative) finding that, in
the good faith opinion of the Board (or its authorized representative), Employee engaged in the
conduct set forth above in clause (1) or (2) of the preceding paragraph or an event specified in
clause (3), (4), (5), (6) or (7) of the preceding paragraph has occurred.
D. Change in Control. A “Change in Control” of the Company shall have occurred if any
of the following events shall occur during the term of Employee’s employment:
(1) 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, the Company or its shareholders or Affiliates immediately
before such transaction beneficially own, immediately after or as a result of such
transaction, equity securities of the surviving or acquiring corporation or such
corporation’s parent corporation possessing less than 51% of the voting power of the
surviving or acquiring person or such person’s parent corporation;
(2) 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, the Company
or its shareholders or Affiliates immediately before such transaction beneficially own,
immediately after or as a result of such transaction, equity securities of the surviving or
acquiring corporation or such corporation’s parent corporation possessing less than 51% of
the voting power of the surviving or acquiring person or such person’s parent corporation
(provided that this provision shall not apply to a registered public offering of securities
of a subsidiary of the Company, which offering is not part of a transaction otherwise a
part of or related to a Change in Control);
(3) 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
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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;
(4) If, at any time, the Continuing Directors then serving on the Board cease for any
reason to constitute at least a majority thereof;
(5) 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
(6) Such other events that cause a Change in Control of the Company, as determined by
the Board in its sole discretion.
E. Continuing Director. A “Continuing Director” shall mean a director of the Company
who (1) 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 (2) was either (a) a member
of the Board on the date of this Agreement or (b) 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.
F. Company. The “Company” shall mean Zix Corporation, a Texas corporation, or its
successors-in-interest, as the context requires.
G. Exchange Act. “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended.
H. Good Reason. “Good Reason” shall mean (1) any material diminution in Employee’s
title and duties, it being understood and agreed that if all or substantially all of the assets of
the Company’s e-Prescribing line of business, the Company’s
Email Encryption line of business, or any other
material line of business is sold, leased, licensed, or otherwise transferred for value to a
non-Affiliate, then Employee shall have “Good Reason” to resign employment pursuant to this clause
(1); (2) the assignment of duties or position that would necessitate a change in the location of
Employee’s home (presently in North Dallas, Texas); (3) the Company fails to maintain directors and
officers liability insurance coverage, including coverage for the Employee, in an amount equal to
at least $10,000,000; (4) Employee’s health becomes impaired to an extent that makes Employee’s
continued performance of substantially all of the essential functions of his position, with
reasonable accommodation, hazardous to Employee’s physical or mental health or Employee’s life; or
(5) Employee becomes the subject of any medically determinable physical or mental impairment that
is reasonably expected to prevent Employee from performing substantially all of the essential
functions of his position, with reasonable accommodation, for at least six months; provided that,
in the case of clause (4) and (5), Employee shall have furnished the Company with a written statement from a
qualified doctor to the effects specified; and provided further that, at the Company’s request,
Employee shall submit to an examination by a doctor selected by the
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Company and such doctor shall
have concurred in the conclusion of Employee’s doctor. To effect a resignation for Good Reason,
the Employee shall deliver to the Company a notice within 120 days of the occurrence of an event
specified in clause (1) and within 60 days of the occurrence of an event specified in clauses (2),
(3), (4), or (5), in each case, that sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for Good Reason resignation. Failure to deliver such notice within the
specified time period shall constitute a waiver by Employee of Employee’s right to resign for Good
Reason by virtue of the event in question.
2. Termination Without Cause Payment. If the Company terminates Employee’s employment
other than for Cause, the Company shall pay to Employee an amount equal to 12 months of
Employee’s base salary, using Employee’s highest monthly base salary during the term of Employee’s
employment (the “Termination Without Cause Payment”), subject to receiving a release reasonably
satisfactory to the Company relating to employment matters. The Company specifically acknowledges
that if (i) a material portion of the Company’s
e-Prescribing line of business, the Company’s Email Encryption line of business, or any other material line of business is sold, leased, licensed, or otherwise
transferred for value (the “Transfer”) to a non-Affiliate (“Non-Affiliated Transferee”) and (ii) in
connection with such Transfer (a) the Employee separates from employment with the Company and (b)
accepts employment with the Non-Affiliated Transferee or one of its Affiliates, then the Company
has terminated the Employee’s employment other than for Cause, regardless of whether or not
the Employee’s separation from employment actually results from a termination of employment or
resignation from employment.
As an additional component of the Termination Without Cause Payment, the Company shall pay the
premiums for COBRA continuation benefits under the applicable Company benefit plans, beginning the
effective date of Employee’s separation from employment, until the earlier of (a) 12 months
following the separation from employment or (b) the Employee obtains medical coverage under a new
employer’s benefit plan. Employee shall not be entitled to more than one Termination Without Cause
Payment pursuant to this Agreement.
3. Change In Control Payment. If Employee resigns from employment with the Company on or
before the 180th day following a Change in Control (with the day immediately following
the occurrence of the Change in Control being day “1”), the Company shall pay to Employee an amount
equal to 12 months of Employee’s base salary, using Employee’s highest monthly base salary during
the term of Employee’s employment (the “Change In Control Payment”), subject to receiving a release
reasonably satisfactory to the Company relating to employment matters.
As an additional component of the Change In Control Payment, the Company shall pay the
premiums for COBRA continuation benefits under the applicable Company benefit plans, beginning the
effective date of Employee’s separation from employment, until the earlier of (a) 12 months following the separation from employment or (b) the Employee
obtains medical coverage under a new employer’s benefit plan. Employee
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shall not be entitled to
more than one Change In Control Payment pursuant to this Agreement.
4. Resignation For Good Reason Payment. If Employee resigns employment for Good
Reason, the Company shall pay to Employee an amount equal to 12 months of Employee’s base salary,
using Employee’s highest monthly base salary during the term of Employee’s employment (the
“Resignation For Good Reason Payment”), subject to receiving a release reasonably satisfactory to
the Company relating to employment matters.
As an additional component of the Resignation For Good Reason Payment, the Company shall pay
the premiums for COBRA continuation benefits under the applicable Company benefit plans, beginning
the effective date of Employee’s separation from employment, until the earlier of (a) 12 months
following the separation from employment or (b) the Employee obtains medical coverage under a new
employer’s benefit plan. Employee shall not be entitled to more than one Resignation For Good
Reason Payment pursuant to this Agreement.
5. Mode of Payment; Acceptance; No Overlapping Payments. The payments provided for in
Sections 2, 3 and 4 shall, in the Company’s discretion, be paid either in twelve equal monthly cash
payments beginning within 30 days of the occurrence of the applicable event, or in a lump sum cash
payment paid within 30 days of the occurrence of the applicable event. Regardless of the manner in
which the applicable payment is made, the Employee shall be responsible for all applicable
withholdings for taxes and other withholdings required by applicable law and any amounts owed by
Employee to Company, and Employee shall pay the same to the Company promptly upon demand if not
otherwise withheld. The Company’s obligation to make the payments provided for in Sections 2, 3 and
4 is absolute, and such payments shall not be mitigated or offset by virtue of Employee obtaining
new employment or failing to seek new employment. Acceptance by Employee of the Termination
Without Cause Payment (Section 2), Change In Control Payment (Section 3), or Resignation For Good
Reason Payment (Section 4), as applicable, shall constitute a release by Employee of the Company
and its affiliates, shareholders, officers, employees, directors and other agents from all claims
arising out of, relating to, or in connection with, Employee’s employment with, or separation from
employment with, the Company and its Affiliates.
Employee shall be entitled to receive pursuant to this Agreement only one of either (a) one
Termination Without Cause Payment (Section 2), (b) one Change In Control Payment (Section 3), or
(c) one Resignation For Good Reason Payment (Section 4), i.e., not more than one of any of such
payments is payable pursuant to this Agreement.
6. Deemed Resignation from Board. Employee agrees that if Employee separates from
employment with the Company and Employee is a member of the Company’s Board of Directors at the
time of the employment separation, then Employee shall be deemed to have tendered Employee’s
resignation from the Board. The resignation shall be deemed to have been tendered, regardless of whether the separation from employment is because of
resignation, termination with or without cause, or otherwise. The
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resignation shall be effective
upon acceptance of the same by the Board unless the Employee shall have specified an earlier
effective date of the resignation. If the Board determines not to accept the resignation, then the
Employee shall (with Employee’s concurrence) continue as a member of the Board until the next
annual meeting of shareholders and until the Employee’s (director) successor is duly elected and
qualified, unless earlier removed in accordance with the Company’s Restated Bylaws.
7. Conflict of Interest. Employee agrees that during the term of his employment, Employee
shall not:
A. Engage, either directly or indirectly, in any activity which may involve a conflict of
interest with the Company or its Affiliates (a “Conflict of Interest”), including ownership in any
supplier, contractor, subcontractor, customer or other entity with which the Company does business
(other than as a shareholder of less than one percent (1%) of a publicly-traded or private class of
equity ownership); and
B. Employee shall not accept any material payment, service, loan, gift, trip, entertainment or
other favor from a supplier, contractor, subcontractor, customer or other entity with which the
Company does business, and Employee shall promptly inform the Board as to each offer received by
Employee to engage in any such activity.
Employee agrees to disclose to the Company any other facts of which Employee becomes aware that
might involve or give rise to a Conflict of Interest or potential Conflict of Interest.
8. Non-competition. Beginning the date that Employee separates from employment with the
Company and through the one year anniversary of such separation from employment date, Employee
agrees and covenants that Employee will not:
A. Directly
or indirectly, compete with the Company’s Email Encryption
business or e-Prescribing business or
any other material line of business being conducted by the Company (“Other Material Business”), in
each case, as the Email Encryption line of business, e-Prescribing line of business, or Other Material Business
line of business is comprised as of the date of the Employee’s separation from employment. For
purposes of this Agreement, “Competition” shall include, without limitation, engaging, directly or
indirectly, in any business, whether as proprietor, partner, joint venturer, employee, agent,
officer, director, consultant, advisor, or holder of more than one percent (1%) of any publicly
traded or private class of equity ownership of a business enterprise, that is competitive with the
Company’s Email Encryption business or e-Prescribing business or Other Material Business;
B. Directly or indirectly, solicit to do, or do, competing business with (i) any person that
is a customer of the Company’s Email Encryption business or
e-Prescribing business or Other Material Business as
of the date of the Employee’s separation from employment, or
(ii) any person that has been a customer of the Company’s
Email Encryption business or e-Prescribing business
or Other Material Business within the six months preceding such date; or
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C. Directly or indirectly, solicit to hire, or hire, any person that is an employee of the
Company (including its affiliated companies) as of the date of the Employee’s separation from
employment, or was an employee within the 3 month period preceding such date, except by way of
bona-fide general advertising.
Although the Company and Employee have, in good faith, used their best efforts to make the
covenants of this Section 8 reasonable in all pertinent respects, and it is not anticipated, nor is
it intended, by either party to this Agreement that any arbitrator or court will find it necessary
to reform any of such covenants to make it reasonable in all pertinent respects, the Company and
Employee understand and agree that if an arbitrator or court determines it necessary to reform any
of such covenants to make it reasonable in all pertinent respects, damages, if any, for a breach
of the non-competition covenant, as so reformed, shall be deemed to accrue to the Company as and
from the date of such a breach only and so far as the damages for such breach related to an action
that accrued within the scope of the covenant as so reformed.
9. Miscellaneous.
A. Pending Litigation; Indemnification. With respect to any lawsuits currently
pending or hereafter asserted against the Company that pertain to (i) matters reasonably within the
purview of Employee’s job responsibilities while employed with the Company or (ii) matters for
which the Employee has particular knowledge, Employee agrees to cooperate reasonably in the defense
of the litigation thereof, including signing affidavits and making himself available for
interviews, deposition preparation, deposition, and trial. If Employee is requested to assist
with litigation activities following Employee’s separation from employment other than those
litigation activities in which Employee would be required to participate as a named party, the
Company agrees to pay all reasonable documented out-of-pocket costs and lost income up to a maximum
of $2,500 per day incurred in connection with such activities. Without the Company’s prior consent,
Employee agrees not to comment publicly on any such litigation or any of the issues in the
litigation. Without the Company’s prior consent, Employee also agrees not to discuss any such
litigation, or cooperate, with the plaintiffs, their attorneys, or their representatives. The
Company acknowledges that the Employee has certain rights to indemnification as an officer and/or
director of the Company as set forth in the Company’s Restated Bylaws.
B. Waiver. No waiver of any provision of this Agreement shall be deemed, or shall
constitute, a waiver of any other provision, whether or not similar, nor shall any waiver
constitute a waiver of any continuing or succeeding breach of such provision, a waiver of the
provision itself, or a waiver of any right under this Agreement. No waiver shall be binding unless
executed in writing by the party making the waiver.
C. Limitation of Rights. Nothing in this Agreement, except as specifically stated in
this Agreement, is intended to confer any rights or remedies under or by reason of this Agreement
on any persons other than the parties to it and their respective permitted successors and assigns
and other legal representatives.
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D. Remedies. Employee hereby agrees that a violation of the provisions of Section 7
and Section 8 would cause irreparable injury to the Company for which it would have no adequate
remedy at law. Accordingly, in the event of any such violation, the Company shall be entitled to
preliminary and other injunctive relief. Any such injunctive relief shall be in addition to any
other remedies to which the Company may be entitled at law or in equity, or otherwise.
E. Notice. Any consent, notice, demand, or other communication regarding any payment
required or permitted hereby must be in writing to be effective and shall be deemed to have been
received on the date delivered, if personally delivered, or the date received, if delivered
otherwise, 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:
The Company:
Zix Corporation
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxx 0000, XX 36
Xxxxxx, Xxxxx 00000-0000, Attn: General Counsel
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxx 0000, XX 36
Xxxxxx, Xxxxx 00000-0000, Attn: General Counsel
If to Employee, to the address on file in the Company’s records.
F. Entirety and Amendments. This Agreement embodies the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior agreements and
understandings relating to the subject matter hereof, including that certain Employment Agreement,
dated as of January 20, 2004, between the parties.
G. Successors and Assigns. This Agreement will be binding upon and inure to the
benefit of the parties to this Agreement and any successors-in-interest to the Company, but
otherwise, neither this Agreement nor any rights or obligations under this Agreement may be
assigned by Employee.
H. Governing Law. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Texas (excluding its conflict of laws rules) and
applicable federal law.
I. Cumulative Remedies. No remedy in this Agreement conferred upon any party is
intended to be exclusive of any other benefit or remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other benefit or remedy given under this Agreement or
now or hereafter existing at law or in equity or by statute or otherwise. No single or partial exercise by any party of any right, power, or remedy under this
Agreement shall preclude any other or further exercise thereof.
J. Multiple Counterparts. This Agreement may be executed in a number of identical
counterparts, each of which constitute collectively, one agreement; but in
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making proof of this
Agreement, it shall not be necessary to produce or account for more than one counterpart.
K. Descriptive Headings. The headings, captions, and arrangements used in this
Agreement are for convenience only and shall not be deemed to limit, amplify, or modify the terms
of this Agreement, nor affect the meaning hereof.
L. Arbitration. The Company and the Employee agree to the resolution by binding
arbitration of all claims, demands, causes of action, disputes, controversies, or other matters in
question (“Claims”), whether sounding in contract, tort, or otherwise and whether provided by
statute or common law, that (a) are asserted by the Employee, and (b) arise out of this Agreement,
or the Employee’s employment (or its termination), or are any other type of claim that Employee may
assert or have, and (c) are against the Company or any and its affiliated companies, or any benefit
plans of the Company or any of its affiliated companies, or any fiduciaries, administrators, and
affiliates of any of such benefit plans, or their respective officers, directors, employees, or
agents in their capacity as such. This agreement to arbitrate shall not limit a party’s right to
seek equitable relief, including, but not limited to, injunctive relief and specific performance in
a court of competent jurisdiction. Claims covered by this agreement to arbitrate include, but are
not limited to, claims by the Employee for breach of this Agreement, wrongful termination,
discrimination (based on age, race, sex, disability, national origin, or other factor), and
retaliation, or any other claim that Employee may have or assert. The only Claims otherwise within
the definition of Claims that are not covered by this Subsection L are: (1) 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 Section L; (2) any Claim by the Employee for
workers’ compensation benefits or unemployment compensation benefits; or (3) any Claim by the
Employee for benefits under a Company or affiliated company pension or benefit plan that provides
its own non-judicial dispute resolution procedure.
Claims shall be submitted to arbitration and finally settled under the applicable rules of the
American Arbitration Association (“AAA”) in effect at the time the written notice of the Claim is
received. An arbitrator shall be selected in the manner provided for in the applicable rules of
the AAA, except that the parties agree that the arbitrator shall be an attorney licensed in the
state where the arbitration is being conducted. If any party refuses to honor its obligations
under this agreement to arbitrate, the other party may compel arbitration in either federal or
state court. The arbitrator will have exclusive authority to resolve any dispute relating to the
interpretation, applicability, enforceability, or formation of this agreement to arbitrate,
including, but not limited to, any claim that all or part of this Agreement is void or voidable and
any claim that an issue is not subject to arbitration. The arbitration will be held in Dallas
County, Texas. The arbitrator shall issue a written decision that identifies the factual findings and principles of law upon which any award
is based. The award and findings of such arbitrator shall be conclusive and binding upon the
parties. Any and all of the arbitrator’s orders, decisions, and awards may be enforceable in, and
judgment upon any award rendered by the arbitrator may be confirmed and entered by, any federal or
state court having jurisdiction. The Company
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shall pay all costs and expenses of its advisors and
expert witnesses, and Employee shall pay all costs and expenses of his advisors and expert
witnesses. The costs and expenses of the arbitration proceedings will be paid by the
non-prevailing party or as the arbitrator otherwise determines. Discovery will be permitted to the
extent directed by the arbitrator. Employee understands that by agreeing to submit Claims to
arbitration, Employee gives up the right to seek a trial by court or jury and the right to appeal a
court or jury decision and forgoes any and all related rights Employee may otherwise have under
federal and state laws.
IN WITNESS WHEREOF, the parties have executed this Agreement effective on the date and year
first above written.
| ZIX CORPORATION |
|||||
| By: | /s/ Xxxxx X. Xxxxxx | ||||
| Xxxxx X. Xxxxxx | |||||
| Chief Financial Officer | |||||
| EMPLOYEE |
|||||
| /s/ Xxxxxxx X. Xxxxx | |||||
| Xxxxxxx X. Xxxxx | |||||
| APPROVED: | APPROVED: | ||||
| /s/ Xxxxx X. Xxxxxxx | /s/ Xxxxxx X. Xxxxxxxx | ||||
| Xxxxx X. Xxxxxxx | Xxxxxx X. Xxxxxxxx | ||||
| Chairman, Compensation Committee Zix Corporation Board of Directors |
Sr. Vice President & General Counsel | ||||
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