Execution Version
Exhibit 10.2
SEPARATION PAY AGREEMENT
     THIS SEPARATION PAY AGREEMENT (this “Agreement”), dated November 4, 2008,
and effective as of October 16, 2008, is between Zix Corporation, a Texas
corporation (the “Company”), and Susan K. Conner (“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
Employee’s obligations under 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 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

2

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

 

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.
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 nine (9) 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.
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 nine (9) 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.
4. Mode of Payment; Acceptance; No Overlapping Payments. The payments provided
for in Sections 2 and 3 shall, in the Company’s discretion, be paid either in
nine (9) 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

3

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

 

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 and 3 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) or Change In Control Payment (Section 3), 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) or (b) one
Change In Control Payment (Section 3), i.e., not more than one of any of such
payments is payable pursuant to this Agreement.
5. Conflict of Interest. Without limiting the Employee’s obligations to comply
with the Company’s Code of Conduct and Code of Ethics, Employee agrees that
during the term of Employee’s 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.
6. Non-competition. Beginning the date that Employee separates from employment
with the Company and through the nine (9) month anniversary of such separation
from employment date, Employee shall 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

4

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

 

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
     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 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.
7. Miscellaneous.
     A. Pending Litigation; Indemnification. During Employee’s employment and
following Employee’s separation from employment, 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 or
herself 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 $1,000 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

5

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

 

has certain rights to indemnification as an officer of the Company as set forth
in the Company’s Restated Bylaws if the Employee is named as a party in
litigation.
     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.
     D. Remedies. Employee hereby agrees that a violation of the provisions of
Section 5, Section 6, or Section 7.A. 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
2711 North Haskell Avenue
Suite 2200, LB 36
Dallas, Texas 75204-2960, 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. This
Agreement is the separation pay agreement referred to in that certain employment
offer letter addressed to Employee, dated October 6, 2008.
     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.

6

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

 

     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 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 acknowledge that they have
executed that certain mutual alternate dispute resolution agreement, dated
October 24, 2008 (the “Arbitration Agreement”). The Company and the Employee
agree that, except as otherwise provided in the Arbitration Agreement, 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, arising under this Agreement or the
Employee’s employment (or its termination) are governed by the Arbitration
Agreement.
     IN WITNESS WHEREOF, the parties have executed this Agreement effective on
the date and year first above written.

            ZIX CORPORATION
      By:        /s/ Richard D. Spurr         Richard D. Spurr        Chairman &
Chief Executive Officer        EMPLOYEE
             /s/ Susan K. Conner         Susan K. Conner           

7