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Company; (5) a breach by Employee of the “confidentiality and invention” agreement between theCompany and Employee; (6) a breach by Employee of Section 8 of this Agreement; or (7) a breach byEmployee of the Company’s “Code of Ethics for Senior Officers,” as currently in effect or amendedfrom time-to-time. For purposes of this definition, no act, or failure to act, on Employee’s partshall be considered “intentional” unless done, or omitted to be done, by him not in good faith andwithout reasonable belief that his action or omission was in, or not opposed to, the best interestof the Company.     Notwithstanding the foregoing, Employee shall not be deemed to have been terminated for Causewithout (1) reasonable written notice to Employee, setting forth the reasons for the Company’sintention to terminate for Cause; (2) an opportunity for Employee, together with his counsel, to beheard before the Board (or an authorized representative thereof; and (3) delivery to Employee of awritten notice of termination from the Board (or its authorized representative) finding that, inthe good faith opinion of the Board (or its authorized representative), Employee engaged in theconduct set forth above in clause (1) or (2) of the preceding paragraph or an event specified inclause (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 anyof the following events shall occur during the term of Employee’s employment;     (1) The Company is merged, consolidated or reorganized into or with another corporationor other legal person, other than an Affiliate, and as a result of such merger,consolidation or reorganization, the Company or its shareholders or Affiliates immediatelybefore such transaction beneficially own, immediately after or as a result of suchtransaction, equity securities of the surviving or acquiring corporation or suchcorporation’s parent corporation possessing less than 51% of the voting power of thesurviving or acquiring person or such person’s parent corporation;     (2) The Company sells all or substantially all of its assets to any other corporationor other legal person, other than an Affiliate, and as a result of such sale, the Company orits shareholders or Affiliates immediately before such transaction beneficially own,immediately after or as a result of such transaction, equity securities of the surviving oracquiring corporation or such corporation’s parent corporation possessing less than 51% ofthe 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 securitiesof a subsidiary of the Company, which offering is not part of a transaction otherwise a partof or related to a Change in Control);     (3) Any Acquiring Person has become the beneficial owner (as the term “beneficialowner” is defined under Rule 13d-3 or any successor rule or regulation promulgated under theExchange Act) of securities which, when added to any securities already owned by suchperson, would represent in the aggregate 35% or more of the then outstanding securities ofthe 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 anyreason to constitute at least a majority thereof;
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     (5) Any occurrence that would be required to be reported in response to Item 6(e) ofSchedule 14A of Regulation 14A or any successor rule or regulation promulgated under theExchange Act; or     (6) Such other events that cause a Change in Control of the Company, as determined bythe Board in its sole discretion.     E. Continuing Director. A “Continuing Director” shall mean a director of the Companywho (1) is not an Acquiring Person or an Affiliate or Associate thereof, or a representative of anAcquiring Person or nominated for election by an Acquiring Person, and (2) was either (a) a memberof the Board on the date of this Agreement or (b) subsequently became a director of the Company andwhose initial election or initial nomination for election by the Company’s shareholders wasapproved by a majority of the Continuing Directors then on the Board.     F. Company. The “Company” shall mean Zix Corporation, a Texas corporation, or itssuccessors in interest, as the context requires.     G. Disability. “Disability” shall mean that Employee is unable to engage in anysubstantial gainful activity by reason of any medically determinable physical or mental impairmentthat can be expected to result in death or can be expected to last for a continuous period of notless than 12 months.     H. Exchange Act. “Exchange Act” shall mean the Securities Exchange Act of 1934, asamended.     I. Good Reason. “Good Reason” shall mean (1) any material diminution in Employee’sduties, it being understood and agreed that if all or substantially all of the assets of theCompany’s e-Prescribing line of business, the Company’s Email Encryption line of business, or anyother material line of business is sold, leased, licensed or otherwise transferred for value to anon-Affiliate, Employee’s duties will be materially reduced and Employee shall have “Good Reason”to resign employment pursuant to this clause (1); (2) the assignment of duties or positions thatwould necessitate a material change in the location of Employee’s home (presently in North Dallas,Texas); or (3) the Company’s failure to maintain directors and officers liability coverage forEmployee in an amount equal to at least $10,000,000.          Notwithstanding the preceding provisions, Employee shall not be permitted to resignemployment for “Good Reason” until (a) Employee has provided to the Company notice of the existenceof the good reason condition within 90 days of its initial existence and (b) the Company has notremedied the good reason condition within a period of 30 days from the Company’s receipt of suchnotice. Following the satisfaction of (a) and (b), Employee must exercise his right to resign forGood Reason within 30 days (i.e., such Good Reason resignation must occur within 150 days of theoccurrence of the good reason event), with the day immediately following the existence of the goodreason condition being day “1.”2. Termination Without Cause Payment. If the Company terminates Employee’s employmentother than for Cause, the Company shall pay to Employee an amount equal to 12 months ofEmployee’s base salary, using Employee’s highest monthly base salary during the
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term of Employee’s employment (the “Termination Without Cause Payment”) pursuant to Section 6. TheCompany specifically acknowledges that Employee will incur a termination of employment for a reasonother than Cause 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-Affiliate Transferee”) and (ii) in connection with such Transfer the Company involuntarilyterminates Employee’s employment with the Company and its Affiliates (regardless of whetherEmployee accepts employment with the Non-Affiliate Transferee or one of its Affiliates).          As an additional component of the Termination Without Cause Payment, the Company shall pay theapplicable premiums for COBRA continuation benefits under the applicable Company benefit plans, ona monthly basis beginning with the effective date of Employee’s loss of coverage by reason ofEmployee’s separation from employment and continuing until the earlier of (a) 12 months followingthe loss of coverage by reason of Employee’s separation from employment or (b) the date Employeeobtains medical coverage under a new employer’s group health plan.          Employee shall not be entitled to more than one Termination Without Cause Payment pursuant tothis Agreement.3. Change In Control Payment. If Employee resigns from employment (subject to the noticeand cure provisions noted below) with the Company and its Affiliates following a Change in Controlfor a “Change in Control Good Reason,” as such term is defined below, the Company shall pay toEmployee an amount equal to 12 months of Employee’s base salary, using Employee’s highest monthlybase salary during the term of Employee’s employment (the “Change In Control Payment”) pursuant toSection 6.     A “Change in Control Good Reason” shall mean (i) a material diminution in the Employee’sauthority, 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 whomthe Employee is required to report, including a requirement that the Employee report to a corporateofficer or employee instead of the board of directors (or similar governing body), (v) a materialdiminution in the budget over which the Employee retains authority, or (vi) any other event thatconstitutes a material breach by the Company of the agreement under which the Employee providesservices.     Notwithstanding the preceding provisions, Employee shall not be permitted to resignemployment for a “Change in Control Good Reason” until (a) Employee has provided to the Companynotice 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 theCompany’s receipt of such notice. Following the satisfaction of (a) and (b), Employee mustexercise his right to resign for a Change in Control Good Reason within 60 days (i.e., such Changein Control Good Reason resignation must occur within 180 days of the
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occurrence of the good reason event), with the day immediately following the existence of thegood reason condition being day “1.”     As an additional component of the Change In Control Payment, the Company shall pay theapplicable premiums for COBRA continuation benefits under the applicable Company benefit plans, ona monthly basis beginning with the effective date of Employee’s loss of coverage by reason ofEmployee’s separation from employment and continuing until the earlier of (a) 12 months followingthe loss of coverage by reason of Employee’s separation from employment or (b) the date Employeeobtains medical coverage under a new employer’s group health plan.     Employee shall not be entitled to more than one Change In Control Payment pursuant to thisAgreement.4. Resignation For Good Reason Payment. If Employee resigns employment for GoodReason, 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”) pursuant to Section 6.     As an additional component of the Resignation For Good Reason or Disability Payment, theCompany shall pay the applicable premiums for COBRA continuation benefits under the applicableCompany benefit plans, on a monthly basis beginning with the effective date of Employee’s loss ofcoverage by reason of Employee’s separation from employment and continuing until the earlier of (a)12 months following the loss of coverage by reason of Employee’s separation from employment or (b)the date Employee obtains medical coverage under a new employer’s group health plan.     Employee shall not be entitled to more than one Resignation For Good Payment pursuant to thisAgreement.5. Disability Payment. If Employee incurs a Disability, the Company shall pay to Employeean amount equal to 8 months of Employee’s base salary using Employee’s highest monthly base salaryduring the term of Employee’s employment (the “Disability Payment”) pursuant to Section 6.     As an additional component of the Disability Payment, the Company shall pay the applicablepremiums for COBRA continuation benefits under the applicable Company benefit plans, on a monthlybasis beginning with the effective date of Employee’s loss of coverage by reason of Employee’sDisability and continuing until 12 months following the date of Employee’s Disability.6. Mode of Payment; Acceptance: No Overlapping Payments. The first 8 months of Employee’sbase salary payable as a Termination Without Cause Payment (Section 2), Change In Control Payment(Section 3), or Resignation For Good Reason Payment (Section 4), and the Disability Payment(Section 5), as applicable, shall be paid to Employee on a monthly basis until the earlierof (a) 8 months after the occurrence of the event giving rise to the payment or (b) thelater of two and one-half (2.5) months after the end of Employee’s tax year in which theevent
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giving rise to the payment occurs or two and one-half (2.5) months after the end of the Company’stax year in which the event giving rise to the payment occurs, with payments commencing as soon aspracticable following the occurrence of the event giving rise to such payment but no later than 60days following such event. The remaining 4 months of the Termination Without Cause Payment(Section 2), Change In Control Payment (Section 3), or Resignation For Good Reason Payment (Section4), shall be paid to Employee on a monthly basis commencing with the 9th month following Employee’sseparation from service. The payment of the Termination Without Cause Payment (Section 2), ChangeIn Control Payment (Section 3), Resignation For Good Reason Payment (Section 4), and the DisabilityPayment (Section 5) shall be subject to the Company’s receipt of a release, within 60 days of thedate of the event giving rise to the payment, in a form reasonably satisfactory to the Companyrelating to employment matters. The Company will provide the form release to Employee within 5days of the date of the event giving rise to the payment. In the event that Employee does notexecute a release within the 60 day period specified above, Employee shall forfeit the TerminationWithout Cause Payment (Section 2), Change In Control Payment (Section 3), Resignation For GoodReason Payment (Section 4) or Disability Payment (Section 5), as applicable. Employee shall beresponsible for all applicable withholdings for taxes and other withholdings required by applicablelaw and any amounts owed by Employee to Company, and Employee shall pay the same to the Companypromptly upon demand if not otherwise withheld. The Company’s obligation to make the paymentsprovided for in Sections 2, 3, 4, and 5 is absolute, and such payments shall not be mitigated oroffset 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 ControlPayment (Section 3), Resignation For Good Reason Payment (Section 4), or Disability Payment(Section 5), as applicable, shall constitute a release by Employee of the Company and itsAffiliates, shareholders, officers, employees, directors and other agents from all claims arisingout of, relating to, or in connection with, Employee’s employment with, or separation fromemployment with, the Company and its Affiliates.     Employee shall be entitled to receive pursuant to this Agreement only one of the followingpayments (a) the Termination Without Cause Payment (Section 2), (b) the Change In Control Payment(Section 3), (c) the Resignation For Good Reason Payment (Section 4) or (d) the Disability Payment(Section 5) (i.e., not more than one of any such payments is payable pursuant to this Agreement).7. Deemed Resignation from Board. Employee agrees that if Employee separates fromemployment with the Company and Employee is a member of the Company’s Board of Directors at thetime of the employment separation, then Employee shall be deemed to have tendered Employee’sresignation from the Board. The resignation shall be deemed to have been tendered, regardless ofwhether the separation from employment is because of resignation, termination with or withoutcause, or otherwise. The resignation shall be effective upon acceptance of the same by the Boardunless the Employee shall have specified an earlier effective date of the resignation. If theBoard determines not to accept the resignation, then the Employee shall (with Employee’sconcurrence) continue as a member of the Board until the next annual meeting of shareholders anduntil the Employee’s (director) successor is duly elected and qualified, unless earlier removed inaccordance with the Company’s Restated Bylaws.
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8. Conflict of Interest. Employee agrees that during the term of his employment, Employeeshall not:     A. Engage, either directly or indirectly, in any activity which may involve a conflictof interest with the Company or its Affiliates (a “Conflict of Interest”), includingownership in any supplier, contractor, subcontractor; customer or other entity with whichthe Company does business (other than as a shareholder of less than one percent (1%) of apublicly-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 otherentity with which the Company does business, and Employee shall promptly inform the Board asto 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 awarethat might involve or give rise to a Conflict of Interest or potential Conflict of Interest.9. Non-competition. Beginning the date that Employee separates from employment with theCompany and through the one year anniversary of such separation from employment date, Employeeagrees and covenants that Employee shall not:     A. Directly or indirectly, compete with the Company’s Email Encryption business ore-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 asof the date of the Employee’s separation from employment. For purposes of this Agreement,“Competition” shall include, without limitation, engaging, directly or indirectly, in anybusiness, whether as proprietor, partner, joint venturer, employee, agent, officer,director, consultant, advisor, or holder of more than one percent (1%) of any publiclytraded or private class of equity ownership of a business enterprise, that is competitivewith the Company’s Email Encryption business or e-Prescribing business or Other MaterialBusiness;     B. Directly or indirectly, solicit to do, or do, competing business with (i) any personthat is a customer of the Company’s Email Encryption business or e-Prescribing business orOther 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 ore-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 ofthe Company (including its affiliated companies) as of the date of the Employee’s separationfrom employment, or was an employee within the 3 month period preceding such date, except byway of bona-fide general advertising.     Although the Company and Employee have, in good faith, used their best efforts to make thecovenants of this Section 9 reasonable in all pertinent respects, and it is not anticipated, nor is
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it intended, by either party to this Agreement that any arbitrator or court will find itnecessary to reform any of such covenants to make it reasonable in all pertinent respects, theCompany and Employee understand and agree that if an arbitrator or court determines it necessary toreform any of such covenants to make it reasonable in all pertinent respects, damages, if any, fora breach of the non-competition covenant, as so reformed, shall be deemed to accrue to the Companyas and from the date of such a breach only and so far as the damages for such breach related to anaction that accrued within the scope of the covenant as so reformed.10. Miscellaneous.     A. Pending Litigation Indemnification. With respect to any lawsuits currentlypending or hereafter asserted against the Company that pertain to (i) matters reasonablywithin 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 cooperatereasonably in the defense of the litigation thereof, including signing affidavits and makinghimself available for interviews, deposition preparation, deposition, and trial. If Employeeis requested to assist with litigation activities following Employee’s separation fromemployment other than those litigation activities in which Employee would be required toparticipate as a named party, the Company agrees to pay all reasonable documentedout-of-pocket costs up to a maximum of $2,500 per day incurred in connection with suchactivities and lost income incurred during the period Employee assists with such litigationactivities (not to exceed the lesser of the amount of lost income or $10,000 in any one taxyear). Such out-of-pocket reimbursement payments shall be made as soon as practicable afterEmployee provides documentation of such out-of-pocket costs but no later than the end of thetax year following the tax year in which such expenses were incurred. The amount ofexpenses reimbursed to the Employee pursuant to this Section 10.A. during the Employee’s taxyear shall not impact the amount of such expenses eligible for reimbursement during anyother tax year of the Employee. Employee’s right to reimbursement of such expenses shallnot be subject to liquidation or exchange for another benefit. The lost incomereimbursement will be paid in a lump sum within 60 days after Employee providesdocumentation of the same and such payment will be subject to the six month delay applicableto specified employees under section 409A of the Internal Revenue Code of 1986, as amended(the “Code”). Without the Company’s prior consent, Employee agrees not to comment publiclyon any such litigation or any of the issues in the litigation. Without the Company’s priorconsent, Employee also agrees not to discuss any such litigation, or cooperate, with theplaintiffs, their attorneys, or their representatives. The Company acknowledges that theEmployee has certain rights to indemnification as an officer and/or director of the Companyas set forth in the Company’s Restated Bylaws.     B. Waiver. No waiver of any provision of this Agreement shall be deemed, orshall constitute, a waiver of any other provision, whether or not similar, nor shall anywaiver constitute a waiver of any continuing or succeeding breach of such provision, awaiver of the provision itself, or a waiver of any right under this Agreement. No waivershall be binding unless executed in writing by the party making the waiver.
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     C. Limitation of Rights. Nothing in this Agreement, except as specificallystated in this Agreement, is intended to confer any rights or remedies under or by reason ofthis Agreement on any persons other than the parties to it and their respective permittedsuccessors and assigns and other legal representatives.     D. Remedies. Employee hereby agrees that a violation of the provisions ofSection 8 and Section 9 would cause irreparable injury to the Company for which it wouldhave no adequate remedy at law. Accordingly, in the event of any such violation, the Companyshall be entitled to preliminary and other injunctive relief. Any such injunctive reliefshall be in addition to any other remedies to which the Company may be entitled at law or inequity, or otherwise.     E. Notice. Any consent, notice, demand, or other communication regarding anypayment required or permitted hereby must be in writing to be effective and shall be deemedto 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 setforth below or at such other address as such party may designate by like notice:The Company:Zix Corporation