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any felony; (4) the commission of acts by Employee of moral turpitude that are injurious tothe Company; (5) a breach by Employee of the “confidentiality and invention” agreement between theCompany 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 ineffect 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 notin 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 Causewithout (1) reasonable written notice to Employee, setting forth the reasons for the Company’sintention to terminate for Cause; (2) an opportunity for Employee to be heard before the Board (oran authorized representative thereof; and (3) delivery to Employee of a written notice oftermination from the Board (or its authorized representative) finding that, in the good faithopinion of the Board (or its authorized representative), Employee engaged in the conduct set forthabove 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 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;
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     (4) If, at any time, the Continuing Directors then serving on the Board cease for anyreason to constitute at least a majority thereof;     (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. Exchange Act. “Exchange Act” shall mean the Securities Exchange Act of 1934, asamended.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 nine (9) monthsof Employee’s base salary, using Employee’s highest monthly base salary during the term ofEmployee’s employment (the “Termination Without Cause Payment”) pursuant to Section 4.3. 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 nine (9) months of Employee’s base salary, using Employee’s highestmonthly base salary during the term of Employee’s employment (the “Change In Control Payment”)pursuant to Section 4.     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.
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     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 her 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 occurrence of the good reasonevent), with the day immediately following the existence of the good reason condition being day“1.”4. Mode of Payment; Acceptance; No Overlapping Payments. The Termination Without CausePayment or Change In Control Payment, as applicable, shall be paid to Employee in nine (9) equalmonthly cash payments beginning as soon as practicable following her termination of employment butno later than 60 days following such termination, subject to the Company’s receipt of a release ina form reasonably satisfactory to the Company relating to employment matters. The Company willprovide the form release to Employee within 5 days of the date of the event giving rise to thepayment. In the event that Employee fails to execute such release within such 60 day time period,she shall forfeit the Termination Without Cause Payment or Change in Control Payment, asapplicable. Employee shall be responsible for all applicable withholdings for taxes and otherwithholdings required by applicable law and any amounts owed by Employee to Company, and Employeeshall pay the same to the Company promptly upon demand if not otherwise withheld. The Company’sobligation to make the payments provided for in Sections 2 and 3 is absolute, and such paymentsshall not be mitigated or offset by virtue of Employee obtaining new employment or failing to seeknew employment. Acceptance by Employee of the Termination Without Cause Payment (Section 2) orChange In Control Payment (Section 3), as applicable, shall constitute a release by Employee of theCompany and its Affiliates, shareholders, officers, employees, directors and other agents from allclaims arising out of, relating to, or in connection with, Employee’s employment with, orseparation from employment with, the Company and its Affiliates.Employee shall be entitled to receive pursuant to this Agreement only one of the following payments(a) the Termination Without Cause 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. Conflict of Interest. Without limiting the Employee’s obligations to comply with theCompany’s Code of Conduct and Code of Ethics, Employee agrees that during the term of Employee’semployment, Employee shall 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 other
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entity with which the Company does business, and Employee shall promptly inform theBoard 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 awarethat 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 theCompany 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 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 makethe covenants of this Section reasonable in all pertinent respects, and it is notanticipated, nor is it intended, by either party to this Agreement that any arbitrator orcourt will find it necessary to reform any of such covenants to make it reasonable in allpertinent respects, the Company and Employee understand and agree that if an arbitrator orcourt determines it necessary to reform any of such covenants to make it reasonable in allpertinent respects, damages, if any, for a breach of the non-competition covenant, as soreformed, shall be deemed to accrue to the Company as and from the date of such a breachonly and so far as the damages for such breach related to an action that accrued within thescope of the covenant as so reformed.
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7. Miscellaneous.     A. Pending Litigation Indemnification. During Employee’s employment andfollowing Employee’s separation from employment, 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 or herself available for interviews, deposition preparation, deposition, and trial.If Employee is requested to assist with litigation activities following Employee’sseparation from employment other than those litigation activities in which Employee would berequired to participate as a named party, the Company agrees to pay all reasonabledocumented out-of-pocket costs up to a maximum of $1,000 per day incurred in connection withsuch activities and lost income incurred during the period in which Employee assists withsuch litigation activities (not to exceed the lesser of the amount of lost income or $10,000in any one tax year). Such out-of-pocket reimbursement payments shall be made as soon aspracticable after Employee provides documentation of such out-of-pocket costs but no laterthan the end of the tax year following the tax year in which such expenses were incurred.The amount of expenses reimbursed to the Employee pursuant to this Section 7.A. during theEmployee’s tax year shall not impact the amount of such expenses eligible for reimbursementduring any other tax year of the Employee. Employee’s right to reimbursement of suchexpenses shall not be subject to liquidation or exchange for another benefit. The lostincome reimbursement 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 of the Company as set forth inthe 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, 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.     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 5, Section 6, or Section 7.A. would cause irreparable injury to the Company for
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which it would have no adequate remedy at law. Accordingly, in the event of any suchviolation, the Company shall be entitled to preliminary and other injunctive relief. Anysuch injunctive relief shall be in addition to any other remedies to which the Company maybe entitled at law or in equity, 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