def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20529
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Exchange Act of 1934 (Amendment No.)
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
ZIX CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form
or Schedule and the date of its filing. |
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Amount Previously Paid: |
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Form, Schedule or Registration Statement No.: |
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Date Filed: |
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ZIX CORPORATION
2711 North Haskell Avenue
Suite 2200, LB 36
Dallas, Texas 75204-2960
To our Shareholders,
You are cordially invited to attend the Annual Meeting of Shareholders of Zix Corporation, which
will take place Wednesday, June 8, 2011, at 10:00 a.m. Central Time at the Cityplace
Conference Center, Turtle Creek I Room, 2711 North Haskell Avenue, Dallas, Texas 75204.
Details of the business to be conducted at the Annual Meeting are given in the Official Notice of
the Meeting, Proxy Statement and form of proxy enclosed with this letter.
Even if you intend to join us in person, we encourage you to vote in advance so that we will know
that we have a quorum of shareholders for the meeting. When you vote in advance, please indicate
your intention to personally attend the Annual Meeting. Please see the Question and Answer section
of the enclosed Proxy Statement for instructions if you plan to personally attend the Annual
Meeting.
Whether or not you are able to personally attend the Annual Meeting, it is important that your
shares be represented and voted. Your prompt vote over the Internet, by telephone via toll-free
number, or by written proxy will save us the expense and extra work of additional proxy
solicitation. Voting by any of these methods at your earliest convenience will ensure your
representation at the Annual Meeting if you choose not to attend in person. If you decide to attend
the Annual Meeting, you will be able to vote in person, even if you have personally submitted your
proxy. Please review the instructions on the proxy card or the information forwarded by your bank,
broker, or other holder of record concerning each of these voting options.
We appreciate your continued interest in Zix Corporation.
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Dallas, Texas April 29, 2011 |
On behalf of the Board of Directors,
![(-s- Richard D. Spurr)](d81426dd8142699.gif)
Richard D. Spurr
Chairman of the Board |
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ZIX CORPORATION
2711 North Haskell Avenue
Suite 2200, LB 36
Dallas, Texas 75204-2960
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Zix Corporation will take place on Wednesday, June 8, 2011,
at 10:00 a.m. Central Time at the Cityplace Conference Center, Turtle Creek I Room, 2711 North
Haskell Avenue, Dallas, Texas 75204. Registration will begin at 9:30 a.m.
At the meeting, we will ask shareholders to consider and vote on the following proposals:
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Elect five members of our Board of Directors for a one-year term; |
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Ratify the appointment of Whitley Penn LLP as our independent registered public
accountants; |
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Provide an advisory vote on executive compensation; |
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Provide an advisory vote on the frequency of the advisory vote on executive
compensation; |
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Approve the merger of the Company into a newly formed Delaware subsidiary resulting
in the reincorporation of the Company in Delaware; and |
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Any other matters properly brought before the meeting or any adjournment thereof. |
Only shareholders of record at the close of business on April 11, 2011, will be entitled to
vote at the meeting. The stock transfer books will not be closed.
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Dallas, Texas April 29, 2011 |
By Order of the Board of Directors,
![(-s- James F. Brashear)](d81426dd8142698.gif)
James F. Brashear Vice President, General Counsel & Corporate Secretary
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE SHAREHOLDER MEETING TO BE HELD ON JUNE 8, 2011
This Proxy Statement, accompanying proxy card and our Annual Report are available at
investor.zixcorp.com in a searchable, readable, and printable format and in a tracking cookie-free
environment.
YOUR VOTE IS IMPORTANT.
Whether or not you expect to personally attend the meeting, we urge you to vote your shares at
your earliest convenience to ensure the presence of a quorum at the meeting. Promptly voting your
shares via the Internet, by telephone via toll-free number, or if you received a paper copy of the
proxy card, by signing, dating, and returning the proxy card in the enclosed postage-paid envelope
will save us the expense and extra work of additional solicitation. Because your proxy is revocable
at your option, submitting your proxy now will not prevent you from voting your shares at the
meeting if you desire to do so. Please refer to the voting instructions included on your proxy card
or the voting instructions forwarded by your bank, broker, or other holder of record.
TABLE OF CONTENTS
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Questions and Answers About the Annual Meeting and Voting
This Question and Answer section provides some background information and brief answers to several
questions you might have about the enclosed proposals. We encourage you to read this Proxy
Statement in its entirety.
What is a proxy?
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A proxy is your legal designation of another person, called a proxy holder, to vote the
shares that you own. If you designate someone as your proxy holder in a written document,
that document is called a proxy. |
When I vote my shares, whom am I designating as my proxy?
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We have designated James F. Brashear, our Vice President, General Counsel and Corporate
Secretary, and Michael W. English, our Controller, to act as proxy holders at the Annual
Meeting as to all shares for which proxy cards are returned or voting instructions are
provided by Internet or telephonic voting. |
What is a proxy statement?
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A proxy statement is a document that SEC regulations require us to give you when we ask you
to sign a proxy card designating the proxy holders described above to vote on your behalf. |
What is the record date?
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The record date for the Annual Meeting is April 11, 2011. The record date is established by
our Board of Directors as required by Texas law. Only shareholders of record at the close
of business on the record date are entitled to receive notice of the Annual Meeting and to
vote their shares at the meeting. |
What is the difference between a stockholder of record and a stockholder who holds stock in street
name, also called a beneficial owner?
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If your shares are registered in your name at our stock registrar and transfer agent,
Computershare Trust Company, N.A., you are a stockholder of record. |
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If your shares are registered at our stock registrar and transfer agent, Computershare
Trust Company, N.A., in the name of a broker, bank, trustee, nominee, or other similar
stockholder of record, your shares are held in street name and you are the beneficial owner
of the shares. |
How do I obtain admission to personally attend the Annual Meeting?
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Shareholders of Record. You will need to bring a government-issued photo identification
card to gain admission to the Annual Meeting. |
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Street Name Holders. You will need to ask your broker or bank for an admission ticket in
the form of a legal proxy and you will need to bring the legal proxy with you to the
meeting. If you do not receive the legal proxy in time, bring your most recent brokerage
statement with you to the meeting. We can use that to verify your ownership of Common Stock
and admit you to the meeting; however, you will not be able to vote your shares at the
meeting without a legal proxy. You will also need to bring a government-issued photo
identification card to gain admission to the Annual Meeting. Please note that if you own
shares in street name and you are issued a legal proxy, any previously executed proxy will
be revoked and your vote will not be counted unless you appear at the meeting and vote in
person. |
What methods can I use to vote?
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By Written Proxy. All shareholders may vote by mailing the written proxy card. |
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By Telephone and Internet Proxy. All shareholders of record may vote by telephone from the
U.S. using the toll-free telephone number on the proxy card, or by the Internet, using the
procedures and instructions described on the proxy card and other enclosures. Street name
holders may vote by telephone or the Internet if their bank, broker, or other stockholder
of record makes those methods available, in which case the bank, broker, or other
stockholder of record will enclose the instructions with the Proxy Statement. The telephone
and Internet voting procedures, including the use of control numbers, are designed to
authenticate shareholders identities, to allow shareholders to vote their shares, and to
confirm that their instructions have been properly recorded. |
What will occur at the Annual Meeting?
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First, we will determine whether we have a quorum of shares represented at the Annual
Meeting to conduct business. If a quorum is not present at the Annual Meeting, we will
adjourn or reschedule the meeting. If enough shares are represented at the Annual Meeting
to conduct business, then we will vote on the proposals described in this Proxy Statement
and any other business that is properly brought before the meeting and any adjournments or
postponements thereof. We know of no other matters that will be presented for consideration
at the Annual Meeting. If, however, other matters or proposals are presented and properly
come before the meeting, the proxy holders intend to vote all proxies in accordance with
their best judgment in the interest of Zix Corporation and our shareholders. |
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A representative of Whitley Penn LLP, our independent registered public accounting firm, is
expected to be present at the Annual Meeting and will be afforded the opportunity to make a
statement, if that representative so desires, and to respond to appropriate questions. A
representative of Broadridge Financial Solutions, Inc. will count the votes and act as the
independent inspector of election. |
What is a quorum?
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The holders of a majority of the shares who are entitled to vote at the Annual Meeting must
be represented at the meeting in person or by proxy to have a quorum for the transaction of
business at the meeting and to act on the matters specified in the notice. A shareholder
will be deemed to be represented at the Annual Meeting if the shareholder: |
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is present in person; or |
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is not present in person, but has voted by proxy card before the Annual
Meeting; or |
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is not present in person, but a broker has cast for the shareholder a
discretionary vote on Proposal 2. |
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As of the record date, there were 66,265,578 shares outstanding and entitled to vote at the
Annual Meeting, held by or through 497 holders of record. Each share of our common stock is
entitled to one vote. Our shareholders are entitled to cast an aggregate of 66,265,578
votes at the Annual Meeting, so a quorum equals 33,132,790 shares of our common stock. |
What proposals are shareholders being asked to consider at the Annual Meeting?
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At the Annual Meeting, we will ask our shareholders to consider and vote on the following: |
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Proposal 1 is to elect five members of our Board of Directors for a
one-year term; |
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Proposal 2 is to ratify the selection of Whitley Penn LLP as our
independent registered public accountants; |
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Proposal 3 is to provide an advisory vote on executive compensation; |
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Proposal 4 is to provide an advisory vote on the frequency of the
advisory vote on executive compensation; |
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Proposal 5 is to approve the merger of the Company into a newly
formed Delaware subsidiary resulting in the reincorporation of the
Company in Delaware; and |
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Any other matters properly brought before the meeting or any adjournment
or postponement thereof. |
What are my voting choices on Proposal 1 for director nominees?
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For the vote on the election of the director nominees, shareholders may: |
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vote in favor of all nominees; |
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vote to withhold votes from all nominees; or |
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vote to withhold votes as to specific nominees, and in favor of the
remaining nominees. |
What vote is needed to elect directors?
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The five nominees will be elected who receive a plurality of the FOR votes out of all votes
cast (either FOR or WITHHELD) in person or by proxy at the Annual Meeting. |
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The Board recommends that you vote FOR Proposal 1 and FOR each of the director
nominees. |
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What is a plurality of the votes?
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In order to be elected, a director nominee does not have to receive a majority of FOR votes
cast out of all votes cast either affirmatively or withheld in person or by proxy at the
Annual Meeting. Instead, the five nominees who will be elected are those five who receive the
most FOR votes of all the votes cast on Proposal 1 in person or by proxy at the meeting. |
What are my voting choices on Proposal 2, the ratification of the appointment of Whitley Penn LLP
as the Companys independent registered public accounting firm?
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For the vote on the ratification of the appointment of our independent registered public
accounting firm, shareholders may: |
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vote in favor of the ratification; |
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vote against the ratification; or |
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abstain from voting on the ratification. |
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Our Board recommends that you vote FOR Proposal 2. |
What vote is required to ratify the appointment of the Companys auditors?
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The proposal to ratify the appointment of our independent registered public accounting firm
requires the affirmative vote of a majority of the votes entitled to be cast affirmatively
or negatively by the shares of stock present in person or by proxy at the Annual Meeting
and entitled to vote thereon. |
What are my voting choices on Proposal 3, the advisory vote on executive compensation?
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For the advisory vote on executive compensation, shareholders may: |
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vote to approve the executive compensation; |
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vote against the executive compensation; or |
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abstain from voting on the advisory proposal. |
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Our Board recommends that you vote FOR Proposal 3. |
What vote is required for the advisory approval of the Companys executive compensation?
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The Companys executive compensation will receive the
advisory approval of the shareholders
if the votes cast FOR the proposal are a majority of the votes entitled to be cast
affirmatively or negatively by the shares of stock present in person or by proxy at the
Annual Meeting and entitled to vote thereon. |
What are my voting choices on Proposal 4, the advisory vote on the frequency of the advisory vote
on executive compensation?
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For the advisory vote about how often shareholders should hold an advisory vote on
executive compensation, shareholders may: |
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vote to hold an advisory vote every 1 year (annually); |
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vote to hold an advisory vote every 2 years (biennially); |
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vote to hold an advisory vote every 3 years (triennially); or |
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abstain from voting on the proposal. |
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Our Board recommends that you vote to recommend the Company hold an advisory vote every 3
YEARS. |
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vote is required for the advisory approval of the frequency of the vote on executive compensation?
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The choice of annual, biennial or triennial voting that receives the highest number
(plurality) of votes cast by the shares present or represented by proxy and entitled to
vote at the annual meeting will be deemed to have received the advisory approval of the
shareholders. |
What are my voting choices on Proposal 5, the approval of the merger of the Company into a newly
formed Delaware subsidiary resulting in the reincorporation in Delaware?
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For the vote on the approval of the merger of the Company into a newly formed Delaware
subsidiary resulting in the Companys reincorporation in Delaware, shareholders may: |
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vote to approve the merger; |
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vote against the merger; or |
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abstain from voting on the proposal. |
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The Board recommends that you vote FOR Proposal 5. |
What vote is required for the approval of the merger of the Company into a newly formed
Delaware subsidiary resulting in the Companys reincorporation in Delaware?
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Approval of the merger of the Company into a newly formed Delaware subsidiary resulting in
the reincorporation of the Company requires the affirmative vote of the holders of at least
two-thirds of the outstanding shares of the Company entitled to vote on this proposal at
the annual meeting. |
What if a stockholder does not specify a choice for a matter when returning a proxy?
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Shareholders should specify their choice for each proposal described on the enclosed proxy
card. Proxy cards that are signed and returned will be voted FOR proposals described in
this proxy statement for which no specific instructions are given. |
How are withheld votes, abstentions and broker non-votes counted?
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Both abstentions and broker non-votes are counted as present for purposes of determining
the existence of a quorum at the Annual Meeting. Shares voted WITHHELD as to a director
nominee on Proposal 1 will count as votes against the indicated nominee. |
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Shares voted ABSTAIN on any of Proposals 2, 3 and 5 will have the same effect as votes cast
AGAINST that proposal. Shares voted ABSTAIN on Proposal 4 will have no effect on that
proposal. Broker non-votes will not be included in vote totals and will not affect the
outcome of the vote on the proposals. |
Why did I receive more than one Proxy Statement?
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If you received more than one Proxy Statement, your shares are probably registered in
different names or are in more than one account. Please vote each proxy card that you
receive. |
What if I want to change my vote?
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You may revoke your vote on any proposal at any time before the Annual Meeting for any
reason. To revoke your proxy before the meeting, write to Zix Corporation, Attention:
Corporate Secretary, 2711 North Haskell Avenue, Suite 2200, LB 36, Dallas, Texas
75204-2960. You will need to include a copy of your earlier voted proxy and may be required
to provide other information to facilitate the administrative steps actually required to
properly revoke your prior proxy and properly record the revocation. You may also come to
the Annual Meeting and change your vote in writing. You will need to bring a copy of your
earlier voted proxy and may be required to provide other information to facilitate the
administrative steps actually required to properly revoke your prior proxy and properly
record the revocation. |
Where will I find the voting results of the Annual Meeting?
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We will announce the preliminary voting results at the Annual Meeting and will publish the
preliminary or final voting results in a Current Report on Form 8-K that we will file with
the SEC within four business days after the Annual Meeting. If the voting results are not
final when that Current Report is filed, we will publish the final voting results in a
Current Report on Form 8-K that we will file with the SEC within four business days after
the final voting results are determined. You may request a copy of that Current Report at
investor.zixcorp.com or by contacting our Investor Relations office at (214) 515-7357. |
Where can I find additional information? Who can help answer my questions?
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You should carefully review the entire Proxy Statement, which contains important
information regarding the proposals, before voting. The section titled WHERE YOU CAN FIND
MORE INFORMATION describes additional sources from which to obtain this Proxy Statement,
our public filings under the Securities Exchange Act of 1934 and other information about
our Company. Additionally, a copy of this Proxy Statement is available on our Companys
website at investor.zixcorp.com. |
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If you would like additional copies of this Proxy Statement or other documents that we have
filed with the SEC that are incorporated by reference into this Proxy Statement, free of
charge, or if you have questions about the proposals or the procedures for voting your
shares, please contact: Zix Corporation, Attention: Corporate Secretary, 2711 North Haskell
Avenue, Suite 2200, LB 36, Dallas, Texas 75204-2960, Telephone: (214) 370-2000. |
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ZIX CORPORATION
2711 North Haskell Avenue
Suite 2200, LB 36
Dallas, Texas 75204-2960
PROXY STATEMENT
Annual Meeting of Shareholders
June 8, 2011
Information Concerning Solicitation And Voting
General
This Proxy Statement is furnished on behalf of the Board of Directors of Zix Corporation
(we, us, our or the Company) to solicit proxies to be voted at the Annual Meeting of our
Shareholders to be held on Wednesday, June 8, 2011, at 10:00 a.m. Central Time, and at any
adjournment or postponement of the Annual Meeting for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Shareholders.
Whether or not you personally attend, it is important that your shares be represented and
voted at the Annual Meeting. Most shareholders have a choice of voting over the Internet, by using
a toll-free telephone number, or by completing a proxy card and mailing it in the postage-paid
envelope provided. Check your proxy card or the information forwarded by your bank, broker, or
other shareholder of record to determine which voting options are available to you. Please be aware
that if you vote over the Internet, you may incur costs such as telecommunication and Internet
access charges for which you will be responsible. The Internet voting and telephone voting
facilities for shareholders of record will be available until 11:59 p.m., local time, on June 6,
2011. This Proxy Statement and the accompanying proxy card were first
mailed on or about April 29, 2011.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN
THOSE CONTAINED IN THIS PROXY STATEMENT, AND, IF GIVEN OR MADE, THE INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THE DELIVERY OF THIS PROXY STATEMENT SHALL,
UNDER NO CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN OUR AFFAIRS SINCE
THE DATE OF THIS PROXY STATEMENT.
Solicitation of Proxies
This solicitation is being made by mail on behalf of our Board of Directors. We will bear the
expense of the preparation, printing and mailing of the enclosed proxy card, Notice of Annual
Meeting of Shareholders and this Proxy Statement, and any additional material relating to the
Annual Meeting that may be furnished to our shareholders by our Board related to the furnishing of
this Proxy Statement. We have engaged Georgeson Inc. to assist in the solicitation of proxy
materials from shareholders at a fee of approximately $7,000 plus reimbursement of reasonable
out-of-pocket expenses. Proxies may also be solicited without additional compensation by our
officers or employees by telephone, facsimile transmission, e-mail, or personal interview. We will
reimburse banks and brokers who hold shares in their name or custody, or in the name of nominees
for others, for their out-of-pocket expenses incurred in forwarding copies of the proxy
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materials to those persons for whom they hold those shares. To obtain the necessary
representation of shareholders at the Annual Meeting, supplementary solicitations may be made by
mail, telephone, facsimile transmission, e-mail, or personal interview by our officers or
employees, without additional compensation, or by selected securities dealers. We anticipate that
the cost of those supplementary solicitations, if any, will not be material.
Purpose of Annual Meeting
The purpose of the Annual Meeting is to obtain approval for the proposals described in this
Proxy Statement and to consider any other business that may properly come before the Annual Meeting,
including any adjournment or postponement thereof. At the meeting, we will ask shareholders to
consider and vote on the following proposals:
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Proposal 1: elect five members of our Board of Directors for a one-year term; |
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Proposal 2: ratify the appointment of Whitley Penn LLP as our independent registered
public accountants; |
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Proposal 3: an advisory vote on executive compensation; |
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Proposal 4: an advisory vote on the frequency of the advisory vote on executive
compensation; and |
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Proposal 5: approve the merger of the Company into a Delaware subsidiary resulting in
the reincorporation of the Company in Delaware. |
Record Date and Shares Outstanding
Only shareholders who owned shares of our common stock at the close of business on April 11,
2011, referred to in this Proxy Statement as the Record Date, are entitled to notice of, and to
vote at, the Annual Meeting. As of the Record Date, 66,265,578 shares of our common stock were
outstanding and entitled to vote at the Annual Meeting. Shareholders are entitled to one vote, in
person or by proxy, for each share of common stock held in their name on the record date.
Quorum
A majority of the outstanding shares of our common stock entitled to vote at the Annual
Meeting must be represented, in person or by proxy, at the Annual Meeting to constitute a quorum to
conduct business at the meeting. As of the Record Date, there were 66,265,578 shares outstanding
and entitled to vote at the Annual Meeting, so we will require a quorum of at least 33,132,790
shares represented at the Annual Meeting in order to conduct business at the meeting.
Revocability of Proxies
You may revoke your proxy at any time before it is exercised. Execution of the proxy will not
affect your right to attend the Annual Meeting in person. Revocation may be made before the Annual
Meeting by written revocation or through a duly executed proxy bearing a later date sent to Zix
Corporation, Attention: Corporate Secretary, 2711 North Haskell Avenue, Suite 2200, LB 36, Dallas,
Texas 75204-2960; or your proxy may be revoked personally at the Annual Meeting by written notice
to the Secretary at the Annual Meeting before the voting of the proxy. Any revocation sent to
the Company must include the shareholders name and must be received before the Annual Meeting to be
effective.
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How Your Proxy Will Be Voted
In the absence of specific instructions to the contrary, shares represented by properly
executed proxies received by the Company, including unmarked signed
proxies, will be voted 3 years on Proposal 4 and FOR each of the
other proposals that will be considered at the Annual Meeting. In addition, if any other
matters properly come before the Annual Meeting the persons named as proxy holders in the enclosed
proxy card will have discretion as to how they will vote the shares they represent. Other than the
proposals described in this Proxy Statement, we have not received notice of any matters that may
properly be presented at the Annual Meeting.
Dissenters Rights
Under Texas law, shareholders are not entitled to dissenters rights with respect to any of
the proposals that will be considered at the Annual Meeting.
Tabulation of Votes
Votes cast at the Annual Meeting will be tabulated by a representative of Broadridge Financial
Solutions, Inc. as the independent inspector of election.
Vote Required to Approve Proposals
Proposal 1
On Proposal 1, shares may either be voted FOR an individual director nominee or voted WITHHELD
as to an individual director nominee. If a quorum is represented at the Annual Meeting, the five
nominees who receive the greatest number of FOR votes (also called a plurality of FOR votes) will
be elected as directors. Brokers cannot cast discretionary votes in the election of directors, so
you must instruct your broker how to vote your shares on Proposal 1. A vote WITHHELD as to any
director effectively will be counted as a vote against the election of that director. In the
election of directors, shareholders are not entitled to cumulate their votes or to vote for a
greater number of persons than the number of nominees named in this Proxy Statement.
Proposal 2
On Proposal 2, shares may either be voted FOR the ratification of the appointment of Whitley
Penn LLP as the Companys independent auditors for 2011, or voted AGAINST that ratification, or
voted to ABSTAIN. If a quorum is represented at the Annual Meeting, the approval of Proposal 2
would require the FOR vote of a majority of the shares of our common stock represented at the
Annual Meeting and entitled to vote. Because votes to ABSTAIN are counted as shares represented at the meeting, they will
have the same effect as votes AGAINST Proposal 2.
Proposal 3
Approval on an advisory basis of this proposal requires the affirmative vote of the holders of
a majority of the shares entitled to vote on the proposal and represented in person or by proxy at
the annual meeting. Broker non-votes will not be included in vote totals and will not affect the
outcome of the vote on this proposal.
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Proposal 4
The option of 1 YEAR, 2 YEARS or 3 YEARS that receives the highest number (plurality) of
votes cast by the shares present or represented by proxy and entitled to vote at the Annual Meeting
will be deemed to have received the advisory approval of the shareholders. Accordingly, abstentions
and broker non-votes will not be counted and therefore will have no effect on this proposal.
Proposal 5
Approval of the merger of the Company into a newly formed Delaware subsidiary resulting in the
reincorporation of the Company in Delaware (including the Plan of
Merger as described on pages 10 to 11) requires the affirmative vote of at least two-thirds of all outstanding shares entitled to
be cast in respect of this proposal. Abstentions will have the effect of a
vote against this proposal.
Other Matters
An affirmative vote of a majority of the shares represented at the Annual Meeting is generally
required for action on any other matters that may properly come before the Annual Meeting.
Effect of Broker Non-Votes
If your shares are held in a brokerage account and you do not instruct your broker how to vote
on a particular proposal, your brokerage firm could either:
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Vote your shares on that proposal in the brokers discretion, if the rules permit; or |
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Leave your shares unvoted on that proposal. |
A broker non-vote occurs when a broker or nominee holding shares for a beneficial owner does
not vote on a particular proposal because the broker or nominee does not have the discretionary voting
power with respect to that proposal and has not received instructions from the beneficial owner.
Under applicable rules, brokers do not have discretionary authority
to vote on Proposals 1, 3, or 4, but they do have the discretionary
authority to vote on Proposals 2 and 5.
Shareholders Proposals
If you would like to submit a proposal to be included in the Proxy Statement for the 2012
Annual Meeting of Shareholders, the submission must be in writing and received by us no later than
December 30, 2011. Submissions of shareholder proposals after that date will be considered
untimely for inclusion in the Proxy Statement and form of proxy for our 2012 Annual Meeting.
If our shareholders approve the Reincorporation, our proposed Delaware Bylaws require that any
shareholder proposal that is not submitted for inclusion in next years Proxy Statement under SEC
Rule 14a-8, but is instead sought to be presented directly at the 2012 Annual Meeting, must be
received by the Corporate Secretary at the principal executive offices of the Company not less than
45 or more than 75 days before the one-year anniversary of the date on which the Company first
mailed its proxy materials for the preceding years annual meeting. As a result, proposals
submitted pursuant to these provisions of our Delaware Bylaws must be received no
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earlier than February 14, 2012, and no later than the close of business on March 15, 2012, and
must otherwise comply with the requirements of our Delaware Bylaws. If our shareholders do not
approve the Reincorporation, a shareholder proposal that does not qualify under SEC Rule 14a-8 for
inclusion in our Proxy Statement must be received by the Corporate Secretary at the principal
executive offices of the Company no later than the close of business on March 15, 2012.
All notices of proposals, whether or not to be included in our proxy materials, should be sent
to our principal executive offices at Zix Corporation, Attention: Corporate Secretary, 2711 North
Haskell Avenue, Suite 2200, LB 36, Dallas, Texas 75204-2960.
Reducing the Costs of Proxy Solicitation
To reduce the expenses of delivering duplicate proxy materials, we may take advantage of the
SECs householding rules that permit us to deliver only one set of proxy materials to
shareholders who share an address, unless otherwise requested. If you share an address with another
shareholder and have received only one set of proxy materials, you may request a separate copy of
these materials at no cost to you by contacting Zix Corporation, Attention: Corporate Secretary,
2711 North Haskell Avenue, Suite 2200, LB 36, Dallas, Texas 75204-2960 or (214) 370-2000. For
future Annual Meetings, you may request separate voting materials, or request that we send only one
set of proxy materials to you if you are receiving multiple copies, by calling or writing to us at
the phone number and address given above.
Shareholders of Record: If you vote on the Internet at www.proxyvote.com, simply follow the
prompts for enrolling in the electronic proxy delivery service.
Beneficial Owners: If you hold your shares in a brokerage account, you also may have the
opportunity to receive copies of these documents electronically. Please check the information
provided in the proxy materials mailed to you by your bank, broker or other holder of record
regarding the availability of this service.
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Proposals
Proposal 1 Election of Directors
Our shareholders will vote on the election of five members of our Board of Directors at the
Annual Meeting. Each director will serve until the next Annual Meeting of Shareholders and until
the directors successor is duly elected and qualified, unless earlier removed in accordance with
our Bylaws.
The nominees for election to our Board are:
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Name |
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Principal Occupation |
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Director Since |
Robert C. Hausmann
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Chief Financial Officer, Tetra Sun, Inc.
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November 2005 |
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James S. Marston
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Private Investor
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September 1991 |
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Maribess L. Miller
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Consultant
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April 2010 |
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Antonio R. Sanchez III
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President, Sanchez Oil & Gas Corporation
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May 2003 |
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Richard D. Spurr
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Chairman and Chief Executive Officer, Zix Corporation
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May 2005 |
For biographical and other information regarding the nominees for Director, please see
OTHER INFORMATION YOU NEED TO MAKE AN INFORMED DECISION Directors. For information on our
directors compensation, please see INFORMATION ON THE COMPENSATION OF DIRECTORS.
Each of the persons nominated for election to our Board of Directors has agreed to stand for
election. Our Board of Directors has no reason to believe that any of the nominees will be unable
or unwilling to serve if elected, and to the knowledge of the Board, each of the nominees intends
to serve the entire term for which election is sought. If any nominee becomes unable or unwilling
to stand for election before the Annual Meeting, there will be no substitute nominated at the
Annual Meeting. Our Bylaws provide that the Board of Directors may reduce the number of positions
on our Board of Directors. In addition, our Bylaws provide that the Board of Directors may fill any
vacancy in the Board of Directors by the affirmative vote of a majority of the remaining Directors.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
FOR PROPOSAL 1 AND FOR EACH DIRECTOR NOMINEE NAMED ABOVE.
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Proposal 2 Ratification of Appointment of Accountants
The Audit Committee of the Board has appointed Whitley Penn LLP as our independent registered
public accounting firm for the fiscal year ending December 31, 2011. Services provided to the
Company and its subsidiaries by Whitley Penn LLP in fiscal 2010 are described under INDEPENDENT
PUBLIC ACCOUNTANTS.
We are asking our shareholders to ratify the appointment of Whitley Penn LLP as our
independent registered public accounting firm for the 2011 fiscal year. Although ratification is
not required by our Bylaws or otherwise, the Board is submitting the appointment of Whitley Penn
LLP to our shareholders for ratification as a matter of good corporate practice.
Representatives of Whitley Penn LLP will be present at the Annual Meeting to respond to
appropriate questions and to make those statements that they may desire.
Votes cast FOR Proposal 2 by a majority of the shares of our common stock represented at the
Annual Meeting is required to approve Proposal 2. Shares voted to ABSTAIN as to Proposal 2 will be
counted as represented at the meeting and will have the same effect as a vote against Proposal 2.
If our shareholders do not approve Proposal 2, the appointment of Whitley Penn LLP will be
reconsidered by our Audit Committee and our Board. Even if Proposal 2 is approved, the Audit
Committee in its discretion may select a different independent registered public accounting firm if
it determines that a change would be in the best interests of the Company and our shareholders and
otherwise complies with all regulations of the SEC regarding a change in public accounting firms.
OUR BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE FOR PROPOSAL 2.
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Proposal 3 Advisory Vote On Executive Compensation
The recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
(Dodd-Frank Act), enables the Companys shareholders to vote to approve, on an advisory
(nonbinding) basis, the compensation of the Companys named executive officers. The Company seeks
your advisory vote and asks that you support the compensation of the named executive officers as
disclosed in this proxy statement.
As described in detail under COMPENSATION DISCUSSION AND ANALYSIS, our compensation programs
are designed to motivate our executives to create a successful company. We believe that our
compensation program, with its balance of short-term incentives and long-term incentives (including
equity awards that vest over multiple years) reward sustained performance that is aligned with
long-term shareholder interests.
This proposal, commonly known as a say on pay proposal, gives the Companys shareholders the
opportunity to express their views on the compensation of its named executive officers. This vote
is not intended to address any specific item of compensation, but rather the overall compensation
of the Companys named executive officers described in this proxy statement.
Accordingly, the Board invites you to review carefully the Compensation Discussion and
Analysis beginning on page 46 and the tabular and other disclosures on compensation under
Executive Compensation beginning on page 53, and cast a vote to approve the Companys executive
compensation programs through the following resolution:
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Resolved, that shareholders approve the compensation of the
Companys named executive officers, as discussed and disclosed in
the Compensation Discussion and Analysis, the executive
compensation tables, and any narrative executive compensation
disclosure contained in this proxy statement. |
The say-on-pay vote is advisory, and therefore not binding on the Company, the Compensation
Committee or the Board of Directors. The Board of Directors and Compensation Committee value the
opinions of the Companys shareholders and to the extent there is any significant vote against the
named executive officer compensation as disclosed in this proxy statement, the Board will consider
the shareholders concerns and the Compensation Committee will evaluate whether any actions are
necessary to address those concerns.
OUR BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE FOR PROPOSAL 3.
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Proposal 4 Advisory Vote On The Frequency Of An
Advisory Vote On Executive Compensation
As required by the Dodd-Frank Act and new Section 14A of the Securities Exchange Act, we are
also providing shareholders an advisory vote on the frequency with which the shareholders will have
the advisory say on pay vote on executive compensation as provided in Proposal 3 above.
The advisory vote on the frequency of the say on pay vote is a non-binding vote as to how
often the say on pay vote should occur: every year, every two years, or every three years. In
addition, shareholders may abstain from voting.
After careful consideration, the Board of Directors recommends that future shareholder say on
pay advisory votes on executive compensation be conducted every three years. A vote every three
years provides shareholders and advisory firms the opportunity to evaluate the Companys
compensation program on a more thorough, longer-term basis than an annual vote.
Further, the Board believes an annual say on pay vote would not allow sufficient time for
changes to the Companys compensation program to be in place to evaluate whether the changes were
effective. For example, if the say on pay vote in May 2011 led to changes to the compensation
program for the 2012 fiscal year, those changes would be in place for only a few months before the
next annual say on pay vote would take place in May 2012. Moreover, the changes would not be
discussed in the proxy statement until May 2013. A say on pay vote every three years would,
however, allow sufficient time for changes to be made, disclosed and evaluated before the next say
on pay vote.
The Company understands that its shareholders may have different views as to what is the best
approach for the Company, and we look forward to hearing from our shareholders on this proposal.
Shareholders who have concerns about executive compensation during the interval between say-on-pay
votes are welcome to bring their specific concerns to the attention of the Board. Please refer to
COMMUNICATIONS WITH DIRECTORS on page 40 for information about communicating with the Board.
Please mark on the proxy card your preference as to the frequency of holding shareholder
advisory votes on executive compensation, as either every year, every two years, or every three
years, or you may abstain from voting.
The Board will take the results of the vote into account when deciding when to call for the
next advisory vote on executive compensation. Nevertheless, because this vote is advisory and not
binding on the Board of Directors in any way, the Board may decide that it is in the best interests
of our shareholders and the Company to hold an advisory vote on executive compensation more or less
frequently than the option approved by the Companys shareholders.
A scheduling vote similar to this Proposal 4 will occur at least once every six years.
OUR BOARD OF DIRECTORS RECOMMENDS ON PROPOSAL 4
THAT YOU VOTE TO RECOMMEND THE COMPANY HOLD
AN ADVISORY SAY ON PAY VOTE EVERY 3 YEARS.
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Proposal 5 Merger of the Company Resulting in the
Reincorporation of the Company in Delaware
The Board of Directors has approved a proposal to change our state of incorporation from the
State of Texas to the State of Delaware (Reincorporation), subject to approval and adoption by
our shareholders of the Agreement and Plan of Merger (Plan of Merger) in substantially the form
of Appendix A to this Proxy Statement. The Reincorporation will be effected through the merger of
the Company into a wholly owned subsidiary of the Company incorporated under the laws of the State
of Delaware (New Zix). New Zix currently has no operations, assets or liabilities. We believe
that this Reincorporation will result in the advantages described below.
BEFORE VOTING ON THE REINCORPORATION, YOU ARE URGED TO CAREFULLY READ THIS PROXY STATEMENT,
INCLUDING EACH APPENDIX THAT IS MENTIONED IN THIS SECTION AND ATTACHED TO THIS PROXY STATEMENT.
The Reincorporation will not result in any material change in our business, assets or
financial position or in the persons who constitute our Board, including those persons who are
elected at the Annual Meeting. The individuals serving as officers of the Company immediately
before the merger will continue to serve as officers of the surviving corporation after the merger.
Upon the effective date of the merger (Effective Date):
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the legal existence of the Company as a separate corporation will cease; |
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New Zix, as the surviving corporation, will succeed to the assets and assume the
liabilities of the Company; |
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each outstanding share of our Common Stock will automatically be converted into one
share of common stock, $.01 par value per share, of New Zix (New Zix Common Stock);
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outstanding options and warrants to purchase our Common Stock will automatically be
converted into options and warrants to purchase an identical number of shares of New Zix
Common Stock. |
The terms of the Reincorporation are described in more detail in the Plan of Merger attached
as Appendix A and all descriptions of the Reincorporation are qualified by and subject to the more
complete information in that appendix.
After the Effective Date, certificates representing shares of our Common Stock will be deemed
to represent an equal number of shares of New Zix Common Stock into which those shares converted.
The Reincorporation will not affect the validity of the currently outstanding stock certificates.
Consequently, it will not be necessary for shareholders of the Company to exchange their existing
stock certificates for stock certificates of New Zix.
The Reincorporation will become effective upon filing merger documents in Delaware and Texas,
which filings are expected to be made as soon as practicable after shareholder approval of the
Reincorporation. Pursuant to the terms of the Plan of Merger, the merger may be abandoned by the
Boards of the Company and New Zix any time before the Effective Date (whether before or after
shareholder approval). In addition, the Board of New Zix may amend the Plan of Merger or the
surviving corporations charter or bylaws at any time before the Effective Date, provided that any
amendment made after shareholder approval may not (i) alter or change the amount or kind of shares
to be received in exchange for or on conversion of all or any of the shares of New Zix, or (ii)
alter or change any of the terms and conditions of the Plan of Merger or
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the surviving corporations charter or bylaws, if that alteration or change would adversely
affect the holders of our capital stock.
After the Effective Date, the Certificate of Incorporation of New Zix, the form of which is
attached hereto as Appendix B (the Delaware Certificate), and the Bylaws of New Zix, the
form of which is attached hereto as Appendix C (Delaware Bylaws), will govern the surviving corporation.
All descriptions of the Certificate of Incorporation and Bylaws are qualified by and subject to the
more complete information set forth in those documents.
Certain changes in the rights of the shareholders of the Company will result under Delaware
law and the new Certificate of Incorporation and Bylaws. See STATE CORPORATION LAW CONSEQUENCES
below.
Principal Reasons for the Reincorporation
As the Company plans for the future, the Board of Directors believes that it is essential to
be able to draw upon well established principles of corporate governance in making legal and
business decisions. The predictability of Delaware corporate law provides a reliable foundation on
which our governance decisions can be based. We believe that the shareholders will benefit from the
reincorporation into the State of Delaware.
The State of Delaware has long been the leader in adopting, construing and implementing
comprehensive, flexible corporation laws which are conducive to the operational needs and
independence of corporations domiciled in that state. The Delaware General Corporation Law (DGCL)
is widely regarded as the most extensive and well-defined body of corporate law in the United
States. Both the legislature and the courts in Delaware have demonstrated an ability and a
willingness to act quickly and effectively to meet changing business needs. The Delaware judiciary
has acquired considerable expertise in dealing with complex corporate issues. Moreover, the
Delaware courts have repeatedly shown their willingness to accelerate the resolution of that
complex corporate issues within the very limited time available to meet the needs of parties
engaged in corporate litigation. It is anticipated that the DGCL will continue to be interpreted
and construed in significant court decisions, thus lending greater predictability and guidance in
managing and structuring the internal affairs of a corporation and its relationships and contacts
with others. Consequently, the DGCL is comparatively well known and understood.
We believe that reincorporation in Delaware should provide greater predictability with respect
to our corporate affairs. We believe that the proposed Reincorporation under Delaware law will
enhance our ability to attract and retain qualified independent directors to represent the Company.
The law of Delaware offers greater certainty and stability from the perspective of those who serve
as corporate directors. To date, we have not experienced difficulty in attracting or retaining
directors. Nevertheless, as a result of the significant potential liability and comparatively
modest compensation associated with service as a director, we believe that the better understood,
and comparatively more stable, corporate environment afforded by Delaware will enable us to improve
our ability to continue to attract capable and experienced individuals to our Board of Directors.
For a discussion of certain differences in shareholder rights and the powers of management
under Delaware and Texas law, see STATE CORPORATION LAW CONSEQUENCES below.
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Federal Income Tax Consequences
The proposed reincorporation is expected to qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986. We believe that for federal income tax
purposes no gain or loss will be recognized by the Company, New Zix or the shareholders of the
Company who receive New Zix Common Stock for their Company Common Stock in connection with the
Reincorporation. The aggregate tax basis of New Zix Common Stock received by a shareholder of the
Company as a result of the Reincorporation will be the same as the aggregate tax basis of the
Company Common Stock converted into that New Zix Common Stock held by that shareholder as a capital
asset at the time of the Reincorporation. A shareholder who holds Company Common Stock will include
in his holding period for the New Zix Common Stock, which he receives as a result of the
Reincorporation his holding period for the Company Common Stock converted into that New Zix Common
Stock, provided the shares are held as a capital asset at the time of the Reincorporation. State,
local or foreign income tax consequences to shareholders may vary
from the federal income tax
consequences described above, and shareholders are urged to consult their own tax advisors as to
the consequences to them of the Reincorporation under all applicable tax laws.
Effect on Market Value of Common Stock
We do not know of any reason why implementation of the Reincorporation and the conversion of
shares of Common Stock of the Company into shares of New Zix Common Stock would cause the market
value of the New Zix Common Stock immediately after the Reincorporation to be different from the
market value of the outstanding shares of the Common Stock of the Company immediately before the
Reincorporation.
Securities Act Consequences
After the merger, New Zix will be a public company, the New Zix Common Stock will be publicly
traded and New Zix will file with the SEC and provide to its holders of New Zix Common Stock the
same type of information that the Company had previously filed and provided. We expect the shares
of New Zix to be traded without interruption on the Nasdaq Stock Market after the merger under the
symbol ZIXI. Shareholders whose stock in the Company is freely tradeable before the merger will
continue to have freely tradeable shares of the surviving corporation. Shareholders holding
restricted securities of the Company will be subject to the same restrictions on transfer as those
to which their present shares of stock in the Company are subject. In summary, the surviving
corporation and its shareholders will generally be in the same respective positions under the
federal securities laws after the merger as were the Company and its shareholders before the
merger.
State Corporation Law Consequences
Because of differences between the Texas Business Organizations Code (TBOC) and the DGCL, as
well as differences between the Companys articles of incorporation and bylaws before and after the
Reincorporation, the Reincorporation will effect some changes in the rights of the Companys
shareholders. Summarized below are the most significant differences between the rights of the
shareholders of the Company before and after the Reincorporation, as a result of the differences
between each of the TBOC and the DGCL, the Restated Articles of Incorporation of the Company
(Texas Articles) and the Amended and Restated Bylaws of the Company (Texas Bylaws) and the
Delaware Certificate and the Delaware Bylaws. The summary
below is not intended to be relied upon as an exhaustive list of
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all differences or a complete description of the differences, and is qualified in its entirety
by reference to the TBOC, the Texas Articles, the Texas Bylaws, the DGCL, the Delaware Certificate
and the Delaware Bylaws.
Business Combination Statute
Texas.
The TBOC imposes a special voting requirement for the approval of specific business
combinations and related party transactions between public corporations and affiliated shareholders
unless the board of directors of the corporation approves the transaction or the acquisition of
shares by the affiliated shareholder prior to the affiliated shareholder becoming an affiliated
shareholder. The TBOC prohibits specific mergers, sales of assets, reclassifications and other
transactions between shareholders beneficially owning 20% or more of the outstanding stock of a
Texas public corporation for a period of three years following the shareholder acquiring shares
representing 20% or more of the corporations voting power unless two-thirds of the unaffiliated
shareholders approve the transaction at a meeting held no earlier than six months after the
shareholder acquires that ownership. A vote of shareholders is not necessary if the board of
directors approves the transaction or approves the purchase of shares by the affiliated shareholder
before the affiliated shareholder acquires beneficial ownership of 20% of the shares, or if the
affiliated shareholder was an affiliated shareholder before December 31, 1996, and continued as
such through the date of the transaction.
Delaware.
Section 203 (Delaware Business Combinations Statute) of the DGCL, prohibits certain
transactions between a Delaware corporation and an interested stockholder, which is broadly
defined as a person (including the affiliates and associates of such person) that is directly or
indirectly a beneficial owner of 15% or more of the outstanding voting stock of a Delaware
corporation. This provision prohibits certain business combinations (including mergers,
consolidations, sales or other dispositions of assets having an aggregate market value of 10% or
more of either the consolidated assets of a company or the outstanding stock of a company, and
certain transactions that would result in the issuance or transfer of stock of a company, increase
the interested stockholders proportionate share of ownership in a company or grant the interested
stockholder disproportionate financial benefits) between an interested stockholder and a company
for a period of three years after the date the interested stockholder acquired its stock, unless:
(i) the business combination or the transaction in which the stockholder became an interested
stockholder is approved by that companys board of directors prior to the date the interested
stockholder becomes an interested stockholder; (ii) the interested stockholder acquired at least
85% of the voting stock of that company in the transaction in which it became an interested
stockholder; or (iii) the business combination is approved by a majority of the board of directors
and the affirmative vote of two-thirds of the votes entitled to be cast by disinterested
stockholders at an annual or special meeting.
Comparison
Under the Delaware Business Combination Statute, stockholders owning 15% of the voting stock
of the Company (or in certain cases an even smaller percentage) might be able to block certain
transactions which is a smaller percentage than is currently the case under Texas law. The
application of either statute could make more difficult or discourage a tender offer or the
completion of a second step merger by a holder of a substantial block of the Companys voting
13
stock, irrespective of whether such action might be perceived by stockholders holding a
majority of the voting stock to be beneficial to the Company and its stockholders.
The application of the Delaware Business Combinations Statute could adversely affect the
ability of stockholders to benefit from certain transactions which are opposed by the Board or by
stockholders owning 15% of the voting stock of the Company, even if the price offered in those
transactions represents a premium over the then-current market price of the Companys voting stock,
to the extent that a market for that stock then exists. To the extent that the Boards disapproval
of a proposed transaction discourages establishment of a controlling stock interest, the position
of the Board and current management may be strengthened, thereby assisting those persons in
retaining their positions.
Nevertheless, the Board believes that, on balance, becoming subject to the provisions of the
Delaware Business Combinations Statute will be in the best interest of the Company and its
shareholders. In recent years there have been a number of surprise takeovers of publicly-owned
corporations. These transactions have occurred through tender offers or other sudden purchases of a
substantial number of outstanding shares. Frequently, these tender offers and other share purchases
have been followed by a merger or other form of complete acquisition of the target company by the
purchaser without any negotiations with the target companys board of directors. Such a second
step business combination automatically eliminates minority interests in the target company, often
for less valuable consideration per share than was paid in the purchasers original tender offer or
market purchases. In other instances, a purchaser has used its controlling interest to effect other
transactions having an adverse impact on the target company and its shareholders.
Right of Shareholders to Vote on Certain Mergers
Texas
Under Texas law, shareholders have the right to vote on all mergers to which the Company is a
party (except for the merger into the surviving corporation of subsidiaries owned 90% or more by
the surviving corporation, in which situation the DGCL also does not require a stockholder vote).
In certain circumstances, different classes of securities may be entitled to vote separately as
classes with respect to such transactions. Unless the articles of incorporation provide otherwise,
approval of the holders of at least two-thirds of all outstanding shares entitled to vote is
required by Texas law to approve a merger, while under Delaware law approval by the holders of a
majority of all outstanding shares is required to approve a merger, unless the certificate of
incorporation provides otherwise. Unless the articles of incorporation provide otherwise, the
approval of the shareholders of the corporation in a merger is not required under Texas law if all
of the following are met: (i) the corporation is the sole surviving corporation in the merger; (ii)
there is no amendment to the corporations articles of incorporation; (iii) each stockholder holds
the same number of shares after the merger as before, with identical designations, preferences,
limitations and relative rights; (iv) the voting power of the shares outstanding after the merger
plus the voting power of the shares issuable as a result of the merger (taking into account
convertible securities and warrants, options or other rights to purchase securities issued pursuant
to the merger) does not exceed the voting power of the shares outstanding prior to the merger by
more than 20%; (v) the number of participating shares (that is, shares whose holders are entitled
to participate without limitation in dividends or other distributions) outstanding after the merger
plus the participating shares issuable as a result of the merger (taking into account convertible
securities and warrants, options or other rights to purchase securities issued pursuant to the
merger) does not exceed the number of participating shares outstanding prior to the merger
by more than 20%; and (vi) the board of directors of the corporation adopts a resolution
approving the plan of merger.
14
The Texas Articles do not alter the statutory rules described above.
Delaware
Under Delaware law, unless the certificate of incorporation provides otherwise, stockholders
of the surviving corporation in a merger have no right to vote, except under limited circumstances,
on the acquisition by merger directly into the surviving corporation in cases where: (x) the
agreement of merger does not amend the certificate of incorporation of such corporation; (y) each
share of stock of such corporation outstanding immediately prior to the effective date of the
merger is to be an identical outstanding or treasury share of the corporation after the effective
date of the merger; and (z) either no shares of common stock of the surviving corporation, and no
shares, securities or obligations convertible into such stock are to be issued or delivered under
the plan of merger, or the authorized unissued shares or the treasury shares of common stock of the
surviving corporation to be issued or delivered under the plan of merger plus those initially
issuable upon conversion of any other shares, securities or obligations to be issued or delivered
under such plan do not exceed 20% of the shares of common stock of such corporation outstanding
immediately prior to the effective date of the merger.
The Delaware Certificate does not alter the statutory rules described above.
Sales, Leases, Exchanges or Other Dispositions
Texas
Generally, the sale, lease, exchange or other disposition of all, or substantially all, of the
property and assets of a Texas corporation, if not made in the usual and regular course of its
business, requires the approval of the holders of at least two-thirds of the outstanding shares of
the corporation entitled to vote. Under Texas law, the transfer of substantially all of a
corporations assets in such a manner that the corporation continues to indirectly engage in its
business is deemed to be in the usual and regular course of its business.
Delaware
A Delaware corporation may sell, lease or exchange all or substantially all of its property
and assets when and as authorized by a majority of the outstanding stock of the corporation
entitled to vote thereon, unless the certificate of incorporation provides to the contrary. The
Delaware Certificate is silent on this issue.
Appraisal Rights
Texas
Except for the limited classes of mergers, consolidations, sales and asset dispositions for
which no stockholder approval is required under Texas law, and as set forth in this paragraph,
shareholders of Texas corporations with voting rights have appraisal rights in the event of a
merger, consolidation, conversion, sale, lease, exchange or other disposition of all, or
substantially all, the property and assets of the corporation. Notwithstanding the foregoing, a
stockholder of a Texas corporation has no appraisal rights with respect to any plan of merger or
conversion in which there is a single surviving or new domestic or foreign corporation, or
with respect to any plan of exchange, if:
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the shares held by the stockholder are part of a class of shares which are listed on a
national securities exchange, the Nasdaq Stock Market or designated as a national market
security on an interdealer quotation system by the National Association of Securities
Dealers, Inc., or are held of record by not less than 2,000 holders, on the record date
set for purposes of determining which shareholders are entitled to vote on the plan of
merger or the plan of exchange; |
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the stockholder is not required by the terms of the plan of merger, conversion, or
exchange to accept for his shares any consideration that is different from the
consideration to be provided to any other holder of shares of the same class or series as
the shares held by the stockholder, other than cash instead of fractional shares or
interests the stockholder would otherwise be entitled to receive; and |
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the stockholder is not required by the terms of the plan of merger or exchange to
accept for his shares any consideration other than: |
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(i) shares of a corporation that, immediately after the merger or exchange, will be part of
a class or series of shares that are: |
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listed, or authorized for listing upon official notice of issuance, on a national
securities exchange or approved for quotation as a national market security on an
interdealer quotation system by the National Association of Securities Dealers, Inc.;
or |
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held of record by not less than 2,000 holders; |
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(ii) |
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cash in lieu of fractional shares otherwise entitled to be received; or |
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(iii) |
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a combination of such shares and cash. |
The appraisal rights of a stockholder of a Texas corporation are summarized under Rights of
Dissenting Shareholders below.
Delaware
Under Delaware law, stockholders have no appraisal rights in the event of a merger or
consolidation of the corporation if the stock of the Delaware corporation is listed on a national
securities exchange or if such stock is held of record by more than 2,000 stockholders. Further, no
appraisal rights are available for any shares of stock of the corporation surviving a merger
if:
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the agreement of merger does not amend the certificate of incorporation of the
surviving corporation; |
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each share of stock of the surviving corporation outstanding immediately prior to the
effective date of the merger is to be an identical outstanding or treasury share of the
surviving corporation after the effective date of the merger; and |
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the increase in the outstanding shares as a result of the merger does not exceed 20% of
the shares of the surviving corporation outstanding immediately prior to the merger. |
16
Stockholders of a
Delaware corporation have no
appraisal rights in a merger between that parent corporation and a subsidiary corporation wholly owned by that parent corporation.
Even if appraisal rights would not otherwise be available under Delaware law in the cases
described in the preceding sections, stockholders would still have appraisal rights if they are
required by the terms of the agreement of merger or consolidation to accept for their stock
anything other than:
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of the surviving corporation; or |
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of any other corporation which shares at the effective date of the merger or
consolidation will be either listed on a national securities exchange or held of
record by more than 2,000 stockholders; |
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cash in lieu of fractional shares; or |
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a combination of such shares and such cash. |
Otherwise, stockholders of a Delaware corporation have appraisal rights in consolidations and
mergers.
Under Delaware law, any corporation may provide in its certificate of incorporation that
appraisal rights will also be available as a result of an amendment to its certificate of
incorporation, any merger or consolidation involving such corporation, or the sale of all or
substantially all of the assets of the corporation. The Delaware Certificate for New Zix currently
has no such provisions.
Stockholder Consent to Action Without a Meeting
Texas
Under Texas law, any action that may be taken at a meeting of the shareholders may be taken
without a meeting if written consent thereto is signed by all the holders of shares entitled to
vote on that action. The articles of incorporation of a Texas corporation may provide that action
by written consent in lieu of a meeting may be taken by the holders of that number of votes which,
under the corporations articles of incorporation, would be required to take the action which is
the subject of the consent at a meeting at which each of the shares entitled to vote thereon were
present and voted.
The Texas Articles set forth the same standard as the TBOC with respect to the use of written
consents in lieu of a meeting. As a result, the taking of any such action without a meeting
requires the unanimous written consent of the holders of the Companys shares.
Delaware
Under Delaware law, unless otherwise provided in the certificate of incorporation, any action
that can be taken at such meeting can be taken without a meeting if written consent thereto is
signed by the holders of outstanding stock having the minimum number of votes necessary to
authorize or take such action at a meeting at which all shares entitled to vote thereon were
presented and voted.
17
As currently proposed, the Delaware Certificate requires that any action required or permitted
to be taken by the stockholders of the Company must be effected at a duly called annual or special
meeting of the stockholders. Thus, the ability of the stockholders to consent in writing to the
taking of any action is expressly denied.
Procedures for Filling Vacant Directorships
Texas
Under Texas law, any vacancy occurring in the board of directors may be filled by the
shareholders or by the affirmative vote of a majority of the remaining directors, even if such
directors constitute less than a quorum. A directorship to be filled by an increase in the number
of directors may be filled by the shareholders or by the board of directors for a term of office
continuing only until the next election of one or more directors by the shareholders, provided that
the board of directors may not fill more than two such directorships during the period between any
two successive Annual Meetings of shareholders.
The Texas Articles are consistent with the TBOC.
Delaware
Under Delaware law, unless the certificate of incorporation or bylaws provide otherwise,
vacancies and newly created directorships resulting from any increase in the authorized number of
directors may be filled by a majority of the directors then in office, although less than a quorum,
or by a sole remaining director.
The Delaware Bylaws provide that subject to the rights of the holders of any series of
preferred stock then outstanding, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the board resulting from death, resignation,
disqualification, removal from office or other cause shall, unless otherwise requires by law or by
resolution of the Board of Directors, be filled only by a majority vote of the directors then in
office, though less than a quorum.
Right to Call Meetings
Texas
Under Texas law, holders of not less than 10% of all of the shares entitled to vote at the
proposed meeting have the right to call a special shareholders meeting, unless the certificate of
formation provide for a number of shares greater than or less than 10%, but in no event may the
certificate of formation provide for a number of shares greater than 50%. The president, board of
directors, or any other person authorized to call special meetings by the certificate of formation
or bylaws of the corporation may also call special shareholders meetings.
The Texas Articles are consistent with the TBOC.
18
Delaware
Delaware law provides that special meetings of the stockholders may be called by the board of
directors or such other persons as are authorized in the certificate of incorporation or bylaws.
The Delaware Bylaws provide that special meetings of the stockholders may be called at any
time by the board acting pursuant to a resolution adopted by a majority of the board.
Voting by Proxy
Texas
Under Texas law, a stockholder may authorize another person or persons to act for such
stockholder by proxy. Under Texas law, a proxy is only valid for eleven months from its date unless
otherwise provided in the proxy.
Delaware
Under Delaware law, a stockholder may authorize another person or persons to act for such
stockholder by proxy. Under Delaware law, a proxy is valid for three years from its date unless
otherwise provided in the proxy.
Charter Amendments
Texas
Under Texas law, an amendment to the articles of incorporation requires the approval of the
holders of at least two-thirds of the outstanding shares of the corporation, unless a different
amount, not less than a majority, is specified in the articles of incorporation.
The Texas Articles do not provide for a different amount.
Delaware
Delaware law provides that amendments to the certificate of incorporation must be approved by
the holders of a majority of the corporations stock entitled to vote thereon, unless the
certificate of incorporation provides for a greater number.
The Delaware Certificate does not provide for any such greater number.
Bylaw Amendments
Texas
Under Texas law, the board of directors may amend, repeal or adopt a corporations bylaws
unless the articles of incorporation reserve this power exclusively to the shareholders, or the
shareholders in amending, repealing or adopting a particular bylaw expressly provide that the board
of directors may not amend, readopt or repeal that bylaw.
19
The Texas Articles do not restrict the ability of the board to amend, repeal or adopt bylaws.
Delaware
Under Delaware law, the right to amend, repeal or adopt the bylaws is permitted to the
stockholders of the corporation entitled to vote and, if the corporations certificate of
incorporation so provides, the corporations board of directors.
The Delaware Certificate and Delaware Bylaws provide that the Companys bylaws may be amended,
repealed, altered or adopted by the majority of the board of directors or upon the affirmative vote
of the holders of three-fourths or more of the combined voting power of the outstanding shares of
the Company entitled to vote generally in the election of directors.
Class Voting
Texas
Under Texas law, class voting is required in connection with certain amendments of a
corporations certificate of formation. Further, class voting is required for approval of a plan of
merger if (i) the plan of merger contains a provision that would require approval by that class of
shares if the provision was contained in a proposed amendment to the corporations certificate of
formation; or (ii) that class is entitled under the certificate of formation to vote as a class on
the plan of merger. Class voting is also required for approval of a sale of all or substantially
all of the assets of a corporation if that class is entitled under the certificate of formation to
vote as a class on the sale of the corporations assets.
Delaware
In contrast, under Delaware law, class voting is not required in connection with such matters,
except in the case of an amendment of a corporations certificate of incorporation which adversely
affects a class of shares. In particular, a class vote of a class is required if the amendment
would: (i) increase or decrease the aggregate number of authorized shares of such class, (ii)
increase or decrease the par value of the shares of such class, or (iii) alter or change the
powers, preferences, or special rights of the shares of such class so as to affect them adversely.
Removal of Directors
Texas
Under Texas law, except as otherwise provided by the certificate of formation or bylaws of a
corporation, the shareholders may remove a director, with or without cause, by a vote of the
holders of a majority of the shares entitled to vote at an election of the directors. If the
certificate of formation permits cumulative voting and less than the entire board is to be removed,
a director may not be removed if the votes cast against the removal would be sufficient to elect
him if cumulatively voted at an election of the entire board of directors, or if there are classes
of directors, at an election of the class of directors of which he is a part. If the corporations
directors serve staggered terms, a director may not be removed except for cause unless the
certificate of formation provides otherwise.
20
The Texas Bylaws currently provide that, by a majority vote or more of the total number of
directors then comprising the entire board, the board of directors may terminate the term of office
of any director for specific causes as are described in the bylaws. In addition, the board of
directors may, by the vote or by the written consent of 66% or more of the entire board, terminate
the term of office of any director who was within the previous 90 day period an employee of the
Company but who is no longer an employee of the Company. The Companys Texas Bylaws do not provide
for cumulative voting or staggered terms for Directors.
Delaware
Under Delaware law, a majority of stockholders then entitled to vote at an election of
directors may remove a director with or without cause except: (i) if the board of directors of a
Delaware corporation is classified (i.e., elected for staggered terms), in which case a director
may only be removed for cause, unless the corporations certificate of incorporation provides
otherwise; and (ii) in the case of a corporation which possesses cumulative voting, if less than
the entire board is to be removed, no director may be removed without cause if the votes cast
against his removal would be sufficient to elect him if then cumulatively voted at an election of
the entire board of directors, or, if there be classes of directors, at an election of the class of
directors of which he is a part. The proposed Delaware Bylaws do not provide for cumulative voting
or staggered terms for Directors.
Inspection of Books and Records
Texas
Under Texas law, a stockholder may, for a proper purpose, inspect the books and records of a
corporation if such stockholder holds at least 5% of the outstanding shares of stock of the
corporation or has been a holder of shares for at least six months prior to such demand.
Delaware
Under Delaware law, any stockholder may inspect the corporations books and records for a
proper purpose.
Distributions and Dividends
Texas
Under Texas law, a distribution is defined as a transfer of cash or other property (except a
corporations own shares or rights to acquire its shares), or an issuance of debt, by a corporation
to its shareholders in the form of: (i) a dividend on any class or series of the corporations
outstanding shares; (ii) a purchase or redemption, directly or indirectly, of its shares; or (iii)
a payment in liquidation of all or a portion of its assets. Under Texas law, a corporation may not
make a distribution if such distribution violates its certificate of formation or, unless the
corporation is in receivership, if it either renders the corporation unable to pay its debts as
they become due in the course of its business or affairs, or exceeds, depending on the type of
distribution, either the net assets or the surplus of the corporation.
21
Delaware
Under Delaware law, a corporation may, subject to any restrictions contained in its
certificate of incorporation, pay dividends out of surplus and, if there is not surplus, out of net
profits for the current and/or the preceding fiscal year, unless the capital of the corporation is
less than the capital represented by issued and outstanding stock having preferences on asset
distributions.
The Delaware Certificate provides that subject to the preferences and rights, if any,
applicable to shares of preferred stock, the holders of shares of common stock would be entitled to
receive any dividends and other distributions in cash, property, stock or otherwise that may be
declared by the board of directors.
Stock Redemption and Repurchase
Texas
As noted above, under Texas law, the purchase or redemption by a corporation of its shares
constitutes a distribution. Accordingly, the discussion above relating to distributions is
applicable to stock redemptions and repurchases.
Delaware
Under Delaware law, a corporation may purchase or redeem shares of any class except when its
capital is impaired or would be impaired by such purchase or redemption. A corporation may,
however, purchase or redeem out of capital, shares that are entitled upon any distribution of its
assets to a preference over another class or series of its stock, or, if no shares entitled to such
a preference are outstanding, any of its own shares, if such shares are to be retired and the
capital reduced.
Indemnification of Directors and Officers
Texas and Delaware law have similar provisions and limitations regarding indemnification by a
corporation of its officers, directors, employees and agents. If the Reincorporation is approved,
the indemnification provisions of Delaware law will not apply to any act or omission that occurs
before the effective date of the reincorporation. The following is a summary comparison of the
indemnification provisions of Texas and Delaware law:
Scope
Texas
Texas law permits a corporation to indemnify a director or former director, against judgments
and expenses reasonably and actually incurred by the person in connection with a proceeding if the
person (i) acted in good faith, (ii) reasonably believed, in the case of conduct in the persons
official capacity, that the persons conduct was in the corporations best interests, and
otherwise, that the persons conduct was not opposed to the corporations best interests, and (iii)
in the case of a criminal proceeding, did not have a reasonable cause to believe the persons
conduct was unlawful. If, however, the person is found liable to the corporation, or is found
liable on the basis he received an improper personal benefit, then
22
indemnification under Texas law is limited to the reimbursement of reasonable expenses
actually incurred and no indemnification will be available if the person is found liable for (i)
willful or intentional misconduct in the performance of the persons duty to the corporation, (ii)
breach of the persons duty of loyalty owed to the enterprise, or (iii) an act or omission not
committed in good faith that constitutes a breach of a duty owed by the person to the corporation.
The Texas Articles and the Texas Bylaws provide for indemnification of directors.
Delaware
Delaware law permits a corporation to indemnify directors, officers, employees, or agents
against expenses (including attorneys fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by the person in connection with an action, suit or proceeding,
other than an action by or in the right of the corporation, to which such director, officer,
employee or agent may be a party, provided such a director, officer, employee or agent shall have
acted in good faith and shall have reasonably believed (a) in the case of a civil, administrative
or investigative proceeding, that his conduct was in or not opposed to the best interests of the
corporation, or (b) in the case of a criminal proceeding, that he had no reasonable cause to
believe his conduct was unlawful. In connection with an action by or in the right of the
corporation against a director, officer, employee or agent, the corporation has the power to
indemnify such director, officer, employee or agent for expenses actually and reasonably incurred
in connection with such suit (a) if such person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the corporation, and (b) if
such person is found liable to the corporation, only if ordered by a court of law. Section 145 of
the DGCL provides that such section is not exclusive of any other indemnification rights, which may
be granted by a corporation to its directors, officers, employees or agents.
The Delaware Certificate and Delaware Bylaws provide for indemnification of directors.
Advancement of Expenses
Texas
Under Texas law, reasonable expenses incurred by a director who was, is, or is threatened to
be made a named defendant or respondent in a proceeding may be paid or reimbursed by the
corporation prior to the final disposition of the proceeding after the corporation receives: (i) a
written affirmation by the director of his good faith belief that he has met the standard of
conduct necessary for indemnification under Texas law; and (ii) a written undertaking by or on
behalf of the director to repay the amount paid or reimbursed if it is ultimately determined that
he has not met that standard or if it is ultimately determined that indemnification for such
expenses is prohibited under Texas law.
Delaware
Delaware law provides for the advancement of expenses for such proceedings upon receipt of a
similar undertaking; such undertaking, however, need not be in writing. Delaware law does not
require that such director give an affirmation regarding his conduct in order to receive an advance
of expenses.
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Procedure for Indemnification
Texas
Texas law provides that a determination that indemnification is appropriate must be made: (i)
by a majority vote of the directors who, at the time of the vote, are disinterested and
independent, regardless of whether such directors constitute a quorum; (ii) by a majority vote of a
special committee of the board of directors if the committee is designated by a majority vote of
the directors who at the time of the vote are disinterested and independent and is composed solely
of one or more directors who are disinterested and independent; (iii) by special legal counsel
selected by majority vote under (i) or (ii); (iv) by the shareholders in a vote that excludes those
shares held by directors who, at the time of the vote, are not disinterested and independent; or
(v) by a unanimous vote of the shareholders of the corporation.
Delaware
Delaware law provides that a determination that indemnification of a director or officer is
appropriate must be made: (i) by a majority vote of directors who are not party to the proceeding,
even though less than a quorum; (ii) by a committee of such directors designated by majority vote
of such directors, even though less than a quorum; (iii) if there are no such directors or if such
directors so direct, by independent legal counsel in a written opinion; or (iv) by stockholder
vote.
Mandatory Indemnification
Texas
Under Texas law, indemnification by the corporation for reasonable expenses actually incurred
is mandatory only if the director is wholly successful on the merits or otherwise, in the defense
of the proceeding.
Delaware
Delaware law requires indemnification for expenses actually and reasonably incurred with
respect to any claim, issue or matter on which the director is successful on the merits or
otherwise, in the defense of the proceeding.
Insurance
Texas
Texas law allows a corporation to purchase and maintain insurance on behalf of any person who
is or was a director, officer, employee or agent of the corporation against any liability asserted
against such person and incurred by such person in such a capacity or arising out of his status as
such a person, whether or not the corporation would have the power to indemnify him against that
liability. Under Texas law, a corporation may also establish and maintain arrangements, other than
insurance, to protect these individuals, including a trust fund or surety arrangement.
24
Delaware
Delaware law is substantially the same as Texas law for this issue.
Persons Covered
Texas
Texas law expressly and separately addresses the indemnification of officers, employees and
agents. The corporation may indemnify and advance expenses to an officer, employee or agent as
provided by the corporations governing documents, general or specific action of the board of
directors, resolution of the shareholders, contract, or common law.
The corporation must indemnify
an officer to the same extent as a director. The procedure for indemnification under Texas law
summarized above need not be followed for officers, employees or agents.
Delaware
Delaware law provides the same indemnification rights to officers, employees and agents that
it provides for directors.
Standard of Care
The standard of care required under Texas and Delaware law is substantially the same. In
general, directors are charged with the duty in their decision-making process and oversight
responsibilities to act as would a reasonably prudent person in the conduct of such persons own
affairs.
Continuity of Indemnification
Texas
Texas law does not contain a provision that expressly provides indemnification after a
directorship has terminated for acts or omissions which took place prior to such termination.
Delaware
Delaware law does contain a provision which expressly provides that the statutory
indemnification provisions: (i) apply to a director, officer, employee or agent after the
termination of such role with respect to acts performed while performing such role, and (ii) inure
to the benefit of the heirs, executors and administrators of such person.
Stockholder Reports
Texas
Texas law requires a written report to the shareholders upon indemnification or advancement of
expense.
25
Delaware
Delaware law does not have a similar reporting requirement.
Specific Instances of Director Liability
Texas
Texas law holds the directors of a corporation specifically liable for corporate distributions
that are not permitted by statute, unless the directors acted in good faith and with ordinary care
in determining that adequate provision existed to permissibly make a distribution.
Delaware
Delaware law holds the directors of a corporation specifically liable for unlawful payments of
dividends or unlawful stock purchases or redemptions if the directors acted willfully or
negligently.
Limited Liability of Directors
Texas
Texas law permits a corporation to eliminate in its certificate of formation all monetary
liability of a director to the corporation or its shareholders for conduct in the performance of
such directors duties. Texas law does not, however, permit any limitation of the liability of a
director for: (i) a breach of the duty of loyalty to the corporation or its shareholders; (ii) an
act or omission not in good faith that constitutes a breach of duty of the person to the
corporation or involves intentional misconduct or a knowing violation of law; (iii) a transaction
from which the director obtains an improper benefit; or (iv) a violation of applicable statutes
which expressly provide for the liability of a director.
Delaware
Delaware law similarly permits the adoption of a provision in the certificate of incorporation
limiting or eliminating the monetary liability of a director to a corporation or its stockholders
by reason of a directors breach of the fiduciary duty of care. Delaware law does not permit any
limitation of the liability of a director for: (i) breaching the duty of loyalty to the corporation
or its stockholders; (ii) failing to act in good faith; (iii) engaging in intentional misconduct or
a knowing violation of law; (iv) obtaining an improper personal benefit from the corporation; or
(v) declaring an illegal dividend or approving an illegal stock purchase or redemption.
The Delaware Certificate eliminates the monetary liability of a director to the fullest extent
permitted by applicable law.
Possible Disadvantages of Reincorporation and Additional Changes to Our Bylaws
There are a number of substantive differences between the DGCL and the TBOC and some of those
differences may, under certain circumstances, limit rights of shareholders with
26
respect to the management of the Companys affairs. For example, unlike the TBOC, the DGCL
does not require a corporation to permit shareholders to call a special meeting of shareholders.
Accordingly, the Delaware Certificate does not provide shareholders a right to call a special
meeting.
See STATE CORPORATION LAW CONSEQUENCES above for a more detailed summary of the differences
between Texas and Delaware law.
The above
summary of the differences in Texas and Delaware law is qualified in its entirety by
reference to New Zixs proposed Delaware Certificate and Delaware Bylaws, which are
attached as Appendix B and Appendix C, respectively.
OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE FOR PROPOSAL 5.
27
OTHER INFORMATION YOU NEED TO MAKE AN INFORMED DECISION
Directors
The following table indicates the names of our director nominees and their ages and positions:
|
|
|
|
|
|
|
Name |
|
Age |
|
Position |
Robert C. Hausmann(1)(3)
|
|
|
47 |
|
|
Independent Director |
|
James S. Marston(2)(3)
|
|
|
77 |
|
|
Independent Director |
|
Maribess L. Miller(3)
|
|
|
58 |
|
|
Independent Director |
|
Antonio R. Sanchez III(1)(2)
|
|
|
37 |
|
|
Independent Director |
|
Richard D. Spurr
|
|
|
57 |
|
|
Chairman of the Board |
|
|
|
(1) |
|
Member of the Nominating and Corporate Governance Committee |
|
(2) |
|
Member of the Compensation Committee |
|
(3) |
|
Member of the Audit Committee |
Robert C. Hausmann was elected to our Board of Directors in November 2005. He is the
Chief Financial Officer of privately-held TetraSun, Inc. (solar cell development). Mr. Hausmann
served as Vice President and Chief Financial Officer of Securify, Inc. (computer security
monitoring) from September 2002 through June 2005. From September 1999 through September 2002, Mr.
Hausmann served as Vice President and Chief Financial Officer of Resonate, Inc. (network traffic
management) and helped manage that companys initial public offering. Previously, he served as
Operations Partner and Chief Financial Officer of Mohr, Davidow Ventures, a Silicon Valley-based
venture capital partnership. He is a Director of Business Services Group LLC, CAY Holding, Sam
Cloud Barn L.P., and Simply Ice, LLC. Mr. Hausmann holds a Master of Business Administration degree
from Santa Clara University and a Bachelors of Arts degree in Finance and Accounting from Bethel
College.
Our Board of Directors selected Mr. Hausmann to serve as a director because of his experience
as Chief Financial Officer of three companies with larger average annual revenues than the Company,
and as Chief Financial Officer of one of Silicon Valleys premiere venture capital firms, which
contributes to the Boards oversight of the Companys financial and accounting matters, including
public company reporting and disclosure. His consulting work at public and private companies,
principally in the information technology industry, brings to the Board valuable experience and
perspective on a variety of matters facing the Company, including financial markets, operations,
corporate governance, compliance and systems and process re-engineering.
James S. Marston was elected to our Board in September 1991. From September 1987 through
February 1998, Mr. Marston served as a Senior, or Executive, Vice President and the Chief
Information Officer of APL Limited (intermodal shipping). Between 1986 and 1987, Mr. Marston served
as President of AMR Technical Training Division, AMR Corporation (transportation). From 1982 until
1986, he was Vice President of Data Processing and Communications for American Airlines, Inc.,
where he was responsible for the Sabre reservations system and related technologies. He holds a
Bachelor of Arts degree in Political Science from the
University of Maryland, and a Master of Arts degree in Public Administration from the
University of Oklahoma.
28
Our Board of Directors selected Mr. Marston to serve as a director because his 18 years of
service on our Board contributes unique knowledge, history and perspective about the Company and
its business, employees and customers. His tenure provides the Board with a deeper understanding of
the issues, risks and opportunities before the Company. Mr. Marstons years operating the Sabre
computer reservation system, then owned by American Airlines, Inc., contributes to the Board a
wealth of experience and depth of understanding about issues facing large and complex information
technology services businesses.
Maribess L. Miller was elected to our Board in April 2010. Ms. Miller was a member of the
public accounting firm PricewaterhouseCoopers LLP from 1975 until 2009, including serving as the
North Texas Market Managing Partner from 2001 until 2009; as Southwest Region Consumer, Industrial
Products and Services Leader from 1998 until 2001; and as Managing Partner of that firms U.S.
Healthcare Audit Practice from 1995 to 1998. She was appointed in 2009 by Governor Rick Perry to
the Texas State Board of Public Accountancy and serves on the behavioral enforcement and rules
committees. She is past Board Chair for the Texas Health Institute, where she remains a member of
the board. Ms. Miller also serves on the Board of the AT&T Center for Performing Arts, the TCU
Neeley School of Business, and the Dallas Symphony Association. She graduated cum laude with a
Bachelors degree in Accounting from Texas Christian University. Ms. Miller is a Certified Public
Accountant.
Our Board of Directors selected Ms. Miller to serve as a director because of her extensive
experience in auditing and consulting with companies in various fields, including healthcare and
technology companies, which allows her to contribute valuable perspective and insights about the
Companys operations. In addition, Ms. Miller has special expertise in public company accounting
and financial reporting. She brings to our Board and its Audit Committee invaluable technical
understanding of public company accounting and internal controls over financial reporting. Ms.
Miller was appointed Chair of the Audit Committee because her experience qualifies her for
designation as an audit committee financial expert under SEC rules and aids in that committees
oversight.
Antonio R. Sanchez III was elected to our Board in May 2003. He has served since March 2006 as
President of Sanchez Oil & Gas Corporation (energy) where he guides day-to-day operations, and
previously served as that companys Executive Vice President beginning in October 2001. From 1999
through 2001, he held a variety of positions at Zix Corporation, including sales and marketing,
product development and investor relations. From 1997 through 1999, he was an analyst in the
mergers and acquisitions group of JP Morgan (investment banking). He received a Bachelor of Science
degree in Business Administration from Georgetown University with a concentration on Accounting and
Finance and a minor in Economics. He also holds a Master of Business Administration degree from
Harvard University.
Our Board of Directors selected Mr. Sanchez to serve as a director because his experience in
senior executive roles at a company with revenues significantly larger than those of the Company,
and in an industry that is distinct from the Companys industry, brings to our Board a unique
outsiders perspective. Mr. Sanchezs early career experience as an employee of the Company
provides him with valuable historical knowledge and perspective about our business.
29
Richard D. Spurr was elected to our Board in May 2005 and elected Chairman of the Board in
February 2006. He joined our Company in January 2004 as President and Chief Operating Officer and
has served as Chief Executive Officer since March 2005. From March 2003 to November 2003, he served
as Senior Vice President, Worldwide Sales, Marketing and Business Development for Securify, Inc.
(information security). From 1997 to 2001 he served in several senior executive positions at
Entrust, Inc. (information technology security) including VP of Sales, Marketing, Business
Development and Professional Services, helping to take this technology company from an early stage
to and beyond the initial public offering. From 1991 to 1996, he was Vice President, Worldwide
Sales at SEER Technologies, Inc. (information technology) and from 1974 to 1990, he worked for IBM
Corporation (information technology) where, as Regional Manager, he was responsible for over 1,000
employees, and as Group Director in Tokyo, where he managed a $1.2 billion Asia Pacific business.
Mr. Spurr earned a Bachelor of Arts degree from the University of Notre Dame, graduating in 1974.
Our Board of Directors selected Mr. Spurr to serve as a director because as the Companys
Chief Executive Officer his direct, day-to-day knowledge of and interaction with all aspects of our
business, including shareholders, employees and customers is unique among the directors and
provides our Board with important insights into our Companys business. In addition, he brings over
30 years of experience in building and managing sales, marketing, business development and service
operations in global information technology businesses, which is unique among the members of our
Board.
30
Executive Officers
The following table indicates the names of our Executive Officers and their ages and
positions. Officers serve at the discretion of our Board of Directors.
|
|
|
|
|
|
|
Name |
|
Age |
|
Position |
Richard D. Spurr
|
|
|
57 |
|
|
Chief Executive Officer, President, Chief Operating Officer |
|
|
|
|
|
|
|
James F. Brashear
|
|
|
53 |
|
|
Vice President, General Counsel and Corporate Secretary |
|
|
|
|
|
|
|
Russell J. Morgan
|
|
|
51 |
|
|
Vice President, Client Services |
|
|
|
|
|
|
|
David J. Robertson
|
|
|
52 |
|
|
Vice President, Engineering |
Richard D. Spurr was elected to our Board in May 2005 and elected Chairman of the Board in
February 2006. He joined our Company in January 2004 as President and Chief Operating Officer and
has served as Chief Executive Officer since March 2005. From March 2003 to November 2003, he served
as Senior Vice President, Worldwide Sales, Marketing and Business Development for Securify, Inc.
(information security). From 1997 to 2001 he served in several senior executive positions at
Entrust, Inc. (information technology security) including VP of Sales, Marketing, Business
Development and Professional Services, helping to take this technology company from an early stage
to and beyond the initial public offering. From 1991 to 1996, he was Vice President, Worldwide
Sales at SEER Technologies, Inc. (information technology) and from 1974 to 1990, he worked for IBM
Corporation (information technology) where, as Regional Manager, he was responsible for over 1,000
employees, and as Group Director in Tokyo, where he managed a $1.2 billion Asia Pacific business.
Mr. Spurr earned a Bachelor of Arts degree from the University of Notre Dame, graduating in 1974.
James F. Brashear has served as Vice President, General Counsel and Corporate Secretary since
February 2010. From September 2007 until joining our Company, Mr. Brashear was a partner at the law
firm Haynes and Boone, LLP. From July 1996 until August 2007, he served in various executive
capacities at Sabre Holdings Corporation (travel commerce) including Senior Vice President, Deputy
General Counsel, Corporate Secretary and Chief Governance Officer. He was previously an attorney at
AMR Corporations subsidiary American Airlines, Inc. (air transportation), and at the law firms
Skadden, Arps, Slate, Meagher & Flom and OMelveny & Myers. Mr. Brashear received a Juris Doctorate
degree, magna cum laude, from the University of San Diego School of Law and a Bachelor of Arts
degree from the University of California at San Diego. He is a member of the California Bar
Association and the State Bar of Texas. He has served since 2004 as a national director of The
Society of Corporate Secretaries and Governance Professionals.
Russell J. Morgan has served as our Vice President, Client Services since September 2002. From
February 1997 until August 2002, he worked at Entrust, Inc. (information technology security) where
he held a variety of senior management positions, including director, professional services and
senior director, Entrust.net. At Entrust, he founded and built the professional services
organization and built and operated a WebTrust certified secure data center for issuing digital
certificates to business customers. Previously, he held several management positions at Lockheed
Martin (aerospace), where he specialized in secure messaging and military command and control
systems. Mr. Morgan is a professional engineer with over 20 years experience in delivering
customer-focused technology solutions. Mr. Morgan holds a Bachelor of Engineering degree from
Concordia University, Montreal, Quebec, Canada.
31
David J. Robertson has served as our Vice President, Engineering since March 2002. Mr.
Robertson has over 30 years of experience in the internet and telecommunications industries, with
specific expertise in hosted network architecture, electronic security, communication protocols,
software systems and wireless infrastructure. From 1981 through 2000, he was employed by Nortel
Networks (telecommunications), where he held technology Vice President positions in the Wireless,
Carrier and Enterprise Divisions. From 2001 to 2002, he participated in creating technology startup
companies with STARTech Early Ventures (venture capital). He has been a participant in several
industry standards-setting groups and serves with the City of Richardson Chamber of Commerce. He
holds a Bachelor of Science degree in Electrical Engineering from the University of Waterloo,
Canada, and a Masters degree in Engineering from Carleton University, Canada.
32
SECURITY OWNERSHIP OF DIRECTORS, MANAGEMENT AND CERTAIN
BENEFICIAL OWNERS
The following table sets forth as of March 31, 2011 (unless otherwise indicated) the shares of
our common stock that were beneficially owned by each director, by each executive officer, by all
of our directors and executive officers as a group, and by all persons known by us to beneficially
own more than 5% of our outstanding common stock. We do not have any equity or security ownership
requirements or guidelines for our directors or executive officers.
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of |
|
|
Beneficial Ownership(1) |
|
|
Number of Common |
|
Percentage of |
|
|
Stock Shares |
|
Total Common Stock |
Beneficial Owner(2) |
|
Beneficially Owned |
|
Shares Outstanding(3) |
Robert C. Hausmann(4) |
|
|
147,664 |
|
|
|
* |
|
James S. Marston(5) |
|
|
374,005 |
|
|
|
* |
|
Maribess L. Miller(6) |
|
|
26,498 |
|
|
|
* |
|
Antonio R. Sanchez III(7) |
|
|
679,836 |
|
|
|
1.0 |
% |
Richard D. Spurr(8) |
|
|
2,470,547 |
|
|
|
3.6 |
% |
James F. Brashear(9) |
|
|
51,666 |
|
|
|
* |
|
Susan K. Conner(10) |
|
|
60,000 |
|
|
|
* |
|
Russell J. Morgan(11) |
|
|
358,071 |
|
|
|
* |
|
David J. Robertson(12) |
|
|
622,290 |
|
|
|
* |
|
Rockall Emerging Markets Master Fund Ltd.(13) |
|
|
5,638,101 |
|
|
|
8.5 |
% |
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
10,428,678 |
|
|
|
15.7 |
% |
All directors and executive officers as a group (9
persons) |
|
|
4,790,577 |
|
|
|
6.8 |
% |
|
|
|
* |
|
Denotes ownership of less than 1%. |
|
(1) |
|
Reported in accordance with the beneficial ownership rules of the
SEC. Unless otherwise noted, each shareholder listed in the table
has both sole voting and sole investment power over the common
stock shown as beneficially owned, subject to community property
laws where applicable. |
|
(2) |
|
Unless otherwise noted, the address for each beneficial owner is
c/o Zix Corporation, 2711 North Haskell Avenue, Suite 2200, LB 36,
Dallas, Texas 75204-2960. |
|
(3) |
|
Percentages are based on the total number of shares of our common
stock outstanding at March 31, 2011, which was 66,236,238 shares.
Shares of our common stock that were not outstanding but could be
acquired upon exercise of an option or other convertible security
within 60 days of March 31, 2010 are deemed outstanding for the
purpose of computing the percentage of outstanding shares
beneficially owned by a particular person. However, those shares
are not deemed to be outstanding for the purpose of computing the
percentage of outstanding shares beneficially owned by any other
person. |
|
(4) |
|
Includes shares that Mr. Hausmann has the right to acquire under
outstanding stock options that are currently exercisable or that
become exercisable within 60 days of March 31, 2010. |
|
(5) |
|
Includes shares that Mr. Marston has the right to acquire under
outstanding stock options that are currently exercisable or that
become exercisable within 60 days of March 31, 2010. |
|
(6) |
|
Includes shares that Ms. Miller has the right to acquire under
outstanding stock options that are currently exercisable or that
become exercisable within 60 days of March 31, 2010 |
|
(7) |
|
Includes purchased shares and shares that Mr. Sanchez has the
right to acquire under outstanding stock options that are
currently exercisable or that become exercisable within 60 days of
March 31, 2010. |
33
|
|
|
(8) |
|
Includes purchased shares and 2,390,000 shares that Mr. Spurr has
the right to acquire under outstanding stock options that are
currently exercisable or that become exercisable within 60 days of
March 31, 2010. |
|
(9) |
|
Includes purchased shares and 41,666 shares that Mr. Brashear has
the right to acquire under outstanding stock options that are
currently exercisable or that become exercisable within 60 days of
March 31, 2010. |
|
(10) |
|
Includes purchased shares and 35,000 shares that Ms. Conner has
the right to acquire under outstanding stock options that are
currently exercisable or that become exercisable within 60 days of
March 31, 2010. |
|
(11) |
|
Includes purchased shares and 355,571 shares that Mr. Morgan has
the right to acquire under outstanding stock options that are
currently exercisable or that become exercisable within 60 days of
March 31, 2010. |
|
(12) |
|
Includes purchased shares and 597,396 shares that Mr. Robertson
has the right to acquire under outstanding stock options that are
currently exercisable or that become exercisable within 60 days of
March 31, 2010. |
|
(13) |
|
As reported in Amendment No. 2 to Schedule 13G filed on February
14, 2011 by Rockall Emerging Markets Master Fund Limited, 570
Lexington Ave, New York, New York 10022 (Rockall) and certain
affiliated entities. According to the Schedule 13G, Rockall has
sole voting and dispositive power to 2,468,307 shares, and Meldrum
Asset Management, LLC (Meldrum), as investment manager of
Rockall, has sole voting and dispositive power to the same
2,468,307 shares. Con Egan, Conor ODriscoll and Fulvio Dobrich
are the principals of Meldrum. Mr. Egan, both as principal of
Meldrum and in his individual capacity, beneficially owns
3,611,307 shares, of which he has sole voting and dispositive
power to 1,143,000 and shared voting and dispositive power to
2,468,307. Mr. ODriscoll, both as principal of Meldrum and in his
individual capacity, beneficially owns 3,166,164 shares, of which
he has sole voting and dispositive power to 697,857 shares and
shared voting and dispositive power to 2,468,307 shares. Mr.
Dobrich, both as principal of Meldrum and in his individual
capacity, beneficially owns 3,797,244, of which he has sole voting
and dispositive power to 1,328,937 shares and shared voting
dispositive power to 2,468,307 shares. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive officers, and certain
persons who own more than ten percent of a registered class of our equity securities, to file with
the SEC initial reports of ownership and reports of changes in ownership of our common stock and
other securities. Directors, executive officers, and greater than ten percent shareholders are
required by the regulations of the SEC to furnish us with copies of all Section 16(a) forms they
file. To our knowledge, based solely on a review of the copies of those reports furnished to us and
written representations that no other reports were required during
2010, our directors and
executive officers complied with all Section 16(a) filing requirements.
Corporate Governance
Board of Directors
Our business is managed under the direction of our Board of Directors. Our Board currently
consists of five members. The names of our Board members, their professional experience and
attributes are described above under the caption OTHER INFORMATION YOU NEED TO MAKE AN INFORMED
DECISION Directors.
Corporate Governance
Our Board has adopted the Zix Corporation Board of Directors Procedures and Corporate
Governance Overview, which is intended to provide a framework for the governance
of our Company. This document is available on our website at
www.zixcorp.com/company/corporate-governance.
34
We are in compliance with corporate governance requirements, including those of the
Sarbanes-Oxley Act of 2002 and the NASDAQ Marketplace Rules. We will continue to monitor our
policies and procedures to ensure compliance with developing standards in the corporate governance
area. Our Board has also designated our Corporate Secretary as the Companys Chief Governance
Officer and looks to this officer to keep the Board informed of corporate governance matters.
Director Independence
Our Board has determined that all of our Board members, other than our Chairman Richard D.
Spurr, are independent as defined in the listing requirements of The NASDAQ Stock Market. The
NASDAQ independence definition includes a series of objective tests, that the subject director is
not an employee of the Company and has not engaged in various types of business dealings with the
Company. In addition, as further required by the NASDAQ Marketplace Rules, our Board has made a
subjective determination as to each independent director that no relationships exist which, in the
opinion of our Board, would interfere with the exercise of independent judgment in carrying out the
responsibilities of a director. In determining whether Mr. Sanchez qualified as independent, our
Board considered the facts that quite some time ago Mr. Sanchez served as an employee of the
Company.
Board Leadership Structure
The Board believes that the independent oversight of management is an important function of an
effective Board of Directors. The independent members of our Board have determined that the most
effective Board leadership structure for our Company at the present time is for the Chief Executive
Officer to also serve as Chairman of the Board. The independent Board members believe that because
the Chief Executive Officer is ultimately responsible for the day-to-day operation of the Company
and for executing our strategy, and because the performance of the Company is an integral part of
Board deliberations, the Chief Executive Officer is the director best qualified to act as Chairman
of the Board. Richard D. Spurr currently serves as both our Chairman of the Board and Chief
Executive Officer. The Board has not designated a lead independent director because the independent
directors already take a significant and sufficient leadership role in the functions of the Board.
The Board retains the authority to modify this structure.
Risk Oversight by the Board
Our management is responsible for assessing and managing the various risks our Company faces.
Our Board is responsible for overseeing management in this effort. In exercising its oversight
responsibilities, our Board has allocated some areas of focus to its standing committees.
Specifically, our Audit Committee has oversight responsibility for financial and compliance risks,
such as accounting, finance, internal controls, tax and other compliance matters, in addition to
overseeing compliance with our Code of Conduct and Code of Ethics. Our Nominating and Corporate
Governance Committee oversees succession management and compliance with our corporate governance
principles. Our Compensation Committee is responsible for overseeing and monitoring our executive
compensation programs and monitoring and assessing the interplay between those programs and risks in
our business.
35
Throughout the year, our Chief Executive Officer, Controller and General Counsel and other
officers review and discuss various risks with the Board and its committees. Our Board has also
designated our General Counsel as the Companys Chief Compliance Officer and looks to this officer
to keep the Board apprised of material developments with respect to the compliance-related risks
that the Company faces, as well as the Companys efforts to manage those risks.
Attendance at Board Meetings and Annual Meeting
Our Board meets during the year to monitor our performance, review significant developments
and act on matters requiring Board approval. Our Board met on nine occasions during 2010. Each of
the current directors attended at least 75% of the aggregate of all meetings of our Board held in
2010 and all meetings of Board committees held during periods on which that director served on
those committees during 2010. Directors are encouraged to attend our Annual Meeting of
Shareholders. Three of our directors attended our 2010 Annual Meeting of Shareholders.
Committees of the Board of Directors
Our Board has three standing committees: Audit Committee, Compensation Committee, and
Nominating and Corporate Governance Committee. These committees devote attention to specific
subjects and to assist our Board in discharging its business and risk oversight and governance
responsibilities. Each committees charter is available on our website at
www.zixcorp.com/company/corporate-governance.
Nominating and Corporate Governance Committee
Our Nominating
and Corporate Governance Committee comprises Robert C. Hausmann (chair)
and Antonio R. Sanchez III. Our Board has determined that each member of the Nominating and
Corporate Governance Committee qualifies as independent in accordance with the NASDAQ Marketplace
Rules. Under its charter, the committees principal responsibilities include: (i) identifying
individuals qualified to become new members of our Board and recommending candidates for reelection
as directors; (ii) developing a set of corporate governance principles applicable to our Company;
and (iii) taking a leadership role in shaping the corporate governance of our Company. The
Nominating and Corporate Governance Committee presents qualified director candidate(s) to our
Board. There is no third party that we currently pay to assist in identifying or evaluating
potential director nominees. The Nominating and Corporate Governance Committee met on five
occasions during 2010.
Shareholder Nomination of Director Candidates
The Nominating and Corporate Governance Committee has a policy with respect to the
consideration of director candidates recommended by shareholders. The policy provides that any
shareholder of record who is entitled to vote for the election of directors at a meeting called for
that purpose may nominate persons for election to our Board, subject to the following requirements.
The Nominating and Corporate Governance Committee will consider director nominees recommended by
our shareholders who comply with this process.
A shareholder desiring to nominate a person for election to our Board must send a written
notice to our principal executive offices at Zix Corporation, Attention: Corporate Secretary, 2711
North Haskell Avenue, Suite 2200, LB 36, Dallas, Texas 75204-2960. The written notice must include
the following information: (i) the name of the candidate; (ii) the address, phone and fax
36
number of the candidate; (iii) a statement signed by the candidate that certifies that the
candidate wishes to be considered for nomination to our Board and that explains why the candidate
believes that he or she meets the Director Qualification Criteria (discussed below) and would
otherwise be a valuable addition to our Board; (iv) the number of shares of our stock that are
beneficially owned by that candidate; and (v) all information required to be disclosed in
solicitations of proxies for election of directors and as otherwise required pursuant to Regulation
14A under the Securities Exchange Act of 1934. The final selection of director nominees is within
the sole discretion of our Board.
If our shareholders approve the Reincorporation, our proposed Delaware Bylaws require that any
shareholder nominations must be received by the Corporate Secretary at the principal executive offices of the
Company not less than 45 or more than 75 days before the one-year anniversary of the date on which
the Company first mailed its proxy materials for the preceding years annual meeting. As a result,
nominations submitted pursuant to these provisions of our Delaware Bylaws must be received no earlier
than February 14, 2012, and no later than the close of business on March 15, 2012, and must
otherwise comply with the requirements of our Delaware Bylaws. If our shareholders do not approve
the Reincorporation, any shareholder nominations must be received by the Corporate Secretary at the principal
executive offices of the Company no later than the close of business on March 15, 2012.
All nominations should be sent to our principal executive offices at Zix Corporation,
Attention: Corporate Secretary, 2711 North Haskell Avenue, Suite 2200, LB 36, Dallas, Texas
75204-2960.
Diversity of Directors
The Board of Directors and the Nominating and Corporate Governance Committee believe that the
Board should include directors with diversity of education, experience, skills, qualities,
backgrounds and other attributes. The Board does not follow any ratio or formula to determine the
appropriate mix of directors, but instead uses its judgment to identify nominees whose education,
experience, skills, qualities, backgrounds and other attributes, taken as a whole, will contribute
to the diversity of the Board.
Director Qualification Criteria
The criteria considered by the Nominating and Corporate Governance Committee and the Board of
Directors in evaluating director candidates include characteristics such as the following:
|
|
|
The highest personal and professional ethics, integrity and values; |
|
|
|
|
Broad-based skills and experience at an executive, policy-making level in business,
academia, government, or technology areas relevant to our activities; |
|
|
|
|
A willingness to devote sufficient time to become knowledgeable about our business and
to carry out his or her duties and responsibilities effectively; |
|
|
|
|
A commitment to serve on our Board for two years or more at the time of his or her
initial election; and |
|
|
|
|
Be between the ages of 30 and 70 at the time of his or her initial election as a
director. |
37
Candidates who will serve on our Audit Committee must have the following additional
characteristics:
|
|
|
All candidates must meet additional independence requirements in accordance with
applicable rules and regulations; |
|
|
|
All candidates must have the ability to read and understand fundamental financial
statements, including a companys balance sheet, statement of operations and statement of
cash flows; and |
|
|
|
At least one member of the Audit Committee must meet the requirements of an audit
committee financial expert under SEC rules and regulations. |
Other factors considered in candidates may include, but are not limited to, the following:
|
|
|
Experience in the technology areas relevant to our activities; |
|
|
|
Experience as a director or executive officer of a large public company; |
|
|
|
Public accounting experience; |
|
|
|
Significant academic experience in a field of importance to our Company; |
|
|
|
Recent experience in an operating role at a large company; and |
|
|
|
Other relevant information. |
The Nominating and Corporate Governance Committee will evaluate a nominated candidate and,
after consideration taking account of the Director Qualification Criteria described above, will
determine whether or not to proceed with the candidate. These procedures have not been materially
modified since our disclosure of these procedures in our proxy statement in connection with our
2010 Annual Meeting of Shareholders. These procedures do not create a contract between our Company,
on the one hand, and a Company shareholder(s) or a candidate recommended by a shareholder(s), on
the other hand. We reserve the right to change these procedures at any time, consistent with the
requirements of applicable law, rules and regulations, and the discretion of our Board. There are
no material differences in the procedures for evaluating new director nominees based on whether
they are recommended by a security holder in or by our Board.
Audit Committee
Our Audit Committee is comprised of Robert C. Hausmann, James S. Marston and Maribess L.
Miller (chair). Our Board determined that all three members of the Audit Committee satisfy the
independence and other requirements for audit committee membership required by the NASDAQ
Marketplace Rules and the SEC, and that each has sufficient knowledge in reading and understanding
our financial statements to serve on the Audit Committee. Our Board determined that Ms. Miller
qualifies as an audit committee financial expert under SEC rules. Our Board determined that other
directors also qualify as an audit committee financial expert under SEC rules.
Our Audit Committee oversees our financial reporting process, related controls and audit
functions on behalf of our Board, pursuant to a written charter adopted by our Board that is
available on our website at www.zixcorp.com/company/corporate-governance. The Audit Committee met
on eight occasions during 2010.
38
Compensation Committee
Our Compensation
Committee comprises James S. Marston (chair) and Antonio R. Sanchez
III. Our Board has determined that each member of the Compensation Committee qualifies as
independent in accordance with the NASDAQ Marketplace Rules. Our Board determines the
compensation payable to our executives and directors and has established the Compensation Committee
to assist it in compensation decisions. The Compensation Committee met on four occasions during
2010.
The Compensation Committee operates under a written charter that is available on our website
at www.zixcorp.com/company/corporate-governance. Under its charter, the Compensation Committees
primary responsibilities are to: (i) establish our Companys overall management compensation
philosophy and policy; (ii) make recommendations to our Board with respect to corporate goals and
objectives with respect to compensation for our executive officers, including our Chief Executive
Officer; (iii) make recommendations to our Board with respect to our executive officers annual
compensation including salary, bonus, incentive and equity compensation; and (iv) administer our
incentive compensation programs and equity-based compensation plans.
In 2010, the independent directors on our Board of Directors, based on the recommendation of
the Compensation Committee, made all significant final compensation decisions regarding our named
executive officers including those pertaining to the base salary, variable compensation and stock
option grants. During 2009, the Company, with the approval of our Compensation Committee, retained
the services of PricewaterhouseCoopers (Compensation Consultant) to provide executive
compensation consulting services to the Company. Although the Consultant was retained by our
management, the Compensation Consultant served in an advisory role to our Compensation Committee,
Board and management. The Compensation Consultant (i) conducted an overall review of the Companys
compensation strategy and incentive compensation plans, (ii) conducted a review of total
compensation for the Companys senior executive officers, (iii) conducted a review of the Companys
compensation of directors and (iv) updated our senior management, and Compensation Committee on
current trends in executive compensation. The Compensation Consultant reported its findings to our
management and Compensation Committee in early 2010, and the written report was provided to the
Board. The Compensation Consultant compared aspects of our compensation programs against
information in certain proprietary compensation surveys and against two peer companies (Netsuite
and Vocus) that were selected by the Compensation Consultant from a Company-suggested list of six
software as a service peer companies. The two peer companies are SaaS software firms and were the
most similar publicly traded companies that we found. We have no access to compensation information
for our major competitors as they are either private firms or
subsidiaries of large corporations. The Compensation Committee and the Board used this information in order to check our compensation
programs against market trends and did not benchmark compensation to any particular level of pay
from the surveys or the peer group. The Compensation Consultant provided no other services to the
Company during 2010.
Policies, Procedures, and Practices
Our processes and procedures for the consideration and determination of executive compensation
are as follows:
|
|
|
Our Compensation Committee requests recommendations from the CEO with respect to the
elements of compensation to be considered by the Compensation
Committee and recommended by it to the independent directors on our Board for the members of management that are direct
reports to the CEO;
|
39
|
|
|
Our Compensation Committee consults with and meets with the CEO as required to discuss
his recommendations, meets in executive session, or discusses among themselves, as
appropriate, in order to formulate a recommendation to the independent directors on our
Board; |
|
|
|
Our Compensation Committee then makes a recommendation to the independent directors on
our Board; |
|
|
|
The independent directors on our Board consult with and meet with the CEO and the
members of the Compensation Committee as required to discuss the latters recommendation,
meet in executive session, or discuss among themselves, as appropriate, to reach a
decision; and |
|
|
|
The indepedent directors decision is communicated to the CEO. |
|
|
|
As required by NASDAQ listing standards, the CEO does not participate in discussions
regarding his own compensation. |
For the consideration and determination of director compensation, our Board typically refers
the matter to the Compensation Committee in order for it to review the matter and make a
recommendation to the entire Board.
Compensation Committee Interlocks and Insider Participation
During 2010, the Compensation Committee comprised three independent directors: David P.
Cook, James S. Marston and Antonio R. Sanchez III. Throughout 2010, none of the members of the
Compensation Committee is or was an officer or employee of our Company or any of our subsidiaries
and none had any relationship requiring disclosure under Item 404 of the SECs Regulation S-K. We
have no executive officers who serve as a member of a Board of Directors or compensation committee
of any other entity that has one or more executive officers serving as a member of our Board or
Compensation Committee.
Communications
with Directors
Shareholders interested in communicating with our Board of Directors may do so by writing to
our executive offices at Zix Corporation, Attention: Corporate Secretary, 2711 North Haskell
Avenue, Suite 2200, LB 36, Dallas, Texas 75204-2960. Our Corporate Secretary will review all
shareholder communications. Those that appear to contain subject matter reasonably related to
matters within the purview of our Board will be forwarded to the entire Board or the individual
Board member to whom the communication is addressed.
Code of Ethics
We have a Code of Conduct and Code of Ethics, which applies to all of our employees, officers
and directors, including our Chief Executive Officer and senior financial officials. The Code of
Conduct and Code of Ethics is available on our website at
www.zixcorp.com/company/corporate-governance. The Code of Conduct and Code of Ethics is a
reaffirmation that we expect all directors and employees to uphold our standards of ethical
behavior and compliance with the law and to avoid conflicts of interest between the Company and
their personal and professional affairs. The Code of Conduct and Code of Ethics establishes
40
procedures for the confidential reporting of suspected violations of the Code of Conduct and Code
of Ethics. The code also sets forth procedures to receive, retain, and treat complaints received
regarding accounting, internal accounting controls, auditing or compliance matters and to allow for
the confidential and anonymous submission by employees of concerns regarding questionable
accounting, auditing or compliance matters. Our Code of Conduct and Code of Ethics also prohibits
actual or apparent conflicts of interest between the interest of any of our directors or officers
and our Company or its shareholders. Any waiver of our Code of Conduct and Code of Ethics is to be
approved on behalf of our Company by the Board of Directors, or a committee of the Board of
Directors, as applicable, and in compliance with applicable law. Any waiver of our Code of Conduct
and Code of Ethics will be publicly disclosed as required by applicable law, rules, and
regulations, including by posting the waiver on our website at
www.zixcorp.com/company/corporate-governance.
Independent Registered Public Accountants
General
Whitley Penn LLP has been appointed by the Audit Committee as our independent registered
public accounting firm for fiscal year 2011. Also, Whitley Penn LLP was selected by the Audit
Committee as our independent registered public accounting firm for 2006, 2007, 2008, 2009 and 2010.
Whitley Penns service as that in each of those years was ratified by our shareholders.
Representatives of
Whitley Penn LLP are expected to be present at the 2011 Annual Meeting;
they will have the opportunity to make a statement if they desire to do so, and they are expected
to be available to respond to appropriate questions.
Fees Paid to Independent Public Accountants
Following is a summary of Whitley Penns professional fees billed to us for the years ended
December 31, 2009 and December 31, 2010, respectively:
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2010 |
|
Audit Fees |
|
|
338,789 |
(1) |
|
|
228,570 |
(1) |
Audit-Related Fees |
|
|
18,695 |
(2) |
|
|
17,540 |
(2) |
Tax Fees |
|
|
0 |
|
|
|
0 |
|
All Other Fees |
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
Total Fees |
|
$ |
357,484 |
|
|
$ |
246,110 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Audit fees consist of the annual audits of our consolidated financial statements included
in our Annual Report on Form 10-K, the quarterly review of our consolidated financial
statements included
in our Quarterly Reports on Form 10-Q, as well as accounting advisory services related to
financial accounting matters, and other services related to filings made with the SEC. |
|
(2) |
|
Audit-related fees consist of required audits of our employee benefit plan. |
Audit Committee Pre-Approval Policies and Procedures
Our Audit Committee is required to pre-approve the audit and non-audit services to be
performed by Whitley Penn LLP in order to assure that the provision of services does not impair the
auditors independence. Annually, Whitley Penn LLP presents to our Audit Committee the services
that are expected to be performed by the independent auditor over the next 12 months.
41
Our Audit
Committee reviews and, as it deems appropriate, pre-approves those services. The services and
estimated fees are to be presented to our Audit Committee for consideration in the following
categories: Audit, Audit-Related, Tax and All Other (each as defined in Schedule 14A under the
Securities Exchange Act of 1934). For each service listed in those categories, our Audit Committee
receives detailed documentation indicating the specific services to be provided. The term of any
pre-approval is 12 months from the date of pre-approval, unless our Audit Committee specifically
provides for a different period. Our Audit Committee reviews, on at least a semi-annual basis, the
services provided by Whitley Penn LLP and the fees incurred for those services. Our Audit Committee
may also revise the list of pre-approved services and related fees from time-to-time, based on
subsequent determinations. All of the services expected to be provided by Whitley Penn LLP in 2011
were pre-approved by our Audit Committee.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee oversees, pursuant to its charter adopted by the Board of Directors, the
Companys internal controls over financial reporting. The Audit Committee also has the sole
authority and responsibility to select, evaluate, compensate and replace our independent registered
public accountants. The Companys independent registered public accounting firm is responsible for
auditing the financial statements. The activities of the Audit Committee are in no way designed to
supersede or alter those traditional responsibilities.
Management has the primary responsibility for our financial statements and our reporting
process, including our systems of internal controls. In fulfilling its oversight responsibilities,
the Audit Committee reviewed with management for inclusion in our 2010 Annual Report on Form 10-K,
the audited consolidated financial statements of the Company, including a discussion of the
quality, not just the acceptability, of the accounting principles, the reasonableness of
significant judgments, and the clarity of disclosures in the consolidated financial statements.
The Audit Committee has reviewed and discussed with management and the independent accounting
firm, as appropriate, the audited financial statements and managements report on internal control
over financial reporting and the independent accounting firms related opinions. The Audit
Committee has discussed with the independent registered public accounting firm, Whitley Penn LLP,
the required communications specified by auditing standards together with guidelines established by
the SEC and the Sarbanes-Oxley Act.
The Audit Committee has received the written disclosures and the letter from the independent
registered public accounting firm required by the applicable requirements of the Public Company
Accounting Oversight Board, regarding the independent registered public accounting firms
communications with the Audit committee concerning independence, and has discussed with Whitley
Penn LLP the firms independence.
Based on the review and discussions referred to above, the Committee recommended to the Board
of Directors that the audited financial statements be included in the Companys Annual Report on
Form 10-K for 2010 filing with the SEC.
|
|
|
April 29, 2011
|
|
Respectfully submitted by the Audit Committee, |
|
|
|
|
|
Robert C. Hausmann |
|
|
James S. Marston |
|
|
Maribess L. Miller, Chair |
42
This Report will not be deemed to be incorporated by reference in any filing by the
Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent that the Company specifically incorporates this Report by reference.
43
INFORMATION ON THE COMPENSATION OF DIRECTORS
Director Compensation Table
The following table sets forth the cash and non-cash compensation paid to our continuing
non-employee directors in calendar year 2010:
Director Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned |
|
|
|
|
Name |
|
or Paid in Cash(1) |
|
Option Awards(2) |
|
Total |
Robert C. Hausmann |
|
$ |
31,250 |
(3) |
|
$ |
60,468 |
(4) |
|
$ |
91,718 |
|
James S. Marston |
|
$ |
38,500 |
|
|
$ |
57,458 |
(5) |
|
$ |
95,958 |
|
Maribess L. Miller |
|
$ |
19,916 |
|
|
$ |
46,483 |
(6) |
|
$ |
66,399 |
|
Antonio R. Sanchez III |
|
$ |
32,500 |
|
|
$ |
54,112 |
(7) |
|
$ |
86,612 |
|
|
|
|
(1) |
|
See the discussion below for an explanation of the cash compensation paid to our
directors. |
|
(2) |
|
The stated amount is the aggregate grant date fair value. These amounts were computed in
accordance with the requirements of FASB ASC Topic 718. The assumptions underlying the
computation of the fair market value of these options are set forth in Footnote 4, Stock
Options and Stock-based Employee Compensation to our Audited Financial Statements included in
our 2010 Annual Report on Form 10-K. |
|
(3) |
|
Fees earned in cash by Mr. Hausmann are paid to Business Services Group, LLC. |
|
(4) |
|
As of December 31, 2010, Mr. Hausmann held options to acquire 179,500 shares of our common
stock, of which 142,998 were vested as of March 31, 2011. The fair market value of his January
2010 (36,000 shares), April 2010 (5,000 shares) and June 2010 (5,000 shares) option grants on
the respective grant dates, computed in accordance with the requirements of FASB ASC Topic
718, was $44,075, $8,365 and $8,028 respectively. Note: Mr. Hausmann received a grant in June
2010 when he assumed the Nominating and Corporate Governance Committee chair role. He had
received a grant earlier in 2010 for serving as Audit Committee chair. |
|
(5) |
|
As of December 31, 2010, Mr. Marston held options to acquire 404,840 shares of our common
stock, of which 368,839 were vested as of March 31, 2011. The fair market value of his January
2010 (36,000 shares) and April 2010 (8,000 shares) option grants on the respective grant dates
computed in accordance with the requirements of FASB ASC Topic 718 was $44,075 and $13,383
respectively. |
|
(6) |
|
As of December 31, 2010, Ms. Miller held options to acquire 30,000 shares of common stock, of
which 19,832 were vested as of March 31, 2011. The fair market value of her April 2010 (28,000
shares) and July 2010 (2,000 shares) option grants on the respective grant dates computed in
accordance with the requirements of FASB ASC Topic 718 was $43,464 and $3,019 respectively.
Note: Ms. Miller received an additional grant in July 2010 when she assumed the Audit
Committee chair role. |
|
(7) |
|
As of December 31, 2010, Mr. Sanchez held options to acquire 301,838 shares of our common
stock, of which 268,003 were vested as of March 31, 2011. The fair market value of his January
2010 (36,000 shares) and April 2010 (6,000) option grants on the respective grant dates
computed in accordance with the requirements of FASB ASC Topic 718 was $44,075 and $10,037
respectively. |
Summary Explanation of Director Compensation
Pursuant to the Zix Corporation 2006 Directors Stock Option Plan (2006 Directors Plan), on
the day that a non-employee director is first appointed or elected to the Board, the
44
director is granted nonqualified options to purchase 25,000 shares of our common stock. The
options vest quarterly and pro-rata over one year from the date of grant. Also, under the 2006
Directors Plan, on the first business day in January of each year, each non-employee director that
has served on the Board for at least six months as of the grant date
may be granted nonqualified
options to purchase a number of shares of our common stock equal to the greater of (i) one-half of
one percent of the number of our outstanding common stock shares (measured as of the immediately
preceding December 31) or (ii) 200,000 shares of our common stock, in each case divided by the
greater of (A) five or (B) the number of non-employee directors that have served on our Board for
at least six months as of the date of grant; provided that, the number of shares of our common
stock covered by any that January option grant cannot exceed 40,000 shares. The options vest
quarterly and pro-rata over three years from the grant date. The exercise price of the 25,000 share
option grants and of the January share option grants is 100% of the fair market value of our common
stock on the date of grant. The options may not be exercised after the tenth anniversary of the
date of grant. Each non-employee director received options to purchase 36,000 stock option shares
in January 2010, other than Ms. Miller, who joined the board in April 2010. Each non-employee
director waived any grant of stock options in January 2011.
Also, during 2010 we augmented the cash compensation paid to our non-employee directors by
granting them stock options for serving on the Audit Committee, Compensation Committee, Nominating
and Corporate Governance Committee, and other eligible active committees of our Board. The chair of
the committee was granted options to acquire 5,000 shares of our common stock and committee
members were granted options to acquire 3,000 shares of our common stock for each committee
on which they served. These options vest quarterly and pro-rata over three years from the grant date
and the exercise price of the options is the closing price of our common stock on the grant date.
In addition to the 2010 stock option grants described above, during 2010 we paid our
non-employee directors cash fees as follows:
|
|
|
Cash payment of $2,000 per meeting per director for attendance in person at Board
meetings; |
|
|
|
Cash payment of $1,000 per meeting per director for participating in telephonic Board
meetings; |
|
|
|
Cash payment of $1,500 per meeting per director for attendance in person at Board
committee meetings, and cash payment of $1,000 per meeting per director for participating
in telephonic Board committee meetings (maximum of ten meetings per year per committee); |
|
|
|
Annual cash payment of $5,000 per director for serving as Chair of a Board committee
(assuming attendance of at least two-thirds of the meetings); and |
|
|
|
Annual cash payment of $3,000 per director for serving as a member (i.e., not the
Chair) of a Board committee (assuming attendance of at least two-thirds of the meetings). |
For 2011, the Board of Directors implemented the following cash compensation program. Each
non-employee director also waived the annual grant of stock options that otherwise would have
issued to him or her in January 2011 and the grant of options
for committee service.
|
|
|
A $15,000 retainer, payable quarterly for Board service; |
|
|
|
|
A $2,000 retainer, payable quarterly for service on each committee of the Board;
and |
45
|
|
|
An additional $500 retainer, payable quarterly for service as a Chair of a
committee of the Board |
We also reimburse our directors for expenses they incur while attending our Board or committee
meetings.
COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary
Our Business
The Company is a leader in providing email encryption services. The ZixCorp® Email
Encryption Service enables the use of secure email for sensitive information. It is currently used
primarily in the healthcare, financial services, insurance and government sectors. More than 1,200
hospitals and over 1,500 financial institutions use our ZixCorp Email Encryption Service, including
some of the most influential companies and government organizations. Wellpoint, Humana, and the
Securities and Exchange Commission are among these notable customers. Our ZixCorp Email Encryption
Service is enhanced by ZixDirectory®, which
includes approximately 26 million members.
ZixDirectory allows for encrypted emails to be sent seamlessly whenever possible, across the
largest email encryption community in the world.
2010 Financial Performance
In 2010, we delivered positive GAAP net earnings for the first time in the Companys history.
Full year GAAP Net Income was $5.9 million (net of the adjustment to the Deferred Tax valuation
allowance) on revenue of $33.1 million from continuing operations (excluding discontinued
ePrescribing operations). We grew revenue by 25.2% year over year while we grew cash by $11.3
million to $24.6 million. We also remained disciplined on costs, delivering $0.09 of GAAP diluted
earnings per share (net of the adjustment to the Deferred Tax valuation allowance).
Executive Compensation Overview
Our compensation philosophy is pay for performance. Reflecting that philosopy, the
compensation of our named executive officers was affected in 2010 by our financial results and
stock price, both in the amount of cash compensation earned and the value of outstanding long-term
equity awards.
Compensation for our executives includes:
|
|
|
Annual incentive awards that are paid in cash based upon achievement of
corporate goals or similarly based discrectionary cash bonuses |
|
|
|
Equity in the form of performance-based stock options |
|
|
|
|
Benefits that include the same group health and welfare benefit programs and
tax-qualified retirement plans available to all of our employees |
46
General
The independent, non-employee directors on our Board, with the assistance of the Compensation
Committee, administer the cash and non-cash compensation programs applicable to our executive
officers. The Compensation Committee is comprised entirely of independent, non-employee directors.
Our Board, with advice from the Compensation Committee and after discussion with our Chief
Executive Officer, makes all executive compensation decisions. Consistent with NASDAQ requirements,
our Chief Executive Officers compensation is determined solely by the independent directors, and
the Chief Executive Officer does not participate in those discussions. Through the active
participation of the independent directors, the Board of Directors has refined recommendations made
by either the Chief Executive Officer or the Compensation Committee related to variable
compensation and stock compensation. Also, the Board commonly is directly involved in compensation
decisions related to the hiring of new executive officers.
In 2010, the Compensation Committee submitted to the Board of Directors that Committees
recommendations on compensation of our directors and our executive officers. The
independent directors on our
Board of Directors
made all significant decisions pertaining to the base salary, compensation and stock option grants
payable or awarded to our executive officers. During 2010, our executive officers were Richard D.
Spurr, James F. Brashear, Susan K. Conner, Russell J. Morgan, and David J. Robertson (collectively,
named executive officers, or NEOs).
Compensation Philosophy and Objectives
Our Board of Directors believes that an effective executive compensation program is one that,
among other things, accomplishes the following goals:
|
|
|
Attracts and retains executives with the experience, skills, and knowledge that our
Company seeks and requires; |
|
|
|
Attracts and retains executives committed to achieving our goals; |
|
|
|
Rewards the achievement and support of specific performance metrics established by our
Board; and |
|
|
|
Rewards increases in shareholder value. |
Our Board and Compensation Committee seek to implement and maintain a compensation plan for
our executive officers that is fair, reasonable, and competitive and attracts and retains talented
and qualified personnel. The compensation paid in 2010 to our named executive officers, as set
forth below in the Summary Compensation Table, primarily consisted of salary, bonus and stock
options. Executives also received partial match contributions to the Company-sponsored 401(k) plan
(which we offer on a non-discriminatory basis to all 401(k) plan participants) and Company-funded
life insurance benefits (which we offer on a non-discriminatory basis to all full-time employees).
We have no non-qualified deferred compensation arrangements, defined benefit retirement plans or
executive perquisites. Our Board believes that
stock options supplement the cash base salary and motivate the recipient to work to achieve
specific financial and business metrics. Our Board also believes that stock options and separation
pay agreements are crucial to recruiting (and retaining) the services of qualified and talented
personnel.
47
Risk Considerations
In establishing and reviewing our executive compensation structure, our Board and Compensation
Committee consider whether the structure encourages unnecessary or excessive risk taking and has
concluded that it does not. Base salaries are fixed in amount and thus do not encourage risk
taking. As discussed below under the heading Executive Officer Variable Compensation, the Company
has utilized in the past, and plans to utilize again in the future, a performance-based variable
compensation program based on the achievement of certain short-term metrics. Like many companies
facing the general economy in the United States, we did not implement a variable compensation plan
in 2009 or 2010.
Role of Executive Officers in Compensation Decisions
Our Board, the Compensation Committee and our management each play a role in our compensation
process. The Compensation Committee reviews and makes recommendations to our Board regarding our
executive compensation practices, after which our Board (or the independent directors as to
compensation of our CEO) makes the final determinations. The matrix below sets forth, in general,
our current practices regarding the authority level for determining certain compensation related
matters. As shown, our Board delegates to our management the authority to make certain compensation
related decisions on behalf of the Board, while our Board retains the authority in other cases.
Approval Authority Matrix for Certain Compensation Related Matters
|
|
|
|
|
|
|
|
|
|
|
Variable |
|
Stock Option |
Employee |
|
Salary |
|
Compensation |
|
Grants |
|
Chief Executive Officer
|
|
Independent Directors
|
|
Independent Directors
|
|
Independent Directors |
Other NEOs
|
|
Board
|
|
Board
|
|
Board |
Other CEO direct reports
|
|
CEO(1)
|
|
Board/CEO(1) (2)
|
|
Board |
Rank & file employees
|
|
CEO/Mgmt(1)
|
|
CEO/Mgmt(1)
|
|
CEO(3) |
|
|
|
(1) |
|
The salary and variable compensation decisions of the CEO and
management are subject to the constraints of our annual budget, as
approved by our Board. |
|
(2) |
|
In addition to any variable compensation that is subject to attaining
performance metrics established by our Board, our CEO may establish
sales objectives or management by objective (MBO) objectives for
certain individuals who are not executive officers. |
|
(3) |
|
All individual stock option grants in excess of 40,000 shares or any
Company-wide stock option grant program and certain other option
grants remain subject to the approval of our Board. Our Board
typically approves an annual pool of stock options that is available
for grant by the CEO or our management during our annual stock option
review and grant cycle. |
As discussed above under the caption Corporate Governance Compensation Committee, we
engaged a Compensation Consultant in 2009 to review our compensation programs and policies. The
Compensation Consultant met with certain executive officers, Compensation Committee members and
directors. The executive officers shared with the Consultant their views on those matters. The
Compensation Consultant reported its findings to
our management and the Compensation Committee in early 2010 and provided a copy of its report
to the Board.
48
Executive Officer Base Salaries and Compensation Comparisons
Our executive officers salaries are, in general, established by (a) reference to each
executives position with our Company and (b) a subjective assessment of the cost to us of hiring
executives with comparable experience and skills. We believe this approach offers our executives,
including our named executive officers, a reasonable base salary as subjectively determined by our
Board following a recommendation by our CEO. Differences in the amount of compensation awarded to
each of the executive officers relate primarily to the experience, responsibilities and performance
of each executive officer, as well as to a market-based analysis of compensation paid by peer
companies for comparable positions.
None of our executive officers received any increases in base salary compensation since 2005,
nor thus far in 2011. Mr. Morgans base salary has not changed during those periods, but when
stated in United States dollars his Canadian dollar compensation may appear to increase or decrease
due to fluctuations in the currency exchange rate.
As
discussed above under the caption Corporate Governance Compensation Committee, in 2009
the Company engaged the Compensation Consultant to review, among other matters related to
compensation, the compensation, including base salaries, of our executive officers. Based in part
on that a review, our Board, with the advice of the Compensation Committee, determined in early
2010 that the base salaries and overall compensation level of each our named executive officers was
approximately at or below the mean compensation levels of our peer companies.
Executive Officer Variable Compensation; Bonus
Historically, the Companys executive officers, other than executives whose primary function
is sales, were eligible to receive variable compensation under a management variable compensation
program that was approved by our Board (Management Plan). We believe that variable compensation,
based on performance and achievement, is an important component of an executives overall
compensation package and helps to attract and retain executives with the skills, experience, and
knowledge we seek. Furthermore, we believe a variable compensation element motivates the recipient
to achieve financial and business objectives established by our Board and enables the recipient to
share in the success of our business endeavors.
Our Board
implemented a Management Plan for 2008. In 2008 the metrics
included Revenue, Year-end Cash, New First Year Orders and Subscriber Renewal Rate. Due primarily
to economic pressures facing the general economy, we did not implement a variable compensation
program for 2009. In 2010 the Board studied the underlying assumptions behind various performance
metrics but did not set formal goals for variable compensation. At year end, however, the Board did
consider those metrics and overachievement of the Companys financial goals to award a cash bonus
as shown in the Summary Compensation Table.
For 2011, our Board approved a Management Plan with metrics tied to:
revenue growth; growth in new first year orders; growth in non-GAAP adjusted
earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA);
and growth in non-GAAP adjusted earnings per share (Adjusted EPS). The 2011 Management Plan
establishes award levels at 80 percent, 100 percent and 120 percent of the
target for each metric. The independent Directors may also, in their discretion,
adjust the awards to reflect overall corporate performance and
business and financial conditions.
The table below sets forth for the years indicated the variable compensation amounts
potentially payable to our named executive officers under the Management Plan (and similar
predecessor plans) and the amounts actually paid.
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount |
|
Amount |
|
|
|
|
|
|
|
|
Potentially |
|
Actually |
|
|
Name |
|
Year |
|
Payable |
|
Paid(2) |
|
Percentage |
|
Richard D. Spurr |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
$ |
200,000 |
|
|
$ |
50,000 |
|
|
|
25.0 |
% |
James F. Brashear |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Susan K. Conner(1) |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
$ |
10,417 |
|
|
$ |
2,604 |
|
|
|
25.0 |
% |
David J. Robertson |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
$ |
75,000 |
|
|
$ |
18,750 |
|
|
|
25.0 |
% |
Russell J. Morgan |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
$ |
75,000 |
|
|
$ |
18,750 |
|
|
|
25.0 |
% |
|
|
|
(1) |
|
Susan K. Conner received $82,819.83 in severance and vacation pay in 2010 that was not
part of the variable compensation plan. |
|
(2) |
|
There was no variable compensation program set by the Compensation Committee or Board
for 2009 and 2010. |
The target amount of variable compensation potentially payable to our executive officers
who are exclusively or primarily sales executives was determined in 2008 by Mr. Spurr. The target
amount varies from year-to-year and is based on our specific sales goals (quota) for the year and
quarter, as applicable, for the executive in question. The actual variable compensation paid to
these executive officers is exclusively based on the achievement of the targeted sales goals.
Stock Options
General
The Board of Directors has not in this calendar year granted stock options to the executive
officers. We have historically awarded stock options to our executives as a means of retaining and
motivating them over the longer-term (and to attract potential executives to accept employment with
us). We have historically offered a stock option compensation element for the following reasons:
|
|
|
Stock options motivate the option recipient to work to achieve the financial and
business metrics that our Board establishes from time-to-time because it enables the
option recipient to share in the success of our Companys business as, if and when that
success is reflected in our stock price. |
|
|
|
Stock options are crucial to recruiting and retaining the services of qualified and
talented personnel (i.e., the option recipient). |
|
|
|
We have no non-qualified deferred compensation arrangements and no defined benefit
pension plans. Accordingly, our Board recognizes that stock options are the primary means
by which our executives anticipate accumulating funds for retirement. |
50
|
|
|
We have not implemented merit based increases of the base salaries of our named
executive officers since 2005, and the variable compensation potential for our named
executive officers has remained static for several years and was not available at all in
2009 or 2010. |
Stock option awards, to the extent made, are allocated among our executive officers based on
the following factors:
|
|
|
How important is the individuals role to our Company? |
|
|
|
What experience and/or critical skills or critical knowledge does the person have in
fulfilling that role, i.e., how easily or readily can the individual be replaced? |
|
|
|
What is the value of previous option grants in regard to employee retention and
motivation for future performance? |
|
|
|
Achieving parity among our executive officers. |
Policies and Practices
The Board generally assesses the appropriateness of stock option grants to our executives once
a year, historically during December. Stock options grants generally occur in the first quarter of
each year. The Board of Directors has not in 2011 granted stock options to the executive officers.
All options granted by the Company in 2010 have an exercise price equal to the market price of
our common stock on the day of the grant. The Company intends that any options granted in the
future would have an exercise price equal to the market price of our common stock on the day of the
grant. Before 2010, we had granted some stock options with exercise prices higher than the market
price of our common stock when the options were granted.
Impact of Accounting and Tax Treatments of Compensation
The tax and accounting treatment of the salary compensation, variable compensation, or stock
options paid or awarded to our executives generally is not a factor in determining the magnitude of
compensation payable to our executives or the relative mix of these elements in their compensation
packages.
We understand that compensation in excess of $1,000,000 per year realized by any of our five
most highly compensated executive officers is not deductible by us for federal income tax purposes
unless the compensation arrangement complies with the requirements of Section 162(m) of the
Internal Revenue Code of 1986, as amended. The independent directors
retain authority under the Management Plan to adjust award levels in
their discretion. We anticipate that none of our five most highly
compensated executive officers would have annual compensation
exceeding $1,000,000, including any awards under the Management Plan.
Thus, we do not expect the Management Plan to result in any
disallowed compensation deduction. Mr. Spurr holds options to acquire 650,000 shares of our
common stock, with an exercise price of $10.80 per share, which were granted in February 2004 in
connection with the inception of his employment. These options do not comply with the requirements
of Section 162(m), which, among other things, would have required us to obtain shareholder approval
of these option grants. Time was of the essence when we were
discussing Mr. Spurrs potential employment. Seeking shareholder approval of the option grants
would have, in the Boards opinion, imposed an unwarranted and harmful delay in completing the
employment arrangements and the commencement of Mr. Spurrs employment duties. These options may,
during the year of exercise, result in Mr. Spurr realizing compensation in excess of $1,000,000,
depending on the number of options exercised and the price of our common stock at the time. We will
not be entitled to deduct the compensation exceeding the
51
$1,000,000 limit from our federal income
taxes. The Company, however, has substantial net operating losses carry forwards (NOLs) that we
expect would mitigate this disallowance. As a result, the cash tax expense related to this
disallowed compensation deduction is expected to be minimal. Other options granted to executives
comply with the requirements of 162(m).
Equity Ownership Guidelines
We do not currently have stock ownership guidelines for our directors or executive officers.
Use of Pre-Approved Trading Plans
We permit our directors and executive officers to enter into pre-approved trading plans
established according to Rule 10b5-1 under the Securities Exchange Act of 1934. Trading plans must
be established by written agreement with an independent broker-dealer and include specific
instructions for the broker to exercise options or purchase or sell our securities at specified
prices or upon certain events, without further instructions from the individual who established the
trading plan. These trading plans may enable purchases and dispositions of our securities during
periods in which the individual might otherwise not be able to buy or sell our stock because
important information about us had not been publicly disclosed. These plans may allow individuals
to realize the value of their compensation and to diversify their investments.
Deductibility of Compensation
Section 162(m) of the Internal Revenue Code limits, under certain circumstances, the
deductibility for federal income tax purposes of compensation paid to our named executive officers
in excess of $1,000,000 per year. No compensation earned or paid in 2010 exceeded the deduction
limits of Section 162(m).
Compensation paid to our named executive officers in excess of $1,000,000 per year would be
deductible by the Company only if it is performance-based. The Compensation Committee believes
that tax deductibility of compensation is an important consideration in establishing our
executives compensation, but the Compensation Committee reserves flexibility to approve
compensation arrangements that are not fully tax deductible by us.
Compensation Committee Report
The Compensation Committee has reviewed and discussed with management the foregoing
Compensation Discussion and Analysis. Based on this review and discussion, the Compensation
Committee has recommended to our Board that the Compensation Discussion and Analysis be included
in our proxy statement for the 2011 Annual Meeting of Shareholders (and incorporated by reference
into our 2010 Annual Report on Form 10-K).
|
|
|
April 29, 2011
|
|
Respectfully submitted by the Compensation Committee, |
|
|
|
|
|
James S. Marston, Chair |
|
|
Antonio R. Sanchez III |
52
Summary Compensation Table
The following narrative, tables and footnotes describe the total compensation earned during
fiscal years 2010, 2009 and 2008 by our named executive officers. The individual components of the
total compensation reflected in the Summary Compensation Table are broken out below:
|
|
|
Salary The table reflects base salary earned during 2010, 2009 and 2008. See
COMPENSATION DISCUSSION AND ANALYSIS Executive Officer Base Salaries and Compensation
Comparisons. |
|
|
|
Bonus The table reflects Board discretionary cash bonuses paid during 2010. See
COMPENSATION DISCUSSION AND ANALYSIS Executive Officer Variable Compensation; Bonus. |
|
|
|
Non-Equity Incentive Plan Compensation The table reflects variable compensation
earned during 2008. As noted above, no such compensation was earned during 2009 or 2010.
See COMPENSATION DISCUSSION AND ANALYSIS Executive Officer Variable Compensation;
Bonus. |
53
|
|
|
Stock Option Awards The table reflects the aggregate grant date fair value of
stock option grants awarded in 2010, 2009, and 2008 computed in accordance with applicable
SEC rules and accounting guidelines. |
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan |
|
All Other |
|
|
Name and Principal Position |
|
Year |
|
Salary (1) |
|
Bonus (2) |
|
Option Awards (3) |
|
Compensation (4) |
|
Compensation (5) |
|
Total |
Richard D. Spurr |
|
|
2010 |
|
|
$ |
300,000 |
|
|
$ |
200,000 |
|
|
|
|
|
|
|
|
|
|
$ |
8,344 |
|
|
$ |
508,344 |
|
Chairman, Chief Executive |
|
|
2009 |
|
|
$ |
300,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
5,391 |
|
|
$ |
305,391 |
|
Officer and President |
|
|
2008 |
|
|
$ |
300,000 |
|
|
|
|
|
|
$ |
73,080 |
|
|
$ |
50,000 |
|
|
$ |
2,141 |
|
|
$ |
425,221 |
|
James F. Brashear*
Vice President, General |
|
|
2010 |
|
|
$ |
196,875 |
|
|
$ |
50,000 |
|
|
$ |
73,080 |
|
|
|
|
|
|
$ |
3,238 |
|
|
$ |
375,023 |
|
Counsel and Secretary |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Susan K. Conner** |
|
|
2010 |
|
|
$ |
150,000 |
|
|
$ |
20,000 |
|
|
$ |
49,399 |
|
|
|
|
|
|
$ |
83,318 |
|
|
$ |
302,717 |
|
Chief Financial Officer |
|
|
2009 |
|
|
$ |
225,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
36,872 |
|
|
$ |
261,872 |
|
|
|
|
2008 |
|
|
$ |
46,375 |
|
|
|
|
|
|
$ |
148,629 |
|
|
$ |
2,604 |
|
|
$ |
1,276 |
|
|
$ |
198,884 |
|
Russell J. Morgan(6) |
|
|
2010 |
|
|
$ |
213,532 |
|
|
$ |
75,000 |
|
|
$ |
79,846 |
|
|
|
|
|
|
$ |
7,075 |
|
|
$ |
375,453 |
|
Vice President, Client |
|
|
2009 |
|
|
$ |
193,664 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
8,314 |
|
|
$ |
201,978 |
|
Services |
|
|
2008 |
|
|
$ |
207,702 |
|
|
|
|
|
|
$ |
11,693 |
|
|
$ |
17,702 |
|
|
$ |
4,367 |
|
|
$ |
241,464 |
|
David J. Robertson |
|
|
2010 |
|
|
$ |
200,000 |
|
|
$ |
75,000 |
|
|
$ |
148,629 |
|
|
|
|
|
|
$ |
7,132 |
|
|
$ |
395,044 |
|
Vice President, Engineering |
|
|
2009 |
|
|
$ |
200,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
6,476 |
|
|
$ |
206,476 |
|
|
|
|
2008 |
|
|
$ |
200,000 |
|
|
|
|
|
|
$ |
13,703 |
|
|
$ |
18,750 |
|
|
$ |
6,757 |
|
|
$ |
239,210 |
|
|
|
|
* |
|
Mr. Brashear was hired in February 2010. |
|
** |
|
Ms. Conners employment with the Company ended in August 2010. |
|
(1) |
|
The columns entitled Stock Awards, and Change in Pension Value and Nonqualified
Deferred Compensation Earnings have been deleted from the Summary Compensation Table because
no amounts were paid or attributable to the named executive officers for those categories for
the periods indicated. |
|
(2) |
|
The stated amounts were paid at the Boards discretion based on the overall performance of
the business. |
|
(3) |
|
The stated amount is the aggregate grant date fair value of stock option grants awarded 2008
to 2010. These amounts were computed in accordance with the requirements of FASB ASC Topic
718. The assumptions underlying the computation of the fair market value of these options (and
the corresponding compensation expense during calendar years 2008, 2009 and 2010) are set
forth in Footnote 4, Stock Options and Stock-based Employee Compensation to our Audited
Financial Statements included in our 2010 Annual Report on Form 10-K. |
|
(4) |
|
The stated amounts were paid based on the achievement of the predetermined performance
objectives approved by our Board of Directors. |
|
(5) |
|
Includes 401(k) Company contribution and life insurance premiums paid by us for the benefit
of the named person. Includes for Ms. Conner in 2009 a $30,000 signing bonus contingent upon
meeting certain requirements and in 2010 $82,820 in severance and vacation pay. |
|
(6) |
|
Actual compensation was paid in Canadian dollars and has been translated to U.S. dollars
using the 2010, 2009 and 2008 average daily exchange rates,
respectively, of .9706, .88029 and .94410 U.S. dollar per Canadian dollar. |
54
Grants of Plan-Based Awards
The Company made no awards under Company-sponsored equity incentive plans or non-equity
incentive plans to executive officers in 2010.
55
Outstanding Equity Awards at 2010 Fiscal Year-End
The following table sets forth information pertaining to unexercised stock options granted to
the named executive officers as of December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Number of |
|
Number of |
|
|
|
|
|
|
|
|
Securities |
|
Securities |
|
|
|
|
|
|
|
|
Underlying |
|
Underlying |
|
|
|
|
|
|
|
|
Unexercised |
|
Unexercised |
|
|
|
|
|
|
|
|
Options |
|
Options |
|
Option |
|
Option Grant |
|
Option |
Name |
|
Exercisable |
|
Unexercisable(1) |
|
Exercise Price |
|
Date |
|
Expiration Date |
Richard D. Spurr |
|
|
650,000 |
|
|
|
|
|
|
$ |
10.80 |
|
|
|
02/24/04 |
|
|
|
02/23/14 |
|
|
|
|
350,000 |
|
|
|
|
|
|
$ |
6.00 |
|
|
|
11/17/04 |
|
|
|
11/16/14 |
|
|
|
|
350,000 |
|
|
|
|
|
|
$ |
3.78 |
|
|
|
03/23/05 |
|
|
|
03/22/15 |
|
|
|
|
350,000 |
|
|
|
|
|
|
$ |
4.00 |
|
|
|
03/02/06 |
|
|
|
03/01/16 |
|
|
|
|
400,000 |
|
|
|
|
|
|
$ |
1.50 |
|
|
|
12/18/06 |
|
|
|
12/17/16 |
|
|
|
|
400,000 |
|
|
|
|
|
|
$ |
4.87 |
|
|
|
12/20/07 |
|
|
|
12/19/17 |
|
|
|
|
8.333 |
|
|
|
33,333 |
|
|
$ |
1.11 |
|
|
|
12/23/08 |
|
|
|
12/22/18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James F. Brashear |
|
|
24,999 |
|
|
|
75,001 |
|
|
$ |
1.82 |
|
|
|
02/08/10 |
|
|
|
02/07/20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Susan K. Conner |
|
|
55,000 |
|
|
|
75,000 |
|
|
$ |
1.70 |
|
|
|
10/16/08 |
|
|
|
10/15/18 |
|
|
|
|
35,000 |
|
|
|
|
|
|
$ |
2.05 |
|
|
|
02/18/10 |
|
|
|
08/31/11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Russell J. Morgan |
|
|
40,000 |
|
|
|
|
|
|
$ |
3.60 |
|
|
|
09/03/02 |
|
|
|
09/02/12 |
|
|
|
|
10,000 |
|
|
|
|
|
|
$ |
4.38 |
|
|
|
01/22/03 |
|
|
|
01/21/13 |
|
|
|
|
100,000 |
|
|
|
|
|
|
$ |
5.00 |
|
|
|
09/08/04 |
|
|
|
09/07/14 |
|
|
|
|
80,000 |
|
|
|
|
|
|
$ |
3.00 |
|
|
|
02/22/06 |
|
|
|
02/21/16 |
|
|
|
|
40,000 |
|
|
|
|
|
|
$ |
1.50 |
|
|
|
12/18/06 |
|
|
|
12/17/16 |
|
|
|
|
50,000 |
|
|
|
|
|
|
$ |
4.87 |
|
|
|
12/20/07 |
|
|
|
12/19/17 |
|
|
|
|
10,667 |
|
|
|
5,333 |
|
|
$ |
1.11 |
|
|
|
12/23/08 |
|
|
|
12/22/18 |
|
|
|
|
14,142 |
|
|
|
42,430 |
|
|
$ |
2.05 |
|
|
|
02/18/10 |
|
|
|
02/17/20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David J. Robertson |
|
|
125,000 |
|
|
|
|
|
|
$ |
5.25 |
|
|
|
03/20/02 |
|
|
|
03/19/12 |
|
|
|
|
50,000 |
|
|
|
|
|
|
$ |
4.38 |
|
|
|
01/22/03 |
|
|
|
01/21/13 |
|
|
|
|
100,000 |
|
|
|
|
|
|
$ |
5.00 |
|
|
|
09/08/04 |
|
|
|
09/07/14 |
|
|
|
|
100,000 |
|
|
|
|
|
|
$ |
3.00 |
|
|
|
02/22/06 |
|
|
|
02/21/16 |
|
|
|
|
100,000 |
|
|
|
|
|
|
$ |
1.50 |
|
|
|
12/18/06 |
|
|
|
12/17/16 |
|
|
|
|
75,000 |
|
|
|
00 |
|
|
$ |
4.87 |
|
|
|
12/20/07 |
|
|
|
12/19/17 |
|
|
|
|
12,500 |
|
|
|
6,250 |
|
|
$ |
1.11 |
|
|
|
12/23/08 |
|
|
|
12/22/18 |
|
|
|
|
19,999 |
|
|
|
60,001 |
|
|
$ |
2.05 |
|
|
|
02/18/10 |
|
|
|
02/17/20 |
|
|
|
|
(1) |
|
These options vest quarterly on a pro-rata basis through the third anniversary of the grant date. |
56
Option Exercises and Stock Vested
Three of the named executive officers exercised stock options in 2010.
|
|
|
|
|
|
|
|
|
|
|
Option Awards |
|
|
Number of |
|
|
|
|
Shares |
|
|
|
|
Acquired |
|
Value Realized |
Name |
|
on Exercise |
|
on Exercise |
Richard D. Spurr |
|
|
185,000 |
|
|
$ |
487,433 |
|
James F. Brashear |
|
|
|
|
|
|
|
|
Susan K. Conner |
|
|
75,000 |
|
|
$ |
187,800 |
|
Russell J. Morgan |
|
|
45,000 |
|
|
$ |
112,436 |
|
David J. Robertson |
|
|
|
|
|
|
|
|
Pension Benefits
We have no Company-sponsored plans that provide for specified retirement payments and
benefits, or payments and benefits that will be provided primarily following retirement, to any
Company employees.
Nonqualified Deferred Compensation
We have no Company-sponsored plans that provide for the payment of nonqualified deferred
compensation to any Company employees.
Separation Payments and Change of Control Payments
General
We have separation pay agreements with our executive officers and certain other key
executives. We use separation pay agreements to attract and retain key executives. The Board
believes separation pay agreements encourage employee retention and that they have been crucial to
retention of senior executives in recent years. We also believe the benefits provided to executives
under these agreements afford legal consideration supporting confidentiality, non-competition and
non-solicitation obligations undertaken by our executives. These
arrangements, and the benefits
potentially payable in certain scenarios, are summarized in the text and table below. Shareholders
should refer to the full text of the agreements, which are on file
with the SEC, for a complete description
of these arrangements.
Termination Without Cause
Our separation pay agreements provide for the payment of a number of months base salary if
the executives employment is terminated other than for cause, as defined in the agreement. For
Mr. Spurr, the termination payments equal 12 months base salary. For the other named executive
officers, the termination payments equal 6 months base salary. Payments are made over many months,
as specified in the agreements, and are conditioned upon the executive providing the Company a
release of liability.
57
Resignation for a Change of Control Good Reason
In some cases, the separation pay agreements provide for the termination payments to be made
to the affected executive upon a resignation for a change of control good reason or for a good
reason, as defined in the agreements. The separation pay agreements do not permit any executive to
resign voluntarily and receive severance payments, unless the resignation was for a reason
permitted by the applicable separation pay agreement, which include reasons such as a material
diminution in the employees authority, duties or responsibilities, a material diminution in the
executives base salary or a material change in the geographic location at which the employee must
perform services. Severance payments are further conditioned upon the executive providing adequate
notice to the Company affording it an opportunity to remedy the situation giving rise to the
change of control good reason or good reason.
Accelerated Vesting of Options
Upon a change in control or upon an executives termination without cause, all of that
executives unvested stock options will immediately vest. The Board believes these option
acceleration provisions encourage employee retention and in the case of a pending change in
control transaction motivate the employee to exert efforts to see that a change in control
transaction is consummated.
CEO COBRA Payment
The Company will pay the cost of COBRA continuation of health benefits for twelve months for
Mr. Spurr upon a termination without cause, or upon a resignation for a change of control good
reason or for a good reason, as stated in the agreements.
CEO Disability Payment
If Mr. Spurr incurs a disability that renders him unable to perform his job responsibilities
(and he separates from employment), the Company will pay him an amount equal to eight months base
salary using his highest monthly base salary during the term of his employment.
Potential Payments
The table below summarizes the value of potential payments and benefits that our named
executive officers would receive if they had terminated employment on December 31, 2010 under the
circumstances shown, or if a change in control of the Company had occurred on December 31, 2010.
The tables exclude (1) amounts that would be paid in the normal course of continued employment,
such as accrued but unpaid salary and earned annual bonus for 2010, and (2) vested account balances
in our 401(k) Plan that are generally available to all of our employees. Actual amounts to be paid
can only be determined at the time of such executives termination of service.
Potential Payments Upon Termination or Change in Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination |
|
Resignation |
|
Change in |
|
|
|
|
|
|
|
|
|
|
|
|
Without |
|
for Good |
|
Control Good |
|
Change in |
|
Voluntary |
|
|
|
|
Name |
|
Benefit |
|
Cause |
|
Reason |
|
Reason |
|
Control |
|
Termination |
|
Death |
|
Disability |
Richard D. Spurr |
|
Severance Pay (1) |
|
$ |
300,000 |
|
|
$ |
300,000 |
|
|
$ |
300,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
200,000 |
|
|
|
Stock Option Vesting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration (2) |
|
$ |
105,332 |
|
|
|
|
|
|
$ |
105,332 |
|
|
$ |
105,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Care Benefits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuation |
|
$ |
6,694 |
|
|
$ |
6,694 |
|
|
$ |
6,694 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James F. Brashear |
|
Severance Pay (1) |
|
$ |
112,500 |
|
|
|
|
|
|
$ |
112,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option Vesting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration (2) |
|
$ |
221,253 |
|
|
|
|
|
|
$ |
221,253 |
|
|
$ |
221,253 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Russell J. Morgan |
|
Severance Pay (1) |
|
$ |
106,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option Vesting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration (2) |
|
$ |
111,047 |
|
|
|
|
|
|
$ |
111,047 |
|
|
$ |
111,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
David J. Robertson |
|
Severance Pay (1) |
|
$ |
100,000 |
|
|
$ |
100,000 |
|
|
$ |
100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option Vesting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration (2) |
|
$ |
152,952 |
|
|
|
|
|
|
$ |
152,952 |
|
|
$ |
152,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Severance would be paid over 12 months to Mr. Spurr, 9 months to Mr. Brashear, and 6 months for the other executive officers. |
|
(2) |
|
Value determined based upon the difference between our stock price on December 31, 2010 of $4.27 and the exercise price of the options, if positive, multiplied by the number of options that would
become vested upon the termination of employment and/or change in control. |
58
Equity Compensation Plan Information
The following table provides information about our equity compensation arrangements that have
been approved by our shareholders, as well as equity compensation arrangements that have not been
approved by our shareholders, as of December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities |
|
|
Number of Securities |
|
Weighted-Average |
|
Remaining Available for |
|
|
to be Issued Upon |
|
Exercise Price of |
|
Future Issuance Under |
|
|
Exercise of |
|
Outstanding |
|
Equity Compensation |
|
|
Outstanding Options, |
|
Options, Warrants |
|
Plans (Excluding Securities |
Plan Category |
|
Warrants and Rights |
|
and Rights |
|
Reflected in Column (a) |
Equity compensation
plans approved by
shareholders |
|
|
6,444,967 |
|
|
$ |
3.76 |
|
|
|
1,516,970 |
|
Equity compensation
plans not approved
by shareholders |
|
|
1,201,925 |
|
|
$ |
7.94 |
|
|
|
190,618 |
|
Total |
|
|
7,646,892 |
|
|
$ |
4.41 |
|
|
|
1,707,588 |
|
A description of the material terms of our equity arrangements that have not been
approved by our shareholders follows:
Richard D. Spurr, Chairman and Chief Executive Officer
In February 2004, Mr. Spurr received options to acquire 650,000 shares of our common stock at
an exercise price of $10.80 per share. These options became fully vested in January 2007. As of
December 31, 2010, all 650,000 options remained unexercised.
Other Non-Shareholder-Approved Executive Stock Option Agreements
In 2001 and 2002, options to purchase 450,000 shares of our common stock were granted to key
Company executives. The options have an exercise price of $5.25 and
became fully vested in March 2005. As of December 31, 2010, option grants covering 125,000 shares were
outstanding.
59
Other Non-Shareholder-Approved Stock Option Agreements With Employees
As of December 31, 2010, option grants to employees were outstanding covering 180,055 and
246,870 shares under our 2001 Employee Stock Option Plan and 2003 New Employee Stock Option Plan,
respectively. The terms of these stock option plans and plan arrangements are substantially the
same as (if not identical to) the provisions of our 2004 Stock Option Plan. These options have
exercise prices ranging from $1.22 to $11.00. The exercise price of all of these options was the
fair market value of our common stock or greater on the date of grant, and the vesting periods
ranged from immediately vested to vesting pro-rata over three years.
Non-Shareholder-Approved Stock Option Agreements With Third Parties
From time-to-time, we may grant stock options to advisory board members, consultants,
contractors, and other third parties for services provided to our Company. At December 31, 2010, no
options were outstanding under non-shareholder approved arrangements to non-employees.
Certain Relationships and Related Transactions
There have been no transactions since January 1, 2010, between the Company and any related
person required to be reported under SEC Regulation S-K, Item 404(a). Todd R. Spurr, the son our
Chairman and CEO, is employed as an Account Executive in our encrypted email business sales
department. Todd Spurrs employment with us pre-dates his fathers employment with us. Todd Spurrs
compensation is comprised of a base salary and commissions and is commensurate with other
similarly-situated employees.
Our Audit Committee Charter provides that the Audit Committee reviews and addresses conflicts
of interest of directors and officers. Unless otherwise approved by another independent body of the
Board of Directors in accordance with NASDAQ Marketplace Rule 4350(h), the Audit Committee reviews,
discusses with management and, if deemed advisable, the Companys independent auditor, and
determines whether to approve any transactions or courses of dealing with related parties.
Transactions or courses of dealing with related parties includes all transactions required to be
disclosed under Item 404 of Regulation S-K.
Our Board of Directors Procedures and Corporate Governance Overview provides that if there is
a proposed transaction between the Company and a related person that is required to be publicly
reported under Item 404(a) of SEC Regulation S-K, the following procedures apply:
|
|
|
the transaction is reviewed by disinterested director, and the affirmative vote of a
majority of the disinterested directors is required to approve the transaction; |
|
|
|
the director that is or has a relationship with the related person in the transaction
is permitted to provide information relating to the transaction in question, either
verbally or in writing; |
|
|
|
the disinterested directors are afforded an opportunity to meet and discuss the
transaction in question in executive session (i.e., without the presence of the related
person director); and |
|
|
|
|
the director that is the related person in the transaction abstains from voting on the
matter. |
60
OTHER MATTERS
We know of no other matters that will be presented for consideration at the Annual Meeting. If
any other matters properly come before the Annual Meeting, it is the intention of the persons named
as proxy holders in the accompanying proxy card and voting instructions to vote the shares in their
discretion. Discretionary authority with respect to that other matters is granted by signing and
returning the enclosed proxy card or by otherwise providing voting instructions.
WHERE YOU CAN FIND MORE INFORMATION
You may read and copy any reports, statements or other information that we file with the SEC
directly from the SEC. You may either:
|
|
|
Read and copy any materials we have filed with the SEC at the SECs Public Reference
Room maintained at 100 F Street, N.E., Washington, D.C. 20549; or |
|
|
|
Visit the SECs website at www.sec.gov, which contains reports, proxy and information
statements, and other information regarding us and other issuers that file electronically
with the SEC. |
You may obtain more information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330.
You should rely only on the information contained (or incorporated by reference) in this Proxy
Statement. We have not authorized anyone to provide you with information that is different from
what is contained in this Proxy Statement. This Proxy Statement is
dated April 29, 2011. You
should not assume that the information contained in this Proxy Statement is accurate as of any date
other than that date (or as of an earlier date if so indicated in this Proxy Statement).
Our 2010 Annual Report to shareholders, including our Annual Report on Form 10-K for the year
ended December 31, 2010 (excluding exhibits), is being mailed together with this Proxy Statement
and is available on our website at investor.zixcorp.com in accordance with the SECs notice and
access regulations. The Annual Report does not constitute any part of the proxy solicitation
material.
Please date, sign and return the proxy card at your earliest convenience in the enclosed
envelope. No postage is required for mailing in the United States. We would appreciate the prompt
return of your proxy card, as it will save the expense of further mailings.
|
|
|
|
|
By Order of the Board of Directors, |
|
|
|
|
|
![(-s- James F. Brashear)](d81426dd8142698.gif) |
|
|
|
Dallas, Texas
|
|
James F. Brashear |
April 29, 2011
|
|
Vice President, General Counsel &Corporate Secretary |
61
APPENDICES
Appendix A Plan of Merger
Appendix B Certificate of Incorporation
Appendix C Bylaws
62
Appendix A Plan of Merger
AGREEMENT AND PLAN OF MERGER
Pursuant to this Agreement and Plan of Merger dated as of the [__] day of June, 2011, Zix
Corporation, a Texas corporation (the Parent Corporation), shall be merged with and into
Zix Corporation, a Delaware corporation and a wholly owned subsidiary of the Parent Corporation
(the Surviving Corporation).
SECTION 1
DEFINITIONS
1.1 Effective Time. Effective Time shall mean the date and time on which the Merger
contemplated by this Agreement and Plan of Merger becomes effective pursuant to the laws of the
States of Texas and Delaware, as determined in accordance with Section 2.2 of this Agreement and
Plan of Merger.
1.2 Merger. Merger shall refer to the merger of the Parent Corporation with and
into the Surviving Corporation as provided in Section 2.1 of this Agreement and Plan of Merger.
SECTION 2
TERMS OF MERGER
2.1 Merger. Subject to the terms and conditions set forth in this Agreement and Plan
of Merger, at the Effective Time, the Parent Corporation shall be merged with and into the
Surviving Corporation in accordance with applicable law. The Surviving Corporation shall be the
surviving entity resulting from the Merger and shall continue to exist and to be governed by the
laws of the State of Delaware under the corporate name Zix Corporation. The Merger shall be
consummated pursuant to the terms of this Agreement and Plan of Merger which has been approved by
the Board of Directors and the shareholders of the Parent Corporation.
2.2 Effective Time. The Merger contemplated by this Agreement and Plan of Merger
shall be effective at 11:59 p.m. EST on June [__], 2011.
2.3 Certificate of Incorporation. The Certificate of Incorporation of the Surviving
Corporation as it exists at the Effective Time shall remain in full force and effect after the
Effective Time.
2.4 Bylaws. The Bylaws of the Surviving Corporation as they exist at the Effective
Time shall remain the Bylaws of the Surviving Corporation until altered or amended as provided in
such Bylaws.
2.5 Board of Directors. The Board of Directors
of the Parent Corporation shall
be the Board of Directors of the Surviving Corporation, and shall hold office
from and after the Effective Time until their respective successors are elected and qualified.
2.6 Officers. The officers
of the Parent Corporation shall be the officers of the Surviving Corporation, and shall hold office from and after the Effective Time
until their respective successors are appointed and qualified.
63
SECTION 3
MANNER OF CONVERTING SHARES
Each share of capital stock of the Parent Corporation that was issued and outstanding
immediately prior to the Merger shall, by virtue of the Merger and without any action on the part
of the holder thereof, be converted into one fully paid and non-assessable share of the capital
stock of the Surviving Corporation. The issued and outstanding shares of capital stock of the
Surviving Corporation prior to the Effective Time shall be cancelled and cease to exist by virtue
of the Merger.
SECTION 4
MISCELLANEOUS
4.1 Further Assurances. Each party to this Agreement and Plan of Merger agrees to do
such things as may be reasonably requested by the other party in order to more effectively
consummate or document the transactions contemplated by this Agreement and Plan of Merger.
4.2 Plan of Reorganization. Each party to this Agreement and Plan of Merger agrees to
treat the Merger for all income tax purposes as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended. Further, each party hereto agrees, by
executing this Agreement and Plan of Merger, to have adopted a plan of reorganization within the
meaning of Treasury Regulations Section 1.368-2(g).
[Signatures on next page]
64
IN WITNESS WHEREOF, the undersigned corporations have caused this Agreement and Plan of Merger
to be executed by their duly authorized officers as of the date first above written.
|
|
|
|
|
|
PARENT CORPORATION:
ZIX CORPORATION
|
|
|
By: |
|
|
|
|
Richard D. Spurr |
|
|
|
President, Chief Executive Officer
and Chief Operating Officer |
|
|
|
SURVIVING CORPORATION:
ZIX CORPORATION
|
|
|
By: |
|
|
|
|
Richard D. Spurr |
|
|
|
President, Chief Executive Officer
and Chief Operating Officer |
|
|
65
Appendix B Certificate of Incorporation
CERTIFICATE OF INCORPORATION
OF
ZIX CORPORATION
ARTICLE ONE
Name of Corporation
The name of the corporation is Zix Corporation (hereinafter referred to as the Corporation).
ARTICLE TWO
Registered Office
The address of the registered office of the Corporation in the State of Delaware is 2711
Centerville Road, Suite 400, Wilmington, DE 19808, New Castle County. The name of the registered
agent of the Corporation at that address is Corporation Service Company.
ARTICLE THREE
Purpose
The purpose of the Corporation is to engage in any lawful act or activity for which a
corporation may be organized under the Delaware General Corporation Law (DGCL).
ARTICLE FOUR
Capital Stock
A. The total number of shares of all classes of stock which the Corporation has authority to
issue is One Hundred Eighty-Five Million (185,000,000), consisting of One Hundred Seventy-Five
Million (175,000,000) shares of Common Stock, $.01 par value (the Common Stock), and Ten Million
(10,000,000) shares of Preferred Stock, $1.00 par value (the Preferred Stock).
B. Each outstanding share of Common Stock entitles the holder thereof to one vote on each
matter properly submitted to the stockholders of the Corporation for their vote; provided, however,
that, except as otherwise required by law, holders of Common Stock are not entitled to vote on any
amendment to this Certificate of Incorporation (including any Preferred Stock Designation relating
to any series of Preferred Stock) that relates solely to the terms of one or more outstanding
series of Preferred Stock if the holders of such affected series are entitled, either separately or
together as a class with the holders of one or more other such series, to vote thereon pursuant to
this Certificate of Incorporation (including any Preferred Stock Designation relating to any series
of Preferred Stock). The Common Stock is subject to the express terms of the Preferred Stock and
any series thereof. Subject to the preferences and rights, if any, applicable to shares of
Preferred Stock or any series thereof, the holders of shares of Common Stock are
66
entitled to receive such dividends and other distributions in cash, property, stock or
otherwise as are declared thereon by the Board of Directors (the Board) at any time and from time
to time out of assets or funds of the Corporation legally available therefor. In the event of any
voluntary or involuntary liquidation, dissolution or winding-up of the Corporation, after payment
or provision for payment of the debts and other liabilities of the Corporation, and subject to the
preferences and rights, if any, applicable to shares of Preferred Stock or any series thereof, the
holders of shares of Common Stock are entitled to receive all of the remaining assets of the
Corporation available for distribution to its stockholders, ratably in proportion to the number of
shares of Common Stock held by them.
C. The Board is authorized, subject to any limitations prescribed by law, to provide for the
issuance of shares of Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware (such certificate being hereinafter referred to as a
Preferred Stock Designation), to establish from time to time the number of shares to be included
in each such series, and to fix the designation, powers, preferences, and rights of the shares of
each such series and any qualifications, limitations or restrictions thereof. The number of
authorized shares of Preferred Stock may be increased or decreased (but not below the number of
shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting
power of all of the then-outstanding shares of capital stock of the Corporation entitled to vote
thereon, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a
vote of any such holders is required pursuant to the terms of any Preferred Stock Designation. The
authority of the Board with respect to each series of Preferred Stock includes, but is not limited
to, determination of the following:
|
i. |
|
the designation of the series, which may be by distinguishing number,
letter or title; |
|
ii. |
|
the number of shares of the series, which number the Board may
thereafter (except where otherwise provided in the applicable Preferred Stock
Designation) increase or decrease (but not below the number of shares thereof then
outstanding); |
|
iii. |
|
the preferences, if any, and relative, participating, optional or
other special rights, if any, and the qualifications, limitations or restrictions
thereof, if any, of the series; |
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iv. |
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whether dividends, if any, are cumulative or noncumulative and the
dividend rate, if any, of the series; |
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v. |
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whether dividends, if any, are payable in cash, in kind or otherwise; |
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vi. |
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the dates on which dividends, if any, are payable; |
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vii. |
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the redemption rights and price or prices, if any, for shares of the
series; |
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viii. |
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the terms and amount of any sinking fund provided for the purchase
or redemption of shares of the series; |
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ix. |
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the amounts payable on shares of the series in the event of any
voluntary or involuntary liquidation, dissolution or winding-up of the affairs of
the Corporation; |
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x. |
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whether the shares of the series are convertible into or exchangeable
for shares of any other class or series, or any other security, of the Corporation
or any other corporation, and, if so, the specification of such other class or
series or such other security, the conversion or exchange price or prices or rate
or rates, any adjustments thereof, the date or dates as of which such shares are
convertible or exchangeable and all other terms and conditions upon which |
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such conversion or exchange may be made; |
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xi. |
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restrictions on the issuance of shares of the same series or of any
other class or series; |
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xii. |
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whether or not the holders of the shares of such series have voting
rights, in addition to the voting rights provided by law, and if so, the terms of
such voting rights, which may provide, among other things and subject to the other
provisions of this Certificate of Incorporation, that each share of such series
carries one vote or more or less than one vote per share, that the holders of such
series are entitled to vote on certain matters as a separate class (which for such
purpose may be comprised solely of such series or of such series and one or more
other series or classes of stock of the Corporation); and |
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xiii. |
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such other rights and provisions with respect to any series that the
Board provides. |
D. Except as may be required by law or as provided in this Certificate of Incorporation or in
the Preferred Stock Designation, holders of Common Stock have the exclusive right to vote for the
election of directors and for all other purposes, and holders of Preferred Stock are not be
entitled to vote on any matter or receive notice of any meeting of stockholders.
E. The Corporation is entitled to treat the person in whose name any share of its stock is
registered as the owner thereof for all purposes and is not bound to recognize any equitable or
other claim to, or interest in, such share on the part of any other person, whether or not the
Corporation has notice thereof, except as expressly provided by applicable law.
ARTICLE FIVE
Management of the Corporation
The following provisions are inserted for the management of the business and the conduct of
the affairs of the Corporation, and for further definition, limitation and regulation of the powers
of the Corporation and of its directors and stockholders:
A. The business and affairs of the Corporation is managed by or under the direction of the
Board. In addition to the powers and authority expressly conferred upon them by statute or by this
Certificate of Incorporation or the bylaws of the Corporation, the directors are hereby empowered
to exercise all such powers and do all such acts and things as may be exercised or done by the
Corporation.
B. The directors of the Corporation need not be elected by written ballot unless the bylaws so
provide.
C. Subject to the rights of the holders of any series of Preferred Stock, any action required
or permitted to be taken by the stockholders of the Corporation must be effected at a duly called
annual or special meeting of stockholders of the Corporation and may not be effected by any consent
in writing by such stockholders.
D. Special meetings of stockholders of the Corporation may be called only by the Board acting
pursuant to a resolution adopted by a majority of the Whole Board (defined below). For purposes of
this Certificate of Incorporation, the term Whole Board means the total number of authorized
directors whether or not there exist any vacancies in previously authorized directorships.
E. An annual meeting of stockholders, for the election of directors to succeed those whose
terms expire and for the transaction of such other business as may properly come before the
meeting, will be held at such place, on such date, and at such time as fixed by the Board.
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ARTICLE SIX
Board of Directors
A. Subject to the rights of the holders of any series of Preferred Stock to elect additional
directors under specified circumstances, the number of directors will be not less than three and
not more than twelve, as fixed from time to time exclusively by the Board pursuant to a resolution
adopted by a majority of the Whole Board.
B. A majority of the Whole Board constitutes a quorum for all purposes at any meeting of the
Board, and, except as otherwise expressly required by law or by this Certificate of Incorporation,
all matters will be determined by the affirmative vote of a majority of the directors present at
any meeting at which a quorum is present.
C. Subject to the rights of the holders of any series of Preferred Stock then outstanding and,
unless otherwise required by law or by resolution of the Board, newly created directorships
resulting from any increase in the authorized number of directors or any vacancies in the Board
resulting from death, resignation, disqualification, removal from office or other cause will be
filled only by a majority vote of the directors then in office, though less than a quorum (and not
by stockholders), and directors so chosen will serve for a term expiring at the annual meeting of
stockholders at which the term of office of the class to which they have been chosen expires, with
each director to hold office until his or her successor is duly elected and qualified. No decrease
in the authorized number of directors will shorten the term of any incumbent director.
D. Advance notice of stockholder nominations for the election of directors and of business to
be brought by stockholders before any meeting of the stockholders of the Corporation must be given
in the manner provided in the bylaws of the Corporation.
E. The election of directors may be conducted in any manner approved by the Board at the time
when the election is held and need not be by written ballot.
ARTICLE SEVEN
Bylaws
The Board is empowered to adopt, amend or repeal bylaws of the Corporation without the assent
or vote of the stockholders. Any adoption, amendment or repeal of the bylaws of the Corporation by
the Board requires the approval of a majority of the Whole Board. The stockholders also have power
to adopt, amend or repeal the bylaws of the Corporation; provided, however, that, in addition to
any vote of the holders of any class or series of stock of the Corporation required by law or by
this Certificate of Incorporation, the affirmative vote of the holders of at least (75%) of the
voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled
to vote thereon, voting together as a single class, is required to adopt, amend or repeal any
provision of the bylaws of the Corporation.
ARTICLE EIGHT
Liability of Directors
A. A director of the Corporation is not personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director, except for liability
(i) for any breach of the directors duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct or a knowing
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violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which
the director derived an improper personal benefit. If the DGCL is amended to authorize corporate
action further eliminating or limiting the personal liability of directors, then the liability of a
director of the Corporation will automatically be deemed eliminated and limited to the fullest
extent permitted by the DGCL as so amended.
B. The Corporation shall indemnify and advance expenses to the directors of the Corporation to
the fullest extent permitted by the applicable provisions of the DGCL, as now or hereafter in
effect, provided that, except as otherwise provided in the bylaws of the Corporation, the
Corporation is not obligated to indemnify or advance expenses to a director of the Corporation in
respect of an action, suit or proceeding (or part thereof) instituted by such director, unless such
action, suit or proceeding (or part thereof) has been authorized by the Board. The rights provided
by this Article Eight, Section B do not limit or exclude any rights, indemnities or limitations of
liability to which any director of the Corporation may be entitled, whether as a matter of law,
under the bylaws of the Corporation, by agreement, vote of the stockholders or disinterested
directors of the Corporation, or otherwise.
C. Any repeal or modification of the foregoing paragraph will not adversely affect any right
or protection of a director of the Corporation existing at the time of such repeal or modification.
ARTICLE NINE
No Stockholder Action By Written Consent; Special Meetings
Any action required or permitted to be taken by the stockholders of the Corporation must be
effected at a duly called annual or special meeting of the stockholders of the Corporation, and the
stockholders have no ability to consent in writing to the taking of any action. A special meeting
of the stockholders of the Corporation can be called only by or at the direction of the Board, and
the stockholders of the Corporation have no ability to call a special meeting of the stockholders.
ARTICLE TEN
Forum Selection
Unless the Corporation consents in writing to the selection of an alternative forum, the Court
of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative
action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of
breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to
the Corporation or the Corporations stockholders, (iii) any action asserting a claim arising
pursuant to any provision of the DGCL, or (iv) any action asserting a claim governed by the
internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in
shares of capital stock of the Company shall be deemed to have notice of and consented to the
provisions of this Article Ten.
ARTICLE ELEVEN
Amendment
The Corporation reserves the right to amend or repeal any provision contained in this
Certificate of Incorporation in the manner prescribed by the laws of the State of Delaware and all
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rights conferred upon stockholders are granted subject to this reservation; provided, however,
that, notwithstanding any other provision of this Certificate of Incorporation or any provision of
law that might otherwise permit a lesser vote or no vote, but in addition to any vote of the
holders of any class or series of the stock of this corporation required by law or by this
Certificate of Incorporation, and the affirmative vote of the holders of at least 75% of the voting
power of all of the then-outstanding shares of the capital stock of the Corporation entitled to
vote thereon, voting together as a single class, is required to amend or repeal any or all of
Article ELEVEN, Sections C or D of Article Five, Article Six, Article Seven and Article Eight.
ARTICLE TWELVE
Incorporator
The incorporator is James F. Brashear, whose mailing address is 2711 N. Haskell Avenue, Suite
2200, Dallas, Texas 75204-2960.
(Remainder of page intentionally left blank.)
I, the undersigned, being the incorporator, for the purpose of forming a corporation under the
laws of the State of Delaware do make, file and record this Certificate of Incorporation, do
certify that the facts herein stated are true, and, accordingly, have hereto set my hand this [__]
day of [April], 2011.
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By: |
James F. Brashear
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Vice President, General Counsel & |
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Corporate Secretary |
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71
Appendix C Bylaws
ZIX CORPORATION
BYLAWS
ARTICLE 1 STOCKHOLDERS
Section 1. Annual Meeting.
(1) An annual meeting of stockholders, for the election of directors to succeed those whose
terms expire and for the transaction of such other business as may properly come before the
meeting, will be held at a place, date, and time fixed by the Board of Directors.
(2) Nominations of persons for election to the Board of Directors and the proposal of business
to be transacted by the stockholders may be made at an annual meeting of stockholders (a) pursuant
to the Corporations proxy materials with respect to such meeting, (b) by or at the direction of
the Board of Directors or (c) by any stockholder of record of the Corporation (Record
Stockholder) at the time of the giving of the notice required in the following paragraph, who is
entitled to vote at the meeting and who has complied with the notice procedures set forth in this
section. The procedure described in the foregoing clause (c) and paragraph (3) below is the
exclusive means for a stockholder to make nominations or propose business (other than business
included in the Corporations proxy materials pursuant to Rule 14a-8 under the Securities Exchange
Act of 1934 (the act, and the rules and regulations promulgated thereunder, as amended from time to
time, the Exchange Act) at an annual meeting of stockholders, unless otherwise specified by law
or stock exchange regulation.
(3) In order for nominations or business to be properly brought before an annual meeting by a
Record Stockholder pursuant to clause (c) of the foregoing paragraph, (a) the Record Stockholder
must have given timely notice thereof in writing to the Secretary of the Corporation, (b) any such
business must be a proper matter for stockholder action under Delaware law and (c) the Record
Stockholder and the beneficial owner, if any, on whose behalf any such proposal or nomination is
made, must have acted in accordance with the representations set forth in the Solicitation
Statement (defined in Article I, Section 1(4)(c)(iv)) required by these Bylaws. To be timely, a
Record Stockholders notice must be received by the Secretary at the principal executive offices of
the Corporation not less than 45 or more than 75 days before the one-year anniversary of the date
on which the Corporation first mailed its proxy materials for the preceding years annual meeting
of stockholders; except not if the meeting is convened more than 30 days before or delayed by more
than 30 days after the anniversary of the preceding years annual meeting, or if no annual meeting
was held in the preceding year, notice by the Record Stockholder must be so received not later than
the close of business on the later of (i) the 90th day before such annual meeting or (ii) the 10th
day after the day on which public announcement of the date of such meeting is first made.
Notwithstanding anything in the preceding sentence to the contrary, if the number of directors to
be elected to the Board of Directors is increased and no public announcement naming all of the
nominees for director or indicating the increase in the number of directors was made by the
Corporation at least 10 days before the last day a Record Stockholder may deliver a notice of
nomination in accordance with the preceding sentence, a Record Stockholders notice will also be
considered timely, but only with respect to nominees for any new director positions created by such
increase, if it is received by the Secretary at the principal executive offices of the Corporation
not later than the close of business on the 10th day
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after the day on which a public announcement of the increase in the number of directors is
first made by the Corporation. In no event will an adjournment, or postponement of an annual
meeting for which notice has been given, commence a new time period for the giving of a Record
Stockholders notice.
(4) In order to be effective, a Record Stockholders notice must set forth:
a. if such notice pertains to the nomination of directors, as to each person whom the Record
Stockholder proposes to nominate for election or reelection as a director, all information relating
to such person as would be required to be disclosed in solicitations of proxies for the election of
such nominees as directors pursuant to Regulation 14A under the Exchange Act, and such persons
written consent to serve as a director if elected;
b. as to any business that the Record Stockholder proposes to bring before the meeting, a
brief description of such business, the reasons for conducting such business at the meeting and any
material interest in such business of such Record Stockholder and the beneficial owner, if any, on
whose behalf the proposal is made; and
c. as to (1) the Record Stockholder giving the notice and (2) the beneficial owner, if any, on
whose behalf the nomination or proposal is made (each, a party):
(i) the name and address of each such party;
(ii) (A) the class, series, and number of shares of the Corporation that are owned, directly
or indirectly, beneficially and of record by each such party, (B) any option, warrant, convertible
security, stock appreciation right, or similar right with an exercise or conversion privilege or a
settlement payment or mechanism at a price related to any class or series of shares of the
Corporation or with a value derived in whole or in part from the value of any class or series of
shares of the Corporation, whether or not such instrument or right will be subject to settlement in
the underlying class or series of capital stock of the Corporation or otherwise (Derivative
Instrument) directly or indirectly owned beneficially by each such party, and any other direct or
indirect opportunity to profit or share in any profit derived from any increase or decrease in the
value of shares of the Corporation, (C) any proxy, contract, arrangement, understanding, or
relationship pursuant to which either party has a right to vote, directly or indirectly, any shares
of any security of the Corporation, (D) any short interest in any security of the Corporation held
by each such party (for purposes of this Section 1(4), a person is deemed to have a short interest
in a security if such person directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has the opportunity to profit or share in any profit
derived from any decrease in the value of the subject security), (E) any rights to dividends on the
shares of the Corporation owned beneficially directly or indirectly by each such party that are
separated or separable from the underlying shares of the Corporation, (F) any proportionate
interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a
general or limited partnership in which either party is a general partner or, directly or
indirectly, beneficially owns an interest in a general partner and (G) any performance-related fees
(other than an asset-based fee) that each such party is directly or indirectly entitled to based on
any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if
any, as of the date of such notice, including without limitation any such interests held by members
of each such partys immediate family sharing the same household. The information required by this
paragraph must be supplemented by such stockholder or such beneficial owner, as the case may be,
not later than 10 days after the record date for determining the stockholders
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entitled to vote at the meeting; provided, that if such date is after the date of the meeting,
not later than the day before the meeting;
(iii) any other information relating to each such party that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with solicitations of
proxies for, as applicable, the proposal or the election of directors in a contested election
pursuant to Section 14 of the Exchange Act; and
(iv) a statement whether or not each such party will deliver a proxy statement and form of
proxy to holders of, in the case of a proposal, at least the percentage of voting power of all of
the shares of capital stock of the Corporation required under applicable law to carry the proposal
or, in the case of a nomination or nominations, at least the percentage of voting power of all of
the shares of capital stock of the Corporation reasonably believed by the Record Stockholder or
beneficial holder, as the case may be, to be sufficient to elect the nominee or nominees proposed
to be nominated by the Record Stockholder (such statement, a Solicitation Statement).
(5) A person is not eligible for election or re-election as a director at an annual meeting
unless (i) the person is nominated by a Record Stockholder in accordance with Section 1(2)(c) or
(ii) the person is nominated by or at the direction of the Board of Directors. Only such business
will be conducted at an annual meeting of stockholders as is brought before the meeting in
accordance with the procedures set forth in this section. The chairman of the meeting has the sole
power and the duty to determine whether a nomination or any business proposed to be brought before
the meeting has been made in accordance with the procedures set forth in these Bylaws and, if any
proposed nomination or business is not in compliance with these Bylaws, to declare that such
defectively proposed business or nomination will not be presented for stockholder action at the
meeting and will be disregarded.
(6) For purposes of these Bylaws, public announcement means disclosure by the Corporation in
a press release issued via a national news service or in a document publicly filed with the
Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(7) Notwithstanding the foregoing provisions of this Section 1, a stockholder must also comply
with all applicable requirements of the Exchange Act and the rules and regulations thereunder with
respect to matters set forth in this Section 1. Nothing in this Section 1 will be deemed to affect
any rights of stockholders to request inclusion of proposals in the Corporations proxy statement
pursuant to Rule 14a-8 under the Exchange Act.
Section 2. Special Meetings.
(1) Special meetings of the stockholders, other than those required by statute, may be called
at any time by the Board of Directors acting pursuant to a resolution adopted by a majority of the
Whole Board (defined below). For purposes of these Bylaws, the term Whole Board means the total
number of authorized director positions whether or not there exist any vacancies in director
positions. The Board of Directors may postpone or reschedule any special meeting.
(2) The only business that will be conducted at a special meeting of stockholders is business
brought before the meeting by or at the direction of the Board of Directors. The notice of such
special meeting must include the purpose for which the meeting is called. Nominations of persons
for election to the Board of Directors may be made at a special meeting of stockholders at which
directors are to be elected (a) by or at the direction of the Board of
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Directors or (b) by any stockholder of record at the time of giving of notice provided for in
this paragraph, who is entitled to vote at the meeting and who delivers a written notice to the
Secretary setting forth the information set forth in Section 1(4)(a) and 1(4)(c) of this Article I.
Nominations by stockholders of persons for election to the Board of Directors may be made at such
a special meeting of stockholders only if such Stockholder of Records notice required by the
preceding sentence will be received by the Secretary at the principal executive offices of the
Corporation not later than the close of business on the later of the 90th day before the special
meeting or the 10th day after the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be elected at such
meeting. An adjournment, or postponement of a special meeting for which notice has been given,
will not commence a new time period for the giving of a Stockholder of Records notice. A person
is not eligible for election or reelection as a director at a special meeting unless the person is
nominated (i) by or at the direction of the Board of Directors or (ii) by a Stockholder of Record
in accordance with the notice procedures set forth in this Article I.
(3) Notwithstanding the foregoing provisions of this Section 2, a stockholder must also comply
with all applicable requirements of the Exchange Act and the rules and regulations thereunder with
respect to matters set forth in this Section 2. Nothing in this Section 2 will be deemed to affect
any rights of stockholders to request inclusion of proposals in the Corporations proxy statement
pursuant to Rule 14a-8 under the Exchange Act.
Section 3. Notice of Meetings.
(1) Notice of the place, if any, date, and time of all meetings of the stockholders, the means
of remote communications, if any, by which stockholders and proxyholders may be deemed to be
present in person and vote at such meeting, and the record date for determining the stockholders
entitled to vote at the meeting, if such date is different from the record date for determining
stockholders entitled to notice of the meeting, must be given, not less than 10 nor more than 60
days before the date on which the meeting is to be held, to each stockholder entitled to vote at
such meeting as of the record date for determining the stockholders entitled to notice of the
meeting, except as otherwise provided herein or required by law. For purposes of these Bylaws, the
term required by law means as required from time to time by the Delaware General Corporation Law
or the Certificate of Incorporation of the Corporation (Certificate of Incorporation).
(2) When a meeting is adjourned to another time or place, notice need not be given of the
adjourned meeting if the time and place, if any, thereof, and the means of remote communications,
if any, by which stockholders and proxyholders may be deemed to be present in person and vote at
such adjourned meeting are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than 30 days after the date for which
the meeting was originally noticed, notice of the place, if any, date, and time of the adjourned
meeting and the means of remote communications, if any, by which stockholders and proxyholders may
be deemed to be present in person and vote at such adjourned meeting, will be given to each
stockholder in conformity herewith. If after the adjournment a new record date for stockholders
entitled to vote is fixed for the adjourned meeting, the Board of Directors must fix a new record
date for notice of such adjourned meeting, which record date will not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors and, except as otherwise
required by law, will not be more than 60 nor less than 10 days before the date of such adjourned
meeting, and will give notice of the adjourned meeting to each stockholder of record entitled to
vote at such adjourned meeting as of the record date fixed for notice of such adjourned meeting.
At any adjourned meeting, any business may be transacted that might have been transacted at the
original meeting.
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Section 4. Quorum.
(1) At any meeting of the stockholders, the holders of a majority of the voting power of all
of the shares of the stock entitled to vote at the meeting, present in person or by proxy, will
constitute a quorum for all purposes, unless or except to the extent that the presence of a larger
number is required by law or by the rules of any stock exchange upon which the Corporations
securities are listed. Where a separate vote by a class or classes or series is required, a
majority of the voting power of the shares of such class or classes or series present in person or
represented by proxy will constitute a quorum entitled to take action with respect to that vote on
that matter. Broker non-votes and abstentions are counted towards establishing a quorum but are
not considered as votes cast for or against a proposal or director nominee.
(2) If a quorum fails to attend any meeting, the chairman of the meeting may adjourn the
meeting to another place, if any, date, or time.
Section 5. Organization.
The person designated by the Board of Directors or, in the absence of such a person, the
Chairman of the Board or, in his or her absence, the President of the Corporation or, in his or her
absence, a person chosen by the holders of a majority of the voting power of the shares entitled to
vote who are present, in person or by proxy, will call to order any meeting of the stockholders and
act as chairman of the meeting. In the absence of the Secretary of the Corporation, the secretary
of the meeting will be appointed by the chairman of the meeting.
Section 6. Conduct of Business.
The chairman of any meeting of stockholders has the exclusive power to determine the order of
business and the procedure at the meeting, including such regulation of the manner of voting and
the conduct of discussion as seem to him or her in order. The chairman of the meeting has the
exclusive power to adjourn the meeting to another place, if any, date and time. The date and time
of the opening and closing of the polls for each matter upon which the stockholders will vote at
the meeting will be announced by the chairman or secretary of the meeting at the meeting.
Section 7. Proxies and Voting.
(1) At any meeting of the stockholders, every stockholder entitled to vote may vote in person
or by proxy authorized by an instrument in writing or by a transmission permitted by law filed in
accordance with the procedure established for the meeting. Any copy, facsimile telecommunication
or other reliable reproduction of the writing or transmission created pursuant to this paragraph
may be substituted or used in lieu of the original writing or transmission for any and all purposes
for which the original writing or transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction is a complete reproduction of the entire original writing
or transmission.
(2) The Corporation may, and to the extent required by law, must, in advance of any meeting of
stockholders, appoint one or more inspectors of election to act at the meeting and make a written
report thereof. The Corporation may designate one or more alternate inspectors to replace any
inspector who fails to act. If no inspector or alternate is able to act at a meeting of
stockholders, the chairman of the meeting may, and to the extent required by law, must, appoint one
or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of
his or her duties, will take and sign an oath faithfully to execute the duties of inspector with
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strict impartiality and according to the best of his or her ability. Every vote taken by
ballots will be counted by a duly appointed inspector or inspectors.
(3) All elections of directors will be determined by a plurality of the votes cast, and except
as otherwise required by law or the rules of any stock exchange upon which the Corporations
securities are listed, all other matters will be determined by a majority of the votes cast
affirmatively or negatively.
Section 8. Stock List.
(1) The officer who has charge of the stock ledger of the Corporation will, at least 10 days
before every meeting of stockholders, prepare or obtain a complete list of stockholders entitled to
vote at that meeting of stockholders, provided, however, if the record date for determining the
stockholders entitled to vote is less than 10 days before the meeting date, the list must reflect
the stockholders entitled to vote as of the 10th day before the meeting date, arranged in
alphabetical order and showing the address of each such stockholder and the number of shares
registered in his or her name. The list will be open to the examination of any stockholder for a
period of at least 10 days before the meeting in the manner required by law.
(2) A stock list will also be open to the examination of any stockholder during the whole time
of the meeting as provided by law. This list will presumptively determine (a) the identity of the
stockholders entitled to examine such stock list and to vote at the meeting and (b) the number of
shares held by each of them.
ARTICLE II BOARD OF DIRECTORS
Section 1. Number, Election and Term of Directors.
The authorized number of directors constituting the Whole Board will be fixed from time to
time in the manner provided in the Certificate of Incorporation.
Section 2. Newly Created Directorships and Vacancies.
Subject to the rights of the holders of any series of preferred stock, newly created
directorships resulting from any increase in the authorized number of directors or any vacancies in
the Board of Directors resulting from death, resignation, disqualification, removal from office or
other cause will, unless otherwise required by law or by resolution of the Board of Directors, be
filled only by a majority vote of the directors then in office, though less than a quorum (and not
by stockholders), and directors so chosen will serve for a term expiring at the annual meeting of
stockholders or until such directors successor will have been duly elected and qualified. No
decrease in the authorized number of directors will shorten the term of any incumbent director.
Section 3. Regular Meetings.
Regular meetings of the Board of Directors will be held at such place or places, on such date
or dates, and at such time or times as are established by the Board of Directors and publicized
among all directors. A notice of each regular meeting is not required.
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Section 4. Special Meetings.
Special meetings of the Board of Directors may be called by the Chairman of the Board, the
President or by the Board of Directors and will be held at such place or places, on such date or
dates, and at such time or times as they or he or she will fix. Unless waived, notice of the
place, date, and time of each such special meeting must be given to each director by mailing
written notice not less than five days before the meeting or by telephone or facsimile or
electronic transmission of the same not less than 24 hours before the meeting. Unless otherwise
indicated in the notice thereof, any and all business may be transacted at a special meeting.
Neither the business to be transacted at, nor the purpose of any special meeting of the directors,
need be specified in any written notice.
Section 5. Quorum.
A majority of the Whole Board constitutes a quorum for conducting any vote at any meeting of
the Board of Directors. If a quorum fails to attend any meeting, a majority of those present may
adjourn the meeting to another place, date, or time, without further notice.
Section 6. Participation in Meetings By Conference Telephone.
Members of the Board of Directors, or of any committee thereof, may participate in a meeting
of the Board of Directors or committee by conference telephone or other communications equipment by
means of which all persons participating in the meeting can hear each other and such participation
constitutes presence in person at such meeting.
Section 7. Action Without a Meeting.
Any action required or permitted to be taken at a meeting of the Board of Directors, or any
committee thereof, may be taken without a meeting if all members of the Board of Directors or
committee consent thereto in writing or by electronic transmission, and such writing, writings or
electronic transmission or transmissions are filed with the minutes of proceedings of the Board of
Directors or committee.
Section 8. Conduct of Business.
At any meeting of the Board of Directors, business will be transacted in such order and manner
as the chairman may from time to time determine, and, except as otherwise expressly required by
law, all matters will be determined by the affirmative vote of a majority of the directors present
at any meeting at which a quorum is present.
Section 9. Compensation of Directors.
Unless otherwise restricted by the Certificate of Incorporation, the Board of Directors has
the authority to fix the compensation of the directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors or committee thereof. For their
service on the Board of Directors or committees thereof, directors may be paid a fixed sum for
attendance at each meeting or paid a stated salary or paid other compensation. Payment for
services as a director does not preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
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Section 10. Resignation.
Any director may resign at any time by submitting an electronic transmission or by delivering
a written notice of resignation signed by such director, to the Chairman of the Board of Directors
or the Secretary of the Corporation. Unless a later effective time is specified therein, such
resignation is effective upon delivery.
ARTICLE III COMMITTEES
Section 1. Committees of the Board of Directors.
The Board of Directors may from time to time designate committees of the Board of Directors,
with such lawfully delegable powers and duties as it thereby confers, to serve at the pleasure of
the Board of Directors and will, for those committees and any others provided for herein, appoint a
director or directors to serve as the member or members, designating, if it desires, other
directors as alternate members who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of any member of any committee and any alternate
member in his or her place, the member or members of the committee present at the meeting and not
disqualified from voting, whether or not he or she or they constitute a quorum, may by unanimous
vote appoint another member of the Board of Directors to act at the meeting in the place of the
absent or disqualified member.
Section 2. Conduct of Business.
Each committee may determine the procedural rules for meeting and conducting its business and
will act in accordance therewith, except as otherwise provided herein or required by law. Adequate
provision will be made for notice to members of all meetings; one-third of the members constitutes
a quorum unless the committee will consist of one or two members, in which event one member
constitutes a quorum; and all matters will be determined by a majority vote of the members present.
Section 3. Resignation; Removal.
Any member (and any alternate member) of any committee may resign at any time by delivering a
notice of resignation by such member to the Board of Directors or the Chairman. Unless a later
effective time is specified therein, such resignation is effective upon delivery. Any member (and
any alternate member) of any committee may be removed at any time, either for or without cause, by
resolution adopted by a majority of the entire Board of Directors.
Section 4. Vacancies.
If any vacancy occurs in any committee, by reason of disqualification, death, resignation,
removal or otherwise, the remaining members (and any alternate members) may continue to act, and
any such vacancy may be filled by the Board of Directors.
ARTICLE IV OFFICERS
Section 1. Generally.
The officers of the Corporation will consist of a President, one or more Vice Presidents, a
Secretary, a Treasurer and such other officers as may from time to time be appointed by the Board
of Directors. Officers will be elected by the Board of Directors, which will consider that
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subject at its first meeting after every annual meeting of stockholders. Each officer will
hold office until his or her successor is elected and qualified or until his or her earlier
resignation or removal. Any number of offices may be held by the same person. The salaries of
officers elected by the Board of Directors will be fixed from time to time by the Board of
Directors or by such officers as may be designated by resolution of the Board of Directors.
Section 2. President.
The President is the chief executive officer of the Corporation. Subject to the provisions of
these Bylaws and to the direction of the Board of Directors, he or she has the responsibility for
the general management and control of the operations, business and affairs of the Corporation and
will perform all duties and have all powers which are commonly incident to the office of chief
executive or which are delegated to him or her by the Board of Directors. He or she has power to
sign all stock certificates, contracts and other instruments of the Corporation which are
authorized and has general supervision and direction of all of the other officers, employees and
agents of the Corporation.
Section 3. Vice President.
Each Vice President has such powers and duties as are delegated to him or her by the Board of
Directors. One Vice President will be designated by the Board of Directors to perform the duties
and exercise the powers of the President in the event of the Presidents absence or disability.
Section 4. Treasurer.
The Treasurer has the responsibility for maintaining the financial records of the Corporation.
He or she makes such disbursements of the funds of the Corporation as are authorized and renders
from time to time an account of all such transactions and of the financial condition of the
Corporation. The Treasurer also performs such other duties as the Board of Directors may from time
to time prescribe.
Section 5. Secretary.
The Secretary issues all authorized notices for, and keeps minutes of, all meetings of the
stockholders and the Board of Directors. He or she has charge of the corporate books and performs
such other duties as the Board of Directors may from time to time prescribe.
Section 6. Delegation of Authority.
The Board of Directors may from time to time delegate the powers or duties of any officer to
any other officers or agents, notwithstanding any provision hereof.
Section 7. Removal.
Any officer of the Corporation may be removed at any time, with or without cause, by the Board
of Directors.
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Section 8. Action with Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, the President or any officer of the
Corporation authorized by the President has power to vote and otherwise act on behalf of the
Corporation, in person or by proxy, at any meeting of stockholders of or with respect to any action
of stockholders of any other corporation in which this Corporation holds securities and otherwise
to exercise any and all rights and powers which this Corporation possesses by reason of its
ownership of securities in such other corporation.
ARTICLE V STOCK
Section 1. Certificates of Stock.
The shares of the Corporation may be represented by certificates, provided that the Board of
Directors may provide by resolution or resolutions that some or all of any or all classes or series
of the stock of the Corporation may be uncertificated shares, such decision to be made in the Board
of Directors sole discretion. Any such resolution will not apply to shares represented by a
certificate until each such certificate is surrendered to the Corporation. All signatures on the
certificate referred to in this Article V, Section 1 of these Bylaws may be in facsimile, engraved
or printed form, to the extent permitted by law. In case any officer, transfer agent or registrar
who has signed, or whose facsimile, engraved or printed signature has been placed upon a
certificate will have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect as if he or she
were such officer, transfer agent or registrar at the date of issue.
Section 2. Transfers of Stock.
Transfers of stock can only be made upon the transfer books of the Corporation kept at an
office of the Corporation or by transfer agents designated to transfer shares of the stock of the
Corporation. Except where a certificate is issued in accordance with Section 4 of Article V of
these Bylaws, an outstanding certificate for the number of shares involved, if one has been issued,
must be surrendered for cancellation before a new certificate, if any, is issued therefor.
Section 3. Record Date.
(1) In order that the Corporation may determine the stockholders entitled to notice of any
meeting of stockholders or any adjournment thereof, the Board of Directors may, except as otherwise
required by law, fix a record date, which record date must not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and must not be more than
60 nor less than 10 days before the date of such meeting. If the Board of Directors fixes a record
date for notice, that date also will be the record date for determining the stockholders entitled
to vote at such meeting unless the Board of Directors fixes a later date on or before the date of
the meeting as the date for making such determination. If no record date is fixed by the Board of
Directors, the record date for determining stockholders entitled to notice of and to vote at a
meeting of stockholders will be the close of business on the day next preceding the day on which
notice is given or, if notice is waived, the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders will also apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for determination of stockholders
entitled to vote at the adjourned meeting, and in such case may also fix as the record date for
stockholders entitled to notice of such adjourned meeting the same or an
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earlier date as that fixed for determination of stockholders entitled to vote in accordance
with the foregoing provisions of this Section 3 at the adjourned meeting.
(2) In order that the Corporation may determine the stockholders entitled to receive payment
of any dividend or other distribution or allotment of any rights or the stockholders entitled to
exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose
of any other lawful action, the Board of Directors may fix a record date, which record date must
not precede the date upon which the resolution fixing the record date is adopted, and which record
date must be not more than 60 days prior to such action. If no record date is fixed, the record
date for determining stockholders for any such purpose will be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
Section 4. Lost, Stolen or Destroyed Certificates.
In the event of the loss, theft or destruction of any certificate of stock, another may be
issued in its place pursuant to such policies as the Board of Directors may establish concerning
proof of such loss, theft or destruction and concerning the giving of a satisfactory bond or bonds
of indemnity.
Section 5. Policies.
The issue, transfer, conversion and registration of certificates of stock will be governed by
such other policies as the Board of Directors may establish.
Section 6. Transfer Agent and Registrar.
The Board of Directors may appoint one or more transfer agents and one or more registrars, and
may require all certificates representing shares to bear the signature of any such transfer agents
or registrars.
ARTICLE VI NOTICES
Section 1. Notices.
If mailed, notice to stockholders will be deemed given when deposited in the mail, postage
prepaid, directed to the stockholder at such stockholders address as it appears on the records of
the Corporation. Without limiting the manner by which notice otherwise may be given effectively to
stockholders, any notice to stockholders may be given by electronic transmission in the manner
provided in Section 232 of the Delaware General Corporation Law.
Section 2. Waivers.
A written waiver of any notice, signed by a stockholder or director, or waiver by electronic
transmission by such person, whether given before or after the time of the event for which notice
is to be given, is deemed equivalent to the notice required to be given to such person. Neither
the business nor the purpose of any meeting need be specified in such a waiver. Attendance at any
meeting will constitute waiver of notice, except attendance for the express purpose of objecting at
the beginning of the meeting to the transaction of business because the meeting is not lawfully
called or convened.
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ARTICLE VII MISCELLANEOUS
Section 1. Facsimile Signatures.
In addition to the provisions for use of facsimile signatures elsewhere specifically
authorized in these Bylaws, facsimile signatures of any officer or officers of the Corporation may
be used whenever and as authorized by the Board of Directors or a committee thereof.
Section 2. Corporate Seal.
The Board of Directors may provide a suitable seal, containing the name of the Corporation,
which seal will be in the charge of and used by the Secretary. If and when so directed by the
Board of Directors or a committee thereof, duplicates of the seal may be kept and used by the
Treasurer or by an Assistant Secretary or Assistant Treasurer.
Section 3. Reliance upon Books, Reports and Records.
Each director and each officer of the Corporation will, in the performance of his or her
duties, be fully protected in relying in good faith upon the books of account or other records of
the Corporation and upon such information, opinions, reports or statements presented to the
Corporation by any of its officers or employees, or committees of the Board of Directors so
designated, or by any other person as to matters which such director or committee member reasonably
believes are within such other persons professional or expert competence and who has been selected
with reasonable care by or on behalf of the Corporation.
Section 4. Fiscal Year.
The fiscal year of the Corporation is as fixed by the Board of Directors.
Section 5. Time Periods.
In applying any provision of these Bylaws which requires that an act be done or not be done a
specified number of days prior to an event or that an act be done during a period of a specified
number of days prior to an event, calendar days will be used, the day of the doing of the act will
be excluded, and the day of the event will be included.
ARTICLE VIII INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Right to Indemnification.
Each person who was or is made a party or is threatened to be made a party to or is otherwise
involved in any action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a proceeding), by reason of the fact that he or she is or was a
director or an officer of the Corporation or is or was serving at the request of the Corporation as
a director, officer or trustee of another corporation or of a partnership, joint venture, trust or
other enterprise, including service with respect to an employee benefit plan (hereinafter an
indemnitee), whether the basis of such proceeding is alleged action in an official capacity as a
director, officer or trustee or in any other capacity while serving as a director, officer or
trustee, will be indemnified and held harmless by the Corporation to the fullest extent permitted
by Delaware law, as the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to provide prior to such amendment),
against all expense, liability
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and loss (including attorneys fees, judgments, fines, ERISA excise taxes or penalties and
amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection
therewith; provided, however, that, except as provided in Section 3 of this Article VIII with
respect to proceedings to enforce rights to indemnification, the Corporation will indemnify any
such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only
if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation.
Section 2. Right to Advancement of Expenses.
In addition to the right to indemnification conferred in Section 1 of this Article VIII, an
indemnitee will also have the right to be paid by the Corporation the expenses (including
attorneys fees) incurred in defending any such proceeding in advance of its final disposition
(hereinafter an advancement of expenses); provided, however, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an indemnitee in his or her
capacity as a director or officer (and not in any other capacity in which service was or is
rendered by such indemnitee, including, without limitation, service to an employee benefit plan)
will be made only upon delivery to the Corporation of an undertaking (hereinafter an
undertaking), by or on behalf of such indemnitee, to repay all amounts so advanced if it will
ultimately be determined by final judicial decision from which there is no further right to appeal
(hereinafter a final adjudication) that such indemnitee is not entitled to be indemnified for
such expenses under this Section 2 or otherwise.
Section 3. Right of Indemnitee to Bring Suit.
If a claim under Section 1 or 2 of this Article VIII is not paid in full by the Corporation
within 60 days after a written claim has been received by the Corporation, except in the case of a
claim for an advancement of expenses, in which case the applicable period will be 20 days, the
indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim. To the fullest extent permitted by law, if successful in whole or in part in
any such suit, or in a suit brought by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the indemnitee will be entitled to be paid also the
expense of prosecuting or defending such suit. In (i) any suit brought by the indemnitee to
enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to
enforce a right to an advancement of expenses) it will be a defense that, and (ii) in any suit
brought by the Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the Corporation will be entitled to recover such expenses upon a final adjudication
that, the indemnitee has not met any applicable standard for indemnification set forth in the
Delaware General Corporation Law. Neither the failure of the Corporation (including its directors
who are not parties to such action, a committee of such directors, independent legal counsel, or
its stockholders) to have made a determination prior to the commencement of such suit that
indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the
applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its directors who are not parties to such action, a
committee of such directors, independent legal counsel, or its stockholders) that the indemnitee
has not met such applicable standard of conduct, will create a presumption that the indemnitee has
not met the applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder, or brought by the Corporation to
recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving
that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under
this Article VIII or otherwise will be on the Corporation.
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Section 4. Non-Exclusivity of Rights.
The rights to indemnification and to the advancement of expenses conferred in this Article
VIII will not be exclusive of any other right which any person may have or hereafter acquire under
any statute, the Corporations Certificate of Incorporation, Bylaws, agreement, vote of
stockholders or directors or otherwise.
Section 5. Insurance.
The Corporation may maintain insurance, at its expense, to protect itself and any director,
officer, employee or agent of the Corporation or another corporation, partnership, joint venture,
trust or other enterprise against any expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
Section 6. Indemnification of Employees and Agents of the Corporation.
The Corporation may, to the extent authorized from time to time by the Board of Directors,
grant rights to indemnification and to the advancement of expenses to any employee or agent of the
Corporation to the fullest extent of the provisions of this Article with respect to the
indemnification and advancement of expenses of directors and officers of the Corporation.
Section 7. Nature of Rights.
The rights conferred upon indemnitees in this Article VIII will be contract rights and such
rights will continue as to an indemnitee who has ceased to be a director, officer or trustee and
will inure to the benefit of the indemnitees heirs, executors and administrators. Any amendment,
alteration or repeal of this Article VIII that adversely affects any right of an indemnitee or its
successors will be prospective only and will not limit, eliminate, or impair any such right with
respect to any proceeding involving any occurrence or alleged occurrence of any action or omission
to act that took place prior to such amendment or repeal.
ARTICLE IX FORUM SELECTION
Unless the Corporation consents in writing to the selection of an alternative forum, the Court
of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative
action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of
breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to
the Corporation or the Corporations stockholders, (iii) any action asserting a claim arising
pursuant to any provision of the Delaware General Corporation Law, or (iv) any action asserting a
claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise
acquiring any interest in shares of capital stock of the Company will be deemed to have notice of
and consented to the provisions of this Article IX.
ARTICLE X AMENDMENTS
These Bylaws may be amended, altered or repealed (1) by resolution adopted by a majority of
the entire Board of Directors at any special or regular meeting of the Board of Directors; or (2)
at any regular or special meeting of the stockholders upon the affirmative vote of the holders of
75% or more of the combined voting power of the outstanding shares of the Corporation entitled to
vote generally in the election of directors if, in the case of such special
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meeting only, notice of such amendment, alteration or repeal is contained in the notice or
waiver of notice of such meeting.
ARTICLE XI CONSTRUCTION
In the event of any conflict between the provisions of these Bylaws as in effect from time to
time and the provisions of the Certificate of Incorporation of the Corporation as in effect from
time to time, the provisions of the Certificate of Incorporation will control.
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ZIX CORPORATION 2711 N. HASKELL AVENUE SUITE 2200,LB36 DALLAS,TX 75204-2960 VOTE BY INTERNET
- www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting
date. Have your proxy card in hand when you access the web site and follow the instructions to
obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF
FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing
proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual
reports electronically via e-mail or the Internet. To sign up for electronic delivery, please
follow the instructions above to vote using the Internet and, when prompted, indicate that you
agree to receive or access proxy materials electronically in future years. VOTE BY PHONE -
1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59
P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand
when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card
and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o
Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK
AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD
IS VALID ONLY WHEN SIGNED AND DATED. For Withhold For All To withhold authority to vote for any
All All Except individual nominee(s), mark For All The Board of Directors recommends you vote
Except and write the number(s) of the nominee(s) on the line below. FOR the following: 1.
Election of Directors Nominees 01 Robert C. Hausmann 02 James S. Marston 03 Maribess L. Miller 04
Antonio R. Sanchez III 05 Richard D. Spurr The Board of Directors recommends you vote FOR proposals
2 and 3. For Against Abstain 2 Ratification of Appointment of Whitley Penn LLP NOTE: Such other
business as may properly come as Independent Registered Public Accountants. before the meeting or
any adjournment or postponement thereof. 3 Advisory vote on executive compensation The Board of
Directors recommends you vote 3 YEARS on the following proposal: 1 year 2 years 3 years Abstain 4
Advisory vote on the frequency of the advisory vote on executive compensation The Board of
Directors recommends you vote FOR the following proposal: For Against Abstain 5 Approve the
merger of the Company into a newly formed Delaware subsidiary resulting in the reincorporation of
the Company in Delaware For address change/comments, mark here. (see reverse for instructions)
Yes No Please indicate if you plan to attend this meeting Please sign exactly as your name(s)
appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please
give full title as such. Joint owners should each sign personally. All holders must sign. If a
corporation or partnership, please sign in full corporate or partnership name, by authorized
officer. Signature [PLEASE SIGN WITHIN BOX Date Signature (Joint Owners) Date |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice &
Proxy Statement, Annual Report is/ are available at www.proxyvote.com . ZIX CORPORATION Annual
Meeting of Shareholders June 8, 2011 10:00 AM This proxy is solicited by the Board of Directors The
shareholder(s) hereby appoint(s) James F. Brashear and Michael W. English, or either of them, as
proxies, each with the power to appoint his/her substitute, and hereby authorizes each of them to
represent and to vote, as designated on the reverse side of this ballot and in his/her discretion
as to such other business as may properly come before the above stated meeting, all of the shares
of Common stock of ZIX CORPORATION that the shareholder(s) is/are entitled to vote at the
above-stated annual meeting, or any adjournment or postponement thereof. This proxy, when properly
executed, will be voted in the manner directed herein. If no such direction is made, this proxy
will be voted in accordance with the Board of Directors recommendations. Address change/comments:
(If you noted any Address Changes and/or Comments above, please mark corresponding box on the
reverse side.) Continued and to be signed on reverse side 00001048972 R1.0.0.11699 |