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EMPLOYMENT AND OPTION AMENDMENT AGREEMENT

     THIS EMPLOYMENT AND OPTION AMENDMENT AGREEMENT (the “Agreement”) is effective as of
September 23, 2005, between First Avenue Networks, Inc., a Delaware corporation (the
“Company”), and Sandra G. Thomas (the “Executive”).

     IN CONSIDERATION FOR the mutual promises set forth below, the parties agree as follows:

     1. Term. Subject to earlier termination as hereafter provided, this Agreement
shall have an original term of six months commencing on September 23, 2005 and shall be
automatically extended thereafter for successive terms of six months each (together, the
“Term”), unless either party provides written notice to the other at least thirty (30) days
prior to the expiration of the original or any extension Term that the Agreement is not to
be extended or renewed. During the Term, the Executive shall be paid a base annual salary
of $150,000, payable in accordance with the Company’s standard payroll practices and subject
to increase from time to time, in the sole discretion of the Company’s board of directors
and the compensation committee thereof.

     2. Removal and Resignation.

          2.1. Removal by Company Without Cause or Resignation by Executive for Good
Reason. Subject to the Executive meeting her obligations hereunder in all
material respects, including those set forth in the last paragraph of this Section
2.1 and in Sections 3, 4, 5 and 6, if the Executive’s employment is terminated by
the Company without Cause or the Executive resigns for Good Reason prior to the
expiration of the Term (the date of such removal or resignation, the “Transition
Date”) (and, for this purpose, in the event the Company provides written notice
under Section 1 to the Executive that the Agreement will not be extended or renewed
at the expiration of the then existing six-month Term, the Executive will be deemed,
without any further action being required on the part of any party, to have resigned
for Good Reason prior to the expiration of the Term):

               (i) The Company shall pay the Executive severance in the amount of $75,000
cash (the “Severance Amount”). The Severance Amount will be paid in six equal
monthly installments, in accordance with the Company’s standard payroll
practices, beginning on the Company’s next regular payday following the
effective date of the General Release described below, and will be reduced by
all required withholdings; provided, however, that if required pursuant to
Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”),
the timing of the payment of the Severance Amount shall be adjusted as necessary
to comply with Section 409A;

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               (ii) The Company shall pay the Executive a cash bonus payment equal to
$60,000, pro-rated for a partial calendar year based on the Transition Date (the
“Annual Bonus”) (e.g. if the Transition Date is June 30, the Annual Bonus would
be 50% of $60,000). The Annual Bonus shall be paid in one lump sum following
the effective date of the General Release described below and at least 45 days
after the Transition Date, and will be reduced by all required withholdings;

               (iii) If the Executive elects to continue her participation and that of her
eligible dependents in the Company’s group health and dental plans pursuant to
her so-called “COBRA” continuation rights by signing and returning the election
form that is provided, then, for a period of 6 months from the Transition Date
or, if earlier, until the Executive ceases to be eligible for participation
under COBRA or the terms of the plans, the full premium cost of such coverage
will be borne by the Company and either paid on behalf of or reimbursed to the
Executive (the “Medical Benefit”);

               (iv) If the Transition Date occurs during the original Term, the Company
shall pay the Executive a cash bonus payment equal to $75,000 (the “Transition
Bonus”), in full and without pro-ration. The Transition Bonus shall be paid in
one lump sum following the effective date of the General Release described below
and at least 45 days after the Transition Date, and will be reduced by all
required withholdings; provided, however, that if required pursuant to Section
409A, the Transition Bonus shall be paid in connection with the Company’s first
regular payday as permitted pursuant to Section 409A; and

               (v) Notwithstanding anything to the contrary contained in the Company’s
Stock Option Plan or any option grant certificate issued to the Executive, eight
days following the Executive’s execution of the General Release (as defined
below), (i) those options to purchase shares of the common stock of the Company
issued to the Executive pursuant to that certain option grant certificate dated
as of September 22, 2003 (the “Legacy Certificate”) that remain unvested as of
the Transition Date and (ii) those options to purchase shares of the common
stock of the Company issued to the Executive pursuant to any other option grant
certificate or otherwise (together with the Legacy Certificate, the “Option
Certificates”) that would have, but for the Executive’s removal or resignation,
become vested and exercisable within the six month period following the
Transition Date shall become immediately vested and exercisable (collectively,
the “Accelerated Options”). Section 1 of the Legacy Certificate is hereby
amended so as to give effect to the first sentence of this Section 2.1(v).
Except as otherwise expressly provided in this Section 2.1(v), the terms and
conditions of the Accelerated Options shall remain unchanged and shall be
governed by the terms of the Stock Option Plan, the Option Certificates and any
other restrictions or provisions generally applicable to shares purchased by
Company employees.

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          The provision of any of the above benefits by the Company to the Executive are
expressly conditioned upon the Executive executing a general release of claims in
substantially the form of the General Release attached hereto as Exhibit B
(the “General Release”) within twenty-one days (or such greater period as may be
specified by the Company) following the latest of the date on which the Executive
receives notice of her removal as a senior financial officer of the Company, the
date on which the Executive gives notice of her resignation or the date she receives
a copy of the General Release, and upon the Executive not revoking the General
Release in a timely manner thereafter. The Executive acknowledges and agrees that
she will not receive any Severance Amount, Annual Bonus, Transition Bonus or Medical
Benefit, and will not be eligible for Accelerated Options, if she does not sign the
General Release and thereby waive those claims against the Company and the related
entities specified in the General Release, and that there is good consideration for
said General Release. For the avoidance of doubt, in the event the Executive fails
to execute the General Release, any outstanding stock options held by the Executive
as of the Transition Date will be exercisable only as provided in the Company’s
Stock Option Plan and the Option Certificates (without giving effect to the first
sentence of Section 2.1(v) hereto). Further, if the Executive fails to comply with
any provision of this Agreement during the period in which she is entitled to
receive the Severance Amount or Medical Benefit described above, she shall no longer
be entitled to receive the Severance Amount or the Medical Benefit and the Company
will have no further obligation to pay or provide them.

          2.2. Death. In the event of the Executive’s death prior to the
expiration of the Term hereof, the Executive’s employment and all of her rights
hereunder shall terminate, and no further payments of any kind shall be made except
for base salary (including without limitation the Severance Amount) earned and
unpaid through the termination date; provided, however, that under such
circumstances, the Executive’s options shall be exercisable in accordance with the
Company’s Stock Option Plan, the Option Certificates (without giving effect to the
first sentence of Section 2.1(v) hereof), and any other restrictions or provisions
generally applicable to shares purchased by Company employees.

          2.3. Disability. In the event of the Executive’s Disability, as
defined below, prior to the expiration of the Term hereof, the Company shall
thereafter have the right, upon written notice to the Executive, to terminate the
employment of the Executive, in which case the date of termination shall be the date
of such written notice to the Executive. “Disability” shall mean a physical
or mental disability of the Executive that prevents the Executive from substantially
performing the essential functions of her position notwithstanding the provision of
any reasonable accommodation. In the event of termination of the Executive’s
employment pursuant to this Section 2.3, all of the Executive’s rights hereunder
shall terminate and no further payments of any kind shall be made except for base
salary (including without limitation the Severance Amount) earned and unpaid through
the termination date; provided, however, that under such circumstances,

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and so long as it does not constitute a new grant under Section 409A, (i) those
options to purchase shares of the common stock of the Company issued to the
Executive pursuant to the Legacy Certificate that remain unvested as of the time of
the Executive’s termination shall become immediately vested and exercisable and (ii)
the Executive’s other outstanding options shall be exercisable in accordance with
the Company’s Stock Option Plan, the Option Certificates other than the Legacy
Certificate (without giving effect to the first sentence of Section 2.1(v) hereof or
this Section 2.3), and any other restrictions or provisions
generally applicable to shares purchased by Company employees. Except as otherwise expressly provided in
this Section 2.3, upon the Executive’s termination due to Disability, the terms and
conditions of the Executive’s options granted pursuant to the Legacy Certificate
shall remain unchanged and shall be governed by the terms of the Stock Option Plan,
the Legacy Certificate and any other restrictions or provisions generally applicable
to shares purchased by Company employees.

          2.4. With Cause or Without Good Reason. If the Executive’s service to
the Company as its Chief Financial Officer or other senior financial officer is
terminated by the Company prior to the Transition Date with Cause (as defined
below), or if the Executive resigns from her position as the Company’s Chief
Financial Officer or other senior financial officer prior to the Transition Date
without Good Reason (as defined below), all of the Executive’s rights hereunder
shall terminate and no further payments of any kind shall be made except for base
salary earned and unpaid through the termination date; provided, however, that under
such circumstances, the Executive’s options shall be exercisable in accordance with
the Company’s Stock Option Plan, the Option Certificates (without giving effect to
the first sentence of Section 2.1(v) hereof), and any other restrictions or
provisions generally applicable to shares purchased by Company employees. As used
herein, “Cause” shall mean (a) conviction of a felony, (b) willful or
persistent failure of Executive to follow the reasonable directions of the Board of
Directors of the Company which are consistent with the Executive’s position and
applicable law after notice detailing the specific failure and the Executive’s
failure to cure within 30 days, or (c) material breach by the Executive of Sections
3 or 4 of this Agreement. As used herein, “Good Reason” shall mean (a)
failure of the Company to continue the Executive in the position of Chief Financial
Officer or other senior financial officer, (b) a material diminution in the nature
or scope of the Executive’s responsibilities, duties or authority, (c) a diminution
in the Executive’s salary, (d) the Company’s provision of the notice described in
Section 1 of its intent not to renew or extend this Agreement upon the expiration of
any Term hereof; or (e) failure of the Company to continue to maintain a corporate
office within 25 miles of Charlottesville, Virginia from which the Executive can
work a minimum of seventy-five percent (75%) of her time.

          2.5. Surrender of Books and Records. The Executive shall upon the
termination of this Agreement for any reason, or at any other time as required by

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the Company, immediately surrender to the Company all lists, books, records,
documents and other information incident to the Company’s business and all other
property belonging to the Company, it being distinctly understood that all such
lists, books, records, documents and all such other information are the property of
the Company.

          2.6. Amendment of Options. The Company represents and warrants to the
Executive that (i) this Agreement has been duly and validly approved by the Board of
Directors of the Company and, if necessary, the compensation committee of the
Company, and (ii) any and all Board of Directors, compensation committee or other
corporate actions that may be required to approve and give effect to this Agreement
and the terms set forth herein, including without limitation the amendment to the
Legacy Certificate described in Sections 2.1(v) and 2.3 and any amendment to the
Stock Option Plan that may be necessary to give effect to the provisions of Sections
2.1(v) and 2.3, have been taken.

     3. Confidential Information; Proprietary Rights.

          3.1. The Executive agrees to comply with the policies and procedures of the
Company and its Affiliates for protecting Confidential Information and shall not,
without the written consent of the Board of Directors of the Company, during or
after the Term of this Agreement, disclose to any person or entity (other than a
person or entity to which disclosure is required by law, or in connection with the
proper performance of her duties as an officer of the Company), any Confidential
Information obtained by the Executive incident to her employment with the Company.
As used herein, Confidential Information means any and all information of the
Company and its Affiliates that is not generally known by others with whom they
compete or do business, or with whom any of them plan to compete or do business and
any and all information, publicly known in whole or in part or not, which, if
disclosed by the Company or its Affiliates would assist in competition against them;
provided, however, that Confidential Information shall not include
information that is generally known to the public other than as a result of
unauthorized disclosure by the Executive. The Executive hereby acknowledges that
Confidential Information constitutes a unique and valuable asset of the Company and
its Affiliates acquired at great time and expense by the Company and its Affiliates,
and that any disclosure or other use of such information other than for the sole
benefit of the Company would be wrongful and would cause irreparable harm to the
Company and its Affiliates. As used herein, “Affiliates” means (i) all subsidiaries
of the Company and (ii) any person or entity holding all or substantially all of the
voting power of the Company.

          3.2. All inventions, developments, methods, processes and ideas conceived,
developed or reduced to practice by the Executive during her employment which are
directly or indirectly useful in, or relate to, the business of or services provided
by or sold by the Company or any of its Affiliates shall be promptly and fully
disclosed by the Executive to an appropriate executive officer

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of the Company (accompanied by all papers, drawings, data and other materials
relating thereto) and shall be the Company’s exclusive property as against the
Executive. The Executive hereby assigns and agrees to assign to the Company and
will, upon the Company’s request and at its expense (but without any additional
compensation to the Executive), execute all documents reasonably necessary to assign
the Executive’s right, title and interest in any such invention, development, method
or idea (and to direct issuance to the Company of all patents or copyrights with
respect thereto).

     4. Restricted Activities.

          4.1. The Executive agrees that, during the Term hereof and for one year
thereafter (the “Non-Competition Period”), she will not, directly or indirectly, as
an officer, director, executive, consultant, owner (other than as the holder of less
than one percent of the equity securities of a publicly-traded business or company),
general partner, agent or employee, become involved with or undertake any planning
for any business that primarily provides fixed broadband wireless services for
mobile backhaul, bypass and fiber extensions in the United States, including without
limitation combining or conspiring with other employees or any third party for the
purpose of organizing any such competitive activity.

          4.2. The Executive further agrees that during the Non-Competition Period, she
shall not, in any manner, directly or indirectly, alone or jointly, with or as an
agent for, or as an employee of, any person, firm or corporation, knowingly hire or
attempt to hire, employ, solicit and/or induce to leave any employee or independent
consultant of the Company or any of its subsidiaries, or any former employee or
independent consultant who was employed or retained by the Company or any of its
subsidiaries within 60 days preceding such attempt to employ or solicit. The
Company may notify subsequent employers of the Executive of the terms of Section 4
hereof.

     5. Cooperation.

          5.1. The Executive agrees to cooperate with the Company during the Term and for
a period of 45 days thereafter to effect a smooth management transition, including,
if requested by the Company, without limitation a transition to any new Chief
Financial Officer; provided, however, that the time commitment required of the
Executive pursuant to this Section 5.1 shall not exceed 5 hours per week and the
Executive will be reimbursed for all reasonable expenses incurred by her in
connection with this Section 5.1.

          5.2. The Executive further agrees to reasonably cooperate with the Company
during the Term and the Non-Competition Period with respect to matters arising
during or related to Executive’s employment, including without limitation all
matters in connection with any governmental investigation, litigation

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or regulatory or other proceeding which may have arisen or which may arise
during Executive’s employment.

     6. No Disparagement. The Executive agrees that during the term of this
Agreement and the Non-Competition Period, the Executive shall not disparage the Company or
any of its subsidiaries, or, unless otherwise required by any applicable laws, rules, or
regulations, otherwise knowingly make any statement or take any actions that would be
materially harmful to the business, interests or reputation of the Company or any of its
subsidiaries; provided, however, that a good faith allegation by the Executive of a breach
by the Company of this Agreement shall not be deemed a violation of this provision.

     7. Waiver of Breach. The failure of the Company at any time to require
performance by the Executive of any provision hereof shall in no way affect the Company’s
right thereafter to enforce the same, nor shall the waiver by the Company of any breach of
any provision hereof be taken or held to be a waiver of any succeeding breach of any
provision or as a waiver of the provision itself.

     8. Attorneys’ Fees.

          8.1. The Company shall promptly pay after presentment of a reasonably
satisfactory invoice therefor the reasonable legal fees and related professional
expenses of the Executive, up to ten thousand dollars ($10,000), incurred in
connection with the entering into of this Agreement by Executive.

          8.2. In the event of any suit, arbitration or other proceeding between the
parties hereto with respect to this Agreement, the prevailing party shall, in
addition to such other relief as may be awarded, be entitled to reasonable
attorneys’ fees, expenses, and costs of investigation, all as actually incurred.

     9. Enforcement of Covenants. The Executive acknowledges that she has carefully
read and considered all of the terms and conditions of this Agreement, including the
restraints imposed upon her by Sections 3, 4 and 6 hereof. The Executive agrees that such
restraints are necessary for the reasonable and proper protection of the Company and its
Affiliates and that each and every one is reasonable in respect to subject matter, length of
time and geographic area. The Executive further acknowledges that the violation of any
provision of Sections 3, 4 or 6 of this Agreement would cause substantial and irreparable
injury to the Company and its Affiliates and that the Company would not have entered into
this Agreement without such restrictions. The parties further agree that in the event that
any provision of Sections 3, 4 or 6 hereof shall be determined by any court of competent
jurisdiction to be unenforceable by reason of its being extended over too great a time, too
large a geographic area or too great a range of activities, such provision shall be deemed
to be modified to permit its enforcement to the maximum extent permitted by law.

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     10. Entire Agreement. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter hereof, and supersedes any and all prior
negotiations, written or oral agreements, understandings and employment relationships.

     11. Compliance with Section 409A. The parties hereto agree that the terms
hereof, including without limitation the terms of any benefit provided to the Executive
hereunder, shall be adjusted to the extent necessary to comply with Section 409A; provided,
however, that the Company shall not be obligated to enter into any amendment to this
Agreement or any provision hereof that would result in increased costs to the Company or any
of its Affiliates.

     12. Miscellaneous. No rights or obligations hereunder may be assigned by
either party without the prior written consent of the other, except that the Company may
assign its rights and obligations hereunder to any purchaser of all or substantially all of
the assets of the Company. This Agreement shall inure to the benefit of and be binding upon
any successor of the Company. If any provision of this Agreement shall to any extent be
declared invalid or legally unenforceable by a court of competent jurisdiction, the same
shall not affect in any respect whatsoever the validity and enforceability of the remainder
of this Agreement, and each provision of this Agreement shall be valid and enforceable to
the fullest extent permitted by law. This Agreement cannot be amended, modified or
supplemented in any respect except by an agreement in writing signed by the Executive and an
expressly authorized representative of the Company. This Agreement shall be governed by,
and construed in accordance with, the internal laws of the State of Delaware, without resort
to choice-of-law principles.

[The remainder of this page has intentionally been left blank.]

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     IN WITNESS WHEREOF, the undersigned have executed this Employment and Option Amendment
Agreement effective as of the date first set forth above.

	 	 	 	 	 
	EXECUTIVE	 	FIRST AVENUE NETWORKS, INC.
	 
	 	 	 	 
	/s/ Sandra G. Thomas

	 	By:
	 	/s/ Richard L. Shorten, Jr.
	 

	 	 	 	 
	Sandra G. Thomas

	 	 	 	Richard L. Shorten, Jr.
	 

	 	 	 	Chairman

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Exhibit 4.1

September 14, 2005

VIA FAX

(212) 758-9620

HFTP Investment LLC

Gaia Offshore Master Fund, Ltd.

Caerus Fund Ltd.

c/o Promethean Asset Management, LLC

750 Lexington Avenue, 22nd Floor

New York, New York 10022

Attn: Robert J. Brantman

Ladies and Gentlemen:

          Reference is made to Warrant Nos. 4, 5, and 6, issued April 29, 2003 (collectively, the
“Promethean Warrants”), by Zix Corporation (“ZixCorp”) to HFTP Investment, L.L.C. (exercisable for
348,759 shares, without giving effect to any anti-dilution adjustments after August 11, 2005),
Caerus Fund. Ltd. (exercisable for 46,502 shares, without giving effect to any anti-dilution
adjustments after August 11, 2005), and Gaia Offshore Master Fund, Ltd. (exercisable for 348,759
shares, without giving effect to any anti-dilution adjustments after August 11, 2005)
(collectively, the “Promethean Entities”).

          ZixCorp has advised you that certain actions are currently occurring that will result in an
anti-dilution adjustment under the Promethean Warrants. These actions will be completed by
September 23, 2005 (the “September 23 Adjustment”). ZixCorp shall advise you of the required
anti-dilution adjustment to the Promethean Warrants by 11:00 a.m. (New York time) on September 26,
2005 and no later than September 26, 2005 shall file a Form 8-K disclosing the updated exercise
price, share number and expiration date. Also, on or about September 26, 2005, ZixCorp will file a
Pre-Effective Amendment No. 1 to the Registration Statement on Form S-3 (File No. 333-127727),
which relates to the Unregistered Shares (as defined below).

          ZixCorp and the Promethean Entities have agreed as follows:

	•	 	After giving effect to the September 23 Adjustment, the term of the Promethean Warrants
with respect to ZixCorp common stock shares issuable upon the exercise of the Promethean
Warrants (“Warrant Shares”) that are covered by an effective registration statement with the
Securities and Exchange Commission (“SEC”) currently and as of September 26, 2005 shall expire
at 5:00 p.m. (New York time) on September 30, 2005. The number of Warrant Shares currently
covered by an effective
registration statement with the SEC is 462,682 (the “Currently Registered Shares”), which are
covered by Registration Statement on Form S-3 (File No. 333-108560).

 

 

	•	 	After giving effect to the September 23 Adjustment, the term of
the Promethean Warrants with respect to shares issuable upon the
exercise of the Promethean Warrants that are not included in the
Currently Registered Shares (the “Unregistered Shares”) shall
expire at 5:00 p.m. (New York time) on the later of (i) December
31, 2005 or (ii) the 45th calendar day following the day that a
registration statement with respect to the Unregistered Shares
becomes effective and remains effective and ZixCorp notifies the
Promethean Entities of such effectiveness.

	•	 	No anti-dilution adjustments will be made under the Promethean
Warrants following the September 23 Adjustment with respect to the
number of shares underlying the Promethean Warrants (other than
pursuant to Sections 8(d) and 8(e)); however, the anti-dilution
adjustments relating to the Warrant Exercise Price (as defined in
the Promethean Warrants) of the Promethean Warrants exercisable
for the Unregistered Shares shall remain in effect following the
September 23 Adjustment until the later of (i) November 18, 2005
or (ii) 45 days after the registration statement with respect to
the Unregistered Shares becomes effective and remains effective
and ZixCorp notifies the Promethean Entities of such
effectiveness.

	•	 	Subject to ZixCorp’s compliance with this letter agreement, the
Promethean Entities waive any remedies they have under the
Registration Rights Agreement, dated as of March 3, 2003, by and
among ZixCorp and the Promethean Entities (the “Registration
Rights Agreement”), including without limitation Section 2(f)
thereof, relating solely to the failure by ZixCorp to have a
registration statement effective to cover the resale of the
Unregistered Shares as required by the Registration Rights
Agreement; provided, that this waiver shall be null and void if
ZixCorp fails to obtain an effective registration statement
covering the resale of the Unregistered Shares on or before
October 31, 2005. The inclusion of this release in this letter
agreement shall not be deemed an admission by ZixCorp that it has
failed to comply with the requirements of the Registration Rights
Agreement with respect to the Unregistered Shares.

          If the foregoing sets forth your understanding of our agreement, please so indicate by signing
in the space provided below and returning a copy of this letter to us for our files.

Very truly yours,

/s/ Ronald A. Woessner

Ronald A. Woessner

Sr. Vice President & General Counsel

 

 

AGREED AND ACCEPTED:

HFTP Investment LLC

Gaia Offshore Master Fund, Ltd.

Caerus Fund Ltd.

Each by: Promethean Asset Management L.L.C.

Each of its: Investment Manager

	 	 	 	 	 	 	 
	By:

	 	/s/
	 	Robert J. Brantman
	 	 
	 	 	 	 	 
	 

	 	 	 	Robert J. Brantman	 	 
	 

	 	 	 	Partner and Authorized Signatory

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