Document:

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                                                                     EXHIBIT 4.2

                                                                         NO. 001

THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE ARE SUBJECT
TO RESTRICTIONS ON TRANSFER PURSUANT TO THAT CERTAIN ASSET PURCHASE AGREEMENT,
DATED AS OF SEPTEMBER 2, 2003, BY AND AMONG THE COMPANY, ZIX ACQUISITION
CORPORATION, ELRON ELECTRONIC INDUSTRIES LTD., ELRON SOFTWARE, INC. AND ELRON
SOFTWARE (2000) LTD. A COPY OF SUCH AGREEMENT MAY BE OBTAINED FROM THE COMPANY
UPON REQUEST.

THIS NOTE AND THE COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY APPLICABLE STATE SECURITIES LAWS. THE COMMON STOCK ISSUABLE UPON
CONVERSION OR REDEMPTION OF THIS NOTE MAY ONLY BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED IF REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR IF THE HOLDER THEREOF PROVIDES THE COMPANY WITH AN
OPINION FROM COUNSEL ACCEPTABLE TO THE COMPANY STATING THAT AN EXEMPTION FROM
REGISTRATION IS AVAILABLE AT THE TIME OF SUCH TRANSFER.

                                 ZIX CORPORATION

                        5.75% CONVERTIBLE PROMISSORY NOTE

$1,000,000.00                                                  September 2, 2003

                  FOR VALUE RECEIVED, ZIX CORPORATION, a Texas corporation (the
"Company"), promises to pay to Elron Electronic Industries Ltd. or its
registered assigns (the "Holder"), at 3 Azrieli Center, 42nd Floor, Tel Aviv,
Israel 67023, or at such other place as the Holder may from time to time
designate in writing, in lawful money of the United States, the principal sum of
One Million and 00/100 dollars ($1,000,000), in accordance with the following
terms and provisions of this 5.75% Convertible Promissory Note (as the same may
be amended, modified or supplemented from time to time, this "Note").

                  The obligations of the Company under this Note shall rank in
right of payment on a parity with all other unsubordinated, unsecured,
obligations of the Company for the payment of borrowed money. This Note was
issued pursuant to that certain Asset Purchase Agreement (the "Purchase
Agreement"), dated as of the date of this Note, by and among the Company, Zix
Acquisition Corporation, Holder, Elron Software, Inc. and Elron Software (2000)
Ltd.

                  1.       Definitions. As used herein, the following terms
shall have the following meanings, capitalized terms not otherwise defined
herein having the meanings ascribed thereto in the Purchase Agreement:

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                           (a)      "Common Stock" means the common stock, par
value $0.01 per share, of the Company.

                           (b)      "Conversion Price" means $3.86, subject to
adjustment in accordance with Section 6.

                           (c)      "Maturity Date" means September 2, 2005.

                           (d)      "person" means an individual, partnership,
corporation, limited liability company, business trust, joint stock company,
trust, unincorporated association, joint venture, governmental authority or
other entity of whatever nature.

                           (e)      "Trading Day" means a day the Nasdaq
National Market or any national exchange which then constitutes the principal
securities market for the Common Stock is open for general trading of
securities.

                  2.       Interest. All unpaid principal amount of this Note
shall bear interest at the rate of 5.75% per annum. Accrued interest shall be
computed for actual days elapsed on the basis of a year of 365 days. The
principal of this Note and accrued interest, if any, shall bear interest at the
maximum lawful rate per annum upon the occurrence and during the continuation of
any Event of Default (as defined below).

                  3.       Payments.

                           (a)      Beginning on October 29, 2004, and
continuing on the last day of each succeeding month until and including the
Maturity Date, an amount of Eighty-Three Thousand Three Hundred Thirty-Three and
33/100 dollars ($83,333.33) plus all accrued interest on this Note shall be
payable to the Holder by the Company. Interest that has accrued but has not yet
been paid (or has not yet been converted) will be paid at the time each
principal payment is made.

                           (b)      As of the Maturity Date, if all payments
described in Section 3(a) have been made, and if applicable, any payments due
under Section 11 have been made, the Company shall have no further obligations
or liability under this Note.

                           (c)      All payments due hereunder shall be made in
immediately available funds and, except as otherwise permitted hereunder or
required by law, without set-off, counterclaim, deduction or withholding.

                  4.       Prepayment. The Company shall have the right to
prepay this Note in whole or in part, at any time, without premium or penalty;
provided that the Company provides the Holder with written notice of such
intention to prepay this Note, and the amount of such intended prepayment, not
less than ten Trading Days prior to the date such prepayment will be made (a
"Prepayment Date"). Holder shall have the right to convert this Note, in whole
or in part, at any time prior to such Prepayment Date in accordance with Section
6. Prepayments shall not postpone the due dates or amounts of subsequent
payments due under the terms of Section 3 of this Note, except as provided in
Section 5. Any prepayments of this Note shall be in

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increments of no less than $100,000.00 (or the total amount of principal and
interest outstanding if less than $100,000.00).

                  5.       Application of Payments, Prepayments and Conversions.
All payments and any prepayments and conversions made pursuant to Section 4 and
Section 6, respectively, shall be applied first to accrued interest hereon, if
any, and any remainder to the principal balance hereof. Any such prepayments or
conversions made under this Note shall apply to the next payment that is due
under this Note.

                  6.       Conversion Rights; Adjustments. The Holder shall have
conversion rights with respect to this Note as follows:

                           (a)      Holder's Right to Convert. At any time after
the date hereof, the outstanding principal amount of this Note plus all accrued
but unpaid interest thereon shall be convertible, in whole or in part, at the
option of the Holder, at any time and from time to time into fully paid and
nonassessable shares of Common Stock. The number of shares of Common Stock
issuable upon a conversion shall equal an amount determined by dividing (i) the
amount of this Note proposed to be converted by (ii) the Conversion Price in
effect as of such Conversion Date (as defined below).

                           (b)      Mechanics of Conversion. In order to
exercise its rights pursuant to a conversion, the Holder shall deliver written
notice in the form of Exhibit A to the Company stating that it elects to convert
all or part of the outstanding principal amount of this Note and accrued but
unpaid interest. Such notice shall state the amount that the Holder seeks to
convert and shall be accompanied by this Note. The date the notice is delivered
to the Company shall be the conversion date ("Conversion Date") and the Holder
shall be deemed to own the underlying Common Stock as of such date. As soon as
practicable (but no later than three Trading Days) after the Conversion Date,
the Company shall, or shall cause its transfer agent for the Common Stock to,
promptly issue and deliver to the Holder a certificate or certificates for the
number of shares of Common Stock to which the Holder is entitled (or process an
electronic transfer of the shares to an account designated by holder) and in the
case where only part of this Note is converted, the Company shall execute and
deliver a new Note in an aggregate principal amount equal to and in exchange for
the unconverted portion of the principal amount of this Note so surrendered.
Notwithstanding anything to the contrary in this Section 6, in the case where
only a part of this Note is converted, the principal amount of the unconverted
portion shall be at least $100,000.00 or else the remainder of this Note shall
be converted. Conversions pursuant to this Section 6 shall be deemed to have
been made immediately prior to the close of business on the Conversion Date. The
person entitled to receive the Common Stock issuable upon such conversion shall
be treated for all purposes as the record holder of such Common Stock at the
close of business on the Conversion Date.

                           (c)      Effect on Note. If this Note (or a portion
thereof) shall have been surrendered for conversion as herein provided, it (or
such portion) shall no longer be deemed to be outstanding and all rights with
respect hereto, including the rights, if any, to receive principal, interest,
notices and consent rights shall immediately cease and terminate on the
Conversion Date, except only the right of the Holder to receive shares of Common
Stock in exchange therefor. To the extent so converted, this Note shall be
retired and canceled.

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                           (d)      Fractional Shares. Notwithstanding any
provision hereof to the contrary, the Company shall not be required to issue
certificates representing fractions of shares of Common Stock upon the
conversion of this Note, nor shall it be required to issue scrip or pay cash in
lieu of fractional interests, it being the intent of the parties that all
fractional interests shall be eliminated by rounding any fraction down to the
nearest whole number of shares of Common Stock.

                           (e)      Reservation of Shares. The Company shall at
all times during which this Note shall be outstanding, reserve and keep
available out of its authorized but unissued stock, for the purpose of effecting
the conversion of this Note, such number of its duly authorized shares of Common
Stock as shall from time to time be sufficient to effect the conversion thereof.

                           (f)      Share Legends. The certificates representing
the shares of Common Stock issued upon conversion shall bear any legend required
by law or any then existing rights agreement.

                           (g)      Adjustment for Stock Splits and
Combinations. If the Company shall at any time or from time to time after the
date of this Note (the "Issue Date") effect a subdivision of the outstanding
Common Stock, the Conversion Price then in effect immediately before that
subdivision shall be proportionately decreased. If the Company shall at any time
or from time to time after the Issue Date combine the outstanding shares of
Common Stock, the Conversion Price then in effect immediately before the
combination shall be proportionately increased. Any adjustment under this
paragraph shall become effective at the close of business on the date the
subdivision or combination becomes effective.

                           (h)      Adjustment for Certain Dividends and
Distributions. In the event the Company at any time or from time to time after
the Issue Date shall make or issue a dividend or other distribution payable in
additional shares of Common Stock, then and in each such event the Conversion
Price shall be decreased as of the time of such issuance, by multiplying such
Conversion Price by a fraction, the numerator of which shall be the total number
of shares of Common Stock outstanding immediately prior to such issuance and the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such issuance plus the number of such
additional shares of Common Stock issuable in payment of such dividend or
distribution.

                           (i)      Adjustments for Other Dividends and
Distributions. In the event the Company at any time, or from time to time after
the Issue Date shall make or issue, a dividend or other distribution payable in
securities of the Company (other than shares of Common Stock) or other assets or
properties (including, without limitation, cash dividends), then and in each
such event provision shall be made so that the Holder shall receive in addition
to the number of shares of Common Stock receivable upon conversion of this Note,
the amount of securities of the Company or other assets or properties that they
would have received had this Note been converted into Common Stock on the date
of such event and had thereafter, during the period from the date of such event
to and including the Conversion Date, retained such securities or other assets
or properties receivable by them as aforesaid during such period giving
application to all adjustments called for during such period, under this
paragraph with respect to

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the rights of the Holder; provided that, in the event rights or benefits under
such securities, assets or properties shall terminate prior to the time that the
Holder may elect to convert this Note into shares of Common Stock, such amount
of securities, assets or properties that the Holder would have received had the
Holder converted this Note immediately prior to the distribution shall be
distributed to the Holder on the date the securities, assets or properties are
distributed to the holders of Common Stock.

                           (j)      Adjustment for Reclassification, Exchange or
Substitution. If the Common Stock shall be changed into the same or a different
number of shares of any class or classes of stock, whether by capital
reorganization, reclassification, or otherwise (other than a subdivision or
combination of shares, stock dividend or reorganization, reclassification,
merger, consolidation or asset sale provided for elsewhere in this Section 6),
then and in each such event the Holder shall have the right thereafter to
convert this Note into the kind and amount of shares of stock and other
securities and property receivable upon such reorganization, reclassification,
or other change, by holders of the number of shares of Common Stock into which
this Note might have been converted immediately prior to such reorganization,
reclassification, or change, all subject to further adjustment as provided
herein or with respect to such other securities or property by the terms
thereof.

                           (k)      Reorganizations, Mergers, Consolidations or
Asset Sales. If at any time after the Issue Date there is a tender offer,
exchange offer, merger, consolidation, recapitalization, sale of all or
substantially all of the Company's assets or reorganization involving the Common
Stock (collectively, a "Capital Reorganization") (other than a merger,
consolidation, sale of assets, recapitalization, subdivision, combination,
reclassification, exchange or substitution of shares provided for elsewhere in
this Section 6), as part of such Capital Reorganization, provision shall be made
so that the Holder will thereafter be entitled to receive upon conversion of
this Note the number of shares of stock or other securities or property of the
Company to which a holder of the number of shares of Common Stock deliverable
upon conversion would have been entitled on such Capital Reorganization, subject
to adjustment in respect to such stock or securities by the terms thereof. In
any such case, appropriate adjustment will be made in the application of the
provisions of this Section 6(k) with respect to the rights of the Holder after
the Capital Reorganization to the end that the provisions of this Section 6(k)
(including adjustment of the Conversion Price then in effect and the number of
shares issuable upon conversion of this Note) will be applicable after that
event and be as nearly equivalent as practicable. In the event that the Company
is not the surviving entity of any such Capital Reorganization, this Note shall
become notes of such surviving entity, with the same powers, rights and
preferences as provided herein.

                           (l)      Notice of Event Requiring Adjustment. The
Company shall provide the Holder written notice at least 10 Trading Days prior
to any event which would result in an adjustment pursuant the provisions of this
Section 6.

                           (m)      Certificate as to Adjustments. Upon the
occurrence of each adjustment or readjustment of the Conversion Price pursuant
to this Section 6, the Company, at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and furnish to
the Holder a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment are based
and shall

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file a copy of such certificate with its corporate records. The Company shall,
upon the reasonable written request of the Holder, furnish or cause to be
furnished to the Holder a similar certificate setting forth (i) such adjustments
and readjustments, (ii) the Conversion Price then in effect and (iii) the number
of shares of Common Stock and the amount, if any, of other property which then
would be received upon the conversion hereof. Despite such adjustment or
readjustment, the form of this Note, if the same shall reflect the initial or
any subsequent Conversion Price, need not be changed in order for the
adjustments or readjustments to be valid in accordance with the provisions of
this Note, which shall control.

                           (n)      No Impairment. The Company will not, by
amendment of its Articles of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Section 6 and in the taking of all such action as may be
necessary or appropriate in order to protect the conversion rights of the Holder
against impairment to the extent required hereunder. Nothing in this Section 6
shall affect the continued accrual of interest on this Note in accordance with
the terms of this Note.

                  7.       Events of Default. Each of the following shall
constitute an "Event of Default" under this Note:

                           (a)      if the Company fails to pay when due any
payment owing to the Holder under the terms of this Note;

                           (b)      if the Company fails to perform or observe
any material term, covenant, warranty or agreement contained in this Note, and
continuance of such failure for a period of five Trading Days after written
notice thereof is received by the Company from the Holder;

                           (c)      (i) a receiver, conservator, liquidator or
trustee of the Company or of its properties is appointed by order or decree of
any court or agency or supervisory authority having jurisdiction; (ii) an order
for relief is entered against the Company or under the United States Bankruptcy
Code, as amended, and any and all regulations promulgated thereunder
(collectively, the "Bankruptcy Code"); (iii) the Company is adjudicated bankrupt
or insolvent; (iv) any material portion of the properties of the Company is
sequestered by court order and such order remains in effect for more than 60
days after the Company obtains knowledge thereof; or (v) a petition is filed
against the Company under any state bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution, liquidation or receivership law
of any jurisdiction, whether now or hereafter in effect, and such petition is
not dismissed within 60 days;

                           (d)      the Company files a petition under the
federal Bankruptcy Code or seeks relief under any provision of any state
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution, liquidation or receivership law of any jurisdiction, whether now or
hereafter in effect, or consents to the filing of any such case or petition
against it under any such law;

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                           (e)      the Company makes a general assignment for
the benefit of its creditors, or admits in writing its inability to pay its
debts generally as they become due, or consents to the appointment of a
receiver, trustee or liquidator of all or any part of its property; or

                           (f)      the Common Stock shall cease to be listed on
any of the Nasdaq National Market, the New York Stock Exchange or the American
Stock Exchange and shall remain unlisted for a period of three Trading Days.

                  8.       Remedies Upon Default.

                           (a)      If an Event of Default (other than an Event
of Default specified in Section 7(d) or 7(e)) shall occur and be continuing,
then the Holder may declare the outstanding principal amount and all accrued and
unpaid interest on this Note immediately due and payable by a notice in writing
to the Company, and upon any such declaration all such amounts payable in
respect of this Note shall become immediately due and payable.

                           (b)      If an Event of Default specified in Section
7(d) or 7(e) occurs and is continuing, then the outstanding principal amount and
all accrued and unpaid interest on this Note shall become immediately due and
payable without any declaration or other act on the part of the Holder.

                           (c)      If this Note shall become due and payable
pursuant to any of the foregoing subsections (a) or (b), then the Holder, in
addition to such remedies as are therein provided, shall be entitled to exercise
all other rights and remedies available at law or in equity.

                  9.       Waiver of Presentment; Extensions. Presentment,
demand, notice of dishonor and protest are hereby waived. The Company agrees
that it shall remain liable for the payment hereof notwithstanding any agreement
for the extension of the due date of any amount payable hereunder made by the
Holder after the maturity thereof.

                  10.      Amendment, Waiver, Etc. Neither this Note nor any
terms hereof may be changed, waived, discharged or terminated unless such
change, waiver, discharge or termination is in writing signed by the Company and
the Holder.

                  11.      Collection Costs and Expenses. The Company shall pay
all reasonable costs, fees and expenses (including court costs and reasonable
attorneys' fees) incurred by the Holder in collecting or attempting to collect
any amount that becomes due hereunder.

                  12.      Notices. All notices, requests, demands and other
communications with respect hereto shall be in writing and shall be delivered by
hand, sent prepaid by an internationally recognized overnight courier service,
sent by first class recorded delivery post, or sent by facsimile transmission,
to the following addresses:

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                  If to the Company, to:

                  Zix Corporation
                  2711 North Haskell Avenue
                  Suite 2300 LB36
                  Dallas, Texas 75204
                  Attention: General Counsel
                  Facsimile: 214-515-7385

                  If to the Holder, to:

                  Elron Electronic Industries Ltd.
                  3 Azrieli Center, Triangle Building
                  42nd Floor
                  Tel Aviv, Israel, 67023
                  Attention: General Counsel
                  Facsimile: 972 -3- 607 5556

Any notice, request, demand or other communication delivered or sent in the
manner aforesaid shall be deemed given or made (as the case may be) upon the
earliest of (i) the date it is actually received, (ii) the first business day
after the day on which it is delivered by hand, (iii) the third business day
after the day on which it is properly delivered to an internationally recognized
overnight courier or if sent by first class recorded delivery post, (iv) the
seventh business day if sent by overseas post or (v) when sent if sent by
facsimile transmission with confirmed receipt thereof. Either the Company or the
Holder may change its address by notifying the other party of the new address in
any manner permitted by this Section 12.

                  13.      Severability. If any provision of this Note, or the
application thereof to any person, entity or circumstance, shall to any extent
be invalid or unenforceable, the remainder of the provisions of this Note, or
the application of such provision to other persons or circumstances, shall not
be affected thereby, and each provision of this Note shall be valid and
enforceable to the fullest extent permitted by law.

                  14.      Transfer of Note and Common Stock. This Note may not
be offered, sold, pledged or otherwise transferred to any person other than to
Holder's Affiliates. The Common Stock issuable upon conversion or redemption of
this Note may only be offered, sold, pledged or otherwise transferred in
accordance with the Purchase Agreement. The Common Stock issuable upon
conversion or redemption of this Note may be offered, sold, pledged or otherwise
transferred only if registered under the Securities Act of 1933, as amended (the
"Securities Act"), and any applicable state securities laws or if the Holder
provides the Company with an opinion from counsel acceptable to the Company
stating that an exemption from registration is available at the time of such
transfer.

                  15.      Successors and Assigns. This Note shall be binding
upon and inure to the benefit of the Company and the Holder, and their
respective successors and permitted assigns;

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provided, however, that the Company may not assign or delegate its obligations
hereunder, by operation of law or otherwise, to any person without the prior
written consent of the Holder.

                  16.      Replacement of Note. Upon receipt by the Company of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Note and (i) in the case of loss, theft, or
destruction, of indemnity from the Holder reasonably satisfactory in form to the
Company (and without the requirement to post any bond or other security) or (ii)
in the case of mutilation, upon surrender and cancellation of this Note, the
Company will execute and deliver to the Holder a new Note of like tenor.

                  17.      Governing Law. This Note and the legal relations
among the parties hereto will be governed by and construed in accordance with
the rules and substantive laws of the State of New York, United States of
America, without regard to conflicts of law provisions thereof.

                  18.      Usury Savings. Nothing in this Note shall require the
Company to pay interest at a rate in excess of the maximum rate permitted by
applicable law. Any interest payable hereunder or under any other instrument
relating to the indebtedness evidenced hereby that is in excess of the maximum
rate permitted by applicable law shall, in the event of acceleration of
maturity, late payment, prepayment, or otherwise, be applied to a reduction of
the unrepaid indebtedness evidenced hereby and not to the payment of interest,
or if such excessive interest exceeds the unpaid balance of such unrepaid
indebtedness, such excess shall be refunded to the Company. To the extent not
prohibited by applicable law, determination of the maximum rate permitted by
applicable law shall at all times be made by amortizing, prorating, allocating
and spreading in equal parts during the full term of the indebtedness evidenced
hereby, all interest at any time contracted for, charged or received from the
Company in connection with the indebtedness evidenced hereby, so that the actual
rate of interest on account of such indebtedness is uniform throughout the term
thereof.

                  19.      Tax Classification. Prior to the conversion hereof,
this Note is intended to represent, and unless otherwise required by law, the
Company and the Holder each shall treat this Note as representing, indebtedness
of the Company for all tax and accounting purposes.

                [Remainder of this page intentionally left blank]

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<PAGE>

                  IN WITNESS WHEREOF, the Company has caused this Note to be
executed by its duly authorized representative as of the day and year first
above written.

                                    ZIX CORPORATION

                                    By:  /s/ RONALD A. WOESSNER
                                        ------------------------------------
                                    Name: Ronald A. Woessner
                                        ------------------------------------
                                    Title: SVP
                                        ------------------------------------

<PAGE>

                                    EXHIBIT A

                                CONVERSION NOTICE

                                       FOR

                        5.75% CONVERTIBLE PROMISSORY NOTE

                  The undersigned, as a holder of a 5.75% Convertible Promissory
Note of ZIX CORPORATION (the "Company"), in the outstanding principal amount and
accrued interest, if any, of $_____________ (the "Note"), hereby elects to
convert that portion of the outstanding principal amount of the Note shown on
the next page into shares of common stock, $0.01 par value per share (the
"Common Stock"), of the Company according to the conditions of the Note, as of
the date written below. The undersigned hereby requests that share certificates
(or electronic transfer equivalent) for the Common Stock to be issued to the
undersigned pursuant to this Conversion Notice be issued in the name of, and
delivered to, the undersigned or its designee as indicated below. If shares are
to be issued in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto.

CONVERSION INFORMATION:

Name of Holder: ________________________________
Signature: _____________________________________
Print Name: ____________________________________
Print Title: ___________________________________

Address of Holder:

Date of Conversion: ____________________________

Applicable Conversion Price: $__________________

Total Dollar Amount Converted: $________________

Conversion Price: $_____________________________

Number of Shares of Common Stock to be Received: __________________________

Please issue and deliver _____ certificate(s) (or electronic transfer
equivalent) for shares of Common Stock in the following amount(s):

Please issue and deliver _____ new Note(s) in the following amounts:<PAGE>

                                                                     EXHIBIT 4.3

                                                                  EXECUTION COPY

                          REGISTRATION RIGHTS AGREEMENT

         REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT"), dated as of September
2, 2003, by and between Zix Corporation, a Texas corporation, with its
headquarters located at 2711 North Haskell Avenue, Suite 2300 LB36, Dallas,
Texas 75204 (the "COMPANY"), and Elron Software, Inc., a Delaware corporation
("SELLER").

         WHEREAS:

         A.       In connection with an Asset Purchase Agreement between the
Company, Seller, Seller's parent corporation, Elron Electronic Industries Ltd.,
an Israeli corporation (the "PARENT") and Seller's subsidiary, Elron Software
(2000) Ltd., an Israeli corporation, dated of even date herewith (the "ASSET
PURCHASE AGREEMENT"), the Company has agreed, upon the terms and subject to the
conditions contained therein, to issue and sell to Seller (Seller and other
persons and entities made parties to this Agreement pursuant to Section 10.7, if
any, are referred to herein as the "SELLING SHAREHOLDERS") the shares of its
Common Stock, par value $.01 per share (the "COMMON STOCK"), and to issue to
Seller a Convertible Promissory Note, which is convertible into Common Stock, in
each case as referenced in Section 4.1 of the Asset Purchase Agreement; and

         B.       To induce Seller and Parent to execute and deliver the Asset
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 ACT"), and applicable state securities laws.

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Selling Shareholders hereby agree as follows:

                                     ARTICLE I.
                                    DEFINITIONS

         Section 1.1. As used in this Agreement, the following terms shall have
the following meanings:

                  (a)      "REGISTER," "REGISTERED," and "REGISTRATION" refer to
         a registration effected by preparing and filing a Registration
         Statement or Statements in compliance with the 1933 Act and pursuant to
         Rule 415 under the 1933 Act or any successor rule providing for
         offering securities on a continuous basis ("RULE 415"), and the
         declaration or ordering of effectiveness of such Registration Statement
         by the United States Securities and Exchange Commission (the "SEC").

                  (b)      "REGISTRABLE SECURITIES" means (i) shares of Common
         Stock issued pursuant to the Asset Purchase Agreement held by a Selling
         Shareholder, (ii) the shares

<PAGE>

         of Common Stock issuable upon conversion of the Convertible Promissory
         Note held by Seller and (iii) any shares of Common Stock issued as a
         dividend or other distribution with respect to, or in exchange for or
         in replacement of, all such shares of Common Stock described in clauses
         (i) and (ii).

                  (c)      "REGISTRATION STATEMENT" means a registration
         statement of the Company under the 1933 Act.

         Section 1.2. Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings set forth in the Asset Purchase
Agreement.

                                   ARTICLE II.
                                  REGISTRATION

         Section 2.1. REGISTRATION. The Company shall prepare, and file with the
SEC within the later of (i) 30 days of the Closing Date and (ii) the date which
the registration statement filed by the Company pursuant that certain
Registration Rights Agreement, dated as of July 22, 2003, by and between the
Company and PocketScript L.L.C. has been declared effective by the SEC (such
date, the "FILING DATE") a Registration Statement on Form S-3 (or, if Form S-3
is not then available, on such form of Registration Statement as is then
available to effect a registration of the Registrable Securities, subject to the
consent of the Selling Shareholders holding a majority of the Registrable
Securities, which consent will not be unreasonably withheld, conditioned or
delayed) covering the resale of the Registrable Securities. The Company shall
provide a draft of the Registration Statement to a single counsel for the
Selling Shareholders prior to its filing or other submission so that such
counsel has a reasonable opportunity to review and comment on the Registration
Statement prior to it being filed. The Company shall use all commercially
reasonable efforts to obtain effectiveness of the Registration Statement as soon
as possible thereafter. If (i) the Registration Statement is not filed by the
Filing Date, (ii) the Registration Statement is not declared effective by the
SEC by the close of business on the 100th day following the Closing Date or
(iii) once declared effective by the SEC, sales of the Registrable Securities
cannot be made (other than during an Allowed Delay, as defined below) pursuant
to the Registration Statement due to the result of any action or inaction on the
part of the Company consistent with its obligations under this Agreement and
through no fault of the Selling Shareholders, then the Company shall pay to each
Selling Shareholder an amount equal to (i) U.S.$1,166.67 times (ii) (A) the
total number of Registrable Securities held by such holder divided by (B) the
total number of Registrable Securities, for each day the Registration Statement
is not filed, effective or available for sale, as applicable, payable on the
last business day of each month. The foregoing payment shall not be exclusive of
any other remedy at law or equity available to the Selling Shareholders for
failure of the Company to comply with its obligations under this Section 2.1;
provided that any damages recovered by the Selling Shareholders from the Company
in pursuing such remedies shall be offset by such payment.

         Section 2.2. UNDERWRITTEN OFFERING. If any offering pursuant to a
Registration Statement pursuant to Section 2.1 hereof involves an underwritten
offering, the Selling Shareholders shall have the right to select one legal
counsel and the right to select the investment banker or bankers and manager or
managers to administer the offering (subject to the approval of the Company,
which approval shall not be unreasonably withheld, conditioned or delayed). In

                                        2

<PAGE>

the event that the Selling Shareholders elect not to participate in such
underwritten offering, the Registration Statement covering all of the
Registrable Securities shall contain appropriate plans of distribution
reasonably satisfactory to the Selling Shareholders holding a majority of the
Registrable Securities.

         Section 2.3. ELIGIBILITY FOR FORM S-3. The Company represents and
warrants that it meets the registrant eligibility and transaction requirements
for the use of Form S-3 for registration of the sale by the Selling Shareholders
and the Company shall file all reports required to be filed by the Company with
the SEC in a timely manner so as to maintain such eligibility for the use of
Form S-3.

                                  ARTICLE III.
                           OBLIGATIONS OF THE COMPANY

         In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:

         Section 3.1. The Company shall prepare promptly, and file with the SEC
as soon as practicable after the Closing Date (but in no event later than the
Filing Date), a Registration Statement with respect to the Registrable
Securities, and thereafter use its commercially reasonable efforts to cause such
Registration Statement relating to Registrable Securities to become effective as
soon as possible after such filing. The Company shall use its commercially
reasonable efforts to keep the Registration Statement effective pursuant to Rule
415 at all times until such date as is the earlier of (i) the date on which all
of the Registrable Securities shall have been registered under the 1933 Act and
been sold or (ii) the date on which the Registrable Securities shall be (in the
opinion of counsel delivered to the Company), saleable immediately to the public
without registration or restriction (including, without limitation, as to volume
by each holder thereof) under the 1933 Act (the "EFFECTIVE PERIOD"), which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein not misleading.

         Section 3.2. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement
effective at all times during the Effective Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by the Registration Statement,
including any amendments that may be required to allow the Selling Shareholders
to sell Registrable Securities under the Registration Statement.

         Section 3.3. The Company shall furnish to each Selling Shareholder
whose Registrable Securities are included in a Registration Statement and its
legal counsel (i) promptly after the same is prepared and publicly distributed,
filed with the SEC, or received by the Company, one copy of such Registration
Statement and any amendment thereto, each preliminary prospectus and prospectus
and each amendment or supplement thereto, and (ii) such number of copies of a
prospectus, including a preliminary prospectus, and all amendments and
supplements thereto and

                                       3

<PAGE>

such other documents as such Selling Shareholder may reasonably request in order
to facilitate the disposition of the Registrable Securities owned by such
Selling Shareholder. The Company will immediately notify each Selling
Shareholder of the effectiveness of such Registration Statement or any
post-effective amendment. The Company will promptly respond to any and all
comments received from the SEC, with a view towards causing such Registration
Statement or any amendment thereto to be declared effective by the SEC as soon
as practicable and shall file an acceleration request as soon as practicable
following the resolution or clearance of all SEC comments or, if applicable,
following notification by the SEC that such Registration Statement or any
amendment thereto will not be subject to review.

         Section 3.4. The Company shall use reasonable efforts to (i) register
and qualify the Registrable Securities covered by the Registration Statement
under such other securities or "BLUE SKY" laws of such jurisdictions in the
United States as each Selling Shareholder may reasonably request, if an
exemption from such securities or blue sky laws is not otherwise available, (ii)
prepare and file in those jurisdictions such amendments (including
post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
the Effective Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Effective Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (a) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3.4, (b) subject itself to general taxation in any such jurisdiction,
(c) file a general consent to service of process in any such jurisdiction, or
(d) make any change in its charter or bylaws, which in each case the Board of
Directors of the Company determines to be contrary to the best interests of the
Company and its shareholders.

         Section 3.5. In the event the Selling Shareholders select underwriters
for the offering, the Company shall enter into and perform its obligations under
an underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.

         Section 3.6. As promptly as practicable after becoming aware of such
event, the Company shall notify each Selling Shareholder of the happening of any
event, of which the Company has knowledge, as a result of which the prospectus
included in a Registration Statement, as then in effect, includes an untrue
statement of a material fact or omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
use its commercially reasonable efforts promptly to prepare a supplement or
amendment to a Registration Statement to correct such untrue statement or
omission, and deliver such number of copies of such supplement or amendment to
each Selling Shareholder as such Selling Shareholder may reasonably request;
provided that, for not more than fifteen (15) consecutive trading days (or a
total of not more than thirty (30) trading days in any twelve (12) month
period), the Company may delay the disclosure of material non-public information
concerning the Company (as well as prospectus or Registration Statement
updating) the disclosure of which at the time is not, in the good faith opinion
of the Company, in the best interests of the Company (an "ALLOWED DELAY");
provided, further, that the Company shall promptly (i) notify the Selling
Shareholders in writing of the existence of (but in no event,

                                       4

<PAGE>

without the prior written consent of a Selling Shareholder, shall the Company
disclose to such Selling Shareholder any of the facts or circumstances
regarding) material non-public information giving rise to an Allowed Delay and
(ii) advise the Selling Shareholders in writing to cease all sales under such
Registration Statement until the end of the Allowed Delay. Upon expiration of
the Allowed Delay, the Company shall again be bound by the first sentence of
this Section 3.6 with respect to the information giving rise thereto.

         Section 3.7. The Company shall use its commercially reasonable efforts
to prevent the issuance of any stop order or other suspension of effectiveness
of any Registration Statement, and, if such an order is issued, to obtain the
withdrawal of such order at the earliest possible moment and to notify each
Selling Shareholder who holds Registrable Securities being sold (or, in the
event of an underwritten offering, the managing underwriters) of the issuance of
such order and the resolution thereof.

         Section 3.8. The Company shall permit a single firm of counsel
designated by the Selling Shareholders holding a majority of the Registrable
Securities to review the Registration Statement, and all amendments and
supplements thereto (as well as all requests for acceleration or effectiveness
thereof (collectively, the "REGISTRATION DOCUMENTS")) a reasonable period of
time prior to their filing with the SEC, and not file (or send) any Registration
Documents in a form to which such counsel reasonably objects and will not
request acceleration of such Registration Statement without prior notice to such
counsel. The sections of such Registration Statement covering information with
respect to the Selling Shareholders, the Selling Shareholders' beneficial
ownership of securities of the Company or the Selling Shareholders's intended
method of disposition of Registrable Securities shall conform to the information
provided to the Company by the Selling Shareholders.

         Section 3.9. The Company shall (i) cause all the Registrable Securities
covered by the Registration Statement to be listed on each national securities
exchange on which securities of the same class or series issued by the Company
are then listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange, or (ii) to the extent the securities
of the same class or series are not then listed or permitted to be listed on a
national securities exchange, secure the designation and quotation of all the
Registrable Securities covered by the Registration Statement on the Nasdaq
National Market or, if not eligible for Nasdaq on the Nasdaq SmallCap Market.

         Section 3.10. The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.

         Section 3.11. At the request of the Selling Shareholders, the Company
shall prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to a Registration Statement and any prospectus used
in connection with the Registration Statement as may be necessary in order to
change the plan of distribution set forth in such Registration Statement.

         Section 3.12. The Company shall not, and shall not agree to, allow the
holders of any securities of the Company to include any of their securities in
any Registration Statement under

                                       5

<PAGE>

Section 2.1 hereof or any amendment or supplement thereto under Section 3.2
hereof without the consent of the Selling Shareholders holding a majority of the
Registrable Securities. In addition, the Company shall not offer any securities
for its own account or the account of others in any Registration Statement under
Section 2.1 hereof or any amendment or supplement thereto under Section 3.2
hereof without the consent of the Selling Shareholders.

         Section 3.13. The Company shall take all other reasonable actions
necessary to expedite and facilitate disposition by the Selling Shareholders of
Registrable Securities pursuant to a Registration Statement.

         Section 3.14. The Company shall comply with all applicable laws related
to a Registration Statement and offering and sale of securities and all
applicable rules and regulations of governmental authorities in connection
therewith (including without limitation the 1933 Act and the 1934 Act (as
defined below) and the rules and regulations promulgated by the SEC).

                                  ARTICLE IV.
                     OBLIGATIONS OF THE SELLING SHAREHOLDERS

         In connection with the registration of the Registrable Securities, the
Selling Shareholders shall have the following obligations:

         Section 4.1. It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable Securities of a particular Selling Shareholder that such
Selling Shareholder shall furnish to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it as shall be reasonably
required to effect the registration of such Registrable Securities and shall
execute such documents in connection with such registration as the Company may
reasonably request. At least ten (10) days prior to the first anticipated filing
date of the Registration Statement, the Company shall notify each Selling
Shareholder of the information the Company requires from each such Selling
Shareholder.

         Section 4.2. Each Selling Shareholder, by such Selling Shareholder's
acceptance of the Registrable Securities, agrees to cooperate with the Company
as reasonably requested by the Company in connection with the preparation and
filing of the Registration Statement hereunder, unless such Selling Shareholder
has notified the Company in writing of such Selling Shareholder's election to
exclude all of such Selling Shareholder's Registrable Securities from the
Registration Statement.

         Section 4.3. If the services of an underwriter are engaged, each
Selling Shareholder agrees to enter into and perform such Selling Shareholder's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the managing underwriter of such offering and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of the Registrable Securities, unless such Selling Shareholder has
notified the Company in writing of such Selling Shareholder's election to
exclude all of such Selling Shareholder's Registrable Securities from such
Registration Statement.

                                       6

<PAGE>

         Section 4.4. Each Selling Shareholder agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 3.6 or 3.7, such Selling Shareholder will immediately discontinue
disposition of Registrable Securities pursuant to the Registration Statement
covering such Registrable Securities until such Selling Shareholder's receipt of
the copies of the supplemented or amended prospectus contemplated by Section 3.6
or 3.7 and, if so directed by the Company, such Selling Shareholder shall
deliver to the Company or destroy all copies in such Selling Shareholder's
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice.

         Section 4.5. No Selling Shareholder may participate in any underwritten
registration hereunder unless such Selling Shareholder (i) agrees to sell such
Selling Shareholder's Registrable Securities on the basis provided in any
underwriting arrangements in usual and customary form entered into by the
Company, (ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements, and (iii) agrees to pay its
pro rata share of all underwriting discounts and commissions and any expenses in
excess of those payable by the Company pursuant to Section 5 below.

         Section 4.6. The Selling Shareholder shall comply with all applicable
laws related to a Registration Statement and offering and sale of securities and
all applicable rules and regulations of governmental authorities in connection
therewith (including without limitation the 1933 Act and the 1934 Act (as
defined below) and the rules and regulations promulgated by the SEC).

                                   ARTICLE V.
                            EXPENSES OF REGISTRATION

         All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualification fees, printers and accounting fees, the
fees and disbursements of legal counsel for the Company, and the reasonable fees
and disbursements of one legal counsel for all holders of Registrable
Securities, selected by the Selling Shareholders pursuant to Sections 2.2 and
3.8 hereof, shall be borne by the Company.

                                   ARTICLE VI.
                                 INDEMNIFICATION

         In the event any Registrable Securities are included in a Registration
Statement under this Agreement:

         Section 6.1. The Company will indemnify, hold harmless and defend (i)
each Selling Shareholder who holds such Registrable Securities, (ii) the
directors, officers, partners, employees, agents and each person who controls
any Selling Shareholder within the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended (the "1934 ACT"), if any, (iii) any underwriter
(as defined in the 1933 Act) for the Selling Shareholders, and (iv) the
directors, officers, partners, employees and each person who controls any such
underwriter within the meaning of the 1933 Act or the 1934 Act, if any (each, an
"INDEMNIFIED PERSON"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together

                                       7

<PAGE>

with actions, proceedings or inquiries by any regulatory or self-regulatory
organization, whether commenced or threatened, in respect thereof, "CLAIMS") to
which any of them may become subject insofar as such Claims arise out of or are
based upon: (i) any untrue statement or alleged untrue statement of a material
fact in a Registration Statement or the omission or alleged omission to state
therein a material fact required to be stated or necessary to make the
statements therein not misleading; (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained in the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading; or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities (the matters in the foregoing clauses (i)
through (iii) being, collectively, "VIOLATIONS"). Subject to the restrictions
set forth in Section 6.3 with respect to the number of legal counsel, the
Company shall reimburse the Indemnified Person, promptly as such expenses are
incurred and are due and payable, for any reasonable legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6.1: (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of such Registration
Statement or any such amendment thereof or supplement thereto; (ii) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of the Company, which consent shall not be
unreasonably withheld; (iii) with respect to any preliminary prospectus, shall
not inure to the benefit of any Indemnified Person if the untrue statement or
omission of material fact contained in the preliminary prospectus was corrected
on a timely basis in the prospectus, as then amended or supplemented, such
corrected prospectus was timely made available by the Company pursuant to
Section 3.3 hereof, and the Indemnified Person was promptly advised in writing
not to use the incorrect prospectus prior to the use giving rise to a Violation
and such Indemnified Person, notwithstanding such advice, used it; and (iv)
shall not apply to any offers to sell or sales made by an Indemnified Person
after receipt of the notice referred to in Section 3.6, clause (ii) and during
the period of the Allowed Delay. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person and shall survive the transfer of the Registrable Securities by the
Selling Shareholders pursuant to Section 10.7.

         Section 6.2. In connection with any Registration Statement in which a
Selling Shareholder is participating, each such Selling Shareholder agrees
severally and not jointly to indemnify, hold harmless and defend, to the same
extent and in the same manner set forth in Section 6.1, the Company, each of its
directors, each of its officers who signs the Registration Statement, each
person, if any, who controls the Company within the meaning of the 1933 Act or
the 1934 Act, any underwriter and any other shareholder selling securities
pursuant to the Registration Statement or any of its directors or officers or
any person who controls such shareholder or underwriter within the meaning of
the 1933 Act or the 1934 Act (collectively and together with an Indemnified
Person, an "INDEMNIFIED PARTY"), against any Claim to which any

                                       8

<PAGE>

of them may become subject, under the 1933 Act, the 1934 Act or otherwise,
insofar as such Claim arises out of or is based upon (i) any Violation, in each
case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished to the
Company by such Selling Shareholder expressly for use in connection with such
Registration Statement or (ii) any offers to sell or sales by such Selling
Shareholder after receipt by such Selling Shareholder of the notice referred to
in Section 3.6, clause (ii) and during the period of the Allowed Delay; and
subject to Section 6.3, such Selling Shareholder will reimburse any legal or
other expenses (promptly as such expenses are incurred and are due and payable)
reasonably incurred by them in connection with investigating or defending any
such Claim; provided, however, that the indemnity agreement contained in this
Section 6.2 shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of such Selling
Shareholder, which consent shall not be unreasonably withheld; provided,
further, however, that the Selling Shareholders shall be liable under this
Agreement (including this Section 6.2 and Section 7) for only that amount as
does not exceed the net proceeds to such Selling Shareholder as a result of the
sale of Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer of
the Registrable Securities by the Selling Shareholders pursuant to Section 10.7.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6.2 with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the prospectus, as then amended or
supplemented, and the Indemnified Party was promptly advised in writing not to
use the incorrect information prior to the use giving rise to a Violation and
such Indemnified Party, notwithstanding such advice, used it.

         Section 6.3. Promptly after receipt by an Indemnified Party under this
Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
selected by the indemnifying party and reasonably satisfactory to the
Indemnified Party, as the case may be; provided, however, that an Indemnified
Party shall have the right to retain its own counsel with the fees and expenses
to be paid by the indemnifying party, if, in the reasonable opinion of counsel
retained by the indemnifying party, the representation by such counsel of the
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Party and any
other party represented by such counsel in such proceeding. The indemnifying
party shall pay for only one separate legal counsel for the Indemnified Persons
or the Indemnified Parties, as applicable, and such legal counsel shall be
selected by the Selling Shareholders, if the Selling Shareholders are entitled
to indemnification hereunder, or the Company, if the Company is entitled to
indemnification hereunder, as applicable. The failure to deliver written notice
to the indemnifying party within a reasonable time of the commencement of any
such action shall not relieve such indemnifying party of any liability to the
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is actually prejudiced in its ability to defend such action.
The indemnification required by this Section 6 shall be made

                                       9

<PAGE>

by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.

                                  ARTICLE VII.
                                  CONTRIBUTION

         If the indemnification provided for in Article 6 above is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to herein,
then the indemnifying party, in lieu of indemnifying the Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified Party with
respect to such loss, liability, claim, damage or expense in the proportion that
is appropriate to reflect the relative fault of the indemnifying party and the
Indemnified Party in connection with the statements or omissions that resulted
in such loss, liability, claim, damage or expense, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of material fact or the omission
to state a material fact relates to information supplied by the indemnifying
party or by the Indemnified Party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. In any such case, (i) no contribution shall be made under
circumstances where the indemnifying party would not have been liable for
indemnification under the fault standards set forth in Section 6, (ii) no
Selling Shareholder guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
Selling Shareholder who was not guilty of such fraudulent misrepresentation, and
(iii) contribution (together with any indemnification or other obligations under
this Agreement) by any Selling Shareholder shall be limited in amount to the net
amount of proceeds received by such Selling Shareholder from the sale of such
Registrable Securities.

                                 ARTICLE VIII.
                           REPORTS UNDER THE 1934 ACT

         With a view to making available to the Selling Shareholders the
benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or
regulation of the SEC that may at any time permit the Selling Shareholders to
sell securities of the Company to the public without registration ("RULE 144"),
the Company agrees to:

                  (a)      make and keep public information available, as those
         terms are understood and defined in Rule 144;

                  (b)      file with the SEC in a timely manner all reports and
         other documents required of the Company under the 1933 Act and the 1934
         Act so long as the Company remains subject to such requirements and the
         filing of such reports and other documents is required for the
         applicable provisions of Rule 144; and

                  (c)      furnish to each Selling Shareholder so long as such
         Selling Shareholder owns Registrable Securities, promptly upon request,
         such information as may be reasonably requested to permit such Selling
         Shareholder to sell such securities pursuant to Rule 144 without
         registration.

                                       10

<PAGE>

                                  ARTICLE IX.
                        AMENDMENT OF REGISTRATION RIGHTS

         Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company and
the Selling Shareholders.

                                   ARTICLE X.
                                  MISCELLANEOUS

         Section 10.1. If at any time during the Effective Period there is not
an effective Registration Statement covering all of the Registrable Securities
and the Company shall determine to prepare and file with the SEC a registration
statement relating to an offering for its own account or the account of other
shareholders of the Company under the 1933 Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the 1933 Act) or
their then equivalents relating to equity securities to be issued solely in
connection with any acquisition of any entity or business or equity securities
issuable in connection with stock option or other employee benefit plans, and
other than any registration statements filed in connection with the registration
of shares of Common Stock issued or issuable with respect to any antidilution
adjustments resulting from the issuance of the Registrable Securities, then the
Company shall send to each Selling Shareholder written notice of such
determination and, if within 15 days after receipt of such notice, any such
Selling Shareholder shall so request in writing, the Company shall (to the
extent permitted under, and consistent with the terms and conditions of, any
agreement pursuant to which such registration rights are granted or governed)
include in such registration statement all or any part of such Registrable
Securities such holder requests to be registered.

         Section 10.2. A person or entity is deemed to be a holder of
Registrable Securities whenever such person or entity owns of record such
Registrable Securities. If the Company receives conflicting instructions,
notices or elections from two or more persons or entities with respect to the
same Registrable Securities, the Company shall act upon the basis of
instructions, notice or election received from the registered owner of such
Registrable Securities.

         Section 10.3. Any notices required or permitted to be given under the
terms hereof shall be given in the manner sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile and shall be effective
five (5) calendar days after being placed in the mail, if mailed by regular
United States mail, or upon receipt, if delivered personally or by courier
(including a recognized overnight delivery service) or by facsimile, in each
case addressed to a party. The addresses and facsimile numbers for such
communications shall be:

                                       11

<PAGE>

                           If to the Company:

                           Zix Corporation
                           2711 North Haskell Avenue
                           Suite 2300 LB36
                           Dallas, Texas 75204
                           Attention: General Counsel
                           Facsimile: (214) 515-7385

If to a Selling Shareholder, to the address and facsimile number set forth in
the Asset Purchase Agreement with a copy to the counsel specified in the Asset
Purchase Agreement or (in the case of permitted assigns, below the Selling
Shareholder's signature on the joinder page to this Agreement).

         Section 10.4. Failure of any party to exercise any right or remedy
under this Agreement or otherwise, or delay by a party in exercising such right
or remedy, shall not operate as a waiver thereof.

         Section 10.5. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE
PRINCIPLES OF CONFLICT OF LAWS OR ANY OTHER PRINCIPLE THAT COULD RESULT IN THE
APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.

         Section 10.6. This Agreement and the Asset Purchase Agreement
(including all schedules and exhibits thereto) constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement and the Asset
Purchase Agreement supersede all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof and thereof.

         Section 10.7. Seller may assign its rights hereunder to (i) any
affiliate of Seller or (ii) to one or more parties acquiring at least 20% of
total Registrable Securities outstanding; provided that each such affiliate or
party shall be required to execute a joinder page indicating its agreement to be
bound to the terms and conditions of this Agreement. This Agreement shall inure
to the benefit of and be binding upon the successors and permitted assigns of
each of the parties hereto.

         Section 10.8. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

         Section 10.9. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same agreement. This Agreement, once executed by a party,
may be delivered to the other party hereto by facsimile transmission of a copy
of this Agreement bearing the signature of the party so delivering this
Agreement.

                                       12

<PAGE>

         Section 10.10. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

         Section 10.11. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules
of strict construction will be applied against any party.

         Section 10.12. In the event that any provision of this Agreement is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any provision hereof which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision hereof.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                       13

<PAGE>

         IN WITNESS WHEREOF, the Company and Seller have caused this Agreement
to be duly executed as of the date first above written.

                                    ZIX CORPORATION

                                    By: /s/ RONALD A. WOESSNER
                                        ----------------------------------------
                                        Name: Ronald A. Woessner
                                             -----------------------------------
                                        Title: S.V.P.
                                               ---------------------------------

                                    ELRON SOFTWARE, INC.

                                    By: /s/ ADAM N. BOSNIAN
                                        ----------------------------------------
                                        Name: Adam N. Bosnian
                                             -----------------------------------
                                        Title: Co-General Manager
                                              ----------------------------------

                                    By: /s/ HENRY R. TUMBLIN
                                        ----------------------------------------
                                        Name: Henry R. Tumblin
                                             -----------------------------------
                                        Title: Co-General Manager
                                               ---------------------------------
                                       14

<PAGE>

                                     JOINDER

         The undersigned, who represents that it is an Affiliate of Elron
Software, Inc. and has acquired 1,709,402 shares of Common Stock of Zix
Corporation from Elron Software, Inc., hereby executes this signature page to
that certain Registration Rights Agreement (the "Registration Rights
Agreement"), dated September 2, 2003, between Elron Software, Inc. and Zix
Corporation, thereby indicating the undersigned's agreement to the terms and
conditions of the Registration Rights Agreement, as fully and effectively as if
the undersigned had executed and delivered this page at the time originally
executed by each of Elron Software, Inc. and Zix Corporation.

                                    ELRON ELECTRONIC INDUSTRIES LTD.

                                    By: /s/ DORAN BIRGER
                                        ----------------------------------------
                                        Name: Doran Birger
                                              ----------------------------------
                                        Title: President & CEO
                                               ---------------------------------

                                    By: /s/ PAUL WEINBERG
                                        ----------------------------------------
                                        Name: Paul Weinberg
                                              ----------------------------------
                                        Title: General Counsel & Corp Secretary
                                               ---------------------------------

                                    September 2, 2003

                                    3 Azrieli Center, 42nd Floor
                                    Tel Aviv, Israel 67023
                                    Attention: Legal Department
                                    Facsimile No.: (972) 3-607-5556

                                       15

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