Exhibit 10.4

REGISTRATION RIGHTS AGREEMENT

      This Registration Rights Agreement (this “Agreement”) is made and entered
into as of June 30, 2004, among Healthaxis Inc., a Pennsylvania corporation (the
“Company”), and the parties who have executed this Agreement and whose names
appear on Schedule I hereto (each party listed on Schedule I hereto is sometimes
individually referred to herein as a “Holder” and all such parties are sometimes
collectively referred to herein as the “Holders”).

      This Agreement is made pursuant to the Preferred Stock Modification
Agreement, dated as of May 12, 2004 among the Company and the Holders (the
“Preferred Stock Agreement”), which provides for the amendment and restatement
of the terms of the Company’s Series A Convertible Preferred Stock and the grant
of warrants to the holders thereof (the “Securities Transactions”).

      The Company and the Holders hereby agree as follows:

      1. Definitions

      Capitalized terms used and not otherwise defined herein shall have the
meanings given to such terms in the Preferred Stock Agreement. As used in this
Agreement, the following terms shall have the following meanings:

      “Affiliate” means, with respect to any Person, any other Person that
directly or indirectly controls or is controlled by or under common control with
such Person. For the purposes of this definition, “control,” when used with
respect to any Person, means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms “affiliated,” “controlling” and “controlled” have meanings
correlative to the foregoing.

      “Business Day” means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State of
New York generally are authorized or required by law or other government actions
to close.

      “Certificate of Designation” means the Series A Convertible Preferred
Stock Certificate of Designation, as amended and restated.

      “Closing Date” means the Closing Date, as defined in the Preferred Stock
Agreement.

      “Commission” means the Securities and Exchange Commission.

      “Common Stock” means the Company’s Common Stock, par value $.10 per share.

      “Effectiveness Date” means the earlier of: (i) ten days after the Company
has received notice (written or oral) from the Commission that the Commission’s
staff will not be reviewing the Registration Statement or has no further
comments on the Registration Statement or (ii) 120 days following the Filing
Date.

      “Effectiveness Period” has the meaning set forth in Section 2(a) hereof.

      “Exchange Act” means the Securities Exchange Act of 1934, as amended.

      “Fair Market Value” means the sum of (a) the product of the sum of the
number of shares of outstanding Registrable Securities plus the number of shares
of Registrable Securities into which the shares of Preferred Stock are
convertible multiplied by the average of the per share closing price in the
Nasdaq or other national market on which the Company’s stock is traded or quoted
for the 10 Trading Days immediately preceding the date the calculation is made;
and (b) the value of the Warrants that are exercisable for Registrable
Securities as of the date of the valuation, calculated using the Black-Scholes
pricing model and the following assumptions: (i) the yield on a five year
Treasury Note, as quoted in The Wall Street Journal on the Trading Day
immediately preceding the date the calculation is made; (ii) expected volatility
of 60%; (iii) current market price of the Company’s common stock is the average
of the closing price on Nasdaq for

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the 10 Trading Days immediately preceding the date the calculation is made;
(iv) dividend yield of 0%; and (v) expected life of 5 years.

      “Filing Date” means the date on which the Initial Registration Statement
is filed with the Commission, which shall be as soon as practicable after the
Closing Date, but in no event later than the 90th day following the Closing
Date.

      “Holder” or “Holders” means the holder or holders, as the case may be,
from time to time of Registrable Securities.

      “Indemnified Party” has the meaning set forth in Section 5(c) hereof.

      “Indemnifying Party” has the meaning set forth in Section 5(c) hereof.

      “Initial Registration Statement” has the meaning set forth in Section 2(a)
hereof.

      “Losses” has the meaning set forth in Section 5(a) hereof.

      “Majority Holders” means the Holders of at least sixty (60%) percent of
the then outstanding Registrable Securities (as calculated on an as-converted or
as-exercised basis).

      “Nasdaq” means The Nasdaq Stock Market.

      “Person” means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.

      “Proceeding” means any action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.

      “Prospectus” means the prospectus included in the Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference in such Prospectus.

      “Registrable Securities” means: (i) the shares of Common Stock issued or
issuable upon the conversion or exercise of the Securities and (ii) any shares
of the Company’s capital stock issued with respect to the Securities as a result
of any stock split, stock dividend, recapitalization, exchange or similar event
or otherwise; provided, that, a security shall cease to be a Registrable
Security upon (A) such security becoming eligible for sale by the Holders
pursuant to Rule 144(k) and (B) the Holder of such security is not deemed to be
an Affiliate under Rule 144(k) as determined by the mutual written Agreement of
the Company and such Holder, as set forth in Section 2(a).

      “Registration Delay Payment” has the meaning set forth in Section 2(c)
hereof.

      “Registration Statement” means the Initial Registration Statement and any
additional registration statements contemplated by Sections 2(a) or 2(b),
including (in each case) the Prospectus, amendments and supplements to such
Registration Statement or Prospectus, including pre-effective and post-effective
amendments, all exhibits thereto, and all material incorporated by reference in
such Registration Statement.

      “Rule 144” means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such rule.

      “Rule 158” means Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such rule.

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      “Rule 415” means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such rule.

      “Securities” means the Company’s Preferred Stock (as amended and restated)
and the Warrants granted to the Holders in connection with the Securities
Transactions.

      “Securities Act” means the Securities Act of 1933, as amended.

      “Special Counsel” means one special counsel to the Holders, as identified
by the Majority Holders.

      “Trading Day” means a day on which Nasdaq (or in the event the Common
Stock is not listed or quoted on Nasdaq, such other securities market on which
the Common Stock is listed or quoted) is open for trading.

      “Underlying Shares” means the shares of Common Stock issuable upon
conversion or exercise of the Securities.

      2. Registration Requirements

      (a) Filing and Effectiveness Obligations. On or prior to the Filing Date,
the Company shall prepare and file with the Commission a Registration Statement
(the “Initial Registration Statement”) which shall cover all Registrable
Securities for an offering to be made on a continuous basis pursuant to a
“shelf” registration statement under Rule 415. The Initial Registration
Statement shall be on Form S-3 or any successor form (except if the Company is
not then eligible to register the Registrable Securities for resale on Form S-3,
in which case such registration shall be on another appropriate form reasonably
acceptable to the Majority Holders). The Company shall: (i) not permit any
securities other than the Registrable Securities to be included in the Initial
Registration Statement (except pursuant to the exercise of other registration
rights outstanding on the date of this Agreement), (ii) use its best efforts to
cause the Initial Registration Statement to be declared effective under the
Securities Act as promptly as possible after the Filing Date, but in any event
on or prior to the Effectiveness Date, and (iii) keep such Initial Registration
Statement continuously effective under the Securities Act (subject to
Section 3(r)) for a period that will terminate upon the date on which all
Registrable Securities covered by such Registration Statement that are held by a
Holder may be sold pursuant to Rule 144(k) and such Holder is not deemed to be
an Affiliate under Rule 144(k), as determined by the mutual written agreement of
the Company and such Holder (it being understood that the Company and a Holder
may reach such a mutual agreement with respect to less than all of the
Registrable Securities held by such Holder, and in such event the Company’s
registration obligations with respect thereto shall cease) (the “Effectiveness
Period”). Once the Company is no longer required to keep the Initial
Registration Statement effective with respect to all or a portion of the
Registrable Securities of a given Holder, the Company shall have no further
obligations hereunder with respect to the registration for resale of such shares
of Registrable Securities and such shares shall no longer be deemed “Registrable
Securities” hereunder; provided, that the termination of any such registration
obligations shall not affect the Company’s obligations with respect to any then
accrued Registration Delay Payment obligations arising under Section 2(c)
hereof).

      (b) Piggyback Registrations. Except as otherwise provided in this
Section 2(b), if at any time when there is not an effective Registration
Statement covering the Registrable Securities, and the Company decides to
prepare and file with the Commission a Registration Statement relating to an
offering for its own account or the account of others under the Securities Act
of any of its equity securities, other than on Form S-4 or Form S-8 (each as
promulgated under the Securities Act) or their then-equivalent forms relating to
equity securities to be issued in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans, the Company shall send to each Holder of
Registrable Securities written notice of such decision and, if within ten
(10) days after receipt of such notice, any such Holder shall so request in
writing (which request shall specify the Registrable Securities intended to be
disposed of by the Holders), the Company will use reasonable best efforts to
effect the registration under the Securities Act of all Registrable Securities
which the Company has been so requested to register by such Holder; provided,
however,that if at any time after giving written notice of its intention to
register any securities and prior to the effective date of the Registration
Statement filed in connection with such registration, the Company shall decide
for any reason not to register or to delay registration of such securities,

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the Company may, at its election, give written notice of such decision to such
Holder and, thereupon: (i) in the case of a determination not to register, shall
be relieved of its obligation to register any Registrable Securities in
connection with such registration (but not from its obligation to pay expenses
in accordance with Section 4 hereof) and (ii) in the case of a determination to
delay registering, shall be permitted to delay registering any Registrable
Securities being registered pursuant to this Section 2(b) for the same period as
the delay in registering such other securities. The Company shall include in
such registration statement all or any part of such Registrable Securities that
such Holder requests to be registered; provided, however, that the Company shall
not be required to register any Registrable Securities pursuant to this
Section 2(b) that are eligible for sale pursuant to Rule 144(k) of the
Securities Act, as determined by the mutual written agreement of the Company and
such Holder (it being understood that the Company and a Holder may reach such a
mutual agreement with respect to less than all of the Registrable Securities
held by such Holder, and in such event the Company’s registration obligations
with respect thereto shall cease). In the case of an underwritten public
offering, if the managing underwriter(s) or underwriter(s) reasonably object to
the inclusion of the Registrable Securities in such Registration Statement, then
if the Company, after consultation with the underwriter’s representative,
reasonably determines that the inclusion of such Registrable Securities would
materially adversely affect the offering contemplated by such Registration
Statement, and based on such determination recommends inclusion in such
Registration Statement of fewer Registrable Securities than proposed to be sold
by the Holders, then (x) the number of Registrable Securities of the Holders
included in such registration statement shall be reduced pro rata among such
Holders (based upon the number of Registrable Securities requested to be
included in the registration) or (y) none of the Registrable Securities of the
Holders shall be included in such Registration Statement if the Company, after
consultation with the underwriter(s), recommends the inclusion of none of such
Registrable Securities; provided, however, that if securities are being offered
for the account of other per sons or entities as well as the Company, such
reduction shall not represent a greater fraction of the number of Registrable
Securities intended to be offered by the Holders than the fraction of similar
reductions imposed on such other persons or entities (other than the Company).

      (c) Liquidated Damages.

        (i) If: (A) the Initial Registration Statement covering all of the
applicable Registrable Securities and required to be filed by the Company
pursuant to this Agreement is not (1) filed with the Commission on or before the
Filing Date or (2) the Company fails to use its reasonable best efforts to cause
the Initial Registration Statement to be declared effective by the Commission on
or before the Effectiveness Date, or (B) subject to Section 2(c)(ii) and
Section 3(r) of this Agreement, on any day after the Initial Registration
Statement has been declared effective by the Commission sales of all the
Registrable Securities required to be included on the Initial Registration
Statement cannot be made pursuant to such Registration Statement (including,
without limitation, because of a failure to keep such Registration Statement
effective, to disclose such information as is necessary for sales to be made
pursuant to such Registration Statement or to register sufficient shares of
Common Stock)(each of the events described in clauses (A) and (B) of this
Section 2(c)(i) is referred to herein as a “Registration Delay”), then the
Company shall pay to each Holder an amount in cash (a “Registration Delay
Payment”) equal to: (a) the aggregate Fair Market Value of the outstanding
Registrable Securities and Securities that are convertible into or exercisable
for Registrable Securities (whether or not such Securities are then convertible
or exercisable) multiplied by (b) 0.0125 and (c) the number of months (prorated
for partial months) that such Registration Delay has occurred and is continuing.
The Company shall pay any Registration Delay Payment in cash to each Holder of
Registrable Securities and/or Securities that are convertible into or
exercisable for Registrable Securities (whether or not such Securities are then
convertible or exercisable) on the last Business Day of each month during which
a Registration Delay has occurred and is continuing. In the event that the
Company fails to make a Registration Delay Payment within ten (10) Business Days
of the date such Registration Delay Payment is due, then such Registration Delay
Payment shall bear interest at the rate of 2.0% per month (prorated for partial
months) until paid in full. The parties hereto agree that the foregoing
Registration Delay Payment is intended as a reasonable estimation of the damages
that would be incurred by the Holders in the event of the occurrence of an event
triggering the obligation to pay a Registration Delay Payment, and is not

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  intended as a penalty. Such payments shall not constitute the Holders’
exclusive remedy for Registration Delays.           (ii) The Registration Delay
Payment shall not be due and payable by the Company in the event that a
Registration Delay is both (A) due to circumstances reasonably beyond the
control of the Company, its subsidiaries or any of their respective agents and
(B) the Company and its subsidiaries and their respective agents have been using
their reasonable best efforts to resolve such Registration Delay.

      (d) Form S-3 Eligibility. The Company represents and warrants that, as of
the date hereof, it meets the registrant eligibility and transaction
requirements for the use of Form S-3 (for secondary offerings) for the
registration of the sale of Registrable Securities by the Holders and the
Company shall file all reports required to be filed by the Company with the
Commission in a timely manner so as to maintain such eligibility for the use of
Form S-3.

      3. Registration Procedures. In connection with the Company’s registration
obligations hereunder, the Company shall:

        (a) Preparation of Registration Statement. Prepare and file with the
Commission on or prior to the Filing Date a Registration Statement on Form S-3
or its successor form (or if the Company is not then eligible to register for
resale the Registrable Securities on Form S-3, such registration shall be on
another appropriate form in accordance herewith, which shall include a Plan of
Distribution substantially in the form of Exhibit A annexed hereto, unless in
connection with a Piggyback Registration), or such other form agreed to by the
Company and by the Majority Holders, and cause the Registration Statement to
become effective and remain effective as provided herein; provided, however,
that not less than five (5) Business Days prior to the filing of the
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated therein by
reference), the Company shall, if reasonably practicable: (i) furnish to the
Holders, their Special Counsel and any managing underwriters, copies of all such
documents proposed to be filed (including documents incorporated by reference),
which documents will be subject to the review of such Holders, their Special
Counsel and such managing underwriters and (ii) cause its officers and
directors, counsel and independent certified public accountants to respond to
such inquiries as shall be necessary, in the reasonable opinion of respective
counsel to such Holders and such underwriters, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file the Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Majority Holders, their Special Counsel or any
managing underwriters shall reasonably object, 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
Holders, the Holder’s beneficial ownership of securities of the Company or the
Holders intended method of disposition of Registrable Securities shall conform
to the information provided to the Company by each of the Holders.          
(b) Amendments. (i) Prepare and file with the Commission any amendments,
including post-effective amendments, to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective for the
Effectiveness Period and prepare and file with the Commission such additional
Registration Statements as are required to be filed hereunder in order to
register all of the Registrable Securities for resale under the Securities Act,
(ii) cause the related Prospectus to be amended or supplemented by any required
Prospectus supplement, and as so amended or supplemented to be filed pursuant to
Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act, (iii) respond as promptly as possible to any comments received
from the Commission with respect to the Registration Statement or any amendment
thereto and as promptly as practicable, but in no event later than ten (10)
Business Days, (iv) provide the Holders true and complete copies of all
correspondence to and from the Commission relating to the Registration Statement
and (v) comply in all material respects with the provisions of the Securities
Act and the Exchange Act with respect to the disposition of all of the
Registrable Securities covered by the Registration Statement during the
applicable period in accordance with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement as so amended or in such
Prospectus as so supplemented.

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        (c) Notifications. Notify the Holders of Registrable Securities to be
sold, their Special Counsel and any managing underwriters as promptly as
possible (and, in the case of (i)(A) below, not less than five (5) days prior to
such filing and, in the case of (i)(C) below, not later than the first Business
Day after effectiveness) and, if requested by any such Person, confirm such
notice in writing no later than one (1) Business Day following the day: (i)
(A) when a Prospectus or any Prospectus supplement or post-effective amendment
to the Registration Statement is proposed to be filed, (B) when the Commission
notifies the Company whether there will be a “review” of such Registration
Statement and whenever the Commission comments in writing on such Registration
Statement and (C) with respect to the Registration Statement or any
post-effective amendment, when the same has become effective, (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or for
additional information, (iii) of the Commission’s issuance of any stop order
suspending the effectiveness of the Registration Statement covering any or all
of the Registrable Securities or the initiation of any Proceeding for that
purpose, (iv) that any of the representations and warranties of the Company
contained in this Agreement ceases to be true and correct in all material
respects, (v) of the Company’s receipt of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any Proceeding for such purpose (vi) of the occurrence of any
event that makes any statement made in the Registration Statement or Prospectus
or any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading and
(vii) the beginning and end of a black-out period pursuant to Section 3(r).    
      (d) Suspensions. Use its best efforts to avoid the issuance of, or, if
issued, obtain the withdrawal of: (i) any order suspending the effectiveness of
the Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.           (e) Supplements
and Post-Effective Amendments. If requested by any managing underwriter or the
Holders of a majority in interest of the Registrable Securities to be offered
under a Registration Statement: (i) promptly incorporate in a Prospectus
supplement or post-effective amendment to the Registration Statement, such
information as the Company reasonably agrees should be included therein and
(ii) make all required filings of such Prospectus supplement or such
post-effective amendment as soon as practicable after the Company has received
notification of the matters to be incorporated in such Prospectus supplement or
post-effective amendment; provided, however, that the Company shall not be
required to take any action pursuant to this Section 3(e) that would, in the
written opinion of counsel for the Company (addressed to counsel to the
Holders), violate applicable law.           (f) Copies of Registration
Statement. Furnish to each Holder, their Special Counsel and any managing
underwriters, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by
reference and all exhibits to the extent requested by such Person (including
those previously furnished or incorporated by reference) promptly after the
filing of such documents with the Commission.           (g) Copies of
Prospectus. Promptly deliver to each Holder, their Special Counsel and any
managing underwriters, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and the Company
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders and any underwriters in connection with
the offering and sale of the Registrable Securities covered by such Prospectus
and any amendment or supplement thereto.

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      (h) Blue Sky. Prior to any public offering of Registrable Securities, use
its best efforts to register or qualify or cooperate with the selling Holders,
any underwriters and their Special Counsel in connection with the registration
or qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder or underwriter
requests in writing, to keep each such registration or qualification (or
exemption therefrom) effective during the Effectiveness Period and to do any and
all other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the Registrable Securities covered by a Registration
Statement; provided, however, that the Company shall not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or to take any action that would subject it to general service of process in any
such jurisdiction where it is not then so subject or subject the Company to any
material tax in any such jurisdiction where it is not then so subject.

      (i) Certificates. Cooperate with the Holders and any managing underwriters
to (A) facilitate the timely preparation and delivery of certificates
representing Registrable Securities sold pursuant to a Registration Statement,
which certificates shall be delivered within two (2) Business Days following the
Company’s receipt of a written request to such effect and all necessary
documentation, and such certificates shall be free, to the extent permitted by
applicable law and the Investor Rights Agreement, of all restrictive legends,
and (B) enable such Registrable Securities to be in such denominations and
registered in such names as any such managing underwriters or Holders may
request.

      (j) Supplements and Amendments. Upon the occurrence of any event
contemplated by Section 3(c)(vi), as promptly as possible, prepare a supplement
or amendment, including a post-effective amendment, to the Registration
Statement or a supplement to the related Prospectus or any document incorporated
or deemed to be incorporated therein by reference, and file any other required
document so that, as thereafter delivered, neither the Registration Statement
nor such Prospectus will 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, in light of the circumstances under which they were made,
not misleading.

      (k) Listing. Cause all Registrable Securities relating to such
Registration Statement to be listed on Nasdaq or any other securities exchange,
quotation system, market or over-the-counter bulletin board, if any, on which
similar securities issued by the Company are then listed as and when required
pursuant to the Preferred Stock Agreement.

      (l) Underwriting Agreement and Related Documents. Enter into such
agreements (including an underwriting agreement in form, scope and substance as
is customary) and take all such other actions in connection therewith (including
those reasonably requested by any managing underwriters and the Holders of a
majority of the Registrable Securities being sold) in order to expedite or
facilitate the disposition of such Registrable Securities, and whether or not an
underwriting agreement is entered into: (i) make such representations and
warranties to such Holders and such underwriters as are customarily made by
issuers to underwriters in underwritten public offerings, and confirm the same
if and when requested, (ii) in the case of an underwritten offering obtain and
deliver copies thereof to the managing underwriters, if any, or in the case of
non-underwritten offerings, if reasonably requested by the selling Holders,
obtain and deliver copies thereof to such selling Holders, of opinions of
counsel to the Company and updates thereof addressed to each such underwriter,
in form, scope and substance reasonably satisfactory to any such managing
underwriters and Special Counsel to the selling Holders covering the matters
customarily covered in opinions requested in underwritten offerings and such
other matters as may be reasonably requested by such Special Counsel and
underwriters, (iii) immediately prior to the effectiveness of a Registration
Statement, and, in the case of an underwritten offering, at the time of delivery
of any Registrable Securities sold pursuant thereto, and, in the case of
non-underwritten offerings, at such time as the selling Holders may reasonably
request (and at the expense of the selling Holders), obtain and deliver copies
to the Holders and the managing underwriters, if any, of “cold comfort” letters
and updates thereof from the Company’s independent certified public accountants
(and, if required, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for which
financial statements and financial data is, or is required to be, included in
the Registration Statement), addressed to each of the underwriters, if any, in
form and substance as are customary in connection with underwritten offerings,
(iv) if an underwriting

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agreement is entered into, the same shall contain indemnification provisions and
procedures no less favorable to the selling Holders and the underwriters, if
any, than those set forth in Section 5 hereof (or such other provisions and
procedures acceptable to the managing underwriters, if any, and the Holders of a
majority of Registrable Securities participating in such offering) and
(v) deliver such documents and certificates as may be reasonably requested by
the Holders of a majority of the Registrable Securities being sold, their
Special Counsel and any managing underwriters to evidence the continued validity
of the representations and warranties made pursuant to clause (i) above and to
evidence compliance with any customary conditions contained in the underwriting
agreement or any other agreement entered into by the Company.

      (m) Due Diligence. Make available for inspection by the selling Holders,
any representative of such Holders, any underwriter participating in any
disposition of Registrable Securities and any attorney or accountant retained by
such selling Holders or underwriters, at the offices where normally kept and
during reasonable business hours, all financial and other records, pertinent
corporate documents and properties of the Company and its subsidiaries, and
cause the officers, directors, agents and employees of the Company and its
subsidiaries to supply all information in each case reasonably requested by any
such Holder, representative, underwriter, attorney or accountant in connection
with the Registration Statement; provided, however, that if any information is
determined in good faith by the Company (in writing) to be of a confidential
nature at the time of delivery of such information, then prior to delivery of
such information, the Company and the Holders shall enter into a confidentiality
agreement reasonably acceptable to the Company and the Holders providing that
such information shall be kept confidential, unless: (i) disclosure of such
information is required by a court or administrative order or is necessary to
respond to inquiries of regulatory authorities (provided, however, that the
Company shall be given notice of any such pending disclosure so that the Company
may seek a protective order), (ii) disclosure of such information, in the
opinion of counsel to such Person, is required by law, (iii) such information
becomes generally available to the public other than as a result of a disclosure
or failure to safeguard by such Person or (iv) such information becomes
available to such Person from a source other than the Company and such source is
not known by such Person to be bound by a confidentiality agreement with the
Company.

      (n) Earnings Statement. Comply in all material respects with all
applicable rules and regulations of the Commission and make generally available
to its security holders earning statements satisfying the provisions of
Section 11(a) of the Securities Act and Rule 158 not later than 45 days after
the end of any 3-month period (or 90 days after the end of any 12-month period
if such period is a fiscal year): (i) commencing at the end of any fiscal
quarter in which Registrable Securities are sold to underwriters in a firm
commitment or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Company after the effective date of the Registration
Statement, which statements shall conform to the requirements of Rule 158.

      (o) Information. The Company may require each selling Holder to furnish to
the Company information regarding such Holder and the distribution of such
Registrable Securities as is required by law to be disclosed in the Registration
Statement and the Company may exclude from such registration the Registrable
Securities of any such Holder who unreasonably fails to furnish such information
within a reasonable time after receiving such request.

      The Company shall hold in confidence and not make any disclosure of
information concerning a Holder provided to the Company unless: (i) disclosure
of such information is necessary to comply with federal or state securities
laws, as determined in the opinion of legal counsel to the Company, (ii) the
disclosure of such information is necessary to avoid or correct a misstatement
or omission in any Registration Statement, (iii) the release of such information
is ordered pursuant to a subpoena or other order from a court or governmental
body of competent jurisdiction or (iv) such information has been made generally
available to the public other than by disclosure in violation of this or any
other agreement. The Company agrees that it shall, upon learning that disclosure
of such information concerning a Holder is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to such Holder prior to making such disclosure, and allow the Holder, at
its expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, such information.

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        If the Registration Statement refers to any Holder by name or otherwise
as the holder of any securities of the Company, then such Holder shall have the
right to require (if such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar Federal statute then in force) the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.           Each Holder covenants and agrees
that: (i) it will not sell any Registrable Securities under the Registration
Statement until it has received copies of the Prospectus as then amended or
supplemented as contemplated in Section 3(g) and notice from the Company or
otherwise that such Registration Statement and any post-effective amendments
thereto have become effective as contemplated by Section 3(c) and (ii) it and
its officers, directors or Affiliates, if any, will comply with the prospectus
delivery requirements of the Securities Act as applicable to them in connection
with sales of Registrable Securities pursuant to the Registration Statement.    
      Each Holder agrees by its acquisition of such Registrable Securities that,
upon receipt of a notice from the Company of the occurrence of any event of the
kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv), 3(c)(v) or 3(c)(vi)
such Holder will forthwith discontinue disposition of such Registrable
Securities under the Registration Statement until such Holder’s receipt of the
copies of the supplemented Prospectus and/or amended Registration Statement
contemplated by Section 3(j), or until it is advised in writing by the Company
that the use of the applicable Prospectus may be resumed, and, in either case,
has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in such Prospectus or
Registration Statement.           (p) Responses to the Commission. The Company
agrees to respond fully and completely to any and all comments on a Registration
Statement received from the Commission staff as promptly as possible but, for
non-underwritten offerings, in no event later than ten (10) Business Days of the
receipt of such comments, regardless of whether such comments are in oral or
written form.           (q) Confirmation of Effectiveness. Within two
(2) Business Days after a Registration Statement which covers applicable
Registrable Securities is ordered effective by the Commission, the Company shall
deliver, and shall cause legal counsel for the Company to deliver, to the
transfer agent for such Registrable Securities (with copies to the Holders whose
Registrable Securities are included in such Registration Statement) confirmation
that such Registration Statement has been declared effective by the Commission
in the form attached hereto as Exhibit B.           (r) Black-out Periods.
(i) For not more than thirty (30) consecutive days and for a total of not more
than sixty (60) days in any twenty-four (24) calendar month period (an “Allowed
Delay Period”), the Company may by written notice require that the Holders
immediately cease sales of Registrable Securities pursuant to a Registration
Statement at any time that: (A) the Company becomes engaged in a business
activity or negotiation which is not disclosed in a Registration Statement (or
the prospectus included therein) which the Company reasonably believes must be
disclosed therein under applicable law and which the Company desires to keep
confidential for business purposes, (B) the Company determines that a particular
disclosure so determined to be required to be disclosed therein would be
premature or would materially adversely affect the Company or its business or
prospects or (C) the Registration Statement or related Prospectus can no longer
be used under the existing rules and regulations promulgated under the
Securities Act (each of (A), (B) or (C), a “Material Condition”); provided that
a period of at least ninety (90) calendar days shall elapse from the end of any
Allowed Delay Period until the beginning of the subsequent Allowed Delay Period.
The Company shall not be required to disclose to the Holders which of the
reasons specified in (A), (B) or (C) above is the basis for requiring a
suspension of sales due to the occurrence of a Material Condition. The Company
shall use its commercially reasonable best efforts to ensure that the use of the
Registration Statement (and the prospectus included therein) may be resumed as
soon as it is practicable.           (ii) If the Company notifies the Holders
that no sales of Registrable Securities may be made for any period of time in
excess of an Allowed Delay Period, then, subject to the conditions set forth in
Section 2(c)(ii) hereof, the Company shall pay to each Holder an amount in cash
(an “Additional

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  Blackout Payment”), which payment shall be in lieu of the Registration Delay
Payment which would otherwise be applicable, equal to: (A) the weighted average
(based on daily trading volume) of the mid-point between the daily high and low
trading prices reported on the national exchange or quotation system on which
the Common Stock is then listed or quoted on each of the Trading Days in excess
of the Allowed Delay Period (the “Excess Days”) (or if the relevant price or
quotation did not exist on any of such days, the relevant price or quotation on
the next preceding Business Day on which there was such a price or quotation for
a total number of Trading Days equal to the number of Excess Days), minus
(B) the Per Share Market Value on the first day of the Excess Days period,
multiplied by (C) the lesser of (x) the Deemed Volume or (y) the number of
Registrable Securities (provided that, the Registrable Securities relating to
the Warrants shall only be included in such number of Registrable Securities if
the weighted average trading price referenced in subclause (A) above is in
excess of $5.50). The Company shall pay any Additional Blackout Payment in cash
to each Holder of Registrable Securities and/or Securities that are convertible
into or exercisable for Registrable Securities (whether or not such Securities
are then convertible or exercisable) on the last Business Day of each month
during which any Excess Days have occurred. In the event that the Company fails
to make an Additional Blackout Payment within ten (10) Business Days of the date
such Additional Blackout Payment is due, then such Additional Blackout Payment
shall bear interest at the rate of 2.0% per month (prorated for partial months)
until paid in full. The parties hereto agree that the foregoing Additional
Blackout Payment is intended as a reasonable estimation of the damages that
would be incurred by the Holders in the event of the occurrence of an event
triggering the obligation to pay an Additional Blackout Payment, and is not
intended as a penalty. Such payments shall not constitute the Holders’ exclusive
remedy for the occurrence of Excess Days.           (iii) For purposes of this
Section 3(r):

        “Per Share Market Value” means on any particular date: (a) the closing
bid price per share of the Common Stock on such date on: (i) the national
exchange or quotation system on which the Common Stock is then listed or quoted,
or, if there is no such price on such date, then the closing bid price on such
exchange or quotation system on the date nearest preceding such date or (ii) the
OTCBB, as reported by the National Quotation Bureau Incorporated (or similar
organization or agency succeeding to its function of reporting prices) or (b) if
the Common Stock is not then listed or quoted on any national exchange or
quotation system or the OTCBB, the fair market value of a share of Common Stock
as determined by an Appraiser selected in good faith by the Holders of a
majority in interest of the outstanding Registrable Securities and the shares of
Preferred Stock that are convertible into Registrable Securities (whether or not
such Securities are then convertible); provided, however, that the Company,
after receipt of the determination by such Appraiser, shall have the right to
select, in good faith, an additional Appraiser, in which case the fair market
value shall be equal to the average of the determinations by each such
Appraiser; and provided, further that all determinations of the Per Share Market
Value shall be appropriately adjusted for any stock dividends, stock splits or
other similar transactions during such period of calculation.           “Deemed
Volume” means (a) .25, multiplied by (b) the average daily trading volume of the
Common Stock during the Excess Days period.

      4. Registration Expenses

      All fees and expenses incident to the performance of or compliance with
this Agreement by the Company shall be borne by the Company, whether or not
pursuant to a Registration Statement and whether or not any Registration
Statement is filed or becomes effective and whether or not any Registrable
Securities are sold pursuant to such Registration Statement. The fees and
expenses referred to in the foregoing sentence shall include, without limitation
(a) all registration and filing fees (including, without limitation, reasonable
fees and expenses (i) incurred with respect to filings required to be made with
Nasdaq and each other securities exchange or market on which Registrable
Securities are required hereunder to be listed and (ii) incurred in connection
with compliance with state securities or Blue Sky laws (including, without
limitation, reasonable fees and disbursements of counsel for the Holders in
connection with Blue Sky qualifications of the

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Registrable Securities and determination of the eligibility of the Registrable
Securities for investment under the laws of such jurisdictions as the managing
underwriters, if any, or the Holders of a majority of Registrable Securities may
designate)), (b) printing expenses (including, without limitation, expenses of
printing certificates for Registrable Securities and of printing prospectuses if
the printing of prospectuses is requested by the managing underwriters, if any,
or by the Holders of a majority of the Registrable Securities included in the
Registration Statement), (c) messenger, telephone and delivery expenses,
(d) fees and disbursements of counsel for the Company, (e) Securities Act
liability insurance, if the Company so desires such insurance, (f) fees and
expenses of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement (other than
underwriting fees, discounts or commissions applicable to the sale of
Registrable Securities) and (g) the fees and expenses of Special Counsel to the
Holders (provided, that the Company’s obligations with respect to such Special
Counsel’s fees and expenses shall not exceed $5,000 hereunder). In addition, the
Company shall be responsible for all of its internal expenses incurred in
connection with the consummation of the transactions contemplated by this
Agreement (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit, and the fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange as required
hereunder.

      5. Indemnification

      (a) Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder and their
respective Affiliates, and the officers, directors, agents (including any
underwriters retained by such Holder in connection with the offer and sale of
Registrable Securities), brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to
perform under a margin call of Common Stock), investment advisors, employees,
successors and assigns of each of them, to the fullest extent permitted by
applicable law, from and against any and all joint or several losses, claims,
damages, liabilities, costs (including, without limitation, costs of preparation
and attorneys’ fees) and expenses (collectively, together with actions,
proceedings or inquiries by any regulatory or self-regulatory organization,
whether commenced or threatened, “Losses”), as incurred, arising out of or
relating to: (i) any untrue or allegedly untrue statement of a material fact
contained in the Registration Statement, any Prospectus, any form of prospectus
or in any amendment or supplement thereto or in any preliminary Prospectus, or
arising out of or relating to any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
(in the case of any Prospectus or form of prospectus or supplement thereto, in
light of the circumstances under which they were made) not misleading, except to
the extent that any untrue statements or omissions are based solely upon and in
conformity with information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, which information was
reasonably relied upon by the Company for use therein or to the extent that such
information relates to such Holder or such Holder’s proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of prospectus or in any amendment or supplement thereto
(provided that the Company amended any disclosure with respect to the method of
distribution upon written notice from the Holders that such section of the
Prospectus should be revised in any way), (ii) any violation or alleged
violation by the Company or any of its Affiliates or agents of the Securities
Act, the Exchange Act, any other law, including, without limitation, any state
securities law or any rule or regulation thereunder relating to the offer or
sale of Registrable Securities and (iii) any costs of enforcing the Company’s
indemnification obligations under this Section 5(a). The Company shall not,
however, be liable for any Losses to any Holder (a) with respect to any untrue
or allegedly untrue statement of material fact or omission or alleged omission
of material fact if such statement or omission was made in a preliminary
Prospectus and such Holder did not provide the final Prospectus (or any
amendment or supplement thereto) to the purchaser of the relevant securities at
or prior to the confirmation of the sale of the Registrable Securities in any
case where such delivery is required by the Securities Act, and the untrue or
allegedly untrue statement of material fact or omission or alleged omission of
material fact contained in such preliminary Prospectus was corrected in such
final Prospectus (or any amendment or supplement thereto), unless the failure to
deliver such final Prospectus (as amended or supplemented) was a result of
noncompliance by the Company with Section 3(g) of this Agreement, or (b) in the
event that notwithstanding the fact that the Company advised the Holder in
writing

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pursuant to Section 3(r) hereof that sales of Registrable Securities cannot be
made under a Registration Statement because of non-public Company developments
that the Company reasonably believes must be disclosed in the Registration
Statement under applicable law and which disclosure was not made (a “Non-Public
Development”), the Holder nonetheless sells Registrable Securities and a
judgment is entered by a court or administrative tribunal of competent
jurisdiction against the Holder on the basis that the Registration Statement or
Prospectus did not contain disclosure of the Non-Public Development or that the
Holder sold such Registrable Securities while in the possession of the
Non-Public Development, unless the Company has advised such Holder of or has
provided information to such Holder regarding such Non-Public Development in
violation of Section 3.3(b) of the Preferred Stock Agreement, but only to the
extent of such judgment.

      The Company shall promptly notify the Holders of the institution, threat
or assertion of any Proceeding of which the Company is aware in connection with
the transactions contemplated by this Agreement or the other Transaction
Documents.

      (b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, and the directors, officers,
agents and employees of the Company, to the fullest extent permitted by
applicable law, from and against all Losses, as incurred, arising solely out of
or based solely upon any untrue statement of a material fact contained in the
Registration Statement, any Prospectus, or any form of prospectus or arising
solely out of or based solely upon any omission of a material fact required to
be stated therein or necessary to make the statements therein not misleading to
the extent, but only to the extent, that such untrue statement or omission is
contained in any information so furnished in writing by such Holder to the
Company specifically for inclusion in the Registration Statement, any Prospectus
or any form of prospectus and that such information was reasonably relied upon
by the Company for use in the Registration Statement, such Prospectus or such
form of prospectus or to the extent that such information relates to such Holder
or such Holder’s proposed method of distribution of Registrable Securities and
was reviewed and expressly approved in writing by such Holder expressly for use
in the Registration Statement, such Prospectus or such form of prospectus;
provided, however, that the indemnity agreement contained in this Section 5(b)
shall not apply to amounts paid in settlement of any Losses if such settlement
is effected without the prior written consent of such Holder, which consent
shall not be unreasonably withheld; provided, further, that such Holder agrees
its consent to any such settlement will not be unreasonably withheld if such
Holder will not be liable for any payments or incur any out-of-pocket expenses
with respect to such settlement. In no event shall the liability of any selling
Holder hereunder be greater in amount than the dollar amount of the net proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation.

      (c) Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
“Indemnified Party”), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the “Indemnifying Party”) in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
fees and expenses incurred in connection with defense thereof; provided,
however, that the failure of any Indemnified Party to give such notice shall not
relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.

      An Indemnified Party shall have the right to employ separate counsel in
any such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party or
Parties unless: (i) the Indemnifying Party has agreed in writing to pay such
fees and expenses, (ii) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding, (iii) the named
parties to any such Proceeding (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party, and the Indemnified Party
shall have reasonably concluded on the advice of counsel that there are legal
defenses available to it that are different from or additional to those
available to the Indemnifying Party or (iv) the named parties to any such
Proceeding (including any impleaded parties)

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include both such Indemnified Party and the Indemnifying Party, and such
Indemnified Party shall have been advised by counsel that a conflict of interest
is likely to exist if the same counsel were to represent such Indemnified Party
and the Indemnifying Party (in which case, if such Indemnified Party notifies
the Indemnifying Party in writing that it elects to employ separate counsel at
the expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the reasonable
expense of the Indemnifying Party). The Indemnifying Party shall not be liable
for any settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding.

      All fees and expenses of the Indemnified Party (including, but not limited
to, reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section 5(c)) shall be paid to the Indemnified Party, as
incurred, within ten (10) Business Days of written notice thereof to the
Indemnifying Party, which notice shall be delivered no more frequently than on a
monthly basis, regardless of whether it is ultimately determined that an
Indemnified Party is not entitled to indemnification hereunder; provided,
however, that the Indemnifying Party may require such Indemnified Party to
undertake to reimburse all such fees and expenses to the extent that there is a
final judicial determination that such Indemnified Party is not entitled to
indemnification hereunder.

      (d) Contribution. If a claim for indemnification under Section 5(a) or
5(b) hereof is unavailable to an Indemnified Party because of the failure or
refusal of a court of competent jurisdiction to enforce such indemnification in
accordance with its terms (by reason of public policy), then each Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of any Losses in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and such Indemnified Party in connection with the actions,
statements or omissions that resulted in such Losses as well as any other
relevant equitable considerations. The relative fault of such Indemnifying Party
and Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or allegedly untrue
statement of a material fact or omission or alleged omission of a material fact,
has been taken or made by, or relates to information supplied by, such
Indemnifying Party or Indemnified Party, and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include, subject to the limitations set forth
in Section 5(c) hereof, any reasonable attorneys’ or other reasonable fees or
expenses incurred by such party in connection with (i) any Proceeding to the
extent that such party would have been indemnified for such fees or expenses if
the indemnification provided for in this Section 5 was available to such party
in accordance with its terms and (ii) enforcing any rights under this Section 5.
In no event shall any selling Holder be required to contribute an amount under
this Section 5(d) in excess of the net proceeds received by such Holder upon
sale of such Holder’s Registrable Securities pursuant to the Registration
Statement giving rise to such contribution obligation.

      The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.

      The indemnity and contribution agreements contained in this Section 5 are
in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.

      6. Miscellaneous

      (a) Remedies. In the event of a breach by the Company or by a Holder of
any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to

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specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agree that, in the event of any action for specific
performance in respect of such breach it shall waive the defense that a remedy
at law would be adequate.

      (b) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has, as of the date hereof, nor shall the Company or any of its
subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders in this Agreement or otherwise conflicts with the provisions hereof.
This Agreement contains the entire understanding of the parties with respect to
the subject matter hereof and supersedes all prior agreements and
understandings, oral or written, with respect to such matters, including without
limitation those certain letters of intent dated April 8, 2004 (and related term
sheets) between the Company and each of Brown Simpson Partners I , Ltd. and LB I
Group Inc.

      (c) Amendments and Waivers. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the same shall be in writing and signed by the Company and the
Majority Holders; provided, however, that for the purposes of this sentence,
Registrable Securities that are owned, directly or indirectly, by the Company or
an Affiliate of the Company are not deemed outstanding. Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with respect
to a matter that relates exclusively to the rights of Holders and that does not
directly or indirectly affect the rights of other Holders may be given by the
Majority Holders to which such waiver or consent relates; provided, however,
that the provisions of this sentence may not be amended, modified, or
supplemented except in accordance with the provisions of the immediately
preceding sentence. Any amendment or waiver effected in accordance with this
Section shall be binding upon each Holder, each future Holder and the Company.
Upon effectiveness of each such amendment or waiver, the Company shall promptly
give written notice thereof to the Holders who have not previously consented
thereto in writing.

      (d) Notices. Any notices, consents, waivers or other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been received: (a) upon hand delivery (receipt acknowledged) or
delivery by telecopy or facsimile (with transmission confirmation report) at the
address or number designated below (if received by 5:00 p.m. eastern time where
such notice is to be received) or the first Business Day following such delivery
(if received after 5:00 p.m. eastern time where such notice is to be received)
or (b) on the second Business Day following the date of mailing by express
courier service, fully prepaid, addressed to such address or upon actual receipt
of such mailing, whichever shall first occur. The addresses for such
communications are:

      If to the Company:

  Healthaxis, Inc.   The Towers at Williams Square   5215 N. O’Connor Blvd.,
Suite 800   Irving, Texas 75039   Telephone: 972-443-5000   Facsimile:
972-556-0572   Attention: Chief Financial Officer

      With a copy to (which copy shall not constitute notice):

  Locke Liddell & Sapp LLP   2200 Ross Avenue, Suite 2200   Dallas, Texas 75201
  Telephone: 214-740-8000   Facsimile: 214-740-8800   Attention: John B.
McKnight

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      If to the Transfer Agent:

  Mellon Investor Services LLC   44 Wall Street, 6th Floor   New York, New York
10005   Telephone: (917) 320-6254   Facsimile: (917) 320-6318   Attention:
Client Service Manager

      If to Brown Simpson Partners I, Ltd. to:

  152 West 57th Street, 21st Floor   New York, New York 10019   Telephone:
(212) 247-8200   Facsimile: (212) 247-1329   Attention: Mitchell D. Kaye

  With a copy, in the case of notice to Brown Simpson Partners I, Ltd.
(which copy shall not constitute notice), to:

  Lowenstein Sandler PC   65 Livingston Avenue   Roseland, New Jersey 07068  
Telephone: (973) 597-2500   Facsimile: (973-597-2400   Attention: Steven E.
Siesser

      If to OTAPE LLC:

  c/o OTA Limited Partnership   1 Manhattanville Road   Purchase, NY 10577  
Telephone: (914) 460-4013   Facsimile: (914) 694-5831   Attention: Vinny Digeso

      If to LB I Group Inc. to:

  c/o Lehman Brothers, Inc.   745 Seventh Avenue, 2nd Floor   New York, New York
10019   Telephone: (212) 526-2614   Facsimile: (212) 526-2198   Attention:
Michael Blaustein

      If to The Pennsylvania State University to:

  The Pennsylvania State University   103 Innovation Boulevard, Suite 212  
University Park, PA 16802   Telephone: (814) 863-9150   Facsimile:
(814) 863-9160   Attention: David E. Branigan

      Each party shall provide written notice to the other party of any change
in address or facsimile number in accordance with the provisions hereof.

      (e) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties
hereto and shall inure to the benefit of each Holder. The Company may not assign
its rights or obligations hereunder without the prior written consent of the
Majority Holders. The rights of each Holder hereunder, including the right to
have the Company register

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Registrable Securities for resale in accordance with the terms of this
Agreement, shall be assignable by each Holder if (i) the Holder agrees in
writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company within a reasonable time after such
assignment, (ii) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (A) the name and address of such
transferee or assignee and (B) the securities with respect to which such
registration rights are being transferred or assigned, (iii) following such
transfer or assignment, to the extent appropriate, the further disposition of
such securities by the transferee or assignee is restricted under the Securities
Act and applicable state securities laws and (iv) at or before the time the
Company receives the written notice contemplated by clause (ii) of this Section,
the transferee or assignee agrees in writing with the Company to be bound by all
of the provisions of this Agreement. The rights to assignment shall apply to the
Holders’ (and to subsequent) successors and assigns.

      (f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid and binding obligation of the party executing (or
on whose behalf such signature is executed) the same with the same force and
effect as if such facsimile signature were the original thereof.

      (g) Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflicts of law. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of
New York, Borough of Manhattan, for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court or that such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consent to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT THAT IT MAY HAVE TO, AND AGREES
NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.

      (h) Cumulative Remedies. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.

      (i) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, then the remainder of the terms, provisions, covenants
and restrictions set forth herein shall remain in full force and effect and
shall in no way be affected, impaired or invalidated and the parties hereto
shall use their reasonable efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any terms,
provisions, covenants and restrictions that may be hereafter declared invalid,
illegal, void or unenforceable.

      (j) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

      (k) Shares Held by The Company and its Affiliates. Whenever the consent or
approval of Holders of a specified percentage of Registrable Securities is
required hereunder, Registrable Securities held by the Company or its Affiliates
(other than any Holder or transferees or successors or assigns thereof if such
Holder is deemed to be an Affiliate of the Company solely by reason of its
holdings of such Registrable Securities)

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shall not be counted in determining whether such consent or approval was given
by the Holders of such required percentage.

      (l) Construction. In the event of any inconsistency or ambiguity between
the terms of this Agreement and the terms of the Certificate of Designation, the
terms of the Certificate of Designation shall control and govern any
construction hereof or thereof.

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      IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.

  HEALTHAXIS INC.

  By:  /s/ JAMES W. MCLANE

 

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  Name: James W. McLane

  Title: Chief Executive Officer

HOLDERS:

  BROWN SIMPSON PARTNERS I, LTD.

  By:  /s/ MITCHELL D. KAYE

 

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  Name: Mitchell D. Kaye

  Title: Chief Investment Officer

  OTAPE LLC

  By:  /s/ RICHARD M. COYNE

 

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  Name: Richard M. Coyne

  Title: General Counsel

  LB I GROUP INC.

  By:  /s/ MARLISA VINCIGUERRA

 

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  Name: Marlisa Vinciguerra

  Title: Attorney-in-fact

  THE PENNSYLVANIA STATE UNIVERSITY

  By:  /s/ DAVID E. BRANIGAN

 

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  Name: David E. Branigan

  Title: Executive Director

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SCHEDULE I

Brown Simpson Partners I, Ltd.:
152 West 57th Street, 21st Floor
New York, New York 10019
Attn: Mitchell D. Kaye
Fax: (212) 247-1329
Residence: Grand Cayman, Cayman Islands

OTAPE LLC

c/o OTA Limited Partnership
1 Manhattanville Road
Purchase, NY 10577
Attention: Vinny Digeso
Facsimile: (914) 694-5831
Residence: Purchase, NY

LB I Group Inc.

c/o Lehman Brothers, Inc.
745 Seventh Avenue, 2nd Floor
New York, New York 10019
Attention: Michael Blaustein
Facsimile: (212) 526-2198
Residence: New York, NY

The Pennsylvania State University

103 Innovation Boulevard, Suite 212
University Park, PA 16802
Attention: David E. Branigan
Facsimile: (814) 863-9160
Residence: University Park, PA

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EXHIBIT A

PLAN OF DISTRIBUTION

      We are registering the shares of common stock on behalf of the selling
stockholders. All costs, expenses and fees in connection with the registration
of the shares offered by this prospectus will be borne by our company, other
than brokerage commissions and similar selling expenses, if any, attributable to
the sale of shares of common stock, which will be borne by the selling
stockholders. We have also agreed to indemnify the selling stockholders against
certain losses, claims, damages and liabilities, including liabilities under the
Securities Act. Sales of shares of common stock may be effected by selling
stockholders from time to time in one or more types of transactions (which may
include block transactions) on Nasdaq, in the over-the-counter market, in
privately negotiated transactions, through put or call options transactions
relating to the shares of common stock, through short sales of shares of common
stock, or a combination of such methods of sale, at market prices prevailing at
the time of sale, or at negotiated prices, and by using any other method
permitted pursuant to applicable law. Such transactions may or may not involve
brokers or dealers. The selling stockholders have advised us that they have not
entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their securities, nor is
there an underwriter or coordinated broker acting in connection with the
proposed sale of shares of common stock by the selling stockholders.

      The selling stockholders may enter into hedging transactions with
broker-dealers or other financial institutions. In connection with such
transactions, broker-dealers or other financial institutions may engage in short
sales of the shares of common stock or of securities convertible into or
exchangeable for the shares of common stock in the course of hedging positions
they assume with the selling stockholders. The selling stockholders may also
enter into options or other transactions with broker-dealers or other financial
institutions which require the delivery to such broker-dealers or other
financial institutions of the shares of common stock offered by this prospectus,
which the broker-dealer or other financial institution may resell pursuant to
this prospectus (as amended or supplemented to reflect such transaction).

      The selling stockholders may make these transactions by selling shares of
common stock directly to purchasers or to or through broker-dealers, which may
act as agents or principals. These broker-dealers may receive compensation in
the form of discounts, concessions or commissions from selling stockholders
and/or the purchasers of shares of common stock for whom these broker-dealers
may act as agents or to whom they sell as principal, or both (which compensation
as to a particular broker-dealer might be in excess of customary commissions).

      The selling stockholders may from time to time pledge or grant a security
interest in some or all of the securities owned by them and, if they default in
the performance of their secured obligations, the pledgees or secured parties
may offer and sell shares of common stock from time to time under this
prospectus, or under an amendment or supplement to this prospectus under
Rule 424(b)(3) or other applicable provision of the Securities Act of 1933
modifying the list of selling stockholders to include the pledgee, transferee or
other successors in interest as selling stockholders under this prospectus.

      The selling stockholders and any broker-dealers that act in connection
with the sale of shares of common stock may be “underwriters” within the meaning
of Section 2(11) of the Securities Act, and any commissions received by these
broker-dealers or any profit on the resale of the shares of common stock sold by
them while acting as principals might be deemed to be underwriting discounts or
commissions under the Securities Act. The selling stockholders may agree to
indemnify any agent, dealer or broker-dealer that participates in transactions
involving sales of the shares of common stock against certain liabilities,
including liabilities arising under the Securities Act.

      The selling stockholders also may transfer the shares of common stock in
other circumstances, in which case the transferees, pledgees or other successors
in interest will be the selling beneficial owners for purposes of this
prospectus.

      Because the selling stockholders may be “underwriters” within the meaning
of Section 2(11) of the Securities Act, the selling stockholders may be subject
to the prospectus delivery requirements of the

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Securities Act. Our company has informed the selling stockholders that the
anti-manipulative provisions of Regulation M promulgated under the Exchange Act
may apply to their sales in the market. In addition, our company has made copies
of this prospectus available to the selling stockholders and has informed them
of the need for delivery of copies of this prospectus to purchasers at or prior
to the time of any sale of the shares offered hereby.

      The selling stockholders also may resell all or a portion of the shares of
common stock in open market transactions in reliance upon Rule 144 under the
Securities Act, provided that they meet the criteria and conform to the
requirements of Rule 144.

      Upon our company being notified by a selling stockholder that a material
arrangement has been entered into with a broker-dealer for the sale of shares of
common stock through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing:

  •  the name of each selling stockholder and of the participating
broker-dealer(s);     •  the number of shares of common stock involved;     • 
the initial price at which shares of common stock were sold;     •  the
commissions paid or discounts or concessions allowed to the broker-dealer(s),
where applicable;     •  that the broker-dealer(s) did not conduct any
investigation to verify the information set out or incorporated by reference in
this prospectus; and     •  other facts material to the transactions.

      In addition, upon our company being notified by a selling stockholder that
a donee or pledgee intends to sell more than 500 shares of common stock, a
supplement to this prospectus will be filed.

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EXHIBIT B
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT

Mellon Investor Services LLC

Overpeck Centre
85 Challenger Road
Ridgefield Park, New Jersey 07660
Attn.:

Re:     Healthaxis Inc.

Ladies and Gentlemen:

      We are counsel to Healthaxis Inc., a Pennsylvania corporation (the
“Company”), and have represented the Company in connection with the Preferred
Stock Agreement entered into by and among the Company and the buyers named
therein (collectively, the “Holders”) pursuant to which the terms of the
Company’s Series A Convertible Preferred Stock were amended and restated (as so
amended and restated, the “Series A Preferred Stock”) and the Company granted to
the Holders of the Series A Preferred Stock certain warrants (“Warrants”) to
purchase shares of the Company’s common stock, par value $.10 per share (the
“Common Stock”). Pursuant to the Preferred Stock Agreement, the Company also has
entered into an Investor Rights Agreement with the Holders (the “Investor Rights
Agreement”) pursuant to which the Holders agreed to certain restrictions on
their resale of the Preferred Stock, Warrants and related shares of Common
Stock, and a Registration Rights Agreement with the Holders (the “Registration
Rights Agreement”) pursuant to which the Company agreed, among other things, to
register the Registrable Securities (as defined in the Registration Rights
Agreement), including the shares of Common Stock issuable upon conversion of the
Series A Preferred Stock or upon exercise of the Warrants, under the Securities
Act of 1933, as amended (the “Securities Act”). In connection with the Company’s
obligations under the Registration Rights Agreement, on                     ,
2004, the Company filed a Registration Statement on Form S-3 (File
No. 333-                    ) (the “Registration Statement”) with the Securities
and Exchange Commission (the “SEC”) relating to the Registrable Securities,
which names each of the Holders as a selling stockholder thereunder.

      In connection with the foregoing, we advise you that a member of the SEC’s
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective under the Securities Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic inquiry of a member of the SEC’s staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the Securities Act pursuant to the
Registration Statement.

      Please be advised that upon presentment to you of a stock certificate(s)
representing shares of Series A Preferred Stock or shares of Common Stock for
transfer to a third party, together with your receipt of written confirmation
from the Company that such transfer is in compliance with the terms of the
Investor Rights Agreement, you will be authorized to issue stock certificate(s)
representing shares of Common Stock in the name of the indicated transferee(s),
which certificates will be free of any restrictive legends.

  Very truly yours,   LOCKE LIDDELL & SAPP LLP

  By: 

 

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cc: [LIST NAMES OF HOLDERS]

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