Document:

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                                                                    Exhibit 10.2

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                               EXCHANGE AGREEMENT

                                      Among

                                 HEALTHAXIS INC.

                                       and

                        THE HOLDERS LISTED ON SCHEDULE I

                            Dated as of July 31, 2002

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                               EXCHANGE AGREEMENT

                  THIS EXCHANGE AGREEMENT (this "Agreement") is dated as of July
31, 2002 among Healthaxis Inc., a Pennsylvania corporation (the "Company"), and
the various persons identified and listed on Schedule I hereto (each referred to
herein as a "Holder" and, collectively, the "Holders.")

                  WHEREAS, the Company and the Holders are parties to that
certain Securities Purchase Agreement dated as of September 14, 1999, as amended
on September 28, 2000 (the "Purchase Agreement") relating to the purchase and
sale of an aggregate of $27,500,000 principal amount of 2% Convertible
Debentures due September 14, 2005 (the "Debentures") and warrants (the
"Warrants") to purchase the Company's common stock, par value $.10 per share
(the "Common Stock");

                  WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to (i) issue to the Holders, and the Holders
desire to acquire by exchange, an aggregate of 23,500 shares of the Company's
Series A Convertible Preferred Stock, par value $1.00 per share, stated value
$1,000 per share, initial conversion price $2.625 (the "Preferred Stock") and
(ii) pay to the Holders an aggregate of $4,000,000, together with accrued but
unpaid interest relating to Debentures in the principal amount of $4,000,000
(the "Payment").

                  WHEREAS, as consideration for the issuance of the Preferred
Stock and the Payment, the Company desires to accept from the applicable
Holders, and the applicable Holders desire to tender and exchange, an aggregate
of $27,500,000 principal amount of the Debentures;

                  WHEREAS, contemporaneously with the execution and delivery of
this Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement by and among the Company and the Holders (the "Registration
Rights Agreement"), substantially in the forms of Exhibit B attached hereto,
pursuant to which the Company has agreed to provide certain registration rights
under the Securities Act and the rules and regulations promulgated thereunder,
and applicable state securities laws; and

                  NOW THEREFORE, in consideration of the promises and mutual
covenants and agreements hereinafter, the Company and the Holders hereby agree
as follows:

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                                   ARTICLE I.

                                    EXCHANGE

         1.1      Exchange

                  On the Closing Date (as defined below), subject to the terms
and conditions set forth herein, the Company shall issue and deliver to each
Holder and each Holder, severally and not jointly, shall (i) acquire from the
Company the number of shares of Preferred Stock as set forth next to such
Holder's name on Schedule I and (ii) receive from the Company its respective
portion of the Payment as set forth next to such Holder's name on Schedule I. In
exchange for the Preferred Stock and the Payment set forth on Schedule I, the
Holders shall tender to the Company for cancellation the aggregate amount of
Debentures as set forth next to such Holder's name on Schedule II.

         1.2      Closing.

                  The Closing. The closing of the exchange of the Preferred
Stock (the "Closing") shall take place at the offices of Akin, Gump, Strauss,
Hauer & Feld, L.L.P., 590 Madison Avenue, New York, New York 10022, or by
transmission by facsimile and overnight courier, immediately following the
execution hereof or such later date or different location as the parties shall
agree, but not prior to the date that the conditions set forth in Section 4.1
have been satisfied or waived by the appropriate party (the "Closing Date"). At
the Closing:

                  a. Each Holder shall deliver and tender, as directed by the
Company, all documents representing the amount of Debentures as set forth next
to its name on Schedule II;

                  b. The Company shall deliver to each Holder a certificate
evidencing the number of shares of Preferred Stock received by such Holder as
set forth on Schedule I hereto, the Preferred Stock shall have the respective
rights, preferences, limitations and privileges set forth in Exhibit A attached
hereto, which shall be incorporated into a Certificate of Designation of Rights,
Preferences and Limitations to be approved by the Holders and the Company's
Board of Directors and filed on or before the Closing with the Secretary of
State of Pennsylvania (the "Certificate of Designation"); and

                  c. The parties shall execute and deliver each of the documents
referred to in Section 4.1.

                                  ARTICLE II.

                         REPRESENTATIONS AND WARRANTIES

         2.1      Representations, Warranties and Agreements of the Company.
The Company hereby makes the following representations and warranties to
each of the Holders:

                  a. Organization and Qualification. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the Commonwealth of

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Pennsylvania, with the requisite corporate power and authority to own and use
its properties and assets and to carry on its business as currently conducted.
Except as set forth on Schedule 2.1(a), the Company has no subsidiaries (each a
"Subsidiary" and collectively, the "Subsidiaries"). Each of the Subsidiaries
(which for purposes of this Agreement means any entity in which the Company,
directly or indirectly, owns the majority of such entity's capital stock or
holds an equivalent equity or similar interest) is a corporation, limited
liability company or limited partnership duly formed, validly existing and in
good standing, or subsisting, as the case may be, under the laws of the
jurisdiction of its incorporation or formation (as applicable), with the full
requisite power and authority to own and use its properties and assets and to
carry on its business as currently conducted. Each of the Company and its
Subsidiaries is duly qualified as a foreign entity to do business and is in good
standing as a foreign entity in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification necessary,
except where the failure to be so qualified or in good standing, as the case may
be, would not, individually or in the aggregate: (i) adversely affect the
legality, validity or enforceability of this Agreement or any of the other
Transaction Documents (as defined in Section 2.1(b) hereof) or any of the
transactions contemplated hereby or thereby, (ii) have or result in a material
adverse effect on the business, results of operations, assets or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole
or (iii) impair the Company's ability to perform fully on a timely basis its
obligations under any Transaction Document (any of (i), (ii) or (iii), being a
"Material Adverse Effect").

                  b. Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by this Agreement, the Certificate of Designation and the
Registration Rights Agreement (collectively, the "Transaction Documents"), and
otherwise to carry out its obligations hereunder and thereunder. The execution
and delivery of this Agreement and each of the other Transaction Documents by
the Company and the consummation by it of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action and no
further action is required by the Company, the Board of Directors or the
Company's stockholders in connection therewith. The Company has full corporate
power and authority to issue, sell and deliver the Preferred Stock and the
Underlying Shares (as defined below), pursuant to this Agreement and the other
Transaction Documents. This Agreement and each of the other Transaction
Documents has been duly executed by the Company and, when delivered in
accordance with the terms hereof or thereof, will constitute the valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application, and
except that rights to indemnification and contribution may be limited by federal
or state securities laws or public policy relating thereto.

                  c. Capitalization. As of the date hereof, the authorized and
issued capital stock of the Company and each of the Subsidiaries and the
ownership of each of the Subsidiaries is as set forth in Schedule 2.1(c). All of
such outstanding shares of capital stock have been, or upon issuance will be,
duly authorized and validly issued, fully paid and nonassessable and were issued
in accordance with the registration or qualification provisions of the
Securities Act, or pursuant to valid exemptions therefrom. Except as disclosed
in Schedule 2.1(c): (i) no shares of

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the Company's capital stock are subject to preemptive rights or any other
similar rights or any liens, claims or encumbrances suffered or permitted by the
Company, nor is any holder of the Common Stock entitled to preemptive, right of
first refusal or similar rights arising out of any agreement or understanding
with the Company, including, without limitation, the Transaction Documents, (ii)
there are no outstanding options, warrants, scrip rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable or exercisable for, or giving any Person (as
defined below) any right to subscribe for or acquire, any shares of capital
stock of the Company or any of the Subsidiaries, or contracts, commitments,
understandings or arrangements by which the Company or any of the Subsidiaries
is or may become bound to issue additional shares of capital stock of the
Company or any of the Subsidiaries or options, warrants, scrip rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, any shares of capital
stock of the Company or any of the Subsidiaries, (iii) there are no outstanding
debt securities, or other form of material debt, of the Company or any of the
Subsidiaries, (iv) there are no contracts, commitments, understandings,
agreements or arrangements under which the Company or any of the Subsidiaries is
obligated to register the sale of any of their securities under the Securities
Act (except the Registration Rights Agreement), (v) there are no outstanding
securities of the Company or any of the Subsidiaries which contain any
redemption or similar provisions, and there are no contracts, commitments,
understandings, agreements or arrangements by which the Company or any of the
Subsidiaries is or may become bound to redeem a security of the Company or any
of the Subsidiaries, (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the shares of Preferred Stock or upon the conversion of the Preferred Stock,
(vii) the Company does not have any stock appreciation rights or "phantom stock"
plans or agreements, or any similar plan or agreement and (viii) except as set
forth in filings made with the Securities and Exchange Commission (the
"Commission"), to the Company's and each Subsidiary's knowledge, no Person (as
defined below) or group of related Persons beneficially owns (as determined
pursuant to Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) or has the right to acquire by agreement with or
by obligation binding upon the Company, beneficial ownership of in excess of 5%
of the Common Stock. Any Person with any right (other than the Holders) to
purchase securities of the Company that would be triggered as a result of the
transactions contemplated under this Agreement has waived such rights. As used
in this Agreement, "Person" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or subdivision
thereof) or other entity of any kind.

                  d. Authorization, Validity and Issuance of Shares. The shares
of Preferred Stock have been duly authorized and, when issued in accordance with
this Agreement, will be duly and validly issued, fully paid and nonassessable,
and will be free and clear of all liens, charges, restrictions, claims and
encumbrances, other than liens, charges, restrictions, claims and encumbrances
that were created by the Holders and restrictions on transfer imposed by this
Agreement or the other Transaction Documents, the Securities Act of 1933, as
amended (the "Securities Act") and applicable state securities laws. The shares
of Common Stock issuable upon conversion of the Preferred Stock, together with
the number of shares of Common Stock issuable as dividends on the shares of
Preferred Stock (collectively, the "Underlying Shares"),

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have been duly reserved for issuance, and, when so issued, will be duly
authorized, validly issued, fully paid and nonassessable, free and clear of all
liens, charges, restrictions, claims and encumbrances, other than rights created
by this Agreement or the other Transaction Documents.

                  e. No Conflicts. The Company's execution, delivery and
performance of this Agreement and each of the other Transaction Documents and
the Company's consummation of the transactions contemplated hereby and thereby
(including the issuance of the Underlying Shares) do not and will not: (i)
conflict with or violate any provision of the Company's Articles of
Incorporation as amended and in effect on the Closing Date (the "Articles of
Incorporation"), the Company's bylaws, as in effect on the Closing Date (the
"Bylaws") or other organizational documents of the Company or any of the
Subsidiaries, (ii) subject to obtaining the consents referred to in Section
2.1(f) hereof, conflict with, or constitute a breach or a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to other Persons any rights of termination, amendment, acceleration or
cancellation of, any contract, agreement, indenture, understanding, note, lease,
evidence of indebtedness, patent, license or other instrument to which the
Company or any Subsidiary is a party or by which any property or asset of the
Company or any Subsidiary is bound or affected, (iii) result in a violation of
any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or any
Subsidiary is subject (including Federal and state securities laws and
regulations and the rules and regulations of The Nasdaq Stock Market ("Nasdaq"))
applicable to the Company or any of the Subsidiaries, or by which any material
property or asset of the Company or any Subsidiary is bound or affected, except
where such conflict has not resulted or would reasonably result, individually or
in the aggregate, in a Material Adverse Effect or (iv) result in the creation or
imposition of any lien, charge, restriction, claim or encumbrance of any nature
whatsoever upon the Company or any Subsidiary, or upon any property or asset of
the Company or any Subsidiary.

                  f. Consents and Approvals. Except as specifically set forth on
Schedule 2.1(f), neither the Company nor any Subsidiary is required to obtain
any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration with, any court or other federal, state, local or other
governmental authority, regulatory or self-regulatory agency, or other Person in
connection with the Company's execution, delivery and performance of this
Agreement or the other Transaction Documents, other than: (i) the filing of a
registration statement with the Commission, which shall be filed in accordance
with and in the time periods set forth in the Registration Rights Agreement,
(ii) the application(s) or any letter(s) acceptable to Nasdaq for the listing or
quoting of the Underlying Shares with Nasdaq (and with any other national
securities exchange or market on which the Common Stock is then traded, listed
or quoted), (iii) the filing of a Form D with the Commission and any filings,
notices or registrations under applicable state securities laws and (iv) the
approval of the Board and the filing of the applicable Certificate of
Designation with the Secretary of State of Pennsylvania, which approval and
filing shall be effected on or prior to the Closing Date (together with the
consents, waivers, authorizations, orders, notices and filings referred to on
Schedule 2.1(f), the "Required Approvals").

                  g. Litigation; Proceedings. Except as specifically set forth
on Schedule 2.1(g), there is no action, suit, claim, notice of violation,
proceeding or investigation or inquiry

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(including, without limitation, any inquiry as to the Company's qualification to
hold or to receive any license or permit), pending or, to the knowledge of the
Company or any of the Subsidiaries, threatened against or affecting the Company
or any of the Subsidiaries or any of their respective properties or assets
before or by any court, governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign) which has or reasonably
could be expected to have a Material Adverse Effect, and there is no basis for
any of the foregoing. There is no action, suit, proceeding or investigation by
the Company pending or threatened against others.

                  h. No Default or Violation. Except as set forth on Schedule
2.1(h), neither the Company nor any Subsidiary is in: (i) default under or in
violation of any agreement, contract, license, understanding, evidence of
indebtedness, note, indenture, instrument, commitment, plan, arrangement or any
other agreement or instrument to which it is a party or by which it or any of
its properties or assets is bound, which default or violation has or reasonably
could be expected to have a Material Adverse Effect, (ii) default or violation
of any order, writ, judgment, injunction or decree of any court, arbitrator or
federal, state, municipal or other governmental body, department, commission,
board, bureau, agency or instrumentality, domestic or foreign, applicable to it,
which default or violation has or reasonably could be expected to have a
Material Adverse Effect, (iii) violation of any law, statute, ordinance, rule or
regulation of any governmental authority to which it is subject, which violation
has or reasonably could be expected to have a Material Adverse Effect, (iv)
violation of any of the provisions of their respective certificates of
incorporation, bylaws or other charter documents such that any right of a holder
of the Preferred Stock would be affected or (v) default under or in violation of
any of the listing or quotation requirements of Nasdaq as in effect on the
Closing Date.

                  i. Disclosure; Absence of Certain Changes. None of this
Agreement, the Schedules to this Agreement, the other Transaction Documents or
any other written or formally presented information, report, financial
statement, exhibit, schedule or document furnished by or on behalf of the
Company or any of the Subsidiaries to the Holders or their counsel in connection
with the negotiation of the transactions contemplated by this Agreement or any
of the other Transaction Documents contained, contains, or will contain at the
time it was or is so furnished any untrue statement of a material fact or
omitted, omits or will omit at such time to state any material fact necessary in
order to make the statements made herein and therein, in light of the
circumstances under which they were made, not misleading. Except as contemplated
by the Transaction Documents or that certain Termination Agreement dated June
11, 2002 by and between the Company and UICI (the "UICI Termination Agreement"),
or on Schedule 2.1(i) or in SEC Documents filed on EDGAR at least five (5)
business days prior to the date hereof, since January 1, 2002, no event has
occurred or exists (or is contemplated to occur) (i) which is not reflected in
the Company's financial statements and which has or reasonably could be expected
to have a Material Adverse Effect or (ii) which would be required to be
disclosed by the Company under applicable securities laws on a registration
statement (including by way of incorporation by reference) filed with the
Commission relating to an issuance and sale of securities by the Company and
which has not been publicly disclosed. The Company has not taken any steps, and
does not currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or any of the Subsidiaries have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings.

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                  j. Private Offering; Solicitation. The Company and, to the
knowledge of the Company, all Persons acting on its behalf have not (i) made,
directly or indirectly, and will not make, offers or sales of any securities or
solicited, and will not solicit, any offers to buy any security under
circumstances that would require registration of the Preferred Stock, or the
Underlying Shares or the issuance of such securities under the Securities Act,
(ii) distributed any offering materials in connection with the offering and sale
of the Preferred Stock, other than the SEC Documents, the Schedules to this
Agreement, and any amendments or supplements thereto or (iii) solicited any
offer to buy or sell the Preferred Stock by means of any form of general
solicitation or advertising (as those terms are used in Rule 502(c) of
Regulation D under the Exchange Act) in a manner which would require
registration under the Securities Act. The offer, issuance and sale of the
Preferred Stock and the Underlying Shares to the Holders will not be integrated
with any other offer, sale and issuance of the Company's securities (past or
current) in violation of the Securities Act or any regulations of any exchange
or automated quotation system on which any of the securities of the Company are
listed, quoted or designated or for purposes of any stockholder approval
provision applicable to the Company or its securities. Subject to the accuracy
and completeness of the representations and warranties of the respective Holders
contained in Section 2.2 hereof, the Company's offer, issuance and sale to the
Holders of the Preferred Stock and the Underlying Shares is exempt from the
registration requirements of the Securities Act.

                  k. SEC Documents; Financial Statements. The Common Stock is
registered pursuant to Section 12(g) of the Exchange Act. Except as set forth on
Schedule 2.1(k), since January 1, 2001, the Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the Commission pursuant to the reporting requirements of the Exchange Act,
including pursuant to Sections 13, 14 or 15(d) thereof (the foregoing materials
and all exhibits included therein and financial statements and schedules thereto
and documents (other than exhibits to such documents) incorporated by reference
therein being collectively referred to herein as the "SEC Documents"), on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Documents prior to the expiration of any such extension. As
of their respective dates, the SEC Documents complied in all material respects
with the requirements of the Securities Act and the Exchange Act and the rules
and regulations of the Commission promulgated thereunder, and none of the SEC
Documents, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Except with respect to the Transaction Documents
and the UICI Termination Agreement, all agreements to which the Company or any
Subsidiary is a party or to which the property or assets of the Company or any
Subsidiary are subject and which are required to be filed as exhibits to the SEC
Documents have been filed as exhibits to the SEC Documents as required and
neither the Company nor any Subsidiary nor, to the Company's knowledge, any
other party is in breach of any such agreement. As of their respective dates,
the Company's financial statements included in the SEC Documents comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission with respect thereto as in
effect at the time of filing. Such financial statements have been prepared in
accordance with U.S. generally accepted accounting principles applied on a
consistent basis during the periods involved, except as may be otherwise
specified in such financial statements or the notes thereto, and fairly present

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in all material respects the Company's financial position as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, immaterial
year-end audit adjustments.

                  l. Investment Company. The Company is not, and is not
controlled by or under common control with an Affiliate of an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.

                  m. Broker's Fees. No fees or commissions or similar payments
with respect to the transactions contemplated by this Agreement and the other
Transaction Documents have been paid or will be payable by the Company to any
broker, financial advisor, finder, investment banker, or bank, other than as set
forth in Schedule 2.1(m). The Holders shall have no obligation with respect to
any fees or with respect to any claims made by or on behalf of other Persons for
fees of a type contemplated in this Section 2.1(m) that may be due in connection
with the transactions contemplated by this Agreement and the other Transaction
Documents.

                  n. Form S-3 Eligibility. The Company is, and at the Closing
Date will be, eligible to register securities (including the Underlying Shares)
for resale with the Commission on Form S-3 (or any successor form) promulgated
under the Securities Act.

                  o. Listing and Maintenance Requirements Compliance. The
principal market on which the Common Stock is currently traded is Nasdaq. Except
as disclosed on Schedule 2.1(o), the Company has not in the three (3) years
preceding the date hereof received notice (written or oral) from Nasdaq (or any
stock exchange, market or trading facility on which the Common Stock is or has
been listed or quoted), to the effect that the Company is not in compliance with
the listing or maintenance requirements of such market or exchange. Except as
disclosed on Schedule 2.1(o), the Company is not aware of any facts which would
reasonably lead to delisting or suspension of the Common Stock by Nasdaq. After
giving effect to the transactions contemplated by this Agreement and the other
Transaction Documents, and except as disclosed on Schedule 2.1(o), the Company
believes that it is and will be in compliance with all such maintenance
requirements.

                  p. Tax Status; Firpta. Except as set forth on Schedule 2.1(p),
the Company and each of the Subsidiaries have made or filed all federal and
state income and all other tax returns, reports and declarations required by any
jurisdiction to which it is subject (unless and only to the extent that the
Company and each of the Subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and have
paid all taxes and other governmental assessments and charges that are material
in amount, shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith (which are set forth on
Schedule 2.1(p) hereof), and have set aside on their books provisions reasonably
adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. There are no unpaid taxes
that have not been reserved on the Company's books in any material amount
claimed to be due from the Company or any of the Subsidiaries by the taxing
authority of any jurisdiction, and the Company knows of no basis for any such
claim. The Company is not a "United States real property

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holding corporation" within the meaning of Section 897(c)(2) of the Internal
Revenue Code of 1986, as amended.

                  q. Permits. The Company and each of the Subsidiaries possess
all certificates, authorizations, licenses, easements, consents, approvals,
orders, registrations, franchises, exemptions, permits and other authorizations
necessary to own, lease and operate their respective properties and to conduct
their respective businesses as currently conducted except where the failure to
possess such certificates, authorizations, licenses, easements, consents,
approvals, orders, registrations, franchises, exemptions, permits and other
authorizations would not, individually or in the aggregate, have a Material
Adverse Effect (the "Material Permits"), and, except as disclosed on Schedule
2.1(q), there is no proceeding pending, or, to the knowledge of the Company or
any Subsidiary, threatened, relating to the revocation, modification, suspension
or cancellation of any Material Permit. The Company and each of the Subsidiaries
has been operating each of their respective businesses pursuant to and in
compliance with the terms of the Material Permits, except where the failure to
so operate their respective businesses would not have a Material Adverse Effect.
All of the Material Permits have been validly issued and are in full force and
effect without further consent or approval of any Person. Neither the Company
nor any of the Subsidiaries is in conflict with or default or violation of any
Material Permit, except where any such conflict or default would not have a
Material Adverse Effect.

                  r. Insurance. The Company and each of the Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and the
Subsidiaries are engaged.

                  s. Transactions With Affiliates. Except as set forth in the
SEC Documents or on Schedule 2.1(s), and other than the granting of stock
options and documents disclosed on Schedule 2.1(c), none of the officers,
directors or employees of the Company is presently a party to any transaction
with the Company or any of its Subsidiaries (other than for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real property or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge
of the Company, any Person in which any officer, director or any such employee
has a substantial interest or is an officer, director, trustee or partner.

                  t. Application to Takeover Protection. The Company and the
Board have taken all necessary action, if any, in order to render inapplicable
any (i) control share acquisition, business combination or other similar
anti-takeover provision under the Articles of Incorporation, Bylaws or the laws
of the Company's state of incorporation or (ii) poison pill provision of any of
the Company's stockholders' rights or similar agreements, which is or could
become applicable to the Holders or the Transaction Documents as a result of the
transactions contemplated by this Agreement and the other Transaction Documents.

                  u.  Acknowledgement Regarding Holders' Purchase of Preferred
Stock. The Company acknowledges and agrees that the Holders are acting solely in
the capacity of arm's length holders with respect to this Agreement and the
other Transaction Documents and the

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transactions contemplated hereby and thereby. The Company further acknowledges
that no Holder is acting as a financial advisor or fiduciary of the Company (or
in any similar capacity) with respect to this Agreement and the other
Transaction Documents and the transactions contemplated hereby and thereby and
any statement made by any Holder or any of their respective representatives or
agents in connection with this Agreement and the other Transaction Documents and
the transactions contemplated hereby and thereby is not advice or a
recommendation and is merely incidental to the Holders' purchase of the
Preferred Stock. The Company further represents to each Holder that the
Company's decision to enter into this Agreement and the other Transaction
Documents has been based solely on the independent evaluation of the Company and
its representatives.

                  v. Intellectual Property Rights. The Company and the
Subsidiaries own or possess adequate rights or licenses to use all trademarks,
trademark applications, trade names and service marks, whether or not
registered, and all patents, patent applications, copyrights, inventions,
licenses, approvals, governmental authorizations, trade secrets and intellectual
property rights (collectively, "Intellectual Property Rights") which are
necessary for use in connection with their respective businesses as now
conducted and as described in the SEC Documents. Except as set forth on Schedule
2.1(v), none of the Company's Intellectual Property Rights have expired or
terminated, or are expected to expire or terminate within two (2) years from the
date of this Agreement. Neither the Company nor any of the Subsidiaries has
infringed upon or is infringing upon any of the Intellectual Property Rights of
any Person and, except as set forth on Schedule 2.1(v), there is no claim,
action or proceeding which has been made or brought or alleged against, or to
the Company's knowledge, is being made, brought or threatened against, the
Company or any of the Subsidiaries regarding the infringement of any of the
Company's Intellectual Property Rights, and the Company and the Subsidiaries are
unaware of any facts or circumstances which might give rise to any of the
foregoing, except where any of the foregoing would not have a Material Adverse
Effect. The Company and the Subsidiaries have taken reasonable security measures
to protect the secrecy, confidentiality and value of all of their intellectual
properties.

                  w. Internal Accounting Controls. The Company and each of the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that: (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with United States generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorizations and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

                  x. Acknowledgement of Dilution. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock of the issuance
of the Underlying Shares upon conversion of the Preferred Stock. The Company
further acknowledges that its obligation to issue the Underlying Shares upon
conversion of the Preferred Stock in accordance with this Agreement and the
Certificates of Designation is absolute and unconditional, regardless of the

                                       10
<PAGE>
dilutive effect that such issuance may have on the ownership interests of the
Company's other stockholders.

                  y. Solvency. The Company (both before and after giving effect
to the transactions contemplated by this Agreement) is solvent (i.e., its assets
have a fair market value in excess of the amount required to pay its probable
liabilities on its existing debts as they become absolute and matured) and
currently the Company has no information that would lead it to reasonably
conclude that the Company would not have the ability to, nor does it intend to
take any action that would impair its ability to, pay its debts from time to
time incurred in connection therewith as such debts mature. The Company did not
receive a qualified opinion from its auditors with respect to its most recent
fiscal year end and does not anticipate or know of any basis upon which its
auditors might issue a qualified opinion in respect of its current fiscal year.

                  z. Seniority. No class of equity securities of the Company is
pari passu or senior to the Preferred Stock in right of payment, whether upon
liquidation, dissolution or otherwise, or with respect to dividends, redemption,
conversion or voting.

                  aa. Other Agreements. The Company has not, directly or
indirectly, made any agreements with any Holders relating to the terms and
conditions of the transactions contemplated by the Transaction Documents, except
as set forth in the Transaction Documents and the UICI Termination Agreement.

                  bb. Absence of Claims. The Company does not currently have
under consideration, and is not otherwise currently aware of, any claims, causes
of action, damages or demands whatsoever that it or any of its officers,
directors, partners or Affiliates (as such term is defined in the Series A
Certificate of Designation) may have against any of the Holders or any of their
respective predecessors, successors, officers, directors, partners, employees,
agents, insurers, representatives or Affiliates, whether legal, equitable or
administrative, or fixed or contingent.

         2.2      Representations and Warranties of the Holders. Each of the
Holders, severally and not jointly, hereby represents and warrants to the
Company as follows:

                  a. Organization; Authority. Such Holder is a corporation or a
limited duration company or a limited liability company or limited partnership
duly formed, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation with the requisite power and
authority, corporate or otherwise, to enter into and to consummate the
transactions contemplated hereby and by the Transaction Documents and otherwise
to carry out its obligations hereunder and thereunder. The exchange by such
Holder for a portion of the Payment and the shares of Preferred Stock hereunder
has been duly authorized by all necessary action on the part of such Holder.
Each of this Agreement and the Registration Rights Agreement has been duly
executed and delivered by such Holder and constitutes the valid and legally
binding obligation of such Holder, enforceable against such Holder in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights generally and to

                                       11
<PAGE>
general principles of equity, and except that rights to indemnification and
contribution may be limited by federal or state securities laws or public policy
relating thereto.

                  b. Investment Intent. Such Holder is acquiring the shares of
Preferred Stock and the Underlying Shares for its own account and not with a
present view to or for distributing or reselling the shares of Preferred Stock
or the Underlying Shares or any part thereof or interest therein in violation of
the Securities Act and, if such Holder is not an individual, such Holder
represents that it has not been formed for the specific purpose of acquiring the
Preferred Stock; provided, however, that by making the representations herein,
such Holder does not agree to hold any of the shares of Preferred Stock or the
Underlying Shares for any minimum or other specific term and reserves the right
to dispose of the shares of Preferred Stock or the Underlying Shares at any time
in accordance with or pursuant to a registration statement or an exemption under
the Securities Act.

                  c. Holder Status. At the time such Holder was offered the
Preferred Stock and, at the Closing Date, (i) it was and will be an "accredited
investor" as defined in Rule 501 under the Securities Act and (ii) such Holder,
either alone or together with its representatives, had and will have such
knowledge, sophistication and experience in business and financial matters so as
to be capable of evaluating the merits and risks of the prospective investment
in the Preferred Stock and the Underlying Shares.

                  d. Reliance. Such Holder understands and acknowledges that (i)
the Preferred Stock and the Underlying Shares are being delivered to such Holder
without registration under the Securities Act in a private placement that is
exempt from the registration provisions of the Securities Act under Section 4(2)
of the Securities Act or Regulation D promulgated thereunder and (ii) the
availability of such exemption depends in part on, and the Company will rely
upon the accuracy and truthfulness of, the representations set forth in this
Section 2.2 and such Holder hereby consents to such reliance.

                  e. Information. Such Holder and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the exchange of the
Preferred Stock which such Holder considers necessary or appropriate and which
have been requested by such Holder or its advisors. Such Holder and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company. Neither such inquiries nor any other due diligence investigation
conducted by Holder or any of its advisors or representatives shall modify,
amend or affect Holder's right to rely on the Company's representations and
warranties contained in Section 2.1 above or representations and warranties of
the Company contained in any other Transaction Document. Such Holder understands
that its investment in the Preferred Stock involves a significant degree of
risk.

                  f. Governmental Review. Such Holder understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Preferred
Stock.

                  g. Residency. Such Holder is a resident of the jurisdiction
set forth immediately below such Holder's name on Schedule II hereto.

                                       12
<PAGE>
                  h. Current Holdings. Such Holder is currently a stockholder of
the Company.

                  i. Investment Experience. Such Holder has experience as an
investor in securities of companies similar to the stage of development of the
Company and acknowledges that it can bear the economic risk of its investment in
the Preferred Stock or the Underlying Shares issuable upon conversion of the
Preferred Stock, and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of this investment
in the Preferred Stock.

                  j. Absence of Claims. Such Holder does not currently have
under consideration, and is not otherwise currently aware of, any claims, causes
of action, damages or demands whatsoever that it or any of its officers,
directors, partners or Affiliates (as such term is defined in the Series A
Certificate of Designation) may have against the Company or its Subsidiaries or
any of their respective predecessors, successors, officers, directors, partners,
employees, agents, insurers, representatives or Affiliates, whether legal,
equitable or administrative, or fixed or contingent.

         The Company acknowledges and agrees that the Holders make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.

                                  ARTICLE III.

                                OTHER AGREEMENTS

         3.1      Transfer Restrictions.

                  a. If any Holder should decide to dispose of the Preferred
Stock or the Underlying Shares held by it, such Holder understands and agrees
that it may do so only pursuant to an effective registration statement under the
Securities Act, to the Company or pursuant to an available exemption from the
registration requirements of the Securities Act or Rule 144 promulgated under
the Securities Act ("Rule 144"). In connection with any transfer of any
Preferred Stock or Underlying Shares other than pursuant to an effective
registration statement, Rule 144 or to the Company, the Company may require the
transferor thereof to provide to the Company a written opinion of counsel
experienced in the area of United States securities laws selected by the
transferor, the form and substance of which opinion shall be customary for
opinions of counsel in comparable transactions and reasonably acceptable to the
Company, to the effect that such transfer does not require registration of such
transferred securities under the Securities Act; provided, however, that if the
Preferred Stock or Underlying Shares may be sold pursuant to Rule 144(k), no
written opinion of counsel shall be required from the Holder if such Holder
provides reasonable assurances that such security can be sold pursuant to Rule
144(k). Notwithstanding the foregoing, the Company hereby consents to and agrees
to register any transfer by any Holder to an Affiliate (as defined in the
Certificates of Designation) of such Holder, provided that the transferee
certifies to the Company that it is an "accredited investor" as defined in Rule
501(a) under the Securities Act. Any such transferee shall agree in writing to
be bound by the terms of this Agreement and shall have the rights of a Holder
under

                                       13
<PAGE>
this Agreement and the Transaction Documents. If a Holder provides the Company
with an opinion of counsel, the form and substance of which opinion shall be
customary for opinions of counsel in comparable transactions and reasonably
acceptable to the Company, to the effect that a public sale, assignment or
transfer of the Preferred Stock and the Underlying Shares may be made without
registration under the Securities Act or the Holder provides the Company with
reasonable assurances that the Preferred Stock and/or the Underlying Shares can
be sold pursuant to Rule 144 without any restriction as to the number of
securities acquired as of a particular date that can then be immediately sold,
the Company shall permit the transfer, and, in the case of the Underlying
Shares, promptly instruct its transfer agent to issue one or more certificates
in such name and in such denominations as specified by such Holder and without
any restrictive legend. Notwithstanding the foregoing or anything else contained
herein to the contrary, the securities may be pledged as collateral in
connection with a bona fide margin account or other lending arrangement.

                  b. Each Holder agrees to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Preferred Stock
and the Underlying Shares:

                           THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
                  REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
                  "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE.
                  ACCORDINGLY, THE SHARES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
                  PLEDGED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
                  EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
                  IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS
                  OF THE SECURITIES ACT AS DETERMINED PURSUANT TO AN OPINION OF
                  COUNSEL FOR THE CORPORATION THAT THE PROPOSED TRANSACTION WILL
                  BE EXEMPT FROM REGISTRATION.

                  Neither the Preferred Stock nor the Underlying Shares shall
contain the legend set forth above (or any other legend) (i) if in the written
opinion of counsel to the Company experienced in the area of United States
securities laws such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued by
the staff of the Commission), (ii) if such Preferred Stock or Underlying Shares
may be sold pursuant to Rule 144(k) or (iii) if such shares are registered for
resale under the Securities Act. The Company agrees that it will provide each
Holder, upon request, with a certificate or certificates representing shares of
Preferred Stock or Underlying Shares, free from such legend at such time as such
legend is no longer required hereunder. If such certificate or certificates had
previously been issued with such a legend or any other legend, the Company
shall, upon request and upon the delivery of the legended certificate(s),
reissue such certificate or certificates free of any legend.

         3.2      Stop Transfer Instruction. The Company may not make any
notation on its records or give instructions to any transfer agent of the
Company which enlarge the restrictions on transfer set forth in Section 3.1.

                                       14
<PAGE>
         3.3      Furnishing of Information. As long as any Holder owns the
Preferred Stock or the Underlying Shares, the Company will cause the Common
Stock to continue at all times to be registered under Section 12 of the Exchange
Act, will timely file (or obtain extensions in respect thereof and file within
the applicable grace period) all reports required to be filed by the Company
after the Closing Date pursuant to Section 13, 14 or 15(d) of the Exchange Act
and, unless filed by EDGAR, promptly furnish, but in no event later than two (2)
business days after the filing thereof with the Commission, the Holders with
true and complete copies of all such filings, and will not take any action or
file any document (whether or not permitted by the Exchange Act or the rules
thereunder) to terminate or suspend such reporting and filing obligations. As
long as any Holder owns the Preferred Stock or the Underlying Shares, if the
Company is not required to file reports pursuant to Section 13(a) or 15(d) of
the Exchange Act, it will prepare and furnish to the Holders and make publicly
available in accordance with Rule 144(c) promulgated under the Securities Act,
annual and quarterly financial statements, together with a discussion and
analysis of such financial statements in form and substance substantially
similar to those that would otherwise be required to be included in reports
required by Section 13(a) or 15(d) of the Exchange Act, as well as any other
information required thereby, in the time period that such filings would have
been required to have been made under the Exchange Act. The Company also agrees
that prior to and during the Effectiveness Period (as defined in the
Registration Rights Agreement) it will make available or give to the Holders all
notices and other information made available or given to the stockholders of the
Company generally, contemporaneously with the making available or giving thereof
to the stockholders. The Company further covenants that it will take such
further action as any Holder of the Preferred Stock or the Underlying Shares may
reasonably request, all to the extent required from time to time to enable such
Person to sell the Preferred Stock or the Underlying Shares without registration
under the Securities Act within the limitation of the exemptions provided by
Rule 144 promulgated under the Securities Act, including delivering the legal
opinion referenced in Section 3.1(b) hereof. Upon the request of any such
Person, the Company shall deliver to such Person a written certification of a
duly authorized officer as to whether it has complied with such requirements.

         3.4      Blue Sky Laws. In accordance with the Registration Rights
Agreement, the Company shall: (a) qualify the Underlying Shares under the
securities or "blue sky" laws of such jurisdictions as the Holders may request
(or to obtain an exemption from such qualification), (ii) shall provide evidence
to each Holder of any such action so taken on or prior to the Closing Date and
(iii) shall continue such qualification at all times through the resale of all
of the Underlying Shares, but in any event not past the third anniversary of the
Closing Date.

         3.5      Integration. The Company shall not sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or exchange of the Preferred Stock or the Underlying Shares in a manner
that would require the registration under the Securities Act of the sale of the
Preferred Stock or the Underlying Shares to any Holder, or to issue securities
in such circumstances that is likely to result in such offering being integrated
with the exchange of the Preferred Stock and Underlying Shares in such manner
that stockholder approval would be required pursuant to any stockholder approval
provision applicable to the Company or its securities.

                                       15
<PAGE>
         3.6      Listing and Reservation of Underlying Shares.

                  a. The Company shall (i) not later than ten (10) business days
after the Closing Date prepare and file with Nasdaq (as well as any other
national securities exchange or market on which the Common Stock is then listed)
a Notification Form: Listing of Additional Shares or such other listing
applications or letters acceptable to Nasdaq covering a number of shares of
Common Stock which is at least equal to 100% of the maximum number of Underlying
Shares then issuable (the "Application"), (ii) take all steps necessary to cause
the Application for the Underlying Shares to be accepted by Nasdaq (as well as
on any other national securities exchange or market on which the Common Stock is
then listed) as soon as possible thereafter, (iii) so long as any shares of
Common Stock shall be so listed, shall not revoke the Application for the
Underlying Shares, and (iv) upon request provide to the Holders evidence of the
Application as accepted by Nasdaq. Prior to the effectiveness of any
registration statement filed to register the resale of the Underlying Shares,
the Company shall promptly provide to each Holder copies of any notices it
receives from Nasdaq regarding the continued eligibility of the Common Stock for
listing on such automated quotation system so long as such notice does not
contain any material, nonpublic information. The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section
3.6(a).

                  b. The number of shares of Common Stock included in the
Initial Registration Statement (as defined in the Registration Rights Agreement)
shall be equal to the Maximum Amount (as defined in the Registration Rights
Agreement).

                  c. The Company at all times shall reserve a sufficient number
of shares of its authorized but unissued Common Stock to provide for 110% of the
maximum number of Underlying Shares. Shares of Common Stock reserved for
issuance upon conversion of the shares of Preferred Stock shall be allocated pro
rata to each of the Holders in accordance with the number of shares of Preferred
Stock issued and delivered to such Holder at the Closing. If at any time the
number of shares of Common Stock authorized and reserved for issuance is
insufficient to cover 100% of the number of Underlying Shares issued and
issuable upon conversion of the shares of Preferred Stock (including the payment
of all dividends thereon) (based on the Conversion Price (as defined in the
Certificates of Designation)) of the shares of Preferred Stock in effect from
time to time without regard to any limitation on conversions, the Company will
promptly take all corporate action necessary to authorize and reserve 110% of
such shares, including, without limitation, calling a special meeting of
stockholders to authorize additional shares to meet the Company's obligations
under this Section 3.6(c), in the case of an insufficient number of authorized
shares, and using best efforts to obtain stockholder approval of an increase in
such authorized number of shares and taking actions pursuant to Section 3(b) of
the Registration Rights Agreement.

                                       16
<PAGE>
         3.7      Notice of Breaches.

                  a. The Company and each Holder shall give prompt written
notice to the other of any breach by it of any representation, warranty or other
agreement contained in this Agreement or in the Transaction Documents, as well
as any events or occurrences arising after the date hereof and prior to the
Closing Date, which would reasonably be likely to cause any representation or
warranty or other agreement of such party, as the case may be, contained herein
to be incorrect or breached as of the Closing Date; provided such notice will
not constitute material non-public information. However, no disclosure by either
party pursuant to this Section 3.7 shall be deemed to cure any breach of any
representation, warranty or other agreement contained herein or in the
Transaction Documents.

                  b. Notwithstanding the generality of Section 3.7(a), the
Company shall promptly notify, provided such notification will not constitute
material non-public information, each Holder of any notice or claim (written or
oral) that it receives from any lender of the Company or any Subsidiary to the
effect that the consummation of the transactions contemplated hereby and by the
Registration Rights Agreement violates or would violate any written agreement or
understanding between such lender and the Company or any Subsidiary, and the
Company shall promptly furnish by facsimile to the Holders a copy of any written
statement in support of or relating to such claim or notice.

                  c. The default by any Holder of any of its obligations,
representations or warranties under this Agreement or the Transaction Documents
shall not be imputed to any other Holder and, except with respect to the
accuracy of each Holder's representations and warranties and the obligation of
each Holder to tender for cancellation the Debentures that it holds to the
Company at Closing, the default by any Holder of its obligations,
representations or warranties under this Agreement or the Transaction Documents
shall not affect the Company's obligations under this Agreement or any
Transaction Document to any non-defaulting Holder.

         3.8      Form D. The Company agrees to file a Form D with respect to
the Preferred Stock as required by Rule 506 under Regulation D and to provide a
copy thereof to each Holder promptly after such filing.

         3.9      Transfer Agent Instructions. On the Closing Date the Company
shall issue irrevocable instructions to its transfer agent (and shall issue to
any subsequent transfer agent as required), to issue certificates, registered in
the name of each Holder or its respective nominee(s), for the Underlying Shares
in such amounts as specified from time to time by each Holder to the Company in
a form acceptable to such Holders (the "Irrevocable Transfer Agent
Instructions"). The Company warrants that no instruction other than the
Irrevocable Transfer Agent Instructions referred to in this Section 3.9, and
stop transfer instructions to give effect to Section 3.1 hereof prior to
registration of the Underlying Shares under the Securities Act, will be given by
the Company to its transfer agent and that the Preferred Stock and the
Underlying Shares shall otherwise be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement and the
other Transaction Documents. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holders by violating
the intent and purpose of the transactions contemplated hereby. Accordingly, the

                                       17
<PAGE>
Company acknowledges that the remedy at law for a breach of its obligations
under this Section 3.9 will be inadequate and agrees, in the event of a beach or
threatened breach by the Company of the provisions of this Section 3.9, that the
Holders shall be entitled, in addition to all other available remedies, to an
order and/or injunction restraining any breach and requiring immediate issuance
and transfer without the necessity of showing economic loss and without any bond
or other security being required.

         3.10     Press Release; Filing of Form 8-K. Subject to the provisions
of Section 6.11 hereof, prior to the opening of Nasdaq on August 1, 2002, the
Company shall issue a press release disclosing the transaction contemplated
hereby in form and substance acceptable to the Holders. On or before the 5th
business day following the Closing Date, the Company shall file a Current Report
on Form 8-K with the Commission describing the terms of the transaction
contemplated by this Agreement and the Transaction Documents in the form
required by the Exchange Act.

         3.11     Ordinary Course Brokerage and Trading. Subject to compliance
with all applicable securities laws and Nasdaq regulations, no Holder shall be
prohibited from engaging in its ordinary course brokerage and trading activities
in respect of the Common Stock; provided, however, that the Holder engaged in
such activities shall not then be in possession of material, non-public
information with respect to the Company.

         3.12     Best Efforts. Each of the parties hereto shall use its best
efforts to satisfy each of the conditions to be satisfied by it as provided in
Article IV of this Agreement.

         3.13     Material Information. The Company covenants that any
information provided by the Company to the Holders and their agents or counsel
which could be deemed to constitute material non-public information will cease
to be material non-public information (either through disclosure by the Company
or otherwise) on such date as the Company files its Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 2002.

         3.14     Preferred Stock Characterization. In the event of any
determination as to whether the Preferred Stock constitutes debt or equity of
the Company, it is hereby declared that it is the mutual intention of the
Company and the Holders that the Preferred Stock be deemed equity of the
Company. In the event that notwithstanding the foregoing expressed intention, it
is determined that the Preferred Stock constitutes debt of the Company, then the
Company and the Holders do hereby agree to negotiate in good faith any
amendments to the Certificate or other Transaction Documents that are necessary
to render the Preferred Stock being deemed equity of the Company, provided that
any such changes shall ultimately be made in the sole discretion of the Holders
of not less than sixty percent (60%) of the then outstanding shares of Preferred
Stock.

                                       18
<PAGE>
                                   ARTICLE IV.

                                   CONDITIONS

         4.1      Closing.

                  a. Conditions Precedent to the Obligation of the Company to
Deliver the Shares of Preferred Stock. The obligation of the Company to deliver
the Payment and the shares of Preferred Stock is subject to the satisfaction or
waiver (with prior written notice to each Holder) by the Company, at or before
the Closing Date of each of the following conditions:

                           (i)      Accuracy of the Holders' Representations and
Warranties. The representations and warranties of each Holder in this Agreement
shall be true and correct in all material respects as of the date when made and
as of the Closing;

                           (ii)     Performance by the Holders. Each Holder
shall have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by such Holder at or before the Closing;

                           (iii)    No Injunction. No statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Transaction Documents;

                           (iv)     UICI Termination. The UICI Termination
Agreement shall have been executed and delivered by the Company and UICI, and
the Company shall have received the cash consideration provided for therein; and

                           (v)      Listing of Underlying Shares. The
Underlying Shares shall be listed for trading on the Nasdaq.

                  b. Conditions Precedent to the Obligation of the Holders to
Exchange the Debentures at the Closing. The obligation of each Holder hereunder
to exchange its Debentures for the shares of Preferred Stock at the Closing is
subject to the satisfaction or waiver by such Holder, at or before the Closing
Date, of each of the following conditions:

                           (i)      Accuracy of the Company's Representations
and Warranties. The representations and warranties of the Company set forth in
this Agreement shall be true and correct in all respects as of the date when
made and as of the Closing Date, unless such representations and warranties of
the Company are specifically made as of the specific dates provided in Section
2.1 of this Agreement;

                           (ii)     Performance by the Company. The Company
shall have performed, satisfied and complied in all respects with all covenants,
agreements and conditions

                                       19
<PAGE>
required by this Agreement to be performed, satisfied or complied with by the
Company at or before the Closing Date, including, but not limited to, tendering
the Payment to the Holders;

                           (iii)    All Proceedings to be Satisfactory. All
corporate and other proceedings to be taken by the Company in connection with
the transactions contemplated hereby and by the other Transaction Documents and
all documents incident thereto shall be satisfactory in form and substance to
the Holders and their counsel and the Holders and their counsel shall have
received all counterpart originals or certified or other copies of such
documents as they may reasonably request;

                           (iv)     No Injunction. No statute, rule,
regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement and the Transaction Documents;

                           (v)      No Suspensions of Trading in Common Stock.
The trading in the Common Stock shall not have been suspended by the Commission,
or Nasdaq (except for any suspension of trading of limited duration solely to
permit dissemination of material information regarding the Company);

                           (vi)     Listing of Underlying Shares. The
Underlying Shares shall be listed for trading on the Nasdaq;

                           (vii)    Required Approvals. The Company shall have
obtained all consents, waivers, authorizations and approvals from any third
parties necessary to the consummation of the transaction contemplated hereby,
and copies thereof shall have been delivered to the Holders;

                           (viii)   Shares of Common Stock. The Company shall
have duly reserved the number of Underlying Shares issuable upon the conversion
of the shares of Preferred Stock acquired by the Holders on the Closing Date;

                           (ix)     Adverse Changes. Since the date of the
financial statements included in the Company's Quarterly Report on Form 10-Q or
Annual Report on Form 10-K, whichever is more recent, last filed prior to the
date of this Agreement, no event which had a Material Adverse Effect shall have
occurred (for purposes hereof, changes in the market price of the Common Stock
as compared to the market generally may be considered as a factor in determining
whether there has occurred an event which has had a Material Adverse Effect);

                           (x)      Litigation. No litigation shall have been
instituted or threatened against the Company which would reasonably be expected
to, individually or in the aggregate, have had a Material Adverse Effect;

                           (xi)     Change of Control. No Change of Control
shall have occurred since the date of this Agreement. "Change of Control" means
the occurrence of any of (i) an acquisition after the date hereof by an
individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act), other than the Holders or any of their

                                       20
<PAGE>
Affiliates, of in excess of 33.33% of the voting securities of the Company, (ii)
a replacement of more than one-half of the members of the Company's Board of
Directors that is not approved by those individuals who are members of the Board
of Directors on the date hereof in one or a series of related transactions,
(iii) the merger of the Company with or into another entity, (iv) the
consolidation or sale of all or substantially all of the assets of the Company
in one or a series of related transactions or (v) the execution by the Company
of an agreement to which the Company is a party or by which it is bound,
providing for any of the events set forth above in (i), (ii), (iii) or (iv);

                           (xii)    Transfer Agent Instructions. The
Irrevocable Transfer Agent Instructions, in a form acceptable to the Holders,
shall have been delivered to and acknowledged in writing by the Company's
transfer agent with a copy forwarded to each Holder;

                           (xiii)   Series A Certificate of Designation. The
Series A Certificate of Designation shall have been filed with the Secretary of
State of Pennsylvania;

                           (xiv)    Resolutions. The Board of Directors of the
Company shall have adopted resolutions consistent with Section 2.1(b) and in a
form reasonably acceptable to each Holder (the "Resolutions"); and

                           (xv)     Qualification Under State Securities Laws.
All registrations, qualifications, permits and approvals required under
applicable state securities laws shall have been obtained for the lawful
execution, delivery and performance of this Agreement and each of the other
Transaction Documents, and also for the offer, sale, issuance and delivery of
the Preferred Stock to be purchased hereunder.

                  c.  Documents and Certificates. At the Closing, the Holders
shall have delivered to the Company, the amount of Debentures as set forth next
to such Holder's name on Schedule II.

                  d.  Documents and Certificates. At the Closing, the Company
shall have delivered to the Holders the following in form and substance
reasonably satisfactory to the Holders:

                           (i)      Preferred Stock Certificate. A Preferred
Stock Certificate(s) representing the number of shares of Preferred Stock
exchanged for by such Holder as set forth next to such Holder's name on Schedule
I, registered in the name of such Holder, each in form satisfactory to the
Holder;

                           (ii)     Registration Rights. The Company shall have
executed and delivered the Registration Rights Agreement;

                           (iii)    Officer's Certificate. An Officer's
Certificate dated the Closing Date and signed by an executive officer of the
Company confirming the accuracy of the Company's representations and warranties
as of such Closing Date and confirming the compliance by the Company with the
conditions precedent set forth in Section 4.1(b) and this Section 4.1(d) as of
the Closing Date;

                                       21
<PAGE>
                           (iv)     Secretary's Certificate. A Secretary's
Certificate dated the Closing Date and signed by the Secretary or Assistant
Secretary of the Company certifying (A) that attached thereto is a true and
complete copy of the Articles of Incorporation of the Company, as in effect on
the Closing Date, (B) that attached thereto is a true and complete copy of the
by-laws of the Company, as in effect on the Closing Date and (C) that attached
thereto is a true and complete copy of the Resolutions duly adopted by the Board
of Directors of the Company authorizing the execution, delivery and performance
of this Agreement and of the Transaction Documents, and that such Resolutions
have not been modified, rescinded or revoked;

                           (v)      Opinion. An opinion of the Company's
principal legal counsel, as well as an opinion of the Company's Pennsylvania
legal counsel, substantially in the forms attached hereto as Exhibit C, dated as
of the Closing Date;

                           (vi)     Governmental Certificates. The Company
shall have delivered to each of the Holders a copy of a certificate evidencing
the existence and good standing of the Company and each Subsidiary in each such
entity's state of formation issued by the appropriate governmental authority of
such state of formation as of a date within ten (10) days of the Closing Date.
The Company shall have delivered to each of the Holders a copy of its Articles
of Incorporation as certified by the Secretary of State of the State of
Pennsylvania within ten (10) days of the Closing Date; and

                           (vii)    Other Documents. The Company shall have
delivered to each Holder such other documents relating to the transactions
contemplated by the Transaction Documents as the Holder or its counsel may
reasonably request.

                                   ARTICLE V.

                                 INDEMNIFICATION

         5.1      Indemnification.

                  a. The Company shall defend, protect, indemnify and hold
harmless each Holder, its past and present Affiliates and their successors and
assigns (in accordance with the provisions of Section 6.6 hereof), each other
holder of the Underlying Shares and all of their stockholders, officers,
directors, partners, members, employees and direct or indirect investors and any
of the foregoing Persons' agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "Indemnitees") from and against any and all
actions, causes of action, suits, claims, losses, proceedings, costs (as
incurred), penalties, fees (including legal fees and expenses), liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including interest and penalties and any fees (including legal
fees) and expenses incurred in enforcing the Company's indemnification
obligations under this Section 5.1(a) (the "Indemnified Liabilities"), incurred
by any Indemnitee as a result of, or arising out of, or relating to: (i) any
misrepresentation or breach of any representation or warranty made by the
Company in this Agreement or in the other Transaction Documents, or any other
certificate, instrument or

                                       22
<PAGE>
document contemplated hereby or thereby, (ii) any breach of any covenant,
agreement or obligation of the Company contained in this Agreement or the other
Transaction Documents, or any other certificate, instrument or document
contemplated hereby or thereby or (iii) any cause of action, suit or claim
brought or made or threatened, other than by the Company, against such
Indemnitee and arising out of or resulting from (A) the execution, delivery,
registration, performance or enforcement of this Agreement or the other
Transaction Documents, (B) any transaction financed or to be financed in whole
or in part, directly or indirectly, with the proceeds of the issuance of the
Preferred Stock or (C) solely the status of such Holders or holder of the
Preferred Stock or the Underlying Shares as an investor in the Company. The
Company's indemnification obligations under this Section 5.1(a) shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliate of any Holder and any
partners, directors, agents, members, employees and controlling Persons (if
any), as the case may be, of any Holder and any such Affiliate, and shall be
binding upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of the Company, the Holders and any such Affiliate and
any such Person. The Company also agrees that neither the Holders nor any such
Affiliates, partners, directors, agents, members, employees or controlling
Persons of the Holders and any such Affiliates shall have any liability to the
Company or any Person asserting claims on behalf of or in right of the Company
in connection with or as a result of the consummation of this Agreement or any
of the Transaction Documents except to the extent that any losses, claims,
damages, liabilities or expenses incurred by the Company result from the gross
negligence or willful misconduct of such Holder or entity in connection with the
transactions contemplated by this Agreement or the Transaction Documents. To the
extent that the foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities that is permissible under
applicable law.

                  b. All fees and expenses (including reasonable fees and
expenses to the extent incurred in connection with investigating or preparing to
defend any proceeding initiated against an Indemnitee in a manner not
inconsistent with this Section or in enforcing the Company's indemnification
obligation) of the Indemnitees shall be paid to the Indemnitees as incurred,
within ten (10) business days of written notice thereof to the Company, which
notice shall be delivered no more frequently than on a monthly basis, regardless
of whether it is ultimately determined that an Indemnitee is not entitled to
indemnification hereunder; provided, however, that the Company may require such
Indemnitee to undertake to reimburse all such fees and expenses to the extent it
is finally judicially determined that such Indemnitee is not entitled to
indemnification hereunder.

                                   ARTICLE VI.

                                  MISCELLANEOUS

         6.1      Entire Agreement. This Agreement, together with the Exhibits
and Schedules hereto and the other Transaction Documents contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters. In the event of any inconsistency or ambiguity between the
terms of this Agreement and the terms of

                                       23
<PAGE>
the Series A Certificate of Designation, the terms of the Series A Certificate
of Designation shall control and govern any construction hereof or thereof.

      6.2         Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile,
provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party (if received by 5:00 p.m.
eastern time ("ET") where such notice is received) or the first business day
following such delivery (if received after 5:00 p.m. ET where such notice is
received); or (iii) one business day after deposit with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
shall be:

                  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:

                            Locke Liddell & Sapp LLP
                            2200 Ross Avenue, Suite 2200
                            Dallas, Texas 75201-6776
                            Telephone: (214) 740-8000
                            Facsimile: (214) 740-8800
                            Attention:     John B. McKnight

                  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

                                       24
<PAGE>
                  If to Brown Simpson Partners I, Ltd. to:

                            152 West 57th Street, 21st Floor
                            New York, New York 10029
                            Telephone: (212) 247-8200
                            Facsimile: (212) 247-1329
                            Attention: Mitchell D. Kaye

                  If to Brown Simpson - ORD Investments LLC to:

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

                  If to LBI Group Inc. to:

                            c/o Lehman Brothers, Inc.
                            3 World Financial Center
                            New York, New York 10285
                            Telephone: (212) 526-7255
                            Facsimile: (212) 526-2198
                            Attention: Steve Weinstein

                  If to UICI to:

                           UICI
                           4001 McEwen Drive, Suite 200
                           Dallas, Texas 75244
                           Telephone: (972) 392-6719
                           Facsimile: (972) 392-6717
                           Attention: Glenn W. Reed
                           Executive Vice President and General Counsel

                  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

                                       25
<PAGE>
                  With a copy, in the case of Notice to Brown Simpson Partners
I, Ltd. [or Brown Simpson - ORD Investments LLC] to:

                           Akin, Gump, Strauss, Hauer & Feld, L.L.P.
                           590 Madison Avenue
                           New York, New York 10022
                           Telephone: (212) 872-1000
                           Facsimile: (212) 872-1002
                           Attention: James Kaye

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

         6.3      Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and the Holders of not less than sixty percent
(60%) of the then outstanding shares of Preferred Stock or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought. No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right accruing to it thereafter. Notwithstanding
the foregoing, no such amendment shall be effective to the extent that it
applies to less than all of the holders of the shares of Preferred Stock
outstanding. The Company shall not offer or pay any consideration to a Holder
for consenting to such an amendment or waiver unless the same consideration is
offered to each Holder and the same consideration is paid to each Holder that
consents to such amendment or waiver.

         6.4      Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.

         6.5      References. References herein to Sections are to Sections of
this Agreement, unless otherwise expressly provided.

         6.6      Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations
hereunder without the prior written consent of each of the Holders. The Holders
may assign this Agreement or any rights or obligations hereunder without the
prior written consent of the Company, provided, that any assignees must execute
and deliver to the Company an instrument expressly making the representations
and warranties set forth in Section 2.2 and agrees to become a party hereto;
further that, prior to the Closing Date, the Holders may assign this Agreement
its rights and rights or obligations hereunder only to an Affiliate of such
Holder. This provision shall not limit a Holder's right to transfer securities
in accordance with all of the terms of this Agreement or the Transaction
Documents.

                                       26
<PAGE>
         6.7      No Third-Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.

         6.8      Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York without regard to the principles of conflicts of law thereof. Each party
hereby irrevocably submits to the nonexclusive 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, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents 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 IT MAY HAVE, 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.

         6.9      Survival. The representations and warranties of the Company
and the Holders contained in Sections 2.1 and 2.2, the agreements and covenants
set forth in Section 3, and the indemnification provisions set forth in Section
5, shall survive the Closing and any conversion of the shares of Preferred Stock
or exercise of the Warrants regardless of any investigation made by or on behalf
of the such Holder or by or on behalf of the Company, except that, in the case
of representations and warranties such survival shall be limited to the period
of six (6) years following the Closing Date on which they were made or deemed to
have been made (other than with respect to any claim by a third party against
the party to this Agreement who seeks to assert a claim based on such
representations and warranties). This section shall have no effect on the
survival of the indemnification provisions of the Registration Rights Agreement.

         6.10     Counterparts. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. 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
page were an original thereof.

         6.11     Publicity. The Company and the Holders shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such

                                       27
<PAGE>
disclosure is required by law, in which such case the disclosing party shall
provide the other party with prior notice of such public statement. The Company
shall not publicly or otherwise disclose the names of any of the Holders without
each such Holder's prior consent, except to the extent required by law and in
the initial press release with respect to the transactions contemplated hereby.
The Holders and their affiliated companies shall, without further cost, have the
right to use in its advertising, marketing or other similar materials all or
parts of the Company's press releases that focus on the transactions forming the
subject matter of this Agreement or which make reference to such transactions.
The Holder understand that this grant by the Company only waives objections that
the Company might have to the use of such materials by the Holders and in no way
constitutes a representation by the Company that references in such materials to
the activities of third-parties have been cleared or constitute a fair use.

         6.12     Severability. In case any one or more of the provisions of
this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affected or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.

         6.13     Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Holders
will be entitled to specific performance of the obligations of the Company under
this Agreement or the Transaction Documents without the showing of economic loss
and without any bond or other security being required. Each of the Company and
the Holders (severally and not jointly) agree that monetary damages would not be
adequate compensation for any loss incurred by reason of any breach of its
obligations described in the foregoing sentence and hereby agree to waive in any
action for specific performance of any such obligation the defense that a remedy
at law would be adequate.

         6.14     Independent Nature of Holders' Obligations and Rights. The
obligations of each Holder hereunder are several and not joint with the
obligations of the other Holders hereunder, and no Holder shall be responsible
in any way for the performance of the obligations of any other Holder hereunder.
Nothing contained herein or in any other agreement or document delivered at any
closing, and no action taken by any Holder pursuant hereto or thereto, shall be
deemed to constitute the Holder as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Holders
are in any way acting in concert with respect to such obligations or the
transactions contemplated by this Agreement. Each Holder shall be entitled to
protect and enforce its rights, including without limitation the rights arising
out of this Agreement or out of the Transaction Documents, and it shall not be
necessary for any other Holder to be joined as an additional party in any
proceeding for such purpose.

         6.15     Payment Set Aside. To the extent that the Company makes a
payment or payments to the Holders hereunder or pursuant to the Transaction
Documents or the Holders enforce or exercise their rights hereunder or
thereunder, and such payment or payments or the proceeds of such enforcement or
exercise or any part thereof are subsequently invalidated, declared fraudulent
or preferential, set aside, recovered from, disgorged by or are required to be

                                       28
<PAGE>
refunded, repaid or otherwise restored to the Company, a trustee, receiver or
any other Person under any law (including, without limitation, any bankruptcy
law, state or federal law, common law or equitable cause of action), then to the
extent of any such restoration the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such enforcement or setoff had not
occurred.

         6.16     Further Assurances. 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.

         6.17     Fees and Expenses. Except as set forth in the Registration
Rights Agreement, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement; provided, that on the Closing Date, the Company
shall reimburse the Holders for $35,000 of the legal fees and expenses of Akin,
Gump, Strauss, Hauer & Feld, L.L.P., incurred in connection with negotiating and
preparing this Agreement and the other Transaction Documents and consummating
the transactions contemplated hereby and thereby. The Company shall pay all
stamp and other taxes and duties levied in connection with the issuance of the
Preferred Stock and upon conversion thereof, the Underlying Shares.

                                       29
<PAGE>
         IN WITNESS WHEREOF, the parties hereto have caused this Exchange
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.

                         HEALTHAXIS INC.

                         By:    /s/ JOHN M. CARRADINE
                            -------------------------------------------------
                         Name:  John M. Carradine
                         Title: Chief Financial Officer

                         BROWN SIMPSON PARTNERS I, LTD.

                         By:    /s/ MITCHELL D. KAYE
                            -------------------------------------------------
                         Name:  Mitchell D. Kaye
                         Title: Attorney-in-Fact

                         BROWN SIMPSON - ORD INVESTMENTS LLC
                         OTAPE LLC SUCCESSOR TO ABOVE

                         By:    /s/ RICHARD M. CAYNE
                            -------------------------------------------------
                         Name:  Richard M. Cayne
                         Title: General Counsel

                         LBI GROUP INC.

                         By:    /s/ KEVIN R. GENIRS
                            -------------------------------------------------
                         Name:  Kevin R. Genirs
                         Title: Vice President

                         UICI

                         By:    /s/ GLENN W. REED
                            -------------------------------------------------
                         Name:  Glenn W. Reed
                         Title: Executive Vice President and General Counsel

                         THE PENNSYLVANIA STATE UNIVERSITY

                         By:    /s/ JOHN C. POMEROY, JR.
                            -------------------------------------------------
                         Name:  John C. Pomeroy, Jr.
                         Title: Chief Investment Officer
<PAGE>
                                     SCHEDULE I

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------

                                            Number of shares of       Portion of Payment
                                            Preferred Stock at            Tendered              Accrued Interest
Name of Holder                                  Closing Date             at Closing            Tendered at Closing
--------------                                  ------------             ----------            -------------------
---------------------------------------------------------------------------------------------------------------------

<S>                                         <C>                       <C>                      <C>
Brown Simpson Partners I, Ltd.                     10,824              $    1,842,425          $    3,129.60

Brown Simpson - ORD Investments                     1,282              $      218,180          $      370.61
LLC

LBI Group Inc.                                      8,546              $    1,454,545          $    2,470.73

UICI                                                1,424              $      242,425          $      411.79

The Pennsylvania State University                   1,424              $      242,425          $      411.79
                                                    -----              --------------          -------------

TOTAL                                              23,500              $    4,000,000          $    6,794.52
                                                   ======              ==============          =============
</TABLE>
<PAGE>
                                   SCHEDULE II

<TABLE>
<CAPTION>
                                                              Principal
                                                         Amount of Debentures
         Name of and Address of Holder                        Exchanged
         -----------------------------                        ---------

<S>                                                      <C>
Brown Simpson Partners I, Ltd.:                             $12,666,666.67
152 West 57th Street, 21st Floor
New York, New York 10019
Attn:  Mitchell D. Kaye
Fax: (212) 247-1329
Residence:  Grand Cayman, Cayman Islands

Brown Simpson - ORD Investments LLC                         $ 1,500,000.00
c/o OTA Limited Partnership
1 Manhattanville Road
Purchase, NY 10577
Attention:  Vinny Digeso
Facsimile:   (914) 694-5831
Residence:  Purchase, NY

LBI Group Inc.                                              $10,000,000.00
c/o Lehman Brothers, Inc.
3 World Financial Center
New York, New York 10285
Attention:  Steve Weinstein
Facsimile:  (212) 526-2198
Residence:  New York, NY

UICI                                                        $ 1,666,666.67
Suite 200
4001 McEwen Drive
Dallas, Texas 75244
Attn:  Glenn W. Reed
Fax:  (972) 392-6717
Residence:   Dallas, Texas

The Pennsylvania State University                           $ 1,666,666.66
103 Innovation Boulevard, Suite 212
University Park, PA 16802
Attention:  David E. Branigan
Facsimile:   (814) 863-9160
Residence:  University Park, PA
</TABLE>
<PAGE>
                                                                       Exhibit A

                      [Form of Certificate of Designation]
<PAGE>
                                                                       Exhibit B

                     [Form of Registration Rights Agreement]
<PAGE>
                                                                       Exhibit C

                            [Forms of Legal Opinion]<PAGE>
                                                                   Exhibit 10.3

                          REGISTRATION RIGHTS AGREEMENT

                  This Registration Rights Agreement (this "AGREEMENT") is made
and entered into as of July 31, 2002, 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 Exchange Agreement,
dated as of the date hereof among the Company and the Holders (the "EXCHANGE
AGREEMENT").

                  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 Exchange Agreement, or the
Certificate of Designation (as defined below), as the case may be. 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.

                  "AMEX" has the meaning set forth in Section 2(d).

                  "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 Certificate of
Designation.

                  "CLOSING DATE" means the Closing Date, as defined in the
Exchange 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) 150 days following the
Closing Date.
<PAGE>
                  "EFFECTIVENESS PERIOD" has the meaning set forth in Section
2(a) hereof.

                  "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

                  "EVENT" has the meaning set forth in Section 2(d) hereof.

                  "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 30th 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.

                  "MAXIMUM AMOUNT" means that number of shares of Common Stock
which is equal to 110% of the maximum number of Underlying Shares then issuable
upon conversion of the Securities (taking into account any adjustments to be
made pursuant to Section 7 of the Certificate of Designations attached as
Exhibit A to the Exchange Agreement known to the Company at the time the
Registration Statement is filed), assuming from time to time that the payment of
all future dividends on such shares then outstanding during the succeeding
twelve (12) months are made in shares of Common Stock (and, in calculating the
number of shares issuable with respect to such dividends on any particular date
of determination, assuming fifty percent (50%) of the Average Price of the last
Trading Day of the Company's preceding fiscal quarter (as such terms are defined
in the Certificate of Designation)).

                  "NASDAQ" has the meaning set forth in Section 2(d).

                  "NYSE" has the meaning set forth in Section 2(d).

                  "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.

                                       -2-
<PAGE>
                  "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 conversion of or with respect to the Securities, (ii)
the shares of Common Stock issued or issuable upon payment of dividends or any
other payments in respect of the Securities (to the extent includable within the
definition of "Maximum Amount") and (iii) any shares of the Company's capital
stock issued with respect to (i) or (ii) as a result of any stock split, stock
dividend, recapitalization, exchange, anti-dilution adjustment or similar event
or otherwise.

                  "REGISTRATION DELAY PAYMENT" has the meaning set forth in
Section 2(d) hereof.

                  "REGISTRATION STATEMENT" means the Initial Registration
Statement and any additional registration statements contemplated by Sections
2(a), 2(b) and 6(d), 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.

                  "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 Series A Convertible
Preferred Stock issuable pursuant to the Exchange Agreement.

                  "SECURITIES ACT" means the Securities Act of 1933, as amended.

                  "SPECIAL COUNSEL" means one special counsel to the Holders.

                                       -3-
<PAGE>
                  "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 of the Securities.

                  "UNDERWRITTEN REGISTRATION" or "UNDERWRITTEN OFFERING" means a
registration in connection with which securities of the Company are sold to an
underwriter for reoffering to the public pursuant to an effective registration
statement, whether on a firm commitment or best efforts basis.

         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 in accordance herewith, subject to the reasonable consent of the Majority
Holders). The Company shall: (i) not permit any securities other than the
Registrable Securities to be included in the Initial Registration Statement,
(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 the exclusion relating to updates, supplements and
amendments in Section 2(d) and subject to Section 3(r)) for a period, with
respect to each Holder's Registrable Securities, extending from the
Effectiveness Date until the earlier of the date which is two (2) years after
the Effectiveness Date or such earlier date when all Registrable Securities held
by a given Holder have been sold or may be sold without volume restrictions
pursuant to Rule 144, as determined by counsel to the Company pursuant to a
written opinion letter to such effect, addressed to the Holders and the
Company's transfer agent (the "EFFECTIVENESS PERIOD"). Once the Company is no
longer required to keep the Initial Registration Statement effective with
respect to 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.

         The number of shares of Common Stock included in the Initial
Registration Statement shall be no less than the Maximum Amount, without regard
to any limitation on the Holder's ability to convert the Securities.

                  (b) Underwritten Offering. In addition to the Initial
Registration Statement, at any time when a Registration Statement covering the
Registrable Securities is not effective (during any period in which a
Registration Statement is otherwise required to be effective pursuant to the
terms hereof), if the Majority Holders so elect on or after July 31, 2003, an

                                       -4-
<PAGE>
offering of Registrable Securities pursuant to such Registration Statement may
be effected on no more than one (1) occasion in the form of an Underwritten
Offering. In such event, and if the managing underwriters advise the Company and
such Holders in writing that in their opinion the amount of Registrable
Securities proposed to be sold in such Underwritten Offering exceeds the amount
of Registrable Securities which can be sold in such Underwritten Offering, there
shall be included in such Underwritten Offering the amount of such Registrable
Securities which in the opinion of such managing underwriters can be sold, and
such amount shall be allocated pro rata among the Holders proposing to sell
Registrable Securities in such Underwritten Offering.

                  (c) Underwriter. If any of the Registrable Securities are to
be sold in an Underwritten Offering, the investment banker in interest that will
administer such offering shall be selected by the Holders of a majority of the
Registrable Securities included in such offering. No Holder may participate in
any Underwritten Offering hereunder unless such Holder: (i) agrees to sell its
Registrable Securities on the basis provided in any underwriting agreements
approved by the Persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
arrangements.

         (d)     Penalties.

         (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) declared effective by the Commission on or before the
Effectiveness Date, (B) on any day after any Registration Statement has been
declared effective by the Commission (1) sales of all the Registrable Securities
required to be included on any 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), but excluding any periods up to
thirty (30) calendar days during which Registrable Securities cannot be sold due
to any update, supplement or amendment of such Registration Statement or the
related Prospectus pursuant to Section 3(b) hereof, and excluding any black-out
period declared by the Company pursuant to Section 3(r) hereof, or (2) the
Common Stock is not listed or included for quotation on The Nasdaq Stock Market
("NASDAQ"), the American Stock Exchange ("AMEX"), The New York Stock Exchange
("NYSE") or the OTC Bulletin Board after being so listed or included for
quotation (any such event specified in (A) or (B) above, an "EVENT"), then, as
partial relief for the damages to any Holder by reason of any such Event (which
remedy shall not be exclusive of any other remedies available at law or in
equity), the Company shall pay to each Holder an amount in cash (a "REGISTRATION
DELAY PAYMENT") equal to: (a) the aggregate Stated Value of the then outstanding
Securities that are convertible into Registrable Securities, multiplied by (b)
one hundredths (.010) and (c) the number of months (prorated for partial months)
that such Event has occurred and is continuing. The Company shall pay any
Registration Delay Payment in cash to each Holder of Securities convertible into
Registrable Securities on the last Business Day of each month during which an
Event 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.

                                       -5-
<PAGE>
         (ii) In addition to the foregoing, in the event that the Initial
Registration Statement is not initially declared effective under the Securities
Act on or before the first anniversary of the Closing Date (a "SUPPLEMENTAL
EVENT"), then the Company shall pay to each Holder, in addition to the
Registration Delay Payment, an amount in cash (a "SUPPLEMENTAL DELAY PAYMENT")
equal to: (a) the aggregate Stated Value of the then outstanding Securities that
are convertible into Registrable Securities, multiplied by (b) one hundredths
(.010) and (c) the number of months (prorated for partial months) that such
Supplemental Event has occurred and is continuing. The Company shall pay any
Supplemental Delay Payment in cash to each Holder of Securities convertible into
Registrable Securities on the last Business Day of each month during which a
Supplemental Event has occurred and is continuing. In the event that the Company
fails to make a Supplemental Delay Payment within ten (10) Business Days of the
date such Supplemental Delay Payment is due, then (1) such Supplemental Delay
Payment shall bear interest at the rate of 2.0% per month (prorated for partial
months) until paid in full and (2) subject to the limitations on the adjustment
of the Conversion Price (as defined in the Certificate of Designation) contained
in the Certificate of Designation, the Conversion Price shall be adjusted
downward at the rate of $0.01 for each day after the Supplemental Delay Payment
is due until such Supplemental Delay Payment and all related interest is paid in
full.

         (e) Form S-3 Eligibility. The Company represents and warrants that it
meets the registrant eligibility and transaction requirements for the use of
Form S-3 (for primary and 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 an Underwritten Offering) or in connection with an
Underwritten Offering hereunder, such other form agreed to by the Company and by
a majority-in-interest of Holders of Registrable Securities to be covered by
such Registration Statement (except if otherwise directed by the Majority
Holders), and cause the Registration Statement to become effective and remain
effective as provided herein; provided, however, that not less than three (3)
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.

                                       -6-
<PAGE>
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, provide the Holders true and complete copies of all
correspondence to and from the Commission relating to the Registration Statement
and (iv) 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. In the event that the number of shares available
under a Registration Statement filed pursuant to this Agreement is insufficient
to cover the Maximum Amount, the Company shall amend the Registration Statement,
or file a new Registration Statement (on the short form available therefore, if
applicable), or both, so as to cover the Maximum Amount, in each case as soon as
practicable, but in any event within twenty (20) Business Days after the
necessity therefor arises (based on the then applicable Conversion Price of the
Securities and other relevant factors on which the Company reasonably elects to
rely). The Company shall use its best efforts to cause such amendment and/or new
Registration Statement to become effective as soon as practicable following the
filing thereof.

                  (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

                                       -7-
<PAGE>
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 any agreement
(including any underwriting agreement) contemplated hereby 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 sold in connection with an Underwritten Offering:
(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.

                                       -8-
<PAGE>
                  (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 facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold pursuant to a Registration
Statement, which certificates shall be free, to the extent permitted by
applicable law and the Exchange Agreement, of all restrictive legends and to
enable such Registrable Securities to be in such denominations and registered in
such names as any such managing underwriters or Holders may request at least two
(2) Business Days prior to any sale of Registrable Securities.

                  (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 Exchange Agreement.

                  (l) Underwriting Agreement and Related Documents. Enter into
such agreements (including an underwriting agreement in form, scope and
substance as is customary in Underwritten Offerings) 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

                                       -9-
<PAGE>
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 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
Underwritten 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

                                      -10-
<PAGE>
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, (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.

                  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 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

                                      -11-
<PAGE>
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. Notwithstanding anything to the contrary, the Company
shall cause its transfer agent to deliver unlegended shares of Common Stock to a
transferee of a Holder in accordance with the terms of the Exchange Agreement in
connection with any sale of Registrable Securities with respect to which a
Holder has entered into a contract for sale prior to the Holder's receipt of a
notice from the Company of the happening 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) and for which the
Holder has not yet settled.

                  (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. Subject to the last sentence of this
Section 3(r), the Company may by written notice require that the Holders
immediately cease sales of Registrable Securities for a period not to exceed
thirty (30) calendar days in any twelve-month period (provided, however, that
the 30-day period shall be extended to a forty-five (45) day period in the event
that the Company is required to submit financial statements pursuant to Item 7
of Form 8-K (or any successor form) in connection with an acquisition or
disposition of significant assets), pursuant to a Registration Statement at any
time that: (i) 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, (ii) the Company determines that a particular disclosure so determined
to be required to be disclosed therein would be premature or would adversely
affect the Company or its business or prospects or (iii) the Registration
Statement can no longer be used under the existing rules and regulations
promulgated under the Securities Act (each of (i), (ii) or (iii), a "MATERIAL

                                      -12-
<PAGE>
CONDITION"). The Company shall not be required to disclose to the Holders which
of the reasons specified in (i), (ii) or (iii) 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. The Company may not suspend sales of Registrable
Securities under a Registration Statement pursuant to this Section 3(r) more
than three times during any twelve-month period (exclusive of any suspension
relating to a Sales Transaction, as described below).

Notwithstanding the foregoing, in the event the Company is engaged in
substantive discussions with a third party relating to a transaction described
in Section 4.b (xii) of the Certificate of Designation (a "Sale Transaction"),
the Company shall provide notice to such effect to the Holders prior to
executing any letter of intent, term sheet or similar written instrument setting
forth the proposed terms of such Sales Transaction. In the event of the
Company's provision of such notice, the Holders shall select a representative
who shall represent the interests of the Holders in subsequent negotiations
relating to the Sale Transaction (the "Representative"), which Representative
shall be Mitchell D. Kaye unless the Majority Holders otherwise provide. Pending
the closing of the Sale Transaction, the Company may by written notice require
that Holders not engage in sales of Registrable Securities pursuant to a
Registration Statement and, until such time as the Holders of more than forty
percent (40%) of the Securities then outstanding provide written notice to the
Company that they would not approve the Sale Transaction as then currently
contemplated (which notice may be provided at any time prior to such time as the
Holders of sixty percent (60%) or more of the then outstanding Securities vote
to approve a Sales Transaction or otherwise grant irrevocable proxies to such
effect) (the "Rejection Notice"), the black-out relating to sales of Registrable
Securities shall continue. In the event the Company receives a Rejection Notice,
it shall take all actions necessary to ensure that the Holders can sell the
Registrable Securities pursuant to the Registration Statement as soon as
possible, but in all cases within three (3) Business Days after delivery of the
Rejection Notice (the "Transition Period"). The Holders agree that prior to the
expiration of the Transition Period, a black-out relating to a Sale Transaction
shall not be subject to any of the time period restrictions set forth in this
Section 3(r), and shall not otherwise give rise to any penalties described in
Section 2(d) of this Agreement.

         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 Registrable Securities and
determination of the eligibility of the Registrable Securities for investment
under the laws of such jurisdictions as the managing

                                      -13-
<PAGE>
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 and (f) fees and expenses of
all other Persons retained by the Company in connection with the consummation of
the transactions contemplated by this Agreement. 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. Notwithstanding
anything contained in this Section 4 to the contrary, the Holders shall be
responsible for all fees and expenses relating to an Underwritten Offering.

         5.       Indemnification

                  (a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, 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 and employees of each of
them, each Person who controls any such Holder (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, agents and employees of each such controlling Person, 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, but only to the extent, that
such 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

                                      -14-
<PAGE>
way), (ii) any violation or alleged violation by the Company 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 receive a copy of the final Prospectus (or
any amendment or supplement thereto) 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 alleged untrue statement of material fact or
omission or alleged omission of material fact contained in such preliminary
Prospectus was corrected in the 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 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 (a "Non-Public
Development"), the Holder nonetheless sells Registrable Securities and a
judgment is entered by a court or administrative tribunal against the Holder for
insider trading under the federal securities laws on the basis of the Holder's
sale of such Registrable Securities while in the possession of the Non-Public
Development.

         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, the directors,
officers, agents and employees of the Company, each Person who controls the
Company (within the meaning of Section 15 of the Securities Act and Section 20
of the Exchange Act), and the directors, officers, agents or employees of such
controlling Persons, 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

                                      -15-
<PAGE>
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 or
(iii) the named parties to any such Proceeding (including any impleaded parties)
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

                                      -16-
<PAGE>
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 or
otherwise), 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 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

                                      -17-
<PAGE>
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.
Except as disclosed in Schedule 2.1(c) of the Exchange Agreement, neither the
Company nor any of its Subsidiaries is currently a party to any agreement
granting any registration rights with respect to any of its securities to any
Person. Without limiting the generality of the foregoing, without the written
consent of the Majority Holders, the Company shall not grant to any Person the
right to request the Company to register any securities of the Company under the
Securities Act unless the rights so granted are subordinated in all respects to
the rights in full of the Holders set forth in Section 2 hereof and are not
otherwise in conflict or inconsistent with the provisions of this Agreement.
This Agreement and the Exchange Agreement contain the entire understanding of
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters.

                  (c) No Piggyback on Registrations. Except as disclosed on
Schedule 2.1(c) of the Exchange Agreement, neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant hereto) may
include securities of the Company in the Registration Statements and the Company
shall not after the date hereof enter into any agreement providing such right to
any of its security holders, unless the rights so granted are subordinated in
all respects to the rights in full of the Holders set forth herein, and are not
otherwise in conflict or inconsistent with the provisions of this Agreement.

                  (d) Piggy-Back Registrations. Except as otherwise provided in
this Section 6(d), 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 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, 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 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, to the extent required
to permit the disposition of the Registrable Securities to be so registered;
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, the Company may, at its election, give written notice of such
decision to such Holder and,

                                      -18-
<PAGE>
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 6(d) 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 6(d)
that are eligible for sale pursuant to Rule 144(k) of the Securities Act. 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 then 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
persons 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). Notwithstanding the foregoing, the
Company shall not file any registration statement under the Securities Act
(other than on Form S-4 or Form S-8) relating to the offer and sale of any
equity securities of the Company, or offer or sell any equity securities of the
Company in a transaction exempt from registration pursuant to Regulation S under
the Securities Act, until such time as the Initial Registration Statement or any
Additional Registration Statement, as the case may be, has been effective for a
period of sixty (60) Trading Days, which period shall be tolled if the
effectiveness of the Initial Registration Statement or any Additional
Registration Statement, as the case may be, is suspended for any reason
whatsoever.

                  (e) 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

                                      -19-
<PAGE>
waiver, the Company shall promptly give written notice thereof to the Holders
who have not previously consented thereto in writing.

                  (f) 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 telex (with correct answer back received), 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

                                      -20-
<PAGE>
                  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 10029
                           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:

                           Akin, Gump, Strauss, Hauer & Feld, L.L.P.
                           590 Madison Avenue
                           New York, New York 10022
                           Telephone: (212) 872-1000
                           Facsimile: (212) 872-1002
                           Attention: James E. Kaye

                  If to Brown Simpson - ORD Investments LLC to:

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

                  If to LBI Group Inc. to:

                           c/o Lehman Brothers, Inc.
                           3 World Financial Center
                           New York, New York 10285
                           Telephone: (212) 526-7255
                           Facsimile: (212) 526-2198
                           Attention: Steve Weinstein

                                      -21-
<PAGE>
                  If to UICI to:

                           UICI
                           4001 McEwen Drive, Suite 200
                           Dallas, Texas 75244
                           Telephone: (972) 392-6719
                           Facsimile: (972) 392-6717
                           Attention: Glenn W. Reed
                           Executive Vice President and General Counsel

                  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.

                  (g) 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. Each Holder may assign its rights hereunder in
the manner and to the Persons as permitted under the Exchange Agreement. In
addition, the rights of each Holder hereunder, including the right to have the
Company register Registrable Securities for resale in accordance with the terms
of this Agreement, shall be automatically 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 the further disposition of such securities
by the transferee or assignee is restricted under the Securities Act and
applicable state securities laws, (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 or (v) such transfer is made in accordance with
the applicable requirements of the Exchange Agreement. The rights to assignment
shall apply to the Holders' (and to subsequent) successors and assigns.

                  (h) 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

                                      -22-
<PAGE>
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.

                  (i) Governing Law. The corporate laws of the Commonwealth of
Pennsylvania shall govern all issues concerning the relative rights of the
Company and the Holders as its stockholders. All other 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.

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

                  (k) 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.

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

                  (m) 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) shall not be counted in

                                      -23-
<PAGE>
determining whether such consent or approval was given by the Holders of such
required percentage.

                  (n) Aggregation of Stock. All Registrable Shares held or
acquired by an Affiliate will be aggregated together for the purpose of
determining the availability of any rights under this Agreement.

                  (o) 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.

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

                                            HEALTHAXIS INC.

                                            By: /s/ JOHN M. CARRADINE
                                                ------------------------------
                                                Name:  John M. Carradine
                                                Title: Chief Financial Officer

                                      -24-
<PAGE>
PURCHASERS:                                 BROWN SIMPSON PARTNERS I, LTD.

                                            By: /s/ MITCHELL D. KAYE
                                                -------------------------------
                                            Name:  Mitchell D. Kaye
                                            Title: Attorney-in-fact

                                            BROWN SIMPSON - ORD INVESTMENTS LLC
                                            OTADE LLC Successor to above

                                            By: /s/ RICHARD M. CAYNE
                                                -------------------------------
                                            Name:  Richard M. Cayne
                                            Title: General Counsel

                                            LBI GROUP INC.

                                            By: /s/ KEVIN R. GENIRS
                                                -------------------------------
                                            Name:  Kevin R. Genirs
                                            Title: Vice President

                                            UICI

                                            By: /s/ GLENN W. REED
                                                -------------------------------
                                            Name:  Glenn W. Reed
                                            Title: Executive Vice President and
                                                   General Counsel

                                            THE PENNSYLVANIA STATE UNIVERSITY

                                            By: /s/ JOHN C. POMEROY, JR.
                                                -------------------------------
                                            Name:  John C. Pomeroy, Jr.
                                            Title: Chief Investment Officer
<PAGE>
                                   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

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

                     LBI Group Inc.
                     c/o Lehman Brothers, Inc.
                     3 World Financial Center
                     New York, New York  10285
                     Attention: Steve Weinstein
                     Facsimile: (212) 526-2198
                     Residence: New York, NY

                     UICI
                     Suite 200
                     4001 McEwen Drive
                     Dallas, Texas  75244
                     Attn: Glenn W. Reed
                     Fax: (972) 392-6717
                     Residence: Dallas, Texas

                     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

                                   Schedule I
<PAGE>
                                                                       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. 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
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. 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 and any broker-dealers that act in
connection with the sale of shares of common stock are "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.

                                       A-1
<PAGE>
                  Because the selling stockholders are "underwriters" within the
meaning of Section 2(11) of the Securities Act, the selling stockholders will be
subject to the prospectus delivery requirements of the 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.

                                       A-2
<PAGE>
                                                                       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 that certain Exchange
Agreement (the "EXCHANGE AGREEMENT") entered into by and among the Company and
the buyers named therein (collectively, the "HOLDERS") pursuant to which the
Company issued to the Holders shares of its Series A Preferred Stock (the
"SECURITIES") convertible into shares of the Company's common stock, par value
$.10 per share (the "COMMON STOCK"). Pursuant to the Exchange Agreement, the
Company also has entered into 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 Securities, under the Securities Act of 1933, as amended
(the "SECURITIES ACT"). In connection with the Company's obligations under the
Registration Rights Agreement, on _______________, 200___, 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.

                                       Very truly yours,

                                       Locke Liddell & Sapp LLP

                                       By: __________________________________

cc:  [LIST NAMES OF HOLDERS]

                                       B-1

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