Document:

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                                                                    EXHIBIT 10.4

                             CONFIDENTIAL SEPARATION
                              AGREEMENT AND RELEASE

      This Confidential Separation Agreement and Release (the "Agreement") is
made between Charles L. Elsey ("Employee") and Domistyle, Inc. (the "Company"),
herein collectively referred to as the "Parties". This Agreement will become
effective as of April 30, 2004 (the "Effective Date").

                                    RECITALS

      WHEREAS, Employee has been employed by the Company as President of
Domistyle, Inc.

      WHEREAS, Employee and the Company have mutually agreed to end Employee's
employment with the Company; and

      WHEREAS, the Parties desire to settle fully and finally, in the manner set
forth herein, all differences between them that have arisen, or which may arise,
prior to, or at the time of, the execution of this Agreement, including but not
limited to, any and all claims and controversies arising out of the employment
relationship, including the termination thereof, between Employee and the
Company.

      NOW, THEREFORE, in consideration of the recitals and the mutual promises,
covenants and agreements set forth herein, the Parties covenant and agree as
follows:

      1.    Termination of Employment. Employee and the Company agree that
            Employee's employment with the Company and any of its affiliates
            including, without limitation, in any position as an officer of the
            Company and any of its affiliates is terminated effective as of
            April 30, 2004 (the "Separation Date"). Effective as of the
            Separation Date, all benefits under all Company plans, programs
            and/or arrangements shall terminate, except as otherwise provided in
            this Agreement.

      2.    General Release. Employee, for and on behalf of himself, and
            Employee's spouse, family, agents, assigns, successors, heirs,
            executors, administrators, affiliates, associates, and legal
            representatives does hereby IRREVOCABLY AND UNCONDITIONALLY RELEASE,
            RELINQUISH, QUITCLAIM, ACQUIT, AND FOREVER DISCHARGE the Company,
            its predecessors, successors, past and present parent companies,
            subsidiary companies, affiliates, associates, partnerships, and its
            respective current and former owners, partners, assigns, successors,
            employees, agents, heirs, executors, administrators, legal
            representatives, officers, directors, shareholders and attorneys and
            insurers of said corporations, firms, associations, partnerships,
            and entities (hereinafter the "Releasees"), of and from any and all
            complaints, claims, grievances, liabilities, suits, demands, causes
            of action, obligations, promises, agreements, rights, damages, costs
            (including court costs and attorney's fees), losses, expenses and

CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 1

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            compensation of any nature whatsoever, KNOWN OR UNKNOWN, past,
            present or future, fixed or contingent, liquidated or unliquidated,
            ACCRUED OR CONTINGENT, including, but not limited to, any and all
            known or unknown claims, which have resulted or may result from any
            alleged acts or omissions, arising out of Employee's hiring, terms
            and conditions of employment, employment benefits, treatment during
            employment, and separation from employment, including but not
            limited to any bonus plans, stock option plans or other compensation
            arrangements and expressly including, but not limited to, any and
            all claims or causes of action based on, related to or arising out
            of any alleged discrimination, harassment or retaliation based on
            age, race, sex, national origin, color, religion, citizenship
            status, disability, or handicap under any municipal, local, state,
            or federal law, common or statutory; including but not limited to
            Title VII of the Civil Rights Act of 1964 (as amended) or any
            similar law; the Age Discrimination in Employment Act (as amended)
            or any similar law; the Americans with Disabilities Act (as
            amended), the Federal Rehabilitation Act or any similar law; the
            Family and Medical Leave Act; the Workers Adjustment and Retraining
            Notification Act; the Fair Labor Standards Act or any similar law;
            the Older Workers Benefit Protection Act and any similar law; the
            Employee Retirement Income Security Act or any similar law; wages,
            compensation, or benefits of employment; retirement benefits or
            compensation; severance pay or benefits; future compensation,
            including bonuses or profit sharing; wrongful discharge from
            employment; negligence; intentional torts; personal injury; mental
            anguish or emotional distress; exemplary damages; alleged
            retaliation related to workers' compensation claims under chapter
            451 or the Texas Labor Code or any similar law or relating to
            so-called "whistle-blowers" law; the Texas Payday Act or any similar
            law; defamation, libel or slander; fraud; or breach of contract
            including, without limitation, any and all claims or causes of
            action based on, related to or arising out of that certain offer of
            employment letter, dated as of August 29, 2003, that certain
            Employment Agreement, dated as of September 9, 2003, or any other
            agreement relating to employment, written or oral, any of which
            existed or may have existed prior to, or contemporaneously with the
            execution of this Agreement.

            By the signature below, Employee does hereby acknowledge that upon
            payment of all the consideration recited herein this is final, full
            and complete satisfaction, settlement and discharge of any and all
            liability of the Releasees, if any, to Employee whatsoever by reason
            of any manner, cause or thing in any way connected with or arising
            out of the Employee's employment and/or termination of employment
            and that Employee shall not receive any further sums of money or
            other property, for severance or compensation including but not
            limited to employment contracts, stock options, bonuses, health
            insurance, life insurance, disability insurance, vehicle allowances,
            and any similar obligations, except as set forth in this Agreement,
            from the Company.

      3.    Covenant Not to Sue. Employee, for himself and on behalf of
            Employee's attorneys, spouse, family, heirs, assigns, successors,
            executors, and administrators, agrees to refrain from instituting,
            prosecuting, filing, or

CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 2

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            processing, or assisting with the institution, prosecution, filing
            or processing, of any litigation, administrative proceeding, or
            other claim against the Company and/or any of the Releasees based
            upon any of the claims released in Section 2 of this Agreement and
            represents that no other person or entity has initiated or will
            initiate any such proceedings on his behalf. A violation by Employee
            of this Section 3 will result in indemnification obligations under
            Section 9, below. EMPLOYEE AGREES, WARRANTS, AND REPRESENTS TO THE
            COMPANY THAT EMPLOYEE HAS FULL EXPRESS AUTHORITY TO SETTLE ALL
            CLAIMS AND DEMANDS THAT ARE THE SUBJECT OF SECTION 2 OF THIS
            AGREEMENT AND THAT EMPLOYEE HAS NOT GIVEN OR MADE ANY ASSIGNMENT TO
            ANYONE, INCLUDING EMPLOYEE'S SPOUSE, FAMILY OR LEGAL COUNSEL, OF ANY
            CLAIMS AGAINST ANY PERSON OR ENTITY ASSOCIATED WITH THE COMPANY OR
            ANY RELEASEES.

      4.    Non-Disclosure of Agreement. As a material and essential
            consideration to payment of the sums made pursuant to this
            Agreement, Employee agrees to keep the terms, amount, and facts of
            this Agreement STRICTLY AND COMPLETELY CONFIDENTIAL, and not to
            communicate or otherwise disclose the terms, amount, or facts of
            this Agreement to any employee of the Company (past, present, or
            future), or to any other person, except (a) to Employee's spouse,
            attorneys, accountants, financial advisors, and future employers,
            provided that such individuals are advised of and agree to maintain
            the confidentiality of such matters and (b) as may be required by
            law or compulsory process. In the event that Employee is required or
            compelled by law or compulsory process to disclose the existence and
            or contents of this Agreement, Employee will use best efforts to
            provide the Company with written notice, at least seven (7) days in
            advance of any such disclosure.

      5.    Return and Non-Disclosure of Proprietary or Confidential
            Information. Employee acknowledges that during the term of
            employment with the Company, Employee had access to customer lists,
            trade secrets and other confidential information not ordinarily
            available to the general public. Employee agrees that such special
            knowledge received is included in the Company's proprietary
            confidential information. Employee agrees that this confidential
            information is valuable to the Company and that its protection and
            maintenance constitutes a legitimate interest to be protected by the
            enforcement of the covenants contained in this Agreement.

            Employee acknowledges that the Confidential Information (as defined
            below) relating to the business of the Company, or any of its
            affiliates, which has been obtained during Employee's employment
            with the Company, is the property of the Company. Employee agrees
            not to disclose or use at any time, any Confidential Information,
            without the prior written consent of the Company. Employee agrees to
            destroy or deliver to the Company, after his termination from
            employment, all memoranda, notes, plans, records, reports, drawings,
            sketches, specifications, diskettes, tapes and other storage media,
            documentation and other materials (and copies thereof), whether in
            written, printed or digital format,

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            containing Confidential Information, no matter where such material
            is located and no matter what form the material may be in, which
            Employee may then possess or have under his control. If requested by
            the Company, Employee shall provide to the Company written
            confirmation that all such materials have been delivered to the
            Company or have been destroyed. Employee shall take all appropriate
            steps to safeguard Confidential Information and to protect it
            against disclosure, misuse, espionage, loss and theft. Company shall
            be authorized to disclose to any future employer of Employee that
            Employee's use or disclosure of the Company's Confidential
            Information is governed by this Agreement and, at the Company's
            election, furnish such new employer with a copy of this Agreement or
            relevant portion thereof.

            For purpose of this Agreement, "Confidential Information" shall mean
            trade secrets, confidential or proprietary information and all other
            knowledge, know-how, information, documents or materials owned,
            developed or possessed by the Company or any of its affiliates,
            whether in tangible or intangible form, pertaining to the business
            of the Company or any of its affiliates, or any customer thereof,
            known or intended to be known only to employees of the Company or of
            any of its affiliates or other persons in a confidential
            relationship with the Company, or the confidentiality of which the
            Company takes reasonable measure to protect, including, but not
            limited to manufacturing processes, research and development data,
            project data, assignments of individual employees, testing and
            evaluation procedures, cost data and techniques, data bases,
            designs, models, operation procedures, knowledge of the organization
            (including pricing and sales policies, techniques and concepts),
            trade shows (including prices, costs, sales or content), details of
            joint venture or sponsorship agreements, knowledge of strategic or
            marketing plans for future products, events, processes, techniques,
            contracts, financial information or measures, business methods,
            future business plans, package design, retail design, field
            marketing outsourcing, displayers and customers (including
            identities and contact information of displayers and customers and
            prospective displayers and customers, and identities and contact
            information of individual contacts at business entities, which are
            customers), suppliers, vendors, business relationships and other
            information owned, developed or possessed by the Company; provided
            however, that Confidential Information shall not include (i)
            information (other than the identities of displayers and customers)
            that is in the public domain through no fault of Employee; (ii)
            information approved for release by written authorization of the
            Company; or (iii) information that may be required by law or an
            order of any court, agency or proceeding to be publicly disclosed;
            (iv) information that is commonly known in the manufacturing and
            sales industries and information that has been learned by and/or
            developed by employee during his career.

      6.    Non-Solicitation and Non-Competition.

CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 4

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            (a)   The Employee acknowledges that: (i) the Company's business is
                  international in scope and its products are marketed
                  throughout the United States and the world; (ii) the Company
                  competes with other businesses both within the United States
                  and internationally; and (iii) the provisions of this Section
                  6 are reasonable and necessary to protect the Company's
                  business.

            (b)   In consideration of the acknowledgments by the Employee, and
                  in consideration of the compensation and benefits to be paid
                  or provided to the Employee by the Company under this
                  Agreement, the Employee agrees that he will not, directly or
                  indirectly:

                  (i)   during the Post-Employment Period (as defined below),
                        engage in, invest in, own, manage, operate, finance,
                        control, or participate in the ownership, management,
                        operation, financing or control of, be employed by, or
                        render services to, any business whose products or
                        services compete with the Company, anywhere within the
                        United States or within foreign countries in which the
                        Company conducts business;

                  (ii)  whether for the Employee's own account or for the
                        account of any other person or entity, at any time
                        during the Post-Employment Period, solicit business of
                        the same or similar type being carried on by the Company
                        or its affiliates, from any retail or wholesale customer
                        of the Company or its affiliates in existence at any
                        time during the year prior to the Effective Date,
                        whether or not the Employee had personal contact with
                        such customer during and by reason of the Employee's
                        employment with the Company;

                  (iii) whether for the Employee's own account or the account of
                        any other person or entity, at any time during the one
                        year period following effective date, solicit, employ,
                        or otherwise engage as an employee, independent
                        contractor, or otherwise, any person who is or was at
                        the time of such solicitation, employment or engagement
                        an employee, displayer, consultant or independent
                        contractor of the Company or its affiliates or in any
                        manner induce or attempt to induce any employee of the
                        Company or its affiliates to terminate his/her
                        employment with the Company, or its affiliates or in any
                        manner induce or attempt to induce any displayer of the
                        Company or its affiliates to terminate his/her
                        relationship with the Company or its affiliates; or

            (c)   If any covenant in this Section 6 is held to be unreasonable,
                  arbitrary, or against public policy, such covenant will be
                  considered to be divisible with respect to scope, time, and
                  geographic area, and such lesser scope, time, or geographic
                  area, or all of them, as a court of competent jurisdiction may
                  determine to be reasonable, not arbitrary,

CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 5

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                  and not against public policy, will be effective, binding, and
                  enforceable against the Employee.

            (d)   The period of time applicable to any covenant in this Section
                  6 will be extended by the duration of any violation by the
                  Employee of such covenant.

            (e)   The Employee will, while the covenant under this Section 6 is
                  in effect, give written notice to the Company, within ten (10)
                  days after accepting any other employment or consulting
                  arrangement, of the identity of the Employee's new employer or
                  contractor and all of the material duties and services to be
                  provided by Employee in such employment or retention, which
                  shall not require disclosure by Employee of any terms of
                  compensation. The Company may notify such new employer that
                  the Employee is bound by this Agreement and, at the Company's
                  election, furnish such new employer with a copy of this
                  Agreement or relevant portion thereof.

            (f)   The term "Post-Employment Period" means the three (3) month
                  period following the Effective Date.

      7.    Severance Benefit Terms. Contingent upon receipt of Employee's
            signature on this Agreement, the Company agrees to:

                  Pay Severance Payment to you in six semi-monthly installments,
                  the total of which shall not exceed $66,250.02. Such payments
                  shall be made pursuant to the Company's current normal
                  semi-monthly payroll cycle. The first payment would be May 15,
                  2004, and the final payment would be July 31, 2004. No
                  interest or other charge shall apply to any such installments
                  that are made by the Company.

                  Also, Employee shall be paid for all accrued vacation.

            No further or additional severance payments shall be due to
            Employee.

            Limitations On Other Benefits Or Compensation. Employee understands
            and agrees that he will receive no other wage, accrued vacation,
            back pay, bonus, severance, or other payment or benefit from the
            Company (other than those set forth in this paragraph).

      8.    No Admission. This Agreement is not an admission of wrongdoing or
            liability by either Employee or the Company. The Parties hereto
            recognize that, by entering into this Agreement, the Company does
            not admit any violation of any local, state, or federal law, common
            or statutory. The Parties further recognize that this Agreement has
            been entered into in release and compromise of any claims that might
            be asserted by Employee, in connection with Employee's employment
            with

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            the Company, or the termination thereof, and to avoid the expense
            and burden of any litigation related thereto.

      9.    Breach by Employee. The Parties acknowledge and agree that in the
            event it is proven that Employee materially breaches any provision
            of this Agreement: (a) the Company may suspend payments under this
            Agreement and/or rescind the Agreement; (b) Employee will indemnify
            and hold the Company harmless from and against any and all resulting
            damages or loss incurred by the Company in any action where the
            Company prevails (including attorneys' fees and expenses); (c) In
            any action where the Company prevails, Employee will immediately
            repay to the Company in full any payment made to him under the
            provisions of this Agreement; and (d) the Company will be entitled
            to recover from Employee any payment not repaid to the Company, as
            required by subpart (c) of this paragraph, as well as any and all
            other resulting actual or consequential damages. The Company may
            also pursue any other available remedies for any breach of this
            Agreement.

            One or more waivers of a breach of any covenant, term, or provision
            of this Agreement by any of the Parties shall not be construed as a
            waiver of a subsequent breach of the same covenant term, or
            provision, nor shall it be considered a waiver of any other existing
            or subsequent breach of a different covenant, term, or provision.

      10.   Severability. If any provision or term of this Agreement is held to
            be illegal, invalid, or unenforceable, such provision or term shall
            be fully severable; this Agreement shall be construed and enforced
            as if such illegal, or unenforceable provision had never comprised
            part of this Agreement; and the remaining provisions of this
            Agreement shall remain in full force and effect and shall not be
            affected by the illegal, invalid, or unenforceable provision or by
            its severance from this Agreement. However, the Parties agree that
            all payments made under the Agreement shall remain full and final
            and the occurrence of any event of inapplicability, invalidity,
            illegality, unenforceability, or modification made to this Agreement
            shall in no way (a) entitle the Employee to any additional payment,
            compensation, or cost from the Company or create any liability for
            the Company to the Employee under this Agreement, or (b) revise,
            reinstate, or otherwise restore any claims or causes of action being
            released hereby. The Parties further agree that the occurrence of
            any such inapplicability, invalidity, illegality, unenforceability,
            or modification will not operate to reduce the consideration paid to
            the Employee under this Agreement. Furthermore, in lieu of such
            illegal, invalid, or unenforceable provision or term there shall be
            added automatically as a part of this Agreement another provision or
            term as similar to the illegal, invalid, or unenforceable
            provisions, as may be possible and that is legal, valid, and
            enforceable.

      11.   Remedies. The Parties agree that should one party sue the other
            party for a breach of any provision of this Agreement, the
            prevailing party shall be entitled to recover its attorneys' fees
            and costs of court. The parties hereby agree that each

CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 7

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            party shall have the right to sue for specific performance of this
            Agreement, and for declaratory and injunctive relief.

      12.   Entire Agreement. This Agreement constitutes the entire Agreement of
            the Parties, and supersedes all prior and contemporaneous
            negotiations and agreements, oral or written. All such prior and
            contemporaneous negotiations and agreements are deemed incorporated
            and merged into this Agreement and are deemed to have been abandoned
            if not so incorporated. No representations, oral or written, are
            being relied upon by either party in executing this Agreement other
            than the express representations of this Agreement. This Agreement
            cannot be changed or terminated without the express written consent
            of the parties.

      13.   Reference. The Parties acknowledge and agree that Employee will
            direct any request for employment references from the Company to
            Patricia L. Sinclair, Associate Vice President of Human Resources of
            the Company, and that the Company will not be obligated to respond
            to any such requests, or to any other inquiries from prospective
            employers of Employee, except to disclose only a neutral reference
            that discloses only Employee's job title and dates of employment.

      14.   Re-Employment. Employee waives and releases forever any right or
            rights he might have to seek re-employment, or reinstatement with
            the Company or any of the other Releasees.

      15.   Mutual Covenant of Non-Disparagement. Employee agrees that he shall
            not, directly or indirectly, in any way disparage the Company or its
            affiliates or any of the shareholders, partners, members, or other
            holders of equity in the Company or its current and former officers,
            directors, and employees, or make to, or solicit from, any third
            party (including, but not limited to, any communications with the
            press or other media), any comments, statements, and the like that
            may be considered to be derogatory or detrimental to the good name
            or business reputation of the Company. The Company or its affiliates
            or any of the shareholders, partners, members, or other holders of
            equity in the Company or its current and former officers, directors,
            and employees shall not make any comments, statements, and the like
            that may be considered to be derogatory or detrimental to the good
            name or business reputation of the Employee.

      16.   Statement of Understanding. You received this Agreement on April 13,
            2004.

            By executing this Agreement, Employee acknowledges that (a) Employee
            has been advised by the Company in writing to consult with an
            attorney regarding the terms of the Agreement; (b) Employee has been
            given the opportunity to have at least twenty-one (21) days from the
            date above on which Employee received this Agreement to consider
            this Agreement and that Employee has considered the Agreement during
            said time period. Employee understands and agrees that he may waive
            the twenty-one (21) day review period and execute this Agreement at
            any time after its receipt, and that any such execution prior to the
            expiration of the

CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 8

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            twenty-one (21) days shall be a knowing waiver by Employee of such
            twenty-one (21) day review period; (c) Employee has consulted with
            an attorney of his own choosing regarding the terms of the
            Agreement; (d) any and all questions regarding the terms of this
            Agreement have been asked and answered to Employee's complete
            satisfaction; (e) Employee has read this Agreement and fully
            understands its terms and their import; (f) except as provided by
            this Agreement, Employee has no contractual right or claim to the
            benefits described herein; (g) the consideration provided for herein
            is good and valuable; (h) Employee is entering into this Agreement
            voluntarily, of his own free will, and without any coercion, undue
            influence, threat, or intimidation of any kind or type whatsoever;
            and (i) Employee is no longer an employee of the Company and its
            subsidiaries effective on the Separation Date.

      17.   Revocation Period. Either Party may revoke this Agreement within
            seven (7) days of the date of its execution by Employee (the
            "Revocation Period"), by written notice to the other Party. Employee
            understands that he has no right to receive payments and benefits
            described in this Agreement if he revokes this Agreement. Employee
            further understands that if the Company does not receive from
            Employee written revocation of this Agreement prior to the
            expiration of the Revocation Period, this Agreement will become
            effective, and Employee will have forever waived his right and
            ability to revoke it, and he and the Company will be fully bound by
            all of its terms and conditions.

      18.   Controlling Law and Venue. This Agreement shall be subject to and
            construed in accordance with the laws of the State of Texas.
            Exclusive venue shall be in Dallas County, Texas for any disputes
            arising out of the interpretation or enforcement of any of the terms
            of this Agreement.

      19.   Binding Effect. This Agreement is binding on and inures to the
            benefit of the Company, its successors and assigns, and on Employee
            and Employee's successors, heirs, assigns and beneficiaries.

      20.   Cooperation and Further Assurances. In order to assist with the
            transition following the termination of his employment with the
            Company, Employee agrees to make himself available to assist with
            such transition through and including July 31, 2004, subject to
            Employee's availability and in such manner as may be reasonably
            requested by the Company. The Parties agree to execute and deliver
            such other and further documents and take such other action as may
            be reasonably necessary to more completely, fully and/or correctly
            evidence or effect the intents and purposes of this Agreement.

      21.   LEGAL COUNSEL. EMPLOYEE UNDERSTANDS THAT HE IS WAIVING IMPORTANT
            LEGAL RIGHTS BY SIGNING THIS AGREEMENT AND, FURTHER, THAT EMPLOYEE
            HAS CONSULTED WITH AN ATTORNEY OF HIS CHOOSING BEFORE SIGNING THIS
            AGREEMENT.

CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 9

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            READ CAREFULLY BEFORE SIGNING. THIS DOCUMENT INCLUDES A RELEASE OF
            ALL KNOWN AND UNKNOWN CLAIMS.

IN WITNESS WHEREOF, the undersigned have executed this Agreement freely and
voluntarily intending to be legally bound by it.

ACCEPTED AND AGREED TO BY:

EMPLOYEE

/s/ Charles L. Elsey
-------------------------------

April 15, 2004
Date

Address for Notice:

    ___________________________
    ___________________________

STATE OF Texas       )
                     )
COUNTY OF Dallas     )

      BEFORE ME, the undersigned, a Notary Public, on this day personally
appeared Charles Elsey known to me to be the person whose name is subscribed to
the foregoing instrument and acknowledged to me that he executed the same for
the purposes and consideration therein expressed.

      GIVEN UNDER MY HAND AND SEAL OF OFFICE this 15th day of April.

                                          /s/ Christopher Lee Reed
                                          --------------------------------------
                                          Notary Public, State of Texas
[SEAL]                                    My commission expires: March 1, 2008

CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 10

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HOME INTERIORS AND GIFTS, INC.

By: /s/ Patricia L. Sinclair
    ----------------------------

Name:  Patricia L. Sinclair

Title: AVP Human Resources

       April 15, 2004

Date

CONFIDENTIAL SEPARATION AGREEMENT AND RELEASE - Page 11exv10w2

 

EXHIBIT 10.2

AMENDED AND RESTATED CERTIFICATE OF
DESIGNATION

OF

SERIES A CONVERTIBLE PREFERRED STOCK

OF

HEALTHAXIS INC.

     
Healthaxis Inc. (hereafter called the
“Company”), a corporation organized and
existing under the laws of the Commonwealth of Pennsylvania,
does hereby certify that, pursuant to the authority conferred
upon the Company’s Board of Directors (the
“Board”) by the Company’s Amended
and Restated Articles of Incorporation (the “Articles
of Incorporation”), the Board, by actions duly
taken on May 26, 2004, duly adopted a resolution providing
for the amendment and restatement of the Certificate of
Designation setting forth the rights and preferences of the
Series A Convertible Preferred Stock, which resolution is
as follows:

		
	 	     
    RESOLVED, that, pursuant to the authority vested
    in the Board by the Articles of Incorporation, the Board hereby
    amends and restates the Certificate of Designation which sets
    forth the designation, preferences, rights and limitations of
    the Series A Convertible Preferred Stock, par value
    $1.00 per share and which shall state as follows, and which
    Amended and Restated Certificate of Designation supercedes the
    original Certificate of Designation and all amendments thereto.
    

     
Following the Board’s adoption of the above
resolution, the holders of the Company’s Series A
Convertible Preferred Stock and the holders of the
Company’s Common Stock also approved the Amended and
Restated Certificate of Designation, as follows:

     
1. Designation, Amount, Par Value, Rank,
Stock Split and Certain Defined Terms.

     
a. The preferred stock authorized under this
Certificate of Designation shall be designated as the
Series A Convertible Preferred Stock, par value
$1.00 per share (the “Series A Preferred
Stock”), and the number of shares so designated
shall be 3,850,000, subject to adjustment for any stock splits,
stock dividends or similar transactions affecting the
Series A Preferred Stock.

     
b. The Series A Preferred Stock shall
rank pari passu with all classes of the Company’s
common stock, par value $.10 per share (the
“Common Stock”), and each other series
of preferred stock or class of other capital stock or
instruments of the Company convertible into Common Stock with
respect to dividend distributions, redemptions and distributions
upon Liquidation that are not, expressly by their terms, made
senior to the Series A Preferred Stock.

     
c. As of the effective date of the filing of
the Amended and Restated Certificate of Designation with the
Pennsylvania Secretary of State, every 1 share of
Series A Preferred Stock issued and outstanding shall
without further action by this Corporation or the holder thereof
be split into and automatically become 174.3975 shares of
Series A Preferred Stock. No fractional shares shall be
issued in connection with the foregoing stock split; all shares
of Series A Preferred Stock so split that are held by a
shareholder will be aggregated and each fractional share
resulting from such aggregation shall be rounded down to the
nearest whole share.

     
d. Certain terms used herein are defined in
Section 9 hereof.

     
2. Dividends.

     
a. The Holders shall be entitled to receive,
out of funds legally available therefor, and the Company shall
pay, when and as declared by the Board, cumulative dividends at
the rate of $0.0001 per share of Series A Preferred
Stock, payable semi-annually, on January 15 and
July 15 of each year (each a “Dividend Payment
Date”) commencing on January 15, 2005, in
cash, as accrued for the six-month period preceding the Record
Date relating to such Dividend Payment Date (or on a pro rata
basis for such other period of time following the filing of this
Amended and Restated Certificate with the Department of State of
the Commonwealth of Pennsylvania). The record date for any
dividend payment pursuant to this Section 2(a) (the
“Record Date”)

1

 

is the close of business on January 1 or
July 1 of each year, as the case may be, whether or not a
Business Day, immediately preceding the Dividend Payment Date on
which such dividend is payable. Dividends on the Series A
Preferred Stock shall be calculated on the basis of a 365-day
year (or 366-day year for any leap year), shall accrue daily
commencing on the date of the filing of this Amended and
Restated Certificate and shall be deemed to accrue from such
date and be cumulative whether or not earned or declared and
whether or not there are profits, surplus or other funds of the
Company legally available for the payment of dividends. Accrued
and unpaid dividends on the Series A Preferred Stock for
any shares that are being converted into shares of Common Stock
shall be forfeited. Except as otherwise provided herein, if at
any time the Company pays less than the total amount of
dividends then accrued on account of the Series A Preferred
Stock, such payment shall be distributed ratably among the
Holders based upon the number of shares of Series A
Preferred Stock held by each Holder.

     
b. In addition, if the Company declares a
dividend or other distribution on its Common Stock, each Holder
shall be entitled to receive, out of funds legally available
therefor, and the Company shall pay, when and as declared by the
Board, dividends or distributions as though the Holder were a
holder of the number of shares of Common Stock into which its
shares of Series A Preferred Stock are convertible as of
the record date fixed for the determination of the holders of
Common Stock entitled to receive the dividend or distribution.

     
3. Liquidation.

     
a. In the event of any Liquidation, whether
voluntary or involuntary, each Holder is entitled to receive, as
though the Holder were a holder of the number of shares of
Common Stock into which its Series A Preferred Stock are
convertible as of the record date fixed for the determination of
the holders of Common Stock entitled to receive a distribution
upon Liquidation, an amount per share equal to the amount per
share distributed to the holders of Common Stock.

     
b. The Company shall mail to each Holder
written notice of any such Liquidation not less than fifteen
(15) days prior to the payment date stated therein.

     
4. Voting Rights.

     
Except as otherwise required by law (taking into
consideration the limitations contained in Section 8
hereof), the Holders of the Series A Preferred Stock shall
not have voting rights.

     
5. Conversion.

     
a. Conversion at Holder’s
Option. Each share of Series A Preferred Stock shall be
convertible, at the option of the Holder thereof, in the event
of any of the following:

		
	 	     
    (i) at any time, provided that the Holder
    will not hold, as a result of the conversion, more than
    750,000 shares of Common Stock;
    
	 
	 	     
    (ii) at any time, if and only if the Common
    Stock is then trading on the National Market and has had a
    closing price in the National Market of $8.00 or more for 20 out
    of the previous 30 Trading Days immediately prior to the
    effective date of the conversion; or
    
	 
	 	     
    (iii) at any time on or after June 30,
    2005.
    

     
b. Conversion at Company’s
Option. Subject to Section 8 hereof, each share of
Series A Preferred Stock shall be convertible, at the
option of the Company, if:

		
	 	     
    (i) the Common Stock has had a per share
    closing price in the National Market of $8.00 or more for 20 out
    of the previous 30 Trading Days immediately prior to the date of
    delivery to the Holders of the Conversion Notice specified in
    Section 5(d) below; and
    
	 
	 	     
    (ii) a registration statement under the
    Securities Act of 1933 that registers the resale of all shares
    of Common Stock that constitute Registrable Securities (as
    defined in the Registration Rights Agreement) is then in effect
    as and to the extent provided in the Registration Rights
    Agreement.
    

2

 

     
c. Automatic Conversion. If, at any
time, any Holder transfers its shares of Series A Preferred
Stock, which transfer shall be in compliance with the terms of
the Investor Rights Agreement (applicable through the first
anniversary of the Closing Date), all such transferred shares of
Series A Preferred Stock shall, by virtue of such transfer
(and without any action on the part of the Holder) be
automatically converted into fully paid and non-assessable
shares of Common Stock.

     
d. Mechanics of Conversion. When
converted in accordance with the terms set forth in this
Certificate of Designation, each share of Series A
Preferred Stock initially shall be convertible into one fully
paid and non-assessable share of Common Stock. A Holder shall
effect a conversion by surrendering to the Company the
certificate or certificates representing the shares of
Series A Preferred Stock to be converted, together with a
written notice of such conversion in the form of
Exhibit A annexed hereto, and the Company shall
effect a conversion by sending to the Holder a notice of such
conversion in the form of Exhibit B annexed hereto
(each of Exhibit A and Exhibit B is a
“Conversion Notice”), provided that
notwithstanding the provisions of Section 10 that may
permit delivery of the certificate(s) by various means, it shall
be necessary for the Holder to hand deliver or deliver via
nationally recognized overnight courier the certificate(s) in
order for the Holder to be deemed to have effectively delivered
a Conversion Notice. Each Conversion Notice shall specify the
Holder, the name or names in which the certificate or
certificates for shares of Common Stock are to be issued (if
applicable), the number of shares of Series A Preferred
Stock to be converted and the date on which such conversion is
to be effected, which date may not be prior to the date such
Conversion Notice is delivered to the Company or the Holder, as
the case may be (the “Conversion Date”).
In the event that the Company effects the conversion pursuant to
Section 5(b), such Holder agrees to deliver the certificate
or certificates representing the shares of Series A
Preferred Stock to be converted as promptly as practicable
thereafter. Upon delivery of the Conversion Notice, the Holder
shall have no rights as a holder of the shares of Series A
Preferred Stock to be converted other than the right to receive
Conversion Shares. If no Conversion Date is specified in the
Conversion Notice, the Conversion Date shall be the date that
the Conversion Notice is deemed delivered pursuant to
Section 10 hereof. The Company shall, within three
(3) Trading Days after delivery or receipt of a Conversion
Notice, cause to be delivered to the Holder, or to such
Holder’s nominee or nominees (i) a certificate or
certificates which shall be free of restrictive legends and
trading restrictions (other than those required pursuant to the
Investor Rights Agreement or otherwise required by law)
representing the number of shares of Common Stock being acquired
upon the conversion of shares of Series A Preferred Stock
and (ii) if the Holder is converting less than all the
shares of Series A Preferred Stock represented by the
certificate or certificates tendered by the Holder with the
Conversion Notice, one or more certificates representing the
number of shares of Series A Preferred Stock not converted.
The Person or Persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of
Common Stock as of the Conversion Date. Upon request of the
Holder, and in compliance with the provisions hereof (but
subject to any limitations arising out of the Investor Rights
Agreement or applicable law), in lieu of physical delivery of
the shares of Common Stock, provided the Company’s transfer
agent is participating in the Depositary Trust Company
(“DTC”) Fast Automated Securities
Transfer program, the Company shall use its best efforts to
cause its transfer agent to electronically transmit any
certificate or certificates required to be delivered to the
Holder (or the Holder’s nominee) under this Section 5
by crediting the account of the Holder’s (or the
Holder’s nominee’s) Prime Broker with DTC through its
Deposit Withdrawal Agent Commission system. The time period for
delivery described herein shall apply to any such electronic
transmittals. If, in the case of any attempted conversion, such
certificate or certificates are not delivered to or as directed
by the applicable Holder by the fifth (5th) Trading Day after
the Conversion Date, the Holder shall be entitled at any time on
or before its receipt of such certificate or certificates to
rescind such conversion by written notice to the Company, in
which event the Company shall immediately return the
certificates representing the shares of Series A Preferred
Stock for which Common Stock was not delivered pursuant to such
conversion and the rights of the Holder as a holder of such
shares of Series A Preferred Stock shall immediately be
restored.

     
6. Reservation of
Shares. The Company covenants that it
will at all times reserve and keep available out of its
authorized and unissued shares of Common Stock, solely for the
purpose of issuance upon conversion of the Series A
Preferred Stock and free from preemptive rights or any other
actual contingent purchase rights of Persons other than the
Holders, not less than 100% of such number of shares of Common
Stock as shall be

3

 

issuable (taking into account the adjustments of
Section 7 hereof) upon the conversion of all outstanding
shares of Series A Preferred Stock (without regard to any
limitations on conversion). The Company shall, from time to
time, take all steps necessary to increase the authorized number
of shares of its Common Stock if at any time the authorized
number of shares of Common Stock remaining unissued is
insufficient to permit the conversion of all of the shares of
the Series A Preferred Stock. The Company covenants that
all shares of Common Stock that shall be so issuable shall, upon
issue, be duly authorized, validly issued, fully paid and
nonassessable.

     
7. Adjustment of Number of Conversion
Shares.

     
a. Common Stock Splits;
Reclassification. If the Company, at any time after the
Closing Date: (i) subdivides outstanding shares of Common
Stock into a larger number of shares, (ii) issues any
shares of Common Stock by reclassification of shares of Common
Stock, or (iii) effects a reverse stock split, then each
share of Series A Preferred Stock shall thereafter be
convertible into that number of Conversion Shares that would
have derived had the share of Series A Preferred Stock been
converted into Common Stock immediately prior to the events
listed in (i), (ii) or (iii) above. In the case of a
subdivision or re-classification, any adjustment made pursuant
to this Section 7(a) shall become effective immediately
after the effective date of such subdivision or
re-classification.

     
b. Adjustment for Recapitalization,
Reclassification, Exchange and Substitution. If at any time
after the Closing Date, the Common Stock issuable upon the
conversion of the Series A Preferred Stock is changed into
the same or a different number of shares of any class or classes
of stock, whether by recapitalization, reclassification,
exchange, substitution or otherwise, and other than a capital
reorganization, merger or consolidation (the adjustment for
which is provided for in Section 7(c)), in any such event
each Holder shall have the right thereafter to convert such
stock into the kind and amount of stock and other securities and
property receivable in connection with such recapitalization,
reclassification or other change that it would have been
entitled to receive had it converted its shares of Series A
Preferred Stock immediately prior to such recapitalization,
reclassification exchange, substitution or other event (without
taking into account any limitations or restrictions on the
convertibility of the Series A Preferred Stock), all
subject to further adjustments as provided herein or with
respect to such other securities or property by the terms
thereof.

     
c. Reorganizations, Mergers or
Consolidations. If at any time after the Closing Date, the
Common Stock is converted into other securities or property,
whether pursuant to a capital reorganization, merger,
consolidation or otherwise (other than a recapitalization,
reclassification, subdivision, exchange or substitution of
shares provided for in Section 7(b)), as a part of such
transaction, provision shall be made so that the Holders of the
Series A Preferred Stock shall thereafter be entitled to
receive upon conversion thereof the number of shares of stock or
other securities or property to which a holder of the number of
shares of Common Stock deliverable upon conversion would have
been entitled to receive in connection with such transaction
(without taking into account any limitations or restrictions on
the convertibility of the Series A Preferred Stock),
subject to adjustment in respect of such stock or securities by
the terms thereof. To the extent applicable, appropriate
adjustment shall be made in the application of the provisions of
this Section 7 with respect to the rights of the Holders of
the Series A Preferred Stock after such transaction to the
end that the provisions of this Section 7 (including
adjustment to the number of shares issuable upon conversion of
the Series A Preferred Stock) shall be applicable after
that event and be as nearly equivalent as practicable.

     
d. Notice of Certain Events. If:

		
	 	     
    (i) the Company declares a dividend (or any
    other distribution) on the Common Stock;
    
	 
	 	     
    (ii) the Company declares a special
    nonrecurring cash dividend on or a redemption of the Common
    Stock;
    
	 
	 	     
    (iii) the Company authorizes the granting to
    the holders of the Common Stock of rights, Options or warrants
    to subscribe for or purchase any shares of capital stock of any
    class or of any rights;
    
	 
	 	     
    (iv) the approval of the Company’s
    shareholders is sought or required in connection with any
    reclassification of the Common Stock or any Change of
    Control; or
    

4

 

		
	 	     
    (v) the Company authorizes a Liquidation;
    

     
then, the Company shall cause to be delivered to
the Holders, at least fifteen (15) calendar days prior to
the applicable record or effective date hereinafter specified, a
notice (provided such notice shall not include any material
non-public information) stating: (a) the date on which a
record is to be taken for the purpose of such dividend,
distribution, redemption, or granting of Options, rights or
warrants, or if a record is not to be taken, the date as of
which the holders of Common Stock of record to be entitled to
such dividend, distribution, redemption, rights, Options or
warrants are to be determined or (b) the date, if
applicable, on which such reclassification, Liquidation or
Change of Control is expected to become effective or close, and
the date as of which it is expected that holders of record of
Common Stock shall be entitled to exchange their shares of
Common Stock for securities, cash or other property deliverable
in connection with such reclassification or Change of Control.
Nothing herein shall prohibit the Holders from converting shares
of Series A Preferred Stock held by such Holder during the
fifteen (15) day period commencing on the date of such notice to
the effective date of the event triggering such notice.

     
e. Notice of Adjustment. Whenever the
number of Conversion Shares is adjusted pursuant to this
Section 7, the Company shall deliver to the Holders a
notice setting forth the number of Conversion Shares after such
adjustment and setting forth a brief statement of the facts
requiring such adjustment. Such notice shall be signed by the
Company’s chairman, president or chief financial officer
and shall be delivered to the Holders within three
(3) Business Days of the date the events occur which
require such adjustment.

     
f. Adjustment in the Number of Conversion
Shares. For the avoidance of doubt, upon each adjustment in
the number of Conversion Shares pursuant to any provision of
this Section 7, the number of Conversion Shares issuable
hereunder shall be adjusted to the nearest 1/100th of a whole
share. Upon each adjustment, other references herein to the
number of shares of Common Stock or the market price of shares
of Common Stock shall be similarly adjusted.

     
g. Rounding. All calculations under
this Section 7 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be.

     
h. Other Events. If any event shall
occur as to which the provisions of this Section 7 are not
strictly applicable but the failure to make any adjustment would
not fairly protect the rights of the Holders in accordance with
the intent and principles of this Section 7 (whether by
grant of the Company of any stock appreciation rights, phantom
stock rights or other rights with equity features or otherwise),
the Board will make an appropriate adjustment in the number of
Conversion Shares so as to protect the rights of the Holders.

     
i. Treasury Shares. The number of
shares of Common Stock outstanding at any given time shall not
include shares owned or held by or for the Company’s
account, if any, and the disposition of any shares so owned or
held shall be considered an issue or sale of Common Stock by the
Company.

     
j. Failure to Adjust Number of Conversion
Shares. If (i) the Company fails to adjust the number
of Conversion Shares upon the occurrence of an event requiring
such adjustment in accordance with the terms of this
Section 7 and (ii) a court of competent jurisdiction
determines that the Company is or was required to adjust the
number of Conversion Shares, in addition to making the
adjustment to the greatest number of Conversion Shares which
would have resulted if the Company had made the adjustment upon
the occurrence of such event (in accordance with this
Section 7), as further adjusted upon the occurrence of any
subsequent events which would require such further adjustment,
the Company shall be required to pay the reasonable legal fees
of one counsel selected by the Majority Holders in connection
with any such dispute.

     
8. Restriction on
Conversion. Notwithstanding anything
herein to the contrary, in no event shall a holder of
Series A Preferred Stock be entitled to convert any portion
of the Series A Preferred Stock so held by such holder, nor
shall the Company have the right to force the conversion of any
portion of the Series A Preferred Stock so held by such
holder, in excess of that portion upon conversion of which the
sum of (1) the number of shares of Common Stock
beneficially owned by such holder and its Affiliates (other than
shares of Common Stock which may be deemed beneficially owned
through ownership of the unconverted shares of Series A
Preferred Stock or the unexercised or unconverted portion of any
other security of the holder subject to a limitation on
conversion analogous to the limitations contained herein) and
(2) the number of shares of

5

 

Common Stock issuable upon the conversion of that
portion of the Series A Preferred Stock with respect to
which the determination of this proviso is being made, would
result in beneficial ownership by such holder and its Affiliates
of more than 4.99% of the then outstanding shares of Common
Stock. The waiver by a holder of Series A Preferred Stock
of any limitation contained in an option or convertible security
now or hereafter held by such holder that is similar or
analogous to the limitations set forth in this Section 8
shall not be deemed a waiver or otherwise effect the limitation
set forth in this Section 8, unless such waiver expressly
states it is a waiver of the provisions of this Section 8.
For purposes of this Section 8, beneficial ownership shall
be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and
Regulations 13D-G thereunder, except as otherwise provided
in clause (1) of such proviso. Any holder of Series A
Preferred Stock may waive the limitations set forth herein by at
least sixty-one (61) days written notice to the Company.

     
9. Definitions.
For the purposes hereof, the following terms shall have the
following meanings:

     
“Affiliate”
means, with respect to any Person, any other Person that
directly or indirectly (i) has a 5% or more equity interest
in that Person, (ii) has 5% or more common ownership with
that Person or (iii) controls, or is under common control
with, or is controlled by, such Person. When used in this
definition, “control” (including, with
its correlative meanings, “controlled
by” and “under common control
with”) shall mean, with respect to any Person, the
possession, direct or indirect, of the power to direct or cause
the direction of the management and policies (whether through
the ownership of securities or partnership or other ownership
interests, by contract or otherwise) of such Person.

     
“Appraiser”
means a nationally recognized or major regional investment
banking firm or firm of independent certified public accountants
of recognized standing.

     
“Business
Day” means any day except
Saturday, Sunday and any day that is 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 action to
close.

     
“Change of
Control” means the occurrence
of any of the following: (i) an acquisition or series of
related acquisitions by any Person or “group” (as
described in Section 13(d)(3) of the Exchange Act) of in
excess of thirty-three and one third percent (33 1/3%) of
the voting power of the Company, (ii) the merger or
consolidation of the Company with or into another Person, unless
the holders of the Company’s securities immediately prior
to such transaction or series of related transactions continue
to hold at least fifty percent (50%) of such securities
following such transaction or series of related transactions,
(iii) the sale, conveyance, lease, transfer, exclusive
license or disposition of all or substantially all of the
Company’s assets in one or a series of related
transactions, (iv) during any period of twelve
(12) consecutive months after the Closing Date, individuals
who at the beginning of any such twelve (12) month period
constituted the Board cease for any reason to constitute a
majority of the Board then in office or (v) the
Company’s execution 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 clauses (i), (ii), (iii) or (iv).

     
“Closing
Date” means June 30,
2004.

     
“Common
Stock” has the meaning set
forth in Section 1(b).

     
“Company”
means Healthaxis Inc., a Pennsylvania corporation.

     
“Conversion
Date” has the meaning set
forth in Section 5(d).

     
“Conversion
Notice” has the meaning set
forth in Section 5(d).

     
“Conversion
Shares” means that number of
shares of Common Stock issuable upon conversion of one share of
Preferred Stock into Common Stock.

     
“Dividend Payment
Date” has the meaning set
forth in Section 2.

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

     
“Holder”
or “Holders” means the holder or holders
of the Series A Preferred Stock.

6

 

     
“Investor Rights
Agreement” means the Investor
Rights Agreement, dated as
of                     ,
2004, by and among the Company and the original Holders.

     
“Liquidation”
means any liquidation, dissolution or winding-up of the Company,
whether voluntary or involuntary.

     
“Majority
Holder(s)” means the
holder(s) of 60% or more of the then outstanding shares of
Series A Preferred Stock.

     
“National
Market” means the NASDAQ
National Market, the NASDAQ SmallCap Market, the New York Stock
Exchange, the American Stock Exchange and the OTCBB.

     
“Options”
means any rights, options or warrants to subscribe for or to
purchase Common Stock or any other stock.

     
“OTCBB”
means the Over-the-Counter Bulletin Board of the National
Association of Securities Dealers, Inc.

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

     
“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.

     
“Preferred Stock Agreement”
means the Preferred Stock
Modification Agreement, dated as of May 12, 2004, among the
Company and the Original Holders.

     
“Record
Date” has the meaning set
forth in Section 2.

     
“Registration Rights
Agreement” means the
Registration Rights Agreement, dated as of June 30, 2004,
by and among the Company and the original Holders.

     
“Series A Preferred
Stock” has the meaning set
forth in Section 1(a).

     
“Trading
Day” means any day on which
the OTCBB or any National Market on which the Common Stock is
then quoted or listed is open for trading.

     
“Transaction
Documents” means this
Certificate of Designation, the Preferred Stock Agreement, the
Investor Rights Agreement and the Registration Rights Agreement.

     
10. Notices.
Any notices, consents, waivers or other communications required
or permitted to be given hereunder shall be in writing and shall
be deemed to have been received: (a) upon hand delivery
(receipt acknowledged) or delivery by telecopy or facsimile
(with transmission confirmation report) at the address or number
designated in the Preferred Stock Agreement (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) one (1) Business Day following
the date of deposit with a nationally recognized overnight
courier, fully prepaid, addressed to such address or upon actual
receipt of such mailing, whichever shall first occur. Each party
shall provide written notice to the other party of any change in

7

 

address or facsimile number from that set forth
in the Preferred Stock Agreement in accordance with the
provisions hereof.

     
11. Lost or Stolen
Certificates. Any Holder claiming a
stock certificate representing the shares of Series A
Preferred Stock to be lost, destroyed or wrongfully taken shall
receive a replacement certificate if such Holder:
(a) requests such replacement certificate before the
Company has notice that the shares have been acquired by a bona
fide purchaser; (b) executes an affidavit of loss, whereby
such Holder agrees to indemnify the Company as it relates to
such stock certificate; and (c) satisfies any other
reasonable requirements fixed by the Company’s Board of
Directors, provided, however, that the Company shall not
be obligated to re-issue stock certificates if the Holder
contemporaneously requests the Company to convert such
Series A Preferred Stock into Common Stock.

     
12. Remedies Characterized; Other
Obligations, Breaches and Injunctive
Relief. The remedies provided in this
Certificate of Designation shall be cumulative and in addition
to all other remedies available under this Certificate of
Designation, at law or in equity, including a decree of specific
performance and/or other injunctive relief. No remedy contained
herein shall be deemed a waiver of compliance with the
provisions giving rise to such remedy and nothing herein shall
limit a Holder’s right to pursue actual damages for any
failure by the Company to comply with the terms of this
Certificate of Designation. Amounts set forth or provided for
herein with respect to payments, conversion and the like (and
the computation thereof) shall be the amounts to be received by
the Holder thereof and shall not, except as expressly provided
herein, be subject to any other obligation of the Company (or
the performance thereof). The Company acknowledges that a breach
by it of its obligations hereunder will cause irreparable harm
to the Holders of the Series A Preferred Stock for which
there is no adequate remedy at law. The Company therefore agrees
that, in the event of any such breach or threatened breach, the
Holders of the Series A Preferred Stock shall be entitled,
in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing
economic loss and without any bond or other security being
required.

     
13. Construction.
This Certificate of Designation shall be deemed to be jointly
drafted by the Company and all Holders and shall not be
construed against any Person as the drafter hereof. In the event
of any inconsistency or ambiguity between the terms of this
Certificate of Designation and the terms of any other
Transaction Document, the terms of this Certificate of
Designation shall control and govern any construction hereof or
thereof.

     
14. Failure or Indulgence Not
Waiver. No failure or delay on the
part of a Holder in the exercise of any power, right or
privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any
other right, power or privilege.

     
15. Fractional
Shares. Upon a conversion of
Series A Preferred Stock hereunder, the Company shall not
be required to issue stock certificates representing fractions
of shares of Common Stock, but may if otherwise permitted, make
a cash payment in respect of any final fraction of a share based
on the Per Share Market Value at such time. If the Company
elects not to, or is unable to, make such a cash payment, the
Holder of a share of Series A Preferred Stock shall be
entitled to receive, in lieu of the final fraction of a share,
one whole share of Common Stock.

     
16. Payment of Tax Upon Issue of
Transfer. The issuance of certificates
for shares of the Common Stock upon conversion of the
Series A Preferred Stock shall be made without charge to
the Holders thereof for any documentary stamp or similar taxes
that may be payable in respect of the issue or delivery of such
certificate, provided that the Company shall not be required to
pay any tax that may be payable in respect of any transfer
involved in the issuance and delivery of any such certificate
upon conversion in a name other than that of the Holders so
converted, and the Company shall not be required to issue or
deliver such certificates unless or until the Person or Persons
requesting the issuance thereof has paid to the Company the
amount of such tax or has established to the Company’s
satisfaction that such tax has been paid or is not payable.

     
17. Shares Owned by Company Deemed Not
Outstanding. In determining whether
the Holders of the outstanding shares of Series A Preferred
Stock have concurred in any direction, consent or waiver under
this

8

 

Certificate of Designation, shares of
Series A Preferred Stock which are owned by the Company or
any other Affiliate or obligor thereof shall be disregarded and
deemed not to be outstanding for the purpose of any such
determination. Shares of the Series A Preferred Stock so
owned which have been pledged in good faith may be regarded as
outstanding if: (i) the pledgee establishes to the
satisfaction of the Holders and the Company the pledgee’s
right so to act with respect to such shares and (ii) the
pledgee is not the Company or any other Affiliate or obligor of
the Company. For purposes of this Section 17, none of Brown
Simpson Partners I, Ltd., OTAPE LLC, LBI Group Inc. or The
Pennsylvania State University shall be deemed to be Affiliates
of the Company.

     
18. Communications.
The Holders shall be entitled to receive, and the Company shall
deliver pursuant to Section 10 hereof, all communications
sent by the Company to the holders of the Common Stock. Such
communications shall be provided to the Holders at the same
times and in the same manner as furnished to the Company’s
shareholders generally.

     
19. Reacquired
Shares. Any shares of Series A
Preferred Stock redeemed, purchased, converted or otherwise
acquired by the Company in any manner whatsoever shall not be
reissued as part of the Company’s Series A Preferred
Stock and shall be retired promptly after the acquisition
thereof. All such shares shall become, upon their retirement
(and the filing of any certificate required in connection
therewith pursuant to the Pennsylvania Business Corporation
Law), authorized but unissued shares of the Company’s
preferred stock.

     
20. Registration of
Transfer. The Company shall keep a
register for the registration of the transfers of shares of
Series A Preferred Stock at its principal office. Upon the
surrender of any certificate representing shares of
Series A Preferred Stock at such place, the Company shall,
at the request of the record Holder of such certificate, execute
and deliver (at the Company’s expense) a new certificate or
certificates in exchange therefor representing in the aggregate
the number of shares represented by the surrendered certificate.
Each such new certificate shall be registered in such name and
shall represent such number of shares as is requested by the
Holder of the surrendered certificate and shall be substantially
identical in form to the surrendered certificate.

     
21. Effect of
Headings. The section headings herein
are for convenience only and shall not affect the construction
hereof.

[Remainder of Page Intentionally Left
Blank]

9

 

     
IN WITNESS WHEREOF, Healthaxis Inc. has caused
this Certificate of Designation to be signed by its Chief
Executive Officer on this 30th day of June, 2004.

		
	 	
    HEALTHAXIS INC.
    

			
	 	By: 	
    /s/ JAMES W. MCLANE
    

		
	 	
    

	 	
    Name: James W. McLane
    

			
	 	Title:	
    Chief Executive Officer
    

Attest:

			
	By: 	
    /s/ J. BRENT WEBB
    	 

		
	
    
	 
	
    Name: J. Brent Webb
    	 

			
	Title:	
    Secretary
    	 

10

 

EXHIBIT A

NOTICE OF CONVERSION

AT THE ELECTION OF HOLDER

(To be Executed by the Registered Holder in
order to convert shares of Series A Convertible Preferred
Stock)

     
The undersigned hereby elects to convert the
number of shares of Series A Convertible Preferred Stock
(“Series A Preferred Stock”)
indicated below, into shares of common stock, par value
$0.10 per share (the “Common
Stock”), of Healthaxis Inc. (the
“Company”) according to the conditions
hereof, as of the date written below. If shares are to be issued
in the name of a person other than undersigned, the undersigned
will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be
charged to the Holder for any conversion, except for such
transfer taxes, if any.

     
The undersigned hereby certifies that the Common
Stock issuable pursuant to this Conversion Notice has been sold
pursuant to a registration statement under the Securities Act of
1933, as amended, which identifies the Holder as a selling
security holder. This must be checked for shares free of
restrictive legends to be issued.

Conversion calculations:

		
	 	
    

		
	 	
    Date to effect conversion
    
	 
	 	
    

		
	 	
    No. of shares of Series A Preferred Stock
    being converted
    
	 
	 	
    

		
	 	
    Number of shares of Common Stock to be issued
    
	 
	 	
    

		
	 	
    Name(s) in which Common Stock to be issued
    
	 
	 	
    

		
	 	
    Signature of Holder
    
	 
	 	
    

		
	 	
    Name
    
	 
	 	
    

		
	 	
    Address
    
	 
	 	
    

		
	 	
    

11

 

EXHIBIT B

NOTICE OF CONVERSION

AT THE ELECTION OF THE COMPANY

(To be Delivered to the Registered Holder in
order to convert shares of Series A Convertible Preferred
Stock)

     
Healthaxis Inc. (the
“Company”) hereby notifies you that it
is exercising its option to require the conversion of the shares
of Series A Convertible Preferred Stock
(“Series A Preferred Stock”)
indicated below, into shares of common stock, par value
$0.10 per share (the “Common
Stock”), of Healthaxis Inc. (the
“Company”) according to the conditions
hereof, as of the date written below. If shares are to be issued
in the name of a person other than the Holder, the Holder will
pay all transfer taxes payable with respect thereto and will
deliver such certificates and opinions as are reasonably
requested by the Company in accordance therewith. No fee will be
charged to the Holder for any conversion, except for such
transfer taxes, if any.

Conversion calculations:

		
	 	
    

	 	
    Date to effect conversion
    
	 
	 	
    

		
	 	
    No. of shares of Series A Preferred Stock
    being converted
    
	 
	 	
    

		
	 	
    Number of shares of Common Stock to be issued
    
	 
	 	
    HEALTHAXIS INC.
    

			
	 	By: 	

		
	 	
    

12

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