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Exhibit 4.4
SUBSCRIPTION AND AGREEMENT
To: Quality Care Solutions, Inc.
5030 East Sunrise Drive
Phoenix, Arizona 85044
Attention: Robert F. Theilmann
Gentlemen:
SUBSCRIPTION FOR SHARES
1. On and subject to the terms and conditions set forth herein, each of
the undersigned (each, a "SUBSCRIBER"), severally and not jointly, hereby offers
to purchase from Quality Care Solutions, Inc., a Nevada corporation (the
"COMPANY"), that number of shares (the "SHARES") of the Company's Series C 12%
Cumulative Convertible Preferred Stock (the "SERIES C PREFERRED") set forth
below the Subscriber's signature on the signature page hereof. The purchase
price is $0.77 per Share. It is anticipated that the purchase and sale of the
Shares hereunder shall be consummated at a closing (the "CLOSING"). The Closing
will be held at the offices of Bryan Cave LLP, Two North Central Avenue, Suite
2200, Phoenix, Arizona at 10:00 a.m. (Phoenix time), on September 28, 1998, or
at such other time and place upon which the Subscriber and the Company shall
agree. At the Closing, the Company will deliver to the Subscriber a certificate
or certificates, registered in the Subscriber's name, representing the Shares to
be purchased by the Subscriber at the Closing, against payment of the purchase
price therefor, by check payable to the Company, or by wire transfer per the
Company's instructions.
Each Subscriber has reviewed (i) the Series C Preferred Stock Purchase
Agreement dated May 29, 1998 (the "PURCHASE AGREEMENT") by and among the Company
and the purchasers listed on the Schedule of Purchasers attached thereto and
(ii) the Shareholder Rights Agreement dated May 29, 1998 by and among the
Company, certain holders of Series A Preferred Stock of the Company, certain
holders of Series B Preferred Stock of the Company, the purchasers of Series C
Preferred Stock of the Company, the holders of the Warrants and certain
significant shareholders (the "SHAREHOLDER RIGHTS AGREEMENT"). Capitalized
terms used without definition in this Agreement shall have the meanings
ascribed to such terms in the Purchase Agreement.
INCORPORATION OF TERMS AND CONDITIONS OF THE PURCHASE AGREEMENT
Each Subscriber agrees that the provisions of Sections 3 through 8 of the
Purchase Agreement are hereby incorporated herein by reference as though fully
set forth in this Subscription Agreement, with the following changes:
2.1 Except as set forth on Exhibit A attached hereto, the Company
represents and warrants to each Subscriber that, as of the date of the Closing
at which the Subscriber consummates
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its purchase of Shares purchased by it hereunder, each of the representations
and warranties of the Company set forth in Section 3 of the Purchase Agreement
are true and correct in all material respects; provided, however, that for
purposes of subsection 3.20 of the Purchase Agreement as incorporated herein,
the reference to "the three month period ended March 31, 1998" shall be deemed
to read as follows: "the six month period ended June 30, 1998."
2.2 Each of the representations and warranties set forth in Section 4 of
the Purchase Agreement is hereby made by the Subscriber to the Company.
2.3 Each Subscriber's obligation to purchase any Shares is, unless waived
in writing by the Subscriber, subject to the fulfillment as of the date of the
Closing of the conditions set forth in Section 6 of the Purchase Agreement (and
the term "Purchaser" or "Purchasers" therein shall be deemed to be a reference
to the Subscriber). In addition, the Subscriber's obligations shall be subject
to the condition that an amendment to the Series C Certificate increasing to
not less than 6,826,983 the aggregate number of authorized shares of the Series
C Preferred shall have been filed in the office of the Nevada Secretary of
State.
2.4 The Company's obligation to sell and issue the Shares at the Closing
is, unless waived in writing by the Company, subject to the fulfillment as of
the date of the Closing of the conditions set forth in Section 7 of the
Purchase Agreement (and the term "Purchaser" or "Purchasers" therein shall be
deemed to be a reference to the Subscriber or Subscribers, as appropriate). In
addition, the Company's obligation to sell and issue the Shares at the Closing
is subject to the further condition that on or before the date of the Closing
that Company shall have received such consents to the transactions contemplated
by this Subscription and Agreement as may be required of the holders of shares
of its preferred stock or other capital stock.
2.5 Each Subscriber shall be a "Purchaser" under the Purchase Agreement
on the date hereof, and shall be entitled to the benefits of the Purchase
Agreement, subject to the terms and provisions of this Subscription and
Agreement. The Subscriber authorizes the Company to add to Schedule I to the
Purchase Agreement certain information concerning the Subscriber, including the
Subscriber's name, address, telefax number, the number of Shares purchased by
the Subscriber, the dollar amount of the purchase, and the date of purchase of
the Shares.
2.6 Each Subscriber, upon becoming a "Purchaser" under the Purchase
Agreement as aforesaid, shall also become a party to the Shareholder Rights
Agreement dated as of May 29, 1998, by and among the Company, the "Purchasers"
under the Purchase Agreement, and the other persons and entities identified
therein. Each Subscriber authorizes the Company to add the Subscriber's name,
address and share holdings to the schedule of holders of the shares of Series C
Preferred Stock which is part of Exhibit A to the said Shareholder Rights, such
authority to be effective upon the Closing.
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GOVERNING LAW
3.1 This Subscription and Agreement shall be construed in accordance with
and governed in all respects by the laws of the State of Nevada without
application of the principles of conflicts of laws.
MISCELLANEOUS
4.1 The Company shall bear its own expenses incurred on its behalf with
respect to this Subscription and Agreement and the transactions contemplated
hereby and will pay the reasonable out-of-pocket expenses of the Subscribers,
including legal fees and expenses, up to a maximum of $5,000.00, of Squire,
Sanders & Dempsey L.L.P., as counsel to the Subscribers.
4.2 This Subscription and Agreement may be executed in counterparts,
each of which shall be an original, and all of which together shall constitute
one instrument.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Agreement on the date set forth below.
Dated: , 1998
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Subscriber: CORNERSTONE FUND 1, LLC
By: Cornerstone Equity Partners, LLC
Its Attorney-in-Fact
By: /s/ Illegible Signature
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Title: Partner
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No. of Shares: 791,396
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Address of Subscriber for Notices:
5050 N. 40th St. Ste. 310
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Phoenix, AZ 85018
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Telefax Number: (602) 956-8080
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Subscriber: VENTURES FUND I, LLC
By: Cornerstone Equity Partners, LLC
Its Attorney-in-Fact
By: /s/ Illegible Signature
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Title: Partner
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No. of Shares: 182,630
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Address of Subscriber for Notices:
5050 N. 40th St. Ste. 310
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Phoenix, AZ 85018
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Telefax Number: (602) 956-8080
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Accepted this day of September, 1998:
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QUALITY CARE SOLUTIONS, INC.
By:
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Title:
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EXHIBIT A TO SUBSCRIPTION AND AGREEMENT
Updated Exhibit B
to Series C Preferred Stock Purchase Agreement
SCHEDULE OF EXCEPTIONS
3.4 CAPITALIZATION
The Company's representation regarding its authorized capital stock is
updated as follows:
As of September 17, 1998, the Company had issued 5,636,325 shares of its
Series C Preferred Stock, and had authorized the issuance of an additional
1,190,658 shares of its Series C Preferred Stock (resulting in a total of
6,826,983 authorized shares of Series C Preferred Stock). The Company has
reserved 6,826,983 shares of Common Stock for issuance upon conversion of the
Series C Preferred.
3.9 MATERIAL AGREEMENTS
Receipts
Software License Agreements
1. American Family Care of Utah, Inc., effective 9/1/98, Initial Term 3
years
2. Global Health Care Corporation, effective 4/10/98, Initial Term 5
years
3. Delta Dental of Missouri, effective 3/2/98, Initial Term 5 years
4. Physicians Health Networks, Inc. effective 10/27/97, Initial Term 5
years
5. Delta Dental Plan of Arizona, Inc. effective 10/8/97, Initial Term 5
years
6. Health Plan Partners, effective 5/15/97, Initial Term 5 years
7. Managed Care Systems, Inc., effective 11/25/98, Initial Term 5 years
8. Schaller Anderson of Arizona, L.L.C., effective 11/23/96, Initial
Term 5 years
9. Molina Medical Centers, Inc. effective 5/23/96, Initial Term 5 years
10. Pima County, Effective 1/8/96, Initial Term 3 years
11. Yuma Phy. Hospital Organization, Inc. effective 4/25/95, Initial Term
3 years
12. Comprehensive AHCCS Plan, Inc. (CAP) effective 4/1/95, Initial Term 3
years
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Expenditures
Group Health Insurance
Health Partners Health Plans
Group Dental Insurance
Delta Dental Of Arizona
General Liability Insurance
Federal Insurance Company
Directors & Officers Liability Insurance
National Union Insurance Company
Equipment Leasing
AT&T Capital Leasing, principle $40,000
Leasetec System Credit, principle $103,400
Dana Commercial Credit, principle $16,000
Information Leasing Corp., principle $249,000
Professional Fees, Accounting
KPMG
Professional Fees, Legal
Westover & Westover
Bryan Cave
Gallagher Kennedy
Facility/Office Lease
Transwestern Investment Company L.L.C.
Utilities, Telephone
US West Communications
Utilities, Electrical
Salt River Project
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MANAGEMENT RIGHTS LETTER
September , 1998
Cornerstone Fund I, LLC
Ventures Fund I, LLC
5050 North 40th Street
Phoenix, Arizona 85018
Re: Management Rights of Cornerstone Fund I, LLC and Ventures Fund I, LLC
Ladies and Gentlemen:
This letter will confirm our agreement that pursuant to the purchase of an
aggregate of shares of Series C Preferred Stock of Quality Care Solutions, Inc.
(the "Company") by Cornerstone Fund I, LLC and Ventures Fund I, LLC
(collectively "Investor"). Investor will be entitled to the following
contractual management rights, in addition to rights to nonpublic financial
information, inspection rights, and other rights specifically provided to all
investors in the current financing:
1. Investor shall be entitled to consult with and advise management of
the Company on significant business issues, including management's proposed
annual operating plans, and management will meet with Investor within thirty
days after the end of each fiscal quarter at the Company's facilities at
mutually agreeable times for such consultation and advice and to review
progress in achieving said plans;
2. Investor may examine the books and records of the Company and inspect
its facilities and may request information at reasonable times and intervals
concerning the general status of the Company's financial condition and
operations, provided that access to highly confidential proprietary information
and facilities need not be provided except to the extent provided to all of the
Company's investors under the terms of the current financing; and
3. If Investor is not represented on this Company's Board of Directors,
the Company shall invite a representative of Investor to attend all meetings of
its Board of Directors in a nonvoting observer capacity and, in this respect,
shall give such representative copies of all notices, minutes, consents and
other material that it provides to its directors. Such representative may
participate in discussions of matters brought to the Board of Directors.
Investor agrees, and will cause any representative of Investor to agree,
to hold in confidence and trust and not use or disclose any confidential
information provided to or learned by it in connection with its rights under
this letter.
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The rights described herein shall terminate and be of no further force or
effect upon (i) the consummation of the sale of the Company's securities
pursuant to a registration statement filed by the Company under the Securities
Act of 1933, as amended, in connection with a firm commitment underwritten
offering of its securities to the general public, or (ii) such time as Investor
ceases to hold shares of Series C Preferred Stock (or securities issued upon
conversion of or in exchange therefor). The confidentiality provisions hereof
will survive any such termination.
The letter may be executed in one or more counterparts, each of which shall
be deemed to be an original, but all of which shall be one and the same
document.
Very truly yours,
Quality Care Solutions, Inc.
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Name: Gregory S. Anderson
Title: President
Agreed and Accepted as of
the __ day of September, 1998:
Cornerstone Fund I, LLC
By: Cornerstone Equity Partners, LLC
Its Attorney-in-Fact
By /s/ (illegible signature)
---------------------------------
Title Partner
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Ventures Fund I, LLC
By: Cornerstone Equity Partners, LLC
Its Attorney-in-Fact
By /s/ (illegible signature)
---------------------------------
Title Partner
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[Counterpart Signature Page to Quality Care Solutions, Inc.
Management Rights Letter]
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Investor agrees, and will cause any representative of Investor to agree, to
hold in confidence and trust and not use or disclose any confidential
information provided to or learned by it in connection with its rights under
this letter.
The rights described herein shall terminate and be of no further force or
effect upon (i) the consummation of the sale of the Company's securities
pursuant to a registration statement filed by the Company under the Securities
Act of 1933, as amended, in connection with a firm commitment underwritten
offering of its securities to the general public, or (ii) such time as Investor
ceases to hold shares of Series C Preferred Stock (or securities issued upon
conversion of or in exchange therefor). The confidentiality provisions hereof
will survive any such termination.
The letter may be executed in one or more counterparts, each of which shall
be deemed to be an original, but all of which shall be one and the same
document.
Very truly yours,
Quality Care Solutions, Inc.
/s/ Gregory S. Anderson
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Name: Gregory S. Anderson
Title: President
Agreed and Accepted as of
the __ day of September, 1998:
Cornerstone Fund I, LLC
By
---------------------------------
Title
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Venture Fund I, LLC
By
---------------------------------
Title
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[Counterpart Signature Page to Quality Care Solutions, Inc.
Management Rights Letter]
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