1
Exhibit 3.1
ARTICLES OF INCORPORATION
OF
QUALITY CARE SOLUTIONS, INC.
The undersigned, a natural person for the purpose of organizing a
corporation for conducting the business and promoting the purposes hereinafter
stated, under the provisions and subject to the requirements of the laws of the
State of Nevada (particularly Chapter 78 of the Nevada Revised Statutes and the
acts mandatory thereof and supplemental thereto), hereby declares that:
FIRST: The name of the corporation (hereinafter called it
"Corporation") is:
QUALITY CARE SOLUTIONS, INC.
SECOND: The name of the person designated as the resident agent of the
Corporation and the street address of the resident agent where process may be
served upon the Corporation which is also the mailing address of the resident
agent, is:
Capitol Document Services, Inc.
400 West King Street, Suite 302
Carson City, Nevada 89703
THIRD: The purpose for which the Corporation is organized is to engage
in any lawful act or activity for which corporations may be organized under
Chapter 78 of the Nevada Revised Statutes.
FOURTH: The total number of shares of capital stock which the
Corporation shall have authority to issue is one hundred Million (100,000,000)
shares of common stock with a par value of one-tenth of one cent ($.001) per
share and ten Million (10,000,000) shares of preferred stock with a par value of
one cent ($.01) per share undesignated as to class, powers, designations,
preferences, limitations, restrictions or relative rights. The board of
directors of the Corporation is authorized to fix and determine any class or
series of preferred stock and the number of shares of each class or series and
to prescribe the powers, designations, references, limitations, restrictions and
relative rights of any class or series established all by resolution of the
board of directors and in accordance with Section 78.1955 of the Nevada Revised
Statutes as the same may be amended and supplemented.
FIFTH: The governing board of this Corporation shall be known as
directors and the number of directors may from time to time be increased or
decreased in such manner as shall be provided in the Bylaws of this Corporation.
SIXTH: The first board of directors of the Corporation shall consist of
one director whose name and street address is:
2
A. Bruce Oliver
5030 East Sunrise Drive
Phoenix, Arizona 85044
SEVENTH: The name and the mailing address of the incorporator is:
Thomas J. Morgan
2600 North Central Avenue
Phoenix, Arizona 85004
EIGHTH: The personal liability of the directors and officers of the
corporation is hereby eliminated to the fullest extent permitted by the
provisions of the Nevada Revised Statutes and particularly Section 78.037.1
thereof as the same may be amended and supplemented.
NINTH: The Corporation shall to the fullest extent permitted by the
provisions of Section 78.751 of the Nevada Revised Statutes, as the same may be
amended and supplemented, indemnify any and all persons whom it shall have power
to indemnify under such section from and against any and all of the expenses,
liabilities or other matters referred to in or covered by such section and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified persons may be entitled under any Bylaw,
agreement, vote of stockholders or disinterested directors or otherwise both as
to action in such person's official capacity and as to action in any other
capacity while holding such office, and shall continue as to persons who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such persons. The
Corporation shall pay or otherwise advance all expenses of officers and
directors incurred in defending a civil or criminal action, suit or proceeding
as such expenses are incurred and in advance of the final disposition of the
action, suit or proceeding, provided that the indemnified officer or director
undertakes to repay the amounts so advanced if a court of competent jurisdiction
ultimately determines that such officer or director is not entitled to be
indemnified by the Corporation. Nothing herein shall be construed to affect any
rights to advancement of expenses to which personnel other than officers or
directors of the Corporation may be entitled under any contract or otherwise by
law.
TENTH: From time to time any of the provisions of these Articles of
Incorporation may be amended, altered or repealed and other provisions
authorized by the laws of the State of Nevada at the time in force may be added
or inserted in the manner and at the time prescribed by such laws and all rights
at any time conferred upon the stockholders of the Corporation by these Articles
of Incorporation are granted subject to the provisions of this Article.
2
3
THE UNDERSIGNED, being the incorporator hereinabove named for the
purpose of forming a corporation pursuant to Chapter 78 of the Nevada Revised
Statutes, does make and file these Articles of Incorporation and hereby declares
and certifies that the facts herein stated are true.
DATED this 1st day of April, 1997.
/s/
--------------------------------
Thomas J. Morgan, Incorporator
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledge before me this 1st day of
April, 1997, by Thomas J. Morgan.
/s/
--------------------------------
Notary Public
My Commission Expires: August 30, 1999
ACCEPTANCE OF APPOINTMENT BY RESIDENT AGENT
This 3rd day of April, 1997, Capitol Document Services, Inc. hereby accepts
appointment as resident agent of QUALITY CARE SOLUTIONS, INC.
CAPITOL DOCUMENT SERVICES, INC.
By:
/s/
- --------------------------------------------------------
Signature of Authorized Representative of Resident Agent
3
4
CERTIFICATE OF DESIGNATION
1. Name. The name of the corporation is Quality Care Solutions, Inc.
(the "Corporation").
2. Text of Resolution. The Board of Directors (the "Board") of the
Corporation duly adopted a resolution in the form attached hereto as Exhibit A
and incorporated herein by this reference, amending and restating the terms of
the Series A 15% Cumulative Convertible Preferred Stock of the Corporation, all
as set forth in such resolution, which amendment and restatement was approved by
the holders of a requisite number of the issued and outstanding shares of the
said Preferred Stock.
3. Statement and Date of Adoption. The aforementioned resolution was
duly adopted by the Board effective as of May 28, 1998.
IN WITNESS WHEREOF, the undersigned hereby certifies this 28th day of
May, 1998 that the foregoing statement has been duly adopted by and on behalf of
the Corporation as set forth above.
/s/ Gregory S. Anderson
------------------------------
Gregory S. Anderson, President
ATTEST:
/s/ Sherwood H. Chapman
- ------------------------------
Sherwood H. Chapman, Secretary
ACKNOWLEDGMENT
STATE OF ARIZONA )
)ss.
County of Maricopa )
On this 28th day of May, 1998, before me the undersigned Notary Public
personally appeared Gregory S. Anderson, known personally to me to be the
President of Quality Care Solutions, Inc., and acknowledged to me the foregoing
instrument was executed for the purposes therein contained, on behalf of the
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Susan A. Malone
-------------------
Notary Public
My commission expires: OFFICIAL SEAL
SUSAN A. MALONE
[SEAL] Notary Public - State of Arizona
Jan. 24, 2000 MARICOPA COUNTY
- ---------------- My Comm. Expires Jan. 24, 2000
5
EXHIBIT A
RESOLUTION AMENDING AND RESTATING DESIGNATION OF
SERIES A 15% CUMULATIVE CONVERTIBLE PREFERRED STOCK OF
QUALITY CARE SOLUTIONS, INC.
WHEREAS, the Board has heretofore adopted a resolution setting forth the
relative rights, preferences and limitations of a series of preferred stock
designated Series A 15% Cumulative Convertible Preferred Stock (the "Prior
Resolution");
WHEREAS, in connection with the Board's designation of a new series of
preferred stock, the Series C 12% Cumulative Convertible Preferred Stock, the
Board desires to amend and restate the Prior Resolution, which amendment has
been approved by the holders of a majority of the outstanding shares of the
Series A Preferred Stock;
NOW, THEREFORE, BE IT RESOLVED, that Prior Resolution is hereby amended
and restated in its entirety to read as follows:
RESOLVED, that pursuant to the authority granted to the Board and in
accordance with the provisions of the Articles of Incorporation of the Company,
the Board hereby creates a series of preferred stock designated as "Series A
15% Cumulative Convertible Preferred Stock" with Preference Amount equal to
$.70 per share, states the number thereof to be 2,861,382 and fixes the
relative rights, preferences and limitations of such Shares as follows:
Section 1. Definitions. For purposes of this Resolution, the following
definitions shall apply:
"Accrual Date" shall mean each July 1, October 1, January 1 and April 1
following January 1, 1997 for so long as any Shares remain outstanding.
"Act" shall mean the Securities Act of 1933, as amended.
"Board" shall mean the Board of Directors of the Company.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Common Stock" shall mean the common stock of the Company.
"Company" shall mean Quality Care Solutions, Inc., a Nevada corporation,
or any successor thereto.
"Conversion Date" shall mean the date on which the Shares are converted to
Common Stock whereby the rights of the Record Holders will cease with respect
to the Shares
6
and certificates for shares of Common Stock will be issued to such Record
Holders who will become the holders of record of the shares of Common Stock
represented thereby.
"Conversion Price" shall initially mean $.70 per Share and shall be
adjusted from time to time pursuant to Section 5 hereof.
"Cumulative Dividend" shall mean a dividend with respect to the Shares
accruing from January 1, 1997 at the rate of 15% per annum of the Preference
Amount ($.105 per share).
"Distribution" shall mean the transfer of cash or property without
consideration, by way of dividend or otherwise (except a dividend in shares of
the capital stock of the Company), or the purchase or redemption of shares of
capital stock of the Company for cash or property, excluding the repurchase of
any shares from a terminated employee or consultant of the Company within the
terms of any agreement providing for such repurchase.
"Five Percent Record Holder" shall mean any Person who has legal title to
no less than 5% or more of the Company's outstanding Common Stock (on a fully
converted basis) as set forth on the stock ownership records of the Company.
"Liquidation Event" shall mean any liquidation, dissolution or winding up
of the Company, a merger or consolidation of the Company or the sale or
transfer of all or substantially all of the assets of the Company, whether
voluntary or involuntary, unless the stockholders of the Company immediately
prior to such transaction hold at least 50% of the outstanding equity
securities of the surviving corporation in such merger, consolidation or sale
of assets reorganization.
"Person" shall mean an individual, a partnership, a joint venture, a
limited liability company, a corporation, a trust, an unincorporated
organization or government or any department or any agency thereof.
"Preference Amount" shall mean $0.70 per Share.
"Qualified Public Offering" shall mean an underwritten public offering of
the Company's Common Stock which has been registered with the Commission
resulting in gross proceeds of not less than $10,000,000 and at a price of not
less than $1.50 per share (as adjusted for any event resulting in an adjustment
pursuant to Section 5(a)).
"Record Holder" shall mean the Person who has legal title to the shares of
Series A Preferred Stock as set forth by the stock ownership records of the
Company as of the particular record date.
"Registration Statement" shall mean any registration statement filed with
the Commission under the Act.
"Series A Preferred Stock" shall mean all Series A Preferred Stock of the
Company, the rights and preferences of which are set forth in this Resolution.
2
7
"Series B Preferred Stock" shall mean all of the Series B 15% Cumulative
Preferred Stock of the Company which shall consist of up to 160,000 shares, the
rights and privileges of which are set forth in that certain Resolution of
Designation of Preferences, Rights and Limitations of Series B 15% Cumulative
Preferred Stock of Quality Care Solutions, Inc. adopted by the Board on June
28, 1996, as thereafter amended, restated or otherwise modified.
"Series C Preferred Stock" shall mean all Series C 12% Cumulative
Convertible Preferred Stock of the Company the rights and privileges of which
are set forth in that certain Resolution of Designation of Preferences, Rights
and Limitations of Series C Preferred Stock of Quality Care Solutions, Inc.
adopted by the Board in May 1998, as the same may from time to time be amended
and restated.
"Share" shall mean a share of Series A Preferred Stock.
"Shareholder" shall mean any Person who has legal title to the Common
Stock, Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock or any other series of preferred stock of the Company designated with the
right to receive liquidation proceeds of the Company, in each case, as set
forth by the stock ownership records of the Company as of the particular record
date.
Section 2. Dividends.
(a) General Obligation. When and as declared by the Board, the
Company shall pay dividends to the Record Holders. Except as otherwise provided
herein, Cumulative Dividends on each Share will accrue on each Accrual Date
whether or not such dividends have been declared or whether or not there are
profits, surplus or other funds of the Company legally available for the
payment of such dividends, provided, however, dividends will be paid only at
such time as both (i) funds of the Company are legally available for payment
thereof and (ii) the Board declares and authorizes such payment.
(b) Distribution of Partial Dividend Payments. If at any time
the Company pays less than the total amount of dividends then accrued with
respect to the Series C Preferred Stock, such payment will be distributed pro
rata among the Record Holders.
(c) Priority. The Series A Preferred Stock ranks pari passu
with the Series B Preferred Stock and the Series C Preferred Stock and the
Series A Preferred Stock is senior to all other capital stock of the Company,
including specifically the Common Stock and any other series or class of stock
as may be designated by the Board from time to time, in right of priority to
Distributions paid as dividends or otherwise. Dividends or other distributions
shall be declared and paid ratably with respect to the Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock, in accordance
with the respective terms of the Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock. No dividends or other Distributions with
respect to any other series or class of capital stock of the Company shall be
declared or paid prior to the declaration and payment in full of all Cumulative
Dividends accrued as of the last preceding Accrual Date.
3
8
Section 3. Liquidation. The Series A Preferred Stock ranks pari passu with
the Series B Preferred Stock and the Series C Preferred Stock and the Series A
Preferred Stock is senior to all other capital stock of the Company, including
specifically the Common Stock and any other series or class of stock (other than
the Series B Preferred Stock and the Series C Preferred Stock) as may be
designated by the Board from time to time, in right of priority to Distributions
paid in liquidation or otherwise. Upon occurrence of a Liquidation Event, the
Record Holders will be entitled to be paid, pari passu with all required
distributions and payments with respect to the Series B Preferred Stock and the
Series C Preferred Stock and before any payment or other Distribution is made
upon any other equity securities of the Company, an amount in cash equal to the
Preference Amount plus any accrued but unpaid dividends thereon up to the date
of occurrence of the Liquidation Event. If upon any Liquidation Event the assets
of the Company to be distributed among the Record Holders and the holders of the
Series B Preferred Stock and Series C Preferred Stock are insufficient to permit
such payment in full to each holder, then the entire assets to be distributed
will be distributed ratably among such Record Holders and the holders of the
Series B Preferred Stock and Series C Preferred Stock in proportion to each such
holder's number of shares of Series A Preferred, Series B Preferred or Series C
Preferred multiplied by the Preference Amount of such series. The Company will
mail written notices of a Liquidation Event not less than 20 days prior to the
payment date stated therein to each Record Holder. After the Preference Amount
plus accrued dividends have been paid on all outstanding Shares, and any other
preference amount is paid on any other series of preferred stock of the Company
in accordance with the rights designated thereto, any remaining funds and assets
of the Company legally available for distribution to Shareholders will be
distributed ratably among the Shareholders in accordance with their Common Stock
holdings on an as converted basis.
Section 4. Conversion.
(a) Automatic Conversion of Series A Preferred Stock. Immediately
upon the earlier of (i) the closing of a Qualified Public Offering and (ii) the
consent of Record Holders of not less than a majority of the then outstanding
Shares, all of the Shares shall be converted into fully paid, nonassessable
shares of Common Stock in accordance with the conversion ratio set forth in
Section 4(d) hereof.
(b) Automatic Conversion of Preferred Stock. Immediately upon the
consent of holders of Series A Preferred, Series B Preferred and Series C
Preferred of not less than a majority of the then outstanding aggregate shares
of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock, all of the shares of Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock shall be converted into fully paid, nonassessable
shares of Common Stock in accordance with the conversion ratio of each of the
series.
(c) Voluntary Conversion. Record Holders of Shares shall have the
right to convert the Shares at any time into shares of Common Stock in
accordance with the conversion ratio in Section 4(d) hereof.
4
9
(d) Conversion Ratio. Upon conversion of a Share, the Record Holder shall
receive the number of shares of Common Stock equal to (i) the Preference Amount
(ii) divided by the Conversion Price, as adjusted from time to time pursuant to
Section 5 hereof.
(e) Mechanics of Conversion. Each Record Holder who converts Shares into
Common Stock shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Company or of any transfer agent for the Series A
Preferred Stock and shall give written verification to the Company of the number
of Shares of Series A Preferred Stock being converted. Thereupon, the Company
shall promptly issue and deliver at its office to such Record Holder a
certificate or certificates for the number of shares of Common Stock to which
such Record Holder is entitled. In the event of an automatic conversion pursuant
to Sections 4(a) or (b), the outstanding Shares shall be converted automatically
without any further action by the holder of such Shares and whether or not the
certificates representing such shares are surrendered to the Company or the
transfer agent for such Series A Preferred Stock; and the Company shall not be
obligated to issue certificates evidencing the shares of Common Stock issuable
upon such automatic conversion unless the certificates evidencing such Shares
are either delivered to the Company or the transfer agent for such Series A
Preferred Stock as provided above, or the holder notifies the Company or the
transfer agent for such Series A Preferred stock that such certificates have
been lost, stolen or destroyed and executes an agreement satisfactory to the
Company to indemnify the Company from any loss incurred by it in connection with
such certificates. The Company shall, as soon as practicable thereafter, issue
and deliver to such address as the holder may direct, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled. If the conversion is in connection with a Qualified Public Offering
of securities described in Section 4(a), the conversion shall be conditioned
upon the closing with the underwriters of the sale of securities pursuant to
such offering, and the conversion shall not be deemed to have occurred until
immediately prior to the closing of such sale of securities.
(f) Undeclared Cumulative Dividends. The Company shall pay undeclared
Cumulative Dividends as accrued under the provisions of Section 2 on the Shares
of Series A Preferred Stock being converted in cash or by the issuance of
additional shares of Common Stock within 30 days after the Conversion Date. If
the Company elects to pay undeclared and accrued Cumulative Dividends in shares
of Common Stock, the number of shares of Common Stock so paid shall equal (i)
the total undeclared and accrued Cumulative Dividends (ii) divided by the
Conversion Price as adjusted from time to time pursuant to the provisions of
Section 5 hereof. Such conversion and issuance of additional shares of Common
Stock, if applicable, shall be deemed to have been made immediately prior to the
close of business on the Conversion Date, and the Person entitled to receive the
shares of Common Stock shall for all purposes be the Record Holder as of such
date.
(g) Fractional Shares. No fractional shares of Common Stock shall be
issued upon the conversion of Series A Preferred Stock. In lieu of any
fractional shares to which a holder of Series A Preferred Stock would otherwise
be entitled, the Company shall pay cash equal to such fraction multiplied by the
then current fair market value, determined in good faith by the Board.
5
10
Section 5. Antidilution Adjustments.
(a) Stock Dividends. Except as provided in Section 5(e) below, in
the event the Company at any time or from time to time after the issuance of
any Shares shall declare or pay any dividend on the Common Stock payable in
Common Stock, or effect a subdivision or combination of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a dividend
in Common Stock), then and in any such event, the Conversion Price shall be
adjusted by multiplying the Conversion Price prior to the adjustment by the
number of shares of Common Stock outstanding immediately prior to the effective
time of such event and dividing the result by the number of shares of Common
Stock outstanding immediately after the effective time of such event, effective
in the case of such dividend, immediately after the close of business on the
record date for the determination of holders of Common Stock entitled to
receive such dividend, or in the case of a subdivision or combination, at the
close of business immediately prior to the date upon which such corporate
action becomes effective.
(b) Adjustments for Reorganizations, Reclassifications or Similar
Events. Except as provided in Section 3 upon any liquidation, dissolution or
winding up of the Company, if the Common Stock shall be changed into the same
or a different number of shares of any other class or classes of stock or other
securities or property, whether by capital reorganization, reclassification or
otherwise, then each share of Series A Preferred Stock shall thereafter be
convertible into the number of shares of stock or other securities or property
to which a holder of the number of shares of Common Stock of the Company
deliverable upon conversion of such shares of Series A Preferred Stock shall
have been entitled upon such reorganization, reclassification or other event.
(c) Dilutive Issuance. Except as provided in Section 5(f) below, in
the event the Company shall issue additional shares of Common Stock or
securities or options convertible into shares of Common Stock without
consideration or for a consideration per share of Common Stock (on an
as-converted to Common Stock basis, if applicable) less than the effective
Conversion Price in effect on the date of and immediately prior to such
issuance, then, and in each such event, such Conversion Price shall be reduced
concurrently with such issue to the Conversion Price determined as follows: (i)
the number of shares of Common Stock outstanding immediately prior to the
issuance that results in the adjustment, (ii) shall be multiplied by such
Conversion Price in effect immediately prior to such issuance, (iii) to the
result of (ii) shall be added the actual consideration received for the
additional shares of Common Stock, (iv) the resulting total shall be divided by
the sum of (A) the number of shares of Common Stock outstanding immediately
prior to the issuance that results in the adjustment and (B) the number of
additional shares of Common Stock resulting in the adjustment. If the quotient
thus obtained is less than the Conversion Price then in effect, such quotient
shall be the adjusted Conversion Price until further adjusted as provided
herein.
6
11
(d) Determination of Consideration. For purposes of Section 5(c), the
consideration received by the Company for the issuance of any additional shares
of Common Stock shall be computed as follows:
(i) Such consideration shall:
(A) insofar as it consists of cash, be computed at the aggregate
amount of cash received by the Company excluding amounts paid or payable
for accrued interest or accrued dividends;
(B) insofar as it consists of property other than cash, be
computed at the fair value thereof at the time of such issue, as determined
in good faith by the Board; and
(C) in the event additional shares of Common Stock are issued
together with other shares of securities or other assets of the Company for
consideration which covers both, be the proportion of such consideration so
received, computed as provided in (A) and (B) above, as determined in good
faith by the Board.
(ii) For the purpose of computing the initial adjustment of the
Conversion Price in the event the Company issues securities or options
convertible into Common Stock, the consideration per share received by the
Company for such securities or options shall be determined by dividing:
(A) the total amount, if any, received or receivable by the
Company as consideration for the issue of such securities or options, plus
the minimum aggregate amount of additional consideration payable to the
Company upon the exercise or the conversion or exchange of such securities
or options, or in the case of options for convertible securities, the
exercise of such options for convertible securities and the conversion or
exchange of such convertible securities, by
(B) the maximum number of shares of Common Stock issuable upon
the exercise of or the conversion or exchange of such options or
securities.
Any commission, fees, costs or other expenses related to the issuance of any
additional shares of Common Stock or securities or options convertible into
shares of Common Stock shall be included in the consideration received by the
Company.
(e) Adjustments for Other Dividends. In the event the Company at any
time or from time to time makes, or fixes a record date for the determination
of holders of Common Stock entitled to receive a dividend or other distribution
payable in capital stock of the Company other than shares of Common Stock or in
other property of the Company, then and in each such event provision shall be
made so that the Record Holders receive upon conversion thereof, in addition to
the number of shares of Common Stock receivable thereupon, the amount of
7
12
securities or other property which such Record Holders would have received had
the Series A Preferred stock been converted prior to such effective record date.
(f) Exceptions. The foregoing provisions of this Section 5
notwithstanding, no adjustment to the Conversion Price shall be made upon the
issuance of (i) up to 2,500,000 shares of Common Stock or options therefor
issued or reserved for issuance to employees, directors, consultants or advisors
of the Company pursuant to stock purchase, stock option or other agreements
approved by the Board since the Company's inception, (ii) any Common Stock or
other securities or options issued or issuable with approval of the Record
Holders holding a majority of the outstanding Shares, (iii) the issuance of
Common Stock upon conversion of the Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock, (iv) Common Stock underlying other options
or convertible securities as to which an adjustment to the Conversion Price has
been made pursuant to Section 5(c) or (v) up to 412,142 shares of Common Stock
issued upon exercise of warrants outstanding as of May 15, 1998.
(g) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price of a series of Preferred
Stock pursuant to this Section 5, the Company at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
furnish to each Record Holder to which such adjustment pertains a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Company shall, upon the
written request at any time of any Record Holder, furnish or cause to be
furnished to such Record Holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Conversion Prices at the time in effect
for the Series A Preferred Stock, and (iii) the number of shares of Common Stock
and the amount, if any, of other property which at the time would be received
upon the conversion of such Record Holder's Series A Preferred Stock.
(h) Notices of Record Date. In the event that the Company shall
propose at any time:
(i) to declare any dividend or distribution upon its Common
Stock, whether in cash, property, stock or other
securities, whether or not a regular cash dividend and
whether or not out of earnings or earned surplus;
(ii) to offer for subscription pro rata to the holders of
Common Stock any additional shares of stock of any class
or series or other rights;
(iii) to effect any reclassification or recapitalization of its
Common Stock outstanding involving a change in the Common
Stock; or
(iv) to merge or consolidate with or into any other
corporation, or sell, lease or convey all or substantially
all of its property or business, or to liquidate, dissolve
or wind up;
8
13
then, in connection with any such event, the corporation shall send to the
Record Holders:
(A) in the case of the matters referred to in (i) and (ii) above,
at least ten (10) days prior written notice of the date on
which a record shall be taken for such dividend, distribution
or subscription rights (and specifying the date on which the
holders of Common Stock shall be entitled thereto) or for
determining rights to vote in respect of the matters referred
to in (i) or (ii) above; and
(B) in the case of the matters referred to in (iii) and (iv)
above, at least ten (10) days prior written notice of the
date when the same shall take place (and specifying the date
on which the holders of Common Stock shall be entitled to
exchange their Common Stock for securities or other property
deliverable upon the occurrence of such event) or for
determining rights to vote in respect of the matters referred
to in (iii) or (iv) above.
Each such written notice shall be delivered personally or given by
first class mail, postage prepaid, addressed to the Record Holders at the
address for each such holder as shown on the books and records of the Company.
Section 6. Restrictions and Limitations. So long as any Shares remain
outstanding, the Company shall not, and shall not permit any successor by merger
or consolidation of the Company, without the approval by vote or written consent
of the Record Holders of a majority of the outstanding Shares to:
(a) No Senior or Pari Passu Securities. Authorize or issue, or
obligate itself to issue, any other equity security senior to or on a parity
with the Series A Preferred Stock, as to dividend, liquidation preferences or
conversion rights;
(b) No Change in Authorized Shares. Increase or decrease (other than
by redemption or conversion) the total number of authorized shares of Series A
Preferred Stock;
(c) No Change in Rights. Change, by amending the Company's Articles
of Incorporation, Bylaws, or otherwise, any of the rights, preferences,
privileges or limitations provided for herein for the benefit of the Series A
Preferred Stock;
(d) No Liquidation Event. Engage in any transaction that is a
Liquidation Event;
(e) No Adverse Change in Articles or Bylaws. Amend the Articles of
Incorporation or Bylaws of the Company to change the number of directors or
increase the authorized number of shares of capital stock; or
(f) No Preference to Subordinate Stock. Make any Distribution, as a
dividend, in liquidation or otherwise, in preference to the Series A Preferred
Stock.
9
14
Nothing herein shall be construed as limiting the Company's ability to make any
subdivision or combination of the outstanding Common Stock.
Section 7. Right of First Refusal.
(a) General Right. Each Record Holder shall be given the right to
purchase such holder's pro rata portion of any equity securities offered by the
Company (other than the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, shares of Common Stock issuable upon conversion of the
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
and shares offered to employees, in a merger or in connection with obtaining a
lease line, line of credit or a similar financing transaction) on the same
terms and conditions as the Company offers such securities to other potential
investors. The pro rata portion to which each Record Holder is entitled shall
be calculated based upon such Record Holder's percentage of ownership of the
Company's outstanding capital stock on an as-converted to Common Stock basis
(assuming all undeclared Cumulative Dividends are paid in Common Stock as
provided in Section 4(f)). The right of first refusal granted hereunder will
terminate immediately prior to the Company's initial underwritten Qualified
Public Offering.
(b) In the event the Company proposes to undertake an issuance of
new securities, it shall give each Record Holder written notice of its
intention, describing the amount and type of the securities, and the price and
terms upon which the Company proposes to issue the same. Each Record Holder
shall have twenty (20) days from the date of receipt of any such notice to
agree to purchase up to its respective pro rata share of such securities for
the price and upon the terms specified in the notice by giving written notice
to the Company and stating therein the quantity of securities to be purchased.
To the extent any Record Holder elects not to purchase such holder's pro rata
share of new securities, then such holder's pro rata share shall be allocated
pro rata among the holders of Series A Preferred Stock electing to purchase
their pro rata share of new securities to the extent such holders wish to
purchase more than their pro rata share.
(c) The Company shall have ninety (90) days after such twenty (20)
day period to sell the new securities not elected to be purchased by Record
Holders at a price and upon terms no more favorable to the purchasers of such
securities than specified in the Company's notice. In the event the Company has
not sold the new securities within said ninety (90) day period, the Company
shall not thereafter issue or sell any new securities, without first offering
such securities to the Record Holders in the manner provided above.
(d) Notwithstanding the foregoing, the rights set forth herein shall
not prevent the corporation from offering and selling new securities at any
time; provided that, if the Company has not given notice to Record Holders
prior to the issuance of new securities as provided in Section 7(b), then the
Company shall give notice to the Record Holders within fifteen (15) days after
the issuance of new securities. Such notice shall describe the amount, type,
price and terms of the new securities. Each Record Holder shall have twenty
(20) days from the date of receipt of such notice to elect to purchase its pro
rata share of new securities.
10
15
The closing of any such sale shall occur within thirty (30) days of the date of
notice to the Record holders.
Section 8. Voting Rights.
(a) Except as otherwise provided herein or under Nevada law, the
shares of Common Stock, the Series A Preferred Stock, the Series B Preferred
Stock, the Series C Preferred Stock and any other series of preferred stock
designated with such right shall vote as a single class on all matters except
that the Series A Preferred Stock shall vote separately as a single class (i)
with respect to all matters which affect rights, preferences or priority of the
Series A Preferred Stock or (ii) as otherwise required by Nevada law. Upon any
vote with the outstanding shares as a single class, each Share shall have the
number of votes equal to (i) the Preference Amount (ii) divided by the
Conversion Price in effect on the record date for determination of the
stockholders entitled to vote, or, if no such record date is established, at the
date such vote is taken or any written consent of stockholders is solicited.
Record Holders shall be entitled to receive notice of all matters submitted to a
vote of shareholders. Any action to be taken by the Record Holders may be taken
without a meeting in accordance with Nevada law.
(b) (i) The holders of Series A Preferred Stock, voting as a
separate class on an as-converted to Common Stock basis, shall be entitled to
elect one director, (ii) the holders of Series C Preferred Stock, voting as a
separate class on an as-converted to Common Stock basis, shall be entitled to
elect one director and (ii) the holders of the Common Stock, the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and
any other series of preferred stock designated with voting rights, voting
together on an as-converted to Common Stock basis (assuming in each instance
that all undeclared Cumulative Dividends are paid in cash as provided in Section
4(f)), shall be entitled to elect one director having industry experience and
who is not an officer or employee of the Company. Any vacancy in the Board
occurring because of the death, resignation or removal of a director shall be
filled by the vote or written consent of the holders of the class or classes
entitled to fill such seats as provided in this Section 8(b).
Section 9. Notices. All notices referred to herein, except as otherwise
expressly provided, will be hand delivered or made by mail, postage prepaid,
and will be deemed to have been given when so hand delivered or mailed to the
last known address of the Record Holder as set forth on the stock ledger of the
Company.
Section 10. Waiver of Rights, Preferences or Privileges.
(a) Any right, preference or privilege of the Series A
Preferred Stock may be waived by two-thirds of the outstanding Shares, and such
waiver shall be binding on all holders of Shares.
(b) Any right, preference or privilege of all of the Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock may be
waived by two-thirds of the aggregate outstanding shares of Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock, and such waiver
shall be binding on all holders of shares of Series A Preferred Stock, Series
B Preferred Stock and Series C Preferred Stock.
11
16
Section 11. Information Rights. The Company shall provide to all Record
Holders an unaudited quarterly report, containing a balance sheet, income
statement and statement of cash flows for the fiscal quarter within 45 days
after the end of each fiscal quarter; and an audited annual report containing a
balance sheet, income statement and statement of cash flows for the fiscal year
within 90 days after the end of each fiscal year. All Record Holders shall have
the right to inspect the records of the Company as provided by Nevada law.
12
17
[FILED STAMP]
CERTIFICATE OF DESIGNATION
1. Name. The name of the corporation is Quality Care Solutions, Inc.
(the "Corporation").
2. Text of Resolution. The Board of Directors (the "Board") of the
Corporation duly adopted a resolution in the form attached hereto as Exhibit A
and incorporated herein by this reference, amending and restating the terms of
the Series B 15% Cumulative Convertible Preferred Stock of the Corporation, all
as set forth in such resolution, which amendment and restatement was approved by
the holders of a requisite number of the issued and outstanding shares of the
said Preferred Stock.
3. Statement and Date of Adoption. The aforementioned resolution was
duly adopted by the Board effective as of May 28, 1998.
IN WITNESS WHEREOF, the undersigned hereby certifies this 28th day of
May, 1998 that the foregoing statement has been duly adopted by and on behalf of
the Corporation as set forth above.
/s/ Gregory S. Anderson
------------------------------
Gregory S. Anderson, President
ATTEST:
/s/ Sherwood H. Chapman
- ------------------------------
Sherwood H. Chapman, Secretary
ACKNOWLEDGMENT
STATE OF ARIZONA )
)ss.
County of Maricopa )
On this 28th day of May, 1998, before me the undersigned Notary Public
personally appeared Gregory S. Anderson, known personally to me to be the
President of Quality Care Solutions, Inc., and acknowledged to me the foregoing
instrument was executed for the purposes therein contained, on behalf of the
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Susan A. Malone
-------------------
Notary Public
My commission expires: [SEAL]
January 24, 2000
18
EXHIBIT A
RESOLUTION AMENDING AND RESTATING DESIGNATION OF
SERIES B 15% CUMULATIVE CONVERTIBLE PREFERRED STOCK OF
QUALITY CARE SOLUTIONS, INC.
WHEREAS, the Board has heretofore adopted a resolution setting forth
the relative rights, preferences and limitations of a series of preferred stock
designated Series B 15% Cumulative Convertible Preferred Stock (the "Prior
Resolution");
WHEREAS, in connection with the Board's designation of a new series of
preferred stock, the Series C 12% Cumulative Convertible Preferred Stock, the
Board desires to amend and restate the Prior Resolution, which amendment has
been approved by the holders of a majority of the outstanding shares of the
Series B Preferred Stock;
NOW, THEREFORE, BE IT RESOLVED, that Prior Resolution is hereby amended
and restated in its entirety to read as follows:
RESOLVED, that pursuant to the authority granted to the Board and in
accordance with the provisions of the Articles of Incorporation of the Company,
the Board hereby creates a series of preferred stock designated as "Series B 15%
Cumulative Convertible Preferred Stock" with Preference Amount equal to $.50 per
share, states the number thereof to be 160,000 and fixes the relative rights,
preferences and limitations of such Shares as follows:
Section 1. Definitions. For purposes of this Resolution, the following
definitions shall apply:
"Accrual Date" shall mean each July 1, October 1, January 1
and April 1 following October 1, 1996 for so long as any Shares remain
outstanding.
"Act" shall mean the Securities Act of 1933, as amended.
"Board" shall mean the Board of Directors of the Company.
"Commission" shall mean the United States Securities and
Exchange Commission.
"Common Stock" shall mean the common stock of the Company.
"Company" shall mean Quality Care Solutions, Inc., a Nevada
corporation, or any successor thereto.
"Conversion Date" shall mean the date on which the Shares are
converted to Common Stock whereby the rights of the Record Holders will cease
with respect to the Shares
19
and certificates for shares of Common Stock will be issued to such Record
Holders who will become the holders of record of the shares of Common Stock
represented thereby.
"Conversion Price" shall initially mean $.50 per Share and
shall be adjusted from time to time pursuant to Section 5 hereof.
"Cumulative Dividend" shall mean a dividend with respect to
the Shares accruing from October 1, 1996 at the rate of 15% per annum of the
Preference Amount ($.075 per share).
"Distribution" shall mean the transfer of cash or property
without consideration, by way of dividend or otherwise (except a dividend in
shares of the capital stock of the Company), or the purchase or redemption of
shares of capital stock of the Company for cash or property, excluding the
repurchase of any shares from a terminated employee or consultant of the Company
within the terms of any agreement providing for such repurchase.
"Five Percent Record Holder" shall mean any Person who has
legal title to no less than 5% or more of the Company's outstanding Common Stock
(on a fully converted basis) as set forth on the stock ownership records of the
Company.
"Liquidation Event" shall mean any liquidation, dissolution or
winding up of the Company, a merger or consolidation of the Company or the sale
or transfer of all or substantially all of the assets of the Company, whether
voluntary or involuntary, unless the stockholders of the Company immediately
prior to such transaction hold at least 50% of the outstanding equity securities
of the surviving corporation in such merger, consolidation or sale of assets
reorganization.
"Person" shall mean an individual, a partnership, a joint
venture, a limited liability company, a corporation, a trust, an unincorporated
organization or government or any department or any agency thereof.
"Preference Amount" shall mean $0.50 per Share.
"Qualified Public Offering" shall mean an underwritten public
offering of the Company's Common Stock which has been registered with the
Commission resulting in gross proceeds of not less than $10,000,000 and at a
price of not less than $1.50 per share (as adjusted for any event resulting in
an adjustment pursuant to Section 5(a)).
"Record Holder" shall mean the Person who has legal title to
the shares of Series B Preferred Stock as set forth by the stock ownership
records of the Company as of the particular record date.
"Registration Statement" shall mean any registration statement
filed with the Commission under the Act.
"Series A Preferred Stock" shall mean all of the Series A 15%
Cumulative Preferred Stock of the Company which shall consist of up to 2,861,382
shares, the rights and
2
20
privileges of which are set forth in that certain Resolution of Designation of
Preferences, Rights and Limitations of Series A 15% Cumulative Preferred Stock
of Quality Care Solutions, Inc. adopted by the Board on June 28, 1996, as
thereafter amended, restated or otherwise modified.
"Series B Preferred Stock" shall mean all Series B Preferred
Stock of the Company, the rights and preferences of which are set forth in this
Resolution.
"Series C Preferred Stock" shall mean all Series C 12%
Cumulative Convertible Preferred Stock of the Company the rights and privileges
of which are set forth in that certain Resolution of Designation of Preferences,
Rights and Limitations of Series C Preferred Stock of Quality Care Solutions,
Inc. adopted by the Board in May 1998, as the same may from time to time be
amended or restated.
"Share" shall mean a share of Series B Preferred Stock.
"Shareholder" shall mean any Person who has legal title to the
Common Stock, Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock or any other series of preferred stock of the Company designated
with the right to receive liquidation proceeds of the Company, in each case, as
set forth by the stock ownership records of the Company as of the particular
record date.
Section 2. Dividends.
(a) General Obligation. When and as declared by the Board, the
Company shall pay dividends to the Record Holders. Except as otherwise provided
herein, Cumulative Dividends on each Share will accrue on each Accrual Date
whether or not such dividends have been declared or whether or not there are
profits, surplus or other funds of the Company legally available for the payment
of such dividends, provided, however, dividends will be paid only at such time
as both (i) funds of the Company are legally available for payment thereof and
(ii) the Board declares and authorizes such payment.
(b) Distribution of Partial Dividend Payments. If at any time
the Company pays less than the total amount of dividends then accrued with
respect to the Series C Preferred Stock, such payment will be distributed pro
rata among the Record Holders.
(c) Priority. The Series B Preferred Stock ranks pari passu
with the Series A Preferred Stock and the Series C Preferred Stock and the
Series B Preferred Stock is senior to all other capital stock of the Company,
including specifically the Common Stock and any other series or class of stock
as may be designated by the Board from time to time, in right of priority to
Distributions paid as dividends or otherwise. Dividends or other distributions
shall be declared and paid ratably with respect to the Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock, in accordance with the
respective terms of the Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock. No dividends or other Distributions with respect to
any other series or class of capital stock of the Company shall be declared or
paid prior to the declaration and payment in full of all Cumulative Dividends
accrued as of the last preceding Accrual Date.
3
21
Section 3. Liquidation. The Series B Preferred Stock ranks pari passu
with the Series A Preferred Stock and the Series C Preferred Stock and the
Series B Preferred Stock is senior to all other capital stock of the Company,
including specifically the Common Stock and any other series or class of stock
(other than the Series A Preferred Stock and the Series C Preferred Stock) as
may be designated by the Board from time to time, in right of priority to
Distributions paid in liquidation or otherwise. Upon occurrence of a Liquidation
Event, the Record Holders will be entitled to be paid, pari passu with all
required distributions and payments with respect to the Series A Preferred Stock
and the Series C Preferred Stock and before any payment or other Distribution is
made upon any other equity securities of the Company, an amount in cash equal to
the Preference Amount plus any accrued but unpaid dividends thereon up to the
date of occurrence of the Liquidation Event. If upon any Liquidation Event the
assets of the Company to be distributed among the Record Holders and the holders
of the Series A Preferred Stock and Series C Preferred Stock are insufficient to
permit such payment in full to each holder, then the entire assets to be
distributed will be distributed ratably among such Record Holders and the
holders of the Series A Preferred Stock and Series C Preferred Stock in
proportion to each such holder's number of shares of Series A Preferred, Series
B Preferred or Series C Preferred multiplied by the Preference Amount of such
series. The Company will mail written notices of a Liquidation Event not less
than 20 days prior to the payment date stated therein to each Record Holder.
After the Preference Amount plus accrued dividends have been paid on all
outstanding Shares, and any other preference amount is paid on any other series
of preferred stock of the Company in accordance with the rights designated
thereto, any remaining funds and assets of the Company legally available for
distribution to Shareholders will be distributed ratably among the Shareholders
in accordance with their Common Stock holdings on an as converted basis.
Section 4. Conversion.
(a) Automatic Conversion of Series B Preferred Stock.
Immediately upon the earlier of (i) the closing of a Qualified Public Offering
and (ii) the consent of Record Holders of not less than a majority of the then
outstanding Shares, all of the Shares shall be converted into fully paid,
nonassessable shares of Common Stock in accordance with the conversion ratio set
forth in Section 4(d) hereof.
(b) Automatic Conversion of Preferred Stock. Immediately upon
the consent of holders of Series A Preferred, Series B Preferred and Series C
Preferred of not less than a majority of the then outstanding aggregate shares
of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock, all of the shares of Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock shall be converted into fully paid, nonassessable
shares of Common Stock in accordance with the conversion ratio of each of the
series.
(c) Voluntary Conversion. Record Holders of Shares shall have
the right to convert the Shares at any time into shares of Common Stock in
accordance with the conversion ratio in Section 4(d) hereof.
4
22
(d) Conversion Ratio. Upon conversion of a Share, the Record
Holder shall receive the number of shares of Common Stock equal to (i) the
Preference Amount (ii) divided by the Conversion Price, as adjusted from time to
time pursuant to Section 5 hereof.
(e) Mechanics of Conversion. Each Record Holder who converts
Shares into Common Stock shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Company or of any transfer agent
for the Series B Preferred Stock and shall give written verification to the
Company of the number of Shares of Series B Preferred Stock being converted.
Thereupon, the Company shall promptly issue and deliver at its office to such
Record Holder a certificate or certificates for the number of shares of Common
Stock to which such Record Holder is entitled. In the event of an automatic
conversion pursuant to Sections 4(a) or (b), the outstanding Shares shall be
converted automatically without any further action by the holder of such Shares
and whether or not the certificates representing such shares are surrendered to
the Company or the transfer agent for such Series B Preferred Stock; and the
Company shall not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon such automatic conversion unless the certificates
evidencing such Shares are either delivered to the Company or the transfer agent
for such Series B Preferred Stock as provided above, or the holder notifies the
Company or the transfer agent for such Series B Preferred Stock that such
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such certificates. The Company shall, as soon as
practicable thereafter, issue and deliver to such address as the holder may
direct, a certificate or certificates for the number of shares of Common Stock
to which such holder shall be entitled. If the conversion is in connection with
a Qualified Public Offering of securities described in Section 4(a), the
conversion shall be conditioned upon the closing with the underwriters of the
sale of securities pursuant to such offering, and the conversion shall not be
deemed to have occurred until immediately prior to the closing of such sale of
securities.
(f) Undeclared Cumulative Dividends. The Company shall pay
undeclared Cumulative Dividends as accrued under the provisions of Section 2 on
the Shares of Series B Preferred Stock being converted in cash or by the
issuance of additional shares of Common Stock within 30 days after the
Conversion Date. If the Company elects to pay undeclared and accrued Cumulative
Dividends in shares of Common Stock, the number of shares of Common Stock so
paid shall equal (i) the total undeclared and accrued Cumulative Dividends (ii)
divided by the Conversion Price as adjusted from time to time pursuant to the
provisions of Section 5 hereof. Such conversion and issuance of additional
shares of Common Stock, if applicable, shall be deemed to have been made
immediately prior to the close of business on the Conversion Date, and the
Person entitled to receive the shares of Common Stock shall for all purposes be
the Record Holder as of such date.
(g) Fractional Shares. No fractional shares of Common Stock
shall be issued upon the conversion of Series B Preferred Stock. In lieu of any
fractional shares to which a holder of Series B Preferred Stock would otherwise
be entitled, the Company shall pay cash equal to such fraction multiplied by the
then current fair market value, determined in good faith by the Board.
5
23
Section 5. Antidilution Adjustments.
(a) Stock Dividends. Except as provided in Section 5(e) below,
in the event the Company at any time or from time to time after the issuance of
any Shares shall declare or pay any dividend on the Common Stock payable in
Common Stock, or effect a subdivision or combination of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a dividend
in Common Stock), then and in any such event, the Conversion Price shall be
adjusted by multiplying the Conversion Price prior to the adjustment by the
number of shares of Common Stock outstanding immediately prior to the effective
time of such event and dividing the result by the number of shares of Common
Stock outstanding immediately after the effective time of such event, effective
in the case of such dividend, immediately after the close of business on the
record date for the determination of holders of Common Stock entitled to receive
such dividend, or in the case of a subdivision or combination, at the close of
business immediately prior to the date upon which such corporate action becomes
effective.
(b) Adjustments for Reorganizations, Reclassifications or
Similar Events. Except as provided in Section 3 upon any liquidation,
dissolution or winding up of the Company, if the Common Stock shall be changed
into the same or a different number of shares of any other class or classes of
stock or other securities or property, whether by capital reorganization,
reclassification or otherwise, then each share of Series B Preferred Stock shall
thereafter be convertible into the number of shares of stock or other securities
or property to which a holder of the number of shares of Common Stock of the
Company deliverable upon conversion of such shares of Series B Preferred Stock
shall have been entitled upon such reorganization, reclassification or other
event.
(c) Dilutive Issuance. Except as provided in Section 5(f)
below, in the event the Company shall issue additional shares of Common Stock or
securities or options convertible into shares of Common Stock without
consideration or for a consideration per share of Common Stock (on an
as-converted to Common Stock basis, if applicable) less than the effective
Conversion Price in effect on the date of and immediately prior to such
issuance, then, and in each such event, such Conversion Price shall be reduced
concurrently with such issue to the Conversion Price determined as follows: (i)
the number of shares of Common Stock outstanding immediately prior to the
issuance that results in the adjustment, (ii) shall be multiplied by such
Conversion Price in effect immediately prior to such issuance, (iii) to the
result of (ii) shall be added the actual consideration received for the
additional shares of Common Stock, (iv) the resulting total shall be divided by
the sum of (A) the number of shares of Common Stock outstanding immediately
prior to the issuance that results in the adjustment and (B) the number of
additional shares of Common Stock resulting in the adjustment. If the quotient
thus obtained is less than the Conversion Price then in effect, such quotient
shall be the adjusted Conversion Price until further adjusted as provided
herein.
6
24
(d) Determination of Consideration. For purposes of Section
5(c), the consideration received by the Company for the issuance of any
additional shares of Common Stock shall be computed as follows:
(i) Such consideration shall:
(A) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Company excluding
amounts paid or payable for accrued interest or accrued
dividends;
(B) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of
such issue, as determined in good faith by the Board; and
(C) in the event additional shares of Common Stock are
issued together with other shares of securities or other
assets of the Company for consideration which covers both, be
the proportion of such consideration so received, computed as
provided in (A) and (B) above, as determined in good faith by
the Board.
(ii) For the purpose of computing the initial adjustment of
the Conversion Price in the event the Company issues securities or options
convertible into Common Stock, the consideration per share received by the
Company for such securities or options shall be determined by dividing:
(A) the total amount, if any, received or receivable
by the Company as consideration for the issue of such
securities or options, plus the minimum aggregate amount of
additional consideration payable to the Company upon the
exercise or the conversion or exchange of such securities or
options, or in the case of options for convertible securities,
the exercise of such options for convertible securities and
the conversion or exchange of such convertible securities, by
(B) the maximum number of shares of Common Stock
issuable upon the exercise of or the conversion or exchange of
such options or securities.
Any commission, fees, costs or other expenses related to the issuance of any
additional shares of Common Stock or securities or options convertible into
shares of Common Stock shall be included in the consideration received by the
Company.
(e) Adjustments for Other Dividends. In the event the Company
at any time or from time to time makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in capital stock of the Company other than shares of Common
Stock or in other property of the Company, then and in each such event provision
shall be made so that the Record Holders receive upon conversion thereof, in
addition to the number of shares of Common Stock receivable thereupon, the
amount of
7
25
securities or other property which such Record Holders would have received had
the Series B Preferred Stock been converted prior to such effective record date.
(f) Exceptions. The foregoing provisions of this Section 5
notwithstanding, no adjustment to the Conversion Price shall be made upon the
issuance of (i) up to 2,500,000 shares of Common Stock or options therefor
issued or reserved for issuance to employees, directors, consultants or advisors
of the Company pursuant to stock purchase, stock option or other agreements
approved by the Board since the Company's inception, (ii) any Common Stock or
other securities or options issued or issuable with approval of the Record
Holders holding a majority of the outstanding Shares, (iii) the issuance of
Common Stock upon conversion of the Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock, (iv) Common Stock underlying other options
or convertible securities as to which an adjustment to the Conversion Price has
been made pursuant to Section 5(c) or (v) up to 412,142 shares of Common Stock
issued upon exercise of warrants outstanding as of May 15, 1998.
(g) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price of a series of Preferred
Stock pursuant to this Section 5, the Company at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
furnish to each Record Holder to which such adjustment pertains a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Company shall, upon the
written request at any time of any Record Holder, furnish or cause to be
furnished to such Record Holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Conversion Prices at the time in effect
for the Series B Preferred Stock, and (iii) the number of shares of Common Stock
and the amount, if any, of other property which at the time would be received
upon the conversion of such Record Holder's Series B Preferred Stock.
(h) Notices of Record Date. In the event that the Company
shall propose at any time:
(i) to declare any dividend or distribution upon its
Common Stock, whether in cash, property, stock or
other securities, whether or not a regular cash
dividend and whether or not out of earnings or
earned surplus;
(ii) to offer for subscription pro rata to the holders
of Common Stock any additional shares of stock of
any class or series or other rights;
(iii) to effect any reclassification or recapitalization
of its Common Stock outstanding involving a change
in the Common Stock; or
(iv) to merge or consolidate with or into any other
corporation, or sell, lease or convey all or
substantially all of its property or business, or
to liquidate, dissolve or wind up;
8
26
then, in connection with any such event, the corporation shall send to the
Record Holders:
(A) in the case of the matters referred to in (i) and
(ii) above, at least ten (10) days prior written
notice of the date on which a record shall be taken
for such dividend, distribution or subscription
rights (and specifying the date on which the
holders of Common Stock shall be entitled thereto)
or for determining rights to vote in respect of the
matters referred to in (i) or (ii) above; and
(B) in the case of the matters referred to in (iii) and
(iv) above, at least ten (10) days prior written
notice of the date when the same shall take place
(and specifying the date on which the holders of
Common Stock shall be entitled to exchange their
Common Stock for securities or other property
deliverable upon the occurrence of such event) or
for determining rights to vote in respect of the
maters referred to in (iii) or (iv) above.
Each such written notice shall be delivered personally or
given by first class mail, postage prepaid, addressed to the Record Holders at
the address for each such holder as shown on the books and records of the
Company.
Section 6. Restrictions and Limitations. So long as any Shares remain
outstanding, the Company shall not, and shall not permit any successor by merger
or consolidation of the Company, without the approval by vote or written consent
of the Record Holders of a majority of the outstanding Shares to:
(a) No Senior or Pari Passu Securities. Authorize or issue, or
obligate itself to issue, any other equity security senior to or on a parity
with the Series B Preferred Stock, as to dividend, liquidation preferences or
conversion rights;
(b) No Change in Authorized Shares. Increase or decrease
(other than by redemption or conversion) the total number of authorized shares
of Series B Preferred Stock;
(c) No Change in Rights. Change, by amending the Company's
Articles of Incorporation, Bylaws, or otherwise, any of the rights, preferences,
privileges or limitations provided for herein for the benefit of the Series B
Preferred Stock;
(d) No Liquidation Event. Engage in any transaction that is a
Liquidation Event;
(e) No Adverse Change in Articles or Bylaws. Amend the
Articles of Incorporation or Bylaws of the Company to change the number of
directors or increase the authorized number of shares of capital stock; or
(f) No Preference to Subordinate Stock. Make any Distribution,
as a dividend, in liquidation or otherwise, in preference to the Series B
Preferred Stock.
9
27
Nothing herein shall be construed as limiting the Company's ability to make any
subdivision or combination of the outstanding Common Stock.
Section 7. Right of First Refusal.
(a) General Right. Each Record Holder shall be given the right
to purchase such holder's pro rata portion of any equity securities offered by
the Company (other than the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, shares of Common Stock issuable upon conversion of the
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
and shares offered to employees, in a merger or in connection with obtaining a
lease line, line of credit or a similar financing transaction) on the same terms
and conditions as the Company offers such securities to other potential
investors. The pro rata portion to which each Record Holder is entitled shall be
calculated based upon such Record Holder's percentage of ownership of the
Company's outstanding capital stock on an as-converted to Common Stock basis
(assuming all undeclared Cumulative Dividends are paid in Common Stock as
provided in Section 4(f)). The right of first refusal granted hereunder will
terminate immediately prior to the Company's initial underwritten Qualified
Public Offering.
(b) In the event the Company proposes to undertake an issuance
of new securities, it shall give each Record Holder written notice of its
intention, describing the amount and type of the securities, and the price and
terms upon which the Company proposes to issue the same. Each Record Holder
shall have twenty (20) days from the date of receipt of any such notice to agree
to purchase up to its respective pro rata share of such securities for the price
and upon the terms specified in the notice by giving written notice to the
Company and stating therein the quantity of securities to be purchased. To the
extent any Record Holder elects not to purchase such holder's pro rata share of
new securities, then such holder's pro rata share shall be allocated pro rata
among the holders of Series B Preferred Stock electing to purchase their pro
rata share of new securities to the extent such holders wish to purchase more
than their pro rata share.
(c) The Company shall have ninety (90) days after such twenty
(20) day period to sell the new securities not elected to be purchased by Record
Holders at a price and upon terms no more favorable to the purchasers of such
securities than specified in the Company's notice. In the event the Company has
not sold the new securities within said ninety (90) day period, the Company
shall not thereafter issue or sell any new securities, without first offering
such securities to the Record Holders in the manner provided above.
(d) Notwithstanding the foregoing, the rights set forth herein
shall not prevent the corporation from offering and selling new securities at
any time; provided that, if the Company has not given notice to Record Holders
prior to the issuance of new securities as provided in Section 7(b), then the
Company shall give notice to the Record Holders within fifteen (15) days after
the issuance of new securities. Such notice shall describe the amount, type,
price and terms of the new securities. Each Record Holder shall have twenty (20)
days from the date of receipt of such notice to elect to purchase its pro rata
share of new securities.
10
28
The closing of any such sale shall occur within thirty (30) days of the date of
notice to the Record holders.
Section 8. Voting Rights.
(a) Except as otherwise provided herein or under Nevada law,
the shares of Common Stock, the Series A Preferred Stock, the Series B Preferred
Stock, the Series C Preferred Stock and any other series of preferred stock
designated with such right shall vote as a single class on all matters except
that the Series B Preferred Stock shall vote separately as a single class (i)
with respect to all matters which affect rights, preferences or priority of the
Series B Preferred Stock or (ii) as otherwise required by Nevada law. Upon any
vote with the outstanding shares as a single class, each Share shall have the
number of votes equal to (i) the Preference Amount (ii) divided by the
Conversion Price in effect on the record date for determination of the
stockholders entitled to vote, or, if no such record date is established, at the
date such vote is taken or any written consent of stockholders is solicited.
Record Holders shall be entitled to receive notice of all matters submitted to a
vote of shareholders. Any action to be taken by the Record Holders may be taken
without a meeting in accordance with Nevada law.
(b) (i) The holders of Series A Preferred Stock, voting as a
separate class on an as-converted to Common Stock basis, shall be entitled to
elect one director, (ii) the holders of Series C Preferred Stock, voting as a
separate class on an as-converted to Common Stock basis, shall be entitled to
elect one director and (ii) the holders of the Common Stock, the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and
any other series of preferred stock designated with voting rights, voting
together on an as-converted to Common Stock basis (assuming in each instance
that all undeclared Cumulative Dividends are paid in cash as provided in Section
4(f)), shall be entitled to elect one director having industry experience and
who is not an officer or employee of the Company. Any vacancy in the Board
occurring because of the death, resignation or removal of a director shall be
filled by the vote or written consent of the holders of the class or classes
entitled to fill such seats as provided in this Section 8(b).
Section 9. Notices. All notices referred to herein, except as
otherwise expressly provided, will be hand delivered or made by mail, postage
prepaid, and will be deemed to have been given when so hand delivered or mailed
to the last known address of the Record Holder as set forth on the stock ledger
of the Company.
Section 10. Waiver of Rights, Preferences or Privileges.
(a) Any right, preference or privilege of the Series B
Preferred Stock may be waived by two-thirds of the outstanding Shares, and such
waiver shall be binding on all holders of Shares.
(b) Any right, preference or privilege of all of the Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock may be
waived by two-thirds of the aggregate outstanding shares of Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock, and such waiver
shall be binding on all holders of shares of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock.
11
29
Section 11. Information Rights. The Company shall provide to all
Record Holders an unaudited quarterly report, containing a balance sheet, income
statement and statement of cash flows for the fiscal quarter within 45 days
after the end of each fiscal quarter; and an audited annual report containing a
balance sheet, income statement and statement of cash flows for the fiscal year
within 90 days after the end of each fiscal year. All Record Holders shall have
the right to inspect the records of the Company as provided by Nevada law.
12
30
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
MAY 28 1998
No. C7194-9-1
/s/ Dean Heller
DEAN HELLER, SECRETARY OF STATE
CERTIFICATE OF DESIGNATION
1. Name. The name of the corporation is Quality Care Solutions, Inc.
(the "Corporation").
2. Text of Resolution. The Board of Directors (the "Board") of the
Corporation duly adopted a resolution in the form attached hereto as Exhibit A
and incorporated herein by this reference, establishing and designating the
Series C 12% Cumulative Convertible Preferred Stock of the Corporation, fixing
and determining the relative preferences, privileges and voting powers of the
shares of such series and the restrictions and qualifications thereof, all as
set forth in such resolution.
3. Statement and Date of Adoption. The aforementioned resolution was
duly adopted by the Board effective as of May 28, 1998.
IN WITNESS WHEREOF, the undersigned hereby certifies this 28th day of
May, 1998 that the foregoing statement has been duly adopted by and on behalf of
the Corporation as set forth above.
/s/ Gregory S. Anderson
------------------------------
Gregory S. Anderson, President
ATTEST:
/s/ Sherwood H. Chapman
- ------------------------------
Sherwood H. Chapman, Secretary
ACKNOWLEDGMENT
STATE OF ARIZONA )
)ss.
County of Maricopa )
On this 28th day of May, 1998, before me the undersigned Notary Public
personally appeared Gregory S. Anderson, known personally to me to be the
President of Quality Care Solutions, Inc., and acknowledged to me the foregoing
instrument was executed for the purposes therein contained, on behalf of the
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Susan A. Malone
-------------------
Notary Public
My commission expires:
January 24, 2000
OFFICIAL SEAL
SUSAN A. MALONE
Notary Public-State of Arizona
MARICOPA COUNTY
My Comm. Expires Jan. 24, 2000
31
EXHIBIT A
RESOLUTION OF DESIGNATION OF
SERIES C 12% CUMULATIVE CONVERTIBLE PREFERRED STOCK OF
QUALITY CARE SOLUTIONS, INC.
RESOLVED, that pursuant to the authority granted to the Board and in
accordance with the provisions of the Articles of Incorporation of the Company,
the Board hereby creates a series of preferred stock designated as "Series C 12%
Cumulative Convertible Preferred Stock" with Preference Amount equal to $.77 per
share, states the number thereof to be 5,194,805 and fixes the relative rights,
preferences and limitations of such Shares as follows:
Section 1. Definitions. For purposes of this Resolution, the following
definitions shall apply:
"Accrual Date" shall mean each July 1, October 1, January 1
and April 1 following May 29, 1998 for so long as any Shares remain outstanding.
"Act" shall mean the Securities Act of 1933, as amended.
"Board" shall mean the Board of Directors of the Company.
"Commission" shall mean the United States Securities and
Exchange Commission.
"Common Stock" shall mean the common stock of the Company.
"Company" shall mean Quality Care Solutions, Inc., a Nevada
corporation, or any successor thereto.
"Conversion Date" shall mean the date on which the Shares are
converted to Common Stock whereby the rights of the Record Holders will cease
with respect to the Shares and certificates for shares of Common Stock will be
issued to such Record Holders who will become the holders of record of the
shares of Common Stock represented thereby.
"Conversion Price" shall initially mean $.77 per Share and
shall be adjusted from time to time pursuant to Section 5 hereof.
"Cumulative Dividend" shall mean a dividend with respect to
the Shares accruing from May 29, 1998 at the rate of 12% per annum of the
Preference Amount ($.09 per share).
1
32
"Distribution" shall mean the transfer of cash or property
without consideration, by way of dividend or otherwise (except a dividend in
shares of the capital stock of the Company), or the purchase or redemption of
shares of capital stock of the Company for cash or property, excluding the
repurchase of any shares from a terminated employee or consultant of the Company
within the terms of any agreement providing for such repurchase.
"Five Percent Record Holder" shall mean any Person who has
legal title to no less than 5% or more of the Company's outstanding Common Stock
(on a fully converted basis) as set forth on the stock ownership records of the
Company.
"Liquidation Event" shall mean any liquidation, dissolution or
winding up of the Company, a merger or consolidation of the Company or the sale
or transfer of all or substantially all of the assets of the Company, whether
voluntary or involuntary, unless the stockholders of the Company immediately
prior to such transaction hold at least 50% of the outstanding equity securities
of the surviving corporation in such merger, consolidation or sale of assets
reorganization.
"Person" shall mean an individual, a partnership, a joint
venture, a limited liability company, a corporation, a trust, an unincorporated
organization or government or any department or any agency thereof.
"Preference Amount" shall mean $0.77 per Share.
"Qualified Public Offering" shall mean an underwritten public
offering of the Company's Common Stock which has been registered with the
Commission resulting in gross proceeds of not less than $10,000,000 and at a
price of not less than $1.50 per share (as adjusted for any event resulting in
an adjustment pursuant to Section 5(a)).
"Record Holder" shall mean the Person who has legal title to
the shares of Series C Preferred Stock as set forth by the stock ownership
records of the Company as of the particular record date.
"Registration Statement" shall mean any registration statement
filed with the Commission under the Act.
"Series A Preferred Stock" shall mean all of the Series A 15%
Cumulative Preferred Stock of the Company which shall consist of up to 2,861,382
shares, the rights and privileges of which are set forth in that certain
Resolution of Designation of Preferences, Rights and Limitations of Series A 15%
Cumulative Preferred Stock of Quality Care Solutions, Inc. adopted by the Board
on June 28, 1996, as thereafter amended, restated or otherwise modified.
"Series B Preferred Stock" shall mean all of the Series B 15%
Cumulative Preferred Stock of the Company which shall consist of up to 160,000
shares, the rights and privileges of which are set forth in that certain
Resolution of Designation of Preferences, Rights and Limitations of Series B 15%
Cumulative Preferred Stock of Quality Care Solutions, Inc. adopted by the Board
on June 28, 1996, as thereafter amended, restated or otherwise modified.
2
33
"Series C Preferred Stock" shall mean all Series C Preferred
Stock of the Company, the rights and privileges of which are set forth in this
Resolution.
"Share" shall mean a share of Series C Preferred Stock.
"Shareholder" shall mean any Person who has legal title to the
Common Stock, Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock or any other series of preferred stock of the Company designated
with the right to receive liquidation proceeds of the Company, in each case, as
set forth by the stock ownership records of the Company as of the particular
record date.
Section 2. Dividends.
(a) General Obligation. When and as declared by the Board, the
Company shall pay dividends to the Record Holders. Except as otherwise provided
herein, Cumulative Dividends on each Share will accrue on each Accrual Date
whether or not such dividends have been declared or whether or not there are
profits, surplus or other funds of the Company legally available for the payment
of such dividends, provided, however, dividends will be paid only at such time
as both (i) funds of the Company are legally available for payment thereof and
(ii) the Board declares and authorizes such payment.
(b) Distribution of Partial Dividend Payments. If at any time
the Company pays less than the total amount of dividends then accrued with
respect to the Series C Preferred Stock, such payment will be distributed pro
rata among the Record Holders.
(c) Priority. The Series C Preferred Stock ranks pari passu
with the Series A Preferred Stock and the Series B Preferred Stock and the
Series C Preferred Stock is senior to all other capital stock of the Company,
including specifically the Series B Preferred Stock, the Common Stock and any
other series or class of stock as may be designated by the Board from time to
time, in right of priority to Distributions paid as dividends or otherwise.
Dividends or other distributions shall be declared and paid ratably with respect
to the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock, in accordance with the respective terms of the Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock. No dividends or other
Distributions with respect to any other series or class of capital stock of the
Company shall be declared or paid prior to the declaration and payment in full
of all Cumulative Dividends accrued as of the last preceding Accrual Date.
Section 3. Liquidation. The Series C Preferred Stock ranks pari passu
with the Series A Preferred Stock and the Series B Preferred Stock and the
Series C Preferred Stock is senior to all other capital stock of the Company,
including specifically the Common Stock and any other series or class of stock
(other than the Series A Preferred Stock and the Series B Preferred Stock) as
may be designated by the Board from time to time, in right of priority to
Distributions paid in liquidation or otherwise. Upon occurrence of a Liquidation
Event, the Record Holders will be entitled to be paid, pari passu with all
required distributions and payments with respect to the Series A Preferred Stock
and the Series B Preferred Stock and before any payment or other Distribution is
made upon any other equity securities of the
3
34
Company, an amount in cash equal to the Preference Amount plus any accrued but
unpaid dividends thereon up to the date of occurrence of the Liquidation Event.
If upon any Liquidation Event the assets of the Company to be distributed among
the Record Holders and the holders of the Series A Preferred Stock and Series B
Preferred Stock are insufficient to permit such payment in full to each holder,
then the entire assets to be distributed will be distributed ratably among such
Record Holders and the holders of the Series A Preferred Stock and Series B
Preferred Stock in proportion to each such holder's number of shares of Series A
Preferred, Series B Preferred or Series C Preferred multiplied by the Preference
Amount of such series. The Company will mail written notices of a Liquidation
Event not less than 20 days prior to the payment date stated therein to each
Record Holder. After the Preference Amount plus accrued dividends have been paid
on all outstanding Shares, and any other preference amount is paid on any other
series of preferred stock of the Company in accordance with the rights
designated thereto, any remaining funds and assets of the Company legally
available for distribution to Shareholders will be distributed ratably among the
Shareholders in accordance with their Common Stock holdings on an as converted
basis.
Section 4. Conversion.
(a) Automatic Conversion of Series C Preferred Stock.
Immediately upon the earlier of (i) the closing of a Qualified Public Offering
and (ii) the consent of Record Holders of not less than a majority of the then
outstanding Shares, all of the Shares shall be converted into fully paid,
nonassessable shares of Common Stock in accordance with the conversion ratio set
forth in Section 4(d) hereof.
(b) Automatic Conversion of Preferred Stock. Immediately upon
the consent of holders of Series A Preferred, Series B Preferred and Series C
Preferred of not less than a majority of the then outstanding aggregate shares
of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock, all of the shares of Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock shall be converted into fully paid, nonassessable
shares of Common Stock in accordance with the conversion ratio of each of the
series.
(c) Voluntary Conversion. Record Holders of Shares shall have
the right to convert the Shares at any time into shares of Common Stock in
accordance with the conversion ratio in Section 4(d) hereof.
(d) Conversion Ratio. Upon conversion of a Share, the Record
Holder shall receive the number of shares of Common Stock equal to (i) the
Preference Amount (ii) divided by the Conversion Price, as adjusted from time to
time pursuant to Section 5 hereof.
(e) Mechanics of Conversion. Each Record Holder who converts
Shares into Common Stock shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Company or of any transfer agent
for the Series C Preferred Stock and shall give written verification to the
Company of the number of Shares of Series C Preferred Stock being converted.
Thereupon, the Company shall promptly issue and deliver at its office to such
Record Holder a certificate or certificates for the number of shares of Common
Stock to which such Record Holder is entitled. In the event of an automatic
conversion pursuant to Sections 4(a)
4
35
or (b), the outstanding Shares shall be converted automatically without any
further action by the holder of such Shares and whether or not the certificates
representing such shares are surrendered to the Company or the transfer agent
for such Series C Preferred Stock; and the Company shall not be obligated to
issue certificates evidencing the shares of Common Stock issuable upon such
automatic conversion unless the certificates evidencing such Shares are either
delivered to the Company or the transfer agent for such Series C Preferred Stock
as provided above, or the holder notifies the Company or the transfer agent for
such Series C Preferred Stock that such certificates have been lost, stolen or
destroyed and executes an agreement satisfactory to the Company to indemnify the
Company from any loss incurred by it in connection with such certificates. The
Company shall, as soon as practicable thereafter, issue and deliver to such
address as the holder may direct, a certificate or certificates for the number
of shares of Common Stock to which such holder shall be entitled. If the
conversion is in connection with a Qualified Public Offering of securities
described in Section 4(a), the conversion shall be conditioned upon the closing
with the underwriters of the sale of securities pursuant to such offering, and
the conversion shall not be deemed to have occurred until immediately prior to
the closing of such sale of securities.
(f) Undeclared Cumulative Dividends. The Company shall pay
undeclared Cumulative Dividends as accrued under the provisions of Section 2 on
the Shares of Series C Preferred Stock being converted in cash or by the
issuance of additional shares of Common Stock within 30 days after the
Conversion Date. If the Company elects to pay undeclared and accrued Cumulative
Dividends in shares of Common Stock, the number of shares of Common Stock so
paid shall equal (i) the total undeclared and accrued Cumulative Dividends (ii)
divided by the Conversion Price as adjusted from time to time pursuant to the
provisions of Section 5 hereof. Such conversion and issuance of additional
shares of Common Stock, if applicable, shall be deemed to have been made
immediately prior to the close of business on the Conversion Date, and the
Person entitled to receive the shares of Common Stock shall for all purposes be
the Record Holder as of such date.
(g) Fractional Shares. No fractional shares of Common Stock
shall be issued upon the conversion of Series C Preferred Stock. In lieu of any
fractional shares to which a holder of Series C Preferred Stock would otherwise
be entitled, the Company shall pay cash equal to such fraction multiplied by the
then current fair market value, determined in good faith by the Board.
Section 5. Antidilution Adjustments.
(a) Stock Dividends. Except as provided in Section 5(e) below,
in the event the Company at any time or from time to time after the issuance of
any Shares shall declare or pay any dividend on the Common Stock payable in
Common Stock, or effect a subdivision or combination of the outstanding shares
of Common Stock (by reclassification or otherwise than by payment of a dividend
in Common Stock), then and in any such event, the Conversion Price shall be
adjusted by multiplying the Conversion Price prior to the adjustment by the
number of shares of Common Stock outstanding immediately prior to the effective
time of such event and dividing the result by the number of shares of Common
Stock outstanding immediately after the effective time of such event, effective
in the case of such dividend, immediately after the close of
5
36
business on the record date for the determination of holders of Common Stock
entitled to receive such dividend, or in the case of a subdivision or
combination, at the close of business immediately prior to the date upon which
such corporate action becomes effective.
(b) Adjustments for Reorganizations, Reclassifications or
Similar Events. Except as provided in Section 3 upon any liquidation,
dissolution or winding up of the Company, if the Common Stock shall be changed
into the same or a different number of shares of any other class or classes of
stock or other securities or property, whether by capital reorganization,
reclassification or otherwise, then each share of Series C Preferred Stock shall
thereafter be convertible into the number of shares of stock or other securities
or property to which a holder of the number of shares of Common Stock of the
Company deliverable upon conversion of such shares of Series C Preferred Stock
shall have been entitled upon such reorganization, reclassification or other
event.
(c) Dilutive Issuance. Except as provided in Section 5(f)
below, in the event the Company shall issue additional shares of Common Stock or
securities or options convertible into shares of Common Stock without
consideration or for a consideration per share of Common Stock (on an
as-converted to Common Stock basis, if applicable) less than the effective
Conversion Price in effect on the date of and immediately prior to such
issuance, then, and in each such event, such Conversion Price shall be reduced
concurrently with such issue to the Conversion Price determined as follows: (i)
the number of shares of Common Stock outstanding immediately prior to the
issuance that results in the adjustment, (ii) shall be multiplied by such
Conversion Price in effect immediately prior to such issuance, (iii) to the
result of (ii) shall be added the actual consideration received for the
additional shares of Common Stock, (iv) the resulting total shall be divided by
the sum of (A) the number of shares of Common Stock outstanding immediately
prior to the issuance that results in the adjustment and (B) the number of
additional shares of Common Stock resulting in the adjustment. If the quotient
thus obtained is less than the Conversion Price then in effect, such quotient
shall be the adjusted Conversion Price until further adjusted as provided
herein.
(d) Determination of Consideration. For purposes of Section
5(c), the consideration received by the Company for the issuance of any
additional shares of Common Stock shall be computed as follows:
(i) Such consideration shall:
(A) insofar as it consists of cash, be
computed at the aggregate amount of cash received by the
Company excluding amounts paid or payable for accrued interest
or accrued dividends;
(B) insofar as it consists of property other
than cash, be computed at the fair value thereof at the time
of such issue, as determined in good faith by the Board; and
(C) in the event additional shares of Common
Stock are issued together with other shares of securities or
other assets of the Company for
6
37
consideration which covers both, be the proportion of such
consideration so received, computed as provided in (A) and (B)
above, as determined in good faith by the Board.
(ii) For the purpose of computing the initial
adjustment of the Conversion Price in the event the Company issues securities or
options convertible into Common Stock, the consideration per share received by
the Company for such securities or options shall be determined by dividing:
(A) the total amount, if any, received or
receivable by the Company as consideration for the issue of
such securities or options, plus the minimum aggregate amount
of additional consideration payable to the Company upon the
exercise or the conversion or exchange of such securities or
options, or in the case of options for convertible securities,
the exercise of such options for convertible securities and
the conversion or exchange of such convertible securities, by
(B) the maximum number of shares of Common
Stock issuable upon the exercise of or the conversion or
exchange of such options or securities.
Any commission, fees, costs or other expenses related to the issuance of any
additional shares of Common Stock or securities or options convertible into
shares of Common Stock shall be included in the consideration received by the
Company.
(e) Adjustments for Other Dividends. In the event the Company
at any time or from time to time makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in capital stock of the Company other than shares of Common
Stock or in other property of the Company, then and in each such event provision
shall be made so that the Record Holders receive upon conversion thereof, in
addition to the number of shares of Common Stock receivable thereupon, the
amount of securities or other property which such Record Holders would have
received had the Series C Preferred Stock been converted prior to such effective
record date.
(f) Exceptions. The foregoing provisions of this Section 5
notwithstanding, no adjustment to the Conversion Price shall be made upon the
issuance of (i) up to 2,500,000 shares of Common Stock or options therefor
issued or reserved for issuance to employees, directors, consultants or advisors
of the Company pursuant to stock purchase, stock option or other agreements
approved by the Board since the Company's inception, (ii) any Common Stock or
other securities or options issued or issuable with approval of the Record
Holders holding a majority of the outstanding Shares, (iii) the issuance of
Common Stock upon conversion of the Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock, (iv) Common Stock underlying other options
or convertible securities as to which an adjustment to the Conversion Price has
been made pursuant to Section 5(c) or (v) up to 412,142 shares of Common Stock
issued upon exercise of warrants outstanding as of May 15, 1998.
7
38
(g) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price of a series of Preferred
Stock pursuant to this Section 5, the Company at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
furnish to each Record Holder to which such adjustment pertains a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Company shall, upon the
written request at any time of any Record Holder, furnish or cause to be
furnished to such Record Holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Conversion Prices at the time in effect
for the Series C Preferred Stock, and (iii) the number of shares of Common Stock
and the amount, if any, of other property which at the time would be received
upon the conversion of such Record Holder's Series C Preferred Stock.
(h) Notices of Record Date. In the event that the Company
shall propose at any time:
(i) to declare any dividend or distribution upon
its Common Stock, whether in cash, property,
stock or other securities, whether or not a
regular cash dividend and whether or not out of
earnings or earned surplus;
(ii) to offer for subscription pro rata to the
holders of Common Stock any additional shares
of stock of any class or series or other
rights;
(iii) to effect any reclassification or
recapitalization of its Common Stock
outstanding involving a change in the Common
Stock; or
(iv) to merge or consolidate with or into any other
corporation, or sell, lease or convey all or
substantially all of its property or business,
or to liquidate, dissolve or wind up;
then, in connection with any such event, the corporation shall send to the
Record Holders:
(A) in the case of the matters referred to in (i)
and (ii) above, at least ten (10) days prior
written notice of the date on which a record
shall be taken for such dividend, distribution
or subscription rights (and specifying the date
on which the holders of Common Stock shall be
entitled thereto) or for determining rights to
vote in respect of the matters referred to in
(i) or (ii) above; and
(B) in the case of the matters referred to in (iii)
and (iv) above, at least ten (10) days prior
written notice of the date when the same shall
take place (and specifying the date on which
the holders of Common Stock shall be entitled
to exchange their Common Stock for securities
or other property deliverable upon the
occurrence of such event) or for determining
rights to vote in respect of the maters
referred to in (iii) or (iv) above.
8
39
Each such written notice shall be delivered personally or
given by first class mail, postage prepaid, addressed to the Record Holders at
the address for each such holder as shown on the books and records of the
Company.
Section 6. Restrictions and Limitations. So long as any Shares remain
outstanding, the Company shall not, and shall not permit any successor by merger
or consolidation of the Company, without the approval by vote or written consent
of the Record Holders of a majority of the outstanding Shares to:
(a) No Senior or Pari Passu Securities. Authorize or issue, or
obligate itself to issue, any other equity security senior to or on a parity
with the Series C Preferred Stock, as to dividend, liquidation preferences or
conversion rights;
(b) No Change in Authorized Shares. Increase or decrease
(other than by redemption or conversion) the total number of authorized shares
of Series C Preferred Stock;
(c) No Change in Rights. Change, by amending the Company's
Articles of Incorporation, Bylaws, or otherwise, any of the rights, preferences,
privileges or limitations provided for herein for the benefit of the Series C
Preferred Stock;
(d) No Liquidation Event. Engage in any transaction that is a
Liquidation Event;
(e) No Adverse Change in Articles or Bylaws. Amend the
Articles of Incorporation or Bylaws of the Company to change the number of
directors or increase the authorized number of shares of capital stock; or
(f) No Preference to Subordinate Stock. Make any Distribution,
as a dividend, in liquidation or otherwise, in preference to the Series C
Preferred Stock.
Nothing herein shall be construed as limiting the Company's ability to make any
subdivision or combination of the outstanding Common Stock.
Section 7. Right of First Refusal.
(a) General Right. Each Record Holder shall be given the right
to purchase such holder's pro rata portion of any equity securities offered by
the Company (other than the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, shares of Common Stock issuable upon conversion of the
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
and shares offered to employees, in a merger or in connection with obtaining a
lease line, line of credit or a similar financing transaction) on the same terms
and conditions as the Company offers such securities to other potential
investors. The pro rata portion to which each Record Holder is entitled shall be
calculated based upon such Record Holder's percentage of ownership of the
Company's outstanding capital stock on an as-converted to Common Stock basis
(assuming all undeclared Cumulative Dividends are paid in Common
9
40
Stock as provided in Section 4(f)). The right of first refusal granted hereunder
will terminate immediately prior to the Company's initial underwritten Qualified
Public Offering.
(b) In the event the Company proposes to undertake an issuance
of new securities, it shall give each Record Holder written notice of its
intention, describing the amount and type of the securities, and the price and
terms upon which the Company proposes to issue the same. Each Record Holder
shall have twenty (20) days from the date of receipt of any such notice to agree
to purchase up to its respective pro rata share of such securities for the price
and upon the terms specified in the notice by giving written notice to the
Company and stating therein the quantity of securities to be purchased. To the
extent any Record Holder elects not to purchase such holder's pro rata share of
new securities, then such holder's pro rata share shall be allocated pro rata
among the holders of Series C Preferred Stock electing to purchase their pro
rata share of new securities to the extent such holders wish to purchase more
than their pro rata share.
(c) The Company shall have ninety (90) days after such twenty
(20) day period to sell the new securities not elected to be purchased by Record
Holders at a price and upon terms no more favorable to the purchasers of such
securities than specified in the Company's notice. In the event the Company has
not sold the new securities within said ninety (90) day period, the Company
shall not thereafter issue or sell any new securities, without first offering
such securities to the Record Holders in the manner provided above.
(d) Notwithstanding the foregoing, the rights set forth herein
shall not prevent the corporation from offering and selling new securities at
any time; provided that, if the Company has not given notice to Record Holders
prior to the issuance of new securities as provided in Section 7(b), then the
Company shall give notice to the Record Holders within fifteen (15) days after
the issuance of new securities. Such notice shall describe the amount, type,
price and terms of the new securities. Each Record Holder shall have twenty (20)
days from the date of receipt of such notice to elect to purchase its pro rata
share of new securities. The closing of any such sale shall occur within thirty
(30) days of the date of notice to the Record holders.
Section 8. Voting Rights.
(a) Except as otherwise provided herein or under Nevada law,
the shares of Common Stock, the Series A Preferred Stock, the Series B Preferred
Stock, the Series C Preferred Stock and any other series of preferred stock
designated with such right shall vote as a single class on all matters except
that the Series C Preferred Stock shall vote separately as a single class (i)
with respect to all matters which affect rights, preferences or priority of the
Series C Preferred Stock or (ii) as otherwise required by Nevada law. Upon any
vote with the outstanding shares as a single class, each Share shall have the
number of votes equal to (i) the Preference Amount (ii) divided by the
Conversion Price in effect on the record date for determination of the
stockholders entitled to vote, or, if no such record date is established, at the
date such vote is taken or any written consent of stockholders is solicited.
Record Holders shall
10
41
be entitled to receive notice of all matters submitted to a vote of
shareholders. Any action to be taken by the Record Holders may be taken without
a meeting in accordance with Nevada law.
(b) (i) The holders of Series C Preferred Stock, voting as a
separate class on an as-converted to Common Stock basis, shall be entitled to
elect one director, (ii) the holders of Series A Preferred Stock, voting as a
separate class on an as-converted to Common Stock basis, shall be entitled to
elect one director and (iii) the holders of the Common Stock, the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and
any other series of preferred stock designated with voting rights, voting
together on an as-converted to Common Stock basis (assuming in each instance
that all undeclared Cumulative Dividends are paid in cash as provided in Section
4(f)), shall be entitled to elect one director having industry experience and
who is not an officer or employee of the Company. Any vacancy in the Board
occurring because of the death, resignation or removal of a director shall be
filled by the vote or written consent of the holders of the class or classes
entitled to fill such seats as provided in this Section 8(b).
Section 9. Notices. All notices referred to herein, except as otherwise
expressly provided, will be hand delivered or made by mail, postage prepaid, and
will be deemed to have been given when so hand delivered or mailed to the last
known address of the Record Holder as set forth on the stock ledger of the
Company.
Section 10. Waiver of Rights, Preferences or Privileges.
(a) Any right, preference or privilege of the Series C
Preferred Stock may be waived by two-thirds of the outstanding Shares, and such
waiver shall be binding on all holders of Shares.
(b) Any right, preference or privilege of all of the Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock may be
waived by two-thirds of the aggregate outstanding shares of Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock, and such waiver
shall be binding on all holders of shares of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock.
11
42
[FILED STAMP]
AMENDMENT TO
CERTIFICATE OF DESIGNATION
PURSUANT TO SECTION 1955 OF THE
NEVADA REVISED STATUTES
1. Name. The name of the corporation is Quality Care Solutions, Inc.
(the "Corporation").
2. Series of Preferred Stock Being Amended. This Amendment related to
the Corporation's Series C 12% Cumulative Convertible Preferred Stock (the
"Series C Preferred"). The designation of the Series C Preferred is NOT being
amended; this Amendment only changes the number of shares of the Series C
Preferred which are authorized for issuance.
3. Text of Resolution. The Board of Directors (the "Board") of the
Corporation duly adopted the following resolution, changing from 5,194,805 to
5,723,089 the number of shares of the Series C Preferred which are authorized
for issuance:
RESOLVED, that the number of shares of Series C 12% Cumulative
Convertible Preferred Stock of the Corporation shall be 5,728,087, and
the "Resolution of Designation of Series C 12% Cumulative Convertible
Preferred Stock of Quality Care Solutions, Inc." (a copy of which was
filed with the Secretary of State of the State of Nevada on May 28,
1998 under No. C7194-97) (the "Resolution of Designation") is hereby
amended by deleting, in the fourth (4th) line of the initial paragraph
thereof, the number 5,194,805 and to insert in its place the number
5,728,087. No other amendment to the Resolution of Designation is made
hereby.
4. Stockholder Approval. The approval of the stockholders of the
Corporation in connection with the foregoing amendment required pursuant to
subsection 3 of Section 78.1955 of the Nevada revised Statutes has been
obtained.
5. Statement and Date of Adoption. The aforementioned resolution was
duly adopted by the Board effective as of June 28, 1998. The aforementioned
approval of the stockholders required pursuant to NRS 78.1955(3) was duly
received effective July 28, 1998.
IN WITNESS WHEREOF, the undersigned hereby certifies this 28th day of
July, 1998 that the foregoing statement has been duly adopted by and on behalf
of the Corporation as set forth above.
/s/ Gregory S. Anderson
------------------------------
Gregory S. Anderson, President
ATTEST:
/s/ Sherwood H. Chapman
- ----------------------------------
Sherwood H. Chapman, Secretary
43
ACKNOWLEDGMENT
STATE OF ARIZONA )
)ss.
County of Maricopa )
On this 27 day of July, 1998, before me the undersigned Notary Public
personally appeared Gregory S. Anderson, known personally to me to be the
President of Quality Care Solutions, Inc., and acknowledged to me the foregoing
instrument was executed for the purposes therein contained, on behalf of the
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Vicki Hange
---------------
Notary Public
My commission expires:
March 10, 2000 [Notary Seal]
VICKI HANES
Notary Public-Arizona
Pinal County
My Comm. Expires Mar 10, 2000
2
44
[FILED STAMP]
SECOND AMENDMENT TO
CERTIFICATE OF DESIGNATION
PURSUANT TO SECTION 1955 OF THE
NEVADA REVISED STATUTES
1. Name. The name of the corporation is Quality Care Solutions, Inc.
(the "Corporation").
2. Series of Preferred Stock Being Amended. This Second Amendment
relates to the Corporation's Series C 12% Cumulative Convertible Preferred Stock
(the "Series C Preferred"). The designation of the Series C Preferred is NOT
being amended; this Second Amendment only (i) changes the number of shares of
the Series C Preferred which are authorized for issuance and (ii) corrects a
typographical error in Section 2(c) of the Resolution of Designation identified
herein.
3. Text of Resolution. The Board of Directors (the "Board") of the
Corporation duly adopted the following resolution (i) changing from 5,723,087 to
6,826,983 the number of shares of the Series C Preferred which are authorized
for issuance and (ii) revising Section 2(c) of the "Resolution of Designation of
Series C 12% Cumulative Convertible Preferred Stock of Quality Care Solutions,
Inc." (the "Resolution of Designation") which was attached as Exhibit A to the
Corporation's Certificate of Designation filed with the Secretary of State of
the State of Nevada on May 28, 1998 under No. C7194-97 (the Certificate of
Designation"):
RESOLVED, that the number of shares of Series C 12% Cumulative
Convertible Preferred Stock of the Corporation shall be 6,826,983, and
the Resolution of Designation, which was amended by the "Amendment to
Certificate of Designation Pursuant to Section 1955 of the Nevada
Revised Statutes" (a copy of which was filed with the Secretary of
State of the State of Nevada on July 28, 1998 under No. C7194-97) (the
"First Amendment of Designation") is hereby further amended by (i)
increasing to 6,826,983 the aggregate number of shares of its Series C
12% Cumulative Convertible Preferred Stock which the Corporation is
authorized to issue; and (ii) deleting, in the third (3rd) line of
Section 2(c) of the Resolution of Designation, the words "Series B
Preferred Stock, the". No other amendment to the Resolution of
Designation is made hereby.
4. Stockholder Approval. The approval of the stockholders of the
Corporation in connection with the foregoing amendment required pursuant to
subsection 3 of Section 78.1955 of the Nevada Revised Statutes has been
obtained.
5. Statement and Date of Adoption. The aforementioned resolution was
duly adopted by the Board effective as of September 17, 1998. The aforementioned
approval of the stockholders required pursuant to Nevada Revised Statutes
78.1955(3) was duly received effective September 17, 1998.
45
IN WITNESS WHEREOF, the undersigned hereby certifies this 17th day of
September, 1998 that the foregoing statement has been duly adopted by and on
behalf of the Corporation as set forth above.
/s/ Gregory S. Anderson
------------------------------
Gregory S. Anderson, President
ATTEST:
/s/ Sherwood H. Chapman, Secretary
- ----------------------------------
Sherwood H. Chapman
ACKNOWLEDGMENT
STATE OF ARIZONA )
)ss.
County of Maricopa )
On this 17 day of September, 1998, before me the undersigned Notary
Public personally appeared Gregory S. Anderson, known personally to me to be the
President of Quality Care Solutions, Inc., and acknowledged to me the foregoing
instrument was executed for the purposes therein contained, on behalf of the
corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Vicki Hange
---------------
Notary Public
My commission expires:
3/10/2000 [Notary Seal]
- --------- VICKI HANGE
Notary Public-Arizona
Pinal County
My Comm. Expires Mar 10, 2000
2
46
STATE OF NEVADA
Secretary of State
I hereby certify that this is a
true and complete copy of
the document as filed in this
office.
MAR 01 '99
/s/ Dean Heller
DEAN HELLER
Secretary of State
By: Illegible
--------------
- ------------------
47
[FILED STAMP]
THIRD AMENDMENT TO
CERTIFICATE OF DESIGNATION
PURSUANT TO SECTION 1955 OF THE
NEVADA REVISED STATUTES
1. Name. The name of the corporation is Quality Care Solutions, Inc.
(the "Corporation").
2. Series of Preferred Stock Being Amended. This Third Amendment
relates to the Corporation's Series C 12% Cumulative Convertible Preferred Stock
(the "Series C Preferred"). The designation of the Series C Preferred is NOT
being amended; this Third Amendment only increases the number of shares of the
Series C Preferred which are authorized for issuance by the Corporation.
3. Text of Resolution. The Board of Directors (the "Board") of the
Corporation has duly adopted the following resolution amending the "Resolution
of Designation of Series C 12% Cumulative Convertible Preferred Stock of Quality
Care Solutions, Inc." (the "Resolution of Designation") which was attached as
Exhibit A to the Corporation's Certificate of Designation filed with the
Secretary of State of the State of Nevada on May 28, 1998 under No. C7194-97
(the Certificate of Designation"):
"RESOLVED, that the number of shares of Series C 12%
Cumulative Convertible Preferred Stock of the Corporation shall be
6,875,685 and the Resolution of Designation, which was amended by (i)
the "Amendment to Certificate of Designation Pursuant to Section 1955
of the Nevada Revised Statutes" (a copy of which was filed with the
Secretary of State of the State of Nevada on July 28, 1998 under No.
C7194-97), and (ii) the "Second Amendment to Certificate of Designation
Pursuant to Section 1955 of the Nevada Revised Statutes" (a copy of
which was filed with the Secretary of State of Nevada on September 17,
1998 under No. C7194-97) is hereby further amended by increasing to
6,875,685 the aggregate number of shares of Series C 12% Cumulative
Convertible Preferred Stock which the Corporation is authorized to
issue. No other amendment to the Resolution of Designation is made
hereby."
4. Stockholder Approval. The approval of the stockholders of the
Corporation in connection with the foregoing amendment required pursuant to
subsection 3 of Section 78.1955 of the Nevada Revised Statutes has been
obtained.
5. Statement and Date of Adoption. The aforementioned resolution was
duly adopted by the Board effective as of February 18, 1999. The aforementioned
approval of the stockholders required pursuant to Nevada Revised Statutes
78.1955(3) was duly received effective February 18, 1999.
48
IN WITNESS WHEREOF, the undersigned hereby certifies this 26 day of
February, 1999 that the foregoing statement has been duly adopted by and on
behalf of the Corporation as set forth above.
/s/ Gregory S. Anderson
----------------------------------
Gregory S. Anderson, President
ATTEST:
/s/ Sherwood Chapman
- ----------------------------------
Sherwood Chapman
Secretary
ACKNOWLEDGMENT
STATE OF ARIZONA )
)ss.
County of Maricopa )
On this 26 day of February, 1999, before me the undersigned Notary
Public personally appeared Gregory S. Anderson, known personally to me to be the
President of Quality Care Solutions, Inc., and acknowledged to me the foregoing
instrument was executed for the purposes therein contained, on behalf of the
Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Vicki Hange
----------------------------------
Notary Public
My commission expires: [Notary Seal]
March 10, 2000 VICKI HANGE
- ---------------------------------- Notary Public-Arizona
Pinal County
My Comm. Expires Mar 10, 2000
2
49
[FILED STAMP]
FOURTH AMENDMENT TO
CERTIFICATE OF DESIGNATION
PURSUANT TO SECTION 1955 OF THE
NEVADA REVISED STATUTES
1. Name. The name of the corporation is Quality Care Solutions, Inc.
(the "Corporation").
2. Series of Preferred Stock Being Amended. This Fourth Amendment
relates to the Corporation's Series C 12% Cumulative Convertible Preferred Stock
(the "Series C Preferred"). The designation of the Series C Preferred is NOT
being amended; this Fourth Amendment only increases the number of shares of the
Series C Preferred which are authorized for issuance by the Corporation.
3. Text of Resolution. The Board of Directors (the "Board") of the
Corporation has duly adopted the following resolution amending the "Resolution
of Designation of Series C 12% Cumulative Convertible Preferred Stock of Quality
Care Solutions, Inc." (the "Resolution of Designation") which was attached as
Exhibit A to the Corporation's Certificate of Designation filed with the
Secretary of State of the State of Nevada on May 28, 1998 under No. C7194-97
(the "Certificate of Designation"):
"RESOLVED, that the number of shares of Series C 12%
Cumulative Convertible Preferred Stock of the Corporation shall be
6,900,685 and the Resolution of Designation, which was amended by (i)
the "Amendment to Certificate of Designation Pursuant to Section 1955
of the Nevada Revised Statutes" (a copy of which was filed with the
Secretary of State of the State of Nevada on July 28, 1998 under No.
C7194-97), (ii) the "Second Amendment to Certificate of Designation
Pursuant to Section 1955 of the Nevada Revised Statutes" (a copy of
which was filed with the Secretary of State of Nevada on September 17,
1998 under No. C7194-97), and (iii) the "Third Amendment to Certificate
of Designation Pursuant to Section 1955 of the Nevada Revised Statutes"
(a copy of which was filed with the Secretary of State of Nevada on
March 15, 1999 under Number C7194-97), is hereby further amended by
increasing to 6,900,685 the aggregate number of shares of Series C 12%
Cumulative Convertible Preferred Stock which the Corporation is
authorized to issue. No other amendment to the Resolution of
Designation is made hereby."
4. Stockholder Approval. The requisite approval of the stockholders of
the Corporation in connection with the foregoing amendment required pursuant to
subsection 3 of Section 78.1955 of the Nevada Revised Statutes has been
obtained.
5. Statement and Date of Adoption. The aforementioned resolution was
duly adopted by the Board effective as of October 29, 1999. The
aforementioned approval of the
50
stockholders required pursuant to Nevada Revised Statutes 78.1955(3) was duly
received effective November 30, 1999.
IN WITNESS WHEREOF, the undersigned hereby certifies this 30th day of
November, 1999 that the foregoing statement has been duly adopted by and on
behalf of the Corporation as set forth above.
/s/ Gregory S. Anderson
----------------------------------
Gregory S. Anderson, President
ATTEST:
/s/ Sherwood Chapman
- ----------------------------------
Sherwood Chapman
Secretary
ACKNOWLEDGMENT
STATE OF ARIZONA )
)ss.
County of Maricopa )
On this 30 day of November, 1999, before me the undersigned Notary
Public personally appeared Gregory S. Anderson, known personally to me to be the
President of Quality Care Solutions, Inc., and acknowledged to me the foregoing
instrument was executed for the purposes therein contained, on behalf of the
Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
/s/ Vicki Hange
----------------------------------
Notary Public
My commission expires: [Notary Seal]
3/10/2000 VICKI HANGE
- ---------------------------------- Notary Public-Arizona
Pinal County
My Comm. Expires Mar 10, 2000
2