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Exhibit 10.20
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON ITS EXERCISE HAVE BEEN
REGISTERED UNDER EITHER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, OFFERED FOR
SALE, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THE SECURITIES UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
QUALITY CARE SOLUTIONS, INC.
(A NEVADA CORPORATION)
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
No. 1999-CS1
THIS CERTIFIES THAT, for value received, Platinum Equity Holdings or
registered assigns (hereinafter, the "Holder"), is entitled to purchase, subject
to the conditions set forth below, at any time or from time to time during the
Exercise Period (as defined in subsection 1.1, below), up to 666,298 shares
("Shares") of common stock, $0.01 par value ("Common Stock"), of QUALITY CARE
SOLUTIONS, INC., a Nevada corporation (the "Company"), at the per share purchase
price (the "Exercise Price") set forth in subsection 1.1, subject to the further
provisions of this Warrant. The term "Warrant" as used herein shall mean this
Warrant and all instruments issued by the Company in replacement of this
instrument.
This Warrant was originally issued to the named Holder in connection
with the execution and delivery of that License Agreement dated July 30, 1999 by
and between the Company and Synertech Health Systems Solutions, Inc. (the
"License Agreement"). On the date of issuance of this warrant, Synertech is a
subsidiary of the Holder named above.
As used in this Warrant, the following terms shall have the following
respective meanings (and the plural form of any defined term used herein shall
have meanings correlative to the singular form of the term unless the context
clearly requires otherwise):
"Carveout Life" shall mean one individual enrollee under any mental
health care benefits plan, radiology service benefits or other one-service type
of medical services benefits plan serviced by the Company.
"Combination Health and Dental Life" shall mean one individual enrollee
under any medical health and dental benefits plan serviced by the Company.
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"Dental Life" shall mean one individual enrollee under any dental plan
serviced by the Company.
"Equivalent Lives" shall mean a unit of measurement used herein in
connection with the determination of when this Warrant may first become
exercisable with respect to a number, specified herein, of Shares. For purposes
of this Warrant: (i) one Health Life or Combination Health and Dental Life shall
equal one Equivalent Life; (ii) three Dental Lives shall equal one Equivalent
Life; and (iii) ten Carveout Lives shall equal one Equivalent Life.
"Health Life" shall mean one individual enrollee under any medical
health benefits plan serviced by the Company.
"System" shall mean the Company's health care benefits recordkeeping
system product, as the same may exist at any time during the Exercise Period.
1. EXERCISE OF WARRANT
The terms and conditions upon which this Warrant may be exercised, and
the Common Stock covered hereby may be purchased, are as follows:
1.1 Exercise Price. The Exercise Price per Share shall vary depending
upon the date upon which this Warrant is duly exercised, and the Exercise Price
in effect during portions of the Exercise Period shall be the Exercise Price set
forth opposite the following time periods (subject to the provisions of Section
4):
Exercise Price Time Period During Which Effective
-------------- ----------------------------------
$1.50 July 1, 1999 through December 31, 2000
$3.00 January 1, 2001 through December 31, 2001
$6.00 January 1, 2002 to the end of the Exercise Period
1.2 Exercisability of Warrant; Method Of Exercise.
(a) Subject to the proviso set forth at the end of this
sentence, the Holder of this Warrant, may at any time prior to 5:00 p.m. on
December 31, 2002 (the "Exercise Period"), exercise in whole or in part the
purchase rights evidenced by this Warrant; provided, however, that
notwithstanding the foregoing,
(i) the number of Shares in respect of which this
Warrant shall first become exercisable and
(ii) the cumulative number of Shares in respect of
which this Warrant shall have become exercisable
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shall be determined by the number of Equivalent Lives that are on the System on
any day preceding the relevant date of exercise, in accordance with the
following table:
No. of Shares Cumulative No. Aggregate No.
for Which Shares for Which Equivalent
No. of Equivalent Warrant is Newly Warrant is Lives on
Lives on the System Exercisable Exercisable the System
- ------------------- ----------- ----------- ----------
First 200,000 150,000 150,000 200,000
Next 500,000 111,050 261,050 700,000
Next 1,000,000 222,100 483,150 1,700,000
Next 1,300,000 183,148 666,298 3,000,000
(b) Due exercise of this Warrant shall be effected by:
(i) the surrender of the Warrant, together with a
duly executed copy of the form of subscription attached
hereto, to the Secretary of the Company at its principal
offices;
(ii) the payment to the Company, by certified check
or bank draft payable to its order, of an amount equal to the
aggregate Exercise Price for the number of Shares for which
the purchase rights hereunder are being exercised; and
(iii) the delivery to the Company, if necessary, to
assure compliance with federal and state securities laws, of
an instrument executed by the Holder certifying that the
Shares are being acquired for the sole account of the Holder
and not with a view to any resale or distribution.
1.3 Satisfaction with Requirements of Securities Act of 1933.
Notwithstanding the provisions of subsection 1.2(c) and Section 7, each and
every exercise of this Warrant is contingent upon the Company's satisfaction
that the issuance of Common Stock upon the exercise is exempt from the
requirements of the Securities Act and all applicable state securities laws. The
Holder of this Warrant agrees to execute any and all documents deemed necessary
by the Company to effect the exercise of this Warrant.
1.4 Issuance Of Shares and New Warrant. This Warrant, with or without
similar Warrants, when surrendered properly endorsed at the principal offices of
the Company may be exchanged for another Warrant or Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of shares of Common Stock of the Company. In the event
the purchase rights evidenced by this Warrant are exercised in whole or in part,
one or more certificates for the purchased Shares shall be issued as soon as
practicable thereafter to the person exercising such rights. Such Holder shall
also be issued at such time a new Warrant representing the number of Shares (if
any) for which the purchase rights under this Warrant remain unexercised and
continuing in force and effect.
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2. TRANSFERS
2.1 Restrictions on Transfers. Neither this Warrant nor the Shares of
Common Stock may be disposed of, directly or indirectly, except in accordance
with the provisions of the Securities Act and the provisions of any applicable
state securities laws and the rules and regulations thereunder.
2.2 Registered Holder. The Holder agrees that until such time as any
permitted transfer of this Warrant is recorded on the books of the Company, the
Company may treat the registered Holder of this Warrant as the absolute owner.
2.3 Form Of New Warrants. All Warrants issued in connection with
transfers of this Warrant shall bear the same date as this Warrant and shall be
substantially identical in form and provision to this Warrant, with the possible
exception of the number of Shares purchasable thereunder.
3. FRACTIONAL SHARES
Notwithstanding that the number of Shares purchasable upon the exercise
of this Warrant may have been adjusted pursuant to the terms hereof, the Company
shall nonetheless not be required to issue fractions of Shares upon exercise of
this Warrant or to distribute certificates that evidence fractional shares nor
shall the Company be required to make any cash payments in lieu thereof upon
exercise of this Warrant. If a fractional Share shall result from adjustments in
the number of Shares purchasable hereunder, the number of Shares purchasable
hereunder shall, on an aggregate basis taking into account all adjustments
hereunder, be rounded down to the next whole number.
4. ANTIDILUTION PROVISIONS
The provisions of this Section 4 shall apply in the event that any of
the events described in this Section 4 shall occur with respect to the Common
Stock of the Company at any time on or after the original issuance date of this
Warrant.
4.1 Stock Splits and Combinations. If the Company shall at any time
subdivide or combine its outstanding shares of Common Stock, this Warrant shall,
after that subdivision or combination, evidence the right to purchase the number
of shares of Common Stock that would have been issuable as a result of that
change with respect to the Shares of Common Stock which were purchasable under
this Warrant immediately before that subdivision or combination. If the Company
shall at any time subdivide the outstanding shares of Common Stock, the Exercise
Price then in effect immediately before that subdivision shall be
proportionately decreased, and, if the Company shall at any time combine the
outstanding shares of Common Stock, the Exercise Price then in effect
immediately before that combination shall be proportionately increased. Any
adjustment under this section shall become effective at the close of business on
the date the subdivision or combination becomes effective.
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4.2 Reclassification, Exchange and Substitution. If the Common Stock
issuable upon exercise of this Warrant shall be changed into the same or a
different number of shares of any other class or classes of stock, whether by
capital reorganization, reclassification, or other otherwise (other than a
subdivision or combination of shares provided for above), the Holder of this
Warrant shall, on its exercise, be entitled to purchase for the same aggregate
consideration, in lieu of the Common Stock which the Holder would have become
entitled to purchase but for such change, a number of shares of such other class
or classes of stock equivalent to the number of shares of Common Stock that
would have been subject to purchase by the Holder on exercise of this Warrant
immediately before that change.
4.3 Reorganizations, Mergers, Consolidations or Sale Of Assets. If at
any time there shall be a capital reorganization of the Company's Common Stock
(other than a combination, reclassification, exchange, or subdivision of shares
provided for elsewhere above) or merger or consolidation of the Company with or
into another corporation, or the sale of the Company's properties and assets as,
or substantially as, an entirety to any other person, then, as a part of such
reorganization, merger, consolidation or sale, lawful provision shall be made so
that the Holder of this Warrant shall thereafter be entitled to receive upon
exercise of this Warrant, during the period specified in this Warrant and upon
payment of the Exercise Price then in effect, the number of shares of Common
Stock or other securities or property of the Company, or of the successor
corporation resulting from such merger or consolidation, to which a holder of
the Common Stock deliverable upon exercise of this Warrant would have been
entitled in such capital reorganization, merger, or consolidation or sale if
this Warrant had been exercised immediately before that capital reorganization,
merger, consolidation, or sale. In any such case, appropriate adjustment (as
determined in good faith by the Company's Board of Directors) shall be made in
the application of the provisions of this Warrant with respect to the rights and
interests of the Holder of this Warrant after the reorganization, merger,
consolidation, or sale to the end that the provisions of this Warrant (including
adjustment of the Exercise Price then in effect and number of Shares purchasable
upon exercise of this Warrant) shall be applicable after that event, as near as
reasonably may be, in relation to any shares or other property deliverable after
that event upon exercise of this Warrant. The Company shall, within thirty (30)
days after making such adjustment, give written notice (by first class mail,
postage prepaid) to the registered Holder of this Warrant at the address of that
Holder shown on the Company's books. That notice shall set forth, in reasonable
detail, the event requiring the adjustment and the method by which the
adjustment was calculated and specify the Exercise Price then in effect after
the adjustment and the increased or decreased number of Shares purchasable upon
exercise of this Warrant. When appropriate, that notice may be given in advance
and included as part of the notice required under other provisions of this
Warrant.
4.4 Certificate as to Adjustments. In the case of each adjustment or
readjustment of the Exercise Price pursuant to this Section 4, the Company will
promptly compute such adjustment or readjustment in accordance with the terms
hereof and cause a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based,
to be delivered to the Holder of this Warrant. The Company will, upon the
written request at any time of the Holder of this Warrant, furnish or cause to
be furnished to such Holder a certificate setting forth:
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(a) Such adjustments and readjustments;
(b) The purchase price at the time in effect; and
(c) The number of shares of Common Stock issuable upon
exercise of the Warrant and the amount, if any, of other property at
the time receivable upon the exercise of the Warrant.
4.5 Reservation of Stock Issuable Upon Exercise. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock solely for the purpose of effecting the exercise of this Warrant
such number of its shares of Common Stock as shall from time to time be
sufficient to effect the exercise of this Warrant and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the exercise of this Warrant, in addition to such other remedies as shall
be available to the Holder of this Warrant, the Company will use its best
efforts to take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes.
5. RIGHTS PRIOR TO EXERCISE OF WARRANT
This Warrant does not entitled the Holder to any of the rights of a
stockholder of the Company, including without limitation, the right to receive
dividends or other distributions, to exercise any preemptive rights, to vote, or
to consent or to receive notice as a stockholder of the Company.
6. SUCCESSORS AND ASSIGNS
The terms and provisions of this Warrant shall inure to the benefit of,
and be binding upon, the Company and the holder thereof and their respective
successors and permitted assigns.
7. RESTRICTED SECURITIES
In order to enable the Company to comply with the Securities Act and
applicable state laws, the Company may require the Holder as a condition of the
transfer or exercise of this Warrant, to give written assurance satisfactory to
the Company that the Warrant, or in the case of an exercise hereof the Shares
subject to this Warrant, are being acquired for his own account, for investment
only, with no view to the distribution of the same, and that any disposition of
all or any portion of this Warrant or the Shares issuable upon the due exercise
of this Warrant shall not be made, unless and until:
(a) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition
is made in accordance with such registration statement; or
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(b) (i) The Holder has notified the Company of the proposed
disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition,
and (ii) the Holder has furnished the Company with an opinion of
counsel, reasonably satisfactory to the Company, that such disposition
will not require registration of such securities under the Securities
Act and applicable state law.
The Holder acknowledges that this Warrant is, and each of the Shares of
Common Stock issuable upon the due exercise hereof will be, a restricted
security, that the Holder understands the provisions of Rule 144 of the
Securities and Exchange Commission, and that the certificate or certificates
evidencing such shares of Common Stock will bear a legend substantially similar
to the following:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
under the securities laws of any state. They may not be sold,
transferred or otherwise disposed of in the absence of an
effective registration statement covering these securities
under the said Act or laws, or an opinion of counsel
satisfactory to the Company and its counsel that registration
is not required thereunder."
8. LOSS OR MUTILATION
Upon receipt by the Company of satisfactory evidence of the ownership
of and the loss, theft, destruction, or mutilation of this Warrant, and (i) in
the case of loss, theft, or destruction, upon receipt by the Company of
indemnity satisfactory to it, or (ii) in the case of mutilation, upon receipt of
this Warrant and upon surrender and cancellation of such instrument, the Company
shall execute and deliver in lieu thereof a new Warrant representing the right
to purchase an equal number of Shares of Common Stock.
9. NOTICES
All notices, requests, demands and other communications under this
Warrant shall be in writing and shall be deemed to have been duly given on the
date of service if served personally on the party to whom notice is to be given,
or on the date of mailing if mailed to the party to whom notice is to be given,
by first class mail, registered or certified, postage prepaid, and properly
addressed as follows: if to the Holder, at the address of the Holder set forth
on the signature page of this Warrant; and if to the Company, at its principal
office. Any party may change its address for purposes of this subsection by
giving the other party written notice of the new address in the manner set forth
above.
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10. GOVERNING LAW
This Warrant and any dispute, disagreement or issue of construction of
interpretation arising hereunder whether relating to its execution, its
validity, the obligations provided herein or performance shall be governed or
interpreted according to the internal laws of the State of Nevada without regard
to conflicts of law.
DATED: July 1, 1999.
QUALITY CARE SOLUTIONS, INC.
By:__________________________________
Title:_______________________________
ATTEST:
_________________________________
Secretary
Acknowledged and Agreed:
PLATINUM EQUITY HOLDINGS
By______________________________
Title: _________________________
Holder's address for notices:
2049 Century Park East
Suite 2710
Los Angeles, California 90067
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SUBSCRIPTION
(to be completed and executed upon exercise of Warrant)
QUALITY CARE SOLUTIONS, INC.
5030 East Sunrise Drive
Phoenix, Arizona 85044
Gentlemen:
The undersigned hereby irrevocably elects to purchase, pursuant to the
provisions of the within Warrant held by the undersigned, ____________ shares of
Common Stock of Quality Care Solutions, Inc.
Payment of the purchase price per Share required under such Warrant accompanies
this subscription.
The undersigned hereby represents and warrants that the undersigned is acquiring
such stock for the account of the undersigned and not for resale or with a view
to distribution of such Common Stock or any part hereof; that the undersigned is
fully aware of the transfer restrictions affecting restricted securities under
the pertinent securities laws and the undersigned understands that the shares
purchased hereby are restricted securities and that the certificate or
certificates evidencing the same will bear a legend to that effect.
DATED:_____________________________, _________.
Signature:__________________________________
Address:____________________________________
____________________________________________
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