Document:

EXHIBIT
      4.4

     

    NEITHER
      THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE HAVE
      BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
      COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
      THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
      MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
      STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
      OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
      SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS
      EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
      SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY
      AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY MAY BE PLEDGED IN
      CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH
      SECURITIES.

    

    COMMON
      STOCK PURCHASE WARRANT

    

    PACE
      HEALTH MANAGEMENT SYSTEMS, INC.

    
      	 	 
	
              Warrant
                No. _____

            	
              Warrant
                Shares: ______

            

    

     

    

    THIS
      COMMON STOCK PURCHASE WARRANT (the “Warrant”)
      certifies that, for value received, ___________ (the “Holder”),
      is
      entitled, upon the terms and subject to the limitations on exercise and the
      conditions hereinafter set forth, at any time on or after the date Shareholder
      Approval is obtained and deemed effective (the “Initial
      Exercise Date”)
      and on
      or prior to the close of business on the fifth anniversary of the Initial
      Exercise Date (the “Termination
      Date”)
      but
      not thereafter, to subscribe for and purchase from Pace Health Management
      Systems, Inc., an Iowa corporation (the “Company”),
      up to
      _____ shares (the “Warrant
      Shares”)
      of
      common stock, no par value per share (the “Common
      Stock”),
      of
      the Company. The purchase price of one share of Common Stock under this Warrant
      shall be equal to the Exercise Price, as defined in Section 2(b).

     

    Section
      1.    Definitions.
      Capitalized terms used and not otherwise defined herein shall have the meanings
      set forth in that certain Securities Purchase Agreement (the “Purchase
      Agreement”),
      dated
      January 24, 2007, among the Company and the purchasers signatory
      thereto.

     

    Section
      2.    Exercise.

     

    a)    Exercise
      of Warrant.
      Exercise of the purchase rights represented by this Warrant may be made, in
      whole or in part, at any time or times on or after the Initial Exercise Date
      and
      on or before the Termination Date by delivery to the Company of a duly executed
      facsimile copy of the Notice of Exercise Form annexed hereto (or
      such

    
      
         

      

      
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    other
      office or agency of the Company as it may designate by notice in writing to
      the
      registered Holder at the address of such Holder appearing on the books of the
      Company); and, within 3 Trading Days of the date said Notice of Exercise is
      delivered to the Company, the Company shall have received payment of the
      aggregate Exercise Price of the Warrant Shares thereby purchased by wire
      transfer or cashier’s check drawn on a United States bank. Notwithstanding
      anything herein to the contrary, the Holder shall not be required to physically
      surrender this Warrant to the Company until the Holder has purchased all of
      the
      Warrant Shares available hereunder and the Warrant has been exercised in full,
      in which case, the Holder shall surrender this Warrant to the Company for
      cancellation within 3 Trading Days of the date the final Notice of Exercise
      is
      delivered to the Company. Partial exercises of this Warrant resulting in
      purchases of a portion of the total number of Warrant Shares available hereunder
      shall have the effect of lowering the outstanding number of Warrant Shares
      purchasable hereunder in an amount equal to the applicable number of Warrant
      Shares purchased. The Holder and the Company shall maintain records showing
      the
      number of Warrant Shares purchased and the date of such purchases. The Company
      shall deliver any objection to any Notice of Exercise Form within 1 Business
      Day
      of receipt of such notice. In the event of any dispute or discrepancy, the
      Notice of Exercise shall be controlling and determinative in the absence of
      manifest error. The Holder and any assignee, by acceptance of this Warrant,
      acknowledge and agree that, by reason of the provisions of this paragraph,
      following the purchase of a portion of the Warrant Shares hereunder, the number
      of Warrant Shares available for purchase hereunder at any given time may be
      less
      than the amount stated on the face hereof.

     

    b)    Exercise
      Price.
      The
      exercise price per Warrant Share under this Warrant shall be $2.50, subject
      to
      adjustment hereunder (the “Exercise
      Price”).

     

    c)    Cashless
      Exercise.
      If at
      any time after one year from the date of issuance of this Warrant there is
      no
      effective Registration Statement registering, or no current prospectus available
      for, the resale of the Warrant Shares by the Holder, then this Warrant may
      also
      be exercised at such time by means of a “cashless exercise” in which the Holder
      shall be entitled to receive a certificate for the number of Warrant Shares
      equal to the quotient obtained by dividing [(A-B) (X)] by (A),
      where:

     

    (A)
      = the
      VWAP on the Trading Day immediately preceding the date of such
      election;

    

    (B)
      = the
      Exercise Price of this Warrant, as adjusted; and 

    

    (X)
      = the
      number of Warrant Shares issuable upon exercise of this Warrant in accordance
      with the terms of this Warrant by means of a cash exercise rather than a
      cashless exercise.

    

    Notwithstanding
      anything herein to the contrary, on the Termination Date, this Warrant shall
      be
      automatically exercised via cashless exercise pursuant to this Section
      2(c).

    
      
         

      

      
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    d)    Holder’s
      Restrictions.
      The
      Company shall not effect any exercise of this Warrant, and a Holder shall not
      have the right to exercise any portion of this Warrant, pursuant to Section
      2(c)
      or otherwise, to the extent that after giving effect to such issuance after
      exercise as set forth on the applicable Notice of Exercise, such Holder
      (together with such Holder’s Affiliates, and any other person or entity acting
      as a group together with such Holder or any of such Holder’s Affiliates), as set
      forth on the applicable Notice of Exercise, would beneficially own in excess
      of
      the Beneficial Ownership Limitation (as defined below).  For purposes of
      the foregoing sentence, the number of shares of Common Stock beneficially owned
      by such Holder and its Affiliates shall include the number of shares of Common
      Stock issuable upon exercise of this Warrant with respect to which such
      determination is being made, but shall exclude the number of shares of Common
      Stock which would be issuable upon (A) exercise of the remaining, nonexercised
      portion of this Warrant beneficially owned by such Holder or any of its
      Affiliates and (B) exercise or conversion of the unexercised or nonconverted
      portion of any other securities of the Company (including, without limitation,
      any other Preferred Stock) subject to a limitation on conversion or exercise
      analogous to the limitation contained herein beneficially owned by such Holder
      or any of its affiliates.  Except as set forth in the preceding sentence,
      for purposes of this Section 2(d), beneficial ownership shall be calculated
      in
      accordance with Section 13(d) of the Exchange Act and the rules and regulations
      promulgated thereunder, it being acknowledged by a Holder that the Company
      is
      not representing to such Holder that such calculation is in compliance with
      Section 13(d) of the Exchange Act and such Holder is solely responsible for
      any
      schedules required to be filed in accordance therewith. To the extent that
      the
      limitation contained in this Section 2(d) applies, the determination of whether
      this Warrant is exercisable (in relation to other securities owned by such
      Holder together with any Affiliates) and of which a portion of this Warrant
      is
      exercisable shall be in the sole discretion of a Holder, and the submission
      of a
      Notice of Exercise shall be deemed to be each Holder’s determination of whether
      this Warrant is exercisable (in relation to other securities owned by such
      Holder together with any Affiliates) and of which portion of this Warrant is
      exercisable, in each case subject to such aggregate percentage limitation,
      and
      the Company shall have no obligation to verify or confirm the accuracy of such
      determination. In addition, a determination as to any group status as
      contemplated above shall be determined in accordance with Section 13(d) of
      the
      Exchange Act and the rules and regulations promulgated thereunder. For purposes
      of this Section 2(d), in determining the number of outstanding shares of Common
      Stock, a Holder may rely on the number of outstanding shares of Common Stock
      as
      reflected in (x) the Company’s most recent Form 10-QSB or Form 10-KSB, as the
      case may be, (y) a more recent public announcement by the Company or (z) any
      other notice by the Company or the Company’s Transfer Agent setting forth the
      number of shares of Common Stock

    
      
         

      

      
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    outstanding. 
      Upon the written or oral request of a Holder, the Company shall within two
      Trading Days confirm orally and in writing to such Holder the number of shares
      of Common Stock then outstanding.  In any case, the number of outstanding
      shares of Common Stock shall be determined after giving effect to the conversion
      or exercise of securities of the Company, including this Warrant, by such Holder
      or its Affiliates since the date as of which such number of outstanding shares
      of Common Stock was reported. The “Beneficial
      Ownership Limitation”
shall
      be 9.99% of the number of shares of the Common Stock outstanding immediately
      after giving effect to the issuance of shares of Common Stock issuable upon
      exercise of this Warrant. The provisions of this paragraph shall be construed
      and implemented in a manner otherwise than in strict conformity with the terms
      of this Section 2(d) to correct this paragraph (or any portion hereof) which
      may
      be defective or inconsistent with the intended Beneficial Ownership Limitation
      herein contained or to make changes or supplements necessary or desirable to
      properly give effect to such limitation. The limitations contained in this
      paragraph shall apply to a successor holder of this Warrant.

     

    e)    Mechanics
      of Exercise.
      

     

    i.    Authorization
      of Warrant Shares.
      The
      Company covenants that all Warrant Shares which may be issued upon the exercise
      of the purchase rights represented by this Warrant and payment of the purchase
      price for the Warrant Shares so purchased will, upon exercise of the purchase
      rights represented by this Warrant, be duly authorized, validly issued, fully
      paid and nonassessable and free from all taxes, liens and charges created by
      the
      Company in respect of the issue thereof (other than taxes in respect of any
      transfer occurring contemporaneously with such issue). 

     

    ii.    Delivery
      of Certificates Upon Exercise.
      Certificates for shares purchased hereunder shall be transmitted by the transfer
      agent of the Company to the Holder by crediting the account of the Holder’s
      prime broker with the Depository Trust Company through its Deposit Withdrawal
      Agent Commission (“DWAC”)
      system
      if the Company is a participant in such system, and otherwise by physical
      delivery to the address specified by the Holder in the Notice of Exercise within
      3 Trading Days from the delivery to the Company of the Notice of Exercise Form,
      surrender of this Warrant (if required) and payment of the aggregate Exercise
      Price as set forth above (“Warrant
      Share Delivery Date”).
      This
      Warrant shall be deemed to have been exercised on the date the Exercise Price
      is
      received by the Company. The Warrant Shares shall be deemed to have been issued,
      and Holder or any other person so designated to be named therein shall be deemed
      to have become a holder of record of such shares for all purposes, as of the
      date the Warrant has been exercised by payment to the Company of the Exercise
      Price (or by cashless exercise, if

    
      
         

      

      
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    permitted)
      and all taxes required to be paid by the Holder, if any, pursuant to Section
      2(e)(vii) prior to the issuance of such shares, have been paid. 

     

    iii.    Delivery
      of New Warrants Upon Exercise.
      If this
      Warrant shall have been exercised in part, the Company shall, at the request
      of
      a Holder and upon surrender of this Warrant certificate, at the time of delivery
      of the certificate or certificates representing Warrant Shares, deliver to
      Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased
      Warrant Shares called for by this Warrant, which new Warrant shall in all other
      respects be identical with this Warrant.

     

    iv.    Rescission
      Rights.
      If the
      Company fails to cause its transfer agent to transmit to the Holder a
      certificate or certificates representing the Warrant Shares pursuant to this
      Section 2(e)(iv) by the second Trading Day following the Warrant Share Delivery
      Date, then the Holder will have the right to rescind such exercise.

     

    v.    Compensation
      for Buy-In on Failure to Timely Deliver Certificates Upon
      Exercise.
      In
      addition to any other rights available to the Holder, if the Company fails
      to
      cause its transfer agent to transmit to the Holder a certificate or certificates
      representing the Warrant Shares pursuant to an exercise on or before the second
      Trading Day following the Warrant Share Delivery Date, and if after such date
      the Holder is required by its broker to purchase (in an open market transaction
      or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of
      Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant
      Shares which the Holder anticipated receiving upon such exercise (a
“Buy-In”),
      then
      the Company shall (1) pay in cash to the Holder the amount by which (x) the
      Holder’s total purchase price (including brokerage commissions, if any) for the
      shares of Common Stock so purchased exceeds (y) the amount obtained by
      multiplying (A) the number of Warrant Shares that the Company was required
      to
      deliver to the Holder in connection with the exercise at issue times (B) the
      price at which the sell order giving rise to such purchase obligation was
      executed, and (2) at the option of the Holder, either reinstate the portion
      of
      the Warrant and equivalent number of Warrant Shares for which such exercise
      was
      not honored or deliver to the Holder the number of shares of Common Stock that
      would have been issued had the Company timely complied with its exercise and
      delivery obligations hereunder. For example, if the Holder purchases Common
      Stock having a total purchase price of $11,000 to cover a Buy-In with respect
      to
      an attempted exercise of shares of Common Stock with an aggregate sale price
      giving rise to such purchase obligation of $10,000, under clause (1) of the
      immediately preceding sentence the Company shall be required to pay the Holder
      $1,000. The Holder shall provide the Company written notice indicating the
      amounts payable to the

    
      
         

      

      
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    Holder
      in
      respect of the Buy-In and, upon request of the Company, evidence of the amount
      of such loss. Nothing herein shall limit a Holder’s right to pursue any other
      remedies available to it hereunder, at law or in equity including, without
      limitation, a decree of specific performance and/or injunctive relief with
      respect to the Company’s failure to timely deliver certificates representing
      shares of Common Stock upon exercise of the Warrant as required pursuant to
      the
      terms hereof.

     

    vi.    No
      Fractional Shares or Scrip.
      No
      fractional shares or scrip representing fractional shares shall be issued upon
      the exercise of this Warrant. As to any fraction of a share which Holder would
      otherwise be entitled to purchase upon such exercise, the Company shall at
      its
      election, either pay a cash adjustment in respect of such final fraction in
      an
      amount equal to such fraction multiplied by the Exercise Price or round up
      to
      the next whole share.

     

    vii.    Charges,
      Taxes and Expenses.
      Issuance of certificates for Warrant Shares shall be made without charge to
      the
      Holder for any issue or transfer tax or other incidental expense in respect
      of
      the issuance of such certificate, all of which taxes and expenses shall be
      paid
      by the Company, and such certificates shall be issued in the name of the Holder
      or in such name or names as may be directed by the Holder; provided,
      however,
      that in
      the event certificates for Warrant Shares are to be issued in a name other
      than
      the name of the Holder, this Warrant when surrendered for exercise shall be
      accompanied by the Assignment Form attached hereto duly executed by the Holder;
      and the Company may require, as a condition thereto, the payment of a sum
      sufficient to reimburse it for any transfer tax incidental thereto.

     

    viii.    Closing
      of Books.
      The
      Company will not close its stockholder books or records in any manner which
      prevents the timely exercise of this Warrant, pursuant to the terms
      hereof.

     

    Section
      3.    Certain Adjustments.

     

    a)    Stock
      Dividends and Splits.
      Other
      than (a) in accordance with the Reverse Merger or (b) the transactions for
      which
      Shareholder Approval is being obtained, if the Company, at any time while this
      Warrant is outstanding: (A) pays a stock dividend or otherwise make a
      distribution or distributions on shares of its Common Stock or any other equity
      or equity equivalent securities payable in shares of Common Stock (which, for
      avoidance of doubt, shall not include any shares of Common Stock issued by
      the
      Company upon exercise of this Warrant), (B) subdivides outstanding shares of
      Common Stock into a larger number of shares, (C) combines (including by way
      of
      reverse stock split) outstanding shares of Common Stock into a smaller number
      of
      shares, or (D) issues by reclassification of shares of the Common Stock any
      shares of capital stock of the Company, then in each case the Exercise Price
      shall be multiplied by a fraction of which the numerator shall be the number
      of
      shares of Common Stock (excluding treasury

    
      
         

      

      
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    shares,
      if any) outstanding immediately before such event and of which the denominator
      shall be the number of shares of Common Stock outstanding immediately after
      such
      event and the number of shares issuable upon exercise of this Warrant shall
      be
      proportionately adjusted. Any adjustment made pursuant to this Section 3(a)
      shall become effective immediately after the record date for the determination
      of stockholders entitled to receive such dividend or distribution and shall
      become effective immediately after the effective date in the case of a
      subdivision, combination or re-classification.

     

    b)    Subsequent
      Equity Sales.
      If the
      Company or any Subsidiary thereof, as applicable, at any time while this Warrant
      is outstanding, shall sell or grant any option to purchase or sell or grant
      any
      right to reprice its securities, or otherwise dispose of or issue (or announce
      any offer, sale, grant or any option to purchase or other disposition) any
      Common Stock or Common Stock Equivalents entitling any Person to acquire shares
      of Common Stock, at an effective price per share less than the then Exercise
      Price (such lower price, the “Base
      Share Price”
and
      such issuances collectively, a “Dilutive
      Issuance”)
      (if
      the holder of the Common Stock or Common Stock Equivalents so issued shall
      at
      any time, whether by operation of purchase price adjustments, reset provisions,
      floating conversion, exercise or exchange prices or otherwise, or due to
      warrants, options or rights per share which are issued in connection with such
      issuance, be entitled to receive shares of Common Stock at an effective price
      per share which is less than the Exercise Price, such issuance shall be deemed
      to have occurred for less than the Exercise Price on such date of the Dilutive
      Issuance), then the Exercise Price shall be reduced and only reduced to equal
      the Base Share Price and the number of Warrant Shares issuable hereunder shall
      be increased such that the aggregate Exercise Price payable hereunder, after
      taking into account the decrease in the Exercise Price, shall be equal to the
      aggregate Exercise Price prior to such adjustment. Such adjustment shall be
      made
      whenever such Common Stock or Common Stock Equivalents are issued.
      Notwithstanding the foregoing, no adjustments shall be made, paid or issued
      under this Section 3(b) in respect of an Exempt Issuance. The Company shall
      notify the Holder in writing, no later than the Trading Day following the
      issuance of any Common Stock or Common Stock Equivalents subject to this Section
      3(b), indicating therein the applicable issuance price, or applicable reset
      price, exchange price, conversion price and other pricing terms (such notice
      the
“Dilutive
      Issuance Notice”).
      For
      purposes of clarification, whether or not the Company provides a Dilutive
      Issuance Notice pursuant to this Section 3(b), upon the occurrence of any
      Dilutive Issuance, after the date of such Dilutive Issuance the Holder is
      entitled to receive a number of Warrant Shares based upon the Base Share Price
      regardless of whether the Holder accurately refers to the Base Share Price
      in
      the Notice of Exercise.

     

    c)    Subsequent
      Rights Offerings.
      If the
      Company, at any time while the Warrant is outstanding, shall issue rights,
      options or warrants to all holders of Common Stock (and not to Holders)
      entitling them to subscribe for or purchase shares of Common Stock at a price
      per share less than the VWAP at the record date mentioned below, then the
      Exercise Price shall be multiplied by a fraction, of which the denominator
      shall
      be the number of shares of the Common Stock outstanding on the date of issuance
      of such rights or warrants plus the number of additional shares of Common Stock
      offered for subscription or purchase, and of which the numerator shall be the
      number of shares of the

    
      
         

      

      
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    Common
      Stock outstanding on the date of issuance of such rights or warrants plus the
      number of shares which the aggregate offering price of the total number of
      shares so offered (assuming receipt by the Company in full of all consideration
      payable upon exercise of such rights, options or warrants) would purchase at
      such VWAP. Such adjustment shall be made whenever such rights or warrants are
      issued, and shall become effective immediately after the record date for the
      determination of stockholders entitled to receive such rights, options or
      warrants. 

     

    d)    Pro
      Rata Distributions.
      If the
      Company, at any time prior to the Termination Date, shall distribute to all
      holders of Common Stock (and not to Holders of the Warrants) evidences of its
      indebtedness or assets (including cash and cash dividends) or rights or warrants
      to subscribe for or purchase any security other than the Common Stock (which
      shall be subject to Section 3(b)), then in each such case the Exercise Price
      shall be adjusted by multiplying the Exercise Price in effect immediately prior
      to the record date fixed for determination of stockholders entitled to receive
      such distribution by a fraction of which the denominator shall be the VWAP
      determined as of the record date mentioned above, and of which the numerator
      shall be such VWAP on such record date less the then per share fair market
      value
      at such record date of the portion of such assets or evidence of indebtedness
      so
      distributed applicable to one outstanding share of the Common Stock as
      determined by the Board of Directors in good faith. In either case the
      adjustments shall be described in a statement provided to the Holder of the
      portion of assets or evidences of indebtedness so distributed or such
      subscription rights applicable to one share of Common Stock. Such adjustment
      shall be made whenever any such distribution is made and shall become effective
      immediately after the record date mentioned above.

     

    e)    Fundamental
      Transaction.
      If, at
      any time while this Warrant is outstanding, (A) the Company effects any merger
      or consolidation of the Company with or into another Person, (B) the Company
      effects any sale of all or substantially all of its assets in one or a series
      of
      related transactions, (C) any tender offer or exchange offer (whether by the
      Company or another Person) is completed pursuant to which holders of Common
      Stock are permitted to tender or exchange their shares for other securities,
      cash or property, or (D) the Company effects any reclassification of the Common
      Stock or any compulsory share exchange pursuant to which the Common Stock is
      effectively converted into or exchanged for other securities, cash or property
      (each “Fundamental
      Transaction”),
      then,
      upon any subsequent exercise of this Warrant, the Holder shall have the right
      to
      receive, for each Warrant Share that would have been issuable upon such exercise
      immediately prior to the occurrence of such Fundamental Transaction, the number
      of shares of Common Stock of the successor or acquiring corporation or of the
      Company, if it is the surviving corporation, and any additional consideration
      (the “Alternate
      Consideration”)
      receivable as a result of such merger, consolidation or disposition of assets
      by
      a Holder of the number of shares of Common Stock for which this Warrant is
      exercisable immediately prior to such event. For purposes of any such exercise,
      the determination of the Exercise Price shall be appropriately adjusted to
      apply
      to such Alternate Consideration based on the amount of Alternate Consideration
      issuable in respect of one share of Common Stock in such Fundamental
      Transaction, and the Company shall apportion the Exercise Price among the
      Alternate Consideration in a

    
      
         

      

      
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    reasonable
      manner reflecting the relative value of any different components of the
      Alternate Consideration. If holders of Common Stock are given any choice as
      to
      the securities, cash or property to be received in a Fundamental Transaction,
      then the Holder shall be given the same choice as to the Alternate Consideration
      it receives upon any exercise of this Warrant following such Fundamental
      Transaction. To the extent necessary to effectuate the foregoing provisions,
      any
      successor to the Company or surviving entity in such Fundamental Transaction
      shall issue to the Holder a new warrant consistent with the foregoing provisions
      and evidencing the Holder’s right to exercise such warrant into Alternate
      Consideration. The terms of any agreement pursuant to which a Fundamental
      Transaction is effected shall include terms requiring any such successor or
      surviving entity to comply with the provisions of this Section 3(e) and insuring
      that this Warrant (or any such replacement security) will be similarly adjusted
      upon any subsequent transaction analogous to a Fundamental Transaction.
      Notwithstanding anything to the contrary, in the event of a Fundamental
      Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3 transaction”
as defined in Rule 13e-3 under the Securities Exchange Act of 1934, as amended,
      or (3) a Fundamental Transaction involving a person or entity not traded on
      a
      national securities exchange, the Nasdaq Global Select Market, the Nasdaq Global
      Market, the Nasdaq Capital Market, the Company or any successor entity shall
      pay
      at the Holder’s option, exercisable at any time concurrently with or within 30
      days after the consummation of the Fundamental Transaction, an amount of cash
      equal to the value of this Warrant as determined in accordance with the
      Black-Scholes option pricing formula using an expected volatility equal to
      the
      100 day historical price volatility obtained from the HVT function on Bloomberg
      L.P. as of the trading day immediately prior to the public announcement of
      the
      Fundamental Transaction. Notwithstanding anything contained herein to the
      contrary, neither the Reverse Merger nor any action taken as a result of the
      obtaining of Shareholder Approval shall be deemed a Fundamental
      Transaction.

     

    f)    Calculations.
      All
      calculations under this Section 3 shall be made to the nearest cent or the
      nearest 1/100th of a share, as the case may be. For purposes of this Section
      3,
      the number of shares of Common Stock deemed to be issued and outstanding as
      of a
      given date shall be the sum of the number of shares of Common Stock (excluding
      treasury shares, if any) issued and outstanding.

     

    g)    Voluntary
      Adjustment By Company.
      The
      Company may at any time during the term of this Warrant reduce the then current
      Exercise Price to any amount and for any period of time deemed appropriate
      by
      the Board of Directors of the Company.

     

    h)    Notice
      to Holder.
      

     

    i.    Adjustment
      to Exercise Price.
      Whenever the Exercise Price is adjusted pursuant to any provision of this
      Section 3, the Company shall promptly mail to the Holder a notice setting forth
      the Exercise Price after such adjustment and setting forth a brief statement
      of
      the facts requiring such adjustment. If the Company issues a variable rate
      security, despite the prohibition thereon in the Purchase Agreement, the Company
      shall be deemed to have issued Common Stock or Common Stock Equivalents
      at

    
      
         

      

      
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    the
      lowest possible conversion or exercise price at which such securities may be
      converted or exercised in the case of a Variable Rate Transaction (as defined
      in
      the Purchase Agreement).

     

    ii.    Notice
      to Allow Exercise by Holder.
      If (A)
      the Company shall declare a dividend (or any other distribution in whatever
      form) on the Common Stock; (B) the Company shall declare a special nonrecurring
      cash dividend on or a redemption of the Common Stock; (C) the Company shall
      authorize the granting to all holders of the Common Stock rights or warrants
      to
      subscribe for or purchase any shares of capital stock of any class or of any
      rights; (D) the approval of any stockholders of the Company shall be required
      in
      connection with any reclassification of the Common Stock, any consolidation
      or
      merger to which the Company is a party, any sale or transfer of all or
      substantially all of the assets of the Company, of any compulsory share exchange
      whereby the Common Stock is converted into other securities, cash or property
      (other than in connection with the Reverse Merger or Shareholder Approval);
      (E)
      the Company shall authorize the voluntary or involuntary dissolution,
      liquidation or winding up of the affairs of the Company; then, in each case,
      the
      Company shall cause to be mailed to the Holder at its last address as it shall
      appear upon the Warrant Register of the Company, at least 20 calendar days
      prior
      to the applicable record or effective date hereinafter specified, a notice
      stating (x) the date on which a record is to be taken for the purpose of such
      dividend, distribution, redemption, rights or warrants, or if a record is not
      to
      be taken, the date as of which the holders of the Common Stock of record to
      be
      entitled to such dividend, distributions, redemption, rights or warrants are
      to
      be determined or (y) the date on which such reclassification, consolidation,
      merger, sale, transfer or share exchange is expected to become effective or
      close, and the date as of which it is expected that holders of the Common Stock
      of record shall be entitled to exchange their shares of the Common Stock for
      securities, cash or other property deliverable upon such reclassification,
      consolidation, merger, sale, transfer or share exchange; provided that the
      failure to mail such notice or any defect therein or in the mailing thereof
      shall not affect the validity of the corporate action required to be specified
      in such notice. The Holder is entitled to exercise this Warrant during the
      20-day period commencing on the date of such notice to the effective date of
      the
      event triggering such notice.

     

    Section
      4.    Transfer
      of Warrant.

     

    a)    Transferability.
      Subject
      to compliance with any applicable securities laws and the conditions set forth
      in Section 4(d) hereof and to the provisions of Section 4.1 of the Purchase
      Agreement, this Warrant and all rights hereunder (including, without limitation,
      any registration rights) are transferable, in whole or in part, upon surrender
      of this Warrant at the principal office of the Company or its designated agent,
      together with a written assignment of this Warrant substantially in the form
      attached hereto duly

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

    executed
      by the Holder or its agent or attorney and funds sufficient to pay any transfer
      taxes payable upon the making of such transfer. Upon such surrender and, if
      required, such payment, the Company shall execute and deliver a new Warrant
      or
      Warrants in the name of the assignee or assignees and in the denomination or
      denominations specified in such instrument of assignment, and shall issue to
      the
      assignor a new Warrant evidencing the portion of this Warrant not so assigned,
      and this Warrant shall promptly be cancelled. A Warrant, if properly assigned,
      may be exercised by a new holder for the purchase of Warrant Shares without
      having a new Warrant issued. 

     

    b)    New
      Warrants.
      This
      Warrant may be divided or combined with other Warrants upon presentation hereof
      at the aforesaid office of the Company, together with a written notice
      specifying the names and denominations in which new Warrants are to be issued,
      signed by the Holder or its agent or attorney. Subject to compliance with
      Section 4(a), as to any transfer which may be involved in such division or
      combination, the Company shall execute and deliver a new Warrant or Warrants
      in
      exchange for the Warrant or Warrants to be divided or combined in accordance
      with such notice.

     

    c)    Warrant
      Register.
      The
      Company shall register this Warrant, upon records to be maintained by the
      Company for that purpose (the “Warrant
      Register”),
      in
      the name of the record Holder hereof from time to time. The Company may deem
      and
      treat the registered Holder of this Warrant as the absolute owner hereof for
      the
      purpose of any exercise hereof or any distribution to the Holder, and for all
      other purposes, absent actual notice to the contrary.

     

    d)    Transfer
      Restrictions.
      If,
      at the
time
      of
      the surrender of this Warrant in connection with any transfer of this Warrant,
      the transfer of this Warrant shall not be registered pursuant to an effective
      registration
      statement under the Securities Act
      and
under
      applicable state securities or blue sky laws, the Company may require, as a
      condition of allowing such transfer, that (i) the Holder or transferee of this
      Warrant, as the case may be, furnish to the Company a written opinion of counsel
      (which opinion shall be in form, substance and scope customary for opinions
      of
      counsel in comparable transactions) to the effect that such transfer may be
      made
      without
      registration under
      the
      Securities Act and under applicable state securities or blue sky laws, and
      (ii)
      the Holder or transferee execute and deliver to the Company an investment letter
      in form and substance acceptable to the Company, and (iii) the transferee be
      an
“accredited
      investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8)
      promulgated under the Securities Act or a “qualified institutional buyer” as
      defined in Rule 144A(a) promulgated under the Securities Act.

     

    Section
      5.    Miscellaneous.

     

    a)    No
      Rights as Shareholder Until Exercise.
      This
      Warrant does not entitle the Holder to any voting rights or other rights as
      a
      shareholder of the Company prior to the exercise hereof as set forth in Section
      2(e)(ii). 

     

    b)    Loss,
      Theft, Destruction or Mutilation of Warrant.
      The
      Company covenants that upon receipt by the Company of evidence reasonably
      satisfactory to it of

    
      
         

      

      
        -11-

        
          

        

      

      
         

      

    

    the
      loss,
      theft, destruction or mutilation of this Warrant or any stock certificate
      relating to the Warrant Shares, and in case of loss, theft or destruction,
      of
      indemnity or security reasonably satisfactory to it (which, in the case of
      the
      Warrant, shall not include the posting of any bond), and upon surrender and
      cancellation of such Warrant or stock certificate, if mutilated, the Company
      will make and deliver a new Warrant or stock certificate of like tenor and
      dated
      as of such cancellation, in lieu of such Warrant or stock
      certificate.

     

    c)    Saturdays,
      Sundays, Holidays, etc.
      If the
      last or appointed day for the taking of any action or the expiration of any
      right required or granted herein shall not be a Business Day, then such action
      may be taken or such right may be exercised on the next succeeding Business
      Day.

     

    d)    Authorized
      Shares.
      

     

    The
      Company covenants that during the period the Warrant is outstanding, it will
      reserve from its authorized and unissued Common Stock a sufficient number of
      shares to provide for the issuance of the Warrant Shares upon the exercise
      of
      any purchase rights under this Warrant. The Company further covenants that
      its
      issuance of this Warrant shall constitute full authority to its officers who
      are
      charged with the duty of executing stock certificates to execute and issue
      the
      necessary certificates for the Warrant Shares upon the exercise of the purchase
      rights under this Warrant. The Company will take all such reasonable action
      as
      may be necessary to assure that such Warrant Shares may be issued as provided
      herein without violation of any applicable law or regulation, or of any
      requirements of the Trading Market upon which the Common Stock may be listed.
      

     

    Except
      and to the extent as waived or consented to by the Holder, the Company shall
      not
      by any action, including, without limitation, amending its certificate of
      incorporation or through any reorganization, transfer of assets, consolidation,
      merger, dissolution, issue or sale of securities or any other voluntary action,
      avoid or seek to avoid the observance or performance of any of the terms of
      this
      Warrant, but will at all times in good faith assist in the carrying out of
      all
      such terms and in the taking of all such actions as may be necessary or
      appropriate to protect the rights of Holder as set forth in this Warrant against
      impairment. Without limiting the generality of the foregoing, the Company will
      (a) not increase the par value of any Warrant Shares above the amount payable
      therefor upon such exercise immediately prior to such increase in par value,
      (b)
      take all such action as may be necessary or appropriate in order that the
      Company may validly and legally issue fully paid and nonassessable Warrant
      Shares upon the exercise of this Warrant, and (c) use commercially reasonable
      efforts to obtain all such authorizations, exemptions or consents from any
      public regulatory body having jurisdiction thereof as may be necessary to enable
      the Company to perform its obligations under this Warrant.

    
      
         

      

      
        -12-

        
          

        

      

      
         

      

    

    Before
      taking any action which would result in an adjustment in the number of Warrant
      Shares for which this Warrant is exercisable or in the Exercise Price, the
      Company shall obtain all such authorizations or exemptions thereof, or consents
      thereto, as may be necessary from any public regulatory body or bodies having
      jurisdiction thereof.

     

    e)    Jurisdiction.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Warrant shall be determined in accordance with the provisions of the
      Purchase Agreement.

     

    f)    Restrictions.
      The
      Holder acknowledges that the Warrant Shares acquired upon the exercise of this
      Warrant, if not registered, will have restrictions upon resale imposed by state
      and federal securities laws.

     

    g)    Nonwaiver
      and Expenses.
      No
      course of dealing or any delay or failure to exercise any right hereunder on
      the
      part of Holder shall operate as a waiver of such right or otherwise prejudice
      Holder’s rights, powers or remedies, notwithstanding the fact that all rights
      hereunder terminate on the Termination Date. If the Company willfully and
      knowingly fails to comply with any provision of this Warrant, which results
      in
      any material damages to the Holder, the Company shall pay to Holder such amounts
      as shall be sufficient to cover any costs and expenses including, but not
      limited to, reasonable attorneys’ fees, including those of appellate
      proceedings, incurred by Holder in collecting any amounts due pursuant hereto
      or
      in otherwise enforcing any of its rights, powers or remedies
      hereunder.

     

    h)    Notices.
      Any
      notice, request or other document required or permitted to be given or delivered
      to the Holder by the Company shall be delivered in accordance with the notice
      provisions of the Purchase Agreement.

     

    i)    Limitation
      of Liability.
      No
      provision hereof, in the absence of any affirmative action by Holder to exercise
      this Warrant to purchase Warrant Shares, and no enumeration herein of the rights
      or privileges of Holder, shall give rise to any liability of Holder for the
      purchase price of any Common Stock or as a stockholder of the Company, whether
      such liability is asserted by the Company or by creditors of the
      Company.

     

    j)    Remedies.
      Holder,
      in addition to being entitled to exercise all rights granted by law, including
      recovery of damages, will be entitled to specific performance of its rights
      under this Warrant. The Company agrees that monetary damages would not be
      adequate compensation for any loss incurred by reason of a breach by it of
      the
      provisions of this Warrant and hereby agrees to waive and not to assert the
      defense in any action for specific performance that a remedy at law would be
      adequate.

     

    k)    Successors
      and Assigns.
      Subject
      to applicable securities laws, this Warrant and the rights and obligations
      evidenced hereby shall inure to the benefit of and be binding upon the
      successors of the Company and the successors and permitted assigns of Holder.
      The provisions of this Warrant are intended to be for the benefit of all
      Holders

    
      
         

      

      
        -13-

        
          

        

      

      
         

      

    

    from
      time
      to time of this Warrant and shall be enforceable by any such Holder or holder
      of
      Warrant Shares.

     

    l)    Amendment.
      This
      Warrant may be modified or amended or the provisions hereof waived with the
      written consent of the Company and the Holder.

     

    m)    Severability.
      Wherever possible, each provision of this Warrant shall be interpreted in such
      manner as to be effective and valid under applicable law, but if any provision
      of this Warrant shall be prohibited by or invalid under applicable law, such
      provision shall be ineffective to the extent of such prohibition or invalidity,
      without invalidating the remainder of such provisions or the remaining
      provisions of this Warrant.

     

    n)    Headings.
      The
      headings used in this Warrant are for the convenience of reference only and
      shall not, for any purpose, be deemed a part of this Warrant.

     

    ********************

    
      
         

      

      
        -14-

        
          

        

      

      
         

      

    

     

     

    IN
      WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
      officer thereunto duly authorized as of the date first above
      indicated.

     

    

     

    
      	
              PACE
                HEALTH MANAGEMENT SYSTEMS, INC.

            
	 
	 
	
              By:__________________________________________

              Name:
                John Pappajohn

              Title:
                President & Chief Executive
                Officer

            

    

    

     

    
      
         

      

      
        -15-

        
          

        

      

      
         

      

    

     

    NOTICE
      OF EXERCISE

    

    TO:_______________________

    

    (1)    The
      undersigned hereby elects to purchase ________ Warrant Shares of the Company
      pursuant to the terms of the attached Warrant (only if exercised in full),
      and
      tenders herewith payment of the exercise price in full, together with all
      applicable transfer taxes, if any.

     

    (2)    Payment
      shall take the form of (check applicable box):

     

    [
      ]
      lawful money of the United States; or

     

    [
      ] [if
      permitted] the cancellation of such number of Warrant Shares as is necessary,
      in
      accordance with the formula set forth in subsection 2(c), to exercise this
      Warrant with respect to the maximum number of Warrant Shares purchasable
      pursuant to the cashless exercise procedure set forth in subsection
      2(c).

     

    (3)    Please
      issue a certificate or certificates representing said Warrant Shares in the
      name
      of the undersigned or in such other name as is specified below:

     

    _______________________________

     

    

    The
      Warrant Shares shall be delivered to the following DWAC Account Number or by
      physical delivery of a certificate to:

    

    _______________________________

     

    _______________________________

     

    _______________________________

    

    (4)    Accredited
      Investor.
      The
      undersigned is an “accredited investor” as defined in Regulation D promulgated
      under the Securities Act of 1933, as amended.

    

    [SIGNATURE
      OF HOLDER]

     

    Name
      of
      Investing Entity:
      ________________________________________________________________________

    Signature
      of Authorized Signatory of Investing Entity:
      _________________________________________________

    Name
      of
      Authorized Signatory:
      ___________________________________________________________________

    Title
      of
      Authorized Signatory:
      ____________________________________________________________________

    Date:
      ________________________________________________________________________________________

    
 

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

     

    ASSIGNMENT
      FORM

    

    (To
      assign the foregoing warrant, execute

    this
      form
      and supply required information. 

    Do
      not
      use this form to exercise the warrant.)

    

    

    

    FOR
      VALUE
      RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all
      rights evidenced thereby are hereby assigned to

     

    

    _______________________________________________
      whose address is

    

    _______________________________________________________________.

    

    

    

    _______________________________________________________________

    

    Dated:
      ______________, _______

    

    

    Holder’s
      Signature:_____________________________

    

    Holder’s
      Address:_____________________________

     

    _____________________________

    

    

    

    Signature
      Guaranteed: ___________________________________________

    

    

    NOTE:
      The
      signature to this Assignment Form must correspond with the name as it appears
      on
      the face of the Warrant, without alteration or enlargement or any change
      whatsoever, and must be guaranteed by a bank or trust company. Officers of
      corporations and those acting in a fiduciary or other representative capacity
      should file proper evidence of authority to assign the foregoing
      Warrant.EXHIBIT
      10.3

    

    

    

    SUBSCRIPTION
      BOOKLET

    

    

    

    PACE
      HEALTH MANAGEMENT SYSTEMS, INC.

    

    

    

    Offering
      of up to $15,000,000 of Units of 

    Pace
      Health Management Systems, Inc.

    

    

    CONTENTS

    

    Instructions
      for Subscription

    

    Subscription
      Agreement

    Exhibit
      A: Registration Rights

    Exhibit
      B: Confidential Purchaser Questionnaire

    
      
         

      

      
         

        
          

        

      

      
         

      

       

      PACE
        HEALTH MANAGEMENT SYSTEMS, INC.

    

    

    INSTRUCTIONS
      FOR SUBSCRIPTION 

    

    The
      subscriber must do the following:

    

    
      	
              1.

            	
              Complete,
                sign and deliver the Subscription Agreement included in this Subscription
                Booklet (fill
                out and sign on page S-1).

            

    

    

    
      	
              2.

            	
              Complete,
                sign and deliver the Confidential Purchaser Questionnaire included
                in this
                Confidential Subscription Booklet and attached hereto as Exhibit
                B (fill
                out (pages 1-5) and sign on page 5).

            

    

    

    
      	
              3.

            	
              Deliver
                payment in the aggregate amount of your
                subscription.

            

    

    

    Delivery
      of the completed subscription documents described above and checks for
      subscription amounts made out to “Continental
      Stock Transfer & Trust Company, as Agent for Pace Health Management Systems,
      Inc.”
should
      be delivered directly to:

    

    Maxim
      Group LLC

    405
      Lexington Avenue 

    New
      York, New York 10174.

    Attention:
      Andrew Rosen

    

    Subscription
      amounts may also be sent by wire transfer of immediately available funds
      to:

    

    
      	
              Bank
                Name:

            	 	
              JP
                Morgan Chase

            
	
              ABA
                #:

            	 	
              021000021

            
	
              Acct
                #:

            	 	
              530-062054

            
	
              Acct.
                Name: 

            	 	
              Continental
                Stock Transfer & Trust Company, as Agent for 

              Pace
                Health Management Systems, Inc. 

            

    

    

    THE
      COMPANY MAY ACCEPT OR REJECT SUBSCRIPTIONS IN ITS SOLE DISCRETION. THE OFFERING
      IS AVAILABLE ONLY TO “ACCREDITED INVESTORS” AS DEFINED UNDER REGULATION D UNDER
      THE SECURITIES ACT OF 1933, AS AMENDED. In the event that a subscription offer
      is not accepted by the Company, the subscription funds shall be returned to
      the
      subscriber, without interest or deduction thereon.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    PACE
      HEALTH MANAGEMENT SYSTEMS, INC.

    

    SUBSCRIPTION
      AGREEMENT

    

    The
      undersigned (hereinafter “Subscriber”)
      hereby
      confirms his/her/its subscription for the purchase of Units, each Unit to
      consist of: (1) 100 shares of Series B Convertible Preferred Stock of Pace
      Health Management Systems, Inc., an Iowa corporation (the “Company”),
      (2) a
      common stock purchase warrant entitling the holder to purchase up to 10,000
      shares of Common Stock of the Company at an exercise price equal to $0.30 per
      share and (3) a common stock purchase warrant entitling the holder to purchase
      up to 3,320 shares of Common Stock of the Company at an exercise price equal
      to
      $2.50 per share. (“Units”)
      of
      Series B Convertible Preferred Stock, par value $0.01 per share (the
“Preferred
      Stock”)
      of
      Pace Health Management Systems, Inc., on the terms described below:

     

    Capitalized
      terms used and not otherwise defined herein shall have the respective meanings
      set forth in the Private Placement Memorandum of the Company, dated as of
      January 16, 2007, and its attachments thereto (the “Memorandum”).
      The
      Units and the underlying common stock are sometimes referred to herein as the
      “Securities.”

    

    In
      connection with this subscription, Subscriber and the Company agree as
      follows:

    

    1.    Purchase
      and Sale of the Units.
      

    

    (a)    The
      Company hereby agrees to issue and to sell to Subscriber, and Subscriber hereby
      agrees to purchase from the Company, such number of Units at a price of One
      Thousand Dollars ($1,000.00) per Unit (the “Unit
      Price”)
      and
      for the aggregate subscription amount set forth on the signature page hereto.
      The Subscriber understands that this subscription is not binding upon the
      Company until the Company accepts it. The Subscriber acknowledges and
      understands that acceptance of this Subscription will be made only by a duly
      authorized representative of the Company executing and mailing or otherwise
      delivering to the Subscriber at the Subscriber’s address set forth herein, a
      counterpart copy of the signature page to this Subscription Agreement indicating
      the Company’s acceptance of this Subscription. The Company and Maxim Group LLC
      (the “Placement
      Agent”)
      reserve the right, in their sole discretion for any reason whatsoever, to accept
      or reject this subscription in whole or in part. Following the acceptance of
      this Subscription Agreement by the Company, and the receipt and acceptance
      by
      the Company of subscriptions to the Minimum Offering (defined below), the
      Company shall instruct its transfer agent to issue and deliver to Subscriber
      (i)
      a share certificate evidencing the applicable number of Shares subscribed for
      hereunder against payment in U.S. Dollars of the Purchase Price (as defined
      below), (ii) a Common Stock purchase warrant exercisable at $0.30 per share,
      and
      (iii) a Common Stock purchase warrant exercisable at $2.50 per share. If this
      subscription is rejected, the Company and the Subscriber shall thereafter have
      no further rights or obligations to each other under or in connection with
      this
      Subscription Agreement. If this subscription is not accepted by the Company
      on
      or before the last day of the Offering Period, this subscription shall be deemed
      rejected.

    

    (b)    Subscriber
      has hereby delivered and paid concurrently herewith the aggregate purchase
      price
      for the Units set forth on the signature page hereof in an amount required
      to
      purchase and pay for the Units subscribed for hereunder (the “Purchase
      Price”),
      which
      amount has been paid in U.S. Dollars by wire transfer or check, subject to
      collection, to the order of “Continental Stock Transfer & Trust Company -
      Pace Health Management Systems, Inc. Escrow Account.”

      
        
           

        

        
           

          
            

          

        

        
           

        

      

    (c)    Subscriber
      understands and acknowledges that this subscription is part of a private
      placement by the Company of up to $15,000,000 of Units, which offering is being
      made on a “best efforts” basis, for a minimum of 10,000 Units (the “Minimum
      Offering”)
      and a
      maximum of 15,000 Units (the “Maximum
      Offering”).
      Subscriber understands that payments hereunder as to the Minimum Offering will
      be held in a non-interest bearing escrow account established by the Company
      with
      Continental Stock Transfer & Trust Company as escrow agent, and will be
      released to the Company if subscriptions for the Minimum Offering are received
      and accepted by the Company within the Offering Period (as described in the
      Memorandum), including any extended period. If subscriptions for the Minimum
      Offering are not received and accepted by the Company within the Offering Period
      (including any extended period), the funds held in such escrow account will
      be
      promptly returned to the subscribers in full without interest or deduction.
      If
      the Company or the Placement Agent rejects all or a portion of any subscription,
      a check will be promptly mailed to the subscriber for all, or the appropriate
      portion of, the amount submitted with such subscriber’s subscription, without
      interest or deduction. All subscriptions received after subscriptions for the
      Minimum Offering have been received and accepted by the Company and the
      Placement Agent will be deposited in such escrow account until accepted by
      the
      Company and the Placement Agent, whereupon such subscription proceeds will
      be
      released by the escrow agent to the Company.

    

    2.    Representations
      and Warranties of Subscriber.
      Subscriber represents and warrants to the Company and the Placement Agent as
      follows:

    

    (a)    Subscriber
      is an “accredited investor” as defined by Rule 501 under the Securities Act of
      1933, as amended (the “Act”),
      and
      Subscriber is capable of evaluating the merits and risks of Subscriber’s
      investment in the Units and has the ability and capacity to protect Subscriber’s
      interests.

    

    (b)    Subscriber
      understands that the Securities are not presently registered, but Subscriber
      is
      entitled to certain rights with respect to the registration of the common stock
      underlying the Units (see Section 6 below). Subscriber understands that the
      Securities will not be registered under the Act on the ground that the issuance
      thereof is exempt under Section 4(2) of the Act as a transaction by an issuer
      not involving any public offering and that, in the view of the Commission,
      the
      statutory basis for the exemption claimed would not be present if any of the
      representations and warranties of Subscriber contained in this Subscription
      Agreement or those of other purchasers of the Securities are untrue or,
      notwithstanding the Subscriber’s representations and warranties, the Subscriber
      currently has in mind acquiring any of the Securities for resale upon the
      occurrence or non-occurrence of some predetermined event.

    

    (c)    Subscriber
      is purchasing the Securities subscribed for hereby for investment purposes
      and
      not with a view to distribution or resale, nor with the intention of selling,
      transferring or otherwise disposing of all or any part thereof for any
      particular price, or at any particular time, or upon the happening of any
      particular event or circumstance, except selling, transferring, or disposing
      the
      Securities made in full compliance with all applicable provisions of the Act,
      the rules and regulations promulgated by the United States Securities and
      Exchange Commission (the “SEC”)
      thereunder, and applicable state securities laws; and that an investment in
      the
      Securities is not a liquid investment.

    

    (d)    Subscriber
      acknowledges that there exists no public market for the Securities, that no
      such
      public market may develop in the future and as a result, Subscriber acknowledges
      that the Securities must be held indefinitely unless subsequently registered
      under the Act or unless an exemption from such registration is available.
      Subscriber is aware of the provisions of Rule 144 promulgated under the Act
      which permit resales of common stock purchased in a private placement subject
      to
      certain limitations and

      
        
           

        

        
           

          
            

          

        

        
           

        

      

    to
      the
      satisfaction of certain conditions provided for thereunder, including, among
      other things, the existence of a public market for the common stock, the
      availability of certain current public information about the Company, the resale
      occurring not less than one year after a party has purchased and paid for the
      security to be sold, the sale being effected through a “broker’s transaction” or
      in transactions directly with a “market maker” and the number of shares of
      common stock being sold during any three-month period not exceeding specified
      limitations.

     

    (e)    Subscriber
      acknowledges that Subscriber has had the opportunity to ask questions of, and
      receive answers from, each of the Company and ConMed, Inc., a Maryland
      corporation (“ConMed”),
      or
      any authorized person acting on behalf of such entity concerning such entity
      and
      its business and to obtain any additional information, to the extent possessed
      by the Company and ConMed (or to the extent it could have been acquired by
      the
      Company or ConMed without unreasonable effort or expense) necessary to verify
      the accuracy of the information received by Subscriber. In connection therewith,
      Subscriber acknowledges that Subscriber has had the opportunity to discuss
      each
      of the Company’s and ConMed’s business, management and financial affairs with
      such entity’s management or any authorized person acting on its behalf.
      Subscriber has received and reviewed the Memorandum and all the information
      concerning the Company, ConMed and the Units, both written and oral, that
      Subscriber desires. Without limiting the generality of the foregoing, Subscriber
      has been furnished with or has had the opportunity to acquire, and to review:
      all information, both written and oral, that Subscriber desires with respect
      to
      each of the Company’s and ConMed’s business, management, financial affairs and
      prospects. In determining whether to make this investment, Subscriber has relied
      solely on (i) Subscriber’s own knowledge and understanding of the Company,
      ConMed and the business of each such entity based upon Subscriber’s own due
      diligence investigations and the information furnished pursuant to this
      paragraph, and (ii) the information described in subparagraph 2(g) below.
      Subscriber understands that no person has been authorized to give any
      information or to make any representations which were not contained in the
      Memorandum and Subscriber has not relied on any other representations or
      information.

    

    (f)    Subscriber
      has all requisite legal and other power and authority to execute and deliver
      this Subscription Agreement and to carry out and perform Subscriber’s
      obligations under the terms of this Subscription Agreement. This Subscription
      Agreement constitutes a valid and legally binding obligation of Subscriber,
      enforceable in accordance with its terms, subject to laws of general application
      relating to bankruptcy, insolvency and the relief of debtors and rules of law
      governing specific performance, injunctive relief or other general principals
      of
      equity, whether such enforcement is considered in a proceeding in equity or
      law.

    

    (g)    Subscriber
      has carefully considered and has discussed with the Subscriber’s legal, tax,
      accounting and financial advisors, to the extent the Subscriber has deemed
      necessary, the suitability of this investment and the transactions contemplated
      by this Subscription Agreement for the Subscriber’s particular federal, state,
      local and foreign tax and financial situation and has independently determined
      that this investment and the transactions contemplated by this Subscription
      Agreement are a suitable investment for the Subscriber. Subscriber has relied
      solely on such advisors and not on any statements or representations of the
      Company or any of its agents. Subscriber understands that Subscriber (and not
      the Company) shall be responsible for Subscriber’s own tax liability that may
      arise as a result of this investment or the transactions contemplated by this
      Subscription Agreement.

    

    (h)    This
      Subscription Agreement and the Confidential Purchaser Questionnaire accompanying
      this Subscription Agreement do not contain any untrue statement of a material
      fact or omit any material fact concerning Subscriber.

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

     

    (i)    There
      are
      no actions, suits, proceedings or investigations pending against Subscriber
      or
      Subscriber’s assets before any court or governmental agency (nor, to
      Subscriber’s knowledge, is there any threat thereof) which would impair in any
      way Subscriber’s ability to enter into and fully perform Subscriber’s
      commitments and obligations under this Subscription Agreement or the
      transactions contemplated hereby.

    

    (j)    The
      execution, delivery and performance of and compliance with this Subscription
      Agreement and the issuance of the Securities will not result in any violation
      of, or conflict with, or constitute a default under, any of Subscriber’s
      articles of incorporation or by-laws, if applicable, or any agreement to which
      Subscriber is a party or by which it is bound, nor result in the creation of
      any
      mortgage, pledge, lien, encumbrance or charge against any of the assets or
      properties of Subscriber or the Securities.

    

    (k)    Subscriber
      acknowledges that an investment in the Securities is speculative and involves
      a
      high degree of risk and that Subscriber can bear the economic risk of the
      purchase of the Securities, including a total loss of his/her/its
      investment.

    

    (l)    Subscriber
      acknowledges that he/she/it has carefully reviewed and considered the risk
      factors discussed in the “Risk Factors” section of the Memorandum.

     

    (m)    Subscriber
      recognizes that no federal, state or foreign agency has recommended or endorsed
      the purchase of the Securities.

    

    (n)    Subscriber
      is aware that the Securities are and will be, when issued, “restricted
      securities” as that term is defined in Rule 144 of the general rules and
      regulations under the Act.

    

    (o)    Subscriber
      understands that any and all certificates representing the Securities and any
      and all securities issued in replacement thereof or in exchange therefor shall
      bear the following legend or one substantially similar thereto, which Subscriber
      has read and understands:

    

    “THE
      SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
      ACT
      OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES
      NOR
      ANY INTEREST THEREIN MAY BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE
      DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
      ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH
      LAWS
      WHICH, IN THE OPINION OF COUNSEL FOR THIS CORPORATION, IS
      AVAILABLE.”

    

    (p)    In
      addition, the certificates representing the Securities, and any and all
      securities issued in replacement thereof or in exchange therefor, shall bear
      such legend as may be required by the securities laws of the jurisdiction in
      which Subscriber resides.

    

    (q)    Because
      of the legal restrictions imposed on resale, Subscriber understands that the
      Company shall have the right to note stop-transfer instructions in its stock
      transfer records, and Subscriber has been informed of the Company’s intention to
      do so. Any sales, transfers, or other

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

     

    dispositions
      of the Securities by Subscriber, if any, will be made in compliance with the
      Act
      and all applicable rules and regulations promulgated thereunder.

    

    (r)    Subscriber
      acknowledges that Subscriber has such knowledge and experience in financial
      and
      business matters that Subscriber is capable of evaluating the merits and risks
      of an investment in the Securities and of making an informed investment decision
      with respect thereto.

    

    (s)    Subscriber
      represents that: (i) Subscriber is able to bear the economic risks of an
      investment in the Securities and to afford a complete loss of the investment,
      and (ii) (A) Subscriber could be reasonably assumed to have the ability and
      capacity to protect his/her/its interests in connection with this subscription;
      or (B) Subscriber has a pre-existing personal or business relationship with
      either the Company or any affiliate thereof of such duration and nature as
      would
      enable a reasonably prudent purchaser to be aware of the character, business
      acumen and general business and financial circumstances of the Company or such
      affiliate and is otherwise personally qualified to evaluate and assess the
      risks, nature and other aspects of this subscription.

    

    (t)    Subscriber
      further represents that the address of Subscriber set forth below is his/her
      principal residence (or, if Subscriber is a company, partnership or other
      entity, the address of its principal place of business); that Subscriber is
      purchasing the Securities for Subscriber’s own account and not, in whole or in
      part, for the account of any other person; Subscriber is purchasing the
      Securities for investment and not with a view to the resale or distribution
      thereof; and that Subscriber has not formed any entity, and is not an entity
      formed, for the purpose of purchasing the Securities.

    

    (u)    Subscriber
      understands that the Company and the Placement Agent shall have the
      unconditional right to accept or reject this subscription, in whole or in part,
      for any reason or without a specific reason, in the sole and absolute discretion
      of the Company (even after receipt and clearance of Subscriber’s funds). This
      Subscription Agreement is not binding upon the Company until accepted in writing
      by an authorized officer of the Company. In the event that this subscription
      is
      rejected, then Subscriber’s subscription funds (to the extent of such rejection)
      will be promptly returned in full without interest thereon or deduction
      therefrom.

    

    (v)    Subscriber
      has not been furnished with any oral representation or oral information in
      connection with the offering of the Securities that is not contained in, or
      is
      in any way contrary to or inconsistent with, statements made in the Memorandum
      and this Subscription Agreement.

    

    (w)    Subscriber
      represents that Subscriber is not subscribing for the Securities as a result
      of
      or subsequent to any advertisement, article, notice or other communication
      published in any newspaper, magazine or similar media or broadcast over the
      Internet, television or radio or presented at any seminar or meeting or any
      public announcement or filing of or by the Company.

     

    (x)    Subscriber
      has carefully read this Subscription Agreement and the Memorandum, and
      Subscriber has accurately completed the Confidential Purchaser Questionnaire
      which accompanies this Subscription Agreement.

    

    (y)    No
      representations or warranties have been made to Subscriber by the Company,
      or
      any officer, employee, agent, affiliate or subsidiary of the Company, other
      than
      the representations of the Company contained herein, and in subscribing for
      the
      Securities the Subscriber is not relying upon any representations other than
      those contained in the Memorandum or in this Subscription Agreement.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

    (z)    Subscriber
      represents and warrants, to the best of Subscriber’s knowledge, that other than
      the Placement Agent, no finder, broker, agent, financial advisor or other
      intermediary, nor any purchaser representative or any broker-dealer acting
      as a
      broker, is entitled to any compensation in connection with the transactions
      contemplated by this Subscription Agreement.

    

    (aa)    Subscriber
      represents and warrants that Subscriber has: (i) not distributed or reproduced
      the Memorandum, in whole or in part, at any time, without the prior written
      consent of the Company and the Placement Agent, (ii) kept confidential and
      non-public the existence of the Memorandum and the information contained therein
      or made available in connection with any further investigation of the Company,
      and Subscriber has not used such information for the Subscriber’s personal
      benefit (other than in connection with this subscription), nor has disclosed
      such information to any third party for any reason, notwithstanding that the
      Subscriber’s subscription may not be accepted by the Company, and (iii)
      refrained and shall refrain from trading in the publicly-traded securities
      of
      the Company for so long as such recipient has been in possession of the material
      non-public information contained in the Memorandum.

    

    (bb)    If
      the
      Subscriber is a corporation, partnership, limited liability company, trust,
      or
      other entity, the person executing this Subscription Agreement hereby represents
      and warrants that the above representations and warranties shall be deemed
      to
      have been made on behalf of such entity and the Subscriber has made the same
      after due inquiry to determine the truthfulness of such representations and
      warranties.

    

    (cc)    If
      the
      Subscriber is a corporation, partnership, limited liability company, trust,
      or
      other entity, it represents that: (i) it is duly organized, validly existing
      and
      in good standing in its jurisdiction of incorporation or organization and has
      all requisite power and authority to execute and deliver this Subscription
      Agreement and purchase the Shares as provided herein; (ii) its purchase of
      the
      Shares will not result in any violation of, or conflict with, any term or
      provision of the charter, By-Laws or other organizational documents of
      Subscriber or any other instrument or agreement to which the Subscriber is
      a
      party or is subject; (iii) the execution and delivery of this Subscription
      Agreement and Subscriber’s purchase of the Shares has been duly authorized by
      all necessary action on behalf of the Subscriber; and (iv) all of the documents
      relating to the Subscriber’s subscription to the Shares have been duly executed
      and delivered on behalf of the Subscriber and constitute a legal, valid and
      binding agreement of the Subscriber.

    

    (dd)    The
      Subscriber acknowledges that if he or she is a registered representative of
      an
      NASD member firm, he or she must give such firm the notice required by the
      NASD
      Rules of Fair Practice, receipt of which must be acknowledged by such
      firm.

    

    (ee)    The
      Subscriber understands that all information regarding the Offering is
      confidential and represents that it will not be used for any purpose other
      than
      in connection with his, her or its consideration of a purchase of the Securities
      and agrees to treat it in a confidential manner. The Subscriber has not, during
      the last thirty (30) days prior to the date hereof, directly or indirectly,
      nor
      has any party acting on behalf of or pursuant to any understanding with such
      Subscriber, effected or agreed to effect any short sale, whether or not against
      the box, established any “put equivalent position” (as defined in Rule
      16(a)-1(h) under the Exchange Act) with respect to any security of the Company,
      granted any other right (including, without limitation, any put or call option)
      with respect to any security of the Company or with respect to any security
      that
      includes, relates to, or derives any significant part of its value from any
      security of the Company or otherwise sought to hedge its positioning of the
      Company’s Securities. For purposes of this Section 2(ee), short sales and
      hedging activities include, without limitation, all types of direct and indirect
      stock pledges, forward sale contracts, options, puts, calls,
      short

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    sales,
      swaps, and similar arrangements (including on a total return basis), and sales
      and other transactions through non-U.S. broker-dealers or foreign regulated
      brokers having the effect of hedging the securities or investment made under
      this Agreement. The Subscriber acknowledges and agrees that in order to enforce
      the foregoing covenant, the Company may impose stop-transfer instructions with
      respect to any shares Preferred Stock or the common stock underlying such shares
      or any other securities exchangeable, convertible or exercisable for shares
      of
      Preferred Stock.

    

    
      
        (ff)    Subscriber
          represents and warrants that he/she/it will have no open position in the
          Company’s
          common stock at the time a Registration Statement is filed with the SEC
          to
          register the Securities (the “Registration Statement”) and is aware of the
          following Telephone Interpretation in the SEC Manual of Publicly Available
          Telephone Interpretations (July 1997):

      

    

    

    A.65.
      Section 5

    

    An
      issuer
      filed a Form S-3 registration statement for a secondary offering of common
      stock
      which is not yet effective. One of the selling shareholders wanted to do a
      short
      sale of common stock “against the box” and cover the short sale with registered
      shares after the effective date. The issuer was advised that the short sale
      could not be made before the registration statement becomes effective, because
      the shares underlying the short sale are deemed to be sold at the time such
      sale
      is made. There would, therefore, be a violation of section 5 if the shares
      were
      effectively sold prior to the effective date.

    

    (gg)    Subscriber
      acknowledges that it will execute and deliver to the Company a completed selling
      stockholder questionnaire in connection with the filing of the Registration
      Statement, prior to the filing thereof.

    

    (hh)    Subscriber
      represents and warrants that he/she/it has complied with all applicable
      provisions of the Act, the rules and regulations promulgated by the SEC
      thereunder, including Regulation M and applicable state securities laws, and
      will comply at the time of sale pursuant to the Registration
      Statement

    

    (ii)    The
      Subscriber acknowledges that the Placement Agent (including any of its members,
      managers, employees, agents or representatives) has not made any representations
      or warranties to the Subscriber concerning the Company or any subsidiary and
      their respective businesses, condition (financial or otherwise) or
      prospects.

    

    3.    Representations
      and Warranties of the Company.
      The
      Company represents and warrants to Subscriber as follows:

    

    (a)    The
      Company is duly organized and validly exists as a corporation in good standing
      under the laws of the State of Iowa.

    

    (b)    The
      Company has all such corporate power and authority to enter into, deliver and
      perform this Subscription Agreement.

    

    (c)    All
      necessary corporate action has been duly and validly taken by the Company to
      authorize the execution, delivery and performance of this Subscription Agreement
      by the Company, and the issuance and sale of the Securities to be sold by the
      Company pursuant to this Subscription Agreement. This Subscription Agreement
      has
      been duly and validly authorized, executed and delivered by the Company and
      constitutes the legal, valid and binding obligation of the Company enforceable
      against the Company in accordance with its terms, except as the enforceability
      thereof may be limited by

      
        
           

        

        
           

          
            

          

        

        
           

        

      

    bankruptcy,
      insolvency, reorganization, moratorium or other similar laws affecting the
      enforcement of creditors’ rights generally and by general equitable
      principles.

    

    (d)    In
      addition to the foregoing, Subscriber shall be entitled to rely on all of the
      representations, warranties and covenants made by the Company to the Placement
      Agent in that certain Placement Agency Agreement, as the same may be amended,
      entered into between the Placement Agent and the Company in connection with
      the
      Offering as if such representations, warranties and covenants were made directly
      to the Subscriber.

    

    4.    Condition
      to Obligations of Subscriber.
      The
      Subscriber’s obligations hereunder are subject to the closing of the
      transactions contemplated by the Stock Purchase Agreement, and the Company
      owning all of the issued and outstanding common stock of ConMed.

    

    5.    Indemnification.
      Subscriber agrees to indemnify and hold harmless the Company, the Placement
      Agent, and their respective officers, directors, employees, shareholders,
      agents, attorneys, representatives and affiliates, and any person acting for
      or
      on behalf of the Company or the Placement Agent, from and against any and all
      damage, loss, liability, cost and expense (including reasonable attorneys’ fees
      and disbursements) which any of them may incur by reason of the failure by
      Subscriber to fulfill any of the terms and conditions of this Subscription
      Agreement, or by reason of any breach of the representations and warranties
      made
      by Subscriber herein, or in any other document provided by Subscriber to the
      Company in connection with this investment. All representations, warranties
      and
      covenants of each of Subscriber and the Company contained herein shall survive
      the acceptance of this subscription and the Closings.

    

    6.    Registration
      Rights.

    

    (a)    In
      consideration of the investment in the Units described in this Subscription
      Agreement and the Memorandum, the Company hereby grants to the Subscriber,
      and
      Subscriber hereby agrees to and accepts from the Company, the registration
      rights set forth in the Registration Rights Agreement, substantially in the
      form
      attached hereto as Exhibit
      A
      (the
“Registration
      Rights Agreement”).

    

    (b)    In
      connection with the exercise by Subscriber of the registration rights set forth
      in the Registration Rights Agreement, and with respect to the Securities held
      by
      such Subscriber, Subscriber hereby covenants that, prior to filing a
      Registration Statement or Prospectus (each as defined in Registration Rights
      Agreement) or any amendments or supplements thereto, Subscriber shall promptly
      and truthfully complete and execute a selling security-holder questionnaire
      provided by the Company, and provide any and all such other material information
      as the Company may require in order to prepare and file such Registration
      Statement, Prospectus or any amendment or supplement thereto.

    

    7.    Covenants.
      Subscriber hereby agrees to
      vote all
      shares of the Company voting stock over which Subscriber has voting control
      in
      favor of any resolution presented to the shareholders of the Company with
      respect to Plan of Recapitalization (as defined in the Memorandum).

      
        
           

        

        
           

          
            

          

        

        
           

        

      

    8.    Miscellaneous.

    

    (a)    Subscriber
      agrees not to transfer or assign this Subscription Agreement or any of
      Subscriber’s interest herein and further agrees that the transfer or assignment
      of the Securities acquired pursuant hereto shall be made only in accordance
      with
      all applicable laws.

    

    (b)    Subscriber
      agrees that Subscriber cannot cancel, terminate, or revoke this Subscription
      Agreement or any agreement of Subscriber made hereunder, and this Subscription
      Agreement shall survive the death or legal disability of Subscriber and shall
      be
      binding upon Subscriber’s heirs, executors, administrators, successors, and
      permitted assigns.

    

    (c)    Subscriber
      has read and has accurately completed this entire Subscription
      Agreement.

    

    (d)    This
      Subscription Agreement, together with the Memorandum, constitutes the entire
      agreement between the parties hereto with respect to the subject matter hereof
      and may be amended or waived only by a written instrument signed by all
      parties.

    

    (e)    Subscriber
      acknowledges that it has been advised and has had the opportunity to consult
      with Subscriber’s own attorney regarding this subscription and Subscriber has
      done so to the extent that Subscriber deems appropriate.

    

    (f)    Any
      notice or other document required or permitted to be given or delivered to
      the
      parties hereto shall be in writing and sent: (i) by fax if the sender on the
      same day sends a confirming copy of such notice by a recognized overnight
      delivery service (charges prepaid), or (ii) by registered or certified mail
      with
      return receipt requested (postage prepaid) or (iii) by a recognized overnight
      delivery service (with charges prepaid). 

    

    If
      to the
      Company:

    

    PACE
      Health Management Systems, Inc.

    666
      Walnut Street, Suite 2116 

    Des
      Moines, IA 50309

    Attention:
      John Pappajohn

    Telephone:
      (515) 244-5746

    

    With
      a
      copy to:

    

    Ellenoff
      Grossman & Schole LLP

    370
      Lexington Avenue

    New
      York,
      NY 10017

    Attn:
      Barry I. Grossman, Esq.

    Tel:
      (212) 370-1300, Fax: (212) 370-7889

    

    If
      to the
      Holder, to the Address Set Forth In the Records of the Company

    

    With
      copies to:

    

    Maxim
      Group LLC

    405
      Lexington Avenue

    New
      York,
      New York 10174

    Tel:
      (212) 895-3500 

    Fax:
      (212) 895-3555

    Attn:
      Andrew Rosen

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    (g)    Failure
      of the Company to exercise any right or remedy under this Subscription Agreement
      or any other agreement between the Company and the Subscriber, or otherwise,
      or
      any delay by the Company in exercising such right or remedy, will not operate
      as
      a waiver thereof. No waiver by the Company will be effective unless and until
      it
      is in writing and signed by the Company.

    

    (h)    This
      Subscription Agreement shall be enforced, governed and construed in all respects
      in accordance with the laws of the State of New York, as such laws are applied
      by the New York courts except with respect to the conflicts of law provisions
      thereof, and shall be binding upon the Subscriber and the Subscriber’s heirs,
      estate, legal representatives, successors and permitted assigns and shall inure
      to the benefit of the Company, and its successors and assigns.

    

    (i)    Any
      legal
      suit, action or proceeding arising out of or relating to this Subscription
      Agreement or the transactions contemplated hereby shall be instituted
      exclusively in New York Supreme Court, County of New York, or in the United
      States District Court for the Southern District of New York. The parties hereto
      hereby: (i) waive any objection which they may now have or hereafter have to
      the
      venue of any such suit, action or proceeding, and (ii) irrevocably consent
      to
      the jurisdiction of the New York Supreme Court, County of New York, and the
      United States District Court for the Southern District of New York in any such
      suit, action or proceeding. The parties further agree to accept and acknowledge
      service of any and all process which may be served in any such suit, action
      or
      proceeding in the New York Supreme Court, County of New York, or in the United
      States District Court for the Southern District of New York and agree that
      service of process upon a party which is mailed by certified mail to such
      party’s address shall be deemed in every respect effective service of process
      upon such party in any such suit, action or proceeding.

    

    (j)    If
      any
      provision of this Subscription Agreement is held to be invalid or unenforceable
      under any applicable statute or rule of law, then such provision shall be deemed
      modified to conform with such statute or rule of law. Any provision hereof
      that
      may prove invalid or unenforceable under any law shall not affect the validity
      or enforceability of any other provisions hereof.

    

    (k)    The
      parties understand and agree that money damages would not be a sufficient remedy
      for any breach of this Subscription Agreement by the Company or the Subscriber
      and that the party against which such breach is committed shall be entitled
      to
      equitable relief, including an injunction and specific performance, as a remedy
      for any such breach, without the necessity of establishing irreparable harm
      or
      posting a bond therefor. Such remedies shall not be deemed to be the exclusive
      remedies for a breach by either party of this Subscription Agreement but shall
      be in addition to all other remedies available at law or equity to the party
      against which such breach is committed.

    

    (l)    All
      pronouns and any variations thereof used herein shall be deemed to refer to
      the
      masculine, feminine, singular or plural, as identity of the person or persons
      may require. 

    

    (m)    This
      Subscription Agreement may be executed in counterparts and by facsimile, each
      of
      which shall be deemed an original, but all of which shall constitute one and
      the
      same instrument.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Signature
      Page for Individuals:

    

    IN
      WITNESS WHEREOF, Subscriber has caused this Subscription Agreement to be
      executed as of the date indicated below.

    

    
      	
               

              $___________________________________

            	
               

              ___________________________________

            
	
              Purchase
                Price

            	
              Number
                of Units

            
	
              ____________________________________

            	
              ___________________________________

            
	
              Print
                or Type Name

            	
              Print
                or Type Name (Joint-owner)

            
	
              ____________________________________

            	
              ___________________________________

            
	
              Signature

            	
              Signature
                (Joint-owner)

            
	
              ____________________________________

            	
              ___________________________________

            
	
              Date

            	
              Date
                (Joint-owner)

            
	
              ____________________________________

            	
              ___________________________________

            
	
              Social
                Security Number

            	
              Social
                Security Number (Joint-owner)

            
	
              ____________________________________

            	
              ___________________________________

            
	
              ____________________________________

            	
              ___________________________________

            
	
              Address

            	
              Address
                (Joint-owner)

            
	 	 
	 	 
	
              _______
                Joint Tenancy

            	
              ______
                Tenants in Common

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Signature
      Page for Partnerships, Corporations or Other Entities:

    

    IN
      WITNESS WHEREOF, Subscriber has caused this Subscription Agreement to be
      executed as of the date indicated below.

     

    
      
        	
                $
                  __________________________

              	___________________________________
	
                Total
                  Purchase Price

              	
                Number
                  of Units

              
	 	 
	 	 
	
                _________________________________

              	 
	
                Print
                  or Type Name of Entity

              	 
	 	 
	 	 
	
                ___________________________________________________________________________________________________________

              
	
                Address

              	 
	 	 
	 	 
	
                _________________________________

              	
                ____________________________________

              
	
                Taxpayer
                  I.D. No. (if applicable) 

              	
                Date

              
	 	 
	 	 
	 	 
	
                _________________________________

              	
                ____________________________________

              
	
                Signature

              	
                Print
                  or Type Name and Indicate

              
	 	
                Title
                  or Position with Entity

              
	 	 
	 	 
	
                _________________________________

              	
                ____________________________________

              
	
                Signature
                  (other authorized signatory)

              	
                Print
                  or Type Name and Indicate

              
	 	
                Title
                  or Position with Entity

              

      

    

    
 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Acceptance:

    

    IN
      WITNESS WHEREOF, the Company has caused this Subscription Agreement to be
      executed, and the foregoing subscription accepted, as of the date indicated
      below, as to _______ Units.

    

    

    PACE
      HEALTH MANAGEMENT SYSTEMS, INC.

    

 

    By:
      __________________________________

    Name:

    Title:

    

    

    

    Date:
      __________________________, 200__

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    EXHIBIT
      A

    

    REGISTRATION
      RIGHTS AGREEMENT

    

    This
      Registration Rights Agreement (this “Agreement”)
      is
      made and entered into as of January ___, 2007 among Pace Health Management
      Systems, Inc., an Iowa corporation (the “Company”),
      and
      the several purchasers signatory hereto (each such purchaser is a “Purchaser”
and
      collectively, the “Purchasers”).

    

    This
      Agreement is made pursuant to the Securities Purchase Agreement, dated as of
      the
      date hereof between the Company and each Purchaser (the “Purchase
      Agreement”).

    

    The
      Company and each Purchaser hereby agrees as follows:

    

    1.    Definitions.Capitalized
      terms used and not otherwise defined herein that are defined in the Purchase
      Agreement shall have the meanings given such terms in the Purchase Agreement.
      As
      used in this Agreement, the following terms shall have the following
      meanings:

    

    “Advice”
shall
      have the meaning set forth in Section 6(d).

    

    “Effectiveness
      Date”
means,
      with respect to the initial Registration Statement required to be filed
      hereunder, June 1, 2007 and, with respect to any additional Registration
      Statements which may be required pursuant to Section 3(c), the 90th
      calendar
      day following the date on which the Company first knows, or reasonably should
      have known, that such additional Registration Statement is required hereunder;
      provided,
      however,
      that in
      the event the Company is notified by the Commission that one of the above
      Registration Statements will not be reviewed or is no longer subject to further
      review and comments, the Effectiveness Date as to such Registration Statement
      shall be the fifth Trading Day following the date on which the Company is so
      notified if such date precedes the dates required above.

    

    “Effectiveness
      Period”
shall
      have the meaning set forth in Section 2(a).

    

    “Event”
shall
      have the meaning set forth in Section 2(b).

    

    “Event
      Date”
shall
      have the meaning set forth in Section 2(b).

    

    “Filing
      Date”
means,
      with respect to the initial Registration Statement required hereunder, April
      1,
      2007 and, with respect to any additional Registration Statements which may
      be
      required pursuant to Section 3(c), the 30th
      calendar
      day following the earlier of: (i) the date on which the Company first knows,
      or
      reasonably should have known that such additional Registration Statement is
      required hereunder and (ii) the date any such additional Registration Statement
      is permitted to be filed with the Commission. 

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    “Holder”
or
      “Holders”
means
      the holder or holders, as the case may be, from time to time of Registrable
      Securities. 

    

    “Indemnified
      Party”
shall
      have the meaning set forth in Section 5(c).

    

    “Indemnifying
      Party”
shall
      have the meaning set forth in Section 5(c).

    

    “Losses”
shall
      have the meaning set forth in Section 5(a).

    

    “Plan
      of Distribution”
shall
      have the meaning set forth in Section 2(a).

    

    “Prospectus”
means
      the prospectus included in a Registration Statement (including, without
      limitation, a prospectus that includes any information previously omitted from
      a
      prospectus filed as part of an effective registration statement in reliance
      upon
      Rule 430A promulgated under the Securities Act), as amended or supplemented
      by
      any prospectus supplement, with respect to the terms of the offering of any
      portion of the Registrable Securities covered by a Registration Statement,
      and
      all other amendments and supplements to the Prospectus, including post-effective
      amendments, and all material incorporated by reference or deemed to be
      incorporated by reference in such Prospectus.

    

    “Registrable
      Securities”
means,
      as of the date in question, (i) all of the shares of Common Stock issuable
      upon
      conversion in full of the shares of Preferred Stock, (ii) all Warrant Shares,
      (iii) any additional shares issuable in connection with any anti-dilution
      provisions associated with the Preferred Stock and Warrants (in each case,
      without giving effect to any limitations on conversion set forth in the
      Certificate of Designation or limitations on exercise set forth in the Warrant)
      and (iv) any securities issued or issuable upon any stock split, dividend or
      other distribution, recapitalization or similar event with respect to the
      foregoing.

    

    “Registration
      Statement”
means
      the registration statements required to be filed hereunder and any additional
      registration statements contemplated by Section 3(c), including (in each case)
      the Prospectus, amendments and supplements to such registration statement or
      Prospectus, including pre- and post-effective amendments, all exhibits thereto,
      and all material incorporated by reference or deemed to be incorporated by
      reference in such registration statement. 

    

    “Rule
      415”
means
      Rule 415 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same purpose and
      effect as such Rule.

    

    “Rule
      424”
means
      Rule 424 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same purpose and
      effect as such Rule.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    “Selling
      Shareholder Questionnaire”
shall
      have the meaning set forth in Section 3(a).

    

     2.    Shelf
      Registration

    

    (a)    On
      or
      prior to each Filing Date, the Company shall prepare and file with the
      Commission a “Shelf” Registration Statement covering the resale of the
      Registrable Securities on such Filing Date for an offering to be made on a
      continuous basis pursuant to Rule 415. The Registration Statement shall be
      on
      Form S-3 (except if the Company is not then eligible to register for resale
      the
      Registrable Securities on Form S-3, in which case such registration shall be
      on
      another appropriate form in accordance herewith) and shall contain (unless
      otherwise directed by at least an 85% majority in interest of the Holders)
      substantially the “Plan
      of Distribution”
      attached hereto as Annex
      A.
      Subject
      to the terms of this Agreement, the Company shall use its best efforts to cause
      a Registration Statement to be declared effective under the Securities Act
      as
      promptly as possible after the filing thereof, but in any event prior to the
      applicable Effectiveness Date, and shall use its best efforts to keep such
      Registration Statement continuously effective under the Securities Act until
      all
      Registrable Securities covered by such Registration Statement have been sold,
      or
      may be sold without volume restrictions pursuant to Rule 144(k), as determined
      by the counsel to the Company pursuant to a written opinion letter to such
      effect, addressed and acceptable to the Company’s transfer agent and the
      affected Holders (the “Effectiveness
      Period”).
      The
      Company shall telephonically request effectiveness of a Registration Statement
      as of 5:00 pm Eastern time on a Trading Day. The Company shall immediately
      notify the Holders via facsimile of the effectiveness of a Registration
      Statement on the same Trading Day that the Company telephonically confirms
      effectiveness with the Commission, which shall be the date requested for
      effectiveness of a Registration Statement. The Company shall, by 9:30 am Eastern
      time on the second Trading Day after the Effective Date (as defined in the
      Purchase Agreement), file a final Prospectus with the Commission as required
      by
      Rule 424. Failure to so notify the Holder within two Trading Days of such
      notification of effectiveness or failure to file a final Prospectus as aforesaid
      shall be deemed an Event under Section 2(b). All selling shareholders included
      on the applicable Registration Statement shall be given notice of the
      effectiveness of such Registration Statement substantially at the same
      time.

    

    (b)    If:
      (i) a
      Registration Statement is not filed on or prior to the 15th
      day
      following its Filing Date (if the Company files a Registration Statement without
      affording the Holders the opportunity to review and comment on the same as
      required by Section 3(a) herein, the Company shall be deemed to not have
      satisfied this clause (i)), or (ii) the Company fails to file with the
      Commission a request for acceleration in accordance with Rule 461 promulgated
      under the Securities Act, within five Trading Days of the date that the Company
      is notified (orally or in writing, whichever is earlier) by the Commission
      that
      a Registration Statement will not be “reviewed,” or not subject to further
      review, or (iii) prior to the 30th
      day
      following its Effectiveness Date, the Company fails to file a pre-effective
      amendment and otherwise respond in writing to comments made by
      the

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Commission
      in respect of such Registration Statement within 15 calendar days after the
      receipt of comments by or notice from the Commission that such amendment is
      required in order for a Registration Statement to be declared effective, or
      (iv)
      a Registration Statement filed or required to be filed hereunder is not declared
      effective by the Commission by its Effectiveness Date, or (v) after the
      Effectiveness Date, a Registration Statement ceases for any reason to remain
      continuously effective as to all Registrable Securities for which it is required
      to be effective, or the Holders are otherwise not permitted to utilize the
      Prospectus therein to resell such Registrable Securities for more than 20
      consecutive calendar days or more than an aggregate of 30 calendar days during
      any 12-month period (which need not be consecutive calendar days) (any such
      failure or breach being referred to as an “Event”,
      and
      for purposes of clause (i) or (iv) the date on which such Event occurs, or
      for
      purposes of clause (ii) the date on which such five Trading Day period is
      exceeded, or for purposes of clause (iii) the date which such 15 calendar day
      period is exceeded, or for purposes of clause (v) the date on which such 20
      or
      30 calendar day period, as applicable, is exceeded being referred to as
“Event
      Date”),
      then
      in addition to any other rights the Holders may have hereunder or under
      applicable law, on each such Event Date and on each monthly anniversary of
      each
      such Event Date (if the applicable Event shall not have been cured by such
      date)
      until the applicable Event is cured, the Company shall pay to each Holder an
      amount in cash, as partial liquidated damages and not as a penalty, equal to
      1.0% of the aggregate purchase price paid by such Holder pursuant to the
      Purchase Agreement for any Registrable Securities then held by such Holder
      and
      not then registered for resale pursuant to an effective Registration Statement
      (calculated as calculated as if all convertible securities had been fully
      converted). The parties agree that (1) in no event shall the Company be liable
      for liquidated damages under this Agreement in excess of 1.0% of the aggregate
      Subscription Amount of the Holders in any 30-day period and (2) the maximum
      aggregate liquidated damages payable to a Holder under this Agreement shall
      be
      10.0% of the aggregate Subscription Amount paid by such Holder pursuant to
      the
      Purchase Agreement. Notwithstanding anything herein to the contrary and subject
      to the payment of liquidated damages as set forth above, in the event the
      Commission determines any Registration Statement filed pursuant hereto
      constitutes a primary offering of securities by the Company and/or requires
      any
      Holder to be named as an underwriter, or otherwise restricts the number of
      Registrable Securities that can be registered in a given Registration Statement
      citing the percentage of Registrable Securities to be registered as compared
      to
      the then-current public float or market capital of the Company (“SEC
      Caused Event”),
      Holders understand and agree that the Company may reduce, on a pro-rata basis,
      the total number of Registrable Securities to be registered on behalf of each
      such Holder. Notwithstanding anything herein to the contrary, the Company will
      not be liable for liquidated damages under this Agreement with respect to any
      Warrants or Warrant Shares. In the event of such reduction, the affected Holders
      shall have demand registration rights during the term of the Effectiveness
      Period and the Holders acknowledge and agree the provisions of this paragraph
      may apply to more than one Registration Statement and that the Commission may
      limit or condition any subsequent Registration Statement. If the Company fails
      to pay any partial liquidated damages pursuant to this Section in full within
      seven days after the date payable, the Company will

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    pay
      interest thereon at a rate of 18% per annum (or such lesser maximum amount
      that
      is permitted to be paid by applicable law) to the Holder, accruing daily from
      the date such partial liquidated damages are due until such amounts, plus all
      such interest thereon, are paid in full. The partial liquidated damages pursuant
      to the terms hereof shall apply on a daily pro-rata basis for any portion of
      a
      month prior to the cure of an Event.

    

     3.    Registration
      Procedures.

    

    In
      connection with the Company’s registration obligations hereunder, the Company
      shall:

    

    (a)    Not
      less
      than five Trading Days prior to the filing of each Registration Statement and
      not less than one Trading Day prior to the filing of any related Prospectus
      or
      any amendment or supplement thereto (including any document that would be
      incorporated or deemed to be incorporated therein by reference), the Company
      shall, (i) furnish to each Holder copies of all such documents proposed to
      be
      filed, which documents (other than those incorporated or deemed to be
      incorporated by reference) will be subject to the review of such Holders, and
      (ii) cause its officers and directors, counsel and independent certified public
      accountants to respond to such inquiries as shall be necessary, in the
      reasonable opinion of respective counsel to each Holder to conduct a reasonable
      investigation within the meaning of the Securities Act. The Company shall not
      file a Registration Statement or any such Prospectus or any amendments or
      supplements thereto to which the Holders of a majority of the Registrable
      Securities shall reasonably object in good faith, provided that, the Company
      is
      notified of such objection in writing no later than 5 Trading Days after the
      Holders have been so furnished copies of a Registration Statement or 1 Trading
      Day after the Holders have been so furnished copies of any related Prospectus
      or
      amendment or supplement thereto. Each Holder agrees to furnish to the Company
      a
      completed Questionnaire in the form attached to this Agreement as Annex B (a
      “Selling
      Shareholder Questionnaire”)
      not
      less than two Trading Days prior to the Filing Date or by the end of the fourth
      Trading Day following the date on which such Holder receives draft materials
      in
      accordance with this Section.

    

    (b)(i)    Prepare
      and
      file with the Commission such amendments, including post-effective amendments,
      to a Registration Statement and the Prospectus used in connection therewith
      as
      may be necessary to keep a Registration Statement continuously effective as
      to
      the applicable Registrable Securities for the Effectiveness Period and prepare
      and file with the Commission such additional Registration Statements in order
      to
      register for resale under the Securities Act all of the Registrable Securities;
      (ii) cause the related Prospectus to be amended or supplemented by any required
      Prospectus supplement (subject to the terms of this Agreement), and as so
      supplemented or amended to be filed pursuant to Rule 424; (iii) respond as
      promptly as reasonably possible to any comments received from the Commission
      with respect to a Registration Statement or any amendment thereto and as
      promptly as reasonably possible provide the Holders true and complete copies
      of
      all correspondence from and to the Commission relating to a Registration
      Statement (provided that the Company may excise any information

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    contained
      therein which would constitute material non-public information as to any Holder
      which has not executed a confidentiality agreement with the Company); and (iv)
      comply in all material respects with the provisions of the Securities Act and
      the Exchange Act with respect to the disposition of all Registrable Securities
      covered by a Registration Statement during the applicable period in accordance
      (subject to the terms of this Agreement) with the intended methods of
      disposition by the Holders thereof set forth in such Registration Statement
      as
      so amended or in such Prospectus as so supplemented.

    

    (c)    If
      during
      the Effectiveness Period, the number of Registrable Securities at any time
      exceeds the number of shares of Common Stock then registered in a Registration
      Statement, then the Company shall file as soon as reasonably practicable but
      in
      any case prior to the applicable Filing Date, an additional Registration
      Statement covering the resale by the Holders of not less than 100% of the number
      of such Registrable Securities.

    

    (d)    Notify
      the Holders of Registrable Securities to be sold (which notice shall, pursuant
      to clauses (iii) through (vi) hereof, shall also be accompanied by an
      instruction to suspend the use of the Prospectus until the requisite changes
      have been made) as promptly as reasonably possible (and, in the case of (i)(A)
      below, not less than 1 Trading Day prior to such filing) and (if requested
      by
      any such Person) confirm such notice in writing no later than one Trading Day
      following the day (i)(A) when a Prospectus or any Prospectus supplement or
      post-effective amendment to a Registration Statement is proposed to be filed;
      (B) when the Commission notifies the Company whether there will be a “review” of
      such Registration Statement and whenever the Commission comments in writing
      on
      such Registration Statement; and (C) with respect to a Registration Statement
      or
      any post-effective amendment, when the same has become effective; (ii) of any
      request by the Commission or any other Federal or state governmental authority
      for amendments or supplements to a Registration Statement or Prospectus or
      for
      additional information; (iii) of the issuance by the Commission or any other
      federal or state governmental authority of any stop order suspending the
      effectiveness of a Registration Statement covering any or all of the Registrable
      Securities or the initiation of any Proceedings for that purpose; (iv) of the
      receipt by the Company of any notification with respect to the suspension of
      the
      qualification or exemption from qualification of any of the Registrable
      Securities for sale in any jurisdiction, or the initiation or threatening of
      any
      Proceeding for such purpose; (v) of the occurrence of any event or passage
      of
      time that makes the financial statements included in a Registration Statement
      ineligible for inclusion therein or any statement made in a Registration
      Statement or Prospectus or any document incorporated or deemed to be
      incorporated therein by reference untrue in any material respect or that
      requires any revisions to a Registration Statement, Prospectus or other
      documents so that, in the case of a Registration Statement or the Prospectus,
      as
      the case may be, it will not contain any untrue statement of a material fact
      or
      omit to state any material fact required to be stated therein or necessary
      to
      make the statements therein, in light of the circumstances under which they
      were
      made, not misleading; and (vi) the occurrence or existence of any pending
      corporate development with respect to the Company that the Company believes
      may
      be material and that, in the determination of the

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Company,
      makes it not in the best interest of the Company to allow continued availability
      of a Registration Statement or Prospectus; provided that any and all of such
      information shall remain confidential to each Holder until such information
      otherwise becomes public, unless disclosure by a Holder is required by law;
      provided,
      further,
      that
      notwithstanding each Holder’s agreement to keep such information confidential,
      the Holders make no acknowledgement that any such information is material,
      non-public information. 

    

    (e)    Use
      its
      best efforts to avoid the issuance of, or, if issued, obtain the withdrawal
      of
      (i) any order suspending the effectiveness of a Registration Statement, or
      (ii)
      any suspension of the qualification (or exemption from qualification) of any
      of
      the Registrable Securities for sale in any jurisdiction, at the earliest
      practicable moment.

    

    (f)    Furnish
      to each Holder, without charge, at least one conformed copy of each such
      Registration Statement and each amendment thereto, including financial
      statements and schedules, all documents incorporated or deemed to be
      incorporated therein by reference to the extent requested by such Person, and
      all exhibits to the extent requested by such Person (including those previously
      furnished or incorporated by reference) promptly after the filing of such
      documents with the Commission.

    

    (g)    Subject
      to the terms of this Agreement, the Company hereby consents to the use of such
      Prospectus and each amendment or supplement thereto by each of the selling
      Holders in connection with the offering and sale of the Registrable Securities
      covered by such Prospectus and any amendment or supplement thereto, except
      after
      the giving of any notice pursuant to Section 3(d).

    

    (h)    The
      Company shall effect a filing with respect to the public offering contemplated
      by the Registration Statement (an “Issuer
      Filing”)
      with
      the National Association of Securities Dealers, Inc. (“NASD”)
      Corporate Financing Department pursuant to NASD Rule 2710(b)(4) within one
      Trading Day of the date that the Registration Statement is first filed with
      the
      Commission and pay the filing fee required by such Issuer Filing. The Company
      shall use commercially reasonable efforts to pursue the Issuer Filing until
      the
      NASD issues a letter confirming that it does not object to the terms of the
      offering contemplated by the Registration Statement.

    

    (i)    Prior
      to
      any resale of Registrable Securities by a Holder, use its commercially
      reasonable efforts to register or qualify or cooperate with the selling Holders
      in connection with the registration or qualification (or exemption from the
      Registration or qualification) of such Registrable Securities for the resale
      by
      the Holder under the securities or Blue Sky laws of such jurisdictions within
      the United States as any Holder reasonably requests in writing, to keep each
      registration or qualification (or exemption therefrom) effective during the
      Effectiveness Period and to do any and all other acts or things reasonably
      necessary to enable the disposition in such jurisdictions of the Registrable
      Securities covered by each Registration Statement; provided, that the Company
      shall not be required to qualify generally to do business in any
      jurisdiction

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    where
      it
      is not then so qualified, subject the Company to any material tax in any such
      jurisdiction where it is not then so subject or file a general consent to
      service of process in any such jurisdiction.

    

    (j)    If
      requested by the Holders, cooperate with the Holders to facilitate the timely
      preparation and delivery of certificates representing Registrable Securities
      to
      be delivered to a transferee pursuant to a Registration Statement, which
      certificates shall be free, to the extent permitted by the Purchase Agreement,
      of all restrictive legends, and to enable such Registrable Securities to be
      in
      such denominations and registered in such names as any such Holders may
      request.

    

    (k)    Upon
      the
      occurrence of any event contemplated by this Section 3, as promptly as
      reasonably possible under the circumstances taking into account the Company’s
      good faith assessment of any adverse consequences to the Company and its
      stockholders of the premature disclosure of such event, prepare a supplement
      or
      amendment, including a post-effective amendment, to a Registration Statement
      or
      a supplement to the related Prospectus or any document incorporated or deemed
      to
      be incorporated therein by reference, and file any other required document
      so
      that, as thereafter delivered, neither a Registration Statement nor such
      Prospectus will contain an untrue statement of a material fact or omit to state
      a material fact required to be stated therein or necessary to make the
      statements therein, in light of the circumstances under which they were made,
      not misleading. If
      the
      Company notifies the Holders in accordance with clauses (iii) through (vi)
      of
      Section 3(d) above to suspend the use of any Prospectus until the requisite
      changes to such Prospectus have been made, then the Holders shall suspend use
      of
      such Prospectus. The Company will use its best efforts to ensure that the use
      of
      the Prospectus may be resumed as promptly as is practicable. The Company shall
      be entitled to exercise its right under this Section 3(k) to suspend the
      availability of a Registration Statement and Prospectus, subject to the payment
      of partial liquidated damages pursuant to Section 2(b), for a period not to
      exceed 60 calendar days (which need not be consecutive days) in any 12 month
      period.

    

    (l)    Comply
      with all applicable rules and regulations of the Commission.

    

    (m)    The
      Company may require each selling Holder to furnish to the Company a certified
      statement as to the number of shares of Common Stock beneficially owned by
      such
      Holder and, if required by the Commission, the natural persons thereof that
      have
      voting and dispositive control over the Shares. During any periods that the
      Company is unable to meet its obligations hereunder with respect to the
      registration of the Registrable Securities solely because any Holder fails
      to
      furnish such information within three Trading Days of the Company’s request, any
      liquidated damages that are accruing at such time as to such Holder only shall
      be tolled and any Event that may otherwise occur solely because of such delay
      shall be suspended as to such Holder only, until such information is delivered
      to the Company.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    4.    Registration
      Expenses.
      All
      fees and expenses incident to the performance of or compliance with this
      Agreement by the Company shall be borne by the Company whether or not any
      Registrable Securities are sold pursuant to a Registration Statement. The fees
      and expenses referred to in the foregoing sentence shall include, without
      limitation, (i) all registration and filing fees (including, without limitation,
      fees and expenses (A) with respect to filings required to be made with any
      Trading Market on which the Common Stock is then listed for trading, (B) in
      compliance with applicable state securities or Blue Sky laws reasonably agreed
      to by the Company in writing (including, without limitation, fees and
      disbursements of counsel for the Company in connection with Blue Sky
      qualifications or exemptions of the Registrable Securities) and (C) if not
      previously paid by the Company in connection with an Issuer Filing, with respect
      to any filing that may be required to be made by any broker through which a
      Holder intends to make sales of Registrable Securities with NASD Regulation,
      Inc. pursuant to the NASD Rule 2710, so long as the broker is receiving no
      more
      than a customary brokerage commission in connection with such sale, (ii)
      printing expenses of the Company (including, without limitation, expenses of
      printing certificates for Registrable Securities, (iii) messenger, telephone
      and
      delivery expenses of the Company, (iv) fees and disbursements of counsel for
      the
      Company, (v) Securities Act liability insurance, if the Company so desires
      such
      insurance, and (vi) fees and expenses of all other Persons retained by the
      Company in connection with the consummation of the transactions contemplated
      by
      this Agreement. In addition, the Company shall be responsible for all of its
      internal expenses incurred in connection with the consummation of the
      transactions contemplated by this Agreement (including, without limitation,
      all
      salaries and expenses of its officers and employees performing legal or
      accounting duties), the expense of any annual audit and the fees and expenses
      incurred in connection with the listing of the Registrable Securities on any
      securities exchange as required hereunder. In no event shall the Company be
      responsible for any broker or similar commissions of any Holder or, except
      to
      the extent provided for in the Transaction Documents, any legal fees or other
      costs of the Holders.

    

     5.    Indemnification

    

    (a)    Indemnification
      by the Company.
      The
      Company shall, notwithstanding any termination of this Agreement, indemnify
      and
      hold harmless each Holder, the officers, directors, members, partners, agents,
      brokers (including brokers who offer and sell Registrable Securities as
      principal as a result of a pledge or any failure to perform under a margin
      call
      of Common Stock), investment advisors and employees (and any other Persons
      with
      a functionally equivalent role of a Person holding such titles, notwithstanding
      a lack of such title or any other title) of each of them, each Person who
      controls any such Holder (within the meaning of Section 15 of the Securities
      Act
      or Section 20 of the Exchange Act) and the officers, directors, members,
      shareholders, partners, agents and employees (and any other Persons with a
      functionally equivalent role of a Person holding such titles, notwithstanding
      a
      lack of such title or any other title) of each such controlling Person, to
      the
      fullest extent permitted by applicable law, from and against any and all losses,
      claims, damages, liabilities, costs (including, without limitation, reasonable
      attorneys’ fees) and expenses (collectively, “Losses”),
      as
      incurred, arising out of or relating to (1) any untrue or alleged untrue
      statement of a material fact contained in a Registration Statement, any
      Prospectus or any form of prospectus or in any

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    amendment
      or supplement thereto or in any preliminary prospectus, or arising out of or
      relating to any omission or alleged omission of a material fact required to
      be
      stated therein or necessary to make the statements therein (in the case of
      any
      Prospectus or form of prospectus or supplement thereto, in light of the
      circumstances under which they were made) not misleading, or (2) any violation
      or alleged violation by the Company of the Securities Act, Exchange Act or
      any
      state securities law, or any rule or regulation thereunder, in connection with
      the performance of its obligations under this Agreement, except to the extent,
      but only to the extent, that (i) such untrue statements or omissions are based
      solely upon information regarding such Holder furnished in writing to the
      Company by such Holder expressly for use therein, or to the extent that such
      information relates to such Holder or such Holder’s proposed method of
      distribution of Registrable Securities and was reviewed and expressly approved
      in writing by such Holder expressly for use in a Registration Statement, such
      Prospectus or such form of Prospectus or in any amendment or supplement thereto
      (it being understood that the Holder has approved Annex A hereto for this
      purpose) or (ii) in the case of an occurrence of an event of the type specified
      in Section 3(d)(iii)-(vi), the use by such Holder of an outdated or defective
      Prospectus after the Company has notified such Holder in writing that the
      Prospectus is outdated or defective and prior to the receipt by such Holder
      of
      the Advice contemplated in Section 6(d). The Company shall notify the Holders
      promptly of the institution, threat or assertion of any Proceeding arising
      from
      or in connection with the transactions contemplated by this Agreement of which
      the Company is aware.

    

    (b)    Indemnification
      by Holders.
      Each
      Holder shall, severally and not jointly, indemnify and hold harmless the
      Company, its directors, officers, agents and employees, each Person who controls
      the Company (within the meaning of Section 15 of the Securities Act and Section
      20 of the Exchange Act), and the directors, officers, agents or employees of
      such controlling Persons (and any other Persons with a functionally equivalent
      role of a Person holding such titles, notwithstanding a lack of such title
      or
      any other title, to the fullest extent permitted by applicable law, from and
      against all Losses, as incurred, to the extent arising out of or based solely
      upon: (x) such Holder’s failure to comply with the prospectus delivery
      requirements of the Securities Act or (y) any untrue or alleged untrue statement
      of a material fact contained in any Registration Statement, any Prospectus,
      or
      any form of prospectus, or in any amendment or supplement thereto or in any
      preliminary prospectus, or arising out of or relating to any omission or alleged
      omission of a material fact required to be stated therein or necessary to make
      the statements therein not misleading (i) to the extent, but only to the extent,
      that such untrue statement or omission is contained in any information so
      furnished in writing by such Holder to the Company specifically for inclusion
      in
      such Registration Statement or such Prospectus or (ii) to the extent that such
      information relates to such Holder’s proposed method of distribution of
      Registrable Securities and was reviewed and expressly approved in writing by
      such Holder expressly for use in a Registration Statement (it being understood
      that the Holder has approved Annex A hereto for this purpose), such Prospectus
      or such form of Prospectus or in any amendment or supplement thereto or (iii)
      in
      the case of an occurrence of an event of the type specified in Section
      3(d)(iii)-(vi), the use by such Holder of an outdated or defective Prospectus
      after the Company has notified

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    such
      Holder in writing that the Prospectus is outdated or defective and prior to
      the
      receipt by such Holder of the Advice contemplated in Section 6(d). In no event
      shall the liability of any selling Holder hereunder be greater in amount than
      the dollar amount of the net proceeds received by such Holder upon the sale
      of
      the Registrable Securities giving rise to such indemnification
      obligation.

    

    (c)    Conduct
      of Indemnification Proceedings.
      If any
      Proceeding shall be brought or asserted against any Person entitled to indemnity
      hereunder (an “Indemnified
      Party”),
      such
      Indemnified Party shall promptly notify the Person from whom indemnity is sought
      (the “Indemnifying
      Party”)
      in
      writing, and the Indemnifying Party shall have the right to assume the defense
      thereof, including the employment of counsel reasonably satisfactory to the
      Indemnified Party and the payment of all fees and expenses incurred in
      connection with defense thereof; provided, that the failure of any Indemnified
      Party to give such notice shall not relieve the Indemnifying Party of its
      obligations or liabilities pursuant to this Agreement, except (and only) to
      the
      extent that it shall be finally determined by a court of competent jurisdiction
      (which determination is not subject to appeal or further review) that such
      failure shall have prejudiced the Indemnifying Party.

    

    An
      Indemnified Party shall have the right to employ separate counsel in any such
      Proceeding and to participate in the defense thereof, but the fees and expenses
      of such counsel shall be at the expense of such Indemnified Party or Parties
      unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
      expenses; (2) the Indemnifying Party shall have failed promptly to assume the
      defense of such Proceeding and to employ counsel reasonably satisfactory to
      such
      Indemnified Party in any such Proceeding; or (3) the named parties to any such
      Proceeding (including any impleaded parties) include both such Indemnified
      Party
      and the Indemnifying Party, and counsel to the Indemnified Party shall
      reasonably believe that a material conflict of interest is likely to exist
      if
      the same counsel were to represent such Indemnified Party and the Indemnifying
      Party (in which case, if such Indemnified Party notifies the Indemnifying Party
      in writing that it elects to employ separate counsel at the expense of the
      Indemnifying Party, the Indemnifying Party shall not have the right to assume
      the defense thereof and the reasonable fees and expenses of no more than one
      separate counsel shall be at the expense of the Indemnifying Party). The
      Indemnifying Party shall not be liable for any settlement of any such Proceeding
      effected without its written consent, which consent shall not be unreasonably
      withheld or delayed. No Indemnifying Party shall, without the prior written
      consent of the Indemnified Party, effect any settlement of any pending
      Proceeding in respect of which any Indemnified Party is a party, unless such
      settlement includes an unconditional release of such Indemnified Party from
      all
      liability on claims that are the subject matter of such Proceeding.

    

    Subject
      to the terms of this Agreement, all reasonable fees and expenses of the
      Indemnified Party (including reasonable fees and expenses to the extent incurred
      in connection with investigating or preparing to defend such Proceeding in
      a
      manner not inconsistent with this Section) shall be paid to the Indemnified
      Party, as incurred, within ten Trading Days of written notice thereof to the
      Indemnifying Party; provided, that the

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Indemnified
      Party shall promptly reimburse the Indemnifying Party for that portion of such
      fees and expenses applicable to such actions for which such Indemnified Party
      is
      judicially determined to be not entitled to indemnification
      hereunder.

    

    (d)    Contribution.
      If the
      indemnification under Section 5(a) or 5(b) is unavailable to an Indemnified
      Party or insufficient to hold an Indemnified Party harmless for any Losses,
      then
      each Indemnifying Party shall contribute to the amount paid or payable by such
      Indemnified Party, in such proportion as is appropriate to reflect the relative
      fault of the Indemnifying Party and Indemnified Party in connection with the
      actions, statements or omissions that resulted in such Losses as well as any
      other relevant equitable considerations. The relative fault of such Indemnifying
      Party and Indemnified Party shall be determined by reference to, among other
      things, whether any action in question, including any untrue or alleged untrue
      statement of a material fact or omission or alleged omission of a material
      fact,
      has been taken or made by, or relates to information supplied by, such
      Indemnifying Party or Indemnified Party, and the parties’ relative intent,
      knowledge, access to information and opportunity to correct or prevent such
      action, statement or omission. The amount paid or payable by a party as a result
      of any Losses shall be deemed to include, subject to the limitations set forth
      in this Agreement, any reasonable attorneys’ or other fees or expenses incurred
      by such party in connection with any Proceeding to the extent such party would
      have been indemnified for such fees or expenses if the indemnification provided
      for in this Section was available to such party in accordance with its
      terms.

    

    The
      parties hereto agree that it would not be just and equitable if contribution
      pursuant to this Section 5(d) were determined by pro rata allocation or by
      any
      other method of allocation that does not take into account the equitable
      considerations referred to in the immediately preceding paragraph.
      Notwithstanding the provisions of this Section 5(d), no Holder shall be required
      to contribute, in the aggregate, any amount in excess of the amount by which
      the
      net proceeds actually received by such Holder from the sale of the Registrable
      Securities subject to the Proceeding exceeds the amount of any damages that
      such
      Holder has otherwise been required to pay by reason of such untrue or alleged
      untrue statement or omission or alleged omission, except in the case of fraud
      by
      such Holder.

    

    The
      indemnity and contribution agreements contained in this Section are in addition
      to any liability that the Indemnifying Parties may have to the Indemnified
      Parties.

    

     6.    Miscellaneous

    

    (a)    Remedies.
      In the
      event of a breach by the Company or by a Holder, of any of their respective
      obligations under this Agreement, each Holder or the Company, as the case may
      be, in addition to being entitled to exercise all rights granted by law and
      under this Agreement, including recovery of damages, will be entitled to
      specific performance of its rights under this Agreement. The Company and each
      Holder agree that monetary

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    damages
      would not provide adequate compensation for any losses incurred by reason of
      a
      breach by it of any of the provisions of this Agreement and hereby further
      agrees that, in the event of any action for specific performance in respect
      of
      such breach, it shall not assert or shall waive the defense that a remedy at
      law
      would be adequate.

    

    (b)    No
      Piggyback on Registrations.
      Except
      as set forth on Schedule
      6(b)
      attached
      hereto, neither the Company nor any of its security holders (other than the
      Holders in such capacity pursuant hereto) may include securities of the Company
      in any Registration Statement other than the Registrable Securities. The Company
      shall not file any other registration statements until there is an effective
      Registration Statement(s) pursuant to which the Holders are permitted to utilize
      a Prospectus to resell all Registrable Securities or such Registrable Securities
      may be resold by the Holders pursuant to Rule 144(k), provided that this Section
      6(b) shall not prohibit the Company from filing amendments to registration
      statements filed prior to the date of this Agreement.

    

    (c)    Compliance.
      Each
      Holder covenants and agrees that it will comply with the prospectus delivery
      requirements of the Securities Act as applicable to it in connection with sales
      of Registrable Securities pursuant to a Registration Statement.

    

    (d)    Discontinued
      Disposition.
      Each
      Holder agrees by its acquisition of Registrable Securities that, upon receipt
      of
      a notice from the Company of the occurrence of any event of the kind described
      in Section 3(d)(iii) through (vi), such Holder will forthwith discontinue
      disposition of such Registrable Securities under a Registration Statement until
      it is advised in writing (the “Advice”)
      by the
      Company that the use of the applicable Prospectus (as it may have been
      supplemented or amended) may be resumed. The Company will use its best efforts
      to ensure that the use of the Prospectus may be resumed as promptly as it
      practicable. The Company agrees and acknowledges that any periods during which
      the Holder is required to discontinue the disposition of the Registrable
      Securities hereunder shall be subject to the provisions of Section
      2(b).

    

    (e)    Piggy-Back
      Registrations.
      If at
      any time during the Effectiveness Period there is not an effective Registration
      Statement covering all of the Registrable Securities and the Company shall
      determine to prepare and file with the Commission a registration statement
      relating to an offering for its own account or the account of others under
      the
      Securities Act of any of its equity securities, other than on Form S-4 or Form
      S-8 (each as promulgated under the Securities Act) or their then equivalents
      relating to equity securities to be issued solely in connection with any
      acquisition of any entity or business or equity securities issuable in
      connection with the stock option or other employee benefit plans, then the
      Company shall send to each Holder a written notice of such determination and,
      if
      within fifteen days after the date of such notice, any such Holder shall so
      request in writing, the Company shall include in such registration statement
      all
      or any part of such Registrable Securities such Holder requests to be
      registered; provided,
      however,
      that,
      the Company shall not be required to register any Registrable Securities
      pursuant to this

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Section
      6(e) that are eligible for resale pursuant to Rule 144(k) promulgated under
      the
      Securities Act or that are the subject of a then effective Registration
      Statement.

    

    (f)    Amendments
      and Waivers.
      The
      provisions of this Agreement, including the provisions of this sentence, may
      not
      be amended, modified or supplemented, and waivers or consents to departures
      from
      the provisions hereof may not be given, unless the same shall be in writing
      and
      signed by the Company and Holders holding at least 67% of the then outstanding
      Registrable Securities. Notwithstanding the foregoing, a waiver or consent
      to
      depart from the provisions hereof with respect to a matter that relates
      exclusively to the rights of Holders and that does not directly or indirectly
      affect the rights of other Holders may be given by Holders of all of the
      Registrable Securities to which such waiver or consent relates; provided,
      however,
      that
      the provisions of this sentence may not be amended, modified, or supplemented
      except in accordance with the provisions of the immediately preceding sentence.
      

    

    (g)    Notices.
      Any and
      all notices or other communications or deliveries required or permitted to
      be
      provided hereunder shall be delivered as set forth in the Purchase Agreement.
      

    

    (h)    Successors
      and Assigns.
      This
      Agreement shall inure to the benefit of and be binding upon the successors
      and
      permitted assigns of each of the parties and shall inure to the benefit of
      each
      Holder. The Company may not assign (except by merger) its rights or obligations
      hereunder without the prior written consent of all of the Holders of the
      then-outstanding Registrable Securities. Each Holder may assign their respective
      rights hereunder in the manner and to the Persons as permitted under the
      Purchase Agreement.

    

    (i)    No
      Inconsistent Agreements.
      Neither
      the Company nor any of its Subsidiaries has entered, as of the date hereof,
      nor
      shall the Company or any of its Subsidiaries, on or after the date of this
      Agreement, enter into any agreement with respect to its securities, that would
      have the effect of impairing the rights granted to the Holders in this Agreement
      or otherwise conflicts with the provisions hereof. Except as set forth on
Schedule
      6(i),
      neither
      the Company nor any of its subsidiaries has previously entered into any
      agreement granting any registration rights with respect to any of its securities
      to any Person that have not been satisfied in full.

    

    (j)    Execution
      and Counterparts.
      This
      Agreement may be executed in two or more counterparts, all of which when taken
      together shall be considered one and the same agreement and shall become
      effective when counterparts have been signed by each party and delivered to
      the
      other party, it being understood that both parties need not sign the same
      counterpart. In the event that any signature is delivered by facsimile
      transmission or by e-mail delivery of a “.pdf” format data file, such signature
      shall create a valid and binding obligation of the party executing (or on whose
      behalf such signature is executed) with the same force and effect as if such
      facsimile or “.pdf” signature page were an original thereof.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (k)    Governing
      Law.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be determined in accordance with the provisions of
      the
      Purchase Agreement.

    

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

    

    (m)    Severability.
      If any
      term, provision, covenant or restriction of this Agreement is held by a court
      of
      competent jurisdiction to be invalid, illegal, void or unenforceable, the
      remainder of the terms, provisions, covenants and restrictions set forth herein
      shall remain in full force and effect and shall in no way be affected, impaired
      or invalidated, and the parties hereto shall use their commercially reasonable
      efforts to find and employ an alternative means to achieve the same or
      substantially the same result as that contemplated by such term, provision,
      covenant or restriction. It is hereby stipulated and declared to be the
      intention of the parties that they would have executed the remaining terms,
      provisions, covenants and restrictions without including any of such that may
      be
      hereafter declared invalid, illegal, void or unenforceable.

    

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

    

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

    

    ********************

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

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

    

     

    
      	
              PACE
                HEALTH MANAGEMENT SYSTEMS, INC.

            
	
            
	 
	
              By:__________________________________________

              Name:

              Title:

            

    

     

    

    

    

    

    

    

    

    

    [SIGNATURE
      PAGE OF HOLDERS FOLLOWS]

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    [SIGNATURE
      PAGE OF HOLDERS TO PACE RRA]

    

    Name
      of
      Holder: __________________________

    Signature
      of Authorized Signatory of Holder:
      __________________________

    Name
      of
      Authorized Signatory: _________________________

    Title
      of
      Authorized Signatory: __________________________

     

    

    

    [SIGNATURE
      PAGES CONTINUE]

    

     

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    ANNEX
      A

    

    Plan
      of Distribution

     

    Each
      Selling Stockholder (the “Selling
      Stockholders”)
      of the
      common stock and any of their pledgees, assignees and successors-in-interest
      may, from time to time, sell any or all of their shares of common stock on
      the
      OTC Bulletin Board or any other stock exchange, market or trading facility
      on
      which the shares are traded or in private transactions. These sales may be
      at
      fixed or negotiated prices. A Selling Stockholder may use any one or more of
      the
      following methods when selling shares:

     

    
      	 	
              ·

            	
              ordinary
                brokerage transactions and transactions in which the broker-dealer
                solicits purchasers;

            

    

     

    
      	 	
              ·

            	
              block
                trades in which the broker-dealer will attempt to sell the shares
                as agent
                but may position and resell a portion of the block as principal to
                facilitate the transaction;

            

    

     

    
      	 	
              ·

            	
              purchases
                by a broker-dealer as principal and resale by the broker-dealer for
                its
                account;

            

    

     

    
      	 	
              ·

            	
              an
                exchange distribution in accordance with the rules of the applicable
                exchange;

            

    

     

    
      	 	
              ·

            	
              privately
                negotiated transactions;

            

    

     

    
      	 	
              ·

            	
              settlement
                of short sales entered into after the effective date of the registration
                statement of which this prospectus is a
                part;

            

    

     

    
      	 	
              ·

            	
              broker-dealers
                may agree with the Selling Stockholders to sell a specified number
                of such
                shares at a stipulated price per
                share;

            

    

     

    
      	 	
              ·

            	
              through
                the writing or settlement of options or other hedging transactions,
                whether through an options exchange or otherwise;
                

            

    

     

    
      	 	
              ·

            	
              a
                combination of any such methods of sale;
                or

            

    

     

    
      	 	
              ·

            	
              any
                other method permitted pursuant to applicable
                law.

            

    

     

    The
      Selling Stockholders may also sell shares under Rule 144 under the Securities
      Act of 1933, as amended (the “Securities
      Act”),
      if
      available, rather than under this prospectus.

     

    Broker-dealers
      engaged by the Selling Stockholders may arrange for other brokers-dealers to
      participate in sales. Broker-dealers may receive commissions or discounts from
      the Selling Stockholders (or, if any broker-dealer acts as agent for the
      purchaser of shares, from the purchaser) in amounts to be negotiated, but,
      except as set forth in a supplement to this Prospectus, in the case of an agency
      transaction not in excess of a customary brokerage

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    commission
      in compliance with NASDR Rule 2440; and in the case of a principal transaction
      a
      markup or markdown in compliance with NASDR IM-2440. 

     

    In
      connection with the sale of the common stock or interests therein, the Selling
      Stockholders may enter into hedging transactions with broker-dealers or other
      financial institutions, which may in turn engage in short sales of the Common
      Stock in the course of hedging the positions they assume. The Selling
      Stockholders may also sell shares of the common stock short and deliver these
      securities to close out their short positions, or loan or pledge the common
      stock to broker-dealers that in turn may sell these securities. The Selling
      Stockholders may also enter into option or other transactions with
      broker-dealers or other financial institutions or the creation of one or more
      derivative securities which require the delivery to such broker-dealer or other
      financial institution of shares offered by this prospectus, which shares such
      broker-dealer or other financial institution may resell pursuant to this
      prospectus (as supplemented or amended to reflect such
      transaction).

     

    The
      Selling Stockholders and any broker-dealers or agents that are involved in
      selling the shares may be deemed to be “underwriters” within the meaning of the
      Securities Act in connection with such sales. In such event, any commissions
      received by such broker-dealers or agents and any profit on the resale of the
      shares purchased by them may be deemed to be underwriting commissions or
      discounts under the Securities Act. Each Selling Stockholder has informed the
      Company that it does not have any written or oral agreement or understanding,
      directly or indirectly, with any person to distribute the Common Stock. In
      no
      event shall any broker-dealer receive fees, commissions and markups which,
      in
      the aggregate, would exceed eight percent (8%).

     

    The
      Company is required to pay certain fees and expenses incurred by the Company
      incident to the registration of the shares. The Company has agreed to indemnify
      the Selling Stockholders against certain losses, claims, damages and
      liabilities, including liabilities under the Securities Act. 

     

    Because
      Selling Stockholders may be deemed to be “underwriters” within the meaning of
      the Securities Act, they will be subject to the prospectus delivery requirements
      of the Securities Act including Rule 172 thereunder. In addition, any securities
      covered by this prospectus which qualify for sale pursuant to Rule 144 under
      the
      Securities Act may be sold under Rule 144 rather than under this prospectus.
      There is no underwriter or coordinating broker acting in connection with the
      proposed sale of the resale shares by the Selling Stockholders.

     

    We
      agreed
      to keep this prospectus effective until the earlier of (i) the date on which
      the
      shares may be resold by the Selling Stockholders without registration and
      without regard to any volume limitations by reason of Rule 144(k) under the
      Securities Act or any other rule of similar effect or (ii) all of the shares
      have been sold pursuant to this prospectus or Rule 144 under the Securities
      Act
      or any other rule of similar effect. The resale shares will be sold only through
      registered or licensed brokers or dealers if required under applicable state
      securities laws. In addition, in certain states, the resale shares may not
      be
      sold unless they have been registered or qualified for sale in the applicable
      state or an exemption from the registration or qualification requirement is
      available and is complied with.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Under
      applicable rules and regulations under the Exchange Act, any person engaged
      in
      the distribution of the resale shares may not simultaneously engage in market
      making activities with respect to the common stock for the applicable restricted
      period, as defined in Regulation M, prior to the commencement of the
      distribution. In addition, the Selling Stockholders will be subject to
      applicable provisions of the Exchange Act and the rules and regulations
      thereunder, including Regulation M, which may limit the timing of purchases
      and
      sales of shares of the common stock by the Selling Stockholders or any other
      person. We will make copies of this prospectus available to the Selling
      Stockholders and have informed them of the need to deliver a copy of this
      prospectus to each purchaser at or prior to the time of the sale (including
      by
      compliance with Rule 172 under the Securities Act).

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

     

    Annex
      B

     

    PACE
      HEALTH MANAGEMENT SYSTEMS, INC. 

     

    Selling
      Securityholder Notice and Questionnaire

     

    The
      undersigned beneficial owner of common stock (the “Registrable
      Securities”)
      of
      Pace Health Management Systems, Inc., an Iowa corporation (the “Company”),
      understands that the Company has filed or intends to file with the Securities
      and Exchange Commission (the “Commission”)
      a
      registration statement (the “Registration
      Statement”)
      for
      the registration and resale under Rule 415 of the Securities Act of 1933, as
      amended (the “Securities
      Act”),
      of
      the Registrable Securities, in accordance with the terms of the Registration
      Rights Agreement (the “Registration
      Rights Agreement”)
      to
      which this document is annexed. A copy of the Registration Rights Agreement
      is
      available from the Company upon request at the address set forth below. All
      capitalized terms not otherwise defined herein shall have the meanings ascribed
      thereto in the Registration Rights Agreement.

     

    Certain
      legal consequences arise from being named as a selling securityholder in the
      Registration Statement and the related prospectus. Accordingly, holders and
      beneficial owners of Registrable Securities are advised to consult their own
      securities law counsel regarding the consequences of being named or not being
      named as a selling securityholder in the Registration Statement and the related
      prospectus.

     

    NOTICE

     

    The
      undersigned beneficial owner (the “Selling
      Securityholder”)
      of
      Registrable Securities hereby elects to include the Registrable Securities
      owned
      by it in the Registration Statement.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

    The
      undersigned hereby provides the following information to the Company and
      represents and warrants that such information is accurate:

     

    QUESTIONNAIRE

     

    1.Name.

     

    
      	 	
              (a)

            	
              Full
                Legal Name of Selling Securityholder

            

    

    
      	  

	 

    

    

    
      	 	
              (b)

            	
              Full
                Legal Name of Registered Holder (if not the same as (a) above) through
                which Registrable Securities are
                held:

            

    

    
      	  

	 

    

    

    
      	 	
              (c)

            	
              Full
                Legal Name of Natural Control Person (which means a natural person
                who
                directly or indirectly alone or with others has power to vote or
                dispose
                of the securities covered by the
                questionnaire):

            

    

    
      	   

	 

    

    

    2.
      Address for Notices to Selling Securityholder:

     

    
      	  

	  

	  

	
              Telephone:

            
	
              Fax:

            
	
              Contact
                Person:

            

    

    

     

    3.
      Broker-Dealer Status:

     

    
      	 	
              (a)

            	
              Are
                you a broker-dealer?

            

    

     

    Yes o  
      No
o

     

    
      	 	
              (b)

            	
              If
                “yes” to Section 3(a), did you receive your Registrable Securities as
                compensation for investment banking services to the
                Company.

            

    

     

    Yes o       No
o

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Note:If
      no,
      the Commission’s staff has indicated that you should be identified as an
      underwriter in the Registration Statement.

     

    
      	 	
              (c)

            	
              Are
                you an affiliate of a
                broker-dealer?

            

    

     

    Yes o       No
o

     

    
      	 	
              (d)

            	
              If
                you are an affiliate of a broker-dealer, do you certify that you
                bought
                the Registrable Securities in the ordinary course of business, and
                at the
                time of the purchase of the Registrable Securities to be resold,
                you had
                no agreements or understandings, directly or indirectly, with any
                person
                to distribute the Registrable
                Securities?

            

    

     

    Yes o       No
o

     

    
      	 	
              Note:

            	
              If
                no, the Commission’s staff has indicated that you should be identified as
                an underwriter in the Registration
                Statement.

            

    

     

    4.
      Beneficial Ownership of Other Securities of the Company Owned by the Selling
      Securityholder.

     

    Except
      as set forth below in this Item 4, the undersigned is not the beneficial or
      registered owner of any securities of the Company other than the securities
      issuable pursuant to the Purchase Agreement.

     

    
      	 	
              (a)

            	
              Type
                and Amount of other securities beneficially owned by the Selling
                Securityholder:

            

    

     

    
      	  

	  

	 

    

    

    5.
      Relationships with the Company:

     

    Except
      as set forth below, neither the undersigned nor any of its affiliates, officers,
      directors or principal equity holders (owners of 5% of more of the equity
      securities of the undersigned) has held any position or office or has had any
      other material relationship with the Company (or its predecessors or affiliates)
      during the past three years.

     

    State
      any
      exceptions here:

     

    
      	  

	  

	  

    

    

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

     

    The
      undersigned agrees to promptly notify the Company of any inaccuracies or changes
      in the information provided herein that may occur subsequent to the date hereof
      at any time while the Registration Statement remains effective.

     

    By
      signing below, the undersigned consents to the disclosure of the information
      contained herein in its answers to Items 1 through 5 and the inclusion of such
      information in the Registration Statement and the related prospectus
and
      any
      amendments or supplements thereto.
      The
      undersigned understands that such information will be relied upon by the Company
      in connection with the preparation or amendment of the Registration Statement
      and the related prospectus.

     

    IN
      WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice
      and Questionnaire to be executed and delivered either in person or by its duly
      authorized agent.

     

    Dated:
      ______________________________________

    Beneficial
      Owner:________________________________

     

    By:
      __________________________________________

    Name:

    Title:

    

    PLEASE
      FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN
      THE ORIGINAL BY OVERNIGHT MAIL, TO:

    
      
         

      

      
         

        
          

        

      

      
         

      

       

      EXHIBIT
        B

    

    

    CONFIDENTIAL
      PURCHASER QUESTIONNAIRE

    

    PACE
      HEALTH MANAGEMENT SYSTEMS, INC.

    

    THIS
      QUESTIONNAIRE MUST BE ANSWERED FULLY AND RETURNED ALONG WITH YOUR COMPLETED
      SUBSCRIPTION AGREEMENT IN CONNECTION WITH YOUR PROSPECTIVE PURCHASE OF
      SECURITIES FROM PACE HEALTH MANAGEMENT SYSTEMS, INC. (THE “COMPANY”).

    

    THE
      INFORMATION SUPPLIED IN THIS QUESTIONNAIRE WILL BE HELD IN STRICT CONFIDENCE.
      NO
      INFORMATION WILL BE DISCLOSED EXCEPT TO THE EXTENT THAT SUCH DISCLOSURE IS
      REQUIRED BY LAW OR REGULATION, OTHERWISE DEMANDED BY PROPER LEGAL PROCESS OR
      IN
      LITIGATION INVOLVING THE COMPANY.

    

    Capitalized
      terms used herein without definition shall have the respective meanings given
      such terms as set forth in the Subscription Agreement between Pace Health
      Management Systems, Inc. and the subscriber signatory thereto (the “Subscription
      Agreement”)
      or in
      the Company’s Confidential Private Placement Memorandum, dated as of January 16,
      2007 (as amended or supplemented, and together with all exhibits attached
      thereto, the “Memorandum”).

    

    
      
        	
              	(1)	
                The
                  undersigned represents and warrants that he, she or it comes within
                  at
                  least one category marked below, and that for any category marked,
                  he, she
                  or it has truthfully set forth, where applicable, the factual basis
                  or
                  reason the undersigned comes within that category. The undersigned
                  agrees
                  to furnish any additional information which the Company deems neces-sary
                  in order to verify the answers set forth
                  below.

              

      

    

    

    
      	Category
              A ___	
              The
                undersigned is an individual (not a partnership, corporation, etc.)
                whose
                individual net worth, or joint net worth with his or her spouse,
                presently
                exceeds $1,000,000.

            

    

    

    Explanation.
      In calculating net worth you may include equity in personal property and real
      estate, including your principal residence, cash, short-term investments, stock
      and securities. Equity in personal property and real estate should be based
      on
      the fair market value of such property less debt secured by such
      property.

    

    
      	Category
              B ___	
              The
                undersigned is an individual (not a partnership, corporation, etc.)
                who
                had an income in excess of $200,000 in each of the two most recent
                years,
                or joint income with his or her spouse in excess of $300,000 in each
                of
                those years (in each case including foreign income, tax exempt income
                and
                full amount of capital gains and losses but excluding any income
                of other
                family members and any unrealized capital appreciation) and has a
                reasonable expectation of reaching the same income level in the current
                year.

            

    

     

    
      	Category
              C ___	
              The
                undersigned is a director or executive officer of the Company which
                is
                issuing and selling the
                Securities.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
      	Category
              D ___	
              The
                undersigned is a bank, as defined in Section 3(a)(2) of the
                Securities Act of 1933, as amended (the “Act”); a savings and loan
                associa-tion or other institution as defined in Section 3(a)(5)(A) of
                the Act, whether acting in its individual or fiduciary capacity;
                any
                insurance company as defined in Section 2(13) of the Act; any
                investment company registered under the Investment Company Act of
                1940 or
                a business development company as defined in Section 2(a)(48) of that
                Act; any Small Business Investment Company licensed by the U.S. Small
                Business Administration under Section 301(c) or (d) of the Small
                Business Investment Act of 1958; any plan established and maintained
                by a
                state, its political subdivisions, or any agency or instrumentality
                of a
                state or its political subdivisions, for the benefit of its employees,
                if
                such plan has total assets in excess of $5,000,000; any employee
                benefit
                plan within the meaning of the Employee Retirement Income Security
                Act of
                1974 if the investment decision is made by a plan fiduciary, as defined
                in
                Section 3(21) of such act, which is either a bank, savings and loan
                association, insurance company, or registered investment advisor,
                or if
                the employee benefit plan has total assets in excess of $5,000,000
                or, if
                a self-directed plan, with investment decisions made solely by persons
                that are accredited investors (describe
                entity).

            

    ______________________________________________________________

    ______________________________________________________________

    

    
      	Category
              E ___	
              The
                undersigned is a private business development company as defined
                in
                section 202(a) (22) of the Investment Advisors Act of 1940 (describe
                entity) 

            

    

    ______________________________________________________________

    ______________________________________________________________

    

    
      	Category
              F ___	
              The
                undersigned is either a corporation, partnership, Massachusetts business
                trust, or non-profit organization within the meaning of
                Section 501(c)(3) of the Internal Revenue Code, in each case not
                formed for the specific purpose of acquiring the Securities and with
                total
                assets in excess of $5,000,000 (describe
                entity)

            

    

    ______________________________________________________________

    ______________________________________________________________

    

    
      	Category
              G ___	
              The
                undersigned is a trust with total assets in excess of $5,000,000,
                not
                formed for the specific purpose of acquiring the Securities, where
                the
                purchase is directed by a “sophisticated investor” as defined in
                Regulation 506(b)(2)(ii) under the
                Act.

            

    

    

    
      	Category
              H ___	
              The
                undersigned is an entity in which all of the equity owners are “accredited
                investors” within one or more of the above categories. If relying upon
                this Category alone, each equity owner must complete a separate copy
                of
                this Purchaser Questionnaire (describe entity). If the entity is
                a trust,
                a copy the trust documents must be provided and in the case of a
                revocable
                trust, the grantor must provide a copy of the Purchaser
                Questionnaire.

            

    

    ______________________________________________________________

    ______________________________________________________________

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    The
      undersigned agrees that the undersigned will notify the Company at any time
      on
      or prior to the applicable Closing (as defined in the Memorandum) in the event
      that the representations and warranties in this Purchaser Questionnaire shall
      cease to be true, accurate and complete.

    

    
      
        	
              	(2)	
                Suitability
                  (please answer each question)

              

      

    

    

    
      	 	
              (a)

            	
              For
                an individual, please describe your current employment, including
                the
                company by which you are employed and its principal
                business:

            

    

    
      ______________________________________________________________

      ______________________________________________________________

      ______________________________________________________________

       

    

    
      	 	
              (b)

            	
              For
                an individual, please describe any college or graduate degrees held
                by
                you:

            

    

    
      ______________________________________________________________

      ______________________________________________________________

      ______________________________________________________________

       

    

    (c)    For
      all
      subscribers, please list types of prior investments:

     

    
      ______________________________________________________________

      ______________________________________________________________

      ______________________________________________________________

       

    

    
      	 	
              (d)

            	
              For
                all subscribers, please state whether you have you participated in
                other
                private
                placements
                before:

            

    

    

    
      	
              YES

            	  
	 	
              NO

            	  

    

    

    
      	 	
              (e)

            	
              If
                your answer to question (d) page #3 was “YES”, please indicate frequency
                of such prior participation in private
                placements
                of:

            

    

    

    
      	 	 	
              Public

              Companies

            	 	
              Private

              Companies

            
	
              Frequently

            	 	      
	 	  

	
              Occasionally

            	 	  
	 	  

	
              Never

            	 	  
	 	  

    

    

    
      	 	
              (f)

            	
              For
                individuals, do you expect your current level of income to significantly
                decrease in the foreseeable future?

            

    

    

    
      	
              YES

            	  
	 	
              NO

            	   

    

    

    
      	
            	(g)	
              For
                trust, corporate, partnership and other institutional subscribers,
                do you
                expect your total assets to significantly decrease in the foreseeable
                future?

            

    

    

    
      	
              YES

            	     
	 	
              NO

            	     

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	 	
              (h)

            	
              For
                all subscribers, do you have any other investments or contingent
                liabilities which you reasonably anticipate could cause you to need
                sudden
                cash requirements in excess of cash readily available to
                you?

            

    

    

    
      	
              YES

            	  
	 	
              NO

            	   

    

    

    
      	 	
              (i)

            	
              For
                all subscribers, are you familiar with the risk aspects and the
                non-liquidity of investments such as the Securities for which you
                seek to
                purchase?

            

    

    

    
      	
              YES

            	  
	 	
              NO

            	   

    

    

    
      	 	
              (j)

            	
              For
                all subscribers, do you understand that there is no guarantee of
                financial
                return on this investment and that you run the risk of losing your
                entire
                investment?

            

    

    

    
      	
              YES

            	   
	 	
              NO

            	   

    

    

    
      	
            	(3)	
              Manner
                in which title is to be held: (circle
                one)

            

    

    

    
      	
            	(a)	
              Individual
                Ownership

            

    

    
      	
            	(b)	
              Community
                Property

            

    

    
      	
            	(c)	
              Joint
                Tenant with Right of Survivorship (both parties must
                sign)

            

    

    
      	
            	(d)	
              Partnership

            

    

    
      	
            	(e)	
              Tenants
                in Common

            

    

    
      	
            	(f)	
              Company

            

    

    
      	
            	(g)	
              Trust

            

    

    
      	
            	(h)	
              Other

            

    

    

    
      	
            	(4)	
              NASD
                Affiliation.

            

    

    

    Are
      you
      affiliated or associated with an NASD member firm (please check
      one):

    

    
      	
              YES

            	    
	 	
              NO

            	    

    

    

    If
      Yes,
      please describe:

    

    _________________________________________________________

    _________________________________________________________

    _________________________________________________________

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    *If
      subscriber is a Registered Representative with an NASD member firm, have the
      following acknowledgment signed by the appropriate party:

    

    The
      undersigned NASD member firm acknowledges receipt of the notice required by
      the
      NASD Conduct Rules.

    

    _________________________________

    Name
      of
      NASD Member Firm

    

    

    By:
      ______________________________

    Authorized
      Officer

    

    Date:
      _____________________________

    

    The
      undersigned has been informed of the significance to the Company of the
      foregoing representations and answers contained in this Confidential Purchaser
      Questionnaire and such representations and answers have been provided with
      the
      understanding that the Company and the Placement Agent will rely on them.

     

    
      
        	
                 

              	
                Individual

              
	 	 
	
                Date:________________________

              	
                ______________________________

              
	 	
                Name
                  of Individual

              
	 	
                (Please
                  type or print)

              
	 	 
	 	
                _______________________________

              
	 	
                Signature
                  of Individual

              
	 	 
	 	 
	 	
                _______________________________

              
	 	
                Name
                  of Joint Owner 

              
	 	
                (Please
                  type or print)

              
	 	 
	 	 
	 	
                _______________________________

              
	 	
                Signature
                  (Joint Owner)

              
	 	 
	 	
                Partnership,
                  Corporation or

              
	 	
                Other
                  Entity

              
	 	 
	
                Date:
                  _______________________ 

              	
                _______________________________

              
	 	
                Print
                  or Type Entity Name

              
	 	 
	 	
                By:____________________________

              
	 	
                Print
                  or Type Name

              
	 	
                Title:

              
	 	 
	 	
                _______________________________

              
	 	
                Signature

              
	 	 
	
                 

              	
                Title:
                  __________________________

              
	 	 
	 	
                _______________________________

              
	 	
                Signature
                  (other authorized signatory)

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