WARRANT, SUBSCRIPTION AND RIGHTS AGREEMENT
THIS AGREEMENT dated as of January 20, 1995 is entered into among
QUALIS CARE, L.P., a Delaware limited partnership ("Qualis"), QUALIS SERVICES,
INC., a Delaware corporation ("Services"), QUALIS CREDIT, CORP., a Delaware
corporation ("Credit"), QUALIS SERVICE HOLDING, INC., a Delaware corporation
("Service Holding"), QUALIS CREDIT HOLDING, INC., a Delaware corporation
("Credit Holding"), QUALIS CARE FUNDING CORPORATION, a Delaware corporation
("Funding"), QUALIS GROUP HOLDINGS, L.P., a Delaware limited partnership ("Group
Holdings"), QUALIS GROUP, INC., a Delaware corporation ("Group") and CARGILL
FINANCIAL SERVICES CORPORATION, a Delaware corporation ("Cargill").
P R E M I S E S:
A. Qualis, Cargill, Funding and a Collateral Agent are entering into a
Purchase Agreement dated as of the date of this Agreement (the "Purchase
Agreement"), pursuant to which Cargill agrees, subject to certain conditions, to
make purchases of up to $150,000,000 of health care receivables from Funding.
B. In connection with the Purchase Agreement, Qualis, Funding, Credit,
Services, and Cargill have entered into a Master Program Agreement dated as of
the date of this Agreement (the "Program Agreement") to set forth additional
rights and obligations of the parties thereto.
C. As a condition to entering into the Purchase Agreement and the
Program Agreement, Cargill has required that
Qualis, Services, Credit, Service Holding, Credit Holding, Funding, Group
Holdings, Group and Cargill enter into this Agreement.
NOW, THEREFORE, Qualis, Services, Credit, Service Holding, Credit
Holding, Funding, Group Holdings, Group and Cargill agree as follows:
ARTICLE 1.
DEFINITIONS
For all purposes of this Agreement, capitalized terms used herein and
not defined shall have the meanings set forth below.
Affiliate: means, as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person, within the meaning of control under Section 15 of the Securities
Act.
Demand Registration: has the meaning provided in Section 7.1(a)
hereof.
Exchange Act: means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
Partnership Interest: means the ownership interest of a general
partner or a limited partner, as the case may be, of Qualis, including, without
limitation, the interest in the capital, income, losses and distributions of
Qualis.
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Person: means an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof or other entity.
Piggyback Registration: has the meaning provided in Section 7.2(a)
hereof.
Prospectus: means the prospectus included in any Registration
Statement, 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 such Registration Statement and by all other amendments and
supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such prospectus.
Registrable Securities: means Partnership Interests or other
securities of Qualis other than the Warrant.
Registration Expenses: has the meaning provided in Section 7.5 hereof.
Registration Statement: means any registration statement of Qualis
that covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, all exhibits and
all material incorporated by reference in such Registration Statement.
SEC: means the Securities and Exchange Commission.
Securities Act: means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
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Underwritten Registration or Underwritten Offering: means a
registration in which securities of Qualis are sold to an underwriter for
reoffering to the public.
ARTICLE 2.
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REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------
2.1. Representations and Warranties. Each of Qualis, Funding, Credit,
Service Holding, Credit Holding, Group Holdings and Group represents and
warrants to Cargill as to itself, as of the date of this Agreement, as follows:
(a) It is an organization duly formed, validly existing and in
good standing under the laws of the state in which it was formed and is duly
qualified to do business, and is in good standing, in each jurisdiction in which
the nature of its business requires it to be so qualified;
(b) It has the power and authority to own and convey all of its
properties and assets and to execute and deliver this Agreement and to perform
the transactions contemplated hereby;
(c) The execution, delivery and performance by it of this
Agreement and the transactions contemplated hereby, at all relevant times, (i)
shall have been duly authorized by all necessary action on its part, (ii) do not
contravene or cause it to be in default under (A) its organizational documents,
(B) any contractual restriction contained in any indenture, loan or credit
agreement, lease, mortgage, security agreement, bond, note, or other agreement
or instrument binding on or affecting it or its property or (C) any law, rule,
regulation, order, writ,
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judgment, award, injunction, or decree applicable to, binding on or affecting it
or its property and (iii) do not and will not result in or require the creation
of any adverse claim upon or with respect to any of its property (other than as
contemplated under the Related Documents (as defined in the Purchase
Agreement));
(d) This Agreement shall have been duly executed and delivered on
its behalf as of the date it is purported to be effective; and
(e) This Agreement is its legal, valid and binding obligation,
enforceable against it in accordance with its terms, subject to bankruptcy laws
and other similar laws of general application affecting creditors, and subject
to the application of rules of equity, including those respecting the
availability of specific performance.
2.2. Covenants.
(a) Until the Demand Registration rights under Section 7.1 have
been utilized or terminate, (i) Qualis covenants and agrees that it shall be the
sole shareholder of Credit Holding, Service Holding, and Funding, (ii) Credit
Holding covenants and agrees that it shall be the sole shareholder of Credit,
and (iii) Service Holding covenants and agrees that it shall be the sole
shareholder of Services.
(b) Qualis covenants and agrees that until the Warrant expires or
is exercised, it shall provide Cargill with copies of all notices, reports or
other communications required
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to be delivered to any limited partner of Qualis simultaneously with the
delivery thereof to such limited partners.
ARTICLE 3.
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WARRANT AND PARTICIPATION AGREEMENT
-----------------------------------
3.1. Issuance of Warrant. On the date hereof, Qualis shall issue a
Warrant, dated the date hereof (the "Warrant") to Cargill.
3.2. Participation Agreement. On the date hereof, Group Holdings shall
enter into a Participation Agreement with Cargill, dated the date hereof (the
"Participation Agreement").
ARTICLE 4.
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TAG-ALONG RIGHTS
----------------
4.1. Tag-Along Rights.
(a) Before February 28, 1999, neither Group Holdings nor any
Affiliate of Group Holdings will sell or otherwise transfer, in one transaction
or series of related transactions, more than thirty percent (30%) in the
aggregate of their Partnership Interests in Qualis ("Sale Interests") to any
Person other than an Affiliate of Group Holdings, unless such party first offers
to Cargill, directly or indirectly, as provided in Paragraph 4.1(b) the
opportunity to participate in such sale by selling to such purchaser a portion
of Cargill's Partnership Interests in Qualis (the "Cargill Interests"), such
that the portion sold by Cargill, as a percentage of the total Partnership
Interests owned or subject to unexercised Warrants and options under the
Participation Agreement before selling to
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such purchaser, is equal to the portion sold by Group Holdings or its Affiliate,
as a percentage of the total Partnership Interests owned by such sellers before
selling to such purchaser.
(b) In order to offer the Sale Interests, the party proposing to
sell or transfer the Sale Interests (the "Selling Party") will:
(i) give Cargill a notice (a "Proposed Sale
Notice") of the proposed sale which
includes the principal terms, including,
but not limited to, the sale price, of the
proposed sale or transfer and, if a
proposed purchaser or transferee has been
identified, the identity of the proposed
purchaser or other transferee, and
(ii) provide to Cargill the option, exercisable
within 30 days after the Proposed Sale
Notice is given, to participate in such
sale by selling to the purchaser a pro
rata portion of the Cargill Sale Interests
at the price, and on the payment terms,
specified in the Proposed Sale Notice.
(c) If an option given as provided in subparagraph (b) is not
exercised within 30 days after the Proposed Sale Notice is given, the Selling
Party may, within 60 days after the option expires or is waived, sell the Sale
Interests for a price which is not higher, and on terms which are
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not more favorable to the seller, than the price and terms set forth in the
Proposed Sale Notice.
(d) If Cargill exercises an option granted as provided in
subparagraph (b), the sale of the Cargill Sale Interests will be completed on a
date designated in the notice of exercise, which will not be later than 30 days
after the notice of exercise is given, or such later date as is the earliest
date on which the purchase may be completed in compliance with all applicable
laws. In order to facilitate such sale, the Selling Party shall make any
customary representations and provide any reasonable certifications or opinions
required by the purchaser with respect to the validity of Sale Interests and the
Cargill Sale Interests.
(e) Any transferee of Partnership Interests from Group Holdings
or any Affiliate of Group Holdings agrees to give Cargill the same rights as
provided under this Article 4.
ARTICLE 5.
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RIGHT OF FIRST REFUSAL AS TO OUALIS
-----------------------------------
5.1. Agreement to Offer Partnership Interests. Before February 28,
1999, Qualis will not issue any Partnership Interests, unless it first offers
Cargill the option, as provided in Paragraph 5.2, to purchase up to fifty
percent (50%) of the Partnership Interests to be issued by Qualis; provided,
however, that Qualis shall have no obligation to offer and Cargill shall have no
right pursuant to this Section 5.1 to purchase any such
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interest or any other interest of Qualis in connection with any public offering
of any securities of Qualis.
5.2. Terms of Offer to Cargill. If Qualis is required by Paragraph 5.1
to offer Cargill the option to purchase Partnership Interests, the following
will take place:
(a) At least 30 days before Qualis proposes to issue Partnership
Interests, Qualis will give Cargill a notice (a "Notice of Proposed Partnership
Interest Issuance") of the proposed issuance of Partnership Interests, which
will state (i) the number and class of Partnership Interests Qualis proposes to
issue and the number of those Partnership Interests which Cargill will have the
right to purchase, (ii) the designations, rights, preferences and limitations
applicable to the class of interests which are to be issued, (iii) the
consideration to be paid to Qualis for the Partnership Interests which are to be
issued, and if that consideration is other than in cash, the cash per
Partnership Interest determined by the Management Committee of Qualis to be
equivalent to the non-cash consideration which is to be received, (iv) the
estimated date of issuance of the Partnership Interests and (v) the identity of
the proposed purchaser.
(b) Cargill will have the option, exercisable by a notice in
writing to Qualis given within 30 days after Cargill receives a Notice of
Proposed Partnership Interest Issuance, to purchase up to 50% of such
Partnership Interests for the consideration to be paid to Qualis as set forth in
the Notice of Proposed Partnership Interest Issuance, or if Cargill so elects,
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the cash equivalent, and on the other terms described in the Notice of Proposed
Partnership Interest Issuance.
(c) If Cargill exercises an option described in subparagraph (b),
Cargill will be contractually obligated to purchase from Qualis, and Qualis will
be contractually obligated to sell to Cargill, the Partnership Interests as to
which the option was exercised. Such purchase and sale will occur
simultaneously.
(d) If Cargill does not exercise an option granted to it as
provided in subparagraph (b), Qualis may, at any time within nine months after
the Notice of Proposed Partnership Interest Issuance which created the option is
given, sell the Partnership Interests to the purchaser described in the Notice
of Proposed Partnership Interest Issuance on the terms described in the Notice
of Proposed Partnership Interest Issuance or on other terms which are no more
favorable to the buyer than those described in the Notice of Proposed
Partnership Interest Issuance; provided, however, that if such sale is not made
to the purchaser described in such Notice of Proposed Partnership Interests
during such nine month period and such Partnership Interests are to be sold on
similar terms during such nine month period, Cargill's option to purchase shall
be reinstated.
ARTICLE 6.
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PURCHASE OPTION
---------------
6.1. Agreement to Offer Partnership Interests. Before February 28,
1999, neither Qualis nor any Affiliate of Qualis
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will purchase any Partnership Interests, unless it offers Cargill the option, as
provided in Section 6.2, to purchase up to fifty percent (50%) of such
Partnership Interests on the same terms and conditions as Qualis is making such
purchase.
6.2. Terms of Offer to Cargill. If any of Qualis or any of its
Affiliates (a "Transacting Party") is required by Section 6.1 to offer Cargill
the right to purchase Partnership Interests, the following will take place:
(a) At least 30 days before such Transacting Party proposes to
purchase Partnership Interests, such Transacting Party will give Cargill a
notice (a "Notice of Proposed Partnership Interest Purchase") of the proposed
purchase of Partnership Interests, which will state (i) the number and class of
Partnership Interests the Transacting Party proposes to purchase and the number
of those Partnership Interests which Cargill will have the right to purchase,
(ii) the designations, rights, preferences and limitations applicable to the
class of interests which are to be purchased, (iii) the consideration to be paid
by such Transacting Party for the Partnership Interests which are to be
purchased, (iv) the estimated date of such purchase of the Partnership Interests
and (v) the identity of the proposed seller.
(b) Cargill will have the option, exercisable by a notice in
writing to the Transacting Party given within 30 days after Cargill receives a
Notice of Proposed Partnership Interest Purchase, to purchase up to 50% of such
Partnership Interests. Cargill will have the right to purchase as set forth in
the
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Notice of Proposed Partnership Interest Purchase, for the consideration per
Partnership Interest to be paid by the Transacting Party as set forth in the
Notice of Proposed Partnership Interest Purchase, and on the other terms
described in the Notice of Proposed Partnership Interest Purchase.
(c) If Cargill exercises an option described in subparagraph (b),
Cargill will be contractually obligated to purchase from the Transacting Party,
and the Transacting Party will be contractually obligated to sell or cause to be
sold to Cargill, the Partnership Interests as to which the option was exercised,
all as part of a simultaneous transaction.
(d) If Cargill does not exercise an option granted to it as
provided in subparagraph (b), the Transacting Party may, at any time within one
year after the Notice of Proposed Partnership Interest Purchase which created
the option is given, purchase the Partnership Interests described in the Notice
of Proposed Partnership Interest Purchase from the seller described in the
Notice of Proposed Partnership Interest Purchase on the terms described in the
Notice of Proposed Partnership Interest Purchase or on other terms which are no
more favorable to the Transacting Party than those described in the Notice of
Proposed Partnership Interest Purchase.
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ARTICLE 7.
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REGISTRATION
------------
7.1. Demand Registration.
(a) Except as provided herein and subject to the condition that
in the reasonable judgment of Group Holdings and at least five members of the
Management Committee of Qualis, implementation of a Demand Registration (as
defined below) will not result in (i) Qualis being treated as a "publicly traded
partnership" within the meaning of Section 7704 of the Internal Revenue Code of
1986, as amended from time to time, any successor thereto and applicable
regulations thereunder, (ii) Qualis otherwise being treated as an association
taxable as a corporation for federal income tax purposes or (iii) Qualis no
longer existing or qualifying as a limited partnership under any applicable
state law, if Cargill has duly exercised the Warrant, Cargill may, at any time
between March 1, 1999 and February 28, 2000, make a written request to Qualis
for registration under the Securities Act of all or part of the Registrable
Securities it then owns or may own at any time upon exercise of the Warrant or
of its option under the Participation Agreement (a "Demand Registration"). Any
such request by Cargill shall specify the aggregate amount of Registrable
Securities to be registered and shall also specify the intended method of
disposition thereof. Within five Business Days after receipt of such
registration request, Qualis shall commence the preparation of the registration
of the Registrable Securities. Qualis may, upon
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notice to Cargill, delay the effectuation of such Demand Registration for a
reasonable period of time, but not more than 90 days after receipt of the
request for such Demand Registration, (x) as is necessary to prepare audited
financial statements of Qualis for its most recently completed fiscal year or
other audited financial statements reasonably required in the Registration
Statement, or (y) if Qualis would be required to divulge in such Registration
Statement the existence of any fact relating to a proposed acquisition,
financing or other material corporate development not otherwise required to be
disclosed and the Management Committee of Qualis shall have in good faith
determined that such disclosure would be materially adverse to Qualis. Such
notice of delay shall explain, in reasonable detail, the reasons for such delay.
If Qualis shall so delay the effectuation of the Demand Registration, Cargill
may, within 30 days after receipt of the notice of delay, notify Qualis that it
is withdrawing its request for registration and, such Demand Registration shall
be deemed to be withdrawn and such request shall be deemed not to have been
exercised for purposes hereof.
(b) Subject to Section 7.1(a) and 7.1(d), Cargill shall be
entitled to one Demand Registration.
(c) The offering of Registrable Securities pursuant to such
Demand Registration shall be in the form of an Underwritten Offering if
requested by Cargill. If the managing underwriter or underwriters unanimously
determine in good faith that the total amount of Registrable Securities proposed
to be included in such offering is such as to materially adversely
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affect the success of such offering, then the amount of Registrable Securities
shall be reduced or limited pro rata among Qualis and Cargill in proportion to
the amount of Registrable Securities sought to be registered by each, to the
extent necessary to reduce the total amount of Registrable Securities to be
included in such offering to the amount that, in the reasonable opinion of such
managing underwriter or underwriters, can be sold without materially adversely
affecting the success of such offering.
(d) If (i) more than 5% of Cargill's Registrable Securities
sought to be registered in any Demand Registration is not included in such
registration pursuant to Section 7.1(c), (ii) a Demand Registration is delayed
pursuant to Section 7.1(a) hereof and is not effective or otherwise is not
effective within 180 days after Cargill's demand for registration, (iii) if such
registration, after it has become effective, is interfered with by any stop
order, injunction or other order or requirement of the SEC or other governmental
agency or court by reason of an act or omission by Qualis or any of its
subsidiaries or (iv) the conditions to closing specified in the purchase
agreement or underwriting agreement entered into in connection with such
registration are not satisfied because of an act or omission by Qualis or any of
its subsidiaries (other than by reason of facts or circumstances not within
control of Qualis or any such subsidiary), then in each such case such Demand
Registration shall not be counted for purposes of calculating the number of
demand rights exercised by Cargill and in case of the
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circumstances described in (i) above, Cargill shall be entitled to a Demand
Registration for such remaining Registerable Securities that may be exercised no
sooner than nine months after the close of the transaction described in (i)
above and no later than 18 months thereafter.
(e) Nothing in this Section 7.1 or in Section 7.2 hereof shall
create any right in Cargill to require Qualis to register any securities other
than Registrable Securities under the Securities Act.
7.2. Piggyback Registration.
(a) If Qualis at any time proposes to register securities of a
class of Registrable Securities on its own behalf or on behalf of any holder of
Registrable Securities of such class under the Securities Act, whether or not
pursuant to registration rights granted to other holders of its securities in a
manner which would permit registration of Registrable Securities, Qualis shall
give prompt written notice each such time to Cargill of its intention to do so
(which notice shall include the anticipated filing date of the Registration
Statement and the amount of Registrable Securities of such class proposed to be
included in the Registration Statement); provided, however, that in any event,
such notice shall be given to Cargill at least thirty (30) days prior to such
proposed filing. The notice shall offer to include in such filing the number of
Registrable Securities as Cargill shall request. Upon the written request of
Cargill given within 15 Business Days after receipt of any such notice by
Cargill (stating the amount of Registrable Securities
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of such class to be disposed of by Cargill and the intended method of
disposition), Qualis shall include the Registrable Securities intended to be
disposed of in a registration statement under the Securities Act so as to permit
disposition (in accordance with the reasonable methods in said request) by
Cargill of the Registrable Securities so registered (a "Piggyback
Registration"). The managing underwriter or underwriters for any offering of
Registrable Securities to be registered pursuant to this Agreement shall be
selected by Qualis, subject to the consent of Cargill, which shall not be
unreasonably withheld.
(b) Notwithstanding any provision of this Section 7.2, if the
registration of which Qualis gives notice pursuant to Section 7.2(a) is for an
Underwritten Offering and, notwithstanding Qualis used reasonable efforts to
arrange such registration so as to include all the Registrable Securities
required to be included by Cargill in the securities to be offered and sold in
the Underwritten offering, the managing underwriter or underwriters shall advise
Qualis in writing (with a copy to Cargill) that, in its or their reasonable and
good faith judgment the total amount of Registrable Securities requested by
Cargill to be included in such offering concurrently with the securities by
Qualis is such as to materially adversely affect the price, timing or
distribution of such offering, then the amount of Registrable Securities shall
be limited pro rata among Cargill and Qualis in proportion to the amount of
Registrable Securities sought to be registered by each, to the extent necessary
to reduce the total amount of Registrable
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Securities to be included in such offering to the amount that in the reasonable
judgment of such managing underwriter or underwriters, can be sold without
materially adversely affecting the success of such offering. Cargill shall not
be required to make any representations or warranties to, or agreements with
Qualis or any underwriter, other than customary representations, warranties or
agreements made by a selling shareholder in a public offering. Qualis agrees
that it will give any representations typically given by an issuer of
securities, including covering the validity of Registrable Securities.
(c) If Cargill elects not to participate in any underwriting in
which it had previously requested the registration described in Section 7.2(a),
Cargill may elect to withdraw therefrom by delivering written notice to Qualis
and the managing underwriter or underwriters, if any, 30 days prior to the
planned effective date of such Registration or 15 days after notice of any
underwriter's opinion pursuant Section 7.2(a) whichever is later.
7.3. Hold-Back Agreements; Press Releases.
(a) If Cargill's Registrable Securities are covered by a
Registration Statement filed pursuant to Section 7.1 or 7.2 hereof, Cargill
agrees not to effect any public sale or distribution of securities of Qualis,
including a sale pursuant to Rule 144 under the Securities Act (except as part
of such Underwritten Registration), during the 30-day period prior to, and
during the 180-day period beginning on, the closing date of the offering made
pursuant to such Registration Statement, unless
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the managing underwriter or underwriters agree in writing to waive or shorten
any such period for Cargill or for any other sellers of securities. This
provision shall not apply to Cargill if there is a public sale or distribution
of securities of Qualis subsequent to such holding period or if Cargill is
prevented by applicable statute or regulation from entering into any such
agreement. Qualis agrees to be bound by the foregoing hold-back agreement to the
same extent as Cargill.
(b) Before Cargill shall disseminate or announce publicly any
information concerning a proposed offering pursuant to Section 7.1 or 7.2 hereof
that is intended for or may result in public knowledge thereof, Cargill shall so
advise Qualis and shall not disseminate or announce publicly such information
without Qualis' consent, unless such information is otherwise publicly available
or the dissemination thereof is required by applicable law.
7.4. Registration Procedures. In connection with the Demand
Registration and Piggyback Registration obligations pursuant to Section 7.1 and
Section 7.2 hereof, Qualis will use its reasonable efforts to effect such Demand
Registration or Piggyback Registration to permit the sale of Registrable
Securities in accordance with the intended method or methods of distribution
thereof, and pursuant thereto Qualis will:
(a) prepare and file with the SEC, as soon as practicable after
receipt of the registration request referred to in Section 7.2 hereof, and use
reasonable efforts to have declared effective, a Registration Statement relating
to the
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Demand Registration or the Piggyback Registration on any appropriate form under
the Securities Act, which form shall be available for the sale of the
Registrable Securities in accordance with the intended method or methods of
distribution thereof and shall include all financial statements (including,
without limitation, any financial statements of any subsidiary of Qualis)
required by the SEC to be filed therewith, and make all filings required to be
made with any national stock exchange or national computerized market system on
which the Registerable Securities are to be listed or quoted; provided, however,
that, before filing a Registration Statement or Prospectus or any amendments or
supplements thereto, Qualis shall furnish to Cargill, and the managing
underwriter or underwriters, if any, copies of all such documents proposed to be
filed, which documents shall be subject to the reasonable review of each of
Cargill and the managing underwriter or underwriters, if any, and Qualis shall
not file any Registration Statement or amendment thereto or any Prospectus or
any supplement thereto to which the managing underwriter or underwriters, if
any, or Cargill shall reasonably object in writing;
(b) cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
under the Securities Act and comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the
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intended method or methods of distribution by Cargill set forth in such
Registration Statement or supplement to the Prospectus;
(c) notify Cargill and the managing underwriter or underwriters,
if any, and (if requested by any such Person) confirm such notice in writing:
(1) when the Registration Statement or any amendment thereto or the Prospectus
or any Prospectus supplement or post-effective amendment has been filed, and,
with respect to the Registration Statement or any post-effective amendment, when
the same has become effective, and to furnish Cargill and the underwriter with
copies thereof, (2) of any request by the SEC for amendments or supplements to
the Registration Statement or the Prospectus or for additional information, (3)
of the issuance by the SEC of any stop order or similar order suspending the
effectiveness of the Registration Statement or the use of any preliminary
Prospectus or Prospectus or the initiation or threatening of any proceedings for
that purpose, (4) if at any time the representations and warranties of Qualis
contemplated by Section 7.4(l) below cease to be true and correct in all
material respects, (5) of the receipt by Qualis of any notification with respect
to the suspension of the qualification of the Registrable Securities for
offering or sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, and (6) upon discovery that, or upon the happening
of any event as a result of which, the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
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make the statements therein not misleading in the light of the circumstances
under which they were made, and at the request of Cargill promptly prepare and
furnish to Cargill a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers or prospective purchasers of such securities, such
prospectus shall not include 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 not misleading in the light of the circumstances under which
they were made;
(d) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such Registration Statement
from and after a date not later than the effective date of such Registration
Statement;
(e) make every reasonable effort to obtain the withdrawal of any
stop order or other order suspending the effectiveness of the Registration
Statement or the use of any preliminary Prospectus or Prospectus, at the
earliest possible moment;
(f) if requested by Cargill or the managing underwriter or
underwriters, if any, incorporate in a Prospectus supplement or post-effective
amendment such information as Cargill or the managing underwriter or
underwriters, if any, reasonably agree should be included therein relating to
the plan of distribution with respect to the Registrable Securities; and make
all required filings of such Prospectus supplement or post-
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effective amendment as soon as notified of the matters to be incorporated in
such Prospectus supplement or post-effective amendment; provided, however, that
Qualis shall not be required to take any actions in this Section 7.4(e) that are
not, in the written opinion of counsel for Qualis delivered to Cargill, in
compliance with applicable law;
(g) furnish to Cargill as soon as available (x) such number of
copies of such drafts and final versions of such Registration Statement and of
each such amendment and supplement thereto (in each case including all
exhibits), (y) such number of copies of such drafts and final version of the
Prospectus contained in such Registration Statement (including each preliminary
prospectus and any summary prospectus) and (z) any other prospectus filed under
Rule 424 under the Securities Act, in conformity with the requirements of the
Securities Act, and such other documents, as Cargill may reasonably request; it
being understood and agreed that Qualis consents to the use of the Prospectus or
any amendment or supplement thereto by Cargill and the managing underwriter or
underwriters, if any, in connection with the offering and sale of the securities
covered by the Prospectus or any amendment or supplement thereto;
(h) prior to any public offering of Registrable Securities
covered by a Registration Statement, use its reasonable efforts to register or
qualify such Registrable Securities for offer and sale under the securities or
blue sky laws of such jurisdictions as Cargill or the underwriters reasonably
request, to keep such registration or qualification in
23
effect for so long as such Registration Statement is in effect, and do any and
all other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the Registrable Securities covered by the Registration
Statement; provided, however, that Qualis shall not be required: (1) to qualify
generally to do business in any jurisdiction where it is not then so qualified
or (2) to consent to general service of process in any such jurisdiction where
it is not then so subject or subject Qualis to any tax in any such jurisdiction
where it is not then so subject;
(i) (1) cooperate with Cargill and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing the Registrable Securities covered by a Registration
Statement to be sold; and (2) enable the Registrable Securities covered by a
Registration Statement to be in such denominations and registered in such names
as the managing underwriter or underwriters may request at least two Business
Days prior to any sale of such Registrable Securities to the underwriters;
(j) use reasonable efforts to cause the Registrable Securities
covered by the applicable Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers, Cargill or the managing underwriter or
underwriters, if any, to consummate the disposition of such Registrable
Securities; provided, however, that Qualis shall not be required to register the
Registrable Securities covered by a
24
Registration Statement in any jurisdiction where such registration would subject
Qualis to general service of process where it is not then so subject, or subject
Qualis to any tax in any such jurisdiction where it is not then so subject;
(k) upon the occurrence of any event contemplated by Section
7.4(c)(6) above, prepare a supplement or post-effective amendment to the
Registration Statement or the related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities covered by a
Registration Statement, the Prospectus will not contain an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading;
(l) enter into such customary agreements (including an
underwriting agreement) and use reasonable efforts to take all such other
actions in order to facilitate the disposition of the Registrable Securities
covered by the Registration Statement and in such connection, whether or not an
underwriting agreement is entered into and whether or not the registration is an
underwritten registration: (1) make such representations and warranties to
Cargill and the managing underwriter or underwriters, if any, in form, substance
and scope, as are customarily made by issuers to underwriters in similar
underwritten offerings; (2) obtain opinions of counsel to Qualis and updates
thereof (which counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriter or underwriters, if any, and
not objected to
25
by Cargill) addressed to Cargill and the managing underwriter or underwriters,
if any, covering the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably requested by
any Cargill and the underwriters; (3) obtain "cold comfort" letters and updates
thereof from Qualis' independent certified public accountants addressed to
Cargill and the managing underwriter or underwriters, if any, such letters to be
in customary form and covering matters of the type customarily covered in "cold
comfort" letters by accountants in connection with primary underwritten
offerings; (4) if an underwriting agreement is entered into, the same shall set
forth certain indemnification provisions and procedures with respect to all
parties to be indemnified pursuant thereto, which provisions and procedures
shall be normal and customary in the investment banking and/or financial
services industry; and (5) deliver such documents and certificates as may be
reasonably requested by Cargill and the managing underwriter or underwriters, if
any, to evidence compliance with Section 7.4(k) above and with any customary
conditions contained in the underwriting agreement or other agreement entered
into by Qualis. Each of the above shall be done at each closing under such
underwriting or similar agreement or as and to the extent required thereunder;
and
(m) otherwise use reasonable efforts to comply with all
applicable rules and regulations of the SEC, and make generally available to
holders of Securities covered by a Registration Statement, earnings statements
satisfying the
26
provisions of Section 11(a) of the Securities Act, no later than 45 days after
the end of any 12-month period (or 90 days, if such period is a fiscal year):
(1) commencing at the end of any fiscal quarter in which Registrable Securities
covered by a Registration Statement are sold to underwriters in a firm or best
efforts underwritten offering, or (2) if not sold to underwriters in such an
offering, beginning with the first month of Qualis' first fiscal quarter
commencing after the effective date of the Registration Statement, which
statements shall cover said 12-month periods.
Qualis may require Cargill to furnish to Qualis such information
regarding the distribution of such securities, including any information
required by law to be given in connection with the Registration Statement, as
Qualis may from time to time reasonably request in writing and as is required by
applicable law or regulations.
Cargill agrees that, upon receipt of any notice from Qualis of the
happening of any event of the kind described in Section 7.4(c)(3), 7.4(c)(5), or
7.4(c)(6) hereof, Cargill shall forthwith discontinue the disposition of
Registrable Securities until Cargill receives copies of the supplemented or
amended Prospectus contemplated by Section 7.4(k) hereof, or until Cargill is
advised in writing by Qualis that the use of the Prospectus may be resumed, and
has received copies of any additional or supplemental filings which are
incorporated by reference in the Prospectus, and, if so directed by Qualis,
Cargill will deliver to Qualis (at Qualis' expense), all copies,
27
other than permanent file copies then in Cargill's possession, of the Prospectus
covering such Registrable Securities at the time of receipt of such notice.
7.5. Registration Expenses.
(a) Except as set forth in Section 7.5(c), all expenses incident
to Qualis' performance of or compliance with this Agreement pursuant to any
Piggyback Registration (the "Registration Expenses"), including, without
limitation, all: (1) registration and filing fees, including fees and expenses
associated with filings required to be made with a national securities exchange
or national computerized market system, (2) fees and expenses of compliance with
state securities or blue sky laws (including reasonable fees and disbursements
of counsel for underwriters in connection with blue sky qualifications of the
securities covered by the Registration Statement and determination of
eligibility for investment under the laws of such jurisdictions designated by
the managing underwriter or underwriters, if any), (3) printing expenses
(including expenses of printing certificates for the Securities covered by the
Registration Statement in a form eligible for deposit with Depositary Trust
Company and of printing prospectuses), (4) fees and disbursements of counsel for
Qualis, of all independent certified public accountants of Qualis (including the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance), and of all other Persons retained by Qualis shall be paid
by Qualis promptly upon receipt of bills or invoices relating thereto,
regardless of whether the
28
Registration Statement becomes effective. In addition to the expenses set forth
in Section 7.5(c) which are to be borne individually, all expenses incident to
Qualis' performance of or compliance with this Agreement pursuant to any Demand
Registration, including, without limitation the expenses described in the first
sentence of 7.5(a) shall be borne by Qualis, except that the fees described in
Section 7.5(a)(2) shall be borne by Cargill and Qualis pro rata in proportion to
the amount of Registrable Securities sold by each if the Registration Statement
becomes effective or proposed to be sold if the Registration Statement does not
become effective.
(b) Qualis shall pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit, rating agency
fees, and the fees and expenses of any Person (other than legal counsel),
including special experts, retained by Qualis.
(c) Cargill shall bear the following expenses in connection with
any Demand Registration or Piggyback Registration, regardless of whether the
Registration Statement becomes effective: (1) all underwriting discounts and
commissions, or fees of underwriters, selling brokers, dealer managers, or
similar securities industry professionals relating to the distribution of the
Registerable Securities of Cargill, (2) all legal and accounting fees and
expenses, if any, of Cargill and (3) all taxes, if any, of Cargill (except
transfer taxes).
29
7.6. Indemnification.
(a) Indemnification by Oualis. Qualis agrees to indemnify and
hold harmless, to the full extent permitted by law, Cargill, its Affiliates, and
their respective officers, directors, and employees, and each Person who
controls Cargill (within the meaning of Section 15 of the Securities Act), from
and against all losses, claims, damages, liabilities (or proceedings in respect
thereof), and expenses, as incurred, arising out of or based upon any untrue or
alleged untrue statement of a material fact contained in any Registration
Statement, Prospectus or preliminary Prospectus or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same are caused by any untrue statement or alleged untrue statement contained in
or by any omission or alleged omission made in such Registration Statement,
Prospectus or preliminary prospectus in conformity with written information
furnished to Qualis by Cargill expressly for reliance upon and use therein;
provided, however, that Qualis shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or expense of Cargill arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in any such preliminary Prospectus, if, unless
an underwriter has been retained to sell Cargill's Registrable Securities: (1)
Cargill or its agents failed to deliver a copy of the Prospectus to the Person
asserting such loss, claim, damage, liability or expense after Qualis had
30
furnished Cargill with a sufficient number of copies of the same, and (2) the
Prospectus corrected such untrue statement or omission; and provided, further,
that Qualis shall not be liable in any such case to the extent that any such
loss, claim, damage, liability, or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission in
the Prospectus, if such untrue statement or alleged untrue statement or omission
or alleged omission is corrected in an amendment or supplement to the Prospectus
and Cargill or its agents thereafter fails to deliver such Prospectus as so
amended or supplemented prior to or concurrently with the sale of the Securities
covered by a Registration Statement to the Person asserting such loss, claim,
damage, liability or expense after Qualis had furnished Cargill with a
sufficient number of copies thereof in a manner and at a time sufficient to
permit delivery of the same. Qualis will also indemnify underwriters, selling
brokers, dealer managers, and similar securities industry professionals
participating in the distribution, their officers and directors, and each Person
who controls such Persons (within the meaning of Section 15 of the Securities
Act), to the extent customary in connection with such offerings.
(b) Indemnification by Cargill. In connection with registration
hereunder, Cargill agrees to indemnify and hold harmless, to the full extent
permitted by law, Qualis, its officers, directors and employees, and each Person
who directly or indirectly controls Qualis (within the meaning of Section 15 of
the Securities Act), from and against any losses, claims,
31
damages, liabilities and reasonable expenses arising out of or based upon any
untrue or alleged untrue statement of a material fact or any omission or alleged
omission of a material fact required to be stated in the Registration Statement
or Prospectus or preliminary Prospectus or necessary to make the statements
therein not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in a writing furnished by Cargill to Qualis
specifically for reliance upon and inclusion in such Registration Statement or
Prospectus.
(c) Conduct of Indemnification Proceedings. Any Person entitled
to indemnification hereunder shall: (1) give prompt written notice to the
indemnifying party of any written claim with respect to which it seeks
indemnification, and (2) permit such indemnifying party to assume the defense of
such claim with counsel reasonably satisfactory to the indemnified party;
provided, however, that any Person entitled to indemnification hereunder shall
have the right to employ separate counsel and to participate in the defense of
such claim, and the fees and expenses of such counsel shall be at the expense of
the indemnifying party. The indemnifying party will not be subject to any
liability for any settlement made without its consent (but such consent will not
be unreasonably withheld) unless such settlement includes as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation. An
indemnifying party will not be obligated to pay the fees and expenses of more
than one counsel (excluding
32
separate counsel as described in 7.6(c)(2) above) (together with appropriate
local counsel) for all parties indemnified by such indemnifying party with
respect to such claim, unless in the reasonable judgment of any indemnified
party, based upon written advice of counsel, a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim, in which event the indemnifying party shall be obligated
to pay the fees and expenses of such additional counsel or counsels.
(d) Contribution. If for any reason the foregoing indemnity is
unavailable, then the indemnifying party in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages, liabilities or
expenses (i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party on the one hand and the indemnified
party on the other or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law or provides a lesser sum to the indemnified party
than the amount hereinafter calculated, in such proportion as is appropriate to
reflect not only the relative benefits received by the indemnifying party on the
one hand (taking into consideration the fact that the provision of the
registration rights hereunder is a material inducement to Cargill to acquire the
Warrant and enter into the Master Program Agreement and the Participation
Agreement) and the indemnified party on the other but also the relative fault of
the indemnifying party and the indemnified
33
party as well as any other relevant equitable considerations. The relative fault
of such indemnifying party and indemnified parties 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 to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include any legal or other fees or expenses reasonably incurred by
such party in connection with any investigation or proceeding. The parties
hereto agree that it would not be just and equitable if contribution pursuant to
this paragraph (d) were determined by pro rata allocation or by any other method
of allocation which does not take account of the equitable considerations
referred to in this Section. Notwithstanding the foregoing, no holder of
Registrable Securities shall be required to contribute any amount in excess of
the amount such holder would have been required to pay to an indemnified party
if the above indemnity was available.
(e) Notwithstanding the termination of this Agreement, the
provisions of this Section 7.6 shall survive.
7.7. Participation in Underwritten Registrations. No Person may
participate in any underwritten registration hereunder unless such Person: (1)
agrees to sell such Person's Registrable
34
securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements, and (2) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements, and other documents required under the terms of such underwriting
arrangements. Nothing in this Section 7.7 shall be construed to create any
additional rights regarding the registration of Registrable Securities in any
Person otherwise than as set forth herein.
ARTICLE 8.
----------
GENERAL PROVISIONS
------------------
8.1. Entire Agreement. This Agreement contains the entire
understanding among Qualis, Services, Service Holding, Credit Holding, Credit,
Funding, Group Holdings, Group and Cargill regarding the subject matter of this
Agreement, and all prior negotiations, understandings and agreements between
them are superseded by this Agreement.
8.2. Headings. The article and paragraph headings of this Agreement
are for convenience only, and do not affect the meaning or interpretation of
this Agreement.
8.3. Notices and Other Communications. Any notice or other
communication required or permitted to be given under this Agreement must be in
writing and will be deemed effective when delivered in person or sent by
facsimile transmission, if promptly confirmed in writing, or on the third day
after the day
35
on which mailed by first class mail from within the United States of America, to
the following addresses:
If to Qualis:
Qualis Care, L.P.
00 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxx X. Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Services:
Qualis Services, Inc.
Suite 100A
000 Xxxxxxxxx Xxxxx
Xxxx Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Credit:
Qualis Credit, Corp.
Xxxxx 000X
000 Xxxxxxxxx Xxxxx
Xxxx Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Funding:
Qualis Care Funding Corporation
Suite 100A
000 Xxxxxxxxx Xxxxx
Xxxx Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
36
If to Group:
Qualis Group Holdings, L.P.
00 Xxxx 00xx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Cargill:
Cargill Financial Services Corporation
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and
Xxxxx Xxxxxxxxxx
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
8.4. Governing Law. This Agreement will be governed by, and construed
under, the laws of the State of New York in the United States of America.
8.5. Amendments. This Agreement may be amended by, but only by, a
document in writing signed by Qualis, Services, Credit, Funding, Group and
Cargill.
8.6. Consent to Jurisdiction. Qualis, Services, Credit, Funding, Group
and Cargill each (i) agrees that any action or proceeding relating to this
Agreement or the transactions contemplated by it shall be brought in a Federal
or state court sitting in the Borough of Manhattan, City and State of New York
in the United States of America, and in no other court, (ii) consents to the
jurisdiction and venue of any Federal or state court sitting in the Borough of
Manhattan, City and
37
State of New York in any such action or proceeding and agrees not to attempt to
transfer any such action or proceeding to another court on the ground of
inconvenient forum or any other ground, and (iii) agrees that process in any
such action or proceeding may be served by registered mail or in any other
manner permitted by the rules of the court in which the action or proceeding is
brought.
8.7. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of Qualis, Services, Credit, Service Holding, Credit
Holding, Funding, Group Holdings, Group and Cargill and their respective
successors and permitted assigns; provided, however, that nothing herein shall
prevent Cargill from being able to transfer all or part of the benefits
hereunder to an Affiliate, which following any such transfer shall be entitled
to the benefits hereunder.
8.8. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed to be an original, but all of which
together will constitute one and the same instrument.
38
This Agreement has been executed on the day set forth on the first
page and constitutes a binding agreement between the parties to it.
QUALIS CARE, L.P.
By: Qualis Group Holdings, L.P.
General Partner
By: Qualis Group, Inc.
General Partner
By: /s/ Xxxx Xxxx
QUALIS SERVICE HOLDING, INC.
By: /s/ Xxxx Xxxxxxx
QUALIS SERVICES, INC.
By: /s/ Xxxx Xxxxxxx
QUALIS CREDIT HOLDING, INC.
By: /s/ Xxxx Xxxxxxx
QUALIS CREDIT, CORP.
By: /s/ Xxxx Xxxxxxx
39
QUALIS CARE FUNDING CORPORATION
By: /s/ Xxxx Xxxxxxx
QUALIS GROUP HOLDINGS, L.P.
By: Qualis Group, Inc.
General Partner
By: /s/ Xxxx Xxxx
QUALIS GROUP, INC.
By: /s/ Xxxx Xxxx
CARGILL FINANCIAL SERVICES
CORPORATION
By: /s/
