EXHIBIT 10.5
AN ASTERISK ([*]) INDICATES THAT CONFIDENTIAL INFORMATION HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION AS PART OF A
CONFIDENTIAL TREATMENT REQUEST.
REGISTRATION RIGHTS AGREEMENT
Dated as of December 30, 1998
by and between
THE WMF GROUP, LTD.
as the Company,
and
[*]
as the Initial Holder
This Registration Rights Agreement is made and entered into as of December
30, 1998, by and between The WMF Group, Ltd., a Delaware corporation (the
"Company"), and [*], a [*] corporation (the "Initial Holder").
This Agreement is entered into pursuant to the Settlement Agreement (the
"Settlement Agreement"), dated December 30, 1998, between the Company, WMF
Capital Corp., a Delaware corporation, [*], in his individual capacity and the
Initial Holder. In order to induce the Initial Holder to enter into the
Settlement Agreement, and pursuant to Sections 1 and 2 of the Settlement
Agreement, the Company has agreed to provide the registration rights provided
for in this Agreement to the Initial Holder and its direct and indirect
transferees.
The parties hereby agree as follows:
1. Definitions
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As used in this Agreement, the following terms shall have the following
meanings:
Affiliate: As to any specified Person, (i) any Person that directly or
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indirectly controls or is controlled by or is under common control with the
specified Person, (ii) any Person that is an officer of, partner in or trustee
of, or serves in a similar capacity with respect to, the specified Person or of
which the specified Person is an officer, partner or trustee, or with respect to
which the specified Person serves in a similar capacity, and (iii) any Person
that, directly or indirectly, is the beneficial owner of 10% or more of any
class of equity securities of the specified Person or of which the specified
Person is directly or indirectly the owner of 10% or more of any class of equity
securities.
Agreement: This Registration Rights Agreement, as the same may be amended,
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supplemented or modified from time to time in accordance with the terms hereof.
Business Day: With respect to any act to be performed hereunder, each
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Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which
banking institutions in New York, New York or such other place where such act is
to occur are authorized or obligated by applicable law, regulation or executive
order to close.
Closing Date: December 30, 1998.
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Commission: The United States Securities and Exchange Commission.
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Common Stock: Common stock, $0.01 par value per share, of the Company.
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Company: The WMF Group, Ltd., a Delaware corporation, and any successor
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corporation thereto.
Company Warrants: The Series 2 Warrants and Series 3 Warrants issued by
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the Company to the Initial Holder pursuant to Section 1 of the Settlement
Agreement.
Controlling Person: As defined in Section 6(a) hereof.
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Exchange Act: The Securities Exchange Act of 1934, as amended, and the
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rules and regulations promulgated by the Commission thereunder.
Expiration Date: The earlier of (i) such time as all outstanding
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Registrable Shares have been sold pursuant to a Registration Statement or have
been transferred pursuant to Rule 144 or otherwise transferred in a manner that
results in the transferred security being delivered not being subject to
transfer restrictions under the Securities Act or (ii) such time as the Company
delivers to the Holders an opinion of counsel reasonably satisfactory to the
Holders that the Registrable Shares may be sold without registration under the
Securities Act
Holder: Each registered holder of any Registrable Shares from time to
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time, including, without limitation, the Initial Holder and its Affiliates.
Initial Holder: [*]
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Person: An individual, partnership, corporation, trust, or unincorporated
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organization, or government and any agency or political subdivision thereof.
Pledged Shares: Those shares of Common Stock pledged by the Company to
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guarantee the obligation of WMF Capital Corp. pursuant to Section 2(ii) of the
Settlement Agreement.
Proceeding: An action, claim, suit or proceeding (including, without
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limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or, to the knowledge of the person subject thereto,
threatened.
Prospectus: The prospectus included in any Registration Statement,
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including any preliminary Prospectus, and all other amendments and supplements
to any such prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference, if any, in
such prospectus.
Register, registered and registration: Such terms shall refer to a
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registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable
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rules and regulations thereunder, and the declaration or ordering of the
effectiveness of such registration statement.
Registrable Shares: The Warrant Shares, the Pledged Shares and any shares
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of Common Stock replacing or issued as a dividend on the Warrant Shares or the
Pledged Shares, upon original issuance thereof and at all times subsequent
thereto, until, in the case of any such share, the earliest to occur of (i) the
date on which it has been registered effectively pursuant to the Securities Act
and disposed of in accordance with the Registration Statement relating to it,
(ii) the date on which either it is transferred in compliance with Rule 144 (or
any similar provisions then in effect) or (iii) the date on which it is sold to
the Company.
Registration Expenses: Any and all expenses incident to performance of or
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compliance with this Agreement, including without limitation: (i) all
Commission, stock exchange, or other market registration, listing and filing
fees, (ii) all fees and expenses incurred in connection with compliance with
federal or state securities or blue sky laws (including any registration,
listing and filing fees and reasonable fees and disbursements of counsel in
connection with blue sky qualification of any of the Registrable Shares and the
preparation of a Blue Sky Memorandum and compliance with applicable rules and
regulations), (iii) all expenses of any Persons in preparing or assisting in
preparing, word processing, duplicating, printing, delivering and distributing
any Registration Statement, any Prospectus, any amendments or supplements
thereto, any underwriting agreements, securities sales agreements, certificates
and other documents relating to the performance of and compliance with this
Agreement, (iv) all fees and expenses incurred in connection with the listing of
any of the Registrable Shares on any securities exchange or market pursuant to
Section 4(i) hereof, (v) the fees and disbursements of counsel for the Company
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and of the independent public accountants (including without limitation, the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance) of the Company (provided that Registration Expenses shall
not include the fees and expenses of any counsel or accountants for the Holders)
and (vi) any fees and disbursements customarily paid by issuers or sellers of
securities (including the fees and expenses of any experts retained by the
Company in connection with any Registration Statement), but excluding
underwriters' and brokers' discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of Registrable Shares by a Holder.
Registration Statement: Any registration statement of the Company that
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covers the issuance or resale of any of the Registrable Shares on an appropriate
form, including 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, if any, in such registration statement.
Rights Offering: The rights offering by the Company announced publicly on
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or about October 14, 1998.
Rule 144: Rule 144 promulgated by the Commission pursuant to the
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Securities Act, as such rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission as a replacement thereto
having substantially the same effect as such rule.
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Rule 158: Rule 158 promulgated by the Commission pursuant to the
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Securities Act, as such rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission as a replacement thereto
having substantially the same effect as such rule.
Rule 424: Rule 424 promulgated by the Commission pursuant to the
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Securities Act, as such rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission as a replacement thereto
having substantially the same effect as such rule.
Securities Act: The Securities Act of 1933, as amended, and the rules and
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regulations promulgated by the Commission thereunder.
Settlement Agreement: As defined in the preamble.
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Underwritten Offering: A sale of securities of the Company to an
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underwriter or underwriters for reoffering to the public.
Warrant Agreements: The Series 2 Warrant Agreement or the Series 3 Warrant
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Agreement between the Company and the Initial Holder, as the context requires.
Warrant Shares: Those shares of Common Stock that the holder of the
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Company Warrants is entitled to purchase upon exercise of the Company Warrants.
2. Shelf Registration
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Pursuant to the registration procedures set forth in Section 4 hereof, the
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Company agrees to file with the Commission no later than April 15, 1999, one or
more shelf Registration Statements with respect to the sale from time to time in
open-market transactions by the Holders of any and all Registrable Shares.
3. Piggyback Registration
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(a) Piggyback Registration Rights and Notice of Registration. From the
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Closing Date until the Expiration Date, the Company shall notify all Holders in
writing at least twenty-one (21) days prior to filing any registration statement
under the Securities Act for the purpose of effecting a public offering of
securities of the Company (including, but not limited to, registration
statements relating to offerings of the Company's securities by any shareholders
of the Company, but excluding registration statements relating to the Rights
Offering or relating exclusively to any employee benefit plan or corporate
reorganization) and will afford each such Holder an opportunity to include in
such registration statement all or any part of the Registrable Shares then held
by such Holder. Each Holder desiring to include in any such registration
statement all or any part of the Registrable Shares held by such Holder shall,
within seven (7) days after receipt of the above-described notice from the
Company, so notify the Company in writing, and in such notice shall inform the
Company of the number of Registrable Shares such Holder wishes to include in
such registration statement. If a Holder decides not to include all of its
Registrable Shares in any registration statement thereafter filed by the
Company, such Holder shall nevertheless continue to have the right to include
any Registrable Shares in any subsequent
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registration statement or registration statements as may be filed by the Company
with respect to offerings of Company securities, all upon the terms and
conditions set forth herein.
(b) Right to Terminate Registration. The Company shall have the right,
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in its sole discretion, to terminate or withdraw any registration initiated by
it under this Section 3 prior to the effectiveness of such registration, whether
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or not any Holder has elected to include Registrable Shares in such
registration.
(c) Underwriting. If a registration statement under which the Company
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gives notice under this Section 3 is for an Underwritten Offering, then the
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Company shall so advise the Holders of Registrable Shares and the Holder shall
have the opportunity to include its Registrable Shares in such registration
statement. In such event, the right of any Holder to include its Registrable
Shares in a registration pursuant to this Section 3(c) shall be conditioned upon
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such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Shares in the underwriting to the extent provided herein.
All Holders proposing to distribute their Registrable Shares through such
underwriting shall enter into an underwriting agreement in customary form with
the underwriter(s) selected for such underwriting. Notwithstanding any other
provision of this Agreement, if the managing underwriter(s) determine(s) in good
faith that marketing factors require a limitation of the number of shares to be
underwritten, then the managing underwriter(s) may exclude shares (including
Registrable Shares) from the registration and the underwriting, and the number
of shares that may be included in the registration and the underwriting shall be
allocated, first, to the Company, and second, to each of the shareholders
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(including the Holders) requesting inclusion of their shares in such
registration statement on a pro rata basis based on the total number of shares
such shareholder has requested be included in such registration statement. If
any Holder disapproves of the proposed terms of any such Underwritten Offering,
such Holder may elect to withdraw therefrom by written notice to the Company and
the managing underwriter(s), delivered at least ten (10) Business Days prior to
the date on which the Underwritten Offering is expected to commence. Any
Registrable Shares excluded or withdrawn from such underwriting shall be
excluded and withdrawn from the registration. For any Holder that is a
partnership or corporation, the partners, retired partners and shareholders of
such Holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "Holder," and any pro rata reduction with respect to such
"Holder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"Holder," as defined in this sentence.
(d) Holdback Agreement. By electing to include Registrable Shares in any
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registration pursuant to Section 3 hereof, the Holder of the Registrable Shares
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shall be deemed to have agreed not to effect any public sale or distribution of
securities of the Company of the same or similar class or classes of the
securities included in the Registration Statement or any securities convertible
into or exchangeable or exercisable for such securities, including a sale
pursuant to Rule 144 under the Securities Act, during such periods as are
reasonably requested by the managing underwriter(s), if an Underwritten
Offering, or the Company, in any other registration. Any period up to 180 days
shall be deemed reasonable.
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(e) The Company shall not be obligated to effect, or to take any action to
effect, any such registration of Registrable Shares pursuant to this Section 3
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in any particular jurisdiction in which the Company would be required to execute
a general consent to service of process or to qualify to do business as a
foreign corporation in affecting such registration, qualification or compliance,
unless the Company is already subject to service or required to be so qualified
in such jurisdiction and except as may be required by the Securities Act.
4. Registration Procedures.
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Subject to Sections 2 and 3 hereof, in connection with the obligations of
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the Company with respect to any registration pursuant to this Agreement, the
Company shall use its commercially reasonable best efforts to effect or cause to
be effected the registration of the Registrable Shares under the Securities Act
to permit the sale of such Registrable Shares by the Holder or Holders in
accordance with customary methods of sale or distribution, including through
brokers' transactions and block trades. The Company shall:
(a) prepare and file with the Commission, as specified in this Agreement,
a Registration Statement, which Registration Statement shall comply as to form
in all material respects with the requirements of the applicable form and
include all financial statements required by the Commission to be filed
therewith, and use its commercially reasonable best efforts to cause such
Registration Statement to become effective as soon as possible after filing and
to remain effective until the Expiration Date;
(b) subject to Section 4(h) hereof, prepare and file with the Commission
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such amendments and post-effective amendments to each such Registration
Statement as may be necessary to keep such Registration Statement effective for
the period described in Section 4(a); cause each such Prospectus contained
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therein to be supplemented by any required prospectus supplement, and as so
supplemented, to be filed pursuant to Rule 424 or any similar rule that may be
adopted under the Securities Act; and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by each
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the selling Holder thereof;
(c) upon request of any Holder named in any Prospectus, prepare and file
with the Commission a post-effective amendment to the Registration Statement of
which such Prospectus is a part to reflect any transfer of one or more Company
Warrants to an individual or entity not already named as a Holder in such
Prospectus;
(d) furnish without charge to any Holder named in any Prospectus as many
copies of such Prospectus, and any amendment or supplement thereto and such
other documents as such Holder may reasonably request, in order to facilitate
the public sale or other disposition of the Registrable Shares; the Company
consents to the use of any such Prospectus by such Holder in connection with the
offering and sale of the Registrable Shares covered by any such Prospectus;
(e) use its commercially reasonable best efforts to register or qualify,
or obtain exemption from registration or qualification for, all Registrable
Shares by the time the applicable
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Registration Statement is declared effective by the Commission under all
applicable state securities or "blue sky" laws of such jurisdictions as any
Holder shall reasonably request in writing, keep each such registration or
qualification or exemption effective during the period such Registration
Statement is required to be kept effective pursuant to Section 4(a) and do any
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and all other acts and things which may be reasonably necessary or advisable to
enable each Holder to consummate the disposition in each such jurisdiction of
such Registrable Shares owned by such Holder;
(f) notify each Holder promptly and, if requested by any Holder, confirm
such advice in writing (i) when a Registration Statement has become effective
and when any post-effective amendments and supplements thereto become effective,
(ii) of the issuance by the Commission or any state securities authority of any
stop order suspending the effectiveness of a Registration Statement or the
initiation of any Proceedings for that purpose, and (iii) of the happening of
any event during the period a Registration Statement is effective as a result of
which such Registration Statement or the related Prospectus contains any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading (which
advice shall be accompanied by an instruction to suspend the use of the
Prospectus until the requisite changes have been made);
(g) during the period of time referred to in Section 4(a), use its
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commercially reasonable best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of any enjoining order suspending the use or effectiveness
of a Registration Statement or the lifting of any suspension of the
qualification (or exemption from qualification) of any of the Registrable Shares
for sale in any jurisdiction, at the earliest possible moment;
(h) upon request, furnish to each requesting Holder, without charge, at
least one conformed copy of each Registration Statement and any post-effective
amendment thereto (without documents incorporated therein by reference or
exhibits thereto, unless requested);
(i) except as provided in Section 5 hereof, upon the occurrence of any
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event contemplated by Section 4(e)(iii) hereof, use its commercially reasonable
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best efforts to promptly prepare a supplement or post-effective amendment to a
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 Shares, such Prospectus will not
contain any 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
the light of the circumstances under which they were made, not misleading;
(j) if the Company has listed its Common Stock on an exchange or automated
quotation system, use its commercially reasonable best efforts (including,
without limitation, seeking to cure any deficiencies (within the Company's
control) cited by the exchange or automated quotation system in the Company's
listing application) to list all Registrable Shares on such exchange or
automated quotation system;
(k) prepare and file in a timely manner all documents and reports pursuant
to the Exchange Act which are incorporated by reference into any Registration
Statement;
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(l) use its commercially reasonable best efforts to comply with all
applicable rules and regulations of the Commission and make generally available
to its securityholders, as soon as reasonably practicable, earnings statements
covering at least 12 months which satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 (or any similar rule promulgated under the
Securities Act) thereunder;
(m) provide and cause to be maintained a transfer agent for all
Registrable Shares covered by any Registration Statement from and after a date
not later than the effective date of such Registration Statement; and
(n) in connection with any sale or transfer of the Registrable Shares that
will result in such securities no longer being restricted from resale without
registration under the Securities Act, cooperate with the Holders to facilitate
the timely preparation and delivery of certificates representing the Registrable
Shares to be sold, which certificates shall not bear any restrictive legends,
and to enable such Registrable Shares to be in such denominations and registered
in such names as the Holders may request at least two (2) Business Days prior to
any sale of the Registrable Shares.
The Company may require each Holder to furnish to the Company such
information regarding the proposed distribution by such Holder of Registrable
Shares as the Company may from time to time reasonably request in writing and no
Holder shall be entitled to be named as a selling securityholder in any
Registration Statement, and no Holder shall be entitled to use the Prospectus
forming a part thereof, if such Holder does not provide such information to the
Company.
Upon receipt of written notice from the Company of the happening of any
event of the kind described in Section 4(e)(iii) hereof, the Holders will
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immediately discontinue disposition of Registrable Shares pursuant to a
Registration Statement until the Holders' receipt of the copies of a
supplemented or amended Prospectus. If so requested by the Company, the Holders
will deliver to the Company (at the expense of the Company) all copies in their
possession, other than permanent file copies then in the Holders' possession, of
the Prospectus covering such Registrable Shares current at the time of receipt
of such notice.
5. Black-Out Period. Subject to the provision of this Section 5, the Company
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may defer filing or requesting the effectiveness of a Registration Statement, or
following the effectiveness of a Registration Statement (and the filings with
any state securities commissions), the Company, by written notice to the
Holders, may direct the Holders to suspend sales of the Registrable Shares
pursuant to the Registration Statement, if either of the following events shall
occur: (i) the suspension of sales is necessary to correct a material
misstatement or omission in the applicable Registration Statement or any
document incorporated by reference therein, (ii) the Company is engaged in a
primary Underwritten Offering of its securities and the managing underwriter(s)
informs the Company that the sale of shares under the Registration Statement
would impair the pricing or commercial practicability of the offering, or (iii)
if (A) the Company is engaged in negotiations relating to, or the consummation
of, a material transaction or (B) an event has occurred that would require
additional disclosure of material information by the Company in the Registration
Statement or the documents incorporated by reference therein, in
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either case as to which the Board of Directors of the Company determines in good
faith that the Company has a bona fide business purpose for preserving
confidentiality or which renders the Company unable to comply with the
Commission's disclosure requirements, but such suspension shall continue only
for so long as such event or its effect is continuing. Upon the occurrence of
such event, the Company shall use its commercially reasonable best efforts to
cause the Registration Statement to become effective or to promptly amend or
supplement the Registration Statement on a post-effective basis, as applicable,
so as to permit the Holders to resume sales of the Registrable Shares.
In the case of an event which causes the Company to suspend the
effectiveness of a Registration Statement (a "Suspension Event"), the Company
may give written notice (a "Suspension Notice") to the Holders at the addresses
set forth in the stock transfer records of the Company to suspend sales of the
Registrable Shares so that the Company may amend or update the Registration
Statement; provided, however, that such suspension shall continue only for so
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long as the Suspension Event or its effect is continuing and the Company is
taking all reasonable steps to terminate suspension of the effectiveness of the
Registration Statement as promptly as possible. In no case shall a suspension of
sales pursuant to this Section 5 continue for a total of more than 120 days out
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of any one-year period and no more than 180 days in any two-year period. The
Warrant Exercise Term (as defined in the applicable Warrant Agreement) of any
Company Warrants outstanding at the time of any Suspension Event shall be
extended for a period of time equal to the duration of the resulting suspension.
The Holders shall not effect any sales of the Registrable Shares pursuant
to such Registration Statement at any time after receipt of a Suspension Notice
from the Company (and prior to receipt of an End of Suspension Notice (defined
below)). If so requested by the Company, the Holders will deliver to the Company
(at the expense of the Company) all copies in their possession, other than
permanent file copies then in the Holders' possession, of the Prospectus
covering such Registrable Shares at the time of receipt of the Suspension
Notice. The Holders may recommence effecting sales of the Registrable Shares
pursuant to the Registration Statement (or such filings) following further
notice to such effect (an "End of Suspension Notice") from the Company, which
End of Suspension Notice shall be given by the Company to the Holders in the
manner described above promptly following the conclusion of any Suspension
Event.
6. Indemnification and Contribution.
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(a) Indemnification by the Company. The Company agrees to indemnify and
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hold harmless (i) the Initial Holder, (ii) each Holder, (iii) each Person, if
any, who controls (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) any of the foregoing (any of the persons
referred to in this clause (iii) being hereinafter referred to as a "Controlling
Person"), (iv) the respective officers, directors, partners, employees,
representatives and agents of each Initial Holder and each Holder or any
Controlling Person, and (v) any person deemed to be an "underwriter" under the
Securities Act or other applicable law as follows:
(i) from and against any and all loss, claim, liability and damage
whatsoever, as incurred, arising out of (A) violation by the Company of the
Securities Act or applicable state
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securities laws in connection with an offering of Registrable Shares hereunder
and (B) any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement (or any amendment thereto) pursuant to
which Registrable Shares were registered under the Securities Act, including all
documents incorporated therein by reference, or the omission or alleged omission
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any Prospectus (or any
amendment or supplement thereto), including all documents incorporated therein
by reference, or the omission or alleged omission to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that such indemnity with respect to any
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Prospectus shall not inure to the benefit of any Holder or Initial Holder (or
any Controlling Person thereof) to the extent that any such loss, claim,
liability, damage or expense arises out of such indemnified person's failure to
send or give a copy of the revised final Prospectus, as the same may be then
supplemented or amended, to the Person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Shares to such Person if such statement
or omission was corrected in such final Prospectus;
(ii) from and against any and all loss, liability, claim and, damage
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or Proceeding by any governmental
agency or body, commenced or threatened, or of any claim whatsoever based upon
any such untrue statement or omission, if such settlement is effected with the
written consent of the Company, which consent shall not be unreasonably
withheld; and
(iii) from and against any and all expense reasonably incurred
(including reasonable fees and disbursements of one firm of attorneys), in
investigating, preparing or defending against any litigation, or investigation
or Proceeding by any governmental agency or body, commenced or threatened, in
each case whether or not a party, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under subparagraph (i) or (ii)
above;
provided, however, that this indemnity agreement does not apply to any
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Holder with respect to any loss, liability, claim, damage or expense to the
extent arising out of any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with information
furnished to the Company in writing by such Holder expressly for use in a
Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto).
(b) Indemnification by Holders. Each Holder severally and not jointly
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agrees to indemnify and hold harmless the Company, its directors, officers,
partners, employees, representatives and agents (including each officer of the
Company who signed the Registration Statement), and each Person, if any, who
controls the Company, within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, against
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(i) any and all loss, liability, claim, damage and expenses
whatsoever, as incurred, arising out of (A) any violation by the Holders of the
Securities Act or applicable state securities laws in connection with the
offering and (B) any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement (or any amendment thereto) pursuant
to which Registrable Shares were registered under the Securities Act, including
all documents incorporated therein by reference, or the omission or alleged
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto), including all documents
incorporated therein by reference, or the omission or alleged omission to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(ii) from and against any and all loss, liability, claim and, damage
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or Proceeding by any governmental
agency or body, commenced or threatened, or of any claim whatsoever based upon
any such untrue statement or omission, if such settlement is effected with the
written consent of such Holder, which consent shall not be unreasonably
withheld; and
(iii) from and against any and all expense reasonably incurred
(including reasonable fees and disbursements of one firm of attorneys), in
investigating, preparing or defending against any litigation, or investigation
or Proceeding by any governmental agency or body, commenced or threatened, in
each case whether or not a party, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under subparagraph (i) or (ii)
above;
but only with respect to such untrue statements or omissions, or alleged
untrue statements or omissions, made in a Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with information furnished to the Company in
writing by such Holder expressly for use in such Registration Statement (or any
amendment thereto) or such Prospectus (or any amendment or supplement thereto),
and provided further, that no Holder shall be liable under this Section 6(b) for
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any amount in excess of the net proceeds received by such Holder from the sale
of such Holder's Registrable Shares pursuant to a Registration Statement or a
Prospectus, as the case may be.
(c) Conduct of Indemnification Proceedings. Each indemnified party shall
--------------------------------------
give reasonably prompt notice to each indemnifying party of any action or
Proceeding commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve it
from any liability which it may have under this Section 6 except to the extent
---------
that the indemnifying party is actually prejudiced by such failure to give
notice. If the indemnifying party so elects within a reasonable time after
receipt of such notice, the indemnifying party may assume the defense of such
action or Proceeding at such indemnifying party's own expense with counsel
chosen by the indemnifying party and approved by the indemnified parties in such
action or Proceeding, which approval shall not be unreasonably withheld;
provided, however, that, if such indemnified party or parties reasonably
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11
determine that a conflict of interest exists where it is advisable for such
indemnified party or parties to be represented by separate counsel or that, upon
advice of counsel, there may be legal defenses available to them which are
different from or in addition to those available to the indemnifying party, then
the indemnifying party shall not be entitled to assume such defense and the
indemnified party or parties shall be entitled to one separate counsel at the
indemnifying party's expense. If an indemnifying party is not entitled to assume
the defense of such action or Proceeding as a result of the proviso to the
preceding sentence, such indemnifying party's counsel shall be entitled to
conduct such indemnifying party's defense, and counsel for the indemnified party
or parties shall be entitled to conduct the defense of such indemnified party or
parties, it being understood that both such counsel will cooperate with each
other to conduct the defense of such action or Proceeding as efficiently as
possible. If an indemnifying party is not so entitled to assume the defense of
such action or does not assume such defense, after having received the notice
referred to in the first sentence of this paragraph, the indemnifying party or
parties will pay the reasonable fees and expenses of not more than one counsel
(and any necessary local counsel) for the indemnified party or parties. In such
event, however, no indemnifying party will be liable for any settlement effected
without the written consent of such indemnifying party. No indemnifying party
shall, without the consent of the indemnified party, consent to entry of any
judgment or enter into a settlement which does not include 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. If an
indemnifying party is entitled to assume, and assumes, the defense of such
action or Proceeding in accordance with this paragraph, such indemnifying party
shall not be liable for any fees and expenses for counsel for the indemnified
parties incurred thereafter in connection with such action or Proceeding.
(d) Contribution. In order to provide for just and equitable contribution
------------
in circumstances in which the indemnity agreement provided for in this Section 6
---------
is for any reason held to be unenforceable, unavailable or insufficient although
applicable in accordance with it terms, the Company and a Holder shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by such indemnity agreement incurred by the Company and
the Holder in such proportion as is appropriate to reflect the relative fault of
the Company on the one hand and the Holder on the other. Relative fault shall be
determined by reference to, among other things, whether an untrue or alleged
untrue statement of a material fact or an omission or alleged omission of a
material fact relates to information supplied by or available to the Company on
the one hand, or the Holder, on the other hand, and by the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. Notwithstanding the foregoing, no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. No Holder shall be liable under
this Section 6(d) for any amount in excess of the net proceeds received from
such Holder from the sale of such Holder's Registrable Shares pursuant to a
Registration Statement or a Prospectus, as the case may be. For purposes of this
Section 6, each Person, if any, who controls (within the meaning of Section 15
---------
of the Securities Act or Section 20 of the Exchange Act) the Holder or the
Company (as applicable) and its respective officers, directors, partners,
employees, representatives and agents shall have the same rights to contribution
as the Holder or the Company (as applicable). Each party entitled to
contribution
12
agrees that upon the service of a summons or other initial legal process upon it
in any action instituted against it in respect of which contribution may be
sought, it shall promptly give written notice of such service to the party or
parties from whom contribution may be sought, but the omission so to notify such
party or parties of any such service shall not relieve the party from whom
contribution may be sought from any obligation it may have hereunder or
otherwise, except to the extent that such party was actually prejudiced by the
failure to receive notice.
(e) Survival. The obligations of the Company and the Holders under this
--------
Section 6 shall survive the completion of any offering of Registrable Shares
---------
pursuant to a Registration Statement or otherwise.
7. Covenants of the Holders. Each of the Holders hereby agrees (a) to
------------------------
cooperate with the Company and to furnish to the Company all such information
concerning its plan of distribution and ownership interests with respect to its
Registrable Shares in connection with the preparation of a Registration
Statement with respect to such Holder's Registrable Shares and filings with any
state securities commissions as the Company may reasonably request, and (b) to
deliver or cause delivery of the Prospectus contained in such Registration
Statement to any purchaser of the shares covered by such Registration Statement
from the Holder, as required by the Securities Act and any applicable state
securities laws.
8. Additional Shares. The Company, at its option, may register under any
-----------------
Registration Statement and any filings with any state securities commissions
filed pursuant to this Agreement, any number of unissued shares of Common Stock
or any shares of Common Stock owned by any other shareholder or shareholders of
the Company.
9. Termination of the Company's Obligations. The Company shall have no
-----------------------------------------
obligations pursuant to this Agreement with respect to any request or requests
for registration made by any Holder on a date after the Expiration Date.
10. No Other Obligation to Register. Except as otherwise expressly provided in
-------------------------------
this Agreement, the Company shall have no obligation to the Holders to register
the Registrable Shares under the Securities Act or applicable state securities
laws.
11. Miscellaneous.
-------------
(a) Remedies.
--------
(i) In the event of a breach by the Company or by a Holder of any of
its obligations under this Agreement, each Holder or the Company, 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
Agreement. The parties agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach of any of the
provisions of this Agreement and the parties hereby further agree that, in the
event of any action for specific performance in respect of such breach, the
parties shall waive the defense that a remedy at law would be adequate. No
Holder shall have any right to obtain or seek an injunction restraining or
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otherwise delaying any registration as a result of any controversy that might
arise with respect to the interpretation or implementation of this Agreement.
(ii) If the Company fails to register the Warrant Shares pursuant to
Section 2 hereof on or before April 15, 1999, the Company shall be obligated to
---------
issue to the Initial Holder or its permitted designee, additional Series 2
Warrants and Series 3 Warrants entitling the Initial Holder to purchase an
additional five (5) shares of Common Stock under each of the Series 2 Warrants
and Series 3 Warrants, for each date after April 15, 1999 which elapses until
such registration shall become effective, up to a maximum of 100,000 additional
Series 2 Warrants and an additional 150,000 Series 3 Warrants.
(b) 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,
without the written consent of the Company and of Holders owning not less than
50% of the then outstanding Registrable Shares; provided, however, that, for the
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purposes of this Agreement, Registrable Shares that are owned, directly or
indirectly, by either the Company or an Affiliate of the Company shall not be
deemed to be outstanding. 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 a Holder whose securities are being sold pursuant
to a Registration Statement and that does not directly or indirectly affect the
rights of any other Holder may be given by such Holder; provided, however, that
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the provisions of this sentence may not be amended, modified, or supplemented
except in accordance with the provisions of the immediately preceding sentence.
(c) Notices. All notices and other communications provided for herein
-------
shall be made in writing by hand-delivery, next-day air courier, certified
first-class mail, return receipt requested, or telecopy;
(i) if to the Company, as provided in the Settlement Agreement,
(ii) if to the Initial Holder, as provided in the Settlement
Agreement, or
(iii) if to any other person who is then the registered Holder of any
Registrable Shares, to the address of such Holder as it appears in the Common
Stock register of the Company.
Except as otherwise provided in this Agreement, all such communications
shall be deemed to have been duly given when (A) delivered by hand, if
personally delivered, (B) one (1) Business Day after being timely delivered to a
next-day air courier, (C) five (5) Business Days after being deposited in the
mail, postage prepaid, if mailed, or (D) when receipt is acknowledged by the
recipient's telecopier machine, if telecopied.
(d) 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. Each Holder shall be deemed a
third party beneficiary of this Agreement. Notwithstanding the foregoing, no
successor of the Company shall have any of the
14
rights granted under this Agreement until such successor shall acknowledge its
rights and obligations hereunder by a signed written agreement pursuant to which
such successor accepts such rights and obligations.
(e) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement.
(f) Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Virginia, as applied to
contracts made and performed within the Commonwealth of Virginia without regard
to principles of conflicts of law.
(g) 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 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.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the provisions hereof.
All references made in this Agreement to "Section" refer to such Section of this
Agreement, unless expressly stated otherwise.
15
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first written above.
THE WMF GROUP, LTD.
By: /s/ Xxxxxx Xxxxxxxxxx
--------------------------------------------
Name: Xxxxxx Xxxxxxxxxx
Title: President and Chief Executive Officer
The foregoing Registration Rights Agreement
is hereby confirmed and accepted as of the date
first above written.
[*]
By:[*]
Name: [*]
Title:[*]
16