REGISTRATION RIGHTS AGREEMENT
Dated as of June 12, 1998
by and between
THE WMF GROUP, LTD.
as the Company,
and
HARVARD PRIVATE CAPITAL HOLDINGS, INC.
and
CAPRICORN INVESTORS II, L.P.
as the Initial Purchasers
This Registration Rights Agreement is made and entered into as of June
12, 1998, by and between The WMF Group, Ltd., a Delaware corporation (the
"Company"), and Harvard Private Capital Holdings, Inc., a Delaware corporation,
and Capricorn Investors II, L.P., a Delaware limited partnership (the "Initial
Purchasers").
This Agreement is entered into pursuant to the Stock Purchase Agreement
(the "Purchase Agreement"), dated June 12, 1998, and Shareholders' Agreement
(the Shareholders' Agreement) of the same date, both between Commercial Mortgage
Investment Trust, Inc., a Virginia corporation, the Company and the Initial
Purchasers. In order to induce the Initial Purchasers to enter into the Purchase
Agreement and Shareholders' Agreement, and pursuant to Section 6(f) of the
Shareholders' Agreement, the Company has agreed to provide the registration
rights provided for in this Agreement to the Initial Purchasers and their direct
and indirect transferees.
The parties hereby agree as follows:
1. DEFINITIONS
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
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 5% 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 5% or more of any class of equity
securities.
AGREEMENT: This Registration Rights Agreement, as the same may be
amended, 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
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.
CMIT: Commercial Mortgage Investment Trust, Inc., a Virginia
corporation.
CLOSING DATE: June 12, 1998.
COMMISSION: The United States Securities and Exchange Commission.
COMMON STOCK: Common stock, $0.01 par value per share, of the Company.
COMPANY: The WMF Group, Ltd., a Delaware corporation, and any successor
corporation thereto.
CONTROLLING PERSON: As defined in SECTION 8(a) hereof.
EXCHANGE DATE: The date on which an Initial Purchaser exchanges its
Shares for Exchange Shares pursuant to Section 6 of the Shareholders' Agreement.
EXCHANGE SHARES: Common Stock issuable upon exchange of the Shares
issued to the Initial Purchasers pursuant to the terms of the Purchase Agreement
and the Shareholders' Agreement.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated by the Commission thereunder.
HOLDER: Each registered holder of any Registrable Shares from time to
time, including the Initial Purchasers and their Affiliates.
INITIAL PURCHASERS: Harvard Private Capital Holdings, Inc. and
Capricorn Investors II, L.P.
PERSON: An individual, partnership, corporation, trust, or
unincorporated organization, or government and any agency or political
subdivision thereof.
PROCEEDING: An action, claim, suit or proceeding (including, without
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,
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.
PURCHASE AGREEMENT: As defined in the preamble.
2
REGISTER, REGISTERED and REGISTRATION: Such terms shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
REGISTRABLE SHARES: The Exchange Shares and any shares of Common Stock
replacing or issued as a dividend on the Exchange 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 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 5(I) hereof, (v) the fees and disbursements of counsel for the Company
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
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.
RULE 144: Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission as a replacement thereto
having substantially the same effect as such rule.
3
RULE 158: Rule 158 promulgated by the Commission pursuant to the
Securities Act, as such rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission as a replacement thereto
having substantially the same effect as such rule.
RULE 424: Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission 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 regulations promulgated by the Commission thereunder.
SHAREHOLDERS' AGREEMENT: As defined in the preamble.
SHARES: The shares of CMIT Common Stock and Class A Participating
Preferred Stock being offered and sold pursuant to the terms and conditions of
the Purchase Agreement.
UNDERWRITTEN OFFERING: A sale of securities of the Company to an
underwriter or underwriters for reoffering to the public.
2. PIGGYBACK REGISTRATION
(a) PIGGYBACK REGISTRATION RIGHTS AND NOTICE OF REGISTRATION. The
Company shall notify all Holders in writing at least fourteen (14) 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 securities of the
Company by any shareholders of the Company, but EXCLUDING registration
statements 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 registration statement or registration
statements as may be filed by the Company with respect to offerings of its
securities, all upon the terms and conditions set forth herein.
(b) RIGHT TO TERMINATE REGISTRATION. The Company shall have the right,
in its sole discretion, to terminate or withdraw any registration initiated by
it under this SECTION 2 prior to the effectiveness of such registration whether
or not any Holder has elected to include Registrable Shares in such
registration.
(c) UNDERWRITING. If a registration statement under which the Company
gives notice under this SECTION 2 is for an Underwritten Offering, then the
Company shall so advise the
4
Holders of Registrable Shares. In such event, the right of any Holder to include
its Registrable Shares in a registration pursuant to this SECTION 2 shall be
conditioned upon 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 (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; PROVIDED, HOWEVER, that the right of
the underwriters to exclude shares (including Registrable Shares) from the
registration and underwriting as described above shall be restricted so that (i)
the number of Registrable Shares included in any such registration statement is
not reduced below twenty-five percent (25%) of the total number of Registrable
Shares requested to be included in the registration statement, and (ii) all
shares that are not Registrable Shares and that are held by persons who are
officers or directors of the Company (or any subsidiary of the Company) shall
first be excluded from such registration and underwriting before any Registrable
Shares are so excluded. 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 registration pursuant to SECTION 2 hereof, the Holder of the Registrable
Shares 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.
(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
2: 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
5
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.
3. DEMAND REGISTRATION.
If the Company shall receive from one or more Holders a written request
or requests that the Company effect a registration on any available Commission
form covering the resale of the Registrable Shares and any related qualification
or compliance under applicable state securities or "Blue Sky" laws with respect
to all or a part of the Registrable Shares owned by such Holders, then the
Company will:
(a) NOTICE. Promptly give written notice of the proposed registration
and the Holders' request therefor, and any related qualification or compliance,
to all other Holders of Registrable Shares; and
(b) REGISTRATION. As soon as practicable, use commercially reasonable
best efforts to effect such registration and all such qualifications and
compliances as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Holders' Registrable Shares as
are specified in such request, together with all or such portion of the
Registrable Shares of any other Holders joining in such request as are specified
in a written request given within twenty (20) days after receipt of such written
notice from the Company; PROVIDED, HOWEVER, that the Company shall not be
obligated to effect any such registration, qualification or compliance pursuant
to this SECTION 3:
(i) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Shares and such other securities (if any) at an aggregate price
to the public of less than $2,000,000;
(ii) if the Company has effected a registration pursuant to this
SECTION 3 during the 6-month period preceding the current registration request;
(iii) if the Board of Directors of the Company determines in its
good faith judgment that it would be inadvisable or not in the best interest of
the Company for such Registration Statement to be filed or declared effective at
such time, and if the Company shall furnish to the Holders a certificate signed
by the President or Chief Executive Officer of the Company stating that the
Board of Directors has so determined, in such event the Company shall have the
right (subject to the limitation set forth in the last sentence of the second
paragraph of SECTION 6) to defer the filing of such Registration Statement or
delay its effective date for a period of not more than 180 days after receipt of
the request of the Holders under this SECTION 3;
(iv) in any particular jurisdiction in which the Company would be
required to qualify to do business as a foreign corporation or to execute a
general consent to service of process in effecting 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.
6
(c) LIMIT ON REQUESTS. Each of the Initial Purchasers (or their
assignees) shall be entitled have effected at its request only one registration
pursuant to this SECTION 3.
(d) OPTION TO FILE A SINGLE REGISTRATION STATEMENT. The Company may at
any time, in its sole discretion, satisfy the obligations set forth in this
SECTION 3 by filing one Registration Statement covering all of the Registrable
Shares and causing such Registration Statement to remain effective until the
date that is two years after the latest Exchange Date.
(e) NO PARTICIPATION. The Company and its officers shall not be
required to participate in any underwritten offering pursuant to this SECTION 3
or to participate in any "road show" or other selling effort relating to any
offering pursuant to this SECTION 3.
4. EXPENSES. As between the Company and the Holders, the Company shall pay
all Registration Expenses in connection with the registration of the Registrable
Shares pursuant to this Agreement. The Holder or Holders shall pay all broker's
commissions and transfer taxes, if any, the fees and disbursements of counsel
for the Holders, and any other expense not specifically allocated to the Company
pursuant to this Agreement relating to the sale or disposition of such Holder's
Registrable Shares pursuant to any Registration Statement.
5. REGISTRATION PROCEDURES.
Subject to SECTIONS 2 and 3 hereof, in connection with the obligations
of 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 earlier of (i) the expiration of 120 days, (ii)
such time as all outstanding 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 (iii) such time as there are no longer any outstanding Registrable Shares;
PROVIDED, HOWEVER, that in the event that sales of the Registrable Shares are
suspended pursuant to the last paragraph of this SECTION 5 or pursuant to
SECTION 6, then the 120-day period referred to in subpart (i) of this sentence
shall be tolled until sales of the Registrable Shares may be resumed.
(b) subject to SECTION 5(h) hereof, prepare and file with the
Commission 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 5(a); cause each such Prospectus
contained therein to be supplemented by any required prospectus
7
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) 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;
(d) 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 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 5(A) and do any 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;
(e) 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);
(f) during the period of time referred to in SECTION 5(A), use its
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;
(g) 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);
(h) except as provided in SECTION 7 hereof, upon the occurrence of any
event contemplated by SECTION 5(e)(iii) hereof, use its commercially reasonable
best efforts to promptly prepare a supplement or post-effective amendment to a
Registration Statement or the related
8
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;
(i) 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;
(j) 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;
(k) 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;
(l) 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
(m) 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 5(E)(III) hereof, the Holders will
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
9
the Prospectus covering such Registrable Shares current at the time of receipt
of such notice.
6. BLACK-OUT PERIOD. Subject to the provision of this SECTION 6, 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
Board of Directors of the Company determines in good faith that sales pursuant
to such Registration Statement would be inadvisable or not in the best interests
of the Company, or (ii) the suspension of sales is necessary to correct a
material misstatement or omission in the applicable Registration Statement. 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
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 6 (which term shall include for this purpose any
deferral of filing or declaration of effectiveness of the applicable
registration statement pursuant to SECTION 3(B)(III)) continue for a total of
more than 180 days out of any 365-day period.
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.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless (i) each Initial Purchaser, (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
10
Person"), and (iv) the respective officers, directors, partners, employees,
representatives and agents of each Initial Purchaser and each Holder or any
Controlling Person 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 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 Prospectus shall not inure to the
benefit of any Holder or Initial Purchaser (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
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 by such Holder expressly for use in a Registration
Statement (or any amendment thereto) or any Prospectus (or any amendment or
supplement thereto).
11
(b) INDEMNIFICATION BY HOLDERS. Each Holder severally 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
(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 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 for 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
12
from any liability which it may have under this SECTION 7 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
defendant in such action or proceeding, which approval shall not be unreasonably
withheld; PROVIDED, HOWEVER, that, if such indemnified party or parties
reasonably 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 7 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 for any amount in excess of the net
13
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 7, 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 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.
(e) SURVIVAL. The obligations of the Company and the Holders under this
SECTION 7 shall survive the completion of any offering of Registrable Shares
pursuant to a Registration Statement or otherwise.
8. 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.
9. 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.
10. 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 more than two (2) years after the
Exchange Date applicable to such Holder.
11. 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.
12. MISCELLANEOUS.
(a) REMEDIES. In the event of a breach by the Company or by a Holder of
any of their 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
14
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
otherwise delaying any registration as a result of any controversy that might
arise with respect to the interpretation or implementation of this Agreement.
(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 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
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, telex or telecopy;
(i) if to the Company, as provided in the Purchase Agreement,
(ii) if to the Initial Purchasers, as provided in the Purchase
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 (v) delivered by hand, if
personally delivered, (w) one (1) Business Day after being timely delivered to a
next-day air courier, (x) five (5) Business Days after being deposited in the
mail, postage prepaid, if mailed, (y) when answered back, if telexed or (z) 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. The Company may not assign
its rights or obligations hereunder without the prior written consent of each
Holder. Notwithstanding the foregoing, no assignee of the Company shall have any
of the rights granted under this Agreement until such assignee shall acknowledge
its rights and obligations hereunder by a signed written agreement pursuant to
which such assignee accepts such rights and obligations.
15
(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.
16
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:
-----------------------------------------
Name:
------------------------------------
Title:
------------------------------------
The foregoing Registration Rights
Agreement is hereby confirmed and
accepted as of the date first above written.
HARVARD PRIVATE CAPITAL HOLDINGS, INC.
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
CAPRICORN INVESTORS II, L.P.
By: Capricorn Holdings, LLC
Its General Partner
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
17
FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
THIS AMENDMENT TO THE REGISTRATION RIGHTS AGREEMENT (the
"Amendment") is made and entered into as of October 16, 1998, by and among THE
WMF GROUP, LTD., a Delaware corporation (the "Company"), HARVARD PRIVATE CAPITAL
HOLDINGS, INC., a Massachusetts corporation ("Harvard"), CAPRICORN INVESTORS II,
L.P., a Delaware limited partnership ("Capricorn"), DEMETER HOLDINGS
CORPORATION, a Massachusetts corporation ("Demeter"), and PHEMUS CORPORATION, a
Massachusetts corporation ("Phemus").
RECITALS
WHEREAS, the Company, Harvard and Capricorn previously had made and
entered a Registration Rights Agreement dated June 12, 1998 (the "Registration
Rights Agreement"); and
WHEREAS, the Company, Demeter, Phemus, Harvard and Capricorn have made
and entered a Stock Purchase Agreement dated as of October 16, 1998 (the "Stock
Purchase Agreement"), whereby Demeter, Phemus and Capricorn have agreed to
purchase 3,635,972 shares of the Company's Class A Non-Voting Convertible
Preferred Stock, par value $.01 per share (the "Class A Preferred Stock"); and
WHEREAS, the Company, Demeter, Phemus and Capricorn have made and
entered a Standby Purchase Agreement dated as of October 16, 1998 ("Standby
Agreement"), whereby Demeter, Phemus, and Capricorn have agreed to purchase
664,028 shares of the Company's common stock not subscribed for by other
shareholders during the rights offering to the shareholders planned for early
1999 (the "Rights Offering"); and
WHEREAS, the parties to this Amendment desire to amend the Registration
Rights Agreement to add as parties Demeter and Phemus, so as to include Demeter
and Phemus as "Holders" and the Common Stock into which the Class A Preferred
Stock purchased pursuant to the Stock Purchase Agreement is convertible and the
Common Stock purchased pursuant to the Standby Agreement as "Registrable
Shares," as those terms are defined in the Registration Rights Agreement, and to
make certain other amendments to the Registration Rights Agreement, as set forth
herein;
THEREFORE, the parties hereby agree that the Registration Rights
Agreement is hereby amended to add Demeter and Phemus as parties as follows,
effective as of October 16, 1998:
AGREEMENT
1. The following definitions shall be added to Section 1 of the
Registration Rights Agreement:
"DEMETER: Demeter Holdings Corporation."
"PHEMUS: Phemus Corporation."
"PURCHASED SHARES: The shares of Common Stock issuable upon
the conversion of the Class A Preferred Stock purchased by Demeter,
Phemus and Capricorn pursuant to the Stock Purchase Agreement, dated as
of October 16, 1998 (the "Stock Purchase Agreement"), by and among the
Company, Demeter, Phemus, Harvard and Capricorn; the shares of Common
Stock purchased by Demeter, Phemus and Capricorn pursuant to the
Standby Purchase Agreement, dated as of October 16, 1998, by and among
the Company, Demeter, Phemus and Capricorn; the shares of Common Stock
issuable to Commercial Mortgage Investment Trust, Inc. ("COMIT") upon
conversion of the Company's subordinated notes held by COMIT pursuant
to Section 5.6 of the Stock Purchase Agreement; and the shares of
Common Stock issuable upon conversion of the Class A Preferred Stock
issuable to COMIT upon conversion of the Company's subordinated notes
held by COMIT pursuant to Section 5.6 of the Stock Purchase Agreement."
2. The definition of "Holder" in Section 1 of the Registration Rights
Agreement shall be deleted in its entirety and shall be replaced by the
following:
"HOLDER: Each registered holder of any Registrable Shares from
time to time, including Demeter, Phemus, the Initial Purchasers and
their respective Affiliates."
3. The definition of "Registrable Shares" in Section 1 of the
Registration Rights Agreement shall be deleted in its entirety and shall be
replaced by the following:
"REGISTRABLE SHARES: The Purchased Shares, the Exchange Shares
and any shares of Common Stock replacing or issued as a dividend on the
Purchased Shares or the Exchange 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 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."
4. Section 3(c) of the Registration Rights Agreement shall be deleted
in its entirety and shall be replaced by the following:
"LIMIT ON REQUESTS. Each of the Holders (or their assignees)
shall be entitled to have effected at its request pursuant to this
SECTION 3 (i) one registration with respect to Exchange Shares and (ii)
one registration with respect to Purchased Shares."
5. The parties hereby ratify and confirm all other provisions of the
Registration Rights Agreement without amendment.
IN WITNESS WHEREOF, the parties have caused this Amendment to
the Registration Rights Agreement to be duly executed as of October 16, 1998.
THE WMF GROUP, LTD.
By:
----------------------------------------------
Name:
Title:
HARVARD PRIVATE CAPITAL HOLDINGS, INC.
By:
----------------------------------------------
Name:
Title:
By:
----------------------------------------------
Name:
Title:
CAPRICORN INVESTORS II, L.P.
By: Capricorn Holdings, LLC, a Delaware limited
liability company, its General Partner
By:
----------------------------------------
Name:
Title:
PHEMUS CORPORATION
By:
----------------------------------------------
Name:
Title:
By:
----------------------------------------------
Name:
Title:
DEMETER HOLDINGS CORPORATION
By:
----------------------------------------------
Name:
Title:
By:
----------------------------------------------
Name:
Title:
