SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(Rule 13d-1)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13d-2(a)
(Amendment No.2)
The WMF Group, Ltd.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, $.01 par value
- --------------------------------------------------------------------------------
(Title of Class of Securities)
929289106
---------------------------------
(CUSIP Number)
COPY TO:
Tami E. Nason, Esq. Christopher A. Klem, Esq.
Charlesbank Capital Partners, LLC Ropes & Gray
600 Atlantic Avenue One International Place
Boston, MA 02210 Boston, MA 02110
(617) 619-5400 (617) 951-7000
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
December 31, 1998
--------------------------------------------------------
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box
[ ].
Page 1 of 11 Pages
<PAGE>
SCHEDULE 13D
- -------------------------- -------------------
CUSIP No. 929289106 Page 2 of 11 Pages
- -------------------------- -------------------
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Demeter Holdings Corporation
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS*
OO
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Massachusetts
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER
NUMBER OF 4,640,864 shares (see Item 5)
SHARES ----------------------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY ----
EACH ----------------------------------------------------------------
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON 4,640,864 shares (see Item 5)
WITH ----------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
----
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,640,864 shares
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES [ ]
CERTAIN SHARES*
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (9)
51.9%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
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CUSIP No. 929289106 Page 3 of 11 Pages
- --------------------- ------------------
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Phemus Corporation
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [x]
(b) [ ]
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS*
OO
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Massachusetts
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER
NUMBER OF 253,816 shares (see Item 5)
SHARES ----------------------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY ----
EACH ----------------------------------------------------------------
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON 253,816 shares (see Item 5)
WITH ----------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
----
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
253,816 shares
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES [ ]
CERTAIN SHARES*
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (9)
2.8%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
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CUSIP No. 929289106 Page 4 of 11 Pages
- --------------------- ------------------
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Harvard Private Capital Holdings, Inc.
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [X]
(b) [ ]
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS*
OO
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION
Massachusetts
- --------------------------------------------------------------------------------
7. SOLE VOTING POWER
NUMBER OF 0 shares (see Item 5)
SHARES ----------------------------------------------------------------
BENEFICIALLY 8. SHARED VOTING POWER
OWNED BY ----
EACH ----------------------------------------------------------------
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON 0 shares (see Item 5)
WITH ----------------------------------------------------------------
10. SHARED DISPOSITIVE POWER
----
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
0 shares
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (9) EXCLUDES [ ]
CERTAIN SHARES*
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (9)
0.0%
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
------------
The WMF Group, Ltd.
-------------------
Amendment No. 2
---------------
This Amendment No. 2 hereby amends the initial Schedule 13D filed on
July 10, 1998 and Amendment No. 1 to the initial Schedule 13D filed on September
25, 1998.
Item 3. Source and Amount of Funds or Other Consideration.
--------------------------------------------------
Item 3 is amended by adding the following thereto:
On December 31, 1998, pursuant to a Stock Purchase Agreement dated as of
October 16, 1998 among the Issuer, Demeter, Phemus, Capricorn Investors II, L.P.
("Capricorn") and HPCH (attached hereto as Exhibit B), Demeter and Phemus
purchased from the Issuer in a private placement 2,757,633 shares and 151,145
shares, respectively, of the Issuer's Class A non-voting, convertible preferred
stock, par $.01 ("Class A Preferred"), at $4.587/share.
The Class A Preferred is a newly created class of stock, which will
automatically convert, on a one-for-one basis, into shares of the Issuer's
common stock upon the expiration or early termination of the waiting period
applicable to such conversion under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), unless the Federal Trade Commission or
Department of Justice take preventative action. The parties filed the HSR Act
notification on December 31, 1998.
As part of the closing of the private placement, HPCH surrendered to the
Issuer for cancellation the warrant to purchase 960,000 shares of the Issuer's
common stock that was acquired by HPCH pursuant to a Subscription Agreement,
dated September 4, 1998, among Commercial Mortgage Investment Trust, Inc.
("CMIT"), HPCH, Capricorn and the Issuer.
All shares issued to Demeter and Phemus pursuant to the foregoing will
have registration rights pursuant to the Registration Rights Agreement, dated as
of June 12, 1998 and amended as of October 16, 1998, among the Issuer, HPCH,
Capricorn, Demeter and Phemus.
Item 4. Purpose of Transaction.
-----------------------
Item 4 is amended in its entirety to read as follows:
Demeter holds fully vested options to purchase 10,000 shares of Common
Stock of the Issuer.
On December 31, 1998 the Issuer filed an S-3 registration statement
relating to a rights offering, whereby the Issuer will distribute to its common
stockholders Rights to purchase additional shares of common stock at
$5.00/share, with 1.072 Rights being received for each share held. The Rights
will include an "oversubscription privilege" to purchase shares not subscribed
for by other holders of Rights. Demeter, Phemus and Capricorn have agreed not to
transfer their Rights or to purchase any shares in the rights offering, and not
to transfer any Issuer shares beneficially owned by them until after the record
date for the rights offering (or June 30, 1999 if sooner).
Pursuant to a Standby Purchase Agreement dated October 16, 1998 among
the Issuer, Demeter, Phemus and Capricorn (attached hereto as Exhibit C),
Demeter, Phemus and Capricorn have severally agreed to purchase, in the
aggregate, up to 664,028 shares of the Issuer's common stock at $5/share, to the
extent that the rights offering is not fully subscribed
Page 5 of 11 Pages
<PAGE>
(not counting Rights issued to Demeter, Phemus and Capricorn). The commitments
are as follows:
Demeter: 503,619 shares
Phemus: 27,603 shares
Capricorn: 132,806 shares
If the shortfall in the rights offering subscriptions is less than
664,028 shares, then the respective commitments of Demeter, Phemus and Capricorn
to purchase such "standby shares" are proportionately reduced.
The proceeds to the Issuer from the private placement, the rights
offering and the sale of any "standby shares" are to be used, first, to pay down
the subordinated notes issued by the Issuer to CMIT (in an aggregate principal
amount of $20 million) on September 4, 1998. Such repayments will result in the
redemption of shares of CMIT's Class C Preferred Stock held by HPCH and
Capricorn. If, following the closing of the rights offering and the purchase of
the standby shares, there are still any amounts outstanding under such notes,
then at the option of HPCH and Capricorn, the remaining outstanding portion of
such notes shall be converted, at $5/share, into Issuer common stock (or, if the
Issuer's Class A Preferred has not yet converted into common stock, such notes
shall be converted into Class A Preferred), following which HPCH and Capricorn
shall exchange all of their CMIT Class C Preferred Stock for the Issuer common
(or Class A Preferred) stock into which the notes were converted.
Any shares issued to HPCH, Demeter, Phemus and Capricorn pursuant to the
foregoing will have registration rights pursuant to the Registration Rights
Agreement, dated as of June 12, 1998 and amended as of October 16, 1998, among
the Issuer, HPCH, Capricorn, Demeter and Phemus.
Except as described above, neither Demeter nor Phemus have any plans or
proposals which relate to or would result in any of the actions set forth in
parts (a) through (j) of Item 4.
Item 5. Interest in Securities of the Issuer.
-------------------------------------
Item 5, paragraphs (a), (b), (c) and (e) are amended in their entirety
to read as follows:
(a), (b) Demeter is the beneficial owner of 4,640,864 shares of Common
Stock (approximately 51.9% of the shares of Common Stock based on the most
recent filing of the Issuer with the SEC plus the number of shares which will be
outstanding following the conversion of the Class A Preferred and including
shares of Common Stock of the Issuer which Demeter has the right to acquire
beneficial ownership of within 60 days). The shares of Common Stock reported
herein as beneficially owned by Demeter include 10,000 shares of Common Stock
that Demeter may acquire at any time upon exercise of an option to purchase such
shares at a price of $9.15 per share and 2,757,633 shares which Demeter will
acquire upon the conversion of the Issuer's Class A Preferred held by Demeter,
as more fully described in Item 3 above. Phemus is the beneficial owner of
253,816 shares of Common Stock (approximately 2.8% of the shares of Common Stock
based on the most recent filing of the Issuer with the SEC plus the number of
shares which will be outstanding following the conversion of the Class A
Preferred and including shares of Common Stock of the Issuer which Phemus has
the right to acquire beneficial ownership of within 60 days). The shares of
Common Stock reported herein as beneficially owned by Phemus include 151,145
shares which Phemus will acquire upon the conversion of the Issuer's Class A
Preferred held by Phemus, as more fully described in Item 3 above.
Each of Demeter and Phemus has sole power to vote and sole power to
dispose of such shares to which this Statement relates, except as provided in
the Existing Assets Management Agreement as described in Item 6.
(c) See response to Item 3 above.
Page 6 of 11 Pages
<PAGE>
(e) On December 31, 1998, HPCH ceased to be the beneficial owner of any
shares of the Issuer's common stock as described in Item 3 above.
Item 6. Contracts, Arrangements, Understandings or Relations With Respect to
--------------------------------------------------------------------
Securities of the Issuer
------------------------
Item 6 is amended by adding thereto the following:
See Item 4.
Item 7. Material to be Filed as Exhibits.
---------------------------------
Exhibit A -- Information concerning Reporting Persons' directors and executive
officers.
Exhibit B -- Stock Purchase Agreement, dated as of October 16, 1998, among the
Issuer, Demeter, Phemus, Capricorn and HPCH.
Exhibit C -- Standby Purchase Agreement, dated as of October 16, 1998, among
the Issuer, Demeter, Phemus and Capricorn.
Page 7 of 11 Pages
<PAGE>
Signature
---------
After reasonable inquiry and to the best of its knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
Dated: January 11, 1999
DEMETER HOLDINGS CORPORATION
By: /s/ Tami E. Nason
------------------------------------
Name: Tami E. Nason
Title: Authorized Signatory
PHEMUS CORPORATION
By: /s/ Tami E. Nason
------------------------------------
Name: Tami E. Nason
Title: Authorized Signatory
HARVARD PRIVATE CAPITAL HOLDINGS, INC.
By: /s/ Tami E. Nason
------------------------------------
Name: Tami E. Nason
Title: Authorized Signatory
Page 8 of 11 Pages
<PAGE>
EXHIBIT INDEX
- -------------
<TABLE>
<CAPTION>
Page Number In
Exhibit Sequentially
Number Description Numbered Copy
- ------- ----------- ---------------
<S> <C> <C>
A Information Concerning Reporting 7
Persons' Directors and Executive Officers
B Stock Purchase Agreement, dated as of October 16, 1998,
among the Issuer, Demeter, Phemus, Capricorn and HPCH
C Standby Purchase Agreement, dated as of October 16, 1998,
among the Issuer, Demeter, Phemus and Capricorn
</TABLE>
Page 9 of 11 Pages
<PAGE>
EXHIBIT A
---------
Directors and Executive Officers
--------------------------------
The names of the Directors and Executive Officers and their business
addresses and present principal occupation or employment are set forth below. If
no business address is given, the business address of such director or executive
officer is c/o Charlesbank Capital Partners, LLC, 600 Atlantic Avenue, Boston,
Massachusetts 02210.
I. Directors of Demeter Holdings Corporation
-----------------------------------------
Present Principal
Name Occupation
------ -----------------
Michael R. Eisenson President and Chief Executive Officer,
Charlesbank Capital Partners, LLC
Tim R. Palmer Managing Director,
Charlesbank Capital Partners, LLC
Mark A. Rosen Managing Director,
Charlesbank Capital Partners, LLC
II. Executive Officers of Demeter Holdings Corporation
--------------------------------------------------
Office/Position
Name with Demeter
------ ---------------
Michael R. Eisenson President
Mark A. Rosen Vice President
Michael Thonis Vice President
Judith A. Murphy Acting Treasurer
Tami E. Nason Clerk
Kevin M. Brown Assistant Clerk
III. Directors of Phemus Corporation
-------------------------------
Present Principal
Name Occupation
------ -----------------
Michael R. Eisenson President and Chief Executive Officer,
Charlesbank Capital Partners, LLC
Jack R. Meyer President,
Harvard Management Company, Inc.
Judith A. Murphy Chief Operations Officer,
(Acting Director) Harvard Management Company, Inc.
Page 10 of 11 Pages
<PAGE>
IV. Executive Officers of Phemus Corporation
----------------------------------------
Office/Position
Name with Phemus
------ ---------------
Michael R. Eisenson President
Tim R. Palmer Vice President
Michael Thonis Vice President
Judith A. Murphy Acting Treasurer
Tami E. Nason Clerk
Kevin M. Brown Assistant Clerk
V. Directors of Harvard Private Capital Holdings, Inc.
---------------------------------------------------
Present Principal
Name Occupation
------ -----------------
Michael R. Eisenson President and Chief Executive Officer
Charlesbank Capital Partners, LLC
Mark A. Rosen Managing Director,
Charlesbank Capital Partners, LLC
Tim R. Palmer Managing Director,
Charlesbank Capital Partners, LLC
VI. Executive Officers of Harvard Private Capital Holdings, Inc.
------------------------------------------------------------
Office/Position
Name with HPCH
------ ---------------
Michael R. Eisenson President
Jack R. Meyer Vice President
John M. Sallay Vice President
Judith A. Murphy Acting Treasurer
Tami E. Nason Clerk
Michael Thonis Assistant Clerk
Page 11 of 11 Pages
<PAGE>
EXHIBIT B
---------
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of October 16, 1998, by and among THE WMF GROUP, LTD., a Delaware
corporation (the "Company"), DEMETER HOLDINGS CORPORATION, a Massachusetts
corporation ("Demeter"), PHEMUS CORPORATION, a Massachusetts corporation
("Phemus"), CAPRICORN INVESTORS II, L.P., a Delaware limited partnership
("Capricorn"), and HARVARD PRIVATE CAPITAL HOLDINGS, INC., a Massachusetts
corporation ("Harvard"). Demeter, Phemus and Capricorn are referred to herein
individually as an "Investor" and collectively as the "Investors."
RECITALS
--------
A. On October 16, 1998, the Investors agreed (subject to the fulfillment
of certain conditions, including the execution of this Agreement) to
purchase from the Company, and the Company agreed to sell to the
Investors, an aggregate of up to 6,000,000 shares of the Company's
Common Stock, par value $0.01 per share (the "Common Stock") at a
price of $5.00 per share, with up to 5,000,000 shares to be purchased
in a private placement and up to 1,000,000 shares to be purchased
pursuant to a stand-by purchase commitment in connection with a rights
offering to be made to the Company's shareholders and announced on
October 21, 1998, as described in Section 5.1 of this Agreement (the
"Rights Offering").
B. The Company and the Investors now desire to enter into this agreement
to provide for the purchase by the Investors of a total of 3,635,972
shares of non-voting, convertible preferred stock, par value $.01 per
share (the "Class A Preferred Stock"), in a private placement by the
Company (the "Private Placement") and to enter into a Stand-By
Purchase Agreement providing for a stand-by commitment by the
Investors to purchase up to an additional 664,028 shares of Common
Stock not subscribed for by other shareholders of the Company pursuant
to the Rights Offering.
C. The Company shall apply the proceeds from the sale of the Common Stock
in the Private Placement to partially repay the COMIT Notes and
Commercial Mortgage Investment Trust, Inc., a Virginia corporation
("COMIT"), shall apply the proceeds of such repayment to retire shares
of COMIT's Class C Non-Voting Preferred Stock (the "COMIT Series C
Preferred") held by the Investors, as provided in COMIT's Second
Amended and Restated Articles of Incorporation creating the COMIT
Series C Preferred.
<PAGE>
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE AND SELL STOCK.
-------------------------------------
1.1. Demeter Agreement to Purchase.
------------------------------
The Company agrees to sell to Demeter at the Closing (as defined
below), and Demeter agrees to purchase from the Company at the Closing, an
aggregate of 2,757,633 shares of Class A Preferred Stock (the "Demeter Shares")
for an aggregate cash purchase price of $12,649,262.57 (the "Demeter Purchase
Price").
1.2. Phemus Agreement to Purchase.
-----------------------------
The Company agrees to sell to Phemus at the Closing (as defined
below), and Phemus agrees to purchase from the Company at the Closing, an
aggregate of 151,145 shares of Class A Preferred Stock (the "Phemus Shares") for
an aggregate cash purchase price of $693,302.11 (the "Phemus Purchase Price").
1.3. Capricorn Agreement to Purchase.
--------------------------------
The Company agrees to sell to Capricorn at the Closing, and Capricorn
agrees to purchase from the Company at the Closing, an aggregate of 727,194
shares of Class A Preferred Stock (the "Capricorn Shares," and together with the
Demeter Shares and Phemus Shares, the "Purchased Shares") for an aggregate cash
purchase price of $3,335,638.88 (the "Capricorn Purchase Price").
1.4. Investors Stand-By Purchase Commitment.
---------------------------------------
The Company agrees to sell to the Investors, and the Investors agree
to purchase from the Company, at the closing of the Rights Offering described in
Section 5.1, up to an aggregate of 664,028 additional shares of Common Stock
(the "Stand-By Shares") on the terms and conditions set forth in the Standby
Purchase Agreement in the form attached hereto as Exhibit A and executed by the
Company and the Investors simultaneously with the execution of this Agreement
(the "Standby Purchase Agreement").
2. CLOSING.
--------
2.1. The Closing.
------------
-2-
<PAGE>
The sale and purchase of the Purchased Shares (the
"Closing") will take place at the offices of the Company at 10:00 a.m., Vienna,
Virginia time, on December 30, 1998, or at such time and place as the Company
and the Investors mutually agree upon (the "Closing Date"), but not later than
December 31, 1998. At the Closing, the Company will deliver to each Investor a
certificate representing the Investor's Purchased Shares against delivery to the
Company by the Investor of the applicable Purchase Price.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
----------------------------------------------
The Company hereby represents and warrants to the Investors that at the
Closing, the following statements will be true and correct:
3.1. Organization, Good Standing and Qualification.
----------------------------------------------
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the state of Delaware and has all requisite
corporate power and authority to own its properties and assets and to carry on
its business as now conducted and as presently proposed to be conducted. The
Company is duly qualified and in good standing to do business as a foreign
corporation in each jurisdiction where failure to be so qualified would have a
material adverse effect on the business, financial condition, assets or
prospects of the Company (a "Material Adverse Effect").
3.2. Capitalization.
---------------
Immediately prior to the Closing, the capitalization of the Company
consists of the following:
(a) Preferred Stock. A total of 12,500,000 authorized shares of
Preferred Stock, $.01 par value per share (the "Preferred Stock"), of which
3,635,972 shares have been designated Class A Preferred Stock, none of
which are issued and outstanding. The rights, privileges and preferences of
the Class A Preferred Stock are as set forth in the Company's Restated
Certificate of Incorporation, as amended (the "Certificate of
Incorporation").
(b) Common Stock. A total of 25,000,000 authorized shares of Common
Stock, of which 5,299,383 shares of Common Stock are issued and
outstanding. All issued shares of Common Stock have been duly and validly
authorized and issued in material compliance with all federal and state
securities laws and are fully paid and nonassessable.
(c) Options, Warrants, Reserved Shares. Except for the Class A
Preferred Stock and as set forth on Schedule 3.2((c)), there are no
outstanding options, warrants, rights (including conversion or preemptive
rights) or agreements for the purchase or acquisition from the Company of
any shares of its capital stock or any securities convertible into or
ultimately exchangeable or exercisable for any shares of the Company's
capital stock. Except as set forth on Schedule 3.2((c)), no shares of the
Company's outstanding capital stock, or stock issuable upon exercise or
exchange of any outstanding options, warrants or
-3-
<PAGE>
rights, or other stock issuable by the Company, are subject to any rights
of first refusal or other rights to purchase such stock (whether in favor
of the Company or any other person), pursuant to any agreement or
commitment of the Company.
(d) No Agreements. To the Company's knowledge, no shareholders
agreement, voting trust agreement or similar agreement exists relating to
the Company's securities.
3.3. Company Subsidiaries.
---------------------
Schedule 3.3 is a true and complete list of all business entities that
the Company operates, owns or otherwise controls directly or indirectly through
one or more subsidiaries, partnerships, joint ventures or other business
associations, a majority of the outstanding voting securities (the
"Subsidiaries"). Each Subsidiary is duly incorporated and validly existing under
the laws of its jurisdiction of incorporation and has the requisite power and
authority to own its properties and assets and to carry on its business as now
being conducted and as presently proposed to be conducted. Each Subsidiary is
duly qualified and in good standing to do business as a foreign corporation in
each jurisdiction where failure to be so qualified would have a material adverse
effect on the business, financial condition, assets or prospects of such
Subsidiary.
All of such outstanding shares of capital stock of each Subsidiary are
validly issued, fully paid and nonassessable. Except as set forth on Schedule
3.3, the Company owns all of the shares of the issued and outstanding capital
stock of the Subsidiaries free and clear of any liens, claims, encumbrances,
charges or rights of third parties of any kind whatsoever.
3.4. Due Authorization; Enforceability.
----------------------------------
All corporate action on the part of the Company, its officers,
directors and shareholders necessary for the authorization, execution, delivery
and performance of all obligations of the Company under this Agreement, and the
authorization, issuance, reservation for issuance and delivery of the Purchased
Shares and the Common Stock issuable upon conversion of the Class A Preferred
Stock has been taken. The shares of Common Stock issuable upon conversion of the
Class A Preferred Stock are referred to herein as the "Conversion Shares." This
Agreement constitutes a valid and legally binding obligation of the Company,
enforceable in accordance with its terms, except as may be limited by (i)
applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) the effect of rules of law governing the availability of
equitable remedies.
3.5. Valid Issuance of Stock; Compliance with Securities Laws.
---------------------------------------------------------
(a) The Purchased Shares, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration provided
for herein, and the Conversion Shares, when issued in accordance with the
Company's Certificate of Incorporation, will be duly and validly issued,
fully paid and nonassessable. The Company has authorized and
-4-
<PAGE>
reserved for issuance upon conversion of the Class A Preferred Stock a
sufficient number of shares of its Common Stock.
(b) Based in part on the representations made by the Investors in
Section 4 hereof, the Purchased Shares will be exempt from the registration
and prospectus delivery requirements of the U.S. Securities Act of 1933, as
amended (the "1933 Act") and the registration and qualification
requirements of the securities laws of Massachusetts, Delaware, Virginia
and Connecticut.
3.6. Consents.
---------
No further consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority or any third-party on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement and the issuance of the Conversion Shares in
accordance with the Company's Certificate of Incorporation (the "Conversion
Share Issuance"), except for such qualifications or filings under the 1933 Act
and the regulations thereunder and all other applicable state securities laws as
may be required in connection with the transactions contemplated by this
Agreement. All such qualifications and filings will, in the case of
qualifications, be effective on the Closing Date and will, in the case of
filings, be made within the time prescribed by law.
3.7. Legal and Governmental Proceedings.
-----------------------------------
Except as set forth on Schedule 3.7, no legal or governmental action,
proceeding or investigation is pending, or to the best of the Company's
knowledge, threatened (or any basis therefor known to the Company) that
questions the validity of this Agreement, the Class A Preferred Stock, the
Conversion Shares, the Common Stock or the Conversion Share Issuance or that, if
determined adversely to the Company or any Subsidiary, is reasonably likely,
currently or prospectively, individually or in the aggregate, to have a Material
Adverse Effect.
3.8. Compliance with Charter Documents, Contracts and Law.
-----------------------------------------------------
Except as set forth on Schedule 3.8, the Company and each Subsidiary
is not in violation of its respective articles of incorporation or bylaws, both
as amended, nor in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or instrument
to which it is a party or by which it or any of its properties may be bound. To
the best of the Company's knowledge, except for any violations that individually
and in the aggregate would not have a Material Adverse Effect, the Company and
the Subsidiaries are in compliance with all applicable statutes, laws,
regulations and executive orders of the United States of America and all states,
foreign countries or other governmental bodies and agencies having jurisdiction
over the Company's and the Subsidiaries' business or properties. Neither the
Company nor any Subsidiary has received any notice of any such violation of such
statutes, laws, regulations or orders that has not been remedied prior to the
date hereof. The execution, delivery
-5-
<PAGE>
and performance by the Company of this Agreement and the consummation of the
transactions contemplated hereby and the Conversion Share Issuance will not
result in any such violation or default, or be in conflict with or constitute,
with or without the passage of time or the giving of notice or both, either a
default under the Company's Certificate of Incorporation or Bylaws, or, to the
best of the Company's knowledge, any such violation of any statutes, laws,
regulations or orders.
3.9. No Conflicts.
-------------
The execution, delivery and performance by the Company of this
Agreement, the consummation of the transactions contemplated hereby and the
Conversion Share Issuance will not violate or conflict with or result in a
breach of any provision of, or constitute a default (or any event that, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination or in a right of termination or cancellation of, or accelerate
the performance required by, or result in the creation of any lien upon any of
the properties of the Company or any Subsidiary under, or result in being
declared void, voidable or without further binding effect, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust
or any license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which the Company or any Subsidiary is a
party, or by which the Company, the Subsidiaries or any of their properties is
bound or affected, except for any of the foregoing matters that would not
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect.
3.10. Securities Filings.
-------------------
As of their respective dates, all reports, schedules, forms,
statements and other documents required to be filed by the Company under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), since December 1,
1997, in each case as amended (the "Company Reports"): (a) complied as to form
in all material respects with the applicable requirements of the 1934 Act and
(b) did 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
made therein, in the light of the circumstances under which they were made, not
misleading. Each of the consolidated balance sheets of the Company included in
or incorporated by reference into the Company Reports (as amended and including
the related notes and schedules) (i) complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the U.S. Securities Exchange Commission ("SEC") with respect
thereto, (ii) were prepared in all material respects in accordance with
generally accepted accounting principles ("GAAP"), and (iii) fairly presented in
all material respects the consolidated financial position of the Company and its
wholly-owned subsidiaries as of its date in conformity with GAAP. Each of the
consolidated statements of income, retained earnings and cash flows of the
Company included in or incorporated by reference into the Company Reports (as
amended and including any related notes and schedules) (A) complied as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, (B) were
prepared in accordance with GAAP, and (C) fairly presented the results of
operations, retained earnings or cash flows, as the case may be, of the Company
and its subsidiaries for the periods
-6-
<PAGE>
set forth therein (subject, in the case of unaudited statements, to normal
year-end audit adjustments that would not be material in amount or effect) in
conformity with GAAP.
The Company's registration statement relating to the Rights Offering
referred to in Section 5.1, as of its filing date, (a) complied as to form in
all material respects with the applicable requirements of the 1933 Act and (b)
did not contain any untrue statement of a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Except as and to the extent set forth in the Company Reports and as
set forth on Schedule 3.10, neither the Company nor any of its subsidiaries has
any material liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) that would be required to be reflected on, or
reserved against in, a balance sheet of the Company or in the notes thereto,
prepared in accordance with GAAP consistently applied, or any other material
liabilities (such liabilities being deemed material if the value of such
liabilities, individually or in the aggregate, is greater than $1 million),
except liabilities arising in the ordinary course of business since such date
which would not have a Material Adverse Effect.
3.11. No Changes.
-----------
Since September 30, 1998, except as set forth on Schedule 3.11, there
has been no material adverse change in the business, financial condition, assets
or prospects of the Company.
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
------------------------------------------------
Each Investor hereby represents and warrants to the Company that at
Closing, the following statements will be true and correct:
4.1. Organization, Good Standing and Qualification.
----------------------------------------------
Such Investor is a partnership or corporation, as applicable, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its formation and has all requisite power and authority to own
its properties and assets and to enter into the transactions contemplated by
this Agreement.
4.2. Due Authorization.
------------------
All corporate or partnership action on the part of such Investor, as
applicable, necessary for the authorization, execution, delivery and performance
of all obligations of such Investor under this Agreement has been taken. This
Agreement constitutes such Investor's valid and legally binding obligation,
enforceable in accordance with its terms except as may be limited by (i)
applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) the effect of rules of law governing the availability of
equitable remedies.
-7-
<PAGE>
4.3. Purchase for Own Account.
-------------------------
The Purchased Shares and the Conversion Shares are being acquired for
investment for such Investor's own account, not as a nominee or agent, and not
with a view to the public resale or distribution thereof within the meaning of
the 1933 Act, and such Investor has no present intention of selling, granting
any participation in, or otherwise distributing the same. Such Investor also
represents that it has not been formed for the specific purpose of acquiring the
Purchased Shares or the Conversion Shares.
4.4. Investment Experience.
----------------------
Such Investor understands that the purchase of the Purchased Shares
and the Conversion Shares involves substantial risk. Such Investor: (i) has
experience as an investor in securities and acknowledges that such Investor is
able to fend for itself, can bear the economic risk of its investment in the
Purchased Shares and the Conversion Shares and has such knowledge and experience
in financial or business matters that such Investor is capable of evaluating the
merits and risks of this investment in the Purchased Shares and the Conversion
Shares and protecting its own interests in connection with this investment
and/or (ii) has a preexisting personal or business relationship with the Company
and certain of its officers, directors or controlling persons of a nature and
duration that enables such Investor to be aware of the character, business
acumen and financial circumstances of such persons.
4.5. Accredited Investor Status.
---------------------------
Such Investor is an "accredited investor" within the meaning of
Regulation D promulgated under the 1933 Act, and such Investor has received a
copy of the Company's Restated Articles, Bylaws, this Agreement and such other
documents and agreements that it has requested and has read and understands the
respective contents thereof. Such Investor has had the opportunity to ask
questions of the Company and has received answers to such questions from the
Company. Such Investor has carefully reviewed and evaluated these documents and
understands the risks and other considerations relating to the investment.
4.6. Restricted Securities.
----------------------
Such Investor understands that the Purchased Shares and the Conversion
Shares are characterized as "restricted securities" under the 1933 Act inasmuch
as they are being acquired from the Company in a transaction not involving a
public offering and that under the 1933 Act and applicable rules and regulations
thereunder such securities may be resold without registration under the 1933 Act
only in certain limited circumstances. In this connection, such Investor
represents that it is familiar with Rule 144 of the SEC, as presently in effect,
and understands the resale limitations imposed thereby and by the 1933 Act.
-8-
<PAGE>
5. COVENANTS OF THE PARTIES.
-------------------------
5.1. Rights Offering.
----------------
As soon as practicable after the date of this Agreement, in compliance
with applicable law, the Company shall distribute on a pro rata basis
transferable rights (each a "Right") to all holders-of-record of Common Stock on
a record date determined by the Board of Directors of the Company. Such holders
shall receive 1.072 Rights for each share of Common Stock held by them on such
record date, and each Right shall entitle the holder thereof to purchase one
share of Common Stock for $5.00 per share (the "Rights Offering"). No adjustment
shall be made in the price or number of shares for which each Right may be
exercised to reflect any change in the market price of the Common Stock. The
Company shall file with the SEC a registration statement relating to the shares
of Common Stock issuable upon exercise of the Rights, shall use its reasonable
best efforts to have such registration statement declared effective as soon as
practicable and shall take all other actions as may be necessary to complete the
Rights Offering as soon as practicable. The Investors agree that (i) after the
date of this Agreement and until the day following the first to occur of (A) the
record date for the Rights Offering and (B) June 30, 1999, they will not
transfer in any manner any of the shares of Common Stock "beneficially owned" by
them (as determined pursuant to Rule 12d-3 under the 1934 Act) or owned by them
as of record, (ii) they will not exercise or transfer in any manner any of the
Rights received by them with respect to any of such shares (and the certificates
representing Rights distributed to them shall bear a legend to such effect), and
(iii) neither they nor any of their affiliates (which term, in the case of
Capricorn, shall not include any of its limited partners or the limited partners
or general partners of Capricorn Investors, L.P. or any of Capricorn's
affiliates) will purchase or otherwise acquire from any person other than the
Company any other Rights.
5.2. Cancellation of Warrants.
-------------------------
At and upon Closing, the Warrants shall no longer be outstanding and
shall automatically be canceled and retired, and all rights with respect thereto
shall cease to exist, and each holder of a certificate representing any such
Warrant shall cease to have any rights with respect thereto. Harvard and
Capricorn shall deliver (or instruct any holder for its benefit to deliver) the
certificates representing the Warrants to the Company for cancellation at the
Closing. The Company has determined that the value of the Warrants is $150,000.
5.3. Taking of Necessary Action.
---------------------------
Each party hereto agrees to use promptly its commercially reasonable
best efforts to take or cause to be taken all action and to do or cause to be
done promptly all things necessary, proper or advisable under applicable laws
and regulations to consummate and make effective the transactions contemplated
by this Agreement, including all actions necessary to cause all conditions
precedent set forth in Section 6 to be satisfied.
-9-
<PAGE>
5.4. Restrictions on Transfer; Registration Rights.
----------------------------------------------
(a) Each Investor agrees not to make any disposition of all or any
portion of the Purchased Shares or the Conversion Shares unless and until:
(i) there is then in effect a registration statement under the
1933 Act and all applicable state securities laws covering such
proposed disposition and such disposition is made in accordance with
such registration statement; or
(ii) (A) the Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a
statement of the circumstances surrounding the proposed disposition,
and (B) the Investor shall have furnished the Company, at the expense
of such Investor or its transferee, with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not
require registration of such securities under the 1933 Act or under
any applicable state securities laws.
(b) The Conversion Shares and, if Common Stock, the COMIT Conversion
Shares (as defined below) shall be Registrable Shares for purposes of the
Registration Rights Agreement, dated June 12, 1998, between the Company,
Harvard and Capricorn (the "Registration Rights Agreement"). By signing and
entering into this Agreement, the Company, the Investors and Harvard each
agree that the Registration Rights Agreement shall be binding upon and
inure to the benefit of Demeter and Phemus. The Company, the Investors and
Harvard will execute an amendment to the Registration Rights Agreement to
confirm the rights and responsibilities of Demeter and Phemus under the
Registration Rights Agreement.
Notwithstanding the provisions of paragraphs (i) and (ii)
above, no such registration statement or opinion of counsel shall be required:
(A) for any transfer of any of the Purchased Shares in compliance with SEC Rule
144; or (B) for any transfer of any of the Purchased Shares by the Investor to
an affiliate of the Investor; provided that in the foregoing case the transferee
agrees in writing to be subject to the terms of this Section 5.4 to the same
extent as if the transferee were the Investor hereunder.
5.5. Legends.
--------
(a) Each Investor acknowledges that the certificates evidencing the
Purchased Shares and the Conversion Shares will bear the legends set forth
below, in addition to any legend required by any state securities laws:
(i) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND
-10-
<PAGE>
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
(ii) THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO
RESTRICTIONS ON TRANSFER PURSUANT TO A STOCK PURCHASE AGREEMENT
BETWEEN THE INITIAL HOLDER HEREOF AND THE WMF GROUP, LTD.
(b) The legend set forth in subsection (a)(i) above shall be removed
by the Company from any certificate evidencing any of the Purchased Shares
or Conversion Shares upon effectiveness of a registration statement under
the 1933 Act with respect to the legended security or upon delivery to the
Company of an opinion of counsel, reasonably satisfactory to the Company,
that such security can be freely transferred in a public sale without such
a registration statement being in effect and that such transfer will not
jeopardize the exemption or exemptions from registration pursuant to which
the Company issued the Purchased Shares or Conversion Shares.
5.6. Use of Proceeds; Conversion of Subordinated Debt.
-------------------------------------------------
(a) Simultaneously with the Closing, the Company shall use the
proceeds from the sale of the Purchased Shares to partially repay the COMIT
Notes.
(b) In addition, simultaneously with the closing of the Rights
Offering, the Company shall use the proceeds of the Rights Offering and of
the sale of any Stand-By Shares (i) to pay all remaining amounts
outstanding with respect to the COMIT Notes and (ii) to the extent that any
such proceeds remain, as working capital.
If the COMIT Notes are not fully repaid simultaneously with Closing of
the Rights Offering (whether out of proceeds from the Rights Offering, the
Stand-By Shares or otherwise), at the option of Harvard and Capricorn, COMIT
shall tender to the Company any remaining COMIT Notes and the Company shall
issue shares of Common Stock or, in the event the Class A Preferred Stock has
not been converted into Common Stock, shares of Class A Preferred Stock at a
price of $5.00 per share (whether such shares be Common Stock or Class A
Preferred Stock) in exchange therefor, the number of shares of Common Stock or
Class A Preferred Stock, as the case may be, to be issued upon such conversion
to be calculated by dividing the outstanding principal balance, and any accrued
but unpaid interest thereon, of the COMIT Notes to be converted by $5.00 (the
"COMIT Conversion Shares"). Harvard and Capricorn may exercise the foregoing
conversion option by giving written notice of the principal amount (and such
accrued interest) of COMIT Notes to be so converted to COMIT and the Company
within 10 business days following the payment of amounts outstanding with
respect to the COMIT Notes following the closing of the Rights Offering. The
closing of any conversion of COMIT Notes shall take place at the Company's
offices on the 10th business day following receipt by COMIT and the Company of a
notice of conversion, or within five business days after the date upon which all
applicable waiting periods under the Hart-Scott-Radino Antitrust
-11-
<PAGE>
Improvements Act of 1976, as amended (the "HSR Act"), shall have expired or been
terminated. At such closing, the Company will deliver to COMIT one or more
certificates representing the COMIT Conversion Shares, registered in such names
and denominations as COMIT shall reasonably request, against delivery of the
COMIT Notes to be converted, endorsed in blank. Upon issuance, the COMIT
Conversion Shares shall be duly and validly issued, fully paid and
non-assessable. If the COMIT Conversion Shares include Common Stock, such shares
of Common Stock shall have been approved for listing on any stock exchange or
inclusion in any automated quotation system on which the Common Stock is then
listed or included and shall be Registrable Shares for purposes of the
Registration Rights Agreement. COMIT shall apply all of the proceeds of the
repayment of the COMIT Notes to immediately redeem shares of the COMIT Series C
Preferred held by the Investors and Harvard as provided in the COMIT Amended and
Restates Articles of Incorporation. In the event any portion of the COMIT Notes
are converted into COMIT Conversion Shares as described above, each share of the
COMIT Series C Preferred then held by the Investors and Harvard shall be
immediately exchanged for a number of COMIT Conversion Shares equal to (1) the
aggregate number of COMIT Conversion Shares divided by (2) the number of shares
of COMIT Series C Preferred then held by the Investors and Harvard, with the
Investors and Harvard receiving only shares of Class A Preferred Stock to the
extent the COMIT Conversion Shares include any shares of Class A Preferred
Stock.
6. CONDITIONS TO CLOSING.
----------------------
6.1. Conditions to Investors' Obligations at Closing.
------------------------------------------------
The obligations of the Investors under Section 2 of this Agreement are
subject to the fulfillment or waiver, on or before the Closing, of each of the
following conditions, the waiver of which may be given by written, oral or
telephone communication to the Company, its counsel or to counsel to the
Investors:
(a) Representations and Warranties. The representations and warranties
of the Company set forth in Section 3 shall be true and correct in all
respects on and as of the Closing Date (except for representations and
warranties that speak as of a specific date and time, which need be true
and correct as of such date and time), and the Company shall have taken all
actions required by this Agreement to be taken by the Company prior to
Closing.
(b) Securities Exemptions. The offer and sale of the Purchased Shares
and the Conversion Shares pursuant to this Agreement shall be exempt from
the registration requirements of the 1933 Act and the registration and/or
qualification requirements of all applicable state securities laws.
(c) Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Investors and to the Investors' counsel, and the Investors
shall have received counterpart originals and certified or other copies of
the following documents:
-12-
<PAGE>
(i) Charter Documents. A copy of the Certificate of Incorporation
and the Bylaws of the Company (as amended through the date of the
Closing and including a copy of a Certificate of Designation setting
forth the rights, privileges and preferences of the Class A Preferred
Stock in the form filed with the Secretary of State of Delaware),
certified by the Secretary of the Company as true and correct copies
thereof as of the Closing.
(ii) Secretary's Incumbency Certificate. A certificate of the
Secretary or an Assistant Secretary or other officer of the Company
certifying the names of the officers of the Company authorized to sign
this Agreement, the certificates for the Purchased Shares and the
other documents, instruments or certificates to be delivered pursuant
to this Agreement by the Company or any of its officers, together with
the true signatures of such officers.
(iii) Corporate Actions. A copy of the resolutions of the Board
of Directors evidencing its approval, including the approval of a
majority of the Company's disinterested directors, of this Agreement,
the issuance of Purchased Shares and the other matters contemplated
hereby, certified by the Secretary of the Company to be true, complete
and correct.
(iv) Legal Opinion. An opinion or opinions of Hunton & Williams
or Krooth & Altman, counsel to the Company, dated as of the Closing
Date, in substantially the form attached hereto as Exhibit B.
(v) Good Standing Certificate. A good standing certificate of the
Company issued by the Secretary of State of the State of Delaware
dated within ten (10) days before the Closing.
(d) Approval by Disinterested Directors. The transactions contemplated
by this Agreement and the Stand-By Purchase Agreement shall have been
approved by a majority of the members of the Company's Board of Directors
who are neither employees of the Company nor affiliated with the Investors.
(e) Listing. The Conversion Shares shall have been approved for
listing on the Nasdaq Stock Market or any other stock exchange or automated
quotation system on which the Common Stock is then listed or included.
(f) Merrill Lynch Transaction. The transactions contemplated by the
Mortgage Loan Purchase Agreement, dated December 18, 1998, by and between
Merrill Lynch Mortgage Capital Inc., a Delaware corporation, and WMF
Capital Corp., a Delaware corporation, shall have been consummated.
(g) Settlement Agreement. The transactions contemplated by the
Settlement Agreement and the Termination of Loan Commitment and Mutual
Release Agreement in the forms attached hereto as Exhibit C shall have been
consummated.
-13-
<PAGE>
(h) Form S-3. The Company shall have filed with the SEC a registration
statement relating to the Rights Offering.
(i) Consents. All government and third-party consents necessary for
the execution, delivery and performance by the Company, each Investor and
COMIT of this Agreement and the related agreements shall have been
received.
(j) Registration Rights Agreement Amendment. The amendment to the
Registration Rights Agreement contemplated by Section 5.4(b) hereof shall
have been executed by the Company, the Investors and Harvard.
(k) Certificate. The Investors shall have received a certificate of
the President or an Executive Vice President of the Company to the effect
that the conditions set forth in subparagraphs (a) and (d) through (j)
hereof have been satisfied and that lenders under the Company's lines of
credit have agreed to forebear until April 1, 1999 from terminating any
such lines of credit, accelerating the Company's obligations to any such
lenders and otherwise exercising any remedies available to such lenders as
the result of any default on the part of the Company.
(l) HSR Act. Any waiting period applicable to the transactions
contemplated by this Agreement under the HSR Act, shall have terminated or
expired.
6.2. Conditions to Company's Obligations at Closing.
-----------------------------------------------
The obligations of the Company to the Investor under Section 2 of this
Agreement are subject to the fulfillment or waiver on or before the Closing of
the following conditions, the waiver of which may be given by written, oral or
telephone communication to the Investors, their counsel or to counsel to the
Company:
(a) Representations and Warranties. The representations and warranties
of each Investor set forth in Section 4 shall be true and correct in all
respects on and as of the Closing Date, and the Company shall have received
a certificate of an appropriate officer or partner, as applicable, of each
Investor to such effect.
(b) Payment of Purchase Price. The Investors shall have delivered to
the Company the Demeter Purchase Price, the Phemus Purchase Price and the
Capricorn Purchase Price in accordance with the provisions of Section 2.
(c) Securities Exemptions. The offer and sale of the Purchased Shares
pursuant to this Agreement shall be exempt from the registration
requirements of the 1933 Act and the registration and/or qualification
requirements of all other applicable state securities laws.
(d) Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Company and to the
-14-
<PAGE>
Company's legal counsel, and the Company shall have received all such
counterpart originals and certified or other copies of such documents as it
may reasonably request.
(e) Listing. The issuance of the Purchased Shares shall not violate or
conflict with the Company's listing agreement with the Nasdaq National
Market with regard to the Common Stock or the listing standards or other
applicable rules of the Nasdaq National Market.
(f) Approval by Disinterested Directors. The transactions contemplated
by this Agreement and the Stand-By Purchase Agreement shall have been
approved by a majority of the members of the Company's Board of Directors
who are neither employees of the Company nor affiliated with the Investors.
(g) Delivery and Cancellation of Warrants. The Company shall have
received the certificates representing the Warrants for cancellation.
(h) Consents. All government and third-party consents necessary for
the execution, delivery and performance by the Company and COMIT of this
Agreement and the related agreements shall have been received.
(i) HSR Act. Any waiting period applicable to the transactions
contemplated by this Agreement under the HSR Act shall have terminated or
expired.
7. MISCELLANEOUS.
--------------
7.1. Survival of Warranties.
-----------------------
The representations, warranties and covenants of the Company and the
Investors contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing and shall in no way be
affected by any investigation of the subject matter thereof made by or on behalf
of each Investor, its counsel or the Company or its counsel, as the case may be.
7.2. Successors and Assigns.
-----------------------
The terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective successors and assigns of the parties.
Except for assignments by the Investors to affiliates, this Agreement may not be
assigned by any Investor without the prior written consent of the Company or by
the Company without the prior written consent of the Investors.
7.3. Governing Law.
--------------
This Agreement shall be governed by and construed under the internal
laws of the Commonwealth of Virginia as applied to agreements among Virginia
residents entered into and
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<PAGE>
to be performed entirely within Virginia, without reference to principles of
conflict of laws or choice of laws.
7.4. Counterparts.
-------------
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
7.5. Headings.
---------
The headings and captions used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement. All references in this Agreement to sections, paragraphs, exhibits
and schedules shall, unless otherwise provided, refer to sections and paragraphs
hereof and exhibits and schedules attached hereto, all of which exhibits and
schedules are incorporated herein by this reference.
7.6. Notices.
--------
Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given upon
personal delivery to the party to be notified or one day after deposit with a
national overnight delivery service or three days after deposit with the United
States Post Office, by registered or certified mail, postage prepaid and
addressed as follows:
To the Company:
The WMF Group, Ltd.
1593 Spring Hill Road, Suite 400
Vienna, Virginia 22182
Attention: Shekar Narasimhan
with copies to:
Krooth and Altman
1850 M Street, Suite 400
Washington, DC 20036
Attention: Patrick J. Clancy, Esquire
and
Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219-4074
Attention: Randall S. Parks, Esquire
-16-
<PAGE>
To Demeter:
c/o Charlesbank Capital Partners, LLC
600 Atlantic Avenue, 26th Floor
Boston, Massachusetts 02210
Attention: Tim R. Palmer
Mark A. Rosen
with copies to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Larry Rowe, Esquire
To Phemus:
c/o Charlesbank Capital Partners, LLC
600 Atlantic Avenue, 26th Floor
Boston, Massachusetts 02210
Attention: Tim R. Palmer
Mark A. Rosen
with copies to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Larry Rowe, Esquire
To Capricorn:
Capricorn Investors II, L.P.
30 East Elm Street
Greenwich, Connecticut 06830
Attention: Herbert S. Winokur, Jr.
James M. Better
with copies to:
O'Melveny & Myers LLP
153 East 53rd Street
New York, New York 10022-4611
Attention: Mark E. Thierfelder, Esquire
-17-
<PAGE>
To Harvard:
c/o Charlesbank Capital Partners, LLC
600 Atlantic Avenue, 26th Floor
Boston, Massachusetts 02210
Attention: Tim R. Palmer
Mark A. Rosen
with copies to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Larry Rowe, Esquire
or at such other address as an Investor or the Company may designate by giving
ten days advance written notice to the other parties.
7.7. No Finder's Fees.
-----------------
Each party represents that it neither is nor will be obligated for any
finder's or broker's fee or commission in connection with this transaction. Each
Investor agrees to indemnify and to hold harmless the Company from any liability
for any commission or compensation in the nature of a finders' or broker's fee
(and any asserted liability) for which such Investor or any of its officers,
partners, employees, or representatives is responsible. The Company agrees to
indemnify and hold harmless the Investors from any liability for any commission
or compensation in the nature of a finder's or broker's fee (and any asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.
7.8. Expenses.
---------
The Company shall pay all reasonable fees and expenses of the
Investors in connection with the preparation, execution and delivery of this
Agreement and the issuance of the Purchased Shares and the Conversion Shares and
any filings necessary under the HSR Act.
7.9. Amendments and Waivers.
-----------------------
Any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the Investors. Any amendment or waiver effected in
accordance with this Section 7.9 shall be binding upon the Investors and the
Company.
-18-
<PAGE>
7.10. Severability.
-------------
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision(s) shall be excluded from
this Agreement, and the balance of the Agreement shall be interpreted as if such
provision(s) were so excluded and shall be enforceable in accordance with its
terms.
7.11. Entire Agreement.
-----------------
This Agreement, together with all exhibits and schedules hereto,
constitutes the entire agreement and understanding of the parties with respect
to the subject matter hereof and supersedes any and all prior negotiations,
correspondence, agreements, understandings, duties or obligations between the
parties with respect to the subject matter hereof. The Schedules hereto shall be
deemed a part of this Agreement for all purposes.
7.12. Further Assurances.
-------------------
From and after the date of this Agreement, upon the request of the
Investors or the Company, the Company and the Investors shall execute and
deliver such instruments, documents or other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement.
[SIGNATURE PAGE FOLLOWS]
-19-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
THE COMPANY: THE WMF GROUP, LTD.,
- ----------- a Delaware corporation
By: /s/ Shekar Narasimhan
--------------------------------------
Name: Shekar Narasimhan
Title: President
THE INVESTORS: DEMETER HOLDINGS CORPORATION, a
- ------------- Massachusetts corporation
By: /s/ Michael R. Eisenson
--------------------------------------
Name: Michael R. Eisenson
Title: Authorized Signatory
By: /s/ Tim R. Palmer
--------------------------------------
Name: Tim R. Palmer
Title: Authorized Signatory
PHEMUS CORPORATION, a Massachusetts
corporation
By: /s/ Michael R. Eisenson
--------------------------------------
Name: Michael R. Eisenson
Title: Authorized Signatory
By: /s/ Tim R. Palmer
--------------------------------------
Name: Tim R. Palmer
Title: Authorized Signatory
HARVARD PRIVATE CAPITAL HOLDINGS,
INC., a Massachusetts corporation
By: /s/ Michael R. Eisenson
--------------------------------------
Name: Michael R. Eisenson
Title: Authorized Signatory
By: /s/ Tim R. Palmer
--------------------------------------
Name: Tim R. Palmer
Title: Authorized Signatory
<PAGE>
CAPRICORN INVESTORS II, L.P.,
a Delaware limited partnership
By: Capricorn Holdings, LLC, a Delaware
limited liability company, its
General Partner
By: /s/ Herbert S. Winokur, Jr.
--------------------------------------
Name: Herbert S. Winokur, Jr.
Title: Manager
<PAGE>
COMIT joins in this
Agreement only with
respect to the
provisions of the last
paragraph of Section
5.6 hereof.
COMMERCIAL MORTGAGE INVESTMENT
TRUST, INC., a Virginia corporation
By: /s/ Shekar Narasimhan
--------------------------------------
Name: Shekar Narasimhan
Title: Chairman
<PAGE>
STOCK PURCHASE AGREEMENT
LIST OF SCHEDULES AND EXHIBITS
------------------------------
SCHEDULES
- ---------
Schedule 3.2 (c) Options, Warrants, Reserved Shares
Schedule 3.3 Subsidiaries
Schedule 3.7 Legal and Governmental Proceedings
Schedule 3.8 Defaults
Schedule 3.10 Liabilities and Obligations
Schedule 3.11 Changes in Business of the Company
EXHIBITS
- --------
Exhibit A Standby Purchase Agreement
Exhibit B Opinions of Hunton & Williams and Krooth & Altman
Exhibit C Settlement Agreement and Termination of Loan
Commitment and Mutual Release Agreement
<PAGE>
EXHIBIT C
---------
STANDBY PURCHASE AGREEMENT
--------------------------
THIS STANDBY PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of October 16, 1998, by and among THE WMF GROUP, LTD., a Delaware
corporation (the "Company"), DEMETER HOLDINGS CORPORATION, a Massachusetts
corporation ("Demeter"), PHEMUS CORPORATION, a Massachusetts corporation
("Phemus"), and CAPRICORN INVESTORS II, L.P., a Delaware limited partnership
("Capricorn"). Demeter, Phemus and Capricorn are referred to herein individually
as an "Investor" and collectively as the "Investors." Capitalized terms not
otherwise defined herein shall have the meanings assigned to them in the Stock
Purchase Agreement referred to below.
RECITALS
--------
A. The Company and the Investors entered into the Stock Purchase
Agreement, dated as of October 16, 1998 (the "Stock Purchase
Agreement"), providing for the purchase by the Investors of 3,635,972
shares of capital stock in a private placement by the Company (the
"Private Placement").
B. On October 21, 1998, the Company announced a rights offering to be
made to the Company's shareholders (the "Rights Offering").
C. As provided for in the Stock Purchase Agreement, the Company and the
Investors now desire to enter into this Agreement to provide for a
stand-by commitment by the Investors to purchase up to 664,028 shares
of Common Stock (the "Stand-By Shares") in connection with the Rights
Offering.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE AND SELL STOCK.
-------------------------------------
Subject to the terms and conditions set forth in this Agreement, the
Company agrees to issue and sell to the Investors, and the Investors agree to
purchase from the Company, up to 664,028 shares of Common Stock not subscribed
for by other shareholders of the Company in the Rights Offering, including
pursuant to any oversubscription privilege (the "Available Shares"), at a
purchase price of $5.00 per share (the "Purchase Price"). Of the Available
Shares, each Investor will purchase up to the maximum amount of its individual
commitment to purchase Stand-By Shares set forth on Exhibit A hereto. The
obligations of the Investors to purchase
<PAGE>
Stand-By Shares shall be several and not joint. If the number of Available
Shares is less than the maximum number of Stand-By Shares, then each Investor
shall purchase a number of Stand-By Shares calculated by multiplying the number
of Available Shares by a fraction, the numerator of which shall be the maximum
amount of such Investor's individual commitment as set forth on Exhibit A and
the denominator of which is the maximum aggregate number of Stand-By Shares.
2. DETERMINATION OF AVAILABLE SHARES; CLOSING.
-------------------------------------------
2.1. Determination of Available Shares.
----------------------------------
As soon as practicable following the expiration of the exercise period
of the rights issued in the Rights Offering (the "Rights"), the Company shall
notify the Investors in writing of the number of Available Shares, which shall
be equal to the total number of Rights issued by the Company, less (i) the
number of Rights issued to the Investors and (ii) the number of Rights for which
the Company has received proper notice of exercise and full payment of the
applicable exercise price, and the number of Available Shares to be purchased by
each Investor, calculated in accordance with Section 1 of this Agreement.
2.2. The Closing.
------------
The sale and purchase of the Stand-By Shares (the "Closing") will take
place at the offices of the Company at 10:00 a.m., Vienna, Virginia, time on the
fifth business day following the Company's delivery to the Investors of notice
of the number of Available Shares to be purchased by each of them, or at such
time and place as the Company and the Investors mutually agree upon (the
"Closing Date"). At the Closing, the Company will deliver to each Investor a
certificate representing the Available Shares to be purchased by such Investor
against delivery to the Company by the Investor of the applicable Purchase Price
for such shares in immediately available funds.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
----------------------------------------------
The Company hereby represents and warrants to the Investors that at the
Closing, the following statements will be true and correct:
3.1. Organization, Good Standing and Qualification.
----------------------------------------------
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the state of Delaware and has all requisite
corporate power and authority to own its properties and assets and to carry on
its business as now conducted and as presently proposed to be conducted. The
Company is duly qualified and in good standing to do business as a foreign
corporation in each jurisdiction where failure to be so qualified would have
-2-
<PAGE>
a material adverse effect on the business, financial condition, assets or
prospects of the Company (a "Material Adverse Effect").
3.2. Capitalization.
---------------
As of the date of this Agreement, the capitalization of the Company
consists of the following:
(a) Preferred Stock. A total of 12,500,000 authorized shares of
Preferred Stock, $.01 par value per share (the "Preferred Stock"), of
which 3,635,972 shares have been designated Class A Non-voting
Convertible Preferred Stock, par value $.01 per share (the "Class A
Preferred Stock"), none of which are issued and outstanding. The
rights, privileges and preferences of the Class A Preferred Stock are
as set forth in the Company's Restated Certificate of Incorporation,
as amended (the "Certificate of Incorporation").
(b) Common Stock. A total of 25,000,000 authorized shares of
Common Stock, of which 5,299,383 shares of Common Stock are issued and
outstanding. All issued shares of Common Stock have been duly and
validly authorized and issued in material compliance with all federal
and state securities laws and are fully paid and nonassessable.
(c) Options, Warrants, Reserved Shares. Except for the Class A
Preferred Stock and as set forth on Schedule 3.2((c)), there are no
outstanding options, warrants, rights (including conversion or
preemptive rights) or agreements for the purchase or acquisition from
the Company of any shares of its capital stock or any securities
convertible into or ultimately exchangeable or exercisable for any
shares of the Company's capital stock. Except as set forth on Schedule
3.2((c)), no shares of the Company's outstanding capital stock, or
stock issuable upon exercise or exchange of any outstanding options,
warrants or rights, or other stock issuable by the Company, are
subject to any rights of first refusal or other rights to purchase
such stock (whether in favor of the Company or any other person),
pursuant to any agreement or commitment of the Company.
(d) No Agreements. To the Company's knowledge, no shareholders
agreement, voting trust agreement or similar agreement exists relating
to the Company's securities.
3.3. Company Subsidiaries.
---------------------
Schedule 3.3 is a true and complete list of all business entities that
the Company operates, owns or otherwise controls directly or indirectly through
one or more subsidiaries, partnerships, joint ventures or other business
associations, a majority of the outstanding voting securities (the
"Subsidiaries"). Each Subsidiary is duly incorporated and validly existing under
the laws of its jurisdiction of incorporation and has the requisite power and
authority to own its properties and assets and to carry on its business as now
being conducted and as presently proposed to be conducted. Each Subsidiary is
duly qualified and in good standing to do business as a foreign corporation in
each jurisdiction where failure to be so qualified would have a
-3-
<PAGE>
material adverse effect on the business, financial condition, assets or
prospects of such Subsidiary.
All of such outstanding shares of capital stock of each Subsidiary are
validly issued, fully paid and nonassessable. Except as set forth on Schedule
3.3, the Company owns all of the shares of the issued and outstanding capital
stock of the Subsidiaries free and clear of any liens, claims, encumbrances,
charges or rights of third parties of any kind whatsoever.
3.4. Due Authorization; Enforceability.
----------------------------------
All corporate action on the part of the Company, its officers,
directors and shareholders necessary for the authorization, execution, delivery
and performance of all obligations of the Company under this Agreement, and the
authorization, issuance, reservation for issuance and delivery of the Stand-By
Shares has been taken. This Agreement constitutes a valid and legally binding
obligation of the Company, enforceable in accordance with its terms, except as
may be limited by (i) applicable bankruptcy, insolvency, reorganization or other
laws of general application relating to or affecting the enforcement of
creditors' rights generally and (ii) the effect of rules of law governing the
availability of equitable remedies.
3.5. Valid Issuance of Stock; Compliance with Securities Laws.
---------------------------------------------------------
(a) The Stand-By Shares, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration
provided for herein, will be duly and validly issued, fully paid and
nonassessable.
(b) Based in part on the representations made by the Investors in
Section 4 hereof, the Stand-By Shares will be exempt from the
registration and prospectus delivery requirements of the U.S.
Securities Act of 1933, as amended (the "1933 Act") and the
registration and qualification requirements of the securities laws of
Massachusetts, Delaware, Virginia and Connecticut.
3.6. Consents.
---------
No further consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority or any third-party on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for such qualifications or filings under
the 1933 Act and the regulations thereunder and all other applicable state
securities laws as may be required in connection with the transactions
contemplated by this Agreement. All such qualifications and filings will, in the
case of qualifications, be effective on the Closing Date and will, in the case
of filings, be made within the time prescribed by law.
3.7. Legal and Governmental Proceedings.
-----------------------------------
-4-
<PAGE>
Except as set forth on Schedule 3.7, no legal or governmental action,
proceeding or investigation is pending, or to the best of the Company's
knowledge, threatened (or any basis therefor known to the Company) that
questions the validity of this Agreement or the Common Stock or that, if
determined adversely to the Company or any Subsidiary, is reasonably likely,
currently or prospectively, individually or in the aggregate, to have a Material
Adverse Effect.
3.8. Compliance with Charter Documents, Contracts and Law.
-----------------------------------------------------
Except as set forth on Schedule 3.8, the Company and each Subsidiary
is not in violation of its respective articles of incorporation or bylaws, both
as amended, nor in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or instrument
to which it is a party or by which it or any of its properties may be bound. To
the best of the Company's knowledge, except for any violations that individually
and in the aggregate would not have a Material Adverse Effect, the Company and
the Subsidiaries are in compliance with all applicable statutes, laws,
regulations and executive orders of the United States of America and all states,
foreign countries or other governmental bodies and agencies having jurisdiction
over the Company's and the Subsidiaries' business or properties. Neither the
Company nor any Subsidiary has received any notice of any such violation of such
statutes, laws, regulations or orders that has not been remedied prior to the
date hereof. The execution, delivery and performance by the Company of this
Agreement and the consummation of the transactions contemplated hereby will not
result in any such violation or default, or be in conflict with or constitute,
with or without the passage of time or the giving of notice or both, either a
default under the Company's Certificate of Incorporation or Bylaws, or, to the
best of the Company's knowledge, any such violation of any statutes, laws,
regulations or orders.
3.9. No Conflicts.
-------------
The execution, delivery and performance by the Company of this
Agreement and the consummation of the transactions contemplated hereby will not
violate or conflict with or result in a breach of any provision of, or
constitute a default (or any event that, with notice or lapse of time or both,
would constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any lien upon any of the properties of the Company or
any Subsidiary under, or result in being declared void, voidable or without
further binding effect, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust or any license, franchise, permit,
lease, contract, agreement or other instrument, commitment or obligation to
which the Company or any Subsidiary is a party, or by which the Company, the
Subsidiaries or any of their properties is bound or affected, except for any of
the foregoing matters that would not reasonably be expected, individually or in
the aggregate, to result in a Material Adverse Effect.
3.10. Securities Filings.
-------------------
-5-
<PAGE>
As of their respective dates, all reports, schedules, forms,
statements and other documents required to be filed by the Company under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), since December 1,
1997, in each case, as amended (the "Company Reports"): (a) complied as to form
in all material respects with the applicable requirements of the 1934 Act and
(b) did 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
made therein, in the light of the circumstances under which they were made, not
misleading. Each of the consolidated balance sheets of the Company included in
or incorporated by reference into the Company Reports (as amended and including
the related notes and schedules) (i) complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the U.S. Securities Exchange Commission ("SEC") with respect
thereto, (ii) were prepared in all material respects in accordance with
generally accepted accounting principles ("GAAP"), and (iii) fairly presented in
all material respects the consolidated financial position of the Company and its
wholly-owned subsidiaries as of its date in conformity with GAAP. Each of the
consolidated statements of income, retained earnings and cash flows of the
Company included in or incorporated by reference into the Company Reports (as
amended and including any related notes and schedules) (A) complied as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, (B) were
prepared in accordance with GAAP, and (C) fairly presented the results of
operations, retained earnings or cash flows, as the case may be, of the Company
and its subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments that would not be
material in amount or effect) in conformity with GAAP.
The Company's registration statement relating to the Rights Offering
as of its effective date (a) complied as to form in all material respects with
the applicable requirements of the 1933 Act and (b) did not contain any untrue
statement of a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
Except as and to the extent set forth in the Company Reports and as
set forth on Schedule 3.10, neither the Company nor any of its subsidiaries has
any material liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) that would be required to be reflected on, or
reserved against in, a balance sheet of the Company or in the notes thereto,
prepared in accordance with GAAP consistently applied, or any other material
liabilities (such liabilities being deemed material if the value of such
liabilities, individually or in the aggregate, is greater than $1 million),
except liabilities arising in the ordinary course of business since such date
which would not have a Material Adverse Effect.
3.11. No Changes.
-----------
Since September 30, 1998, except as set forth on Schedule 3.11, there
has been no material adverse change in the business, financial condition, assets
or prospects of the Company.
-6-
<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
------------------------------------------------
Each Investor hereby represents and warrants to the Company that at
Closing, the following statements will be true and correct:
4.1. Organization, Good Standing and Qualification.
----------------------------------------------
Such Investor is a partnership or corporation, as applicable, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its formation and has all requisite power and authority to own
its properties and assets and to enter into the transactions contemplated by
this Agreement.
4.2. Due Authorization.
------------------
All corporate and partnership action on the part of such Investor as
applicable, necessary for the authorization, execution, delivery and performance
of all obligations of such Investor under this Agreement has been taken. This
Agreement constitutes such Investor's valid and legally binding obligation,
enforceable in accordance with its terms except as may be limited by (i)
applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) the effect of rules of law governing the availability of
equitable remedies.
4.3. Purchase for Own Account.
-------------------------
The Stand-By Shares are being acquired for investment for such
Investor's own account, not as a nominee or agent, and not with a view to the
public resale or distribution thereof within the meaning of the 1933 Act, and
such Investor has no present intention of selling, granting any participation
in, or otherwise distributing the same. Such Investor also represents that it
has not been formed for the specific purpose of acquiring the Stand-By Shares.
4.4. Investment Experience.
----------------------
Such Investor understands that the purchase of the Stand-By Shares
involves substantial risk. Such Investor: (i) has experience as an investor in
securities and acknowledges that such Investor is able to fend for itself, can
bear the economic risk of its investment in the Stand-By Shares and has such
knowledge and experience in financial or business matters that such Investor is
capable of evaluating the merits and risks of this investment in the Stand-By
Shares and protecting its own interests in connection with this investment
and/or (ii) has a preexisting personal or business relationship with the Company
and certain of its officers, directors or controlling persons of a nature and
duration that enables such Investor to be aware of the character, business
acumen and financial circumstances of such persons.
4.5. Accredited Investor Status.
---------------------------
-7-
<PAGE>
Such Investor is an "accredited investor" within the meaning of
Regulation D promulgated under the 1933 Act, and such Investor has received a
copy of the Company's Certificate of Incorporation, Bylaws, this Agreement and
such other documents and agreements that it has requested and has read and
understands the respective contents thereof. Such Investor has had the
opportunity to ask questions of the Company and has received answers to such
questions from the Company. Such Investor has carefully reviewed and evaluated
these documents and understands the risks and other considerations relating to
the investment.
4.6. Restricted Securities.
----------------------
Such Investor understands that the Stand-By Shares may be
characterized as "restricted securities" under the 1933 Act inasmuch as the
Stand-By Shares are being acquired from the Company in a transaction not
involving a public offering and that under the 1933 Act and applicable rules and
regulations thereunder such securities may be resold without registration under
the 1933 Act only in certain limited circumstances. In this connection, such
Investor represents that it is familiar with Rule 144 of the SEC, as presently
in effect, and understands the resale limitations imposed thereby and by the
1933 Act.
5. COVENANTS OF THE PARTIES.
-------------------------
5.1. Restrictions on Transfer; Registration Rights.
----------------------------------------------
(a) Each Investor agrees not to make any disposition of all or any
portion of the Stand-By Shares unless and until:
(i) there is then in effect a registration statement under the
1933 Act and all applicable state securities laws covering such
proposed disposition and such disposition is made in accordance with
such registration statement; or
(ii) (A) the Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a
statement of the circumstances surrounding the proposed disposition,
and (B) the Investor shall have furnished the Company, at the expense
of such Investor or its transferee, with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not
require registration of such securities under the 1933 Act or under
any applicable state securities laws.
(b) The Stand-By Shares shall be Registrable Shares for purposes of
the Registration Rights Agreement, dated June 12, 1998, between the
Company, Harvard and Capricorn (the "Registration Rights Agreement"), as
amended. By signing and entering into this Agreement, the Company, the
Investors and Harvard each agree that the Registration Rights Agreement
shall be binding upon and inure to the benefit of Demeter and Phemus. The
Company and Demeter and Phemus will execute an amendment to the
-8-
<PAGE>
Registration Rights Agreement to confirm the rights and responsibilities of
Demeter and Phemus under the Registration Rights Agreement.
Notwithstanding the provisions of paragraphs (i) and (ii) above, no
such registration statement or opinion of counsel shall be required: (A) for any
transfer of any of the Stand-By Shares in compliance with SEC Rule 144; or (B)
for any transfer of any of the Stand-By Shares by the Investor to an affiliate
of the Investor; provided that in the foregoing case the transferee agrees in
writing to be subject to the terms of this Section 5.1 to the same extent as if
the transferee were the Investor hereunder.
5.2. Legends.
--------
(a) Each Investor acknowledges that the certificates evidencing the
Stand-By Shares will bear the legends set forth below, in addition to any
legend required by any state securities laws:
(i) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
(ii) THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO
RESTRICTIONS ON TRANSFER PURSUANT TO A STANDBY PURCHASE AGREEMENT
BETWEEN THE INITIAL HOLDER HEREOF AND THE WMF GROUP, LTD.
(b) The legend set forth in subsection (a)(i) above shall be removed
by the Company from any certificate evidencing any of the Stand-By Shares
upon effectiveness of a registration statement under the 1933 Act with
respect to the legended security or upon delivery to the Company of an
opinion of counsel, reasonably satisfactory to the Company, that such
security can be freely transferred in a public sale without such a
registration statement being in effect and that such transfer will not
jeopardize the exemption or exemptions from registration pursuant to which
the Company issued the Stand-By Shares.
-9-
<PAGE>
6. CONDITIONS TO CLOSING.
----------------------
6.1. Conditions to Investors' Obligations at Closing.
------------------------------------------------
The obligations of the Investors under this Agreement are subject to
the fulfillment or waiver, on or before the Closing, of each of the following
conditions, the waiver of which may be given by written, oral or telephone
communication to the Company, its counsel or to counsel to the Investors:
(a) Representations and Warranties. The representations and warranties
of the Company set forth in Section 3 shall be true and correct in all
respects on and as of the Closing Date (except for representations and
warranties that speak as of a specific date and time, which need be true
and correct as of such date and time), the Company shall have taken all
actions required by this Agreement to be taken by the Company prior to
Closing.
(b) Securities Exemptions. The offer and sale of the Stand-By Shares
by the Company to the Investors pursuant to this Agreement shall be exempt
from the registration requirements of the 1933 Act and the registration
and/or qualification requirements of all applicable state securities laws.
(c) Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Investors and to the Investors' counsel, and the Investors
shall have received counterpart originals and certified or other copies of
the following documents:
(i) Certified Charter Documents. A copy of the Certificate of
Incorporation and the Bylaws of the Company (as amended through the
date of the Closing), certified by the Secretary of the Company as
true and correct copies thereof as of the Closing.
(ii) Secretary's Incumbency Certificate. A certificate of the
Secretary or an Assistant Secretary or other officer of the Company
certifying the names of the officers of the Company authorized to sign
this Agreement, the certificates for the Stand-By Shares and the other
documents, instruments or certificates to be delivered pursuant to
this Agreement by the Company or any of its officers, together with
the true signatures of such officers.
(iii) Corporate Actions. A copy of the resolutions of the Board
of Directors evidencing its approval, including the approval of a
majority of the Company's disinterested directors, of this Agreement,
the issuance of Stand-By Shares and the other matters contemplated
hereby, certified by the Secretary of the Company to be true, complete
and correct.
-10-
<PAGE>
(iv) Legal Opinion. An opinion or opinions of Hunton & Williams
or Krooth & Altman, counsel to the Company, dated as of the Closing
Date, in substantially the form attached hereto as Exhibit B.
(v) Good Standing Certificate. A good standing certificate of the
Company issued by the Secretary of State of the State of Delaware
dated within ten (10) days before the Closing.
(d) Approval by Disinterested Directors. The transactions contemplated
by this Agreement shall have been approved by a majority of the members of
the Company's Board of Directors who are neither employees of the Company
nor affiliated with the Investors.
(e) Private Placement. The Private Placement shall have been completed
successfully.
(f) Listing. The Stand-By Shares shall have been approved for listing
on The Nasdaq Stock Market or any other stock exchange or automated
quotation system on which the Common Stock is then listed or included.
(g) Consents. All government and third-party consents necessary for
the execution, delivery and performance by the Company and each Investor of
this Agreement and the related agreements shall have been received.
(h) Registration Rights Agreement Amendment. The amendment to the
Registration Rights Agreement contemplated by Section 5.1(b) hereof shall
have been executed by the Company, the Investors and Harvard.
(i) Certificate. The Investors shall have received a certificate of
the President or an Executive Vice President of the Company to the effect
that the conditions set forth in subparagraphs (a) and (d) through (g)
hereof have been satisfied and setting forth the capitalization of the
Company as of the Closing Date.
(j) HSR Act. Any waiting period applicable to the transactions
contemplated by this Agreement under the Hart-Scott-Radino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), shall have terminated
or expired.
6.2. Conditions to Company's Obligations at Closing.
-----------------------------------------------
The obligations of the Company to the Investors of this Agreement are
subject to the fulfillment or waiver on or before the Closing of the following
conditions, the waiver of which may be given by written, oral or telephone
communication to the Investors, their counsel or to counsel to the Company:
-11-
<PAGE>
(a) Representations and Warranties. The representations and warranties
of each Investor set forth in Section 3.1 shall be true and correct in all
respects on and as of the Closing Date, and the Company shall have received
a certificate of an appropriate officer or partner, as applicable, of each
Investor to such effect.
(b) Payment of Purchase Price. Each Investor shall have delivered to
the Company such Investor's aggregate Purchase Price in accordance with the
provisions of Sections 1 and 2.
(c) Securities Exemptions. The offer and sale of the Stand-By Shares
by the Company to the Investors pursuant to this Agreement shall be exempt
from the registration requirements of the 1933 Act and the registration
and/or qualification requirements of all other applicable state securities
laws.
(d) Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Company and to the Company's legal counsel, and the
Company shall have received all such counterpart originals and certified or
other copies of such documents as it may reasonably request.
(e) Private Placement. The Private Placement shall have been completed
successfully.
(f) Listing. The issuance of the Stand-By Shares shall not violate or
conflict with the Company's listing agreement with the Nasdaq National
Market with regard to the Common Stock or the listing standards or other
applicable rules of the Nasdaq National Market.
(g) Approval by Disinterested Directors. The transactions contemplated
by this Agreement shall have been approved by a majority of the members of
the Company's Board of Directors who are neither employees of the Company
nor affiliated with the Investors.
(h) Consents. All government and third-party consents necessary for
the execution, delivery and performance by the Company of this Agreement
and the related agreements shall have been received.
(i) HSR Act. Any waiting period applicable to the transactions
contemplated by this Agreement under the HSR Act shall have terminated or
expired.
7. MISCELLANEOUS.
--------------
7.1. Survival of Warranties.
-----------------------
The representations, warranties and covenants of the Company and the
Investors contained in or made pursuant to this Agreement shall survive the
execution and delivery of this
-12-
<PAGE>
Agreement and the Closing and shall in no way be affected by any
investigation of the subject matter thereof made by or on behalf of each
Investor, its counsel or the Company or its counsel, as the case may be.
7.2. Successors and Assigns.
-----------------------
The terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective successors and assigns of the parties.
Except for assignments by the Investors to affiliates, this Agreement may not be
assigned by any Investor without the prior written consent of the Company or by
the Company without the prior written consent of the Investors.
7.3. Governing Law.
--------------
This Agreement shall be governed by and construed under the internal
laws of the Commonwealth of Virginia as applied to agreements among Virginia
residents entered into and to be performed entirely within Virginia, without
reference to principles of conflict of laws or choice of laws.
7.4. Counterparts.
-------------
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
7.5. Headings.
---------
The headings and captions used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement. All references in this Agreement to sections, paragraphs, exhibits
and schedules shall, unless otherwise provided, refer to sections and paragraphs
hereof and exhibits and schedules attached hereto, all of which exhibits and
schedules are incorporated herein by this reference.
7.6. Notices.
--------
Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given upon
personal delivery to the party to be notified or one day after deposit with a
national overnight delivery service or three days after deposit with the United
States Post Office, by registered or certified mail, postage prepaid and
addressed as follows:
To the Company:
The WMF Group, Ltd.
1593 Spring Hill Road, Suite 400
-13-
<PAGE>
Vienna, Virginia 22182
Attention: Shekar Narasimhan
with copies to:
Krooth and Altman
1850 M Street, Suite 400
Washington, DC 20036
Attention: Patrick J. Clancy, Esquire
and
Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219-4074
Attention: Randall S. Parks, Esquire
To Demeter:
c/o Charlesbank Capital Partners, LLC
600 Atlantic Avenue, 26th Floor
Boston, Massachusetts 02210
Attention: Tim R. Palmer
Mark A. Rosen
with copies to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Larry Rowe, Esquire
To Phemus:
c/o Charlesbank Capital Partners, LLC
600 Atlantic Avenue, 26th Floor
Boston, Massachusetts 02210
Attention: Tim R. Palmer
Mark A. Rosen
with copies to:
Ropes & Gray
One International Place
-14-
<PAGE>
Boston, Massachusetts 02110
Attention: Larry Rowe, Esquire
To Capricorn:
Capricorn Investors II, L.P.
30 East Elm Street
Greenwich, Connecticut 06830
Attention: Herbert S. Winokur, Jr.
James M. Better
with copies to:
O'Melveny & Myers LLP
153 East 53rd Street
New York, New York 10022-4611
Attention: Mark E. Thierfelder, Esquire
or at such other address as an Investor or the Company may designate by giving
ten days advance written notice to the other parties.
7.7. No Finder's Fees.
-----------------
Each party represents that it neither is nor will be obligated for any
finder's or broker's fee or commission in connection with this transaction. Each
Investor agrees to indemnify and to hold harmless the Company from any liability
for any commission or compensation in the nature of a finders' or broker's fee
(and any asserted liability) for which such Investor or any of its officers,
partners, employees, or representatives is responsible. The Company agrees to
indemnify and hold harmless the Investors from any liability for any commission
or compensation in the nature of a finder's or broker's fee (and any asserted
liability) for which the Company or any of its officers, employees or
representatives is responsible.
7.8. Expenses.
---------
The Company shall pay all reasonable fees and expenses of the
Investors in connection with the preparation, execution and delivery of this
Agreement and the issuance of the Stand-By Shares and any filings necessary
under the HSR Act.
7.9. Amendments and Waivers.
-----------------------
Any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the Investors.
-15-
<PAGE>
Any amendment or waiver effected in accordance with this Section 7.9 shall be
binding upon the Investors and the Company.
7.10. Severability.
-------------
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision(s) shall be excluded from
this Agreement, and the balance of the Agreement shall be interpreted as if such
provision(s) were so excluded and shall be enforceable in accordance with its
terms.
7.11. Entire Agreement.
-----------------
This Agreement, together with all exhibits and schedules hereto,
constitutes the entire agreement and understanding of the parties with respect
to the subject matter hereof and supersedes any and all prior negotiations,
correspondence, agreements, understandings, duties or obligations between the
parties with respect to the subject matter hereof. The schedules hereto shall be
deemed a part of this Agreement for all purposes.
7.12. Further Assurances.
-------------------
From and after the date of this Agreement, upon the request of the
Investors or the Company, the Company and the Investors shall execute and
deliver such instruments, documents or other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement.
[SIGNATURE PAGE FOLLOWS]
-16-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
THE COMPANY: THE WMF GROUP, LTD.,
- ----------- a Delaware corporation
By: /s/ Shekar Narasimhan
------------------------------------------
Name: Shekar Narasimhan
Title President
THE INVESTORS: DEMETER HOLDINGS CORPORATION, a
- ------------- Massachusetts corporation
By: /s/ Michael R. Eisenson
------------------------------------------
Name: Michael R. Eisenson
Title: Authorized Signatory
By: /s/ Tim R. Palmer
------------------------------------------
Name: Tim R. Palmer
Title: Authorized Signatory
PHEMUS CORPORATION, a Massachusetts
corporation
By: /s/ Michael R. Eisenson
------------------------------------------
Name: Michael R. Eisenson
Title: Authorized Signatory
By: /s/ Tim R. Palmer
------------------------------------------
Name: Tim R. Palmer
Title: Authorized Signatory
<PAGE>
CAPRICORN INVESTORS II, L.P.,
a Delaware limited partnership
By: Capricorn Holdings, LLC, a Delaware
limited liability company, its General Partner
By: /s/ Herbert S. Winokur, Jr.
------------------------------------------
Name: Herbert S. Winokur, Jr.
Title: Manager
<PAGE>
STANDBY PURCHASE AGREEMENT
LIST OF SCHEDULES AND EXHIBITS
------------------------------
SCHEDULES
- ---------
Schedule 3.2 (c) Options, Warrants, Reserved Shares
Schedule 3.3 Subsidiaries
Schedule 3.7 Legal and Governmental Proceedings
Schedule 3.8 Defaults
Schedule 3.10 Liabilities and Obligations
Schedule 3.11 Changes in Business of the Company
EXHIBITS
- --------
Exhibit A Stand-By Shares Purchase Commitments
Exhibit B Form of Legal Opinion
<PAGE>
Exhibit A
---------
STAND-BY SHARES
PURCHASE COMMITMENTS
--------------------
<TABLE>
<CAPTION>
Name Commitment
---- ----------
<S> <C>
Demeter Holdings Corporation 503,619 Shares
Phemus Corporation 27,603
Capricorn Investors II, L.P. 132,806
-------
Total 664,028
</TABLE>