<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
The WMF Group, Ltd.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
THE WMF GROUP, LTD.
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 16, 1998
------------------
To the Shareholders:
Notice is hereby given that the Annual Meeting of Stockholders of The WMF
Group, Ltd., a Delaware corporation ("WMF" or the "Company"), will be held in
the Conference Center on the first floor of the principal executive offices of
the Company located at 1593 Spring Hill Road, Vienna, Virginia 22182, on
Tuesday, June 16, 1998 at 10:00 a.m., local time, for the following purposes:
1. To elect seven directors.
2. To approve the Employee Stock Purchase Plan.
3. To ratify the selection of KPMG Peat Marwick LLP as the
Company's independent public accountants.
4. To transact any and all other business that may properly come
before the meeting.
All shareholders of record at the close of business on April 24, 1998 are
entitled to notice of and to vote at this meeting.
Shareholders are requested to sign and date the enclosed proxy and return
it in the enclosed envelope. The envelope requires no postage if mailed in the
United States.
By order of the Board of Directors
/s/BARBARA EKSTROM
Barbara Ekstrom, Secretary
Vienna, Virginia
April 30, 1998
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED, SELF-ADDRESSED
ENVELOPE SO THAT YOUR SHARES ARE REPRESENTED. NO POSTAGE IS NEEDED IF THE PROXY
IS MAILED WITHIN THE UNITED STATES.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
GENERAL..................................................... 1
ELECTION OF DIRECTORS....................................... 2
PROPOSAL TO APPROVE THE EMPLOYEE STOCK PURCHASE PLAN........ 3
PROPOSAL TO RATIFY THE SELECTION OF INDEPENDENT PUBLIC
ACCOUNTANTS............................................... 6
EXECUTIVE OFFICERS.......................................... 7
BENEFICIAL OWNERSHIP OF COMMON STOCK........................ 9
PRICE RANGE OF COMMON STOCK................................. 11
EXECUTIVE COMPENSATION...................................... 11
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 18
FINANCIAL INFORMATION....................................... 20
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT........... 20
ADJOURNMENT OF MEETING...................................... 20
SHAREHOLDER PROPOSALS....................................... 20
EXHIBIT A -- The 1998 Employee Stock Purchase Plan.......... 21
</TABLE>
<PAGE> 4
THE WMF GROUP, LTD.
PROXY STATEMENT FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 16, 1998
------------------------
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of The WMF Group, Ltd., a Delaware corporation
incorporated in 1992 ("WMF" or the "Company"), for the Annual Meeting of
Stockholders of WMF to be held at 10:00 a.m., local time, on Tuesday, June 16,
1998, in the Conference Center on the first floor of the principal executive
offices of the Company located at 1593 Spring Hill Road, Vienna, Virginia 22182,
and any adjournments thereof, for the purposes set forth in the notice of the
meeting. STOCKHOLDERS WITH QUESTIONS OR WHO WOULD LIKE TO RECEIVE A FREE COPY OF
THE COMPANY'S 1997 FORM 10-K SHOULD CONTACT MICHAEL D. KETCHAM, CHIEF FINANCIAL
OFFICER AND TREASURER, AT THE ABOVE ADDRESS OR BY TELEPHONE AT (703) 610-1400.
This Proxy Statement is first being distributed to Shareholders on or about
April 30, 1998, and the cost of this solicitation is being borne by the Company.
VOTING RIGHTS AND OUTSTANDING SHARES
As of April 24, 1998, the Company had outstanding 5,247,525 shares of its
common stock, $.01 par value ("Common Stock"). Each share of Common Stock
entitles the holder of record thereof at the close of business on April 24, 1998
to one vote on the matters to be voted upon at the meeting.
If the enclosed form of proxy is properly signed and returned, the shares
represented thereby will be voted. If the stockholder specifies in the proxy how
the shares are to be voted, they will be voted as specified. If the stockholder
does not specify how the shares are to be voted, they will be voted (i) to elect
the seven nominees listed under "Election of Directors," (ii) to approve the
Employee Stock Purchase Plan, and (iii) to ratify the selection of KPMG Peat
Marwick LLP as independent public accountants for the fiscal 1998 audit. Should
any person nominated to serve as a director be unable or unwilling to serve,
those named in the form of proxy for the annual meeting intend to vote for such
other person as the Board of Directors may recommend. Any stockholder has the
right to revoke his or her proxy at any time before it is voted by attending the
meeting and voting in person or filing with the Secretary of the Company a
written instrument revoking the proxy or delivering another newly executed proxy
bearing a later date.
As of the date hereof, management of WMF has no knowledge of any business
other than that described in the notice for the Annual Meeting which will be
presented for consideration at such meeting. If any other business should come
before such meeting, the persons appointed by the enclosed form of the proxy
shall have discretionary authority to vote all such proxies as they shall
decide.
QUORUM, REQUESTED VOTES AND METHOD OF TABULATION
Consistent with state law and under the Company's by-laws, 34% of shares
entitled to be cast on a particular matter, present in person or represented by
proxy, constitutes a quorum as to such matter. Accordingly, at least 1,784,156
shares must be present or represented by proxy at the Annual Meeting to
constitute a quorum. Votes cast by proxy or in person at the Annual Meeting will
be counted by persons appointed by the Company to act as election inspectors for
the meeting. The seven nominees for election as directors who receive the
greatest numbers of votes properly cast for the election of directors at the
Annual Meeting shall be elected directors. Approval of the Employee Stock
Purchase Plan (the "Plan") and ratification of the selection of the Company's
independent public accountants require the affirmative vote of a majority of the
shares present in person or by proxy at the Annual Meeting and entitled to vote.
The election inspectors will count the total number of votes cast "for"
approval of proposals, other than election of directors, for purposes of
determining whether sufficient affirmative votes have been cast. The election
inspectors will count shares represented by proxies that withhold authority to
vote for a nominee for
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election as a director or that reflect abstentions or "broker non-votes" (i.e.,
shares represented at the meeting held by brokers or nominees as to which (i)
instructions have not been received from the beneficial owners or persons
entitled to vote and (ii) the broker or nominee does not have the discretionary
voting power on a particular matter) as shares that are present and entitled to
vote on the matter for purposes of determining the presence of a quorum. Neither
abstentions nor broker non-votes have any effect on the outcome of voting.
ELECTION OF DIRECTORS
At the Annual Meeting, it is intended that the Company's Board of Directors
be elected and serve until the next Annual Meeting or until their successors
shall have been duly elected and qualified. The following persons have been
nominated as directors by the Board of Directors of the Company. All nominees
are currently directors of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
J. Roderick Heller III................... 60 Chairman of the Board
Shekar Narasimhan........................ 45 Director, President and Chief Executive Officer
Mohammed A. Al-Tuwaijri.................. 42 Director
Michael R. Eisenson...................... 42 Director
Tim R. Palmer............................ 40 Director
John D. Reilly........................... 55 Director
Herbert S. Winokur, Jr................... 54 Director
</TABLE>
J. Roderick Heller III has served as Chairman of the Board since 1996 and
as an employee since 1997. He served as a director, President and Chief
Executive Officer of NHP Incorporated ("NHP") beginning in 1986 and served as
Chairman of NHP's Board from 1988 to 1997. From 1982 until 1985, Mr. Heller
served as President and Chief Executive Officer of Bristol Compressors, Inc., a
Bristol, Virginia-based company involved in the manufacturing of air
conditioning compressors. From 1971 until 1982, he was a partner in the
Washington, D.C. law firm of Wilmer, Cutler & Pickering. Mr. Heller is a
director of Auto-Trol Technology Corporation and City First Bank of D.C. Mr.
Heller is also Chairman of public television station WETA and is trustee of
numerous housing-related and other non-profit institutions.
Shekar Narasimhan has served as a director, President and Chief Executive
Officer of the Company since 1992 and as director, President and Chief Executive
Officer of Washington Mortgage Financial Group, Ltd., a subsidiary of the
Company ("Washington Mortgage"), since its incorporation in 1990. Mr. Narasimhan
has 19 years of experience in property management and real estate mortgage
finance, primarily for multifamily properties. He has been a member of the Board
of Governors of the Mortgage Bankers Association of America (the "MBA") since
1995 and was the 1996 recipient of the MBA's Burton C. Wood Legislative Service
Award.
Mohammed A. Al-Tuwaijri has served as a director of the Company since 1992.
He was Chairman of the Company's Board from 1992 to 1996. He served as a
director of Washington Mortgage from 1990 to 1997 and was Chairman of Washington
Mortgage's Board from 1991 to 1996. He also served as a director of WMF/Huntoon,
Paige Associates Limited, another subsidiary of the Company, from 1991 to 1997.
Mr. Al-Tuwaijri has been President of Dar Al-Majd Consulting Engineers since
1989 and serves as director of Al-Thomad Trading & Contracting.
Michael R. Eisenson has served as a director of the Company since 1997. He
also served as a director of NHP from 1990 until May 1997. Mr. Eisenson is the
President and Chief Executive Officer of Harvard Private Capital Group, Inc.
("Harvard Capital"), which manages the private equities and real estate
portfolios of the Harvard University Endowment Fund, and which Mr. Eisenson
joined in 1986. Harvard Capital is the investment advisor for Demeter Holdings
Corporation, a controlling shareholder of the Company. Mr. Eisenson is a
director of Harken Energy Corporation, ImmunoGen, Inc., Playtex Products, Inc.,
and United Auto Group, Inc.
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<PAGE> 6
Tim R. Palmer has served as a director of the Company since 1996. He also
served as a director of NHP from 1990 until May 1997. Mr. Palmer is a Managing
Director of Harvard Capital, which he joined in 1990. From 1987 to 1990, Mr.
Palmer was Manager of Business Development at The Field Corporation, a private
investment firm.
John D. Reilly has served as a director of the Company since 1996. He is
President of Reilly Investment Corporation, a real estate investment company,
and from 1991 through 1994 he was Executive Director of Reilly Mortgage Group,
Inc., a mortgage banking and servicing company. Mr. Reilly serves as a director
of Allied Capital Corporation ("Allied") and is a member of Allied's Audit
Committee and Valuation Committee. He serves as a director of Data Vault
Corporation and Mexico Private Equity Fund. He is also a board member of Maret
School, Victory Housing, Raphael Inc., Manor Apartments and Avondale Park
Apartments.
Herbert S. Winokur, Jr. has served as a director of the Company since 1997.
He also served as a director of NHP from 1991 until May 1997. Since 1987, he has
served as the President of Winokur & Associates, Inc., an investment and
management services firm, and Winokur Holdings, Inc., which is the managing
general partner of Capricorn, a private investment partnership. Mr. Winokur is
also the manager of Capricorn Holdings LLC, which is the general partner of
Capricorn II, a separate investment partnership. Mr. Winokur serves as a
director of DynCorp, Enron Corp., Mrs. Fields Holdings, Inc. and NAC Re
Corporation.
During the fiscal year ended December 31, 1997, the WMF Board of Directors
held three meetings and acted by written consent on two additional occasions.
Each of the directors attended at least 75% of the meetings held during such
director's term, except for Mr. Al-Tuwaijri and Ann Torre Grant. Ms. Grant is no
longer a director of the Company.
There are two committees of the Board of Directors: (1) a Compensation
Committee and (2) an Audit Committee.
The Compensation Committee reviews salary policies and compensation of
officers and other members of management and approves compensation plans. The
Compensation Committee also administers the Company's Stock Option Plan. Messrs.
Eisenson and Winokur are the members of the Compensation Committee. During the
fiscal year ended December 31, 1997, the Compensation Committee met on one
occasion and did not act by written consent. See "Executive
Compensation -- Compensation Committee Report on Executive Compensation."
The Audit Committee reviews the Company's annual audit and meets with the
Company's independent accountants to review the Company's internal controls and
financial management practices. The Audit Committee consists of Messrs. Reilly,
Al-Tuwaijri and Palmer. During the fiscal year ended December 31, 1997, the
Audit Committee did not meet and did not act by written consent.
DIRECTORS' COMPENSATION
The Company compensates each director who is not also an executive officer
of the Company ("Non-Management Directors") for all out-of-pocket expenses
related to his service as director. Each Non-Management Director received
options to purchase 5,000 shares of Common Stock for his services as director in
the year ended December 31, 1997. Mr. Heller receives annual compensation in the
amount of $50,000 for his services as Chairman of the Board and as an employee
of the Company. Mr. Reilly receives an amount equal to $30,000 per year for his
services as a director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES TO THE
BOARD OF DIRECTORS.
PROPOSAL TO APPROVE THE EMPLOYEE STOCK PURCHASE PLAN
The WMF Board of Directors proposes that the stockholders of WMF approve
The WMF Group, Ltd. 1998 Employee Stock Purchase Plan (the "1998 ESPP"). The
1998 ESPP, attached hereto as Exhibit A, supersedes the previous Employee Stock
Purchase Plan of The WMF Group, Ltd. The 1998 ESPP provides employees of WMF
with an opportunity to become owners of WMF through a convenient arrangement for
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<PAGE> 7
purchasing shares of WMF Common Stock. The 1998 ESPP is intended to become
effective as of July 1, 1998. The following is a summary of the 1998 ESPP. This
summary description is a fair and complete summary of the 1998 ESPP, but it is
qualified in its entirety by reference to the full text of the 1998 ESPP.
GENERAL
Purpose. The 1998 ESPP offers eligible employees the opportunity to
purchase shares of WMF Common Stock through after-tax payroll withholding. The
1998 ESPP is intended to permit employees to acquire an equity interest in WMF,
which thereby will create a stronger incentive to expend maximum effort for the
growth and success of WMF and its subsidiaries. WMF may use the funds it
receives under the 1998 ESPP for any general corporate purpose.
Eligibility. All common law employees of WMF and certain subsidiaries
(including part-time and seasonal employees) are eligible to participate in the
1998 ESPP, other than employees whom WMF has employed for less than one month at
the beginning of the Payroll Deduction Period and holders of more than 5% of the
Common Stock of WMF and its subsidiaries, either directly or by attribution. As
of April 24, 1998, there were approximately 349 employees who would be eligible
to participate in the 1998 ESPP.
Shares Available Under the 1998 ESPP. Subject to stockholder approval, the
1998 ESPP authorizes the issuance of up to 400,000 shares of WMF Common Stock
from authorized but unissued shares or from stock owned by WMF, including stock
purchased on the market. The number of shares issuable under the 1998 ESPP will
be adjusted for stock dividends, stock splits, reclassifications and other
changes affecting the WMF Common Stock. Because the 1998 ESPP permits
participants to choose their own level of participation, subject to overall tax
and program limits, the specific amounts to be granted to particular persons
cannot be determined in advance.
Administration. The Compensation Committee administers the 1998 ESPP. The
Compensation Committee has the authority and discretion to specify the terms and
conditions of options granted to employees (within the limitations of the 1998
ESPP) and to otherwise interpret and construe the terms of the 1998 ESPP and any
agreements governing options granted under the 1998 ESPP. Under the 1998 ESPP,
the Compensation Committee (or the WMF Board of Directors) can lengthen or
shorten the Payroll Deduction Periods, increase the purchase price for shares,
or make other administrative adjustments. The 1998 ESPP also specifically
provides for indemnification of the Compensation Committee, other directors, and
agents for actions taken with respect to the 1998 ESPP.
OPTIONS GRANTED UNDER THE 1998 ESPP
General. All options granted under the 1998 ESPP will be evidenced by
participation agreements. The Committee has broad discretion to determine the
timing, amount, exercisability, and other terms and conditions of options
granted to employees. No options granted or funds accumulated under the 1998
ESPP are assignable or transferable, other than by will or in accordance with
the laws of descent and distribution. Payroll Deduction Periods for the 1998
ESPP are quarterly.
Election to Participate. Employees must elect before the beginning of a
given Payroll Deduction Period to participate.
Exercise Price. The initial exercise price for options under the 1998 ESPP
will be 95% of the fair market value of the Common Stock as of the first day of
the Payroll Deduction Period (July 1, October 1, January 1 and April 1). The
Committee may change the exercise price before a Payroll Deduction Period but
not below the lesser of 85% of the fair market value on the first day of the
Payroll Deduction Period and 85% of the fair market value on the last day of the
Payroll Deduction Period. No participant may purchase more than $25,000 worth of
WMF Common Stock in all Payroll Deduction Periods ending during the same
calendar year. The closing price of a share of WMF Common Stock, as reported on
April 24, 1998 was $25.
Exercise. Options granted under the 1998 ESPP to employees will be
automatically exercised as of the last day of the Payroll Deduction Period,
unless the participant has requested withdrawal of his or her payroll
contributions at least thirty days earlier. The number of shares to be purchased
will be determined by dividing
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the dollars accumulated through payroll withholding by the exercise price for
the purchase of the maximum number of shares (including fractional shares) that
the sum of the payroll deduction in the participant's account can purchase.
Termination of Service. If an employee's employment ends for any reason,
including death, the employee's account will be distributed, and the employee
will immediately cease to participate in the 1998 ESPP.
Stockholder Approval. In general, stockholder approval is only required
for changes to the extent necessary to preserve the 1998 ESPP's status as a plan
under Section 423 of the Internal Revenue Code of 1986, as amended (the "Code").
AMENDMENT OR TERMINATION OF THE 1998 ESPP
Subject to the foregoing, the Board of Directors may amend or terminate the
1998 ESPP at any time and from time to time. Absent extension of the 1998 ESPP
by the Board with stockholder approval, the 1998 ESPP will terminate no later
than June 30, 2008.
TAX CONSEQUENCES
The following summarizes certain federal income tax consequences of
participation in the 1998 ESPP. It does not cover employment taxes except as
specified, nor does it cover other federal, state, local, or foreign tax
consequences, if any.
Rights granted under the 1998 ESPP are intended to quality for the
favorable federal income tax treatment provided by an employee stock purchase
plan that qualifies under Section 423 of the Code.
A participant's withheld compensation will be post-tax. In other words, the
participant will be taxed on amounts withheld for the purchase of shares of WMF
Common Stock as if he or she had instead received full salary or wages. Other
than this, no income will be taxable to a participant until disposition of the
shares acquired, and the method of taxation will depend upon how long the shares
were held before disposition.
If the purchased shares of Common Stock are disposed of more than two years
after the beginning of the applicable Payroll Deduction Period and more than one
year after the exercise date or if the participant dies at any time while
holding the stock, then the lesser of (a) the excess of the fair market value of
the stock at the time of such disposition or death over the purchase price or
(b) the discount element (up to 15% of fair market value) of the stock as of the
beginning of the applicable offering period will be treated as ordinary income.
Any further gain or any loss will be taxed as a long-term capital gain or loss.
Net long-term capital gains for individuals are currently subject to a maximum
marginal federal income tax rate that is less than the maximum marginal rate for
ordinary income.
If the participant sells or disposes of the stock before the expiration of
either of the holding periods described above (a "disqualifying disposition"),
then the excess of the fair market value of the stock on the exercise date over
the exercise price will be treated as ordinary income at the time of such
disposition. WMF may, in the future, be required to withhold income taxes
relating to such ordinary income from other payments made to the participant.
The balance of any gain on a sale will be treated as capital gain. Even if the
stock is sold for less than its fair market value on the exercise date, the same
amount of ordinary income is attributed to the participant, and a capital loss
is recognized equal to the difference between the sales price and the fair
market value of the stock on the exercise date. Any capital gain or loss will be
long- or short-term depending on whether the stock has been held for more than
one year.
There are no federal income tax consequences to WMF by reason of the grant
or exercise of rights under the 1998 ESPP. WMF will, in general, be entitled to
a deduction to the extent amounts are taxed as ordinary income to a participant
by reason of a disqualifying disposition of the purchased shares of stock, but
will not be entitled to a deduction in respect of the ordinary income realized
by a participant upon a later disposition, or realized upon death. WMF's
deduction may be limited under Code Section 162(m) and may be subject to
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<PAGE> 9
disallowance for failure to report the optionee's income (which could arise if
an optionee does not notify WMF of the sale of stock in a disqualifying
disposition).
NEW PLAN BENEFITS
Benefits to be awarded under the 1998 ESPP to employees vary depending upon
the elections of the participants as to their level of participation. No
non-employee directors are eligible to participate.
STOCKHOLDER APPROVAL
Approval of the 1998 ESPP will require that the votes cast in favor of the
1998 ESPP exceed the votes cast against the 1998 ESPP. Abstentions and broker
non-votes will not be counted for purposes of the 1998 ESPP. Failure of the
stockholders to approve the 1998 ESPP will cause the 1998 ESPP to terminate.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL AND ADOPTION OF THE
1998 ESPP.
PROPOSAL TO RATIFY THE SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
Effective December 8, 1997, the Board of Directors approved the engagement
of KPMG Peat Marwick LLP as independent auditors to audit the financial
statements of the Company for the year ended 1997.
Arthur Andersen LLP had been the Company's auditors since July 1996 after
the Company was acquired by NHP. The Company decided to terminate its
relationship with Arthur Andersen LLP and re-engage KPMG Peat Marwick LLP, the
Company's auditors prior to the acquisition by NHP. Arthur Andersen LLP's report
on the Company's financial statements for the year ended December 31, 1996
contained no adverse opinion or disclaimer of opinion, nor was it qualified or
modified as to uncertainty, audit scope or accounting principles. During the
same period, and from January 1, 1997 through December 8, 1997, there were no
disagreements with Arthur Andersen LLP on any matter of accounting principles or
practices, financial statement disclosure, auditing scope or procedure, which
disagreement, if not resolved to the satisfaction of Arthur Andersen LLP, would
have caused Arthur Andersen LLP to make reference to the subject matter of the
disagreement in connection with its report.
During the Company's fiscal year ended December 31, 1996, the Company had
not consulted with KPMG Peat Marwick LLP on items that (1) concerned the
application of accounting principles to a specific transaction, either completed
or proposed, or the type of audit opinion that might be rendered on the
Company's financial statements or (2) concerned the subject matter of a
disagreement or reportable event with Arthur Andersen LLP.
Arthur Andersen LLP has furnished the Company with a letter addressed to
the Securities and Exchange Commission stating that Arthur Andersen LLP agrees
with the statements, pertaining to them, contained above.
The Company has selected KPMG Peat Marwick LLP to examine the financial
statements of the Company for fiscal 1998. The Company expects that
representatives of KPMG Peat Marwick LLP will be present at the Annual Meeting
and available to respond to appropriate questions, and such representatives will
be given the opportunity to make a statement if they desire to do so.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP.
6
<PAGE> 10
EXECUTIVE OFFICERS
The executive officers and certain other officers of the Company as of
April 24, 1998 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Shekar Narasimhan.......................... 45 Director, President and Chief Executive Officer
Mitchell D. Clarfield...................... 38 Executive Vice President -- Advisory Services
James L. Clouser........................... 56 Executive Vice President -- FHA Lending
Michael H. Greco........................... 47 Executive Vice President -- Capital Markets
Michael D. Ketcham......................... 39 Executive Vice President, Chief Financial
Officer and Treasurer
Douglas J. Moritz.......................... 48 Executive Vice President -- Multifamily
Conventional
Howard S. Perkins.......................... 49 Executive Vice President -- National
Originations
Glenn A. Sonnenberg........................ 41 Executive Vice President -- Advisory Services
Clarke B. Welburn.......................... 50 Executive Vice President -- Risk Management
Lawrence A. Brown.......................... 35 Senior Vice President -- Capital Markets
Joan C. May................................ 41 Senior Vice President and Chief Underwriter --
Multifamily
Elizabeth Whitbred-Snyder.................. 43 Senior Vice President -- Operations and
Assistant Secretary
Mathew J. Whelan, III...................... 30 Group Vice President and Controller
</TABLE>
Information regarding the executive officers of the Company other than Mr.
Narasimhan is set forth below. Information regarding Mr. Narasimhan is set forth
under "Election of Directors," above.
Mitchell D. Clarfield has served as Executive Vice President of the Company
since 1998. Mr. Clarfield also serves as co-Chief Executive Officer of WMF
Carbon Mesa Advisors, Inc., a subsidiary of the Company. Mr. Clarfield became an
Executive Vice President of the Company in connection with the Company's
acquisition of all of the assets of Carbon Mesa Advisors, Inc. and Strategic
Real Estate Partners. Mr. Clarfield and his wife owned in excess of 90% of the
equity interests of Carbon Mesa Advisors, Inc. at the time of the acquisition.
From 1994 to 1998, Mr. Clarfield was the founder and served as President and
Chief Executive Officer of Carbon Mesa Advisors, Inc. From 1990 to 1994, Mr.
Clarfield was a co-founder and served as Senior Vice President of Secured
Capital Corp., a Los Angeles-based investment advisory firm. Prior to that Mr.
Clarfield served as Vice President in the Commercial Mortgage Trading Group of
Drexel Burnham Lambert.
James L. Clouser has served as Executive Vice President of the Company
since 1997. He joined WMF/Huntoon, Paige Associates Limited in 1979 and has
served as President since 1989. He has also been Executive Vice President of
Washington Mortgage since 1992. Mr. Clouser has 22 years of real estate finance
experience. He is active in the MBA and sits on the Insured Project and Income
Producing Loan Subcommittee of the MBA. Mr. Clouser is a regular speaker at MBA
seminars and conventions and was contributing editor to the MBA Servicing
Handbook.
Michael H. Greco has served as Executive Vice President of the Company
since 1998. Mr. Greco also serves as Chief Executive Officer and Senior Managing
Director of WMF Capital Corp. and is responsible for
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<PAGE> 11
all business of that corporation. From 1994 to 1998, Mr. Greco served as the
Managing Director of Real Estate Capital Markets at First Union National Bank.
From 1991 to 1994, Mr. Greco served as Senior Vice President at Donaldson,
Lufkin & Jenrette, where he was responsible for commercial mortgage-backed
securities.
Michael D. Ketcham has served as Executive Vice President, Chief Financial
Officer and Treasurer of the Company since 1997. He served as Senior Vice
President and Treasurer of the Company from 1996 to 1997. Mr. Ketcham has also
served as Executive Vice President of Operations, Chief Financial Officer and
Treasurer of Washington Mortgage since 1996. Prior to joining the Company, Mr.
Ketcham served as Vice President of Corporate Financial Planning at Marriott
Corporation and one of its successor companies, Marriott International, from
1992 to 1994, and Vice President of Treasury Development at Marriott
International from 1994 to 1996. Mr. Ketcham joined Marriott Corporation in
1986. He has 16 years of corporate finance experience.
Douglas J. Moritz has served as Executive Vice President of the Company
since 1997. He currently serves as Executive Vice President of
Multifamily/Conventional of Washington Mortgage. Mr. Moritz joined Washington
Mortgage in 1988, serving as Executive Vice President of Lending from 1990 to
1996. Mr. Moritz has 26 years of experience in the multifamily industry, with 15
years of experience in multifamily finance. He has served on the Board of
Governors of the Mortgage Bankers Association of Metropolitan Washington, Inc.
(the "Association") since 1993, was the Chairman of the Association's Income
Property Committee in 1995 and 1996 and currently serves as the Association's
President. Mr. Moritz has been a member of the Fannie Mae DUS Lenders' Advisory
Council since 1996.
Howard S. Perkins has served as Executive Vice President of the Company
since 1997. He also serves as Executive Vice President of National Originations
for Washington Mortgage. From 1990 to 1996, he served as Executive Vice
President, Chief Financial Officer and Treasurer of Washington Mortgage. Mr.
Perkins joined Washington Mortgage in 1987. He has 20 years of lending
experience.
Glenn A. Sonnenberg has served as Executive Vice President of the Company
since 1998. Mr. Sonnenberg also serves as co-Chief Executive Officer of WMF
Carbon Mesa Advisors, Inc., a subsidiary of the Company. From 1997 to 1998, Mr.
Sonnenberg served as Managing Director of Carbon Capital Mortgage Partners and
Principal of Strategic Real Estate Partners. Mr. Sonnenberg became an Executive
Vice President of the Company in connection with the Company's acquisition of
all of the assets of Carbon Mesa Advisors, Inc. and Strategic Real Estate
Partners. Mr. Sonnenberg was the sole proprietor of Strategic Real Estate
Partners at the time of the acquisition. From 1995 to 1997, Mr. Sonnenberg
served as President and Chief Executive Officer of ING Real Estate Investors.
From 1994 to 1995, Mr. Sonnenberg served as Executive Vice President and
co-Chief Executive Officer of Kearny Street Real Estate Company. From 1980 to
1993, Mr. Sonnenberg was a partner in the law firm of Allen, Matkins, Leck,
Gamble & Mallroy.
Clarke B. Welburn has served as Executive Vice President of the Company
since 1997. He also serves as Executive Vice President of Risk Management and
Credit Policy for Washington Mortgage. From 1990 to 1996, he served as Executive
Vice President of Credit Policy for Washington Mortgage. Mr. Welburn joined
Washington Mortgage in 1988. In addition, he has served as Executive Vice
President since 1991 and as a director of WMF/Huntoon Paige Associates Limited
since 1993; since 1996 he has served as a director of Washington Mortgage; and
this year he became a director of WMF Capital Corp. Mr. Welburn has 26 years of
lending experience.
Lawrence A. Brown has served as Senior Vice President of the Company since
1998. He also serves as President and Senior Managing Director of WMF Capital
Corp. and oversees all commercial real estate finance and capital market
activities of that company. From 1994 to 1998, Mr. Brown served as the Managing
Director of Commercial Real Estate Finance at First Union National Bank. From
1992 to 1994, Mr. Brown served as Senior Vice President in the Real Estate
Finance Group at Donaldson, Lufkin & Jenrette. Prior to that, he handled real
estate banking and finance transactions for the law firm of Baker & McKenzie in
New York.
8
<PAGE> 12
Joan C. May has served as Senior Vice President of the Company since 1997.
Since 1992, Ms. May has served as Senior Vice President and Chief Underwriter of
Washington Mortgage. Ms. May joined Washington Mortgage in 1989, serving as Vice
President of Underwriting from 1990 to 1992. She has 14 years of real estate
lending experience.
Elizabeth Whitbred-Snyder has served as Senior Vice President of the
Company since 1997. From 1990 to 1992, Ms. Whitbred-Snyder served as Vice
President of Washington Mortgage. In addition, Ms. Whitbred-Snyder served as
Controller of Washington Mortgage from 1990 to 1997. She is a certified public
accountant and has 13 years of financial services experience.
Mathew J. Whelan, III has served as Group Vice President and Controller of
the Company since 1997. From 1989 to 1997, Mr. Whelan served as Senior Manager
of Financial Services Assurance and Consulting Practice in KPMG Peat Marwick's
National Mortgage and Structured Finance Group. Mr. Whelan is a certified public
accountant and a member of the MBA.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth, as of April 24, 1998, the number and
percentage of outstanding shares of the Company's Common Stock beneficially
owned by all persons known by the Company to own beneficially more than 5% of
the Company's Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
------------------------------------ --------- -------
<S> <C> <C>
Demeter Holdings Corporation(1)
600 Atlantic Ave.
Boston, MA 02210.......................................... 1,985,902 37.8%
Michael R. Eisenson(2)
600 Atlantic Ave.
Boston, MA 02210.......................................... 1,985,902 37.8%
Tim R. Palmer(2)
600 Atlantic Ave.
Boston, MA 02210.......................................... 1,985,902 37.8%
Herbert S. Winokur, Jr.(3)
30 East Elm Street
Greenwich, CT 06830....................................... 805,938 15.4%
Capricorn Investors II, L.P.(4)
30 East Elm Street
Greenwich, CT 06830....................................... 727,013 13.8%
Warburg, Pincus Asset Management, Inc.(5)
466 Lexington Ave.
New York, NY 10017........................................ 459,733 8.8%
Wallace R. Weitz & Company(6)
1125 South 103rd Street
Omaha, NE 68124........................................... 272,448 5.2%
</TABLE>
- ---------------
(1) Includes: (i) 10,000 shares subject to options that are exercisable
currently or within 60 days of the date of this Proxy Statement, and (ii)
102,671 shares of Common Stock owned by Phemus Corporation, an investment
affiliate of Demeter Holdings Corporation.
(2) Includes: (i) all shares held by Demeter Holdings Corporation, (ii) 10,000
shares subject to options that are exercisable currently or within 60 days
of the date of this Proxy Statement, and (iii) 102,671 shares of Common
Stock owned by Phemus Corporation, an investment affiliate of Demeter
Holdings Corporation. Messrs. Eisenson and Palmer disclaim beneficial
ownership of all the shares held by Demeter or Phemus Corporation.
(3) Includes 727,013 shares beneficially owned by Capricorn Investors II, L.P.
and 78,925 shares beneficially owned by Winokur Holdings, Inc.
9
<PAGE> 13
(4) Includes all shares owned by Capricorn Investors II, L.P. of which Capricorn
Holdings, LLC is the general partner.
(5) As reported in the Schedule 13G filed with the SEC on January 20, 1998.
(6) As reported in the Schedule 13G filed with the SEC on February 11, 1998.
The following table sets forth, as of April 24, 1998, the number and
percentage of outstanding shares of the Company's Common Stock beneficially
owned by (i) each director, (ii) the Chief Executive Officer and each of the
four other most highly compensated executive officers of the Company (the "Named
Executive Officers"), and (iii) all directors and executive officers as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
------------------------------------ --------- -------
<S> <C> <C>
Michael R. Eisenson(1)...................................... 1,985,902 37.8%
Tim R. Palmer(1)............................................ 1,985,902 37.8%
Herbert S. Winokur, Jr.(2).................................. 805,938 15.4%
J. Roderick Heller III(3)................................... 165,290 3.1%
Mohammed A. Al-Tuwaijri(4).................................. 69,400 1.3%
Shekar Narasimhan(5)........................................ 76,438 1.4%
Michael D. Ketcham(6)....................................... 21,733 *
Douglas J. Moritz(7)........................................ 17,900 *
Howard S. Perkins(7)........................................ 17,067 *
Clarke B. Welburn(7)........................................ 16,526 *
John D. Reilly(8)........................................... 5,033 *
All directors and executive officers as a group (19
persons)(9)............................................... 3,354,517 60.3%
</TABLE>
- ---------------
* Less than 1%
(1) Includes: (i) all shares held by Demeter Holdings Corporation, (ii) 10,000
shares subject to options that are exercisable currently or within 60 days
of the date of this Proxy Statement, and (iii) 102,671 shares of Common
Stock owned by Phemus Corporation, an investment affiliate of Demeter
Holdings Corporation. Messrs. Eisenson and Palmer disclaim beneficial
ownership of all the shares held by Demeter or Phemus Corporation.
(2) Includes 727,013 shares beneficially owned by Capricorn Investors II, L.P.
and 78,925 shares beneficially owned by Winokur Holdings, Inc.
(3) Includes 125,290 shares subject to options that are exercisable currently or
within 60 days of the date of this Proxy Statement.
(4) Includes 5,000 shares subject to options that are exercisable currently or
within 60 days of the date of this Proxy Statement.
(5) Includes 60,267 shares subject to options that are exercisable currently or
within 60 days of the date of this Proxy Statement. Excludes 50,400 shares
subject to options that are not exercisable within 60 days.
(6) Includes 16,733 shares subject to options that are exercisable currently or
within 60 days of the date of this Proxy Statement. Excludes 12,600 shares
subject to options that are not exercisable within 60 days.
(7) Includes 15,067 shares subject to options that are exercisable currently or
within 60 days of the date of this Proxy Statement. Excludes 12,600 shares
subject to options that are not exercisable within 60 days.
(8) Includes 5,000 shares subject to options that are exercisable currently or
within 60 days of the date of this Proxy Statement.
(9) Includes: (i) 1,883,231 shares beneficially owned by Demeter Holdings
Corporation and 120,671 shares beneficially owned by Phemus Corporation, an
investment affiliate of Demeter Holdings Corporation, (ii) 727,013 shares
beneficially owned by Capricorn Investors II, L.P., and 78,925 shares
beneficially owned by Winokur Holdings, Inc., and (iii) 317,357 shares
subject to options that are exercisable
10
<PAGE> 14
currently or within 60 days of the date of this Proxy Statement. Excludes
414,600 shares subject to options that are not exercisable within 60 days
of the date of this Proxy Statement.
During the fiscal year ended December 31, 1997, the Company underwent a
change of control, which was effectuated on December 8, 1997. Prior to that
date, all of the Company's Common Stock was held by NHP. On December 8, 1997,
NHP distributed all of the issued and outstanding shares of the Company's Common
Stock held by it to NHP shareholders, who each received one share of the
Company's Common Stock for every three shares of NHP common stock owned by such
NHP shareholder, with cash paid for any fractional shares (this transaction is
referred to as the "Share Distribution" in this Proxy Statement). The Company's
Common Stock was valued at $9.15 per share, but no separate consideration was
paid for the shares of Company Common Stock received by NHP shareholders
pursuant to the Share Distribution. As a result of the Share Distribution,
Demeter Holdings Corporation, the Capricorn entities, and the individuals
affiliated with those entities now have control over the Company, as set forth
in the table above.
As part of the Share Distribution, one of the Company's directors, Ann
Torre Grant, resigned from the Board of Directors on December 8, 1997, and two
new directors, Messrs. Winokur and Eisenson, joined the Company's Board of
Directors.
PRICE RANGE OF COMMON STOCK
Effective December 9, 1997, the Common Stock of the Company was listed for
trading on the Nasdaq Stock Market under the symbol WMFG. The following table
sets forth for the periods indicated the high intraday ask price and low
intraday bid price of the Common Stock on the Nasdaq Stock Market.
<TABLE>
<CAPTION>
1997 HIGH LOW
- ---- ------ -------
<S> <C> <C>
Fourth Quarter (from December 9)............................ $14.50 $12.125
</TABLE>
As of April 20, 1998, there were approximately 258 stockholders of record
of the Common Stock of the Company. This number does not include beneficial
owners holding shares through nominee names. Based on information available to
it, the Company believes it has more than 1500 beneficial owners of its Common
Stock.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the compensation
paid by the Company for services rendered during the years ended December 31,
1997 and 1996 to the Named Executive Officers.
11
<PAGE> 15
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM
-------------------------- COMPENSATION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) OPTIONS(#)(2) COMPENSATION(3)
- --------------------------- ---- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Shekar Narasimhan................... 1997 $250,000 $175,000 84,000 $10,383
President and Chief Executive
Officer 1996 240,000 110,000 26,667 6,533
Michael D. Ketcham.................. 1997 175,000 92,500 21,000 5,350
Executive Vice President, Chief
Financial Officer and Treasurer 1996 20,118 70,000 8,333 0
Douglas J. Moritz................... 1997 175,000 92,500 21,000 11,075
Executive Vice President 1996 165,000 70,000 6,667 5,675
Howard S. Perkins................... 1997 200,000 120,000 21,000 6,390
Executive Vice President 1996 195,000 70,000 6,667 2,730
Clarke B. Welburn................... 1997 160,000 92,500 21,000 7,765
Executive Vice President 1996 155,000 50,000 6,667 5,626
</TABLE>
- ---------------
(1) The amounts reported for 1996 were paid in 1997, and the amounts reported
for 1997 were paid in 1998.
(2) The options to acquire stock reported for 1996 were granted as options to
acquire NHP common stock and were converted into options to acquire shares
of the Company's Common Stock in connection with the Share Distribution.
(3) These amounts represent the Company's payment of life insurance premiums and
matching contributions to the Company's 401(k) Retirement Plan and includes
the difference between the market price per share and the $9.15 purchase
price per share of 1,000 shares of common stock granted to each employee
pursuant to The WMF Group, Ltd. Employee Stock Purchase Plan.
STOCK OPTIONS
The following table sets forth certain information regarding options
granted to the Named Executive Officers during the year ended December 31, 1997.
12
<PAGE> 16
OPTIONS GRANTED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
PERCENT OF APPRECIATION FOR
TOTAL OPTIONS OPTION TERM
OPTIONS GRANTED IN EXERCISE EXPIRATION ---------------------
NAME GRANTED (#) FISCAL YEAR(1) PRICES ($/SH) DATE 5%($) 10%($)
- ---- ----------- -------------- ------------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Shekar Narasimhan.......... 1,000(2) 0.16% $9.15 12/19/97 $ 3,374 $ 3,398
26,667(3) 4.38% $6.92 03/31/06 307,956 530,003
84,000(4) 13.80% $9.15 12/08/07 941,739 1,954,830
Michael D. Ketcham......... 1,000(2) 0.16% $9.15 12/19/97 3,374 3,398
8,333(3) 1.37% $6.73 11/18/06 105,509 189,529
21,000(4) 3.45% $9.15 12/08/07 235,435 488,707
Douglas J. Moritz.......... 1,000(2) 0.16% $9.15 12/19/97 3,374 3,398
6,667(3) 1.10% $6.92 03/31/06 76,992 132,506
21,000(4) 3.45% $9.15 12/08/07 235,435 488,707
Howard S. Perkins.......... 1,000(2) 0.16% $9.15 12/19/97 3,374 3,398
6,667(3) 1.10% $6.92 03/31/06 76,992 132,506
21,000(4) 3.45% $9.15 12/08/07 235,435 488,707
Clarke B. Welburn.......... 1,000(2) 0.16% $9.15 12/19/97 3,374 3,398
6,667(3) 1.10% $6.92 03/31/06 76,992 132,506
21,000(4) 3.45% $9.15 12/08/07 235,435 488,707
</TABLE>
- ---------------
(1) Percentages indicated are based on a total of 608,686 options (including
options received upon conversion of NHP options) granted to 287 employees
during the fiscal year ended December 31, 1997.
(2) These options were fully vested and immediately exercisable on the grant
date of December 8, 1997.
(3) The options to acquire common stock of NHP were converted into these options
to acquire the Company's Common Stock at the time of the Share
Distribution.
(4) These options vest in five equal installments beginning on December 8, 1997,
with the second installment on January 31, 1998, and subsequent
installments on January 31 of each of the following three years.
13
<PAGE> 17
OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information regarding unexercised
and exercised options held by the Named Executive Officers on December 31, 1997.
AGGREGATED OPTION EXERCISES IN 1997
AND YEAR-END 1997 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN THE MONEY OPTIONS AT
SHARES AT DECEMBER 31, 1997 DECEMBER 31, 1997(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Shekar Narasimhan..... 1,000 $3,850 43,467 67,200 $205,082 $225,120
Michael D. Ketcham.... 1,000 3,850 12,533 16,800 62,151 56,280
Douglas J. Moritz..... 1,000 3,850 10,867 16,800 51,272 56,280
Howard S. Perkins..... 1,000 3,850 10,867 16,800 51,272 56,280
Clarke B. Welburn..... 1,000 3,850 10,867 16,800 51,272 56,280
</TABLE>
- ---------------
(1) Calculated based on the Nasdaq National Market closing price of the
underlying Common Stock on December 31, 1997 of $12.50, minus the exercise
price.
EMPLOYMENT AND RELATED CONTRACTS
Except as described below, none of the Named Executive Officers has an
employment contract with the Company.
Pursuant to a letter agreement with the Company dated October 25, 1996, Mr.
Ketcham received an annual base salary of $175,000 and a cash incentive bonus of
$92,500 for the year ended December 31, 1997.
Each of the Named Executive Officers has entered into a Key Employee
Incentive Award Agreement with the Company, pursuant to which the Named
Executive Officer's unvested options will vest immediately and in their entirety
upon a "transfer of control" of the Company (as defined below). Additionally,
the Company provides certain severance arrangements for its Named Executive
Officers in the Key Employee Incentive Award Agreements. If a Named Executive
Officer is terminated without "cause" (as defined below), that officer will be
paid his then current salary for two years in the case of Mr. Narasimhan as
Chief Executive Officer ("CEO"), or for one year in the case of Messrs. Ketcham,
Moritz, Perkins and Welburn as Executive Vice Presidents ("EVPs"). If a Named
Executive Officer's employment is terminated within 180 days of a "transfer of
control" of the Company (as defined below), Mr. Narasimhan, as the CEO, would be
paid his then current salary for three years and Messrs. Ketcham, Mortiz,
Perkins and Welburn, as EVPs, would each be paid their then current salary for
two years. The Company has required each of the Named Executive Officers to
agree to refrain from competing in the business of mortgage origination and
servicing during his employment with the Company and, after such employment is
terminated, for the greater of one year or the period during which such officer
is receiving severance benefits. In addition, the Company has required the Named
Executive Officers to agree to refrain from disclosing confidential information
about the Company during their employment and indefinitely thereafter.
For purposes of the arrangements described in the above paragraph, "cause"
means (i) the engaging by the officer in any act of dishonesty in connection
with the performance of his or her employment duties and responsibilities, (ii)
the conviction of the officer of a felony, (iii) the failure of the officer to
perform his or her duties or responsibilities or (iv) the inability of the
officer to perform his duties or responsibilities for a period of more than 120
consecutive days due to physical or mental illness or incapacity. For purposes
of the arrangements described in the above paragraph, "transfer of control"
means (i) a transfer of a majority of the Company's voting stock outstanding on
the day of the transfer, (ii) a sale of substantially all of the Company's
14
<PAGE> 18
assets to any entity or person unaffiliated with the Company, (iii) the
consolidation of the Company with, or its merger into, any unaffiliated
corporation or (iv) the dissolution of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors has created a Compensation Committee which consists
of Messrs. Eisenson and Winokur. The Compensation Committee is charged with
determining the compensation of all executive officers upon consultation with
the Chairman of the Board. No member of the Compensation Committee has ever been
an officer or employee of the Company or any of its subsidiaries. Mr. Eisenson
and Mr. Winokur are officers of Demeter Holdings Corporation ("Demeter") and
Capricorn Investors II, L.P. ("Capricorn"), respectively, the controlling
shareholders of the Company. Demeter and Capricorn have engaged in a variety of
transactions with the Company, as described under "Certain Relationships and
Related Transactions."
15
<PAGE> 19
PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Company's Common Stock against
the cumulative total return of the Nasdaq National Market Index and the Standard
Industrial Classification Industry Index of Mortgage Bankers & Loan
Correspondents, for the period commencing December 9, 1997 and ending March 31,
1998.
COMPARE CUMULATIVE TOTAL RETURN AMONG THE WMF GROUP, LTD.,
NASDAQ MARKET INDEX AND SIC CODE INDEX
[GRAPH]
<TABLE>
<CAPTION>
12/09/97 12/31/97 03/31/98
-------- -------- --------
<S> <C> <C> <C>
The WMF Group, Ltd. ........................................ 100.00 89.29 194.64
SIC Code Index.............................................. 100.00 104.11 117.54
Nasdaq National Market Index................................ 100.00 98.35 115.26
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
composed entirely of non-management directors. The Chief Executive Officer of
the Company initiates recommendations with respect to base salary, bonus, and
stock option awards for all executive officers other than himself for the
Committee's review. The Committee determines the compensation paid or awarded to
the Company's executive officers.
16
<PAGE> 20
The Committee's goal is to attract, motivate, and retain an executive
management team that can take full advantage of the Company's opportunities for
growth and achieve long-term success in an increasingly competitive business
environment, thereby increasing stockholder value. The Committee believes that
linking a significant portion of an executive's current and potential net worth
to the Company's success, as reflected in the stock price, ensures that the
interests of management are closely aligned with that of shareholders.
Accordingly, the Company maintains a stock option plan and intends to implement
stock ownership guidelines for all executive and senior officers. The guidelines
will require such officers to purchase a minimum number of the Company's shares
and to achieve additional established ownership goals over a set period of
years, with progress toward meeting those goals reviewed annually. Achievement
of guideline levels of ownership will be considered when future long-term
incentive or bonus awards are made.
In deciding on initial base salary for an individual, the Committee
considers determinants of the individual's market value, including experience,
education, accomplishments and reputation, as well as the level of
responsibility to be assumed. The Committee's approach is to offer salaries it
believes to be fair and competitive with those of executives with similar
responsibilities at companies it considers to be comparable in terms of assets,
net revenues, and cash flows, based upon such information as the Committee may
acquire from annual reports and proxy materials of such other companies,
business and industry publications, and other sources as may be available from
time to time. In deciding whether to increase the compensation of an individual,
the Committee considers the overall contribution of the employee to the
performance of the Company, experience gained by the employee, and market
conditions.
In determining annual bonuses, the Committee considers each individual's
area of responsibility and the specific goals that were achieved in that area of
responsibility. For any given executive officer, such goals may include growth
in the Company's earnings before interest, taxes, depreciation and amortization,
growth in the Company's revenues generated on either an absolute or per unit
basis, and completion of major acquisitions or other significant corporate
transactions that promote achieving the Company's objectives.
In addition to base salary and bonuses, the Committee recommends the award
of stock options under the Company's Key Employee Incentive Plan. In that
regard, during the fiscal year ended December 31, 1997 and primarily in
connection with the Share Distribution, the Committee granted options (including
options received upon conversion of NHP options) to purchase 392,917 shares of
common stock to the executive officers. The determination to award options on
initial employment is based on the same factors as initial salary award. The
determination to award additional options is based primarily on such
individual's performance and as an incentive for future performance.
Applying these factors to each individual's case is a judgment process,
exercised by the Committee with the advice of management. No specific
relationship exists between the Company's performance and the compensation of an
individual executive officer. There is no intent to relate compensation to the
Company's stock price performance, either absolute or relative to peer groups,
except as that relationship is implicit in the stock-based compensation plans.
Chief Executive Officer's Compensation. For Mr. Narasimhan's services as
the Company's president and chief executive officer, his compensation has been
determined in accordance with the compensation policies outlined above. The
Committee awarded Mr. Narasimhan a bonus of $175,000 for the fiscal year ended
December 31, 1997. In addition, effective January 1, 1997, Mr. Narasimhan's base
salary was increased from $240,000 to $250,000 per year. The increase in salary
was based on the performance of the Company in 1996. The bonus was based on the
Committee's assessment of Mr. Narasimhan's role in the Company's performance in
1997. In particular, the Committee considered Mr. Narasimhan's leadership in
successfully completing the Company's spin-off from NHP, significantly
increasing the size of the Company's loan production and servicing portfolio,
and implementing the Company's objective of growth through acquisitions in the
commercial lending servicing markets.
17
<PAGE> 21
Compensation Deduction Limit. The Committee has considered the $1 million
limit on deductible executive compensation that is not performance-based. The
Committee does not believe that the $1 million limit will prevent the Company
from deducting any executive compensation expenses established in 1997.
Herbert S. Winokur, Jr.
Michael R. Eisenson
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended December 31, 1997, the Company engaged in the
following transactions and is a party to the following agreements with entities
in which its directors or executive officers have the interests described.
Prior to the Share Distribution on December 8, 1997 (the "Share
Distribution"), the Company was a wholly-owned subsidiary of NHP. Messrs. Heller
and Palmer were directors of both the Company and NHP, and Mr. Heller was
President and Chief Executive Officer of NHP and Chairman of the Board of
Directors of the Company. Following the Share Distribution, Messrs. Heller and
Palmer -- as well as Messrs. Eisenson and Winokur (who were directors of NHP
until May 6, 1997) -- have served as directors of the Company. As of December 8,
1997, the Company owed NHP approximately $8 million as a result of loans made by
NHP to the Company to fund the acquisition of Proctor and Askew. As of December
8, 1997, the Company also owed NHP approximately $900,000 in respect of taxes
paid by NHP on the Company's behalf. These amounts, net of any cumulative free
cash flow produced by NHP between February 1, 1997 and December 8, 1997, were
repaid in connection with the Share Distribution on December 8, 1997.
On April 21, 1997, Capricorn Investors II, L.P. ("Capricorn II") agreed to
acquire 546,448 shares of the Company's Common Stock at a price of $9.15 per
share, or $5,000,000 in aggregate, following the consummation of the Share
Distribution. Capricorn II closed the purchase of those shares on December 8,
1997. In connection with the purchase, the Company registered the sale of these
shares by Capricorn II under the Securities Act of 1933, as amended, subject to
certain limitations. Mr. Winokur is the manager of the general partner of
Capricorn II.
In connection with the Share Distribution, Demeter Holdings Corporation
("Demeter") and Capricorn Investors, L.P. ("Capricorn I") each agreed not to
purchase any shares of the Company's Common Stock at a price of less than $9.15
per share before April 1, 1998 and, except in certain situations, until December
8, 1998, not to sell, in one or more related transactions, more than 50% of the
shares held by it at the time of the Share Distribution (i.e., December 8, 1997)
without requiring the purchaser of the shares to offer to purchase the shares of
all holders of the Company's Common Stock or to propose a merger, each on terms
comparable to those on which Demeter or Capricorn I, as the case may be, agreed
to sell its shares of the Company's Common Stock. In addition, Capricorn II
agreed that it would not purchase any shares of Common Stock on the open market
before March 8, 1998 unless it had been notified by the Company that the Company
would not be buying any shares of Common Stock in open market transactions. In
January 1998, Capricorn II acquired an aggregate of 150,565 shares of Common
Stock in several open market transactions for an aggregate purchase price of
$1,991,307. Capricorn II also agreed that, if during the period from December 8,
1997 to December 8, 1998 it (together with its affiliates, which does not
include Capricorn I for this purpose) is the single largest stockholder of the
Company and holds more than 20% of the shares of Common Stock, it would not
sell, in one or more related transactions, more than 50% of the shares held by
it at the time of the sale without requiring the purchaser of the shares held by
it at the time of the sale to offer to purchase the shares of all holders of
Common Stock or propose a merger, each on terms comparable to those on which
Capricorn II sells such shares.
In addition, since the Share Distribution, the Company has had certain
other arrangements with NHP. Following the Share Distribution, the Company and
NHP (which is now a wholly-owned subsidiary of Apartment Investment and
Management Company ("AIMCO") and its unconsolidated subsidiaries) have operated
independently, and neither has any stock ownership, beneficial or otherwise, in
the other. For the
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<PAGE> 22
purposes of governing certain of the ongoing relationships between the Company
and NHP after the Share Distribution, and to provide mechanisms for an orderly
transition, the Company and NHP entered into an agreement (the "Contribution
Agreement") on December 4, 1997, a Separation Agreement (the "Separation
Agreement") and a Tax Sharing Agreement (the "Tax Sharing Agreement") on
December 8, 1997. The Contribution Agreement, Separation Agreement and Tax
Sharing Agreement were agreed to while the Company was a wholly-owned subsidiary
of NHP and therefore the terms of such agreements may not be the same as they
would have been if the agreements were the result of arms'-length negotiations
between independent parties.
Under the Contribution Agreement, NHP agreed to pay the Company the amount
that NHP's free cash flow from February 17, 1997 until December 8, 1997 exceeded
NHP's transaction costs incurred in connection with NHP's merger with and into a
wholly owned subsidiary of AIMCO. On December 8, 1997, NHP paid the Company
$6,500,000 to satisfy this obligation in full.
The Separation Agreement provides for cross indemnification designed to
place with the Company responsibility for liabilities of the business carried on
by the Company prior to the Share Distribution and to place on NHP
responsibility for liabilities of all other business carried on by NHP prior to
the Share Distribution. In addition, the Separation Agreement provides for
indemnification by the Company of NHP and its officers, directors and
controlling persons relating to the Information Statement/Prospectus filed as
part of the registration statement pursuant to which the Company's Common Stock
was registered with the Securities and Exchange Commission, except as to certain
matters, for which NHP is expected to indemnify the Company. The Separation
Agreement also provides for the amendment of all options to acquire NHP common
stock ("NHP Options") issued to NHP employees, officers and directors so that
each NHP Option was converted into an adjusted NHP Option and an option to
acquire the Company's Common Stock.
The Tax Sharing Agreement provides for the payment by the Company to NHP of
tax liabilities of the Company, computed on a stand-alone basis, for periods
when the Company was affiliated with NHP, and for certain procedural matters
relating to the preparation of tax returns and responses to Internal Revenue
Service proceedings relating to taxes incurred by NHP or the Company on or
before May 9, 1997.
On April 1, 1998, the Company entered into an Option Agreement with Carbon
Capital Management, L.L.C. ("CCM") to acquire substantially all of the assets of
CCM. The option is exercisable only between March 5, 1999 and March 20, 1999 and
the purchase price for the option and the assets (all of which is payable in
cash, or cash and stock of the Company, upon closing of the purchase of the
assets) is $1,750,000. Mr. Clarfield owns in excess of 45% of the equity
interests of CCM and Mr. Sonnenberg owns 45% of the equity interests of CCM. The
purchase price of the assets was determined in arms-length negotiations with
Messrs. Clarfield and Sonnenberg before they became executive officers of the
Company.
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FINANCIAL INFORMATION
The audited financial statements and related financial and business
information of the Company for its fiscal years ended December 31, 1997, 1996
and 1995 (except that the Annual Report does not have a 1995 Balance Sheet) are
contained in the Company's Annual Report, a copy of which is being delivered to
Shareholders with this Proxy Statement.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors and persons who beneficially own more than
10% of the Company's Common Stock to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and the National
Association of Securities Dealers, Inc. Based solely on its review of the copies
of such reports received by it, the Company believes that during the fiscal year
ended December 31, 1997, all filing requirements applicable to its officers,
directors and such 10% beneficial owners were complied with, except that the
Forms 3 required with respect to each of Messrs. Al-Tuwaijri, Moritz, Heller,
Whelan, Narasimhan, Ketcham, Reilly and Ms. Grant and NHP were filed late. In
each case, only one filing was late and resulted from the Company's registration
statement on Form 10 becoming effective under the Securities Exchange Act of
1934, as amended, prior to the Company's initial registration statement under
the Securities Act of 1933, as amended, becoming effective.
ADJOURNMENT OF MEETING
In the event that sufficient votes in favor of the election of the nominees
for director (the "Nominees") or any other matter presented hereunder are not
received by June 16, 1998, the persons named as proxies may propose one or more
adjournments of the meeting to permit further solicitation of proxies. Any such
adjournment will require the affirmative vote of a majority of the shares cast
on the question, in person or by proxy, at the session of the meeting to be
adjourned. The persons named as proxies will vote in favor of such adjournment
those proxies that they are entitled to vote in favor of the Nominees and all
other such matters. They will vote against any such adjournment those proxies
withholding authority to vote on any Nominee and voting against or abstaining
with respect to all other such matters. The Company will pay the costs of any
additional solicitation and of any adjourned meetings.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 1999 Annual Meeting
of Stockholders must be received at WMF's principal executive offices not later
than December 31, 1998.
By Order of the Board of Directors,
/s/BARBARA EKSTROM
Barbara Ekstrom, Secretary
April 30, 1998
THE BOARD OF DIRECTORS HOPES THAT YOU WILL ATTEND THE MEETING. WHETHER OR
NOT YOU PLAN TO ATTEND, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED
PROXY IN THE ACCOMPANYING ENVELOPE PROMPTLY. IF YOU ATTEND THE MEETING, YOU MAY
WITHDRAW YOUR PROXY AND VOTE YOUR OWN SHARES.
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EXHIBIT A
THE WMF GROUP, LTD.
1998 EMPLOYEE STOCK PURCHASE PLAN
PURPOSE The WMF Group, Ltd. 1998 Employee Stock Purchase
Plan (the "1998 ESPP" or the "Plan") provides
employees of The WMF Group, Ltd. (the "Company")
and selected Company Subsidiaries with an
opportunity to become owners of the Company through
the purchase of shares of the Company's common
stock (the "Common Stock"). The Company intends
this Plan to qualify as an employee stock purchase
plan under Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code"), and its terms
should be construed accordingly. The Plan is
effective as of July 1, 1998.
ELIGIBILITY An Employee whom the Company or an Eligible
Subsidiary has employed for at least one full month
as of the first day of a Payroll Deduction Period
is eligible to participate in the 1998 ESPP for
that Payroll Deduction Period; provided, however,
that an Employee may not make a purchase under the
1998 ESPP if such purchase would result in the
Employee's owning Common Stock possessing 5% or
more of the total combined voting power or value of
the Company's outstanding stock. For purposes of
determining an individual's amount of stock
ownership, any options to acquire shares of Company
Common Stock are counted as shares of stock, and
the attribution rules of Section 424(d) of the Code
apply.
Employee means any person employed as a common law
employee of the Company or an Eligible Subsidiary.
Employee excludes anyone who, with respect to any
particular period of time, was not treated
initially on the payroll records as a common law
employee.
ADMINISTRATOR The Compensation Committee of the Board of
Directors (the "Board") of the Company, or such
other committee as the Board designates (the
"Committee"), will administer the 1998 ESPP. The
Committee is vested with full authority and
discretion to make, administer, and interpret such
rules and regulations as it deems necessary to
administer the 1998 ESPP (including rules and
regulations deemed necessary in order to comply
with the requirements of Section 423 of the Code).
Any determination or action of the Committee in
connection with the administration or
interpretation of the 1998 ESPP shall be final and
binding upon each Employee, Participant and all
persons claiming under or through any Employee or
Participant.
Without shareholder consent and without regard to
whether the actions might adversely affect
Participants, the Committee (or the Board) may
change the Payroll Deduction Periods,
limit or increase the frequency and/or number
of changes in the amounts withheld during a
Payroll Deduction Period,
establish the exchange ratio applicable to
amounts withheld in a currency other than U.S.
dollars,
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permit payroll withholding in excess of the
amount the Participant designated to adjust
for delays or mistakes in the Company's
processing of properly completed withholding
elections,
establish reasonable waiting and adjustment
periods and/or accounting and crediting
procedures to ensure that amounts applied
toward the purchase of Common Stock for each
Participant properly correspond with amounts
withheld from the Participant's Compensation,
delegate its functions (other than those with
respect to setting Payroll Deduction Periods
or determining the price of stock and the
number of shares to be offered under the Plan)
to officers or employees of the Company, and
establish such other limitations or procedures
as it determines in its sole discretion to be
advisable and consistent with the Plan.
The Committee may also increase the price provided
in Step 2 under GRANTING OF OPTIONS below (by
decreasing the discount and/or by designating that
the price is determined as of either the beginning
or the ending date of a Payroll Deduction Period or
the lower of both rather than as of the beginning
date) for Payroll Deduction Periods beginning after
committee action.
PAYROLL DEDUCTION PERIOD Payroll Deduction Periods are successive calendar
quarters beginning January 1, April 1, July 1, and
October 1, and the first such period under the Plan
will begin on July 1, 1998.
PARTICIPATION An eligible Employee may become a "Participant" for
a Payroll Deduction Period by completing an
authorization notice and delivering it to the
Committee through the Company's Human Resources
Department within a reasonable period of time
before the first day of such Payroll Deduction
Period. The Committee will send to each new
Employee who satisfies the rules in ELIGIBILITY
above a notice advising the Employee of his or her
right to participate in the 1998 ESPP for the
following Payroll Deduction Period. All
Participants receiving options under the 1998 ESPP
will have the same rights and privileges.
METHOD OF PAYMENT A Participant may contribute to the 1998 ESPP
through payroll deductions, as follows:
The Participant must elect on an authorization
notice to have deductions made from his
Compensation for each payroll period during the
Payroll Deduction Period at a rate of at least 1%
of such Compensation. Compensation under the Plan
means an Employee's regular compensation, including
overtime, bonuses, and commissions, from the
Company or an Eligible Subsidiary paid during a
Payroll Deduction Period.
All payroll deductions will be credited to the
Participant's account under the 1998 ESPP. No
interest will accrue on the account.
Payroll deductions will begin on the first payday
coinciding with or following the first day of each
Payroll Deduction Period and will end with the last
payday preceding or coinciding with the end of that
Payroll Deduction Period, unless the Participant
sooner withdraws as authorized under WITHDRAWALS
below.
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A Participant may not alter the rate of payroll
deductions during the Payroll Deduction Period.
The Company may use the consideration it receives
for general corporate purposes.
GRANTING OF OPTIONS On the first day of each Payroll Deduction Period,
a Participant will receive options to purchase a
number of shares of Common Stock with funds
withheld from their Compensation. Such number of
shares will be determined at the end of the Payroll
Deduction Period according to the following
procedure:
Step 1 -- Determine the amount the Company withheld
from Compensation since the beginning of the
Payroll Deduction Period;
Step 2 -- Determine the "Purchase Price" to be the
amount that represents 95% of the Fair Market Value
of a share of Common Stock on the first day of the
Payroll Deduction Period (provided that the
Committee can change the price before a Payroll
Deduction Period begins but not below the lower of
the Fair Market Value of a share of Common Stock on
the (I) first day of the Payroll Deduction Period,
or (II) the last day of the Payroll Deduction
Period); and
Step 3 -- Divide the amount determined in Step 1 by
the amount determined in Step 2.
FAIR MARKET VALUE The Fair Market Value of a share of Common Stock
for purposes of the Plan as of the date described
in Step 2 will be determined as follows:
if the Common Stock is traded on a national
securities exchange, the closing sale price on
that date;
if the Common Stock is not traded on any such
exchange, the closing sale price as reported
by the National Association of Securities
Dealers, Inc. Automated Quotation System
("Nasdaq") for such date;
if no such closing sale price information is
available, the average of the closing bid and
asked prices as reported by Nasdaq for such
date;
if there are no such closing bid and asked
prices, the average of the closing bid and
asked prices as reported by any other
commercial service for such date; or
if there is no established market for the
Common Stock, the value as determined in good
faith by the Committee.
For January 1 and any other date described in Step
2 that is not a trading day, the Fair Market Value
of a share of Common Stock for such date shall be
determined by using the closing sale price or the
average of the closing bid and asked prices, as
appropriate, for the immediately preceding trading
day.
No Participant shall receive options:
if, immediately after the grant, that
Participant would own shares, or hold
outstanding options to purchase shares, or
both, possessing 5% or more of the total
combined voting power or value of all
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classes of shares of the Company or any
Subsidiaries (as defined below); or
that permit the Participant to purchase shares
under all employee stock purchase plans of the
Company and any Subsidiary with a Fair Market
Value (determined at the time the options are
granted) that exceeds $25,000 in any calendar
year.
EXERCISE OF OPTION Unless a Participant effects a timely withdrawal
pursuant to the WITHDRAWAL paragraph below, his
option for the purchase of shares of Common Stock
during a Payroll Deduction Period will be
automatically exercised as of the last day of the
Payroll Deduction Period for the purchase of the
maximum number of shares (including fractional
shares) that the sum of the payroll deductions
credited to the Participant's account during such
Payroll Deduction Period can purchase pursuant to
the formula specified in GRANTING OF OPTIONS.
DELIVERY OF COMMON STOCK As soon as administratively feasible after the
options are used to purchase Common Stock, the
Company will deliver to each Participant or, in the
alternative, to an agent or custodian that the
Committee designates, the shares of Common Stock
the Participant purchased upon the exercise of the
option. If delivered to an agent or custodian, the
agent or custodian may hold the shares in nominee
name and may commingle shares held in its custody
in a single account or stock certificate without
identification as to individual Participants. If
shares are delivered to a custodian, the
Participant may elect at any time thereafter to
take possession of the shares or to have the
Committee deliver the shares to any brokerage firm.
The Committee may, in its discretion, establish a
program for cashless sales of Common Stock received
under the 1998 ESPP.
SUBSEQUENT OFFERINGS A Participant will be deemed to have elected to
participate in each subsequent Payroll Deduction
Period following his initial election to
participate in the 1998 ESPP, unless the
Participant files a written withdrawal notice with
the Human Resources Department at least ten days
before the beginning of the Payroll Deduction
Period as of which the Participant desires to
withdraw from the 1998 ESPP.
WITHDRAWAL FROM THE PLAN A Participant may withdraw all, but not less than
all, payroll deductions credited to his account for
a Payroll Deduction Period before the end of such
Payroll Deduction Period by delivering a written
notice to the Human Resources Department on behalf
of the Committee at least thirty days before the
end of such Payroll Deduction Period. A Participant
who for any reason, including retirement,
termination of employment, or death, ceases to be
an Employee before the last day of any Payroll
Deduction Period will be deemed to have withdrawn
from the 1998 ESPP as of the date of such
cessation.
Upon the withdrawal of a Participant from the 1998
ESPP, his outstanding options under the 1998 ESPP
will immediately terminate.
If a Participant withdraws from the 1998 ESPP for
any reason, the Company will pay to the Participant
all payroll deductions credited to his account or,
in the event of death, to the persons designated as
provided in
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DESIGNATION OF BENEFICIARY, as soon as
administratively feasible after the date of such
withdrawal, and no further deductions will be made
from the Participant's Compensation.
A Participant who has elected to withdraw from the
1998 ESPP may resume participation in the same
manner and pursuant to the same rules as any
Employee making an initial election to participate
in the ESPP, (i.e., he may elect to participate in
the next following Payroll Deduction Period so long
as he or she files the authorization form by the
deadline for that Payroll Deduction Period). Any
Participant who is subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and who withdraws from the 1998
ESPP for any reason will only be permitted to
resume participation in a manner that will permit
transactions under the 1998 ESPP to continue to be
exempt within the meaning of Rule 16b-3, as issued
under the Exchange Act.
STOCK SUBJECT TO PLAN The shares of Common Stock that the Company will
sell to Participants under the 1998 ESPP will be
shares of authorized but unissued Common Stock or
shares held as treasury stock. The maximum number
of shares made available for sale under the 1998
ESPP will be 400,000 (subject to the provisions in
ADJUSTMENTS UPON CHANGES IN CAPITAL STOCK below).
If the total number of shares for which options are
to be exercised in a Payroll Deduction Period
exceeds the number of shares then available under
the 1998 ESPP, the Company will make, so far as is
practicable, a pro rata allocation of the shares
available.
A Participant will have no interest in shares
covered by his option until the Participant
exercises the option.
Shares that a Participant purchases under the 1998
ESPP will be registered in the name of the
Participant or, at the Participant's election, in
street name.
REPORTS Individual accounts will be maintained for each
Participant. Statements of account will be given to
Participants at least annually, and those
statements will set forth the amount of payroll
deductions, the exercise price, interest credited,
the number of shares purchased, and the remaining
cash balance, if any.
ADJUSTMENTS UPON CHANGES IN
CAPITAL STOCK Subject to any required action by the Company
(which it shall promptly take) or its stockholders,
and subject to the provisions of applicable
corporate law, if, during a Payroll Deduction
Period,
the outstanding shares of Common Stock
increase or decrease or change into or are
exchanged for a different number or kind of
security by reason of any recapitalization,
reclassification, stock split, reverse stock
split, combination of shares, exchange of
shares, stock dividend, or other distribution
payable in capital stock, or
some other increase or decrease in such Common
Stock occurs without the Company's receiving
consideration,
the Committee will make a proportionate and
appropriate adjustment in the number of shares of
Common Stock underlying the options, so that the
proportionate interest of the Participant
immediately following such
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event will, to the extent practicable, be the same
as immediately before such event. Any such
adjustment to the options will not change the total
price with respect to shares of Common Stock
underlying the Participant's election but will
include a corresponding proportionate adjustment in
the price of the Common Stock, to the extent
consistent with Section 424 of the Code.
The Committee will make a commensurate change to
the maximum number and kind of shares provided in
the STOCK SUBJECT TO PLAN section.
Any issue by the Company of any class of preferred
stock, or securities convertible into shares of
common or preferred stock of any class, will not
affect, and no adjustment by reason thereof will be
made with respect to, the number of shares of
Common Stock subject to any options or the price to
be paid for stock except as this ADJUSTMENTS
section specifically provides. The grant of an
option under the Plan will not affect in any way
the right or power of the Company to make
adjustments, reclassifications, reorganizations or
changes of its capital or business structure, or to
merge or to consolidate, or to dissolve, liquidate,
sell, or transfer all or any part of its business
or assets.
SUBSTANTIAL CORPORATE
CHANGE Upon a Substantial Corporate Change, the Plan and
the offering will terminate unless provision is
made in writing in connection with such transaction
for
the assumption or continuation of outstanding
elections, or
the substitution for such options or grants of
any options covering the stock or securities
of a successor employer corporation, or a
parent or subsidiary of such successor, with
appropriate adjustments as to the number and
kind of shares of stock and prices, in which
event the options will continue in the manner
and under the terms so provided.
If an option would otherwise terminate pursuant to
the preceding sentence, the optionee will have the
right, at such time before the consummation of the
transaction causing such termination as the Board
reasonably designates, to exercise any unexercised
portions of the option. However, the Board may
determine that allowing such exercise before the
end of the Payroll Deduction Period will not occur
if the election would render unavailable "pooling
of interest" accounting for any reorganization,
merger, or consolidation of the Company.
A Substantial Corporate Change means the
dissolution or liquidation of the Company,
merger, consolidation, or reorganization of
the Company with one or more corporations in
which the Company is not the surviving
corporation,
the sale of substantially all of the assets of
the Company to another corporation, or
any transaction (including a merger or
reorganization in which the Company survives)
approved by the Board that results in any
person
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or entity (other than any affiliate of the
Company as defined in Rule 144(a)(1) under the
Securities Act) owning 100% of the combined
voting power of all classes of stock of the
Company.
DESIGNATION OF BENEFICIARY A Participant may file with the Committee a written
designation of a beneficiary who is to receive any
payroll deductions credited to the Participant's
account under the 1998 ESPP or any shares of Common
Stock owed to the Participant under the 1998 ESPP
if the Participant dies. A Participant may change a
beneficiary at any time by filing a notice in
writing with the Human Resources Department on
behalf of the Committee.
Upon the death of a Participant and upon receipt by
the Committee of proof of the identity and
existence of the Participant's designated
beneficiary, the Company shall deliver such cash or
shares, or both, to the beneficiary. If a
Participant dies and is not survived by a
beneficiary that the Participant designated in
accordance with the immediate preceding paragraph,
the Company will deliver such cash or shares, or
both, to the personal representative of the estate
of the deceased Participant. If, to the knowledge
of the Committee, no personal representative has
been appointed within 90 days following the date of
the Participant's death, the Committee, in its
discretion, may direct the Company to deliver such
cash or shares, or both, to the surviving spouse of
the deceased Participant, or to any one or more
dependents or relatives of the deceased
Participant, or if no spouse, dependent or relative
is known to the Committee, then to such other
person as the Committee may designate.
No designated beneficiary may acquire any interest
in such cash or shares before the death of the
Participant.
SUBSIDIARY EMPLOYEES Employees of Eligible Subsidiaries will be entitled
to participate in the 1998 ESPP.
Eligible Subsidiary means each of the Company's
Subsidiaries, except as the Board or Committee
otherwise specifies. Subsidiary means any
corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company
if, at the time an option is granted to a
Participant under the 1998 ESPP, each of the
corporations (other than the last corporation in
the unbroken chain) owns stock possessing 50% or
more of the total combined voting power of all
classes of stock in one of the other corporations
in such chain.
TRANSFERS ASSIGNMENTS, AND
PLEDGES A Participant may not assign, pledge, or otherwise
dispose of payroll deductions credited to the
Participant's account or any rights to exercise an
option or to receive shares of Common Stock under
the 1998 ESPP other than by will or the laws of
descent and distribution or pursuant to a qualified
domestic relations order, as defined in the
Employee Retirement Income Security Act. Any other
attempted assignment, pledge or other disposition
will be without effect, except that the Company may
treat such act as an election to withdraw under the
WITHDRAWAL section.
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AMENDMENT OR TERMINATION OF
PLAN The Board of Directors of the Company or the
Committee may at any time terminate or amend the
1998 ESPP. Any amendment of the 1998 ESPP that (i)
materially increases the benefits to Participants,
(ii) materially increases the number of securities
that may be issued under the 1998 ESPP, or (iii)
materially modifies the eligibility requirements
for participation in the 1998 ESPP must be approved
by the shareholders of the Company to take effect.
The Company shall refund to each Participant the
amount of payroll deductions credited to his
account as of the date of termination as soon as
administratively feasible following the effective
date of the termination.
EFFECT ON OTHER PLANS Whether exercising or receiving an award causes the
participant to accrue or receive additional
benefits under any pension or other plan is
governed solely by the terms of such other plan.
NOTICES All notices or other communications by a
Participant to the Committee or the Company shall
be deemed to have been duly given when the Human
Resources Department or the Secretary of the
Company receives them or when any other person the
Company designates receives the notice or other
communication in the form the Company specifies.
GENERAL ASSETS Any amounts the Company invests or otherwise sets
aside or segregates to satisfy its obligations
under this 1998 ESPP will be solely the Company's
property (except as otherwise required by Federal
or state wage laws), and the optionee's claim
against the Company under the 1998 ESPP, if any,
will be only as a general creditor. The optionee
will have no right, title, or interest whatever in
or to any investments that the Company may make to
aid it in meeting its obligations under the 1998
ESPP. Nothing contained in the 1998 ESPP, and no
action taken pursuant to its provisions, will
create or be construed to create an implied or
constructive trust of any kind or a fiduciary
relationship between the Company and any Employee,
Participant, former Employee, former Participant,
or any beneficiary.
PRIVILEGES OF STOCK
OWNERSHIP No Participant and no beneficiary or other person
claiming under or through such Participant will
have any right, title, or interest in or to any
shares of Common Stock allocated or reserved under
the Plan except as to such shares of Common Stock,
if any, that have been issued to such Participant.
TAX WITHHOLDING To the extent that a Participant realizes ordinary
income in connection with a sale or other transfer
of any shares of Common Stock purchased under the
Plan or the crediting of interest to an account,
the Company may withhold amounts needed to cover
such taxes from any payments otherwise due to the
Participant. Any Participant who sells or otherwise
transfers shares purchased under the Plan within
two years after the beginning of the Payroll
Deduction Period in which he purchased the shares
must, within 30 days of such transfer, notify the
Company's Payroll Department in writing of such
transfer.
LIMITATIONS ON LIABILITY Notwithstanding any other provisions of the 1998
ESPP, no individual acting as a director, employee,
or agent of the Company shall be liable to any
Employee, Participant, former Employee, former
Participant, or any spouse or beneficiary for any
claim, loss, liability, or expense incurred in
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connection with the 1998 ESPP, nor shall such
individual be personally liable because of any
contract or other instrument he executes in such
other capacity. The Company will indemnify and hold
harmless each director, employee, or agent of the
Company to whom any duty or power relating to the
administration or interpretation of the 1998 ESPP
has been or will be delegated, against any cost or
expense (including attorneys' fees) or liability
(including any sum paid in settlement of a claim
with the Board's approval) arising out of any act
or omission to act concerning this 1998 ESPP unless
arising out of such person's own fraud or bad
faith.
NO EMPLOYMENT CONTRACT Nothing contained in this Plan constitutes an
employment contract between the Company or an
Eligible Subsidiary and any Employee. The 1998 ESPP
does not give an Employee any right to be retained
in the Company's employ, nor does it enlarge or
diminish the Company's right to terminate the
Employee's employment.
DURATION OF ESPP Unless the Company's Board extends the Plan's term,
no Payroll Deduction Period will begin after June
30, 2008.
APPLICABLE LAW The laws of the Commonwealth of Virginia (other
than its choice of law provisions) govern the 1998
ESPP and its interpretation.
LEGAL COMPLIANCE The Company will not issue any shares of Common
Stock under the Plan until the issuance satisfies
all applicable requirements imposed by Federal and
state securities and other laws, rules, and
regulations, and by any applicable regulatory
agencies or stock exchanges. To that end, the
Company may require the optionee to take any
reasonable action to comply with such requirements
before issuing such shares. No provision in the
Plan or action taken under it authorizes any action
that Federal or state laws otherwise prohibit.
The Plan is intended to conform to the extent
necessary with all provisions of the Securities Act
of 1933, as amended, ("Securities Act") and the
Securities Exchange Act of 1934, as amended, and
all regulations and rules that the Securities and
Exchange Commission issues under those laws,
including specifically Rule 16b-3. Notwithstanding
anything in the Plan to the contrary, the Committee
and the Board must administer the Plan, and
Participants may purchase Common Stock, only in a
way that conforms to such laws, rules, and
regulations. To the extent permitted by applicable
law, the Plan and any offers will be deemed amended
to the extent necessary to conform to such laws,
rules, and regulations.
APPROVAL OF SHAREHOLDERS The 1998 ESPP must be submitted to the shareholders
of the Company for their approval within 12 months
after the Board of Directors of the Company adopts
the 1998 ESPP. The adoption of the 1998 ESPP is
conditioned upon the approval of the shareholders
of the Company, and failure to receive their
approval will render the 1998 ESPP and any
outstanding options thereunder void and of no
effect.
29
<PAGE> 33
WMF75 1 DETACH HERE
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<S> <C>
[X] Please mark
votes as in
this example.
The Board of Directors recommends a vote FOR the nominees identified in
Item 1 and FOR Items 2 and 3.
1. Election of seven directors for a term expiring in 1998 as set forth in
the Proxy Statement.
FOR AGAINST ABSTAIN
Nominees: J. Roderick Heller III, Shekar Narasimhan, 2. Approval and Adoption of the [ ] [ ] [ ]
Mohammed A. Al-Tuwaijri, Michael R. Elsenson, Tim R. Palmer, Employee Stock Purchase Plan.
John D. Reilly, Herbert S. Winokur, Jr.
[ ] FOR [ ] WITHHELD 3. Ratification of the Appointment [ ] [ ] [ ]
ALL FROM ALL of KPMG Peat Marwick LLP as
NOMINEES NOMINEES Independent Auditors.
[ ] ------------------------------------------
For all nominees except as noted above
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please mark, sign and date, and return the proxy
card promptly using the enclosed envelope.
Please sign exactly as name appears hereon. When
shares are held by joint tenants, both should sign.
When signing as attorney, executor, administrator,
trustee or guardian, please give full title as
such. If a corporation, please give the full
corporate name and have a duly authorized officer
sign, stating such officer's title. If a
partnership, please sign in the partnership name
by an authorized person.
Signature: Date: Signature: Date:
---------------------------- ------------------- ----------------------------- --------------
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<PAGE> 34
WMF75 DETACH HERE
PROXY
THE WMF GROUP, LTD.
This proxy is solicited on behalf of the Board of Directors.
The undersigned hereby appoints Shekar Narasimhan and Barbara Ekstrom, or
either of them, as attorney-in-fact, with full power of substitution, to vote
in the manner indicated on the reverse side, and with discretionary authority
as to any other matters that may properly come before the meeting, all shares
of common stock of The WMF Group, Ltd. ("WMF"), which the undersigned is
entitled to vote at the annual meeting of stockholders of WMF to be held on
June 16, 1998 at WMF's offices at 1593 Spring Hill Road, Vienna, Virginia
22182, at 10:00 a.m. or any adjournment thereof.
SIDE NOT VALID UNLESS DATED AND SIGNED ON THE REVERSE
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, this proxy will be
voted FOR the nominees for directors and FOR each of the the other proposals.
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<S> <C> <C>
[SEE REVERSE] CONTINUED AND TO BE SIGNED ON REVERSE SIDE [SEE REVERSE]
SIDE SIDE
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