<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-----------------
FORM 8-K
-----------------
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES AND EXCHANGE ACT of 1934
January 13, 1999 (December 22, 1998)
Date of Report (Date of Earliest Event Reported)
THE WMF GROUP LTD.
(Exact name of registrant as specified in its charter)
Delaware 000-22567 54-1647759
- ---------------------------- ----------------------- --------------------
(State or other jurisdiction (Commission File No.) I.R.S. Employer
of incorporation) (Identification No.)
1593 Spring Hill Road
Suite 400
Vienna, Virginia 22182
(Address of principal executive offices)
(703) 610-1400
(Registrant's telephone number, including area code)
N/A
(former name or former address, if changed since last report)
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<PAGE>
ITEM 5. OTHER EVENTS.
During the weeks of December 21 and 28, 1998, The WMF Group, Inc. (the
"Company") completed the following transactions:
. Execution of a Fifth Amendment to Credit And Security Agreement
dated December 22, 1998, by and among the Company, its subsidiaries
and Residential Funding Corporation, Bank United and PNC Bank, N.A.
pursuant to which the Company secured an extension and waiver of
defaults on its bank warehouse lines and other credit facilities.
. Sale of $16.7 million of a new class of non-voting convertible
security to its principal shareholders, Demeter Holding Corporation
("Demeter"), Phemus Corporation ("Phemus") and Capricorn Investors
II, L.P. ("Capricorn") The Company expects that these securities
will be automatically converted into approximately 3.6 million
shares of common stock on or before January 31, 1999, after the
Company receives clearances from federal antitrust regulators. The
Company has agreed to register the shares of common stock issuable
upon such conversion for resale without restriction. As part of this
transaction, Harvard Private Capital Holdings, Inc. (an affiliate of
Demeter and Phemus) and Capricorn canceled warrants to purchase 1.2
million shares of common stock at an exercise price of $11.25.
. Execution of a Standby Purchase Agreement among the Company,
Demeter, Phemus and Capricorn, pursuant to which Demeter, Phemus and
Capricorn have agreed to purchase up to 664,028 shares of common
stock during the Company's previously announced rights offering, if
such shares have not been purchased by other shareholders during the
rights offering. The Company has agreed to register the 664,028
shares of common stock for resale without restriction.
. Settlement of claims related to a loan commitment made by one of the
Company's subsidiaries, WMF Capital Corp. Pursuant to the
settlement, the Company, among other things, issued (A) a warrant to
purchase 100,000 shares of common stock at an exercise price of
$5.98125 and (B) a warrant to purchase 150,000 shares of common
stock at an exercise price of $10.00 per share, and pledged 50,000
shares of the Company's common stock to secure certain obligations
under the agreement. The Company has agreed to register the 250,000
shares of common stock issuable upon exercise of the warrants for
resale without restriction.
Material agreements relating to the above transactions are attached as
Exhibits to this report.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) EXHIBITS.
The following exhibits are filed herewith:
Exhibit No. Description
----------- -----------
3.1 Certificate of Designations, Preferences and Rights
of Class A Non-Voting Convertible Preferred Stock
2
<PAGE>
10.1 Registration Rights Agreement dated June 12, 1998, by and
among the Company, Harvard Private Capital Holdings, Inc. and
Capricorn Investors II, L.P., as amended by the First
Amendment to the Registration Rights Agreement, dated as of
October 16, 1998, between the Company, Harvard Private
Capital Holdings, Inc., Capricorn Investors II, L.P., Demeter
Holdings Corporation and Phemus Corporation
10.2 Standby Purchase Agreement dated as of October 16, 1998 by
and among the Company, Demeter Holding Corporation, Phemus
Corporation and Capricorn Investors II, L.P.
10.3 Series 2 Warrant Agreement dated December 30, 1998, by and
between the Company and [*] (1)
10.4 Series 3 Warrant Agreement dated December 30, 1998, by and
between the Company and [*] (1)
10.5 Registration Rights Agreement dated December 30, 1998, by and
between the Company and [*] (1)
10.6 Stock Purchase Agreement dated as of October 16, 1998, by and
among the Company, Harvard Private Capital Holdings, Inc.,
Demeter Holdings Corporation, Phemus Corporation and
Capricorn Investors II, L.P.
10.7 Fourth Amendment To Credit And Security Agreement dated
November 15, 1998, by and among the Company, WMF Washington
Mortgage Corp., WMF Huntoon, Paige Associates Limited, WMF
Proctor, Ltd., The Robert C. Wilson Company, The Robert C.
Wilson Company-Arizona, WMF Carbon Mesa Advisors, Inc.,
Residential Funding Corporation, Bank United and PNC Bank,
N.A.
10.8 Fifth Amendment To Credit And Security Agreement dated
December 21, 1998, by and among the Company, WMF Washington
Mortgage Corp., WMF Huntoon, Paige Associates Limited, WMF
Proctor, Ltd., The Robert C. Wilson Company, The Robert C.
Wilson Company-Arizona, WMF Carbon Mesa Advisors, Inc.,
Residential Funding Corporation, Bank United and PNC Bank,
N.A.
(1) The Company has requested confidential treatment for a portion of this
document.
3
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE WMF GROUP LTD.
Date: January 12, 1999 By: /s/ Michael D. Ketcham
----------------------------------------
Name: Michael D. Ketcham
Title: Chief Financial Officer and Treasurer
(Principal Financial Officer)
4
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
3.1 Certificate of Designations, Preferences and Rights of Class A
Non-Voting Convertible Preferred Stock
10.1 Registration Rights Agreement dated June 12, 1998, by and among
the Company, Harvard Private Capital Holdings, Inc. and
Capricorn Investors II, L.P., as amended by the First Amendment
to the Registration Rights Agreement, dated as of October 16,
1998, between the Company, Harvard Private Capital Holdings,
Inc., Capricorn Investors II, L.P., Demeter Holdings Corporation
and Phemus Corporation
10.2 Standby Purchase Agreement dated as of October 16, 1998 by and
among the Company, Demeter Holding Corporation, Phemus
Corporation and Capricorn Investors II, L.P.
10.3 Series 2 Warrant Agreement dated December 30, 1998, by and
between the Company and [*] (1)
10.4 Series 3 Warrant Agreement dated December 30, 1998, by and
between the Company and [*] (1)
10.5 Registration Rights Agreement dated December 30, 1998, by and
between the Company and [*] (1)
10.6 Stock Purchase Agreement dated as of October 16, 1998, by and
among the Company, Harvard Private Capital Holdings, Inc.,
Demeter Holdings Corporation, Phemus Corporation and Capricorn
Investors II, L.P.
10.7 Fourth Amendment To Credit And Security Agreement dated
November 15, 1998, by and among the Company, WMF Washington
Mortgage Corp., WMF Huntoon, Paige Associates Limited, WMF
Proctor, Ltd., The Robert C. Wilson Company, The Robert C.
Wilson Company-Arizona, WMF Carbon Mesa Advisors, Inc.,
Residential Funding Corporation, Bank United and PNC Bank, N.A.
10.8 Fifth Amendment To Credit And Security Agreement dated December
21, 1998, by and among the Company, WMF Washington Mortgage
Corp., WMF Huntoon, Paige Associates Limited, WMF Proctor, Ltd.,
The Robert C. Wilson Company, The Robert C. Wilson Company-
Arizona, WMF Carbon Mesa Advisors, Inc., Residential Funding
Corporation, Bank United and PNC Bank, N.A.
(1) The Company has requested confidential treatment for a portion of this
document.
5
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS OF CLASS A NON-VOTING
CONVERTIBLE PREFERRED STOCK
OF
THE WMF GROUP, LTD.
-------------------
PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
THE WMF GROUP, LTD., a Delaware corporation ("WMF" or the "Corporation"),
certifies that pursuant to the authority conferred upon the Board of Directors
by the Fifth Article of its Amended and Restated Certificate of Incorporation,
and in accordance with the provisions of Section 151 of the General Corporation
Law of the State of Delaware, its Board of Directors has adopted the following
resolution at a meeting of the Board of Directors duly held on December 30,
1998, creating a series of its Preferred Stock designated as Class A Non-Voting
Convertible Preferred Stock;
RESOLVED, that pursuant to Section 151 of the Delaware General Corporation
Law and authority granted in the Corporation's Amended and Restated Certificate
of Incorporation, such Amended and Restated Certificate of Incorporation shall
be amended by adding a new Article Eleventh such that a series of Class A Non-
Voting Convertible Preferred Stock of the Corporation be hereby created, and
that the designation and amount thereof and the voting power, preferences and
relative, participating, optional and other special rights of the shares of such
series, and the qualifications, limitations or restrictions thereof, of such
shares, in addition to those set forth in the Amended and Restated Certificate
of Incorporation, shall be as follows:
ARTICLE ELEVENTH
SECTION 1. DEFINITIONS.
-----------
As used in this Article Eleventh, unless otherwise defined herein,
capitalized terms shall have the meanings set forth below:
"Change of Control" shall mean each occurrence of any of the following:
(i) the acquisition, directly or indirectly, by any individual or entity or
group (as such term is used in Section 13(d)(3) of the Exchange Act) other than
Harvard Private Capital Holdings, Inc., Demeter Holdings Corporation, Phemus
Corporation, Capricorn Investors I, L.P., Capricorn Investors II, L.P. and their
respective affiliates, of the Corporation's outstanding shares with voting
power, under ordinary circumstances, to elect Directors of the Corporation which
would result in such individual entity or group beneficially owning more than
25% of such outstanding shares; (ii) if during any period of two consecutive
years, individuals who at the beginning of such period constituted the Board of
Directors of the Corporation (together with any new directors whose election by
such Board of Directors or whose nomination for election by the shareholders of
the Corporation was approved by a vote of 66 2/3% of the directors of the
Corporation then still in office who were either directors at the beginning of
such period, or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors then in office; and (iii) (A) the Corporation
<PAGE>
consolidating with or merging into another entity or conveying, transferring or
leasing all or substantially all of its assets to any individual or entity, or
(B) any entity consolidating with or merging into the Corporation, provided,
--------
however, that the events described in clause (iii) shall not be deemed to be a
- -------
Change of Control if the sole purpose of such event is that the Corporation is
seeking to change its domicile or to change its form of organization from a
corporation to another organizational form.
"Class A Stock" shall mean the Class A Non-voting Convertible Preferred
Stock of The WMF Group, Ltd.
"Class A Value" shall mean $5.00 per share, except with respect to shares
of Class A Stock purchased pursuant Article 1 of the Stock Purchase Agreement,
in which instance "Class A Value" shall mean $4.587 per share.
"Common Stock" shall mean the common shares of The WMF Group, Ltd.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976.
"Initial Holders" shall mean Demeter Holdings Corporation, Phemus
Corporation and Capricorn Investors II, L.P., the initial holders of the Class A
Stock.
"Mandatory Conversion" shall mean the mandatory conversion of the Class A
Stock into Common Stock pursuant to Section 5 of this Article Eleventh.
"Mandatory Conversion Date" shall mean the earlier of (i) the date upon
which the Corporation receives notice that the Mandatory Conversion has received
any necessary approval under the HSR Act from the Federal Trade Commission, the
Antitrust Division of the United States Department of Justice or other agency
having jurisdiction or (ii) the date immediately following the date upon which
any waiting period applicable to the Mandatory Conversion under the HSR Act
expires or is terminated without any action by the Federal Trade Commission, the
Antitrust Division of the United States Department of Justice or other agency
having jurisdiction to enjoin the Mandatory Conversion.
"Redemption Date" shall mean the date the Corporation designates for
redemption of outstanding shares of Class A Stock pursuant to Section 7 hereof.
"Stock Purchase Agreement" shall mean the Stock Purchase Agreement dated as
of October 16, 1998 among WMF, Demeter Holdings Corporation, Phemus Corporation
and Capricorn Investors, II, L.P.
SECTION 2. DESIGNATION.
------------
The designation of this Series shall be Class A Non-Voting Convertible
Preferred Stock and the number of shares constituting this Series shall be Three
Million, Six Hundred Thirty Five Thousand, Nine Hundred Seventy Two
(3,635,972). Shares of this Series shall have a par value of $0.01 per share.
-2-
<PAGE>
SECTION 3. VOTING RIGHTS.
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The holders of each share of Class A Stock shall have no voting rights,
except as required by the laws of the State of Delaware. In the event that the
laws of the State of Delaware require that the holders of Class A Stock have
voting rights, the holders of Class A Stock shall have the right to one vote per
share, and shall be entitled to notice of any stockholders' meeting in
accordance with the Bylaws of this Corporation, and shall be entitled to vote
upon such matters and in such manner as may be provided by law, voting together
as a single voting group with the holders of the Common Stock.
SECTION 4. DIVIDENDS.
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(a) Limits. Holders of the Class A Stock shall not be entitled to
------
participate in the earnings or assets of the Corporation, except as provided
herein.
(b) Dividend Between Issuance and Mandatory Conversion Date. From the
-------------------------------------------------------
date of issuance of the Class A Stock up to, but not including, the Mandatory
Conversion Date, the Class A Stock shall rank pari passu with the Common
---- -----
Stock as to dividends, and the holders of the Class A Stock shall be entitled to
receive out of any funds of the Corporation legally available therefor,
dividends at the same rate per share as may be declared and paid upon the Common
Stock, if, when and as declared from time to time by the Board of Directors, in
its discretion, and upon the liquidation or winding up of the Corporation.
(c) Calculation of Dividend if Mandatory Conversion Denied HSR Act
--------------------------------------------------------------
Approval. Commencing upon the first to occur of (i) February 5, 1999, and (ii)
- --------
the date of the Corporation's receipt of final notice from the Federal Trade
Commission, the Antitrust Division of the United States Department of Justice or
other agency having jurisdiction, that it intends to object to the Mandatory
Conversion (the "Commencement Date"), and continuing thereafter, cumulative
preferential dividends shall accrue on the Class A Stock (i) at an annual rate
of 11% of the Class A Value from the Commencement Date through February 1, 1999
(if the Commencement Date occurs on or prior to February 1, 1999), (ii) at an
annual rate to be agreed upon between the holders of a majority of the Class A
Stock and the Corporation or, if there is not such agreement, 15% of the Class A
Value for the period from February 2, 1999 through May 31, 1999, and (iii) at an
annual rate to be agreed upon between the holders of a majority of the Class A
Stock and the Corporation or, if there is no such agreement, 18% of the Class A
Value thereafter (each, separately and collectively, the "Preferred Dividend"),
provided that such rate shall at all times be equal to the equivalent dividend
- --------
rate on the Company's Common Stock for each quarterly period if such rate
exceeds the Preferred Dividend. The Preferred Dividend shall be payable prior to
the payment of dividends on any other class or series of the Corporation's
capital stock on May 31, 1999, and thereafter quarterly in arrears on the last
day of each June, September, December and March and on any other date designated
by the Board of Directors to holders of record of the Class A Stock on each such
date.
(d) Limits on Dividend Preference. Holders of the Class A Stock will
-----------------------------
not be entitled to any dividends in excess of the dividends as described above.
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<PAGE>
SECTION 5. MANDATORY CONVERSION.
---------------------
(a) Conversion; Conversion Factor. On the Mandatory Conversion Date, each
-----------------------------
share of Class A Stock outstanding will be converted into one share (the
"Conversion Factor") of Common Stock of the Corporation. The Conversion Factor
shall be proportionally adjusted if the Corporation (A) pays a dividend or makes
a distribution on the Common Stock in Common Stock, (B) subdivides its
outstanding Common Stock into a greater number of shares, (C) combines its
outstanding Common Stock into a smaller number of shares, or (D) issues any
shares of capital stock by reclassification of its Common Stock. The Conversion
Factor shall be equitably adjusted to reflect the effect of any issuance of
capital stock (or options, rights or warranties to acquire capital stock) of the
Company for less than fair market value, other than pursuant to the Rights
Offering referred to in the Stock Purchase Agreement. The Corporation shall mail
to each holder of record of the Class A Stock at their respective addresses as
they appear on the stock transfer records of the Corporation a summary of the
basis for and calculation of each such adjustment.
(b) Notice. Notice of any mandatory conversion hereunder will be mailed
------
by the Corporation, postage prepaid, not less than three days after the
Conversion Date, addressed to the respective holders of record of the Class A
Stock to be converted at their respective addresses as they appear on the stock
transfer records of the Corporation. No failure to give such notice or any
defect therein or in the mailing thereof shall affect the validity of the
proceedings for the conversion of any Class A Stock except as to the holder to
whom the Corporation has failed to give notice or except as to the holder to
whom such notice was defective. In addition to any information required by law,
such notice shall state: (A) the Conversion Date; (B) the total number of shares
of Class A Stock to be converted; and (C) the place or places where certificates
for such shares are to be surrendered for replacement with certificates for
Common Stock.
(c) Effect of Conversion. After the Conversion Date, Class A Stock shall
--------------------
no longer be deemed to be outstanding and shall not have the status of Class A
Stock and all rights of the holders thereof as shareholders of the Corporation
shall terminate, except the right to receive shares of Common Stock upon
conversion of shares of Class A Stock.
SECTION 6. CONVERSION AT THE OPTION OF THE HOLDER.
--------------------------------------
(a) Each share of the Class A Stock shall be convertible at any time
(including the period between the mailing of notice of redemption of any Class A
Stock and the redemption of such Class A Stock) at the option of the holder into
(i) one share of Common Stock, adjusted by application of the Conversion Factor
as provided in Section 5(a), plus (ii) an additional number of shares of Common
Stock having a fair market value on the date of conversion equal to accrued but
unpaid cash dividends through the Conversion Date.
(b) To exercise the conversion right provided for in Section 6(a), the
holder of each share of Class A Stock to be converted shall surrender the
certificate representing such share, duly endorsed or assigned to the
Corporation, at the Corporation's principal executive office, accompanied by
written notice to the Corporation that the holder thereof irrevocably elects to
convert such Class A Stock.
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<PAGE>
SECTION 7. OPTIONAL REDEMPTION.
--------------------
(a) Redemption Value. The Corporation may, at its option at any time,
----------------
redeem outstanding shares of Class A Stock for a cash price equal to the sum of
(i) the Class A Value and (ii) all accrued but unpaid cash dividends through the
Redemption Date (the "Redemption Price"). If the Corporation redeems fewer than
all of the shares of the Class A Stock outstanding, it shall redeem such shares
pro rata from each of the holders of record of the Class A Stock (based upon the
- --------
number of shares of Class A Stock held by each of them), as determined five (5)
business days prior to the designated Redemption Date.
(b) Notice. Notice of any redemption will be mailed by the Corporation,
------
postage prepaid, not less than 40 days prior to the Redemption Date, addressed
to the respective holders of record of the Class A Stock to be redeemed at their
respective addresses as they appear on the stock transfer records of the
Corporation. No failure to give such notice or any defect therein or in the
mailing thereof shall affect the validity of the proceedings for the redemption
of any Class A Stock except as to the holder to whom the Corporation has failed
to give notice or except as to the holder to whom such notice was defective. In
addition to any information required by law, such notice shall state: (A) the
Redemption Date; (B) the total number of shares of Class A Stock to be redeemed;
and (C) the place or places where certificates for such shares are to be
surrendered for replacement with certificates for common stock.
(c) Effect of Redemption. After the Redemption Date, the Class A Stock
--------------------
to be redeemed shall no longer be deemed to be outstanding and shall not have
the status of Class A Stock and all rights of the holders thereof as
shareholders of the Corporation shall terminate, except the right to receive the
Redemption Price.
(d) Subsequent Transactions. If (i) during the two-year period following
-----------------------
any Redemption Date, the Corporation (A) announces that it intends to engage in,
or engages in, any dissolution, liquidation, Change of Control, merger,
consolidation, share exchange, self-tender offer, sale of substantially all
assets or other transaction in which the Common Stock of the Company is
exchanged for cash, securities or other property (each an "Adjustment
Transaction"), (B) agrees to engage in any Adjustment Transaction or (C)
solicits any Adjustment Transaction, and (ii) in the case of an Adjustment
Transaction that is announced, agreed to or solicited within such period, such
Adjustment Transaction is actually consummated, then, upon repayment to the
Company of the Redemption Price, plus interest at the prime rate (as published
from time to time in The Wall Street Journal under the caption "Money Rates")
-----------------------
from the Redemption Date through the date of such repayment, the former holders
of the Class A Stock redeemed on such Redemption Date shall be entitled to
receive in such Adjustment Transaction the consideration that they would have
received if they had retained and converted their shares of Class A Stock into
shares of Common Stock pursuant to Section 6 hereof immediately prior to such
Adjustment Transaction. The Corporation shall not enter into any agreement with
respect to any Adjustment Transaction that does not make appropriate provision
for the rights of the former holders of Class A Stock hereunder.
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<PAGE>
SECTION 8. LIQUIDATION PREFERENCE.
-----------------------
Upon any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, or upon any Change of Control (in each case, a
"Liquidation Event"), the holders of the shares of Class A Stock then
outstanding will be entitled to receive an amount per share as a dividend (the
"Class A Preferential Amount") equal to the Class A Value, plus (i) all accrued
----
but unpaid cash dividends through the Liquidation Event minus (ii) all amounts
-----
previously paid by the Corporation to the holders of such Class A Stock (and all
prior holders) which represented a return of invested capital for financial
accounting purposes.
All of the Class A Preferential Amounts to be paid to the holders of the
Class A Stock pursuant to this Section 8 shall be paid or set apart for payment
before the payment or setting apart for payment of any amount for, or the
distribution of any assets or surplus funds of the Corporation to, the holders
of the Common Stock in connection with such Liquidation Event. After the
setting apart or payment in full by the Corporation of the Class A Preferential
Amounts as set forth in this Section 8, and subject to any agreements between
the holders of the Common Stock and the Corporation, the holders of the Common
Stock shall be entitled to participate ratably, to the exclusion of the holders
of the Class A Stock, in the distribution of all remaining assets or surplus
funds of the Corporation, on the basis of the number of shares held by each such
holder, until such holders have received an amount per share equal to the Class
A Preferential Amount and then the holders of the Common Stock and Class A Stock
shall be entitled to participate ratably in the distribution of all remaining
assets or surplus funds of the Corporation on the basis of the number of shares
of Common Stock and Class A Stock (on an as-converted basis) held by them.
The Corporation will mail a Liquidation Notice not less than 10 days prior
to the payment date stated therein, to each record holder of shares of Class A
Stock. The purchase or redemption by the Corporation of stock of any class, in
any manner permitted by law, shall not for the purpose of this Section 8 be
regarded as a Liquidation Event.
The foregoing Section 8 may be waived in writing by the holders of a
majority of the Class A Stock and such waiver shall be binding upon all the
holders of Class A Stock.
SECTION 9. MISCELLANEOUS.
--------------
(a) Registration of Transfer. The Corporation shall keep at its principal
------------------------
office a register for the registration of shares of Class A Stock. Upon the
surrender at its principal office of any certificate representing shares of
Class A Stock, the Corporation shall, at the request of the record holder of
such certificate, execute and deliver (at the Corporation's expense) a new
certificate or certificates in exchange therefor representing in the aggregate
the number of shares represented by the surrendered certificate. Each such new
certificate will be registered in such name and will represent such number of
shares as is requested by the holder of the surrendered certificate and will be
substantially identical in form to the surrendered certificate.
(b) Replacement. Upon receipt of evidence of the ownership and the loss,
-----------
theft, destruction or mutilation of any certificate evidencing one or more
shares of Class A Stock, and
-6-
<PAGE>
an agreement to indemnify reasonably satisfactory to the Corporation (an
affidavit of the registered holder, without bond, will be satisfactory), the
Corporation will (at its expense) execute and deliver in lieu of such
certificate a new certificate representing the number of shares represented by
such lost, stolen, destroyed or mutilated certificate.
(c) Notices. All notices referred to herein, except as otherwise
-------
expressly provided, will be hand delivered or made by registered or certified
mail, return receipt requested, postage prepaid, by overnight courier, or by
telefax and will be deemed to have been given when so hand delivered or mailed
or confirmed as received by telefax.
The Corporation shall provide at least 30-days' prior written notice
to the Holders of Class A Stock of the consummation of any Adjustment
Transaction or of any record date with respect to the Common Stock relating to
any Adjustment Transaction.
-7-
<PAGE>
IN WITNESS WHEREOF, The WMF Group, Ltd. has caused this Certificate of
Designations, Preferences and Rights of Class A Non-Voting Convertible Preferred
Stock to be duly executed by its President and Chief Executive Officer and
attested to by its Secretary and has caused its corporate seal to be affixed
hereto, this 30th day of December, 1998.
THE WMF GROUP, LTD.
By: /s/ Shekar Narasimhan
---------------------
Shekar Narasimhan
President and Chief Executive Officer
(Corporate Seal)
ATTEST:
By: /s/ Barbara Ekstrom
-------------------
Barbara Ekstrom
Corporate Secretary
-8-
<PAGE>
EXHIBIT 10.1
REGISTRATION RIGHTS AGREEMENT
Dated as of June 12, 1998
by and between
THE WMF GROUP, LTD.
as the Company,
and
HARVARD PRIVATE CAPITAL HOLDINGS, INC.
and
CAPRICORN INVESTORS II, L.P.
as the Initial Purchasers
This Registration Rights Agreement is made and entered into as of June 12,
1998, by and between The WMF Group, Ltd., a Delaware corporation (the
"Company"), and Harvard Private Capital Holdings, Inc., a Delaware corporation,
and Capricorn Investors II, L.P., a Delaware limited partnership (the "Initial
Purchasers").
This Agreement is entered into pursuant to the Stock Purchase Agreement
(the "Purchase Agreement"), dated June 12, 1998, and Shareholders' Agreement
(the Shareholders' Agreement) of the same date, both between Commercial Mortgage
Investment Trust, Inc., a Virginia corporation, the Company and the Initial
Purchasers. In order to induce the Initial Purchasers to enter into the Purchase
Agreement and Shareholders' Agreement, and pursuant to Section 6(f) of the
Shareholders' Agreement, the Company has agreed to provide the registration
rights provided for in this Agreement to the Initial Purchasers and their direct
and indirect transferees.
The parties hereby agree as follows:
1. Definitions
-----------
As used in this Agreement, the following terms shall have the following
meanings:
Affiliate: As to any specified Person, (i) any Person that directly or
---------
indirectly controls or is controlled by or is under common control with the
specified Person, (ii) any Person that is an officer of, partner in or trustee
of, or serves in a similar capacity with respect to, the specified Person or of
which the specified Person is an officer, partner or trustee, or with respect to
which the specified Person serves in a similar capacity, and (iii) any Person
that, directly or indirectly, is the beneficial owner of 5% or more of any class
of equity securities of the specified Person or of which the specified Person is
directly or indirectly the owner of 5% or more of any class of equity
securities.
Agreement: This Registration Rights Agreement, as the same may be amended,
---------
supplemented or modified from time to time in accordance with the terms hereof.
<PAGE>
Business Day: With respect to any act to be performed hereunder, each
------------
Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which
banking institutions in New York, New York or such other place where such act is
to occur are authorized or obligated by applicable law, regulation or executive
order to close.
CMIT: Commercial Mortgage Investment Trust, Inc., a Virginia corporation.
----
Closing Date: June 12, 1998.
------------
Commission: The United States Securities and Exchange Commission.
----------
Common Stock: Common stock, $0.01 par value per share, of the Company.
------------
Company: The WMF Group, Ltd., a Delaware corporation, and any successor
-------
corporation thereto.
Controlling Person: As defined in Section 8(a) hereof.
------------------ ------------
Exchange Date: The date on which an Initial Purchaser exchanges its Shares
--------------
for Exchange Shares pursuant to Section 6 of the Shareholders' Agreement.
Exchange Shares: Common Stock issuable upon exchange of the Shares issued
---------------
to the Initial Purchasers pursuant to the terms of the Purchase Agreement and
the Shareholders' Agreement.
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
------------
rules and regulations promulgated by the Commission thereunder.
Holder: Each registered holder of any Registrable Shares from time to
------
time, including the Initial Purchasers and their Affiliates.
Initial Purchasers: Harvard Private Capital Holdings, Inc. and Capricorn
------------------
Investors II, L.P.
Person: An individual, partnership, corporation, trust, or unincorporated
------
organization, or government and any agency or political subdivision thereof.
Proceeding: An action, claim, suit or proceeding (including, without
----------
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or, to the knowledge of the person subject thereto,
threatened.
Prospectus: The prospectus included in any Registration Statement,
----------
including any preliminary Prospectus, and all other amendments and supplements
to any such prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference, if any, in
such prospectus.
Purchase Agreement: As defined in the preamble.
------------------
2
<PAGE>
Register, registered and registration: Such terms shall refer to a
-------- ---------- ------------
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
Registrable Shares: The Exchange Shares and any shares of Common Stock
------------------
replacing or issued as a dividend on the Exchange Shares, upon original issuance
thereof and at all times subsequent thereto, until, in the case of any such
share, the earliest to occur of (i) the date on which it has been registered
effectively pursuant to the Securities Act and disposed of in accordance with
the Registration Statement relating to it, (ii) the date on which either it is
transferred in compliance with Rule 144 (or any similar provisions then in
effect) or (iii) the date on which it is sold to the Company.
Registration Expenses: Any and all expenses incident to performance of or
---------------------
compliance with this Agreement, including without limitation: (i) all
Commission, stock exchange, or other market registration, listing and filing
fees, (ii) all fees and expenses incurred in connection with compliance with
federal or state securities or blue sky laws (including any registration,
listing and filing fees and reasonable fees and disbursements of counsel in
connection with blue sky qualification of any of the Registrable Shares and the
preparation of a Blue Sky Memorandum and compliance with applicable rules and
regulations), (iii) all expenses of any Persons in preparing or assisting in
preparing, word processing, duplicating, printing, delivering and distributing
any Registration Statement, any Prospectus, any amendments or supplements
thereto, any underwriting agreements, securities sales agreements, certificates
and other documents relating to the performance of and compliance with this
Agreement, (iv) all fees and expenses incurred in connection with the listing of
any of the Registrable Shares on any securities exchange or market pursuant to
Section 5(i) hereof, (v) the fees and disbursements of counsel for the Company
- ------------
and of the independent public accountants (including without limitation, the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance) of the Company (provided that Registration Expenses shall
not include the fees and expenses of any counsel or accountants for the Holders)
and (vi) any fees and disbursements customarily paid by issuers or sellers of
securities (including the fees and expenses of any experts retained by the
Company in connection with any Registration Statement), but excluding
underwriters' and brokers' discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of Registrable Shares by a Holder.
Registration Statement: Any registration statement of the Company that
----------------------
covers the issuance or resale of any of the Registrable Shares on an appropriate
form, including the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference, if any, in such registration statement.
Rule 144: Rule 144 promulgated by the Commission pursuant to the
--------
Securities Act, as such rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission as a replacement thereto
having substantially the same effect as such rule.
3
<PAGE>
Rule 158: Rule 158 promulgated by the Commission pursuant to the
--------
Securities Act, as such rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission as a replacement thereto
having substantially the same effect as such rule.
Rule 424: Rule 424 promulgated by the Commission pursuant to the
--------
Securities Act, as such rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission as a replacement thereto
having substantially the same effect as such rule.
Securities Act: The Securities Act of 1933, as amended, and the rules and
--------------
regulations promulgated by the Commission thereunder.
Shareholders' Agreement: As defined in the preamble.
-----------------------
Shares: The shares of CMIT Common Stock and Class A Participating
------
Preferred Stock being offered and sold pursuant to the terms and conditions of
the Purchase Agreement.
Underwritten Offering: A sale of securities of the Company to an
---------------------
underwriter or underwriters for reoffering to the public.
2. Piggyback Registration
----------------------
(a) Piggyback Registration Rights and Notice of Registration. The Company
--------------------------------------------------------
shall notify all Holders in writing at least fourteen (14) days prior to filing
any registration statement under the Securities Act for the purpose of effecting
a public offering of securities of the Company (including, but not limited to,
registration statements relating to offerings of securities of the Company by
any shareholders of the Company, but excluding registration statements relating
exclusively to any employee benefit plan or corporate reorganization) and will
afford each such Holder an opportunity to include in such registration statement
all or any part of the Registrable Shares then held by such Holder. Each Holder
desiring to include in any such registration statement all or any part of the
Registrable Shares held by such Holder shall, within seven (7) days after
receipt of the above-described notice from the Company, so notify the Company in
writing, and in such notice shall inform the Company of the number of
Registrable Shares such Holder wishes to include in such registration statement.
If a Holder decides not to include all of its Registrable Shares in any
registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Shares in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(b) Right to Terminate Registration. The Company shall have the right, in
-------------------------------
its sole discretion, to terminate or withdraw any registration initiated by it
under this Section 2 prior to the effectiveness of such registration whether or
---------
not any Holder has elected to include Registrable Shares in such registration.
(c) Underwriting. If a registration statement under which the Company
------------
gives notice under this Section 2 is for an Underwritten Offering, then the
---------
Company shall so advise the Holders of Registrable Shares. In such event, the
right of any Holder to include its Registrable Shares in a registration pursuant
to this Section 2 shall be conditioned upon such Holder's
---------
4
<PAGE>
participation in such underwriting and the inclusion of such Holder's
Registrable Shares in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Shares through such
underwriting shall enter into an underwriting agreement in customary form with
the underwriter(s) selected for such underwriting. Notwithstanding any other
provision of this Agreement, if the managing underwriter(s) determine(s) in good
faith that marketing factors require a limitation of the number of shares to be
underwritten, then the managing underwriter(s) may exclude shares (including
Registrable Shares) from the registration and the underwriting, and the number
of shares that may be included in the registration and the underwriting shall be
allocated, first, to the Company, and second, to each of the shareholders
----- ------
(including the Holders) requesting inclusion of their shares in such
registration statement on a pro rata basis based on the total number of shares
such shareholder has requested be included in such registration statement;
provided, however, that the right of the underwriters to exclude shares
- -------- -------
(including Registrable Shares) from the registration and underwriting as
described above shall be restricted so that (i) the number of Registrable Shares
included in any such registration statement is not reduced below twenty-five
percent (25%) of the total number of Registrable Shares requested to be included
in the registration statement, and (ii) all shares that are not Registrable
Shares and that are held by persons who are officers or directors of the Company
(or any subsidiary of the Company) shall first be excluded from such
registration and underwriting before any Registrable Shares are so excluded. If
any Holder disapproves of the proposed terms of any such Underwritten Offering,
such Holder may elect to withdraw therefrom by written notice to the Company and
the managing underwriter(s), delivered at least ten (10) Business Days prior to
the date on which the Underwritten Offering is expected to commence. Any
Registrable Shares excluded or withdrawn from such underwriting shall be
excluded and withdrawn from the registration. For any Holder that is a
partnership or corporation, the partners, retired partners and shareholders of
such Holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "Holder," and any pro rata reduction with respect to such
"Holder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"Holder," as defined in this sentence.
(d) Holdback Agreement. By electing to include Registrable Shares in any
------------------
registration pursuant to Section 2 hereof, the Holder of the Registrable Shares
---------
shall be deemed to have agreed not to effect any public sale or distribution of
securities of the Company of the same or similar class or classes of the
securities included in the Registration Statement or any securities convertible
into or exchangeable or exercisable for such securities, including a sale
pursuant to Rule 144 under the Securities Act, during such periods as are
reasonably requested by the managing underwriter(s), if an Underwritten
Offering, or the Company, in any other registration. Any period up to 180 days
shall be deemed reasonable.
(e) The Company shall not be obligated to effect, or to take any action to
effect any such registration of Registrable Shares pursuant to this Section 2:
in any particular jurisdiction in which the Company would be required to execute
a general consent to service of process or to qualify to do business as a
foreign corporation in affecting such registration, qualification, or
compliance, unless the Company is already subject to service or required to be
so qualified in such jurisdiction and except as may be required by the
Securities Act.
5
<PAGE>
3. Demand Registration.
-------------------
If the Company shall receive from one or more Holders a written request or
requests that the Company effect a registration on any available Commission form
covering the resale of the Registrable Shares and any related qualification or
compliance under applicable state securities or "Blue Sky" laws with respect to
all or a part of the Registrable Shares owned by such Holders, then the Company
will:
(a) Notice. Promptly give written notice of the proposed registration and
------
the Holders' request therefor, and any related qualification or compliance, to
all other Holders of Registrable Shares; and
(b) Registration. As soon as practicable, use commercially reasonable best
------------
efforts to effect such registration and all such qualifications and compliances
as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Holders' Registrable Shares as are
specified in such request, together with all or such portion of the Registrable
Shares of any other Holders joining in such request as are specified in a
written request given within twenty (20) days after receipt of such written
notice from the Company; provided, however, that the Company shall not be
-------- -------
obligated to effect any such registration, qualification or compliance pursuant
to this Section 3:
---------
(i) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Shares and such other securities (if any) at an aggregate price
to the public of less than $2,000,000;
(ii) if the Company has effected a registration pursuant to this
Section 3 during the 6-month period preceding the current registration request;
- ---------
(iii) if the Board of Directors of the Company determines in its good
faith judgment that it would be inadvisable or not in the best interest of the
Company for such Registration Statement to be filed or declared effective at
such time, and if the Company shall furnish to the Holders a certificate signed
by the President or Chief Executive Officer of the Company stating that the
Board of Directors has so determined, in such event the Company shall have the
right (subject to the limitation set forth in the last sentence of the second
paragraph of Section 6) to defer the filing of such Registration Statement or
---------
delay its effective date for a period of not more than 180 days after receipt of
the request of the Holders under this Section 3;
---------
(iv) in any particular jurisdiction in which the Company would be
required to qualify to do business as a foreign corporation or to execute a
general consent to service of process in effecting such registration,
qualification, or compliance, unless the Company is already subject to service
or required to be so qualified in such jurisdiction and except as may be
required by the Securities Act.
(c) Limit on Requests. Each of the Initial Purchasers (or their assignees)
-----------------
shall be entitled have effected at its request only one registration pursuant to
this Section 3.
---------
6
<PAGE>
(d) Option to File a Single Registration Statement. The Company may at any
----------------------------------------------
time, in its sole discretion, satisfy the obligations set forth in this Section
-------
3 by filing one Registration Statement covering all of the Registrable Shares
- -
and causing such Registration Statement to remain effective until the date that
is two years after the latest Exchange Date.
(e) No Participation. The Company and its officers shall not be required
----------------
to participate in any underwritten offering pursuant to this Section 3 or to
---------
participate in any "road show" or other selling effort relating to any offering
pursuant to this Section 3.
---------
4. Expenses. As between the Company and the Holders, the Company shall pay
--------
all Registration Expenses in connection with the registration of the Registrable
Shares pursuant to this Agreement. The Holder or Holders shall pay all broker's
commissions and transfer taxes, if any, the fees and disbursements of counsel
for the Holders, and any other expense not specifically allocated to the Company
pursuant to this Agreement relating to the sale or disposition of such Holder's
Registrable Shares pursuant to any Registration Statement.
5. Registration Procedures.
-----------------------
Subject to Sections 2 and 3 hereof, in connection with the obligations of
---------- -
the Company with respect to any registration pursuant to this Agreement, the
Company shall use its commercially reasonable best efforts to effect or cause to
be effected the registration of the Registrable Shares under the Securities Act
to permit the sale of such Registrable Shares by the Holder or Holders in
accordance with customary methods of sale or distribution, including through
brokers' transactions and block trades. The Company shall:
(a) prepare and file with the Commission, as specified in this Agreement,
a Registration Statement, which Registration Statement shall comply as to form
in all material respects with the requirements of the applicable form and
include all financial statements required by the Commission to be filed
therewith, and use its commercially reasonable best efforts to cause such
Registration Statement to become effective as soon as possible after filing and
to remain effective, until the earlier of (i) the expiration of 120 days, (ii)
such time as all outstanding Registrable Shares have been sold pursuant to a
Registration Statement or have been transferred pursuant to Rule 144 or
otherwise transferred in a manner that results in the transferred security being
delivered not being subject to transfer restrictions under the Securities Act,
or (iii) such time as there are no longer any outstanding Registrable Shares;
provided, however, that in the event that sales of the Registrable Shares are
- -------- -------
suspended pursuant to the last paragraph of this Section 5 or pursuant to
---------
Section 6, then the 120-day period referred to in subpart (i) of this sentence
- ---------
shall be tolled until sales of the Registrable Shares may be resumed.
(b) subject to Section 5(h) hereof, prepare and file with the Commission
------------
such amendments and post-effective amendments to each such Registration
Statement as may be necessary to keep such Registration Statement effective for
the period described in Section 5(a); cause each such Prospectus contained
------------
therein to be supplemented by any required prospectus supplement, and as so
supplemented, to be filed pursuant to Rule 424 or any similar rule that may be
adopted under the Securities Act; and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by each
Registration Statement during the
7
<PAGE>
applicable period in accordance with the intended method or methods of
distribution by the selling Holder thereof;
(c) furnish without charge to any Holder named in any Prospectus as many
copies of such Prospectus, and any amendment or supplement thereto and such
other documents as such Holder may reasonably request, in order to facilitate
the public sale or other disposition of the Registrable Shares; the Company
consents to the use of any such Prospectus by such Holder in connection with the
offering and sale of the Registrable Shares covered by any such Prospectus;
(d) use its commercially reasonable best efforts to register or qualify,
or obtain exemption from registration or qualification for, all Registrable
Shares by the time the applicable Registration Statement is declared effective
by the Commission under all applicable state securities or "blue sky" laws of
such jurisdictions as any Holder shall reasonably request in writing, keep each
such registration or qualification or exemption effective during the period such
Registration Statement is required to be kept effective pursuant to Section 5(a)
------------
and do any and all other acts and things which may be reasonably necessary or
advisable to enable each Holder to consummate the disposition in each such
jurisdiction of such Registrable Shares owned by such Holder;
(e) notify each Holder promptly and, if requested by any Holder, confirm
such advice in writing (i) when a Registration Statement has become effective
and when any post-effective amendments and supplements thereto become effective,
(ii) of the issuance by the Commission or any state securities authority of any
stop order suspending the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, and (iii) of the happening of
any event during the period a Registration Statement is effective as a result of
which such Registration Statement or the related Prospectus contains any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading (which
advice shall be accompanied by an instruction to suspend the use of the
Prospectus until the requisite changes have been made);
(f) during the period of time referred to in Section 5(a), use its
------------
commercially reasonable best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of any enjoining order suspending the use or effectiveness
of a Registration Statement or the lifting of any suspension of the
qualification (or exemption from qualification) of any of the Registrable Shares
for sale in any jurisdiction, at the earliest possible moment;
(g) upon request, furnish to each requesting Holder, without charge, at
least one conformed copy of each Registration Statement and any post-effective
amendment thereto (without documents incorporated therein by reference or
exhibits thereto, unless requested);
(h) except as provided in Section 7 hereof, upon the occurrence of any
---------
event contemplated by Section 5(e)(iii) hereof, use its commercially reasonable
-----------------
best efforts to promptly prepare a supplement or post-effective amendment to a
Registration Statement or the related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Shares, such Prospectus will not
contain any untrue statement of a material fact or omit to state a material fact
8
<PAGE>
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
(i) if the Company has listed its Common Stock on an exchange or automated
quotation system, use its commercially reasonable best efforts (including,
without limitation, seeking to cure any deficiencies (within the Company's
control) cited by the exchange or automated quotation system in the Company's
listing application) to list all Registrable Shares on such exchange or
automated quotation system;
(j) prepare and file in a timely manner all documents and reports pursuant
to the Exchange Act which are incorporated by reference into any Registration
Statement;
(k) use its commercially reasonable best efforts to comply with all
applicable rules and regulations of the Commission and make generally available
to its securityholders, as soon as reasonably practicable, earnings statements
covering at least 12 months which satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 (or any similar rule promulgated under the
Securities Act) thereunder;
(l) provide and cause to be maintained a transfer agent for all
Registrable Shares covered by any Registration Statement from and after a date
not later than the effective date of such Registration Statement; and
(m) in connection with any sale or transfer of the Registrable Shares that
will result in such securities no longer being restricted from resale without
registration under the Securities Act, cooperate with the Holders to facilitate
the timely preparation and delivery of certificates representing the Registrable
Shares to be sold, which certificates shall not bear any restrictive legends,
and to enable such Registrable Shares to be in such denominations and registered
in such names as the Holders may request at least two (2) Business Days prior to
any sale of the Registrable Shares.
The Company may require each Holder to furnish to the Company such
information regarding the proposed distribution by such Holder of Registrable
Shares as the Company may from time to time reasonably request in writing and no
Holder shall be entitled to be named as a selling securityholder in any
Registration Statement and no Holder shall be entitled to use the Prospectus
forming a part thereof if such Holder does not provide such information to the
Company.
Upon receipt of written notice from the Company of the happening of any
event of the kind described in Section 5(e)(iii) hereof, the Holders will
-----------------
immediately discontinue disposition of Registrable Shares pursuant to a
Registration Statement until the Holders' receipt of the copies of a
supplemented or amended Prospectus. If so requested by the Company, the Holders
will deliver to the Company (at the expense of the Company) all copies in their
possession, other than permanent file copies then in the Holders' possession, of
the Prospectus covering such Registrable Shares current at the time of receipt
of such notice.
9
<PAGE>
6. Black-Out Period. Subject to the provision of this Section 6, following
---------------- ---------
the effectiveness of a Registration Statement (and the filings with any state
securities commissions), the Company, by written notice to the Holders, may
direct the Holders to suspend sales of the Registrable Shares pursuant to the
Registration Statement, if either of the following events shall occur: (i) the
Board of Directors of the Company determines in good faith that sales pursuant
to such Registration Statement would be inadvisable or not in the best interests
of the Company, or (ii) the suspension of sales is necessary to correct a
material misstatement or omission in the applicable Registration Statement. Upon
the occurrence of such event, the Company shall use its commercially reasonable
best efforts to cause the Registration Statement to become effective or to
promptly amend or supplement the Registration Statement on a post-effective
basis, as applicable, so as to permit the Holders to resume sales of the
Registrable Shares.
In the case of an event which causes the Company to suspend the
effectiveness of a Registration Statement (a "Suspension Event"), the Company
may give written notice (a "Suspension Notice") to the Holders at the addresses
set forth in the stock transfer records of the Company to suspend sales of the
Registrable Shares so that the Company may amend or update the Registration
Statement; provided, however, that such suspension shall continue only for so
-------- -------
long as the Suspension Event or its effect is continuing and the Company is
taking all reasonable steps to terminate suspension of the effectiveness of the
Registration Statement as promptly as possible. In no case shall a suspension of
sales pursuant to this Section 6 (which term shall include for this purpose any
---------
deferral of filing or declaration of effectiveness of the applicable
registration statement pursuant to Section 3(b)(iii)) continue for a total of
-----------------
more than 180 days out of any 365-day period.
The Holders shall not effect any sales of the Registrable Shares pursuant
to such Registration Statement at any time after receipt of a Suspension Notice
from the Company (and prior to receipt of an End of Suspension Notice (defined
below)). If so requested by the Company, the Holders will deliver to the
Company (at the expense of the Company) all copies in their possession, other
than permanent file copies then in the Holders' possession, of the Prospectus
covering such Registrable Shares at the time of receipt of the Suspension
Notice. The Holders may recommence effecting sales of the Registrable Shares
pursuant to the Registration Statement (or such filings) following further
notice to such effect (an "End of Suspension Notice") from the Company, which
End of Suspension Notice shall be given by the Company to the Holders in the
manner described above promptly following the conclusion of any Suspension
Event.
7. Indemnification and Contribution.
--------------------------------
(a) Indemnification by the Company. The Company agrees to indemnify and
------------------------------
hold harmless (i) each Initial Purchaser, (ii) each Holder, (iii) each Person,
if any, who controls (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) any of the foregoing (any of the persons
referred to in this clause (iii) being hereinafter referred to as a "Controlling
Person"), and (iv) the respective officers, directors, partners, employees,
representatives and agents of each Initial Purchaser and each Holder or any
Controlling Person as follows:
10
<PAGE>
(i) from and against any and all loss, claim, liability and damage
whatsoever, as incurred, arising out of (A) violation by the Company of the
Securities Act or applicable state securities laws in connection with an
offering of Registrable Shares hereunder and (B) any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement (or
any amendment thereto) pursuant to which Registrable Shares were registered
under the Securities Act, including all documents incorporated therein by
reference, or the omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or arising out of any untrue statement or alleged untrue statement of a material
fact contained in any Prospectus (or any amendment or supplement thereto),
including all documents incorporated therein by reference, or the omission or
alleged omission to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
-------- -------
that such indemnity with respect to any Prospectus shall not inure to the
benefit of any Holder or Initial Purchaser (or any Controlling Person thereof)
to the extent that any such loss, claim, liability, damage or expense arises out
of such indemnified person's failure to send or give a copy of the revised final
Prospectus, as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Shares to such Person if such statement or omission was corrected in such final
Prospectus;
(ii) from and against any and all loss, liability, claim and, damage
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any governmental
agency or body, commenced or threatened, or of any claim whatsoever based upon
any such untrue statement or omission, if such settlement is effected with the
written consent of the Company, which consent shall not be unreasonably
withheld; and
(iii) from and against any and all expense reasonably incurred
(including reasonable fees and disbursements of one firm of attorneys), in
investigating, preparing or defending against any litigation, or investigation
or proceeding by any governmental agency or body, commenced or threatened, in
each case whether or not a party, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under subparagraph (i) or (ii)
above;
provided, however, that this indemnity agreement does not apply to any
-------- -------
Holder with respect to any loss, liability, claim, damage or expense to the
extent arising out of any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with information
furnished to the Company by such Holder expressly for use in a Registration
Statement (or any amendment thereto) or any Prospectus (or any amendment or
supplement thereto).
(b) Indemnification by Holders. Each Holder severally agrees to indemnify
--------------------------
and hold harmless the Company, its directors, officers, partners, employees,
representatives and agents (including each officer of the Company who signed the
Registration Statement), and each Person, if any, who controls the Company,
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, against
11
<PAGE>
(i) any and all loss, liability, claim, damage and expenses
whatsoever, as incurred, arising out of (A) any violation by the Holders of the
Securities Act or applicable state securities laws in connection with the
offering and (B) any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement (or any amendment thereto) pursuant
to which Registrable Shares were registered under the Securities Act, including
all documents incorporated therein by reference, or the omission or alleged
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto), including all documents
incorporated therein by reference, or the omission or alleged omission to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(ii) from and against any and all loss, liability, claim and, damage
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any governmental
agency or body, commenced or threatened, or of any claim whatsoever based upon
any such untrue statement or omission, if such settlement is effected with the
written consent of such Holder, which consent shall not be unreasonably
withheld; and
(iii) from and against any and all expense reasonably incurred
(including reasonable fees and disbursements of one firm of attorneys), in
investigating, preparing or defending against any litigation, or investigation
or proceeding by any governmental agency or body, commenced or threatened, in
each case whether or not a party, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under subparagraph (i) or (ii)
above;
but only with respect to such untrue statements or omissions, or alleged
untrue statements or omissions, made in a Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with information furnished to the Company by
such Holder expressly for use in such Registration Statement (or any amendment
thereto) or such Prospectus (or any amendment or supplement thereto), and
provided further, that no Holder shall be liable for any amount in excess of the
- -------- -------
net proceeds received by such Holder from the sale of such Holder's Registrable
Shares pursuant to a Registration Statement or a Prospectus, as the case may be.
(c) Conduct of Indemnification Proceedings. Each indemnified party shall
--------------------------------------
give reasonably prompt notice to each indemnifying party of any action or
proceeding commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve it
from any liability which it may have under this Section 7 except to the extent
---------
that the indemnifying party is actually prejudiced by such failure to give
notice. If the indemnifying party so elects within a reasonable time after
receipt of such notice, the indemnifying party may assume the defense of such
action or proceeding at such indemnifying party's own expense with counsel
chosen by the indemnifying party and approved by the indemnified parties
defendant in such action or proceeding, which approval shall not be unreasonably
withheld; provided, however, that, if such indemnified party or parties
-------- -------
reasonably
12
<PAGE>
determine that a conflict of interest exists where it is advisable for such
indemnified party or parties to be represented by separate counsel or that, upon
advice of counsel, there may be legal defenses available to them which are
different from or in addition to those available to the indemnifying party, then
the indemnifying party shall not be entitled to assume such defense and the
indemnified party or parties shall be entitled to one separate counsel at the
indemnifying party's expense. If an indemnifying party is not entitled to assume
the defense of such action or proceeding as a result of the proviso to the
preceding sentence, such indemnifying party's counsel shall be entitled to
conduct such indemnifying party's defense, and counsel for the indemnified party
or parties shall be entitled to conduct the defense of such indemnified party or
parties, it being understood that both such counsel will cooperate with each
other to conduct the defense of such action or proceeding as efficiently as
possible. If an indemnifying party is not so entitled to assume the defense of
such action or does not assume such defense, after having received the notice
referred to in the first sentence of this paragraph, the indemnifying party or
parties will pay the reasonable fees and expenses of not more than one counsel
(and any necessary local counsel) for the indemnified party or parties. In such
event, however, no indemnifying party will be liable for any settlement effected
without the written consent of such indemnifying party. No indemnifying party
shall, without the consent of the indemnified party, consent to entry of any
judgment or enter into a settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation. If an
indemnifying party is entitled to assume, and assumes, the defense of such
action or proceeding in accordance with this paragraph, such indemnifying party
shall not be liable for any fees and expenses for counsel for the indemnified
parties incurred thereafter in connection with such action or proceeding.
(d) Contribution. In order to provide for just and equitable contribution
------------
in circumstances in which the indemnity agreement provided for in this Section 7
---------
is for any reason held to be unenforceable, unavailable or insufficient although
applicable in accordance with it terms, the Company and a Holder shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by such indemnity agreement incurred by the Company and
the Holder in such proportion as is appropriate to reflect the relative fault of
the Company on the one hand and the Holder on the other. Relative fault shall be
determined by reference to, among other things, whether an untrue or alleged
untrue statement of a material fact or an omission or alleged omission of a
material fact relates to information supplied by or available to the Company on
the one hand, or the Holder, on the other hand, and by the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. Notwithstanding the foregoing, no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. No Holder shall be liable for any
amount in excess of the net proceeds received from such Holder from the sale of
such Holder's Registrable Shares pursuant to a Registration Statement or a
Prospectus, as the case may be. For purposes of this Section 7, each Person, if
---------
any, who controls (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) the Holder or the Company (as applicable) and
its respective officers, directors, partners, employees, representatives and
agents shall have the same rights to contribution as the Holder or the Company
(as applicable). Each party entitled to contribution agrees that upon the
service of a
13
<PAGE>
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it shall promptly give
written notice of such service to the party or parties from whom contribution
may be sought, but the omission so to notify such party or parties of any such
service shall not relieve the party from whom contribution may be sought from
any obligation it may have hereunder or otherwise.
(e) Survival. The obligations of the Company and the Holders under this
--------
Section 7 shall survive the completion of any offering of Registrable Shares
- ---------
pursuant to a Registration Statement or otherwise.
8. Covenants of the Holders. Each of the Holders hereby agrees (a) to
------------------------
cooperate with the Company and to furnish to the Company all such information
concerning its plan of distribution and ownership interests with respect to its
Registrable Shares in connection with the preparation of a Registration
Statement with respect to such Holder's Registrable Shares and filings with any
state securities commissions as the Company may reasonably request, and (b) to
deliver or cause delivery of the Prospectus contained in such Registration
Statement to any purchaser of the shares covered by such Registration Statement
from the Holder, as required by the Securities Act and any applicable state
securities laws.
9. Additional Shares. The Company, at its option, may register under any
-----------------
Registration Statement and any filings with any state securities commissions
filed pursuant to this Agreement, any number of unissued shares of Common Stock
or any shares of Common Stock owned by any other shareholder or shareholders of
the Company.
10. Termination of the Company's Obligations. The Company shall have no
-----------------------------------------
obligations pursuant to this Agreement with respect to any request or requests
for registration made by any Holder on a date more than two (2) years after the
Exchange Date applicable to such Holder.
11. No Other Obligation to Register. Except as otherwise expressly provided in
-------------------------------
this Agreement, the Company shall have no obligation to the Holders to register
the Registrable Shares under the Securities Act or applicable state securities
laws.
12. Miscellaneous.
-------------
(a) Remedies. In the event of a breach by the Company or by a Holder of
--------
any of their obligations under this Agreement, each Holder or the Company, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The parties agree that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach of any of the
provisions of this Agreement and the parties hereby further agree that, in the
event of any action for specific performance in respect of such breach, the
parties shall waive the defense that a remedy at law would be adequate. No
Holder shall have any right to obtain or seek an injunction restraining or
otherwise delaying any registration as a result of any controversy that might
arise with respect to the interpretation or implementation of this Agreement.
14
<PAGE>
(b) Amendments and Waivers. The provisions of this Agreement, including
----------------------
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, without the written consent of the Company and of Holders owning not less
than 50% of the then outstanding Registrable Shares; provided, however, that,
-------- -------
for the purposes of this Agreement, Registrable Shares that are owned, directly
or indirectly, by either the Company or an Affiliate of the Company shall not be
deemed to be outstanding. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of a Holder whose securities are being sold pursuant
to a Registration Statement and that does not directly or indirectly affect the
rights of any other Holder may be given by such Holder; provided, however, that
-------- -------
the provisions of this sentence may not be amended, modified, or supplemented
except in accordance with the provisions of the immediately preceding sentence.
(c) Notices. All notices and other communications provided for herein
-------
shall be made in writing by hand-delivery, next-day air courier, certified
first-class mail, return receipt requested, telex or telecopy;
(i) if to the Company, as provided in the Purchase Agreement,
(ii) if to the Initial Purchasers, as provided in the Purchase
Agreement, or
(iii) if to any other person who is then the registered Holder of any
Registrable Shares, to the address of such Holder as it appears in the Common
Stock register of the Company.
Except as otherwise provided in this Agreement, all such communications
shall be deemed to have been duly given when (v) delivered by hand, if
personally delivered, (w) one (1) Business Day after being timely delivered to a
next-day air courier, (x) five (5) Business Days after being deposited in the
mail, postage prepaid, if mailed, (y) when answered back, if telexed or (z) when
receipt is acknowledged by the recipient's telecopier machine, if telecopied.
(d) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors and permitted assigns of each of the parties
and shall inure to the benefit of each Holder. Each Holder shall be deemed a
third party beneficiary of this Agreement. The Company may not assign its rights
or obligations hereunder without the prior written consent of each Holder.
Notwithstanding the foregoing, no assignee of the Company shall have any of the
rights granted under this Agreement until such assignee shall acknowledge its
rights and obligations hereunder by a signed written agreement pursuant to which
such assignee accepts such rights and obligations.
(e) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement.
15
<PAGE>
(f) Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Virginia, as applied to
contracts made and performed within the Commonwealth of Virginia without regard
to principles of conflicts of law.
(g) Severability. If any term, provision, covenant or restriction of this
------------
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their reasonable efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the provisions hereof.
All references made in this Agreement to "Section" refer to such Section of this
Agreement, unless expressly stated otherwise.
16
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first written above.
THE WMF GROUP, LTD.
By: /s/ Shekar Narasimhan
--------------------------------
Name: Shekar Narasimhan
Title: President and Chief Executive Officer
The foregoing Registration Rights Agreement
is hereby confirmed and accepted as of the date
first above written.
HARVARD PRIVATE CAPITAL HOLDINGS, INC.
By: /s/ Michael R. Eisenson
-------------------------------
Name: Michael R. Eisenson
Title: Authorized Signatory
By: /s/ Tim R. Palmer
-------------------------------
Name: Tim R. Palmer
Title: Authorized Signatory
CAPRICORN INVESTORS II, L.P.
By: Capricorn Holdings, LLC
Its General Partner
By: /s/ Herbert S. Winokur, Jr.
-------------------------------
Name: Herbert S. Winokur, Jr.
Title: Manager
17
<PAGE>
FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
------------------------------------------------
THIS AMENDMENT TO THE REGISTRATION RIGHTS AGREEMENT (the "Amendment") is
made and entered into as of October 16, 1998, by and among THE WMF GROUP, LTD.,
a Delaware corporation (the "Company"), HARVARD PRIVATE CAPITAL HOLDINGS, INC.,
a Massachusetts corporation ("Harvard"), CAPRICORN INVESTORS II, L.P., a
Delaware limited partnership ("Capricorn"), DEMETER HOLDINGS CORPORATION, a
Massachusetts corporation ("Demeter"), and PHEMUS CORPORATION, a Massachusetts
corporation ("Phemus").
RECITALS
--------
WHEREAS, the Company, Harvard and Capricorn previously had made and entered
a Registration Rights Agreement dated June 12, 1998 (the "Registration Rights
Agreement"); and
WHEREAS, the Company, Demeter, Phemus, Harvard and Capricorn have made and
entered a Stock Purchase Agreement dated as of October 16, 1998 (the "Stock
Purchase Agreement"), whereby Demeter, Phemus and Capricorn have agreed to
purchase 3,635,972 shares of the Company's Class A Non-Voting Convertible
Preferred Stock, par value $.01 per share (the "Class A Preferred Stock"); and
WHEREAS, the Company, Demeter, Phemus and Capricorn have made and entered a
Standby Purchase Agreement dated as of October 16, 1998 ("Standby Agreement"),
whereby Demeter, Phemus, and Capricorn have agreed to purchase 664,028 shares of
the Company's common stock not subscribed for by other shareholders during the
rights offering to the shareholders planned for early 1999 (the "Rights
Offering"); and
WHEREAS, the parties to this Amendment desire to amend the Registration
Rights Agreement to add as parties Demeter and Phemus, so as to include Demeter
and Phemus as "Holders" and the Common Stock into which the Class A Preferred
Stock purchased pursuant to the Stock Purchase Agreement is convertible and the
Common Stock purchased pursuant to the Standby Agreement as "Registrable
Shares," as those terms are defined in the Registration Rights Agreement, and to
make certain other amendments to the Registration Rights Agreement, as set forth
herein;
THEREFORE, the parties hereby agree that the Registration Rights Agreement
is hereby amended to add Demeter and Phemus as parties as follows, effective as
of October 16, 1998:
AGREEMENT
---------
1. The following definitions shall be added to Section 1 of the
Registration Rights Agreement:
"Demeter: Demeter Holdings Corporation."
-------
"Phemus: Phemus Corporation."
------
<PAGE>
"Purchased Shares: The shares of Common Stock issuable upon the
----------------
conversion of the Class A Preferred Stock purchased by Demeter, Phemus and
Capricorn pursuant to the Stock Purchase Agreement, dated as of October 16,
1998 (the "Stock Purchase Agreement"), by and among the Company, Demeter,
Phemus, Harvard and Capricorn; the shares of Common Stock purchased by
Demeter, Phemus and Capricorn pursuant to the Standby Purchase Agreement,
dated as of October 16, 1998, by and among the Company, Demeter, Phemus and
Capricorn; the shares of Common Stock issuable to Commercial Mortgage
Investment Trust, Inc. ("COMIT") upon conversion of the Company's
subordinated notes held by COMIT pursuant to Section 5.6 of the Stock
Purchase Agreement; and the shares of Common Stock issuable upon conversion
of the Class A Preferred Stock issuable to COMIT upon conversion of the
Company's subordinated notes held by COMIT pursuant to Section 5.6 of the
Stock Purchase Agreement."
2. The definition of "Holder" in Section 1 of the Registration Rights
Agreement shall be deleted in its entirety and shall be replaced by the
following:
"Holder: Each registered holder of any Registrable Shares from time
------
to time, including Demeter, Phemus, the Initial Purchasers and their
respective Affiliates."
3. The definition of "Registrable Shares" in Section 1 of the
Registration Rights Agreement shall be deleted in its entirety and shall be
replaced by the following:
"Registrable Shares: The Purchased Shares, the Exchange Shares and
------------------
any shares of Common Stock replacing or issued as a dividend on the
Purchased Shares or the Exchange Shares, upon original issuance thereof and
at all times subsequent thereto, until, in the case of any such share, the
earliest to occur of (i) the date on which it has been registered
effectively pursuant to the Securities Act and disposed of in accordance
with the Registration Statement relating to it, (ii) the date on which it
is transferred in compliance with Rule 144 (or any similar provisions then
in effect) or (iii) the date on which it is sold to the Company."
4. Section 3(c) of the Registration Rights Agreement shall be deleted in
its entirety and shall be replaced by the following:
"Limit on Requests. Each of the Holders (or their assignees) shall be
-----------------
entitled to have effected at its request pursuant to this Section 3 (i) one
---------
registration with respect to Exchange Shares and (ii) one registration with
respect to Purchased Shares."
5. The parties hereby ratify and confirm all other provisions of the
Registration Rights Agreement without amendment.
2
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to the
Registration Rights Agreement to be duly executed as of October 16, 1998.
THE WMF GROUP, LTD.
By: /s/ Shekar Narasimhan
----------------------------
Name: Shekar Narasimhan
Title: President and Chief Executive Officer
HARVARD PRIVATE CAPITAL HOLDINGS, INC.
By: /s/ Michael Thonis
----------------------------
Name: Michael Thonis
Title: Authorized Signatory
By: /s/ Tim R. Palmer
----------------------------
Name: Tim R. Palmer
Title: Authorized Signatory
CAPRICORN INVESTORS II, L.P.
By: Capricorn Holdings, LLC, a Delaware
limited liability company, its General
Partner
By: /s/ Herbert S. Winokur, Jr.
----------------------------
Name: Herbert S. Winokur, Jr.
Title: Manager
PHEMUS CORPORATION
By: /s/ Michael Thonis
----------------------------
Name: Michael Thonis
Title: Authorized Signatory
By: /s/ Tim R. Palmer
----------------------------
Name: Tim R. Palmer
Title: Authorized Signatory
3
<PAGE>
DEMETER HOLDINGS CORPORATION
By: /s/ Michael Thonis
----------------------------
Name: Michael Thonis
Title: Authorized Signatory
By: /s/ Tim R. Palmer
----------------------------
Name: Tim R. Palmer
Title: Authorized Signatory
4
<PAGE>
EXHIBIT 10.2
STANDBY PURCHASE AGREEMENT
--------------------------
THIS STANDBY PURCHASE AGREEMENT (this "Agreement") is made and entered
---------
into as of October 16, 1998, by and among THE WMF GROUP, LTD., a Delaware
corporation (the "Company"), DEMETER HOLDINGS CORPORATION, a Massachusetts
-------
corporation ("Demeter"), PHEMUS CORPORATION, a Massachusetts corporation
-------
("Phemus"), and CAPRICORN INVESTORS II, L.P., a Delaware limited partnership
------
("Capricorn"). Demeter, Phemus and Capricorn are referred to herein
---------
individually as an "Investor" and collectively as the "Investors." Capitalized
-------- ---------
terms not otherwise defined herein shall have the meanings assigned to them in
the Stock Purchase Agreement referred to below.
RECITALS
--------
A The Company and the Investors entered into the Stock Purchase
Agreement, dated as of October 16, 1998 (the "Stock Purchase
--------------
Agreement"), providing for the purchase by the Investors of 3,635,972
---------
shares of capital stock in a private placement by the Company (the
"Private Placement").
-----------------
B On October 21, 1998, the Company announced a rights offering to be
made to the Company's shareholders (the "Rights Offering").
---------------
C As provided for in the Stock Purchase Agreement, the Company and the
Investors now desire to enter into this Agreement to provide for a
stand-by commitment by the Investors to purchase up to 664,028 shares
of Common Stock (the "Stand-By Shares") in connection with the Rights
---------------
Offering.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE AND SELL STOCK.
------------------------------------
Subject to the terms and conditions set forth in this Agreement, the
Company agrees to issue and sell to the Investors, and the Investors agree to
purchase from the Company, up to 664,028 shares of Common Stock not subscribed
for by other shareholders of the Company in the Rights Offering, including
pursuant to any oversubscription privilege (the "Available Shares"), at a
----------------
purchase price of $5.00 per share (the "Purchase Price"). Of the Available
--------------
Shares, each Investor will purchase up to the maximum amount of its individual
commitment to purchase Stand-By Shares set forth on Exhibit A hereto. The
---------
obligations of the Investors to purchase
<PAGE>
Stand-By Shares shall be several and not joint. If the number of Available
Shares is less than the maximum number of Stand-By Shares, then each Investor
shall purchase a number of Stand-By Shares calculated by multiplying the number
of Available Shares by a fraction, the numerator of which shall be the maximum
amount of such Investor's individual commitment as set forth on Exhibit A and
---------
the denominator of which is the maximum aggregate number of Stand-By Shares.
2. DETERMINATION OF AVAILABLE SHARES; CLOSING.
------------------------------------------
2.1. Determination of Available Shares.
---------------------------------
As soon as practicable following the expiration of the exercise
period of the rights issued in the Rights Offering (the "Rights"), the Company
------
shall notify the Investors in writing of the number of Available Shares, which
shall be equal to the total number of Rights issued by the Company, less (i) the
number of Rights issued to the Investors and (ii) the number of Rights for which
the Company has received proper notice of exercise and full payment of the
applicable exercise price, and the number of Available Shares to be purchased by
each Investor, calculated in accordance with Section 1 of this Agreement.
---------
2.2. The Closing.
-----------
The sale and purchase of the Stand-By Shares (the "Closing") will
-------
take place at the offices of the Company at 10:00 a.m., Vienna, Virginia, time
on the fifth business day following the Company's delivery to the Investors of
notice of the number of Available Shares to be purchased by each of them, or at
such time and place as the Company and the Investors mutually agree upon (the
"Closing Date"). At the Closing, the Company will deliver to each Investor a
------------
certificate representing the Available Shares to be purchased by such Investor
against delivery to the Company by the Investor of the applicable Purchase Price
for such shares in immediately available funds.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
---------------------------------------------
The Company hereby represents and warrants to the Investors that at the
Closing, the following statements will be true and correct:
3.1. Organization, Good Standing and Qualification.
---------------------------------------------
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the state of Delaware and has all requisite
corporate power and authority to own its properties and assets and to carry on
its business as now conducted and as presently proposed to be conducted. The
Company is duly qualified and in good standing to do business as a foreign
corporation in each jurisdiction where failure to be so qualified would have a
material adverse effect on the business, financial condition, assets or
prospects of the Company (a "Material Adverse Effect").
-----------------------
-2-
<PAGE>
3.2. Capitalization.
--------------
As of the date of this Agreement, the capitalization of the Company
consists of the following:
(a) Preferred Stock. A total of 12,500,000 authorized shares of
---------------
Preferred Stock, $.01 par value per share (the "Preferred Stock"), of which
---------------
3,635,972 shares have been designated Class A Non-voting Convertible
Preferred Stock, par value $.01 per share (the "Class A Preferred Stock"),
none of which are issued and outstanding. The rights, privileges and
preferences of the Class A Preferred Stock are as set forth in the
Company's Restated Certificate of Incorporation, as amended (the
"Certificate of Incorporation").
(b) Common Stock. A total of 25,000,000 authorized shares of Common
------------
Stock, of which 5,299,383 shares of Common Stock are issued and
outstanding. All issued shares of Common Stock have been duly and validly
authorized and issued in material compliance with all federal and state
securities laws and are fully paid and nonassessable.
(c) Options, Warrants, Reserved Shares. Except for the Class A
----------------------------------
Preferred Stock and as set forth on Schedule 3.2(c), there are no
---------------
outstanding options, warrants, rights (including conversion or preemptive
rights) or agreements for the purchase or acquisition from the Company of
any shares of its capital stock or any securities convertible into or
ultimately exchangeable or exercisable for any shares of the Company's
capital stock. Except as set forth on Schedule 3.2(c), no shares of the
---------------
Company's outstanding capital stock, or stock issuable upon exercise or
exchange of any outstanding options, warrants or rights, or other stock
issuable by the Company, are subject to any rights of first refusal or
other rights to purchase such stock (whether in favor of the Company or any
other person), pursuant to any agreement or commitment of the Company.
(d) No Agreements. To the Company's knowledge, no shareholders
-------------
agreement, voting trust agreement or similar agreement exists relating to
the Company's securities.
3.3. Company Subsidiaries.
--------------------
Schedule 3.3 is a true and complete list of all business entities
------------
that the Company operates, owns or otherwise controls directly or indirectly
through one or more subsidiaries, partnerships, joint ventures or other business
associations, a majority of the outstanding voting securities (the
"Subsidiaries"). Each Subsidiary is duly incorporated and validly existing under
------------
the laws of its jurisdiction of incorporation and has the requisite power and
authority to own its properties and assets and to carry on its business as now
being conducted and as presently proposed to be conducted. Each Subsidiary is
duly qualified and in good standing to do business as a foreign corporation in
each jurisdiction where failure to be so qualified would have a material adverse
effect on the business, financial condition, assets or prospects of such
Subsidiary.
All of such outstanding shares of capital stock of each Subsidiary
are validly issued, fully paid and nonassessable. Except as set forth on
Schedule 3.3, the Company owns all
- ------------
-3-
<PAGE>
of the shares of the issued and outstanding capital stock of the Subsidiaries
free and clear of any liens, claims, encumbrances, charges or rights of third
parties of any kind whatsoever.
3.4. Due Authorization; Enforceability.
---------------------------------
All corporate action on the part of the Company, its officers,
directors and shareholders necessary for the authorization, execution, delivery
and performance of all obligations of the Company under this Agreement, and the
authorization, issuance, reservation for issuance and delivery of the Stand-By
Shares has been taken. This Agreement constitutes a valid and legally binding
obligation of the Company, enforceable in accordance with its terms, except as
may be limited by (i) applicable bankruptcy, insolvency, reorganization or other
laws of general application relating to or affecting the enforcement of
creditors' rights generally and (ii) the effect of rules of law governing the
availability of equitable remedies.
3.5. Valid Issuance of Stock; Compliance with Securities Laws.
--------------------------------------------------------
(a) The Stand-By Shares, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration provided
for herein, will be duly and validly issued, fully paid and nonassessable.
(b) Based in part on the representations made by the Investors in
Section 4 hereof, the Stand-By Shares will be exempt from the registration
---------
and prospectus delivery requirements of the U.S. Securities Act of 1933, as
amended (the "1933 Act") and the registration and qualification
--------
requirements of the securities laws of Massachusetts, Delaware, Virginia
and Connecticut.
3.6. Consents.
--------
No further consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority or any third-party on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for such qualifications or filings under
------ ---
the 1933 Act and the regulations thereunder and all other applicable state
securities laws as may be required in connection with the transactions
contemplated by this Agreement. All such qualifications and filings will, in the
case of qualifications, be effective on the Closing Date and will, in the case
of filings, be made within the time prescribed by law.
3.7. Legal and Governmental Proceedings.
----------------------------------
Except as set forth on Schedule 3.7, no legal or governmental action,
------------
proceeding or investigation is pending, or to the best of the Company's
knowledge, threatened (or any basis therefor known to the Company) that
questions the validity of this Agreement or the Common Stock or that, if
determined adversely to the Company or any Subsidiary, is reasonably likely,
currently or prospectively, individually or in the aggregate, to have a Material
Adverse Effect.
-4-
<PAGE>
3.8. Compliance with Charter Documents, Contracts and Law.
----------------------------------------------------
Except as set forth on Schedule 3.8, the Company and each Subsidiary
------------
is not in violation of its respective articles of incorporation or bylaws, both
as amended, nor in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or instrument
to which it is a party or by which it or any of its properties may be bound. To
the best of the Company's knowledge, except for any violations that individually
and in the aggregate would not have a Material Adverse Effect, the Company and
the Subsidiaries are in compliance with all applicable statutes, laws,
regulations and executive orders of the United States of America and all states,
foreign countries or other governmental bodies and agencies having jurisdiction
over the Company's and the Subsidiaries' business or properties. Neither the
Company nor any Subsidiary has received any notice of any such violation of such
statutes, laws, regulations or orders that has not been remedied prior to the
date hereof. The execution, delivery and performance by the Company of this
Agreement and the consummation of the transactions contemplated hereby will not
result in any such violation or default, or be in conflict with or constitute,
with or without the passage of time or the giving of notice or both, either a
default under the Company's Certificate of Incorporation or Bylaws, or, to the
best of the Company's knowledge, any such violation of any statutes, laws,
regulations or orders.
3.9. No Conflicts.
------------
The execution, delivery and performance by the Company of this
Agreement and the consummation of the transactions contemplated hereby will not
violate or conflict with or result in a breach of any provision of, or
constitute a default (or any event that, with notice or lapse of time or both,
would constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any lien upon any of the properties of the Company or
any Subsidiary under, or result in being declared void, voidable or without
further binding effect, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust or any license, franchise, permit,
lease, contract, agreement or other instrument, commitment or obligation to
which the Company or any Subsidiary is a party, or by which the Company, the
Subsidiaries or any of their properties is bound or affected, except for any of
the foregoing matters that would not reasonably be expected, individually or in
the aggregate, to result in a Material Adverse Effect.
3.10. Securities Filings.
------------------
As of their respective dates, all reports, schedules, forms, statements and
other documents required to be filed by the Company under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), since December 1, 1997, in
--------
each case, as amended (the "Company Reports"): (a) complied as to form in all
---------------
material respects with the applicable requirements of the 1934 Act and (b) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. Each of the consolidated balance sheets of the Company included in
or incorporated by reference into the Company Reports (as
-5-
<PAGE>
amended and including the related notes and schedules) (i) complied as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the U.S. Securities Exchange Commission
("SEC") with respect thereto, (ii) were prepared in all material respects in
---
accordance with generally accepted accounting principles ("GAAP"), and (iii)
----
fairly presented in all material respects the consolidated financial position of
the Company and its wholly-owned subsidiaries as of its date in conformity with
GAAP. Each of the consolidated statements of income, retained earnings and cash
flows of the Company included in or incorporated by reference into the Company
Reports (as amended and including any related notes and schedules) (A) complied
as to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto, (B) were
prepared in accordance with GAAP, and (C) fairly presented the results of
operations, retained earnings or cash flows, as the case may be, of the Company
and its subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments that would not be
material in amount or effect) in conformity with GAAP.
The Company's registration statement relating to the Rights Offering as of
its effective date (a) complied as to form in all material respects with the
applicable requirements of the 1933 Act and (b) did not contain any untrue
statement of a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
Except as and to the extent set forth in the Company Reports and as set
forth on Schedule 3.10, neither the Company nor any of its subsidiaries has any
-------------
material liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that would be required to be reflected on, or reserved
against in, a balance sheet of the Company or in the notes thereto, prepared in
accordance with GAAP consistently applied, or any other material liabilities
(such liabilities being deemed material if the value of such liabilities,
individually or in the aggregate, is greater than $1 million), except
liabilities arising in the ordinary course of business since such date which
would not have a Material Adverse Effect.
3.11. No Changes.
----------
Since September 30, 1998, except as set forth on Schedule 3.11,
-------------
there has been no material adverse change in the business, financial condition,
assets or prospects of the Company.
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
-----------------------------------------------
Each Investor hereby represents and warrants to the Company that at
Closing, the following statements will be true and correct:
4.1. Organization, Good Standing and Qualification.
---------------------------------------------
Such Investor is a partnership or corporation, as applicable, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its formation and has
-6-
<PAGE>
all requisite power and authority to own its properties and assets and to enter
into the transactions contemplated by this Agreement.
4.2. Due Authorization.
-----------------
All corporate and partnership action on the part of such Investor as
applicable, necessary for the authorization, execution, delivery and performance
of all obligations of such Investor under this Agreement has been taken. This
Agreement constitutes such Investor's valid and legally binding obligation,
enforceable in accordance with its terms except as may be limited by (i)
applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) the effect of rules of law governing the availability of
equitable remedies.
4.3. Purchase for Own Account.
------------------------
The Stand-By Shares are being acquired for investment for such
Investor's own account, not as a nominee or agent, and not with a view to the
public resale or distribution thereof within the meaning of the 1933 Act, and
such Investor has no present intention of selling, granting any participation
in, or otherwise distribution the same. Such Investor also represents that it
has not been formed for the specific purpose of acquiring the Stand-By Shares.
4.4. Investment Experience.
---------------------
Such Investor understands that the purchase of the Stand-By Shares
involves substantial risk. Such Investor: (i) has experience as an investor in
securities and acknowledges that such Investor is able to fend for itself, can
bear the economic risk of its investment in the Stand-By Shares and has such
knowledge and experience in financial or business matters that such Investor is
capable of evaluating the merits and risks of this investment in the Stand-By
Shares and protecting its own interests in connection with this investment
and/or (ii) has a preexisting personal or business relationship with the Company
and certain of its officers, directors or controlling persons of a nature and
duration that enables such Investor to be aware of the character, business
acumen and financial circumstances of such persons.
4.5. Accredited Investor Status.
--------------------------
Such Investor is an "accredited investor" within the meaning of
Regulation D promulgated under the 1933 Act, and such Investor has received a
copy of the Company's Certificate of Incorporation, Bylaws, this Agreement and
such other documents and agreements that it has requested and has read and
understands the respective contents thereof. Such Investor has had the
opportunity to ask questions of the Company and has received answers to such
questions from the Company. Such Investor has carefully reviewed and evaluated
these documents and understands the risks and other considerations relating to
the investment.
4.6. Restricted Securities.
---------------------
-7-
<PAGE>
Such Investor understands that the Stand-By Shares may be
characterized as "restricted securities" under the 1933 Act inasmuch as the
Stand-By Shares are being acquired from the Company in a transaction not
involving a public offering and that under the 1933 Act and applicable rules and
regulations thereunder such securities may be resold without registration under
the 1933 Act only in certain limited circumstances. In this connection, such
Investor represents that it is familiar with Rule 144 of the SEC, as presently
in effect, and understands the resale limitations imposed thereby and by the
1933 Act.
5. COVENANTS OF THE PARTIES.
------------------------
5.1. Restrictions on Transfer; Registration Rights.
---------------------------------------------
(a) Each Investor agrees not to make any disposition of all or any
portion of the Stand-By Shares unless and until:
(i) there is then in effect a registration statement under the
1933 Act and all applicable state securities laws covering such
proposed disposition and such disposition is made in accordance with
such registration statement; or
(ii) (A) the Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a
statement of the circumstances surrounding the proposed disposition,
and (B) the Investor shall have furnished the Company, at the expense
of such Investor or its transferee, with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will
not require registration of such securities under the 1933 Act or
under any applicable state securities laws.
(b) The Stand-By Shares shall be Registrable Shares for purposes of
the Registration Rights Agreement, dated June 12, 1998, between the
Company, Harvard and Capricorn (the "Registration Rights Agreement"), as
-----------------------------
amended. By signing and entering into this Agreement, the Company, the
Investors and Harvard each agree that the Registration Rights Agreement
shall be binding upon and inure to the benefit of Demeter and Phemus. The
Company and Demeter and Phemus will execute an amendment to the
Registration Rights Agreement to confirm the rights and responsibilities of
Demeter and Phemus under the Registration Rights Agreement.
Notwithstanding the provisions of paragraphs (i) and (ii) above, no
such registration statement or opinion of counsel shall be required: (A) for any
transfer of any of the Stand-By Shares in compliance with SEC Rule 144; or (B)
for any transfer of any of the Stand-By Shares by the Investor to an affiliate
of the Investor; provided that in the foregoing case the transferee agrees in
--------
writing to be subject to the terms of this Section 5.1 to the same extent as if
-----------
the transferee were the Investor hereunder.
5.2. Legends.
-------
-8-
<PAGE>
(a) Each Investor acknowledges that the certificates evidencing the
Stand-By Shares will bear the legends set forth below, in addition to any
legend required by any state securities laws:
(i) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER
THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
(ii) THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO
RESTRICTIONS ON TRANSFER PURSUANT TO A STANDBY PURCHASE AGREEMENT
BETWEEN THE INITIAL HOLDER HEREOF AND THE WMF GROUP, LTD.
(b) The legend set forth in subsection (a)(i) above shall be removed
-----------------
by the Company from any certificate evidencing any of the Stand-By Shares
upon effectiveness of a registration statement under the 1933 Act with
respect to the legended security or upon delivery to the Company of an
opinion of counsel, reasonably satisfactory to the Company, that such
security can be freely transferred in a public sale without such a
registration statement being in effect and that such transfer will not
jeopardize the exemption or exemptions from registration pursuant to which
the Company issued the Stand-By Shares.
6. CONDITIONS TO CLOSING.
---------------------
6.1. Conditions to Investors' Obligations at Closing.
-----------------------------------------------
The obligations of the Investors under this Agreement are subject to
the fulfillment or waiver, on or before the Closing, of each of the following
conditions, the waiver of which may be given by written, oral or telephone
communication to the Company, its counsel or to counsel to the Investors:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Company set forth in Section 3 shall be true and correct
---------
in all respects on and as of the Closing Date (except for representations
and warranties that speak as of a specific date and time, which need be
true and correct as of such date and time), the Company shall have taken
all actions required by this Agreement to be taken by the Company prior to
Closing.
(b) Securities Exemptions. The offer and sale of the Stand-By
---------------------
Shares by the Company to the Investors pursuant to this Agreement shall be
exempt from the registration
-9-
<PAGE>
requirements of the 1933 Act and the registration and/or qualification
requirements of all applicable state securities laws.
(c) Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Investors and to the Investors' counsel, and the Investors
shall have received counterpart originals and certified or other copies of
the following documents:
(i) Certified Charter Documents. A copy of the Certificate
---------------------------
of Incorporation and the Bylaws of the Company (as amended through
the date of the Closing), certified by the Secretary of the Company
as true and correct copies thereof as of the Closing.
(ii) Secretary's Incumbency Certificate. A certificate of the
----------------------------------
Secretary or an Assistant Secretary or other officer of the Company
certifying the names of the officers of the Company authorized to
sign this Agreement, the certificates for the Stand-By Shares and the
other documents, instruments or certificates to be delivered pursuant
to this Agreement by the Company or any of its officers, together
with the true signatures of such officers.
(iii) Corporate Actions. A copy of the resolutions of the
-----------------
Board of Directors evidencing its approval, including the approval of
a majority of the Company's disinterested directors, of this
Agreement, the issuance of Stand-By Shares and the other matters
contemplated hereby, certified by the Secretary of the Company to be
true, complete and correct.
(iv) Legal Opinion. An opinion or opinions of Hunton &
-------------
Williams or Krooth & Altman, counsel to the Company, dated as of the
Closing Date, in substantially the form attached hereto as Exhibit B.
---------
(v) Good Standing Certificate. A good standing certificate
-------------------------
of the Company issued by the Secretary of State of the State of
Delaware dated within ten (10) days before the Closing.
(d) Approval by Disinterested Directors. The transactions
-----------------------------------
contemplated by this Agreement shall have been approved by a majority of
the members of the Company's Board of Directors who are neither employees
of the Company nor affiliated with the Investors.
(e) Private Placement. The Private Placement shall have been
-----------------
completed successfully.
(f) Listing. The Stand-By Shares shall have been approved for
-------
listing on The Nasdaq Stock Market or any other stock exchange or automated
quotation system on which the Common Stock is then listed or included.
-10-
<PAGE>
(g) Consents. All government and third-party consents necessary for
--------
the execution, delivery and performance by the Company and each Investor of
this Agreement and the related agreements shall have been received.
(h) Registration Rights Agreement Amendment. The amendment to the
---------------------------------------
Registration Rights Agreement contemplated by Section 5.1(b) hereof shall
--------------
have been executed by the Company, the Investors and Harvard.
(i) Certificate. The Investors shall have received a certificate of
-----------
the President or an Executive Vice President of the Company to the effect
that the conditions set forth in subparagraphs (a) and (d) through (g)
hereof have been satisfied and setting forth the capitalization of the
Company as of the Closing Date.
(j) HSR Act. Any waiting period applicable to the transactions
-------
contemplated by this Agreement under the Hart-Scott-Radino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), shall have terminated
-------
or expired.
6.2. Conditions to Company's Obligations at Closing.
----------------------------------------------
The obligations of the Company to the Investors of this Agreement are
subject to the fulfillment or waiver on or before the Closing of the following
conditions, the waiver of which may be given by written, oral or telephone
communication to the Investors, their counsel or to counsel to the Company:
(a) Representations and Warranties. The representations and
------------------------------
warranties of each Investor set forth in Section 3.1 shall be true and
-----------
correct in all respects on and as of the Closing Date, and the Company
shall have received a certificate of an appropriate officer or partner, as
applicable, of each Investor to such effect.
(b) Payment of Purchase Price. Each Investor shall have delivered to
-------------------------
the Company such Investor's aggregate Purchase Price in accordance with the
provisions of Sections 1 and 2.
----------------
(c) Securities Exemptions. The offer and sale of the Stand-By Shares
---------------------
by the Company to the Investors pursuant to this Agreement shall be exempt
from the registration requirements of the 1933 Act and the registration
and/or qualification requirements of all other applicable state securities
laws.
(d) Proceedings and Documents. All corporate and other proceedings in
-------------------------
connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Company and to the Company's legal counsel, and the
Company shall have received all such counterpart originals and certified or
other copies of such documents as it may reasonably request.
(e) Private Placement. The Private Placement shall have been
-----------------
completed successfully.
-11-
<PAGE>
(f) Listing. The issuance of the Stand-By Shares shall not violate or
-------
conflict with the Company's listing agreement with the Nasdaq National
Market with regard to the Common Stock or the listing standards or other
applicable rules of the Nasdaq National Market.
(g) Approval by Disinterested Directors. The transactions
-----------------------------------
contemplated by this Agreement shall have been approved by a majority of
the members of the Company's Board of Directors who are neither employees
of the Company nor affiliated with the Investors.
(h) Consents. All government and third-party consents necessary for
--------
the execution, delivery and performance by the Company of this Agreement
and the related agreements shall have been received.
(i) HSR Act. Any waiting period applicable to the transactions
-------
contemplated by this Agreement under the HSR Act shall have terminated or
expired.
7. MISCELLANEOUS.
7.1. Survival of Warranties.
----------------------
The representations, warranties and covenants of the Company and the
Investors contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing and shall in no way be
affected by any investigation of the subject matter thereof made by or on behalf
of each Investor, its counsel or the Company or its counsel, as the case may be.
7.2. Successors and Assigns.
----------------------
The terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective successors and assigns of the parties.
Except for assignments by the Investors to affiliates, this Agreement may not be
assigned by any Investor without the prior written consent of the Company or by
the Company without the prior written consent of the Investors.
7.3. Governing Law.
-------------
This Agreement shall be governed by and construed under the internal
laws of the Commonwealth of Virginia as applied to agreements among Virginia
residents entered into and to be performed entirely within Virginia, without
reference to principles of conflict of laws or choice of laws.
7.4. Counterparts.
------------
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
-12-
<PAGE>
7.5. Headings.
--------
The headings and captions used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement. All references in this Agreement to sections, paragraphs, exhibits
and schedules shall, unless otherwise provided, refer to sections and paragraphs
hereof and exhibits and schedules attached hereto, all of which exhibits and
schedules are incorporated herein by this reference.
7.6. Notices.
-------
Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given upon
personal delivery to the party to be notified or one day after deposit with a
national overnight delivery service or three days after deposit with the United
States Post Office, by registered or certified mail, postage prepaid and
addressed as follows:
To the Company:
The WMF Group, Ltd.
1593 Spring Hill Road, Suite 400
Vienna, Virginia 22182
Attention: Shekar Narasimhan
with copies to:
Krooth and Altman
1850 M Street, Suite 400
Washington, DC 20036
Attention: Patrick J. Clancy, Esquire
and
Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219-4074
Attention: Randall S. Parks, Esquire
To Demeter:
c/o Charlesbank Capital Partners, LLC
600 Atlantic Avenue, 26th Floor
Boston, Massachusetts 02210
Attention: Tim R. Palmer
Mark A. Rosen
-13-
<PAGE>
with copies to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Larry Rowe, Esquire
To Phemus:
c/o Charlesbank Capital Partners, LLC
600 Atlantic Avenue, 26th Floor
Boston, Massachusetts 02210
Attention: Tim R. Palmer
Mark A. Rosen
with copies to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Larry Rowe, Esquire
To Capricorn:
Capricorn Investors II, L.P.
30 East Elm Street
Greenwich, Connecticut 06830
Attention: Herbert S. Winokur, Jr.
James M. Better
with copies to:
O'Melveny & Myers LLP
153 East 53rd Street
New York, New York 10022-4611
Attention: Mark E. Thierfelder, Esquire
or at such other address as an Investor or the Company may designate by giving
ten days advance written notice to the other parties.
7.7. No Finder's Fees.
----------------
Each party represents that it neither is nor will be obligated for any
finder's or broker's fee or commission in connection with this transaction. Each
Investor agrees to indemnify and to hold harmless the Company from any liability
for any commission or
-14-
<PAGE>
compensation in the nature of a finders' or broker's fee (and any asserted
liability) for which such Investor or any of its officers, partners, employees,
or representatives is responsible. The Company agrees to indemnify and hold
harmless the Investors from any liability for any commission or compensation in
the nature of a finder's or broker's fee (and any asserted liability) for which
the Company or any of its officers, employees or representatives is responsible.
7.8. Expenses.
--------
The Company shall pay all reasonable fees and expenses of the
Investors in connection with the preparation, execution and delivery of this
Agreement and the issuance of the Stand-By Shares and any filings necessary
under the HSR Act.
7.9. Amendments and Waivers.
----------------------
Any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the Investors. Any amendment or waiver effected in
accordance with this Section 7.9 shall be binding upon the Investors and the
Company.
7.10. Severability.
------------
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision(s) shall be excluded from
this Agreement, and the balance of the Agreement shall be interpreted as if such
provision(s) were so excluded and shall be enforceable in accordance with its
terms.
7.11. Entire Agreement.
----------------
This Agreement, together with all exhibits and schedules hereto,
constitutes the entire agreement and understanding of the parties with respect
to the subject matter hereof and supersedes any and all prior negotiations,
correspondence, agreements, understandings, duties or obligations between the
parties with respect to the subject matter hereof. The schedules hereto shall be
deemed a part of this Agreement for all purposes.
7.12. Further Assurances.
------------------
From and after the date of this Agreement, upon the request of the
Investors or the Company, the Company and the Investors shall execute and
deliver such instruments, documents or other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement.
[SIGNATURE PAGE FOLLOWS]
-15-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
THE COMPANY: THE WMF GROUP, LTD.,
- -----------
a Delaware corporation
By: /s/ Shekar Narasimhan
---------------------------------------
Name: Shekar Narasimhan
Title President
THE INVESTORS: DEMETER HOLDINGS CORPORATION, a
- -------------
Massachusetts corporation
By: /s/ Michael R. Eisenson
---------------------------------------
Name: Michael R. Eisenson
Title: Authorized Signatory
By: /s/ Tim R. Palmer
---------------------------------------
Name: Tim R. Palmer
Title: Authorized Signatory
PHEMUS CORPORATION, a Massachusetts
corporation
By: /s/ Michael R. Eisenson
---------------------------------------
Name: Michael R. Eisenson
Title:Authorized Signatory
By: /s/ Tim R. Palmer
---------------------------------------
Name: Tim R. Palmer
Title: Authorized Signatory
<PAGE>
CAPRICORN INVESTORS II, L.P.,
a Delaware limited partnership
By: Capricorn Holdings, LLC, a Delaware limited
liability company, its General Partner
By: /s/ Herbert S. Winokur, Jr.
---------------------------------------
Name: Herbert S. Winokur, Jr.
Title: Manager
<PAGE>
STANDBY PURCHASE AGREEMENT
LIST OF SCHEDULES AND EXHIBITS
------------------------------
SCHEDULES
- ---------
Schedule 3.2 (c) Options, Warrants, Reserved Shares
Schedule 3.3 Subsidiaries
Schedule 3.7 Legal and Governmental Proceedings
Schedule 3.8 Defaults
Schedule 3.10 Liabilities and Obligations
Schedule 3.11 Changes in Business of the Company
EXHIBITS
- --------
Exhibit A Stand-By Shares Purchase Commitments
Exhibit B Form of Legal Opinion
<PAGE>
Exhibit A
---------
STAND-BY SHARES
PURCHASE COMMITMENTS
--------------------
NAME COMMITMENT
---- ----------
Demeter Holdings Corporation 503,619 Shares
Phemus Corporation 27,603
Capricorn Investors II, L.P. 132,806
-------
TOTAL 664,028
<PAGE>
EXHIBIT 10.3
AN ASTERISK ([*]) INDICATES THAT CONFIDENTIAL INFORMATION HAS BEEN
OMMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION AS
PART OF A CONFIDENTIAL TREATMENT REQUEST.
SERIES 2 WARRANT AGREEMENT dated as of December 30, 1998 between The
WMF Group, Ltd., a Delaware corporation (the "Company"), and [*], a [*]
corporation (hereinafter referred to as "XYZ Corp.").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, WMF Capital Corp., a subsidiary of the Company ("Capital
Corp."), issued a certain Credit Lease Loan Commitment dated [*], to XYZ Corp.;
and
WHEREAS, XYZ Corp., [*] ("Party A"), the Company and Capital Corp.
have entered into a Settlement Agreement whereby XYZ Corp. and Party A have
agreed to release the Company and Capital Corp. from liability under the Credit
Lease Loan Commitment; and
WHEREAS, as partial consideration to XYZ Corp. and Party A under the
Settlement Agreement, the Company has agreed to issue to XYZ Corp. Series 2
warrants (the "Warrants") to purchase up to 100,000 shares (the "Shares") of
common stock of the Company, $.01 par value (the "Common Stock");
NOW, THEREFORE, in further consideration for the release by XYZ Corp.
and Party A of the Company and Capital Corp., from their obligations to XYZ
Corp. under the Credit Lease Loan Commitment, and in consideration of the
premises and agreements herein set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Grant.
------
XYZ Corp. (or its designees, as permitted pursuant to the Settlement
Agreement) is
<PAGE>
hereby granted the right to purchase, at any time from the date hereof until
5:00 P.M., New York City time, on December 30, 2002 (the "Warrant Exercise
Term"), up to 100,000 Shares at an initial exercise price per Share (subject to
adjustment as provided in Section 8 hereof) equal to the average closing sale
---------
price of the Common Stock for the ten (10) consecutive trading days ending on
the trading day immediately prior to the date of this Agreement (the "Initial
Exercise Price").
2. Warrant Certificates.
---------------------
The warrant certificates (the "Warrant Certificates") delivered and to be
delivered pursuant to this Agreement shall be in the form set forth as Exhibit
-------
A, attached hereto and made a part hereof, with such appropriate insertions,
- -
omissions, substitutions and other variations as required or permitted by this
Agreement.
3. Cash Exercise of Warrants.
--------------------------
The Warrants initially are exercisable at the Initial Exercise Price,
payable in cash or by check to the order of the Company, or any combination of
cash or check, subject to adjustment as provided in Section 8 hereof. Upon
---------
surrender of the Warrant Certificate with the annexed Form of Election to
Purchase duly executed, together with payment of the Exercise Price (as
hereinafter defined) for the Shares purchased, at the Company's principal
offices (presently located at 1593 Spring Hill Road, Suite 400, Vienna, Virginia
22182) the registered holder of a Warrant Certificate ("Holder" or "Holders")
shall be entitled to receive a certificate or certificates for the Shares so
purchased. The purchase rights represented by each Warrant Certificate are
-2-
<PAGE>
exercisable at the option of the Holder thereof, in whole or in part (but not as
to fractional shares of the Common Stock). In the case of the purchase of less
than all the Shares purchasable under any Warrant Certificate, the Company shall
cancel said Warrant Certificate upon the surrender thereof and shall execute and
deliver a new Warrant Certificate of like tenor for the balance of the Shares
purchasable thereunder.
4. Cashless Exercise of Warrants.
------------------------------
At any time during the Warrant Exercise Term, the Holder may, at its
option, exchange the Warrant, in whole or in part, into the number of Shares
determined in accordance with this Section 4 (a "Warrant Exchange"), by
---------
surrendering this Warrant at the principal office of the Company or at the
office of its transfer agent, accompanied by a notice stating such Holder's
intent to effect such exchange, the number of Shares to be exchanged and the
date on which the Holder requests that such Warrant Exchange occur (the "Notice
of Exchange"). The Warrant Exchange shall take place on the date specified in
the Notice of Exchange or, if later, the date the Notice of Exchange is received
by the Company (the "Exchange Date"). Certificates for the Shares issuable upon
such Warrant Exchange and, if applicable, a new warrant of like tenor evidencing
the balance of the Shares remaining subject to this Warrant, shall be issued as
of the Exchange Date and delivered to the Holder within five (5) business days
following the Exchange Date. In connection with any Warrant Exchange, this
Warrant shall represent the right to subscribe for and acquire the number of
Shares (rounded to the next highest integer) equal to (i) the number of Shares
specified by the Holder in its Notice of Exchange (the "Total Number") less (ii)
the number of Shares equal to the quotient obtained by dividing (A) the product
of the
-3-
<PAGE>
Total Number and the existing Exercise Price (as hereinafter defined) by (B) the
current Market Price of one share of Common Stock.
5. Issuance of Certificates.
------------------------
Upon the exercise of the Warrants, the issuance of certificates for the
Shares shall be made forthwith (and in any event within five (5) business days
thereafter) without charge to the Holder thereof including, without limitation,
any tax which may be payable in respect of the issuance thereof, and such
certificates shall be issued in the name of, or, if the requirements of Section
-------
7 hereof have been satisfied, in such names as may be directed by, the Holder
- -
thereof; provided, however, that the Company shall not be required to pay any
-------- -------
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any such certificates in a name other than that of the Holder, and
the Company shall not be required to issue or deliver such certificates unless
and until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the Shares shall
be executed on behalf of the Company by the manual or facsimile signature of the
present or any future Chairman or Vice Chairman of the Board of Directors or
President or a Vice President of the Company, attested to by the manual or
facsimile signature of the present or any future Treasurer or an Assistant
Treasurer or Secretary or an Assistant Secretary of the Company. Warrant
Certificates shall be dated the date of execution by the Company upon initial
issuance, division,
-4-
<PAGE>
exchange, substitution or transfer.
The Warrant Certificates and, upon exercise of the Warrants, in part or in
whole, certificates representing the Shares shall bear a legend substantially
similar to the following:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act") or applicable
state securities laws, and may not be offered or sold except (i) pursuant
to an effective registration statement under the Act or such laws, (ii) to
the extent applicable, pursuant to Rule 144 under the Act (or any similar
rule under the Act relating to the disposition of securities), or (iii)
upon the delivery by the holder to the Company of an opinion of counsel,
reasonably satisfactory to counsel to the Company, stating that an
exemption from registration under the Act is available."
6. Price.
------
6.1 Initial and Adjusted Exercise Price.
------------------------------------
The initial exercise price of each Warrant shall be the Initial Exercise
Price set forth in Section 1. The adjusted exercise price shall be the price
---------
which shall result from time to time from any and all adjustments of the Initial
Exercise Price in accordance with the provisions of Section 8 hereof.
---------
6.2 Exercise Price.
--------------
The term "Exercise Price" herein shall mean the Initial Exercise Price or
the adjusted exercise price, depending upon the context.
7. Registration Rights; Limitations on Transfer.
---------------------------------------------
The Warrants and the Shares have not been registered for purposes of public
distribution under the Securities Act of 1933, as amended ("the Act") or
applicable state securities laws and
-5-
<PAGE>
may not be offered, sold or otherwise transferred except (i) pursuant to an
effective registration statement under the Act or such laws, (ii) to the extent
applicable, pursuant to Rule 144 under the Act (or any similar rule under the
Act relating to the disposition of securities), or (iii) upon the delivery by
the holder to the Company of an opinion of counsel, reasonably satisfactory to
counsel to the Company, stating that exemptions from registration under the Act
and such laws are available. The Shares shall be registered under the Act
pursuant to the terms and conditions of the Registration Rights Agreement, of
even date herewith, by and between XYZ Corp. and the Company.
8. Adjustments of Exercise Price and Number of Shares.
---------------------------------------------------
8.1 Adjustment of Number of Shares Purchasable.
------------------------------------------
Upon any adjustment of the Exercise Price as provided in Section 8.2, the
-----------
holder hereof shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares of Common Stock (calculated
to the nearest full share) obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
purchasable hereunder immediately prior to such adjustment and dividing the
product thereof by the Exercise Price resulting from such adjustment.
8.2 Adjustment of Exercise Price.
-----------------------------
The Exercise Price shall be subject to adjustment from time to time as
hereinafter set forth.
(a) Stock Dividends, Subdivisions and Combinations. In the event
----------------------------------------------
that
-6-
<PAGE>
the Company after the date hereof shall:
(1) declare a dividend upon, or make any distribution in
respect of, any of its stock, payable in Common Stock, securities
convertible or exchangeable into Common Stock ("Convertible
Securities") or options, rights or warrants to purchase Common
Stock ("Stock Purchase Rights"), or
(2) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or
(3) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then the Exercise Price shall be adjusted to that price determined by
multiplying the Exercise Price immediately prior to such event by a fraction (A)
the numerator of which shall be the total number of outstanding shares of Common
Stock of the Company immediately prior to such event, and (B) the denominator of
which shall be the total number of outstanding shares of Common Stock of the
Company immediately after such event, treating as outstanding all shares of
Common Stock issuable upon conversions or exchanges of the Convertible
Securities and exercises of the Stock Purchase Rights referred to in Section
-------
8.2(a)(1).
- ---------
(b) Issuance of Additional Shares of Common Stock. In case the
---------------------------------------------
Company shall issue or sell any shares of Common Stock after the
Closing Date for a consideration less than the Market Price (as
defined below) per share on the date immediately prior to such
issuance, the Exercise Price upon each such
-7-
<PAGE>
issuance or sale shall be adjusted (to the nearest full cent) to the
price calculated by multiplying the then existing Exercise Price by a
-----------
fraction the numerator of which is (A) the sum of (1) the number of
shares of Common Stock outstanding immediately prior to such issue or
sale multiplied by the Market Price per share of Common Stock on the
date immediately prior to such issue or sale plus (2) the
----
consideration received by the Company upon such issue or sale, divided
by (B) the total number of shares of Common Stock outstanding
immediately after such issue or sale, and the denominator of which
shall be the Market Price per share of Common Stock on the date
immediately prior to such issue or sale.
For purposes of this Section 8.2(b) the adjustment shall be made
--------------
successively whenever any issuance is made, and shall become effective
immediately after such issuance.
The provisions of this Section 8.2(b) shall not apply to any additional
--------------
shares of Common Stock which are distributed to holders of Common Stock pursuant
to a stock dividend or subdivision for which an adjustment is provided for under
Section 8.2(a). No adjustment of the Exercise Price shall be made under this
- --------------
Section 8.2(b) upon the issuance of any additional shares of Common Stock which
- --------------
are issued pursuant to the exercise of any Stock Purchase Rights or pursuant to
the conversion or exchange of any Convertible Securities to the extent that such
adjustment shall previously have been made upon the issuance of such Stock
Purchase Rights or Convertible Securities pursuant to subsection (a), (c) or (d)
of this Section 8.2.
-----------
Further, the provisions of this Section 8.2(b) shall not apply if:
--------------
-8-
<PAGE>
(i) the Company issues stock to third parties in an arms-length
transaction for cash or other consideration having a value equal to at
least (A) 85 percent (85%) of the Market Price on the date of the issuance
of such stock or, if the offering is priced prior to the closing of the
applicable market for the Common Stock on such date, the trading day
immediately preceding such date, or (B) 90 percent (90%) of the average of
the Market Prices of the Common Stock for the ten (10) consecutive trading
days ending on the date of the issuance of such stock, including but not
limited to, stock issuances pursuant to a merger, consolidation, corporate
reorganization (both taxable and nontaxable), corporate restructuring, or
private placement or;
(ii) the Company issues shares of Common Stock to individuals or
entities upon the exercise or conversion of Convertible Securities or Stock
Purchase Rights outstanding on the date hereof, or pursuant to Stock
Purchase Rights issued pursuant to the rights offering first announced
publicly on or about October 21, 1998 (the "Company Rights Offering") or
pursuant to any stand-by purchase commitment relating to the Company Rights
Offering; or
(iii) the Company issues warrants, rights, options or restricted
stock to employees of the Company or its affiliates pursuant to a deferred
compensation plan, key employee incentive plan or another applicable
employment compensation plan so long as the exercise price for any such
warrants, rights or options is equal to or greater than either (A) the
Market Price on the date of the issuance of such warrants, rights or
options, or (B) the average Market Prices for the ten (10) consecutive
trading days ending on the date of
-9-
<PAGE>
the issuance of such warrants, rights or options.
As used in this Agreement, the phrase "Market Price" at any date shall be
deemed to be the last reported sale price, or, in case no such reported sale
takes place on such day, the average of the last reported sale prices for the
last three trading days, in either case as officially reported by the principal
securities exchange on which the Common Stock is listed or admitted to trading
or as reported in the Nasdaq National Market System, or, if the Common Stock is
not listed or admitted to trading on any national securities exchange or quoted
on the Nasdaq National Market System, the closing bid price as furnished by the
National Association of Securities Dealers, Inc. through Nasdaq or similar
organization if Nasdaq is no longer reporting such information, or if the Common
Stock is not quoted on Nasdaq, as determined in good faith by resolution of the
Board of Directors of the Company based on the best information available to it.
(c) Issuance of Stock Purchase Rights. In case the Company shall
----------------------------------
issue or sell any Stock Purchase Rights and the consideration per
share for which additional shares of Common Stock may at any time
thereafter be issuable upon exercise thereof (or, in the case of Stock
Purchase Rights exercisable for the purchase of Convertible
Securities, upon the subsequent conversion or exchange of such
Convertible Securities) shall be less than the then Market Price per
share, the Exercise Price shall be adjusted as provided in Section
-------
8.2(b) on the basis that (I) the maximum number of additional shares
------
of Common Stock issuable upon exercise of such Stock Purchase Rights
(or upon conversion or exchange of such Convertible Securities
following such exercise) shall be deemed to have been
-10-
<PAGE>
issued as of the date of the determination of the Market Price, as
hereinafter provided, and (II) the aggregate consideration received
for such additional shares of Common Stock shall be deemed to be the
minimum consideration received and receivable by the Company in
connection with the issuance and exercise of such Stock Purchase
Rights (or upon conversion or exchange of such Convertible
Securities). For the purposes of this Section 8.2(c), the date as of
--------------
which the Market Price shall be determined shall be the earlier of (A)
the date on which the Company shall enter into a firm contract for the
issuance of such Stock Purchase Rights, or (B) the date of actual
issuance of such Stock Purchase Rights. The provisions of this Section
-------
8.2(c) shall not apply to Stock Purchase Rights issued in connection
------
with the Company Rights Offering.
(d) Issuance of Convertible Securities. In case the Company
----------------------------------
shall issue or sell any Convertible Securities and the consideration
per share for which additional shares of Common Stock may at any time
thereafter be issuable pursuant to the terms of such Convertible
Securities shall be less than the then Market Price per share, the
Exercise Price shall be adjusted as provided in Section 8.2(b) on the
--------------
basis that (I) the maximum number of additional shares of Common Stock
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued as of the date for the
determination of the Market Price, as hereinafter provided, and (II)
the aggregate consideration received for such additional shares of
Common Stock shall be deemed to be equal
-11-
<PAGE>
to the minimum consideration received and receivable by the Company in
connection with the issuance and exercise of such Convertible
Securities. For the purposes of this Section 8.2(d), the date as of
--------------
which the Market Price per share shall be determined shall be the
earlier of (A) the date on which the Company shall enter into a firm
contract for the issuance of such Convertible Securities, or (B) the
date of actual issuance of such Convertible Securities. No adjustment
of the Exercise Price shall be made under this Section 8.2(d) upon the
--------------
issuance of any Convertible Securities which are issued pursuant to
the exercise of any Stock Purchase Rights, if an adjustment shall
previously have been made upon the issuance of such Stock Purchase
Rights pursuant to Section 8.2(c).
--------------
(e) Minimum Adjustment. In the event any adjustment of the
------------------
Exercise Price pursuant to this Section 8.2 shall result in an
-----------
adjustment of less than $.02 per share of Common Stock, no such
adjustment shall be made, but any such lesser adjustment shall be
carried forward and shall be made at the time and together with the
next subsequent adjustment, if any, which, together with any
adjustments so carried forward, shall amount to $.02 more per share of
Common Stock; provided, however, that upon any adjustment of the
-------- -------
Exercise Price resulting from (i) the declaration of a dividend upon,
or the making of any distribution in respect of, any stock of the
Company payable in Common Stock or Convertible Securities or (ii) the
reclassification by subdivision, combination or otherwise, of the
Common Stock into a greater or smaller number of shares, the
-12-
<PAGE>
foregoing figure of $.02 per share (or such figure as last adjusted)
shall be proportionately adjusted.
(f) Readjustment of Exercise Price. In the event (i) the
------------------------------
purchase price payable for any Stock Purchase Rights or Convertible
Securities referred to in subsection (c) or (d) above, (ii) the
additional consideration, if any, payable upon exercise of such Stock
Purchase Rights or upon the conversion or exchange of such Convertible
Securities or (iii) the rate at which any Convertible Securities
referred to above are convertible into or exchangeable for additional
shares of Common Stock shall change, the Exercise Price in effect at
the time of such event shall forthwith be readjusted to the Exercise
Price which would have been in effect at such time had such Stock
Purchase Rights or Convertible Securities provided for such changed
purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold. On the
expiration of any such Stock Purchase Rights or of any such right to
convert or exchange under any such Convertible Securities, if none of
such Stock Purchase Rights or such Convertible Securities, as the case
may be, shall have been exercised, the Exercise Price then in effect
hereunder shall forthwith be increased to the Exercise Price which
would have been in effect at the time of such expiration or
termination had such Stock Purchase Rights or Convertible Securities
never been issued. No readjustment of the Exercise Price pursuant to
this Section 8.2(f) shall have the effect of increasing the Exercise
--------------
Price by an
-13-
<PAGE>
amount in excess of the adjustment originally made to the Exercise
Price in respect of the issue, sale or grant of the applicable Stock
Purchase Rights or Convertible Securities.
(g) Reorganization, Reclassification or Recapitalization of
-------------------------------------------------------
Company. In case of any capital reorganization or reclassification or
-------
recapitalization of the capital stock of the Company (other than in
the cases referred to in Section 8.2(a)), or in case of the
--------------
consolidation or merger of the Company with or into another
corporation, or in case of the sale or transfer of the property of the
Company as an entirety or substantially as an entirety, there shall
thereafter be deliverable upon the exercise of any Warrant or any
portion thereof (in lieu of or in addition to the number of shares of
Common Stock theretofore deliverable, as appropriate) the number of
shares of stock or other securities or property to which the holder of
the number of shares of Common Stock which would otherwise have been
deliverable upon the exercise of any Warrant or any portion thereof at
the time would have been entitled upon such capital reorganization or
reclassification of capital stock, consolidation, merger or sale, and
at the same aggregate Exercise Price.
Prior to and as a condition of the consummation of any transaction
described in the preceding sentence, the Company shall make equitable, written
adjustments in the application of the provisions herein set forth satisfactory
to the holder or holders of a majority of the Warrants, so that the provisions
set forth herein shall thereafter be applicable, as nearly as possible, in
-14-
<PAGE>
relation to any shares of stock or other securities or other property thereafter
deliverable upon exercise of any Warrant. Any such adjustment shall be made by
and set forth in a supplemental agreement between the Company and/or the
successor entity, as applicable, which agreement shall bind each such entity,
shall be accompanied by an opinion of counsel as to the enforceability of such
agreement and shall be approved by the holder or the holders of a majority of
the Warrants.
(h) Other Dilutive Events. In case any Distribution shall occur
---------------------
as to which the other provisions of this Section 8 are not strictly
---------
applicable but the failure to make any adjustment would not fairly
protect the purchase rights represented by this Warrant in accordance
with the essential intent and principles hereof, then, in each such
case, the Board of Directors of the Company shall determine the amount
of the adjustment in good faith and on a basis consistent with the
essential intent and principles established in this Section 8,
---------
necessary to preserve, without dilution, the purchase rights
represented by this Warrant. Upon determination of such adjustment,
the Company will promptly mail a copy thereof to the holder of this
Warrant and shall make the adjustment described therein.
(i) Determination of Consideration. For purposes of this Section
------------------------------ -------
8, the consideration received or receivable by the Company for the
-
issuance, sale, grant or assumption of additional shares of Common
Stock, Stock Purchase Rights or Convertible Securities, irrespective
of the accounting treatment of such consideration, shall be valued as
follows:
-15-
<PAGE>
(1) Cash Payment. In the case of cash, the net amount
------------
received by the Company without deduction of any expenses paid or
incurred or any underwriting commissions or concessions paid or
allowed by the Company.
(2) Securities or Other Property. In the case of securities
----------------------------
or other property, at the Market Price of the security or the
fair value of such other property as determined in good faith by
the Board of Directors of the Company (in both cases as of the
date immediately preceding the issuance, sale or grant in
question).
(3) Allocation Related to Common Stock. In the event
----------------------------------
additional shares of Common Stock are issued or sold together
with other securities or other assets of the Company for a
consideration which covers both, the consideration received
(computed as provided in (1) and (2) above) shall be allocable to
such additional shares of Common Stock as determined in good
faith by the Board of Directors of the Company.
(4) Dividends in Securities. In case the Company shall
-----------------------
declare a dividend or make any other distribution upon any stock
of the Company (other than Common Stock) payable in either case
in Common Stock, Convertible Securities or Stock Purchase Rights,
such Common Stock, Convertible Securities or Stock Purchase
Rights, as the case may be, issuable in payment of such dividend
or distribution shall be deemed to
-16-
<PAGE>
have been issued or sold without consideration.
(5) Stock Purchase Rights and Convertible Securities. The
------------------------------------------------
consideration for which shares of Common Stock shall be deemed to
be issued upon the issuance of any Stock Purchase Rights or
Convertible Securities shall be determined by dividing (i) the
total consideration, if any, received or receivable by the
Company as consideration for the granting of such Stock Purchase
Rights or the issuance of such Convertible Securities, plus the
minimum aggregate amount of additional consideration payable to
the Company upon the exercise of such Stock Purchase Rights, or,
in the case of such Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the
conversion or exchange thereof, in each case after deducting any
accrued interest, dividends, or any expenses paid or incurred or
any underwriting commissions or concessions paid or allowed by
the Company, by (ii) the maximum number of shares of Common Stock
issuable upon the exercise of such Stock Purchase Rights or upon
the conversion or exchange of all such Convertible Securities.
(6) Merger, Consolidation or Sale of Assets. In case any
---------------------------------------
shares of Common Stock or Convertible Securities or any Stock
Purchase Rights shall be issued in connection with any merger or
consolidation in which the Company is the surviving corporation,
the amount of consideration
-17-
<PAGE>
therefor shall be deemed to be the fair value of such portion of
the assets and business of the nonsurviving corporation as shall
be attributable to such Common Stock, Convertible Securities or
Stock Purchase Rights, as the case may be. In the event of any
merger or consolidation of the Company in which the Company is
not the surviving corporation or in the event of any sale of all
or substantially all of the assets of the Company for stock or
other securities of any corporation, the Company shall be deemed
to have issued a number of shares of its Common Stock for stock
or securities of the other corporation computed on the basis of
the actual exchange ratio on which the transaction was predicated
and for a consideration equal to the Market Price on the date of
such transaction of such stock or securities of the other
corporation, and if any such calculation results in adjustment of
the Exercise Price, the determination of the number of shares of
Common Stock issuable upon exercise of this Warrant immediately
prior to such merger, consolidation or sale, for the purposes of
Section 8.2(g) above, shall be made after giving effect to such
--------------
adjustment of the Exercise Price.
(j) Record Date. In case the Company shall take a record of the
-----------
holders of the Common Stock for the purpose of entitling them (i) to
receive a distribution payable in Common Stock, Stock Purchase Rights
or in Convertible Securities or (ii) to subscribe for or purchase
Common Stock or Convertible
-18-
<PAGE>
Securities, then all references in this Section 8 to the date of the
---------
issue or sale of the shares of Common Stock deemed to have been issued
or sold upon the making of such distribution or the date of the
granting of such right of subscription or purchase, as the case may
be, shall be deemed to be references to such record date.
(k) Shares Outstanding. The number of shares of Common Stock
------------------
deemed to be outstanding at any given time shall exclude shares of
Common Stock in the treasury of the Company and those held by any
subsidiary of the Company.
(l) Maximum Exercise Price. At no time shall the Exercise Price
----------------------
per share of Common Stock exceed the amount set forth in Section 1 of
---------
this Agreement except as provided in subsection (a) or (g) of this
Section 8.2.
-----------
(m) Application. Except as otherwise provided herein, all
-----------
subsections of this Section 8.2 are intended to operate independently
-----------
of one another. If an event occurs that requires the application of
more than one subsection, all applicable subsections shall be given
independent effect.
8.3 Certificates and Notices.
-------------------------
(a) Adjustments to Exercise Price. Upon any adjustment under
-----------------------------
this Section 8 of the number of shares of Common Stock purchasable
---------
upon exercise of a Warrant or of the Exercise Price, a certificate,
signed (i) by the President or a Vice President and by the Treasurer
or an Assistant Treasurer or the Secretary or an Assistant Secretary
of the Company, or (ii) by any independent firm of certified
-19-
<PAGE>
public accountants of recognized national standing selected by, and at
the expense of, the Company, setting forth in reasonable detail the
events requiring the adjustment and the method by which such
adjustment was calculated, shall be mailed to the holders of the
Warrant specifying the adjusted Exercise Price and the number of
shares of Common Stock purchasable upon exercise of such holder's
Warrant after giving effect to such adjustment.
The certificate of any independent firm of certified public accountants of
recognized national standing selected by the Board of Directors of the Company
shall be conclusive evidence of the correctness of any computation made under
this Section 8.
---------
(b) Effect of Failure.
-----------------
Failure to file any certificate or notice or to mail any
notice or any defect in any certificate or notice pursuant to this
Section 8.3 shall not affect the legality or validity of the
-----------
adjustment of the Exercise Price or the number of shares purchasable
upon exercise of any Warrant, or any transaction giving rise thereto.
9. Exchange and Replacement of Warrant Certificates.
-------------------------------------------------
Each Warrant Certificate is exchangeable without expense, upon the
surrender hereof by the registered Holder at the principal executive office of
the Company, for a new Warrant Certificate of like tenor and date representing
in the aggregate the right to purchase the same number of Shares in such
denominations as shall be designated by the Holder thereof at the time of such
surrender.
-20-
<PAGE>
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrant
Certificate, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
10. Elimination of Fractional Interests.
-----------------------------------
The Company shall not be required to issue certificates representing
fractions of shares of Common Stock and shall not be required to issue scrip or
pay cash in lieu of fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up to
the nearest whole number of shares of Common Stock.
11. Reservation and Listing of Securities.
-------------------------------------
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of the Warrants, such number of shares of Common Stock as shall be
issuable upon the exercise thereof. The Company covenants and agrees that, upon
exercise of the Warrants and payment of the Exercise Price therefor, all shares
of Common Stock issuable upon such exercise shall be duly and validly issued,
fully paid, non-assessable and not subject to the preemptive rights of any
shareholder. As long as the Warrants shall be outstanding, the Company shall
cause all shares of Common Stock issuable upon the exercise of the Warrants to
be listed on or quoted by Nasdaq or listed on such national securities exchanges
as the Company's Common Stock is then listed or quoted, if any.
-21-
<PAGE>
12. Notices to Warrant Holders.
---------------------------
Nothing contained in this Agreement shall be construed as conferring
upon the Holder or Holders the right to vote or to consent or to receive notice
as a shareholder in respect of any meetings of shareholders for the election of
directors or any other matter, or as having any rights whatsoever as a
shareholder of the Company. If, however, at any time prior to the expiration of
the Warrants and their exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its shares
of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in cash, or a cash
dividend or distribution payable otherwise than out of current or
retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or
securities convertible into or exchangeable for shares of capital
stock of the Company, or any option, right or warrant to subscribe
therefor; or
(c) a merger or consolidation involving the Company or
subsidiary of the Company and any other entity and the Company is not
the surviving entity; or
(d) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of
all or substantially all of its property, assets and business as an
entirety shall be proposed; then, in any one
-22-
<PAGE>
or more of said events, the Company shall give written notice of such
event at least fifteen (15) days prior to the date fixed as a record
date or the date of closing the transfer books for the determination
of the shareholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, options
or warrants, or entitled to vote on such proposed merger,
consolidation, dissolution, liquidation, winding up or sale. Such
notice shall specify such record date or the date of closing the
transfer books, as the case may be. Failure to give such notice or any
defect therein shall not affect the validity of any action taken in
connection with the declaration or payment of any such dividend or
distribution, or the issuance of any convertible or exchangeable
securities or subscription rights, options or warrants, or any
proposed merger, consolidation, dissolution, liquidation, winding up
or sale.
13. Notices.
-------
All notices, requests, consents and other communications hereunder shall be
in writing and shall be deemed to have been duly made when delivered, or mailed
by registered or certified mail, return receipt requested:
(a) If to a registered Holder of the Warrants, to the address of
such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3 of
---------
this Agreement or to such other address as the Company may designate
by notice to the Holders
-23-
<PAGE>
14. Supplements and Amendments.
---------------------------
The Company and XYZ Corp. may from time to time supplement or amend this
Agreement without the approval of any Holders of Warrant Certificates in order
to cure any ambiguity, to correct or supplement any provision contained herein
which may be defective or inconsistent with any provisions herein, or to make
any other provisions in regard to matters or questions arising hereunder which
the Company and XYZ Corp. may deem necessary or desirable and which the Company
and XYZ Corp. deem not to adversely affect the interests of the Holders of
Warrant Certificates.
15. Successors.
-----------
All the covenants and provisions of this Agreement by or for the benefit of
the Company and the Holders inure to the benefit of their respective successors
and assigns hereunder.
16. Termination.
------------
This Agreement shall terminate at the close of business on December 30,
2002. Notwithstanding the foregoing, this Agreement will terminate on any
earlier date when all Warrants have been exercised and all the Shares issuable
upon exercise of the Warrants have been resold to the public.
17. Governing Law.
--------------
This Agreement and each Warrant Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of New York and for all
purposes shall be construed in accordance with the laws of said State.
-24-
<PAGE>
18. Benefits of This Agreement.
---------------------------
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company and XYZ Corp. and any other registered Holder
or Holders of the Warrant Certificates, Warrants or the Shares any legal or
equitable right, remedy or claim under this Agreement; and this Agreement shall
be for the sole and exclusive benefit of the Company and XYZ Corp. and any other
Holder or Holders of the Warrant Certificates, Warrants or the Shares.
19. Counterparts.
-------------
This Agreement may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be an original, and such
counterparts shall together constitute but one and the same instrument.
-25-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
[SEAL] THE WMF GROUP, LTD.
By: /s/ Shekar Narasimhan
-----------------------------
Name: Shekar Narasimhan
Title: President and Chief Executive Officer
Attest:
/s/ Barbara Ekstrom
- -------------------------
Barbara Ekstrom, Corporate Secretary
[*]
By: [*]
Name: [*]
Title: [*]
-26-
<PAGE>
EXHIBIT 10.4
AN ASTERISK ([*]) INDICATES THAT CONFIDENTIAL INFORMATION HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION AS PART
OF A CONFIDENTIAL TREATMENT REQUEST.
SERIES 3 WARRANT AGREEMENT dated as of December 30, 1998 between The
WMF Group, Ltd., a Delaware corporation (the "Company"), and [*], a [*]
corporation (hereinafter referred to as "XYZ Corp.").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, WMF Capital Corp., a subsidiary of the Company ("Capital
Corp."), issued a certain Credit Lease Loan Commitment dated [*], to XYZ Corp.;
and
WHEREAS, XYZ Corp., [*] ("Party A"), the Company and Capital Corp.
have entered into a Settlement Agreement whereby XYZ Corp. and Party A have
agreed to release the Company and Capital Corp. from liability under the Credit
Lease Loan Commitment; and
WHEREAS, as partial consideration to XYZ Corp. and Party A under the
Settlement Agreement, the Company has agreed to issue to XYZ Corp. Series 3
warrants (the "Warrants") to purchase up to 150,000 shares (the "Shares") of
common stock of the Company, $.01 par value (the "Common Stock");
NOW, THEREFORE, in further consideration for the release by XYZ Corp.
and Party A of the Company and Capital Corp., from their obligations to XYZ
Corp. under the Credit Lease Loan Commitment, and in consideration of the
premises and agreements herein set forth and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Grant.
------
XYZ Corp. (or its designees, as permitted pursuant to the Settlement
Agreement) is
<PAGE>
hereby granted the right to purchase, at any time from the date hereof until
5:00 P.M., New York City time, on December 30, 2003 (the "Warrant Exercise
Term"), up to 150,000 Shares at an initial exercise price of $10.00 per Share
(the "Initial Exercise Price") (subject to adjustment as provided in Section 8
---------
hereof).
2. Warrant Certificates.
---------------------
The warrant certificates (the "Warrant Certificates") delivered and to be
delivered pursuant to this Agreement shall be in the form set forth as Exhibit
-------
A, attached hereto and made a part hereof, with such appropriate insertions,
- -
omissions, substitutions and other variations as required or permitted by this
Agreement.
3. Cash Exercise of Warrants.
--------------------------
The Warrants initially are exercisable at the Initial Exercise Price,
payable in cash or by check to the order of the Company, or any combination of
cash or check, subject to adjustment as provided in Section 8 hereof. Upon
---------
surrender of the Warrant Certificate with the annexed Form of Election to
Purchase duly executed, together with payment of the Exercise Price (as
hereinafter defined) for the Shares purchased, at the Company's principal
offices (presently located at 1593 Spring Hill Road, Suite 400, Vienna, Virginia
22182) the registered holder of a Warrant Certificate ("Holder" or "Holders")
shall be entitled to receive a certificate or certificates for the Shares so
purchased. The purchase rights represented by each Warrant Certificate are
exercisable at the option of the Holder thereof, in whole or in part (but not as
to fractional shares of the Common Stock). In the case of the purchase of less
than all the Shares purchasable under any Warrant Certificate, the Company shall
cancel said Warrant Certificate upon the surrender
-2-
<PAGE>
thereof and shall execute and deliver a new Warrant Certificate of like tenor
for the balance of the Shares purchasable thereunder.
4. Cashless Exercise of Warrants.
------------------------------
At any time during the Warrant Exercise Term, the Holder may, at its
option, exchange the Warrant, in whole or in part, into the number of Shares
determined in accordance with this Section 4 (a "Warrant Exchange"), by
---------
surrendering this Warrant at the principal office of the Company or at the
office of its transfer agent, accompanied by a notice stating such Holder's
intent to effect such exchange, the number of Shares to be exchanged and the
date on which the Holder requests that such Warrant Exchange occur (the "Notice
of Exchange"). The Warrant Exchange shall take place on the date specified in
the Notice of Exchange or, if later, the date the Notice of Exchange is received
by the Company (the "Exchange Date"). Certificates for the Shares issuable upon
such Warrant Exchange and, if applicable, a new warrant of like tenor evidencing
the balance of the Shares remaining subject to this Warrant, shall be issued as
of the Exchange Date and delivered to the Holder within five (5) business days
following the Exchange Date. In connection with any Warrant Exchange, this
Warrant shall represent the right to subscribe for and acquire the number of
Shares (rounded to the next highest integer) equal to (i) the number of Shares
specified by the Holder in its Notice of Exchange (the "Total Number") less (ii)
the number of Shares equal to the quotient obtained by dividing (A) the product
of the Total Number and the existing Exercise Price (as hereinafter defined) by
(B) the current Market Price of one share of Common Stock.
5. Issuance of Certificates.
------------------------
-3-
<PAGE>
Upon the exercise of the Warrants, the issuance of certificates for the
Shares shall be made forthwith (and in any event within five (5) business days
thereafter) without charge to the Holder thereof including, without limitation,
any tax which may be payable in respect of the issuance thereof, and such
certificates shall be issued in the name of, or, if the requirements of Section
-------
7 hereof have been satisfied, in such names as may be directed by, the Holder
- -
thereof; provided, however, that the Company shall not be required to pay any
-------- -------
tax which may be payable in respect of any transfer involved in the issuance and
delivery of any such certificates in a name other than that of the Holder, and
the Company shall not be required to issue or deliver such certificates unless
and until the person or persons requesting the issuance thereof shall have paid
to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the Shares shall
be executed on behalf of the Company by the manual or facsimile signature of the
present or any future Chairman or Vice Chairman of the Board of Directors or
President or a Vice President of the Company, attested to by the manual or
facsimile signature of the present or any future Treasurer or an Assistant
Treasurer or Secretary or an Assistant Secretary of the Company. Warrant
Certificates shall be dated the date of execution by the Company upon initial
issuance, division, exchange, substitution or transfer.
The Warrant Certificates and, upon exercise of the Warrants, in part or in
whole, certificates representing the Shares shall bear a legend substantially
similar to the following:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act") or applicable
state securities laws,
-4-
<PAGE>
and may not be offered or sold except (i) pursuant to an effective
registration statement under the Act or such laws, (ii) to the extent
applicable, pursuant to Rule 144 under the Act (or any similar rule under
the Act relating to the disposition of securities), or (iii) upon the
delivery by the holder to the Company of an opinion of counsel, reasonably
satisfactory to counsel to the Company, stating that an exemption from
registration under the Act is available."
6. Price.
------
6.1 Initial and Adjusted Exercise Price.
------------------------------------
The initial exercise price of each Warrant shall be the Initial Exercise
Price set forth in Section 1. The adjusted exercise price shall be the price
---------
which shall result from time to time from any and all adjustments of the Initial
Exercise Price in accordance with the provisions of Section 8 hereof.
---------
6.2 Exercise Price.
--------------
The term "Exercise Price" herein shall mean the Initial Exercise Price or
the adjusted exercise price, depending upon the context.
7. Registration Rights; Limitations on Transfer.
---------------------------------------------
The Warrants and the Shares have not been registered for purposes of public
distribution under the Securities Act of 1933, as amended ("the Act") or
applicable state securities laws and may not be offered, sold or otherwise
transferred except (i) pursuant to an effective registration statement under the
Act or such laws, (ii) to the extent applicable, pursuant to Rule 144 under the
Act (or any similar rule under the Act relating to the disposition of
securities), or (iii) upon the delivery by the holder to the Company of an
opinion of counsel, reasonably satisfactory to counsel to the Company, stating
that exemptions from registration under the Act and such laws are available. The
Shares shall be registered under the Act pursuant to the terms and conditions
-5-
<PAGE>
of the Registration Rights Agreement, of even date herewith, by and between XYZ
Corp. and the Company.
8. Adjustments of Exercise Price and Number of Shares.
--------------------------------------------------
8.1 Adjustment of Number of Shares Purchasable.
------------------------------------------
Upon any adjustment of the Exercise Price as provided in Section 8.2, the
-----------
holder hereof shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares of Common Stock (calculated
to the nearest full share) obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
purchasable hereunder immediately prior to such adjustment and dividing the
product thereof by the Exercise Price resulting from such adjustment.
8.2 Adjustment of Exercise Price.
-----------------------------
The Exercise Price shall be subject to adjustment from time to time as
hereinafter set forth.
(a) Stock Dividends, Subdivisions and Combinations. In the event
----------------------------------------------
that the Company after the date hereof shall:
(1) declare a dividend upon, or make any distribution in
respect of, any of its stock, payable in Common Stock, securities
convertible or exchangeable into Common Stock ("Convertible
Securities") or options, rights or warrants to purchase Common
Stock ("Stock Purchase Rights"), or
(2) subdivide its outstanding shares of Common Stock into a
-6-
<PAGE>
larger number of shares of Common Stock, or
(3) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then the Exercise Price shall be adjusted to that price determined by
multiplying the Exercise Price immediately prior to such event by a fraction (A)
the numerator of which shall be the total number of outstanding shares of Common
Stock of the Company immediately prior to such event, and (B) the denominator of
which shall be the total number of outstanding shares of Common Stock of the
Company immediately after such event, treating as outstanding all shares of
Common Stock issuable upon conversions or exchanges of the Convertible
Securities and exercises of the Stock Purchase Rights referred to in Section
-------
8.2(a)(1).
- ---------
(b) Issuance of Additional Shares of Common Stock. In case the
---------------------------------------------
Company shall issue or sell any shares of Common Stock after the
Closing Date for a consideration less than the Market Price (as
defined below) per share on the date immediately prior to such
issuance, the Exercise Price upon each such issuance or sale shall be
adjusted (to the nearest full cent) to the price calculated by
multiplying the then existing Exercise Price by a fraction the
-----------
numerator of which is (A) the sum of (1) the number of shares of
Common Stock outstanding immediately prior to such issue or sale
multiplied by the Market Price per share of Common Stock on the date
immediately prior to such issue or sale plus (2) the consideration
----
received by the Company upon such issue or sale, divided by (B) the
total number of shares of Common Stock outstanding immediately after
such issue or sale, and the denominator of which shall be the Market
Price per share of
-7-
<PAGE>
Common Stock on the date immediately prior to such issue or sale.
For purposes of this Section 8.2(b) the adjustment shall be made
--------------
successively whenever any issuance is made, and shall become effective
immediately after such issuance.
The provisions of this Section 8.2(b) shall not apply to any additional
--------------
shares of Common Stock which are distributed to holders of Common Stock pursuant
to a stock dividend or subdivision for which an adjustment is provided for under
Section 8.2(a). No adjustment of the Exercise Price shall be made under this
- --------------
Section 8.2(b) upon the issuance of any additional shares of Common Stock which
- --------------
are issued pursuant to the exercise of any Stock Purchase Rights or pursuant to
the conversion or exchange of any Convertible Securities to the extent that such
adjustment shall previously have been made upon the issuance of such Stock
Purchase Rights or Convertible Securities pursuant to subsection (a), (c) or (d)
of this Section 8.2.
-----------
Further, the provisions of this Section 8.2(b) shall not apply if:
--------------
(i) the Company issues stock to third parties in an arms-length
transaction for cash or other consideration having a value equal to at
least (A) 85 percent (85%) of the Market Price on the date of the issuance
of such stock or, if the offering is priced prior to the closing of the
applicable market for the Common Stock on such date, the trading day
immediately preceding such date, or (B) 90 percent (90%) of the average of
the Market Prices of the Common Stock for the ten (10) consecutive trading
days ending on the date of the issuance of such stock, including but not
limited to, stock issuances pursuant to a merger, consolidation, corporate
reorganization (both taxable and nontaxable), corporate restructuring, or
private placement or;
-8-
<PAGE>
(ii) the Company issues shares of Common Stock to individuals or
entities upon the exercise or conversion of Convertible Securities or Stock
Purchase Rights outstanding on the date hereof, or pursuant to Stock
Purchase Rights issued pursuant to the rights offering first announced
publicly on or about October 21, 1998 (the "Company Rights Offering") or
pursuant to any stand-by purchase commitment relating to the Company Rights
Offering; or
(iii) the Company issues warrants, rights, options or restricted stock
to employees of the Company or its affiliates pursuant to a deferred
compensation plan, key employee incentive plan or another applicable
employment compensation plan so long as the exercise price for any such
warrants, rights or options is equal to or greater than either (A) the
Market Price on the date of the issuance of such warrants, rights or
options, or (B) the average Market Prices for the ten (10) consecutive
trading days ending on the date of the issuance of such warrants, rights or
options.
As used in this Agreement, the phrase "Market Price" at any date shall be
deemed to be the last reported sale price, or, in case no such reported sale
takes place on such day, the average of the last reported sale prices for the
last three trading days, in either case as officially reported by the principal
securities exchange on which the Common Stock is listed or admitted to trading
or as reported in the Nasdaq National Market System, or, if the Common Stock is
not listed or admitted to trading on any national securities exchange or quoted
on the Nasdaq National Market System, the closing bid price as furnished by the
National Association of Securities Dealers, Inc. through Nasdaq or similar
organization if Nasdaq is no longer reporting such information, or if the Common
Stock is not quoted on Nasdaq, as determined in good faith by resolution of the
-9-
<PAGE>
Board of Directors of the Company based on the best information available to it.
(c) Issuance of Stock Purchase Rights. In case the Company shall
---------------------------------
issue or sell any Stock Purchase Rights and the consideration per
share for which additional shares of Common Stock may at any time
thereafter be issuable upon exercise thereof (or, in the case of Stock
Purchase Rights exercisable for the purchase of Convertible
Securities, upon the subsequent conversion or exchange of such
Convertible Securities) shall be less than the then Market Price per
share, the Exercise Price shall be adjusted as provided in Section
-------
8.2(b) on the basis that (I) the maximum number of additional shares
------
of Common Stock issuable upon exercise of such Stock Purchase Rights
(or upon conversion or exchange of such Convertible Securities
following such exercise) shall be deemed to have been issued as of the
date of the determination of the Market Price, as hereinafter
provided, and (II) the aggregate consideration received for such
additional shares of Common Stock shall be deemed to be the minimum
consideration received and receivable by the Company in connection
with the issuance and exercise of such Stock Purchase Rights (or upon
conversion or exchange of such Convertible Securities). For the
purposes of this Section 8.2(c), the date as of which the Market Price
--------------
shall be determined shall be the earlier of (A) the date on which the
Company shall enter into a firm contract for the issuance of such
Stock Purchase Rights, or (B) the date of actual issuance of such
Stock Purchase Rights. The provisions of this Section 8.2(c) shall
--------------
not apply to Stock Purchase Rights issued in connection with the
Company Rights Offering.
-10-
<PAGE>
(d) Issuance of Convertible Securities. In case the Company shall
----------------------------------
issue or sell any Convertible Securities and the consideration per
share for which additional shares of Common Stock may at any time
thereafter be issuable pursuant to the terms of such Convertible
Securities shall be less than the then Market Price per share, the
Exercise Price shall be adjusted as provided in Section 8.2(b) on the
--------------
basis that (I) the maximum number of additional shares of Common Stock
necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued as of the date for the
determination of the Market Price, as hereinafter provided, and (II)
the aggregate consideration received for such additional shares of
Common Stock shall be deemed to be equal to the minimum consideration
received and receivable by the Company in connection with the issuance
and exercise of such Convertible Securities. For the purposes of this
Section 8.2(d), the date as of which the Market Price per share shall
--------------
be determined shall be the earlier of (A) the date on which the
Company shall enter into a firm contract for the issuance of such
Convertible Securities, or (B) the date of actual issuance of such
Convertible Securities. No adjustment of the Exercise Price shall be
made under this Section 8.2(d) upon the issuance of any Convertible
--------------
Securities which are issued pursuant to the exercise of any Stock
Purchase Rights, if an adjustment shall previously have been made upon
the issuance of such Stock Purchase Rights pursuant to Section 8.2(c).
--------------
(e) Minimum Adjustment. In the event any adjustment of the
------------------
Exercise Price pursuant to this Section 8.2 shall result in an
-----------
adjustment of less than $.02
-11-
<PAGE>
per share of Common Stock, no such adjustment shall be made, but any
such lesser adjustment shall be carried forward and shall be made at
the time and together with the next subsequent adjustment, if any,
which, together with any adjustments so carried forward, shall amount
to $.02 more per share of Common Stock; provided, however, that upon
-------- -------
any adjustment of the Exercise Price resulting from (i) the
declaration of a dividend upon, or the making of any distribution in
respect of, any stock of the Company payable in Common Stock or
Convertible Securities or (ii) the reclassification by subdivision,
combination or otherwise, of the Common Stock into a greater or
smaller number of shares, the foregoing figure of $.02 per share (or
such figure as last adjusted) shall be proportionately adjusted.
(f) Readjustment of Exercise Price. In the event (i) the purchase
------------------------------
price payable for any Stock Purchase Rights or Convertible Securities
referred to in subsection (c) or (d) above, (ii) the additional
consideration, if any, payable upon exercise of such Stock Purchase
Rights or upon the conversion or exchange of such Convertible
Securities or (iii) the rate at which any Convertible Securities
referred to above are convertible into or exchangeable for additional
shares of Common Stock shall change, the Exercise Price in effect at
the time of such event shall forthwith be readjusted to the Exercise
Price which would have been in effect at such time had such Stock
Purchase Rights or Convertible Securities provided for such changed
purchase price, additional consideration or conversion rate, as the
case may be, at the time initially granted, issued or sold. On the
-12-
<PAGE>
expiration of any such Stock Purchase Rights or of any such right to
convert or exchange under any such Convertible Securities, if none of
such Stock Purchase Rights or such Convertible Securities, as the case
may be, shall have been exercised, the Exercise Price then in effect
hereunder shall forthwith be increased to the Exercise Price which
would have been in effect at the time of such expiration or
termination had such Stock Purchase Rights or Convertible Securities
never been issued. No readjustment of the Exercise Price pursuant to
this Section 8.2(f) shall have the effect of increasing the Exercise
--------------
Price by an amount in excess of the adjustment originally made to the
Exercise Price in respect of the issue, sale or grant of the
applicable Stock Purchase Rights or Convertible Securities.
(g) Reorganization, Reclassification or Recapitalization of
-------------------------------------------------------
Company. In case of any capital reorganization or reclassification or
-------
recapitalization of the capital stock of the Company (other than in
the cases referred to in Section 8.2(a)), or in case of the
---------------
consolidation or merger of the Company with or into another
corporation, or in case of the sale or transfer of the property of the
Company as an entirety or substantially as an entirety, there shall
thereafter be deliverable upon the exercise of any Warrant or any
portion thereof (in lieu of or in addition to the number of shares of
Common Stock theretofore deliverable, as appropriate) the number of
shares of stock or other securities or property to which the holder of
the number of shares of Common Stock which would otherwise have been
deliverable upon the exercise of any Warrant or any portion thereof at
the
-13-
<PAGE>
time would have been entitled upon such capital reorganization or
reclassification of capital stock, consolidation, merger or sale, and
at the same aggregate Exercise Price.
Prior to and as a condition of the consummation of any transaction
described in the preceding sentence, the Company shall make equitable, written
adjustments in the application of the provisions herein set forth satisfactory
to the holder or holders of a majority of the Warrants, so that the provisions
set forth herein shall thereafter be applicable, as nearly as possible, in
relation to any shares of stock or other securities or other property thereafter
deliverable upon exercise of any Warrant. Any such adjustment shall be made by
and set forth in a supplemental agreement between the Company and/or the
successor entity, as applicable, which agreement shall bind each such entity,
shall be accompanied by an opinion of counsel as to the enforceability of such
agreement and shall be approved by the holder or the holders of a majority of
the Warrants.
(h) Other Dilutive Events. In case any Distribution shall occur
---------------------
as to which the other provisions of this Section 8 are not
---------
strictly applicable but the failure to make any adjustment would
not fairly protect the purchase rights represented by this
Warrant in accordance with the essential intent and principles
hereof, then, in each such case, the Board of Directors of the
Company shall determine the amount of the adjustment in good
faith and on a basis consistent with the essential intent and
principles established in this Section 8, necessary to preserve,
---------
without dilution, the purchase rights represented by this
Warrant. Upon determination of such adjustment, the Company will
promptly mail a copy thereof
-14-
<PAGE>
to the holder of this Warrant and shall make the adjustment described
therein.
(i) Determination of Consideration. For purposes of this
------------------------------
Section 8, the consideration received or receivable by the Company for
---------
the issuance, sale, grant or assumption of additional shares of Common
Stock, Stock Purchase Rights or Convertible Securities, irrespective
of the accounting treatment of such consideration, shall be valued as
follows:
(1) Cash Payment. In the case of cash, the net amount
------------
received by the Company without deduction of any expenses paid or
incurred or any underwriting commissions or concessions paid or
allowed by the Company.
(2) Securities or Other Property. In the case of securities
----------------------------
or other property, at the Market Price of the security or the
fair value of such other property as determined in good faith by
the Board of Directors of the Company (in both cases as of the
date immediately preceding the issuance, sale or grant in
question).
(3) Allocation Related to Common Stock. In the event
----------------------------------
additional shares of Common Stock are issued or sold together
with other securities or other assets of the Company for a
consideration which covers both, the consideration received
(computed as provided in (1) and (2) above) shall be allocable to
such additional shares of Common Stock as determined in good
faith by the Board of Directors of the Company.
(4) Dividends in Securities. In case the Company shall
-----------------------
declare
-15-
<PAGE>
a dividend or make any other distribution upon any sto ck of the
Company (other than Common Stock) payable in either case in
Common Stock, Convertible Securities or Stock Purchase Rights,
such Common Stock, Convertible Securities or Stock Purchase
Rights, as the case may be, issuable in payment of such dividend
or distribution shall be deemed to have been issued or sold
without consideration.
(5) Stock Purchase Rights and Convertible Securities. The
------------------------------------------------
consideration for which shares of Common Stock shall be deemed to
be issued upon the issuance of any Stock Purchase Rights or
Convertible Securities shall be determined by dividing (i) the
total consideration, if any, received or receivable by the
Company as consideration for the granting of such Stock Purchase
Rights or the issuance of such Convertible Securities, plus the
minimum aggregate amount of additional consideration payable to
the Company upon the exercise of such Stock Purchase Rights, or,
in the case of such Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the
conversion or exchange thereof, in each case after deducting any
accrued interest, dividends, or any expenses paid or incurred or
any underwriting commissions or concessions paid or allowed by
the Company, by (ii) the maximum number of shares of Common Stock
issuable upon the exercise of such Stock Purchase Rights or upon
the conversion or exchange of all such Convertible Securities.
-16-
<PAGE>
(6) Merger, Consolidation or Sale of Assets. In case any
---------------------------------------
shares of Common Stock or Convertible Securities or any Stock
Purchase Rights shall be issued in connection with any merger or
consolidation in which the Company is the surviving corporation,
the amount of consideration therefor shall be deemed to be the
fair value of such portion of the assets and business of the
nonsurviving corporation as shall be attributable to such Common
Stock, Convertible Securities or Stock Purchase Rights, as the
case may be. In the event of any merger or consolidation of the
Company in which the Company is not the surviving corporation or
in the event of any sale of all or substantially all of the
assets of the Company for stock or other securities of any
corporation, the Company shall be deemed to have issued a number
of shares of its Common Stock for stock or securities of the
other corporation computed on the basis of the actual exchange
ratio on which the transaction was predicated and for a
consideration equal to the Market Price on the date of such
transaction of such stock or securities of the other corporation,
and if any such calculation results in adjustment of the Exercise
Price, the determination of the number of shares of Common Stock
issuable upon exercise of this Warrant immediately prior to such
merger, consolidation or sale, for the purposes of Section 8.2(g)
--------------
above, shall be made after giving effect to such adjustment of
the Exercise Price.
(j) Record Date. In case the Company shall take a record of the
-----------
-17-
<PAGE>
holders of the Common Stock for the purpose of entitling them (i) to
receive a distribution payable in Common Stock, Stock Purchase Rights
or in Convertible Securities or (ii) to subscribe for or purchase
Common Stock or Convertible Securities, then all references in this
Section 8 to the date of the issue or sale of the shares of Common
---------
Stock deemed to have been issued or sold upon the making of such
distribution or the date of the granting of such right of subscription
or purchase, as the case may be, shall be deemed to be references to
such record date.
(k) Shares Outstanding. The number of shares of Common Stock
------------------
deemed to be outstanding at any given time shall exclude shares of
Common Stock in the treasury of the Company and those held by any
subsidiary of the Company.
(l) Maximum Exercise Price. At no time shall the Exercise Price
----------------------
per share of Common Stock exceed the amount set forth in Section 1 of
---------
this Agreement except as provided in subsection (a) or (g) of this
Section 8.2.
-----------
(m) Application. Except as otherwise provided herein, all
-----------
subsections of this Section 8.2 are intended to operate independently
-----------
of one another. If an event occurs that requires the application of
more than one subsection, all applicable subsections shall be given
independent effect.
8.3 Certificates and Notices.
------------------------
(a) Adjustments to Exercise Price. Upon any adjustment under this
-----------------------------
Section 8 of the number of shares of Common Stock purchasable upon
---------
exercise of a Warrant or of the Exercise Price, a certificate, signed
(i) by the President or a
-18-
<PAGE>
Vice President and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the Company, or (ii) by any
independent firm of certified public accountants of recognized
national standing selected by, and at the expense of, the Company,
setting forth in reasonable detail the events requiring the adjustment
and the method by which such adjustment was calculated, shall be
mailed to the holders of the Warrant specifying the adjusted Exercise
Price and the number of shares of Common Stock purchasable upon
exercise of such holder's Warrant after giving effect to such
adjustment.
The certificate of any independent firm of certified public accountants of
recognized national standing selected by the Board of Directors of the Company
shall be conclusive evidence of the correctness of any computation made under
this Section 8.
---------
(b) Effect of Failure.
-----------------
Failure to file any certificate or notice or to mail any
notice or any defect in any certificate or notice pursuant to this
Section 8.3 shall not affect the legality or validity of the
-----------
adjustment of the Exercise Price or the number of shares purchasable
upon exercise of any Warrant, or any transaction giving rise thereto.
9. Exchange and Replacement of Warrant Certificates.
-------------------------------------------------
Each Warrant Certificate is exchangeable without expense, upon the
surrender hereof by the registered Holder at the principal executive office of
the Company, for a new Warrant Certificate of like tenor and date representing
in the aggregate the right to purchase the same number of Shares in such
denominations as shall be designated by the Holder thereof at the time of such
surrender.
-19-
<PAGE>
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrant
Certificate, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
10. Elimination of Fractional Interests.
------------------------------------
The Company shall not be required to issue certificates representing
fractions of shares of Common Stock and shall not be required to issue scrip or
pay cash in lieu of fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up to
the nearest whole number of shares of Common Stock.
11. Reservation and Listing of Securities.
--------------------------------------
The Company shall at all times reserve and keep available out of its
authorized shares of Common Stock, solely for the purpose of issuance upon the
exercise of the Warrants, such number of shares of Common Stock as shall be
issuable upon the exercise thereof. The Company covenants and agrees that, upon
exercise of the Warrants and payment of the Exercise Price therefor, all shares
of Common Stock issuable upon such exercise shall be duly and validly issued,
fully paid, non-assessable and not subject to the preemptive rights of any
shareholder. As long as the Warrants shall be outstanding, the Company shall
cause all shares of Common Stock issuable upon the exercise of the Warrants to
be listed on or quoted by Nasdaq or listed on such national securities exchanges
as the Company's Common Stock is then listed or quoted, if any.
-20-
<PAGE>
12. Notices to Warrant Holders.
---------------------------
Nothing contained in this Agreement shall be construed as conferring
upon the Holder or Holders the right to vote or to consent or to receive notice
as a shareholder in respect of any meetings of shareholders for the election of
directors or any other matter, or as having any rights whatsoever as a
shareholder of the Company. If, however, at any time prior to the expiration of
the Warrants and their exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its shares
of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in cash, or a cash
dividend or distribution payable otherwise than out of current or
retained earnings, as indicated by the accounting treatment of such
dividend or distribution on the books of the Company; or
(b) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or
securities convertible into or exchangeable for shares of capital
stock of the Company, or any option, right or warrant to subscribe
therefor; or
(c) a merger or consolidation involving the Company or
subsidiary of the Company and any other entity and the Company is not
the surviving entity; or
(d) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of
all or substantially all of its property, assets and business as an
entirety shall be proposed; then, in any one or more of said events,
the Company shall give written notice of such event at
-21-
<PAGE>
least fifteen (15) days prior to the date fixed as a record date or
the date of closing the transfer books for the determination of the
shareholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, options or warrants,
or entitled to vote on such proposed merger, consolidation,
dissolution, liquidation, winding up or sale. Such notice shall
specify such record date or the date of closing the transfer books, as
the case may be. Failure to give such notice or any defect therein
shall not affect the validity of any action taken in connection with
the declaration or payment of any such dividend or distribution, or
the issuance of any convertible or exchangeable securities or
subscription rights, options or warrants, or any proposed merger,
consolidation, dissolution, liquidation, winding up or sale.
13. Notices.
--------
All notices, requests, consents and other communications hereunder shall be
in writing and shall be deemed to have been duly made when delivered, or mailed
by registered or certified mail, return receipt requested:
(a) If to a registered Holder of the Warrants, to the address of
such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3 of
---------
this Agreement or to such other address as the Company may designate
by notice to the Holders.
-22-
<PAGE>
14. Supplements and Amendments.
---------------------------
The Company and XYZ Corp. may from time to time supplement or amend this
Agreement without the approval of any Holders of Warrant Certificates in order
to cure any ambiguity, to correct or supplement any provision contained herein
which may be defective or inconsistent with any provisions herein, or to make
any other provisions in regard to matters or questions arising hereunder which
the Company and XYZ Corp. may deem necessary or desirable and which the Company
and XYZ Corp. deem not to adversely affect the interests of the Holders of
Warrant Certificates.
15. Successors.
-----------
All the covenants and provisions of this Agreement by or for the benefit of
the Company and the Holders inure to the benefit of their respective successors
and assigns hereunder.
16. Termination.
------------
This Agreement shall terminate at the close of business on December 30,
2003. Notwithstanding the foregoing, this Agreement will terminate on any
earlier date when all Warrants have been exercised and all the Shares issuable
upon exercise of the Warrants have been resold to the public.
17. Governing Law.
--------------
This Agreement and each Warrant Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of New York and for all
purposes shall be construed in accordance with the laws of said State.
-23-
<PAGE>
18. Benefits of This Agreement.
---------------------------
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company and XYZ Corp. and any other registered Holder
or Holders of the Warrant Certificates, Warrants or the Shares any legal or
equitable right, remedy or claim under this Agreement; and this Agreement shall
be for the sole and exclusive benefit of the Company and XYZ Corp. and any other
Holder or Holders of the Warrant Certificates, Warrants or the Shares.
19. Counterparts.
-------------
This Agreement may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be an original, and such
counterparts shall together constitute but one and the same instrument.
-24-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
[SEAL] THE WMF GROUP, LTD.
By: /s/ Shekar Narasimhan
-----------------------------------
Name: Shekar Narasimhan
Title: President and Chief Executive Officer
Attest:
/s/ Barbara Ekstrom
- -------------------
XYZ CORP.
By:[*]
Name:[*]
Title:[*]
-25-
<PAGE>
EXHIBIT 10.5
AN ASTERISK ([*]) INDICATES THAT CONFIDENTIAL INFORMATION HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION AS PART OF A
CONFIDENTIAL TREATMENT REQUEST.
REGISTRATION RIGHTS AGREEMENT
Dated as of December 30, 1998
by and between
THE WMF GROUP, LTD.
as the Company,
and
[*]
as the Initial Holder
This Registration Rights Agreement is made and entered into as of December
30, 1998, by and between The WMF Group, Ltd., a Delaware corporation (the
"Company"), and [*], a [*] corporation (the "Initial Holder").
This Agreement is entered into pursuant to the Settlement Agreement (the
"Settlement Agreement"), dated December 30, 1998, between the Company, WMF
Capital Corp., a Delaware corporation, [*], in his individual capacity and the
Initial Holder. In order to induce the Initial Holder to enter into the
Settlement Agreement, and pursuant to Sections 1 and 2 of the Settlement
Agreement, the Company has agreed to provide the registration rights provided
for in this Agreement to the Initial Holder and its direct and indirect
transferees.
The parties hereby agree as follows:
1. Definitions
-----------
As used in this Agreement, the following terms shall have the following
meanings:
Affiliate: As to any specified Person, (i) any Person that directly or
---------
indirectly controls or is controlled by or is under common control with the
specified Person, (ii) any Person that is an officer of, partner in or trustee
of, or serves in a similar capacity with respect to, the specified Person or of
which the specified Person is an officer, partner or trustee, or with respect to
which the specified Person serves in a similar capacity, and (iii) any Person
that, directly or indirectly, is the beneficial owner of 10% or more of any
class of equity securities of the specified Person or of which the specified
Person is directly or indirectly the owner of 10% or more of any class of equity
securities.
Agreement: This Registration Rights Agreement, as the same may be amended,
---------
supplemented or modified from time to time in accordance with the terms hereof.
Business Day: With respect to any act to be performed hereunder, each
------------
Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which
banking institutions in New York, New York or such other place where such act is
to occur are authorized or obligated by applicable law, regulation or executive
order to close.
<PAGE>
Closing Date: December 30, 1998.
------------
Commission: The United States Securities and Exchange Commission.
----------
Common Stock: Common stock, $0.01 par value per share, of the Company.
------------
Company: The WMF Group, Ltd., a Delaware corporation, and any successor
-------
corporation thereto.
Company Warrants: The Series 2 Warrants and Series 3 Warrants issued by
----------------
the Company to the Initial Holder pursuant to Section 1 of the Settlement
Agreement.
Controlling Person: As defined in Section 6(a) hereof.
------------------ ------------
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
------------
rules and regulations promulgated by the Commission thereunder.
Expiration Date: The earlier of (i) such time as all outstanding
---------------
Registrable Shares have been sold pursuant to a Registration Statement or have
been transferred pursuant to Rule 144 or otherwise transferred in a manner that
results in the transferred security being delivered not being subject to
transfer restrictions under the Securities Act or (ii) such time as the Company
delivers to the Holders an opinion of counsel reasonably satisfactory to the
Holders that the Registrable Shares may be sold without registration under the
Securities Act
Holder: Each registered holder of any Registrable Shares from time to
------
time, including, without limitation, the Initial Holder and its Affiliates.
Initial Holder: [*]
--------------
Person: An individual, partnership, corporation, trust, or unincorporated
------
organization, or government and any agency or political subdivision thereof.
Pledged Shares: Those shares of Common Stock pledged by the Company to
--------------
guarantee the obligation of WMF Capital Corp. pursuant to Section 2(ii) of the
Settlement Agreement.
Proceeding: An action, claim, suit or proceeding (including, without
----------
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or, to the knowledge of the person subject thereto,
threatened.
Prospectus: The prospectus included in any Registration Statement,
----------
including any preliminary Prospectus, and all other amendments and supplements
to any such prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference, if any, in
such prospectus.
Register, registered and registration: Such terms shall refer to a
-------- ---------- ------------
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable
2
<PAGE>
rules and regulations thereunder, and the declaration or ordering of the
effectiveness of such registration statement.
Registrable Shares: The Warrant Shares, the Pledged Shares and any shares
------------------
of Common Stock replacing or issued as a dividend on the Warrant Shares or the
Pledged Shares, upon original issuance thereof and at all times subsequent
thereto, until, in the case of any such share, the earliest to occur of (i) the
date on which it has been registered effectively pursuant to the Securities Act
and disposed of in accordance with the Registration Statement relating to it,
(ii) the date on which either it is transferred in compliance with Rule 144 (or
any similar provisions then in effect) or (iii) the date on which it is sold to
the Company.
Registration Expenses: Any and all expenses incident to performance of or
---------------------
compliance with this Agreement, including without limitation: (i) all
Commission, stock exchange, or other market registration, listing and filing
fees, (ii) all fees and expenses incurred in connection with compliance with
federal or state securities or blue sky laws (including any registration,
listing and filing fees and reasonable fees and disbursements of counsel in
connection with blue sky qualification of any of the Registrable Shares and the
preparation of a Blue Sky Memorandum and compliance with applicable rules and
regulations), (iii) all expenses of any Persons in preparing or assisting in
preparing, word processing, duplicating, printing, delivering and distributing
any Registration Statement, any Prospectus, any amendments or supplements
thereto, any underwriting agreements, securities sales agreements, certificates
and other documents relating to the performance of and compliance with this
Agreement, (iv) all fees and expenses incurred in connection with the listing of
any of the Registrable Shares on any securities exchange or market pursuant to
Section 4(i) hereof, (v) the fees and disbursements of counsel for the Company
- ------------
and of the independent public accountants (including without limitation, the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance) of the Company (provided that Registration Expenses shall
not include the fees and expenses of any counsel or accountants for the Holders)
and (vi) any fees and disbursements customarily paid by issuers or sellers of
securities (including the fees and expenses of any experts retained by the
Company in connection with any Registration Statement), but excluding
underwriters' and brokers' discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of Registrable Shares by a Holder.
Registration Statement: Any registration statement of the Company that
----------------------
covers the issuance or resale of any of the Registrable Shares on an appropriate
form, including the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference, if any, in such registration statement.
Rights Offering: The rights offering by the Company announced publicly on
---------------
or about October 14, 1998.
Rule 144: Rule 144 promulgated by the Commission pursuant to the
--------
Securities Act, as such rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission as a replacement thereto
having substantially the same effect as such rule.
3
<PAGE>
Rule 158: Rule 158 promulgated by the Commission pursuant to the
--------
Securities Act, as such rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission as a replacement thereto
having substantially the same effect as such rule.
Rule 424: Rule 424 promulgated by the Commission pursuant to the
--------
Securities Act, as such rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission as a replacement thereto
having substantially the same effect as such rule.
Securities Act: The Securities Act of 1933, as amended, and the rules and
--------------
regulations promulgated by the Commission thereunder.
Settlement Agreement: As defined in the preamble.
--------------------
Underwritten Offering: A sale of securities of the Company to an
---------------------
underwriter or underwriters for reoffering to the public.
Warrant Agreements: The Series 2 Warrant Agreement or the Series 3 Warrant
------------------
Agreement between the Company and the Initial Holder, as the context requires.
Warrant Shares: Those shares of Common Stock that the holder of the
--------------
Company Warrants is entitled to purchase upon exercise of the Company Warrants.
2. Shelf Registration
------------------
Pursuant to the registration procedures set forth in Section 4 hereof, the
---------
Company agrees to file with the Commission no later than April 15, 1999, one or
more shelf Registration Statements with respect to the sale from time to time in
open-market transactions by the Holders of any and all Registrable Shares.
3. Piggyback Registration
----------------------
(a) Piggyback Registration Rights and Notice of Registration. From the
--------------------------------------------------------
Closing Date until the Expiration Date, the Company shall notify all Holders in
writing at least twenty-one (21) days prior to filing any registration statement
under the Securities Act for the purpose of effecting a public offering of
securities of the Company (including, but not limited to, registration
statements relating to offerings of the Company's securities by any shareholders
of the Company, but excluding registration statements relating to the Rights
Offering or relating exclusively to any employee benefit plan or corporate
reorganization) and will afford each such Holder an opportunity to include in
such registration statement all or any part of the Registrable Shares then held
by such Holder. Each Holder desiring to include in any such registration
statement all or any part of the Registrable Shares held by such Holder shall,
within seven (7) days after receipt of the above-described notice from the
Company, so notify the Company in writing, and in such notice shall inform the
Company of the number of Registrable Shares such Holder wishes to include in
such registration statement. If a Holder decides not to include all of its
Registrable Shares in any registration statement thereafter filed by the
Company, such Holder shall nevertheless continue to have the right to include
any Registrable Shares in any subsequent
4
<PAGE>
registration statement or registration statements as may be filed by the Company
with respect to offerings of Company securities, all upon the terms and
conditions set forth herein.
(b) Right to Terminate Registration. The Company shall have the right,
-------------------------------
in its sole discretion, to terminate or withdraw any registration initiated by
it under this Section 3 prior to the effectiveness of such registration, whether
---------
or not any Holder has elected to include Registrable Shares in such
registration.
(c) Underwriting. If a registration statement under which the Company
------------
gives notice under this Section 3 is for an Underwritten Offering, then the
---------
Company shall so advise the Holders of Registrable Shares and the Holder shall
have the opportunity to include its Registrable Shares in such registration
statement. In such event, the right of any Holder to include its Registrable
Shares in a registration pursuant to this Section 3(c) shall be conditioned upon
------------
such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Shares in the underwriting to the extent provided herein.
All Holders proposing to distribute their Registrable Shares through such
underwriting shall enter into an underwriting agreement in customary form with
the underwriter(s) selected for such underwriting. Notwithstanding any other
provision of this Agreement, if the managing underwriter(s) determine(s) in good
faith that marketing factors require a limitation of the number of shares to be
underwritten, then the managing underwriter(s) may exclude shares (including
Registrable Shares) from the registration and the underwriting, and the number
of shares that may be included in the registration and the underwriting shall be
allocated, first, to the Company, and second, to each of the shareholders
----- ------
(including the Holders) requesting inclusion of their shares in such
registration statement on a pro rata basis based on the total number of shares
such shareholder has requested be included in such registration statement. If
any Holder disapproves of the proposed terms of any such Underwritten Offering,
such Holder may elect to withdraw therefrom by written notice to the Company and
the managing underwriter(s), delivered at least ten (10) Business Days prior to
the date on which the Underwritten Offering is expected to commence. Any
Registrable Shares excluded or withdrawn from such underwriting shall be
excluded and withdrawn from the registration. For any Holder that is a
partnership or corporation, the partners, retired partners and shareholders of
such Holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "Holder," and any pro rata reduction with respect to such
"Holder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"Holder," as defined in this sentence.
(d) Holdback Agreement. By electing to include Registrable Shares in any
------------------
registration pursuant to Section 3 hereof, the Holder of the Registrable Shares
---------
shall be deemed to have agreed not to effect any public sale or distribution of
securities of the Company of the same or similar class or classes of the
securities included in the Registration Statement or any securities convertible
into or exchangeable or exercisable for such securities, including a sale
pursuant to Rule 144 under the Securities Act, during such periods as are
reasonably requested by the managing underwriter(s), if an Underwritten
Offering, or the Company, in any other registration. Any period up to 180 days
shall be deemed reasonable.
5
<PAGE>
(e) The Company shall not be obligated to effect, or to take any action to
effect, any such registration of Registrable Shares pursuant to this Section 3
---------
in any particular jurisdiction in which the Company would be required to execute
a general consent to service of process or to qualify to do business as a
foreign corporation in affecting such registration, qualification or compliance,
unless the Company is already subject to service or required to be so qualified
in such jurisdiction and except as may be required by the Securities Act.
4. Registration Procedures.
-----------------------
Subject to Sections 2 and 3 hereof, in connection with the obligations of
---------- -
the Company with respect to any registration pursuant to this Agreement, the
Company shall use its commercially reasonable best efforts to effect or cause to
be effected the registration of the Registrable Shares under the Securities Act
to permit the sale of such Registrable Shares by the Holder or Holders in
accordance with customary methods of sale or distribution, including through
brokers' transactions and block trades. The Company shall:
(a) prepare and file with the Commission, as specified in this Agreement,
a Registration Statement, which Registration Statement shall comply as to form
in all material respects with the requirements of the applicable form and
include all financial statements required by the Commission to be filed
therewith, and use its commercially reasonable best efforts to cause such
Registration Statement to become effective as soon as possible after filing and
to remain effective until the Expiration Date;
(b) subject to Section 4(h) hereof, prepare and file with the Commission
------------
such amendments and post-effective amendments to each such Registration
Statement as may be necessary to keep such Registration Statement effective for
the period described in Section 4(a); cause each such Prospectus contained
------------
therein to be supplemented by any required prospectus supplement, and as so
supplemented, to be filed pursuant to Rule 424 or any similar rule that may be
adopted under the Securities Act; and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by each
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the selling Holder thereof;
(c) upon request of any Holder named in any Prospectus, prepare and file
with the Commission a post-effective amendment to the Registration Statement of
which such Prospectus is a part to reflect any transfer of one or more Company
Warrants to an individual or entity not already named as a Holder in such
Prospectus;
(d) furnish without charge to any Holder named in any Prospectus as many
copies of such Prospectus, and any amendment or supplement thereto and such
other documents as such Holder may reasonably request, in order to facilitate
the public sale or other disposition of the Registrable Shares; the Company
consents to the use of any such Prospectus by such Holder in connection with the
offering and sale of the Registrable Shares covered by any such Prospectus;
(e) use its commercially reasonable best efforts to register or qualify,
or obtain exemption from registration or qualification for, all Registrable
Shares by the time the applicable
6
<PAGE>
Registration Statement is declared effective by the Commission under all
applicable state securities or "blue sky" laws of such jurisdictions as any
Holder shall reasonably request in writing, keep each such registration or
qualification or exemption effective during the period such Registration
Statement is required to be kept effective pursuant to Section 4(a) and do any
------------
and all other acts and things which may be reasonably necessary or advisable to
enable each Holder to consummate the disposition in each such jurisdiction of
such Registrable Shares owned by such Holder;
(f) notify each Holder promptly and, if requested by any Holder, confirm
such advice in writing (i) when a Registration Statement has become effective
and when any post-effective amendments and supplements thereto become effective,
(ii) of the issuance by the Commission or any state securities authority of any
stop order suspending the effectiveness of a Registration Statement or the
initiation of any Proceedings for that purpose, and (iii) of the happening of
any event during the period a Registration Statement is effective as a result of
which such Registration Statement or the related Prospectus contains any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading (which
advice shall be accompanied by an instruction to suspend the use of the
Prospectus until the requisite changes have been made);
(g) during the period of time referred to in Section 4(a), use its
------------
commercially reasonable best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of any enjoining order suspending the use or effectiveness
of a Registration Statement or the lifting of any suspension of the
qualification (or exemption from qualification) of any of the Registrable Shares
for sale in any jurisdiction, at the earliest possible moment;
(h) upon request, furnish to each requesting Holder, without charge, at
least one conformed copy of each Registration Statement and any post-effective
amendment thereto (without documents incorporated therein by reference or
exhibits thereto, unless requested);
(i) except as provided in Section 5 hereof, upon the occurrence of any
---------
event contemplated by Section 4(e)(iii) hereof, use its commercially reasonable
-----------------
best efforts to promptly prepare a supplement or post-effective amendment to a
Registration Statement or the related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Shares, such Prospectus will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
(j) if the Company has listed its Common Stock on an exchange or automated
quotation system, use its commercially reasonable best efforts (including,
without limitation, seeking to cure any deficiencies (within the Company's
control) cited by the exchange or automated quotation system in the Company's
listing application) to list all Registrable Shares on such exchange or
automated quotation system;
(k) prepare and file in a timely manner all documents and reports pursuant
to the Exchange Act which are incorporated by reference into any Registration
Statement;
7
<PAGE>
(l) use its commercially reasonable best efforts to comply with all
applicable rules and regulations of the Commission and make generally available
to its securityholders, as soon as reasonably practicable, earnings statements
covering at least 12 months which satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 (or any similar rule promulgated under the
Securities Act) thereunder;
(m) provide and cause to be maintained a transfer agent for all
Registrable Shares covered by any Registration Statement from and after a date
not later than the effective date of such Registration Statement; and
(n) in connection with any sale or transfer of the Registrable Shares that
will result in such securities no longer being restricted from resale without
registration under the Securities Act, cooperate with the Holders to facilitate
the timely preparation and delivery of certificates representing the Registrable
Shares to be sold, which certificates shall not bear any restrictive legends,
and to enable such Registrable Shares to be in such denominations and registered
in such names as the Holders may request at least two (2) Business Days prior to
any sale of the Registrable Shares.
The Company may require each Holder to furnish to the Company such
information regarding the proposed distribution by such Holder of Registrable
Shares as the Company may from time to time reasonably request in writing and no
Holder shall be entitled to be named as a selling securityholder in any
Registration Statement, and no Holder shall be entitled to use the Prospectus
forming a part thereof, if such Holder does not provide such information to the
Company.
Upon receipt of written notice from the Company of the happening of any
event of the kind described in Section 4(e)(iii) hereof, the Holders will
-----------------
immediately discontinue disposition of Registrable Shares pursuant to a
Registration Statement until the Holders' receipt of the copies of a
supplemented or amended Prospectus. If so requested by the Company, the Holders
will deliver to the Company (at the expense of the Company) all copies in their
possession, other than permanent file copies then in the Holders' possession, of
the Prospectus covering such Registrable Shares current at the time of receipt
of such notice.
5. Black-Out Period. Subject to the provision of this Section 5, the Company
---------------- ---------
may defer filing or requesting the effectiveness of a Registration Statement, or
following the effectiveness of a Registration Statement (and the filings with
any state securities commissions), the Company, by written notice to the
Holders, may direct the Holders to suspend sales of the Registrable Shares
pursuant to the Registration Statement, if either of the following events shall
occur: (i) the suspension of sales is necessary to correct a material
misstatement or omission in the applicable Registration Statement or any
document incorporated by reference therein, (ii) the Company is engaged in a
primary Underwritten Offering of its securities and the managing underwriter(s)
informs the Company that the sale of shares under the Registration Statement
would impair the pricing or commercial practicability of the offering, or (iii)
if (A) the Company is engaged in negotiations relating to, or the consummation
of, a material transaction or (B) an event has occurred that would require
additional disclosure of material information by the Company in the Registration
Statement or the documents incorporated by reference therein, in
8
<PAGE>
either case as to which the Board of Directors of the Company determines in good
faith that the Company has a bona fide business purpose for preserving
confidentiality or which renders the Company unable to comply with the
Commission's disclosure requirements, but such suspension shall continue only
for so long as such event or its effect is continuing. Upon the occurrence of
such event, the Company shall use its commercially reasonable best efforts to
cause the Registration Statement to become effective or to promptly amend or
supplement the Registration Statement on a post-effective basis, as applicable,
so as to permit the Holders to resume sales of the Registrable Shares.
In the case of an event which causes the Company to suspend the
effectiveness of a Registration Statement (a "Suspension Event"), the Company
may give written notice (a "Suspension Notice") to the Holders at the addresses
set forth in the stock transfer records of the Company to suspend sales of the
Registrable Shares so that the Company may amend or update the Registration
Statement; provided, however, that such suspension shall continue only for so
-------- -------
long as the Suspension Event or its effect is continuing and the Company is
taking all reasonable steps to terminate suspension of the effectiveness of the
Registration Statement as promptly as possible. In no case shall a suspension of
sales pursuant to this Section 5 continue for a total of more than 120 days out
---------
of any one-year period and no more than 180 days in any two-year period. The
Warrant Exercise Term (as defined in the applicable Warrant Agreement) of any
Company Warrants outstanding at the time of any Suspension Event shall be
extended for a period of time equal to the duration of the resulting suspension.
The Holders shall not effect any sales of the Registrable Shares pursuant
to such Registration Statement at any time after receipt of a Suspension Notice
from the Company (and prior to receipt of an End of Suspension Notice (defined
below)). If so requested by the Company, the Holders will deliver to the Company
(at the expense of the Company) all copies in their possession, other than
permanent file copies then in the Holders' possession, of the Prospectus
covering such Registrable Shares at the time of receipt of the Suspension
Notice. The Holders may recommence effecting sales of the Registrable Shares
pursuant to the Registration Statement (or such filings) following further
notice to such effect (an "End of Suspension Notice") from the Company, which
End of Suspension Notice shall be given by the Company to the Holders in the
manner described above promptly following the conclusion of any Suspension
Event.
6. Indemnification and Contribution.
--------------------------------
(a) Indemnification by the Company. The Company agrees to indemnify and
------------------------------
hold harmless (i) the Initial Holder, (ii) each Holder, (iii) each Person, if
any, who controls (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) any of the foregoing (any of the persons
referred to in this clause (iii) being hereinafter referred to as a "Controlling
Person"), (iv) the respective officers, directors, partners, employees,
representatives and agents of each Initial Holder and each Holder or any
Controlling Person, and (v) any person deemed to be an "underwriter" under the
Securities Act or other applicable law as follows:
(i) from and against any and all loss, claim, liability and damage
whatsoever, as incurred, arising out of (A) violation by the Company of the
Securities Act or applicable state
9
<PAGE>
securities laws in connection with an offering of Registrable Shares hereunder
and (B) any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement (or any amendment thereto) pursuant to
which Registrable Shares were registered under the Securities Act, including all
documents incorporated therein by reference, or the omission or alleged omission
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any Prospectus (or any
amendment or supplement thereto), including all documents incorporated therein
by reference, or the omission or alleged omission to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; provided, however, that such indemnity with respect to any
-------- -------
Prospectus shall not inure to the benefit of any Holder or Initial Holder (or
any Controlling Person thereof) to the extent that any such loss, claim,
liability, damage or expense arises out of such indemnified person's failure to
send or give a copy of the revised final Prospectus, as the same may be then
supplemented or amended, to the Person asserting an untrue statement or alleged
untrue statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Shares to such Person if such statement
or omission was corrected in such final Prospectus;
(ii) from and against any and all loss, liability, claim and, damage
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or Proceeding by any governmental
agency or body, commenced or threatened, or of any claim whatsoever based upon
any such untrue statement or omission, if such settlement is effected with the
written consent of the Company, which consent shall not be unreasonably
withheld; and
(iii) from and against any and all expense reasonably incurred
(including reasonable fees and disbursements of one firm of attorneys), in
investigating, preparing or defending against any litigation, or investigation
or Proceeding by any governmental agency or body, commenced or threatened, in
each case whether or not a party, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under subparagraph (i) or (ii)
above;
provided, however, that this indemnity agreement does not apply to any
-------- -------
Holder with respect to any loss, liability, claim, damage or expense to the
extent arising out of any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with information
furnished to the Company in writing by such Holder expressly for use in a
Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto).
(b) Indemnification by Holders. Each Holder severally and not jointly
--------------------------
agrees to indemnify and hold harmless the Company, its directors, officers,
partners, employees, representatives and agents (including each officer of the
Company who signed the Registration Statement), and each Person, if any, who
controls the Company, within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, against
10
<PAGE>
(i) any and all loss, liability, claim, damage and expenses
whatsoever, as incurred, arising out of (A) any violation by the Holders of the
Securities Act or applicable state securities laws in connection with the
offering and (B) any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement (or any amendment thereto) pursuant
to which Registrable Shares were registered under the Securities Act, including
all documents incorporated therein by reference, or the omission or alleged
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto), including all documents
incorporated therein by reference, or the omission or alleged omission to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(ii) from and against any and all loss, liability, claim and, damage
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or Proceeding by any governmental
agency or body, commenced or threatened, or of any claim whatsoever based upon
any such untrue statement or omission, if such settlement is effected with the
written consent of such Holder, which consent shall not be unreasonably
withheld; and
(iii) from and against any and all expense reasonably incurred
(including reasonable fees and disbursements of one firm of attorneys), in
investigating, preparing or defending against any litigation, or investigation
or Proceeding by any governmental agency or body, commenced or threatened, in
each case whether or not a party, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under subparagraph (i) or (ii)
above;
but only with respect to such untrue statements or omissions, or alleged
untrue statements or omissions, made in a Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with information furnished to the Company in
writing by such Holder expressly for use in such Registration Statement (or any
amendment thereto) or such Prospectus (or any amendment or supplement thereto),
and provided further, that no Holder shall be liable under this Section 6(b) for
-------- -------
any amount in excess of the net proceeds received by such Holder from the sale
of such Holder's Registrable Shares pursuant to a Registration Statement or a
Prospectus, as the case may be.
(c) Conduct of Indemnification Proceedings. Each indemnified party shall
--------------------------------------
give reasonably prompt notice to each indemnifying party of any action or
Proceeding commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve it
from any liability which it may have under this Section 6 except to the extent
---------
that the indemnifying party is actually prejudiced by such failure to give
notice. If the indemnifying party so elects within a reasonable time after
receipt of such notice, the indemnifying party may assume the defense of such
action or Proceeding at such indemnifying party's own expense with counsel
chosen by the indemnifying party and approved by the indemnified parties in such
action or Proceeding, which approval shall not be unreasonably withheld;
provided, however, that, if such indemnified party or parties reasonably
- -------- -------
11
<PAGE>
determine that a conflict of interest exists where it is advisable for such
indemnified party or parties to be represented by separate counsel or that, upon
advice of counsel, there may be legal defenses available to them which are
different from or in addition to those available to the indemnifying party, then
the indemnifying party shall not be entitled to assume such defense and the
indemnified party or parties shall be entitled to one separate counsel at the
indemnifying party's expense. If an indemnifying party is not entitled to assume
the defense of such action or Proceeding as a result of the proviso to the
preceding sentence, such indemnifying party's counsel shall be entitled to
conduct such indemnifying party's defense, and counsel for the indemnified party
or parties shall be entitled to conduct the defense of such indemnified party or
parties, it being understood that both such counsel will cooperate with each
other to conduct the defense of such action or Proceeding as efficiently as
possible. If an indemnifying party is not so entitled to assume the defense of
such action or does not assume such defense, after having received the notice
referred to in the first sentence of this paragraph, the indemnifying party or
parties will pay the reasonable fees and expenses of not more than one counsel
(and any necessary local counsel) for the indemnified party or parties. In such
event, however, no indemnifying party will be liable for any settlement effected
without the written consent of such indemnifying party. No indemnifying party
shall, without the consent of the indemnified party, consent to entry of any
judgment or enter into a settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation. If an
indemnifying party is entitled to assume, and assumes, the defense of such
action or Proceeding in accordance with this paragraph, such indemnifying party
shall not be liable for any fees and expenses for counsel for the indemnified
parties incurred thereafter in connection with such action or Proceeding.
(d) Contribution. In order to provide for just and equitable contribution
------------
in circumstances in which the indemnity agreement provided for in this Section 6
---------
is for any reason held to be unenforceable, unavailable or insufficient although
applicable in accordance with it terms, the Company and a Holder shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by such indemnity agreement incurred by the Company and
the Holder in such proportion as is appropriate to reflect the relative fault of
the Company on the one hand and the Holder on the other. Relative fault shall be
determined by reference to, among other things, whether an untrue or alleged
untrue statement of a material fact or an omission or alleged omission of a
material fact relates to information supplied by or available to the Company on
the one hand, or the Holder, on the other hand, and by the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. Notwithstanding the foregoing, no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. No Holder shall be liable under
this Section 6(d) for any amount in excess of the net proceeds received from
such Holder from the sale of such Holder's Registrable Shares pursuant to a
Registration Statement or a Prospectus, as the case may be. For purposes of this
Section 6, each Person, if any, who controls (within the meaning of Section 15
- ---------
of the Securities Act or Section 20 of the Exchange Act) the Holder or the
Company (as applicable) and its respective officers, directors, partners,
employees, representatives and agents shall have the same rights to contribution
as the Holder or the Company (as applicable). Each party entitled to
contribution
12
<PAGE>
agrees that upon the service of a summons or other initial legal process upon it
in any action instituted against it in respect of which contribution may be
sought, it shall promptly give written notice of such service to the party or
parties from whom contribution may be sought, but the omission so to notify such
party or parties of any such service shall not relieve the party from whom
contribution may be sought from any obligation it may have hereunder or
otherwise, except to the extent that such party was actually prejudiced by the
failure to receive notice.
(e) Survival. The obligations of the Company and the Holders under this
--------
Section 6 shall survive the completion of any offering of Registrable Shares
- ---------
pursuant to a Registration Statement or otherwise.
7. Covenants of the Holders. Each of the Holders hereby agrees (a) to
------------------------
cooperate with the Company and to furnish to the Company all such information
concerning its plan of distribution and ownership interests with respect to its
Registrable Shares in connection with the preparation of a Registration
Statement with respect to such Holder's Registrable Shares and filings with any
state securities commissions as the Company may reasonably request, and (b) to
deliver or cause delivery of the Prospectus contained in such Registration
Statement to any purchaser of the shares covered by such Registration Statement
from the Holder, as required by the Securities Act and any applicable state
securities laws.
8. Additional Shares. The Company, at its option, may register under any
-----------------
Registration Statement and any filings with any state securities commissions
filed pursuant to this Agreement, any number of unissued shares of Common Stock
or any shares of Common Stock owned by any other shareholder or shareholders of
the Company.
9. Termination of the Company's Obligations. The Company shall have no
-----------------------------------------
obligations pursuant to this Agreement with respect to any request or requests
for registration made by any Holder on a date after the Expiration Date.
10. No Other Obligation to Register. Except as otherwise expressly provided in
-------------------------------
this Agreement, the Company shall have no obligation to the Holders to register
the Registrable Shares under the Securities Act or applicable state securities
laws.
11. Miscellaneous.
-------------
(a) Remedies.
--------
(i) In the event of a breach by the Company or by a Holder of any of
its obligations under this Agreement, each Holder or the Company, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this
Agreement. The parties agree that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach of any of the
provisions of this Agreement and the parties hereby further agree that, in the
event of any action for specific performance in respect of such breach, the
parties shall waive the defense that a remedy at law would be adequate. No
Holder shall have any right to obtain or seek an injunction restraining or
13
<PAGE>
otherwise delaying any registration as a result of any controversy that might
arise with respect to the interpretation or implementation of this Agreement.
(ii) If the Company fails to register the Warrant Shares pursuant to
Section 2 hereof on or before April 15, 1999, the Company shall be obligated to
- ---------
issue to the Initial Holder or its permitted designee, additional Series 2
Warrants and Series 3 Warrants entitling the Initial Holder to purchase an
additional five (5) shares of Common Stock under each of the Series 2 Warrants
and Series 3 Warrants, for each date after April 15, 1999 which elapses until
such registration shall become effective, up to a maximum of 100,000 additional
Series 2 Warrants and an additional 150,000 Series 3 Warrants.
(b) Amendments and Waivers. The provisions of this Agreement, including the
----------------------
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
without the written consent of the Company and of Holders owning not less than
50% of the then outstanding Registrable Shares; provided, however, that, for the
-------- -------
purposes of this Agreement, Registrable Shares that are owned, directly or
indirectly, by either the Company or an Affiliate of the Company shall not be
deemed to be outstanding. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of a Holder whose securities are being sold pursuant
to a Registration Statement and that does not directly or indirectly affect the
rights of any other Holder may be given by such Holder; provided, however, that
-------- -------
the provisions of this sentence may not be amended, modified, or supplemented
except in accordance with the provisions of the immediately preceding sentence.
(c) Notices. All notices and other communications provided for herein
-------
shall be made in writing by hand-delivery, next-day air courier, certified
first-class mail, return receipt requested, or telecopy;
(i) if to the Company, as provided in the Settlement Agreement,
(ii) if to the Initial Holder, as provided in the Settlement
Agreement, or
(iii) if to any other person who is then the registered Holder of any
Registrable Shares, to the address of such Holder as it appears in the Common
Stock register of the Company.
Except as otherwise provided in this Agreement, all such communications
shall be deemed to have been duly given when (A) delivered by hand, if
personally delivered, (B) one (1) Business Day after being timely delivered to a
next-day air courier, (C) five (5) Business Days after being deposited in the
mail, postage prepaid, if mailed, or (D) when receipt is acknowledged by the
recipient's telecopier machine, if telecopied.
(d) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors and permitted assigns of each of the parties
and shall inure to the benefit of each Holder. Each Holder shall be deemed a
third party beneficiary of this Agreement. Notwithstanding the foregoing, no
successor of the Company shall have any of the
14
<PAGE>
rights granted under this Agreement until such successor shall acknowledge its
rights and obligations hereunder by a signed written agreement pursuant to which
such successor accepts such rights and obligations.
(e) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and, all of which taken
together shall constitute one and the same Agreement.
(f) Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Virginia, as applied to
contracts made and performed within the Commonwealth of Virginia without regard
to principles of conflicts of law.
(g) Severability. If any term, provision, covenant or restriction of this
------------
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their reasonable efforts to find and employ an alternative means to achieve the
same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the provisions hereof.
All references made in this Agreement to "Section" refer to such Section of this
Agreement, unless expressly stated otherwise.
15
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first written above.
THE WMF GROUP, LTD.
By: /s/ Shekar Narasimhan
--------------------------------------------
Name: Shekar Narasimhan
Title: President and Chief Executive Officer
The foregoing Registration Rights Agreement
is hereby confirmed and accepted as of the date
first above written.
[*]
By:[*]
Name: [*]
Title:[*]
16
<PAGE>
EXHIBIT 10.6
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
---------
as of October 16, 1998, by and among THE WMF GROUP, LTD., a Delaware corporation
(the "Company"), DEMETER HOLDINGS CORPORATION, a Massachusetts corporation
-------
("Demeter"), PHEMUS CORPORATION, a Massachusetts corporation ("Phemus"),
------- ------
CAPRICORN INVESTORS II, L.P., a Delaware limited partnership ("Capricorn"), and
---------
HARVARD PRIVATE CAPITAL HOLDINGS, INC., a Massachusetts corporation ("Harvard").
-------
Demeter, Phemus and Capricorn are referred to herein individually as an
"Investor" and collectively as the "Investors."
-------- ---------
RECITALS
--------
A. On October 16, 1998, the Investors agreed (subject to the fulfillment of
certain conditions, including the execution of this Agreement) to purchase
from the Company, and the Company agreed to sell to the Investors, an
aggregate of up to 6,000,000 shares of the Company's Common Stock, par
value $0.01 per share (the "Common Stock") at a price of $5.00 per share,
------------
with up to 5,000,000 shares to be purchased in a private placement and up
to 1,000,000 shares to be purchased pursuant to a stand-by purchase
commitment in connection with a rights offering to be made to the Company's
shareholders and announced on October 21, 1998, as described in Section 5.1
-----------
of this Agreement (the "Rights Offering").
---------------
B. The Company and the Investors now desire to enter into this agreement to
provide for the purchase by the Investors of a total of 3,635,972 shares of
non-voting, convertible preferred stock, par value $.01 per share (the
"Class A Preferred Stock"), in a private placement by the Company (the
-----------------------
"Private Placement") and to enter into a Stand-By Purchase Agreement
-----------------
providing for a stand-by commitment by the Investors to purchase up to an
additional 664,028 shares of Common Stock not subscribed for by other
shareholders of the Company pursuant to the Rights Offering.
C. The Company shall apply the proceeds from the sale of the Common Stock in
the Private Placement to partially repay the COMIT Notes and Commercial
Mortgage Investment Trust, Inc., a Virginia corporation ("COMIT"), shall
-----
apply the proceeds of such repayment to retire shares of COMIT's Class C
Non-Voting Preferred Stock (the "COMIT Series C Preferred") held by the
------------------------
Investors, as provided in COMIT's Second Amended and Restated Articles of
Incorporation creating the COMIT Series C Preferred.
<PAGE>
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE AND SELL STOCK.
------------------------------------
1.1. Demeter Agreement to Purchase.
-----------------------------
The Company agrees to sell to Demeter at the Closing (as defined
below), and Demeter agrees to purchase from the Company at the Closing, an
aggregate of 2,757,633 shares of Class A Preferred Stock (the "Demeter Shares")
--------------
for an aggregate cash purchase price of $12,649,262.57 (the "Demeter Purchase
----------------
Price").
- -----
1.2. Phemus Agreement to Purchase.
----------------------------
The Company agrees to sell to Phemus at the Closing (as defined
below), and Phemus agrees to purchase from the Company at the Closing, an
aggregate of 151,145 shares of Class A Preferred Stock (the "Phemus Shares") for
-------------
an aggregate cash purchase price of $693,302.11 (the "Phemus Purchase Price").
---------------------
1.3. Capricorn Agreement to Purchase.
-------------------------------
The Company agrees to sell to Capricorn at the Closing, and
Capricorn agrees to purchase from the Company at the Closing, an aggregate of
727,194 shares of Class A Preferred Stock (the "Capricorn Shares," and together
-----------------
with the Demeter Shares and Phemus Shares, the "Purchased Shares") for an
----------------
aggregate cash purchase price of $3,335,638.88 (the "Capricorn Purchase Price").
------------------------
1.4. Investors Stand-By Purchase Commitment.
--------------------------------------
The Company agrees to sell to the Investors, and the Investors agree
to purchase from the Company, at the closing of the Rights Offering described in
Section 5.1, up to an aggregate of 664,028 additional shares of Common Stock
- -----------
(the "Stand-By Shares") on the terms and conditions set forth in the Standby
---------------
Purchase Agreement in the form attached hereto as Exhibit A and executed by the
---------
Company and the Investors simultaneously with the execution of this Agreement
(the "Standby Purchase Agreement").
--------------------------
2. CLOSING.
-------
2.1. The Closing.
-----------
-2-
<PAGE>
The sale and purchase of the Purchased Shares (the "Closing") will
-------
take place at the offices of the Company at 10:00 a.m., Vienna, Virginia time,
on December 30, 1998, or at such time and place as the Company and the Investors
mutually agree upon (the "Closing Date"), but not later than December 31, 1998.
------------
At the Closing, the Company will deliver to each Investor a certificate
representing the Investor's Purchased Shares against delivery to the Company by
the Investor of the applicable Purchase Price.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
---------------------------------------------
The Company hereby represents and warrants to the Investors that at the
Closing, the following statements will be true and correct:
3.1. Organization, Good Standing and Qualification.
---------------------------------------------
The Company is a corporation duly organized, validly existing and in
good standing under the laws of the state of Delaware and has all requisite
corporate power and authority to own its properties and assets and to carry on
its business as now conducted and as presently proposed to be conducted. The
Company is duly qualified and in good standing to do business as a foreign
corporation in each jurisdiction where failure to be so qualified would have a
material adverse effect on the business, financial condition, assets or
prospects of the Company (a "Material Adverse Effect").
-----------------------
3.2. Capitalization.
--------------
Immediately prior to the Closing, the capitalization of the Company
consists of the following:
(a) Preferred Stock. A total of 12,500,000 authorized shares of
---------------
Preferred Stock, $.01 par value per share (the "Preferred Stock"), of which
---------------
3,635,972 shares have been designated Class A Preferred Stock, none of
which are issued and outstanding. The rights, privileges and preferences of
the Class A Preferred Stock are as set forth in the Company's Restated
Certificate of Incorporation, as amended (the "Certificate of
--------------
Incorporation").
-------------
(b) Common Stock. A total of 25,000,000 authorized shares of Common
------------
Stock, of which 5,299,383 shares of Common Stock are issued and
outstanding. All issued shares of Common Stock have been duly and validly
authorized and issued in material compliance with all federal and state
securities laws and are fully paid and nonassessable.
(c) Options, Warrants, Reserved Shares. Except for the Class A
----------------------------------
Preferred Stock and as set forth on Schedule 3.2(c), there are no
---------------
outstanding options, warrants, rights (including conversion or preemptive
rights) or agreements for the purchase or acquisition from the Company of
any shares of its capital stock or any securities convertible into or
ultimately exchangeable or exercisable for any shares of the Company's
capital stock. Except as set forth on Schedule 3.2(c), no shares of the
---------------
Company's outstanding capital stock, or stock issuable upon exercise or
exchange of any outstanding options, warrants or
-3-
<PAGE>
rights, or other stock issuable by the Company, are subject to any rights
of first refusal or other rights to purchase such stock (whether in favor
of the Company or any other person), pursuant to any agreement or
commitment of the Company.
(d) No Agreements. To the Company's knowledge, no shareholders
-------------
agreement, voting trust agreement or similar agreement exists relating to
the Company's securities.
3.3. Company Subsidiaries.
--------------------
Schedule 3.3 is a true and complete list of all business entities
------------
that the Company operates, owns or otherwise controls directly or indirectly
through one or more subsidiaries, partnerships, joint ventures or other business
associations, a majority of the outstanding voting securities (the
Subsidiaries"). Each Subsidiary is duly incorporated and validly existing under
- ------------
the laws of its jurisdiction of incorporation and has the requisite power and
authority to own its properties and assets and to carry on its business as now
being conducted and as presently proposed to be conducted. Each Subsidiary is
duly qualified and in good standing to do business as a foreign corporation in
each jurisdiction where failure to be so qualified would have a material adverse
effect on the business, financial condition, assets or prospects of such
Subsidiary.
All of such outstanding shares of capital stock of each Subsidiary
are validly issued, fully paid and nonassessable. Except as set forth on
Schedule 3.3, the Company owns all of the shares of the issued and outstanding
- ------------
capital stock of the Subsidiaries free and clear of any liens, claims,
encumbrances, charges or rights of third parties of any kind whatsoever.
3.4. Due Authorization; Enforceability.
---------------------------------
All corporate action on the part of the Company, its officers,
directors and shareholders necessary for the authorization, execution, delivery
and performance of all obligations of the Company under this Agreement, and the
authorization, issuance, reservation for issuance and delivery of the Purchased
Shares and the Common Stock issuable upon conversion of the Class A Preferred
Stock has been taken. The shares of Common Stock issuable upon conversion of
the Class A Preferred Stock are referred to herein as the "Conversion Shares."
-----------------
This Agreement constitutes a valid and legally binding obligation of the
Company, enforceable in accordance with its terms, except as may be limited by
(i) applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) the effect of rules of law governing the availability of
equitable remedies.
3.5. Valid Issuance of Stock; Compliance with Securities Laws.
--------------------------------------------------------
(a) The Purchased Shares, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration provided
for herein, and the Conversion Shares, when issued in accordance with the
Company's Certificate of Incorporation, will be duly and validly issued,
fully paid and nonassessable. The Company has authorized and
-4-
<PAGE>
reserved for issuance upon conversion of the Class A Preferred Stock a
sufficient number of shares of its Common Stock.
(b) Based in part on the representations made by the Investors in
Section 4 hereof, the Purchased Shares will be exempt from the registration
---------
and prospectus delivery requirements of the U.S. Securities Act of 1933, as
amended (the "1933 Act") and the registration and qualification
--------
requirements of the securities laws of Massachusetts, Delaware, Virginia
and Connecticut.
3.6. Consents.
--------
No further consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority or any third-party on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement and the issuance of the Conversion Shares in
accordance with the Company's Certificate of Incorporation (the "Conversion
----------
Share Issuance"), except for such qualifications or filings under the 1933 Act
- -------------- ------ ---
and the regulations thereunder and all other applicable state securities laws as
may be required in connection with the transactions contemplated by this
Agreement. All such qualifications and filings will, in the case of
qualifications, be effective on the Closing Date and will, in the case of
filings, be made within the time prescribed by law.
3.7. Legal and Governmental Proceedings.
----------------------------------
Except as set forth on Schedule 3.7, no legal or governmental action,
-------------
proceeding or investigation is pending, or to the best of the Company's
knowledge, threatened (or any basis therefor known to the Company) that
questions the validity of this Agreement, the Class A Preferred Stock, the
Conversion Shares, the Common Stock or the Conversion Share Issuance or that, if
determined adversely to the Company or any Subsidiary, is reasonably likely,
currently or prospectively, individually or in the aggregate, to have a Material
Adverse Effect.
3.8. Compliance with Charter Documents, Contracts and Law.
----------------------------------------------------
Except as set forth on Schedule 3.8, the Company and each Subsidiary
-------------
is not in violation of its respective articles of incorporation or bylaws, both
as amended, nor in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or instrument
to which it is a party or by which it or any of its properties may be bound. To
the best of the Company's knowledge, except for any violations that individually
and in the aggregate would not have a Material Adverse Effect, the Company and
the Subsidiaries are in compliance with all applicable statutes, laws,
regulations and executive orders of the United States of America and all states,
foreign countries or other governmental bodies and agencies having jurisdiction
over the Company's and the Subsidiaries' business or properties. Neither the
Company nor any Subsidiary has received any notice of any such violation of such
statutes, laws, regulations or orders that has not been remedied prior to the
date hereof. The execution, delivery
-5-
<PAGE>
and performance by the Company of this Agreement and the consummation of the
transactions contemplated hereby and the Conversion Share Issuance will not
result in any such violation or default, or be in conflict with or constitute,
with or without the passage of time or the giving of notice or both, either a
default under the Company's Certificate of Incorporation or Bylaws, or, to the
best of the Company's knowledge, any such violation of any statutes, laws,
regulations or orders.
3.9. No Conflicts.
------------
The execution, delivery and performance by the Company of this
Agreement, the consummation of the transactions contemplated hereby and the
Conversion Share Issuance will not violate or conflict with or result in a
breach of any provision of, or constitute a default (or any event that, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination or in a right of termination or cancellation of, or accelerate
the performance required by, or result in the creation of any lien upon any of
the properties of the Company or any Subsidiary under, or result in being
declared void, voidable or without further binding effect, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust
or any license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which the Company or any Subsidiary is a
party, or by which the Company, the Subsidiaries or any of their properties is
bound or affected, except for any of the foregoing matters that would not
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect.
3.10. Securities Filings.
------------------
As of their respective dates, all reports, schedules, forms, statements and
other documents required to be filed by the Company under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), since December 1, 1997, in
--------
each case as amended (the "Company Reports"): (a) complied as to form in all
---------------
material respects with the applicable requirements of the 1934 Act and (b) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. Each of the consolidated balance sheets of the Company included in
or incorporated by reference into the Company Reports (as amended and including
the related notes and schedules) (i) complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the U.S. Securities Exchange Commission ("SEC") with respect
---
thereto, (ii) were prepared in all material respects in accordance with
generally accepted accounting principles ("GAAP"), and (iii) fairly presented in
----
all material respects the consolidated financial position of the Company and its
wholly-owned subsidiaries as of its date in conformity with GAAP. Each of the
consolidated statements of income, retained earnings and cash flows of the
Company included in or incorporated by reference into the Company Reports (as
amended and including any related notes and schedules) (A) complied as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, (B) were
prepared in accordance with GAAP, and (C) fairly presented the results of
operations, retained earnings or cash flows, as the case may be, of the Company
and its subsidiaries for the periods
-6-
<PAGE>
set forth therein (subject, in the case of unaudited statements, to normal year-
end audit adjustments that would not be material in amount or effect) in
conformity with GAAP.
The Company's registration statement relating to the Rights Offering
referred to in Section 5.1, as of its filing date, (a) complied as to form in
-----------
all material respects with the applicable requirements of the 1933 Act and (b)
did not contain any untrue statement of a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Except as and to the extent set forth in the Company Reports and as set
forth on Schedule 3.10, neither the Company nor any of its subsidiaries has any
-------------
material liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that would be required to be reflected on, or reserved
against in, a balance sheet of the Company or in the notes thereto, prepared in
accordance with GAAP consistently applied, or any other material liabilities
(such liabilities being deemed material if the value of such liabilities,
individually or in the aggregate, is greater than $1 million), except
liabilities arising in the ordinary course of business since such date which
would not have a Material Adverse Effect.
3.11. No Changes.
----------
Since September 30, 1998, except as set forth on Schedule 3.11, there
--------------
has been no material adverse change in the business, financial condition, assets
or prospects of the Company.
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
-----------------------------------------------
Each Investor hereby represents and warrants to the Company that at
Closing, the following statements will be true and correct:
4.1. Organization, Good Standing and Qualification.
---------------------------------------------
Such Investor is a partnership or corporation, as applicable, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its formation and has all requisite power and authority to own
its properties and assets and to enter into the transactions contemplated by
this Agreement.
4.2. Due Authorization.
-----------------
All corporate or partnership action on the part of such Investor, as
applicable, necessary for the authorization, execution, delivery and performance
of all obligations of such Investor under this Agreement has been taken. This
Agreement constitutes such Investor's valid and legally binding obligation,
enforceable in accordance with its terms except as may be limited by (i)
applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) the effect of rules of law governing the availability of
equitable remedies.
-7-
<PAGE>
4.3. Purchase for Own Account.
------------------------
The Purchased Shares and the Conversion Shares are being acquired for
investment for such Investor's own account, not as a nominee or agent, and not
with a view to the public resale or distribution thereof within the meaning of
the 1933 Act, and such Investor has no present intention of selling, granting
any participation in, or otherwise distributing the same. Such Investor also
represents that it has not been formed for the specific purpose of acquiring the
Purchased Shares or the Conversion Shares.
4.4. Investment Experience.
---------------------
Such Investor understands that the purchase of the Purchased Shares
and the Conversion Shares involves substantial risk. Such Investor: (i) has
experience as an investor in securities and acknowledges that such Investor is
able to fend for itself, can bear the economic risk of its investment in the
Purchased Shares and the Conversion Shares and has such knowledge and experience
in financial or business matters that such Investor is capable of evaluating the
merits and risks of this investment in the Purchased Shares and the Conversion
Shares and protecting its own interests in connection with this investment
and/or (ii) has a preexisting personal or business relationship with the Company
and certain of its officers, directors or controlling persons of a nature and
duration that enables such Investor to be aware of the character, business
acumen and financial circumstances of such persons.
4.5. Accredited Investor Status.
--------------------------
Such Investor is an "accredited investor" within the meaning of
Regulation D promulgated under the 1933 Act, and such Investor has received a
copy of the Company's Restated Articles, Bylaws, this Agreement and such other
documents and agreements that it has requested and has read and understands the
respective contents thereof. Such Investor has had the opportunity to ask
questions of the Company and has received answers to such questions from the
Company. Such Investor has carefully reviewed and evaluated these documents and
understands the risks and other considerations relating to the investment.
4.6. Restricted Securities.
---------------------
Such Investor understands that the Purchased Shares and the
Conversion Shares are characterized as "restricted securities" under the 1933
Act inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under the 1933 Act and applicable rules and
regulations thereunder such securities may be resold without registration under
the 1933 Act only in certain limited circumstances. In this connection, such
Investor represents that it is familiar with Rule 144 of the SEC, as presently
in effect, and understands the resale limitations imposed thereby and by the
1933 Act.
-8-
<PAGE>
5. COVENANTS OF THE PARTIES.
------------------------
5.1. Rights Offering.
---------------
As soon as practicable after the date of this Agreement, in
compliance with applicable law, the Company shall distribute on a pro rata basis
transferable rights (each a "Right") to all holders-of-record of Common Stock on
-----
a record date determined by the Board of Directors of the Company. Such holders
shall receive 1.072 Rights for each share of Common Stock held by them on such
record date, and each Right shall entitle the holder thereof to purchase one
share of Common Stock for $5.00 per share (the "Rights Offering"). No
---------------
adjustment shall be made in the price or number of shares for which each Right
may be exercised to reflect any change in the market price of the Common Stock.
The Company shall file with the SEC a registration statement relating to the
shares of Common Stock issuable upon exercise of the Rights, shall use its
reasonable best efforts to have such registration statement declared effective
as soon as practicable and shall take all other actions as may be necessary to
complete the Rights Offering as soon as practicable. The Investors agree that
(i) after the date of this Agreement and until the day following the first to
occur of (A) the record date for the Rights Offering and (B) June 30, 1999, they
will not transfer in any manner any of the shares of Common Stock "beneficially
owned" by them (as determined pursuant to Rule 12d-3 under the 1934 Act) or
owned by them as of record, (ii) they will not exercise or transfer in any
manner any of the Rights received by them with respect to any of such shares
(and the certificates representing Rights distributed to them shall bear a
legend to such effect), and (iii) neither they nor any of their affiliates
(which term, in the case of Capricorn, shall not include any of its limited
partners or the limited partners or general partners of Capricorn Investors,
L.P. or any of Capricorn's affiliates) will purchase or otherwise acquire from
any person other than the Company any other Rights.
5.2. Cancellation of Warrants.
------------------------
At and upon Closing, the Warrants shall no longer be outstanding and
shall automatically be canceled and retired, and all rights with respect thereto
shall cease to exist, and each holder of a certificate representing any such
Warrant shall cease to have any rights with respect thereto. Harvard and
Capricorn shall deliver (or instruct any holder for its benefit to deliver) the
certificates representing the Warrants to the Company for cancellation at the
Closing. The Company has determined that the value of the Warrants is $150,000.
5.3. Taking of Necessary Action.
--------------------------
Each party hereto agrees to use promptly its commercially reasonable
best efforts to take or cause to be taken all action and to do or cause to be
done promptly all things necessary, proper or advisable under applicable laws
and regulations to consummate and make effective the transactions contemplated
by this Agreement, including all actions necessary to cause all conditions
precedent set forth in Section 6 to be satisfied.
---------
-9-
<PAGE>
5.4. Restrictions on Transfer; Registration Rights.
---------------------------------------------
(a) Each Investor agrees not to make any disposition of all or any
portion of the Purchased Shares or the Conversion Shares unless and until:
(i) there is then in effect a registration statement under the
1933 Act and all applicable state securities laws covering such
proposed disposition and such disposition is made in accordance with
such registration statement; or
(ii) (A) the Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a
statement of the circumstances surrounding the proposed disposition,
and (B) the Investor shall have furnished the Company, at the expense
of such Investor or its transferee, with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will
not require registration of such securities under the 1933 Act or
under any applicable state securities laws.
(b) The Conversion Shares and, if Common Stock, the COMIT Conversion
Shares (as defined below) shall be Registrable Shares for purposes of the
Registration Rights Agreement, dated June 12, 1998, between the Company,
Harvard and Capricorn (the "Registration Rights Agreement"). By signing and
-----------------------------
entering into this Agreement, the Company, the Investors and Harvard each
agree that the Registration Rights Agreement shall be binding upon and
inure to the benefit of Demeter and Phemus. The Company, the Investors and
Harvard will execute an amendment to the Registration Rights Agreement to
confirm the rights and responsibilities of Demeter and Phemus under the
Registration Rights Agreement.
Notwithstanding the provisions of paragraphs (i) and (ii) above, no
such registration statement or opinion of counsel shall be required: (A) for
any transfer of any of the Purchased Shares in compliance with SEC Rule 144; or
(B) for any transfer of any of the Purchased Shares by the Investor to an
affiliate of the Investor; provided that in the foregoing case the transferee
--------
agrees in writing to be subject to the terms of this Section 5.4 to the same
-----------
extent as if the transferee were the Investor hereunder.
5.5. Legends.
-------
(a) Each Investor acknowledges that the certificates evidencing the
Purchased Shares and the Conversion Shares will bear the legends set forth
below, in addition to any legend required by any state securities laws:
(i) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER
THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND
-10-
<PAGE>
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
(ii) THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO
RESTRICTIONS ON TRANSFER PURSUANT TO A STOCK PURCHASE AGREEMENT
BETWEEN THE INITIAL HOLDER HEREOF AND THE WMF GROUP, LTD.
(b) The legend set forth in subsection (a)(i) above shall be removed
-----------------
by the Company from any certificate evidencing any of the Purchased Shares
or Conversion Shares upon effectiveness of a registration statement under
the 1933 Act with respect to the legended security or upon delivery to the
Company of an opinion of counsel, reasonably satisfactory to the Company,
that such security can be freely transferred in a public sale without such
a registration statement being in effect and that such transfer will not
jeopardize the exemption or exemptions from registration pursuant to which
the Company issued the Purchased Shares or Conversion Shares.
5.6. Use of Proceeds; Conversion of Subordinated Debt.
------------------------------------------------
(a) Simultaneously with the Closing, the Company shall use the
proceeds from the sale of the Purchased Shares to partially repay the COMIT
Notes.
(b) In addition, simultaneously with the closing of the Rights
Offering, the Company shall use the proceeds of the Rights Offering and of
the sale of any Stand-By Shares (i) to pay all remaining amounts
outstanding with respect to the COMIT Notes and (ii) to the extent that any
such proceeds remain, as working capital.
If the COMIT Notes are not fully repaid simultaneously with Closing
of the Rights Offering (whether out of proceeds from the Rights Offering, the
Stand-By Shares or otherwise), at the option of Harvard and Capricorn, COMIT
shall tender to the Company any remaining COMIT Notes and the Company shall
issue shares of Common Stock or, in the event the Class A Preferred Stock has
not been converted into Common Stock, shares of Class A Preferred Stock at a
price of $5.00 per share (whether such shares be Common Stock or Class A
Preferred Stock) in exchange therefor, the number of shares of Common Stock or
Class A Preferred Stock, as the case may be, to be issued upon such conversion
to be calculated by dividing the outstanding principal balance, and any accrued
but unpaid interest thereon, of the COMIT Notes to be converted by $5.00 (the
"COMIT Conversion Shares"). Harvard and Capricorn may exercise the foregoing
-----------------------
conversion option by giving written notice of the principal amount (and such
accrued interest) of COMIT Notes to be so converted to COMIT and the Company
within 10 business days following the payment of amounts outstanding with
respect to the COMIT Notes following the closing of the Rights Offering. The
closing of any conversion of COMIT Notes shall take place at the Company's
offices on the 10th business day following receipt by COMIT and the Company of a
notice of conversion, or within five business days after the date upon which all
applicable waiting periods under the Hart-Scott-Radino Antitrust
-11-
<PAGE>
Improvements Act of 1976, as amended (the "HSR Act"), shall have expired or been
-------
terminated. At such closing, the Company will deliver to COMIT one or more
certificates representing the COMIT Conversion Shares, registered in such names
and denominations as COMIT shall reasonably request, against delivery of the
COMIT Notes to be converted, endorsed in blank. Upon issuance, the COMIT
Conversion Shares shall be duly and validly issued, fully paid and non-
assessable. If the COMIT Conversion Shares include Common Stock, such shares of
Common Stock shall have been approved for listing on any stock exchange or
inclusion in any automated quotation system on which the Common Stock is then
listed or included and shall be Registrable Shares for purposes of the
Registration Rights Agreement. COMIT shall apply all of the proceeds of the
repayment of the COMIT Notes to immediately redeem shares of the COMIT Series C
Preferred held by the Investors and Harvard as provided in the COMIT Amended and
Restates Articles of Incorporation. In the event any portion of the COMIT Notes
are converted into COMIT Conversion Shares as described above, each share of the
COMIT Series C Preferred then held by the Investors and Harvard shall be
immediately exchanged for a number of COMIT Conversion Shares equal to (1) the
aggregate number of COMIT Conversion Shares divided by (2) the number of shares
of COMIT Series C Preferred then held by the Investors and Harvard, with the
Investors and Harvard receiving only shares of Class A Preferred Stock to the
extent the COMIT Conversion Shares include any shares of Class A Preferred
Stock.
6. CONDITIONS TO CLOSING.
---------------------
6.1. Conditions to Investors' Obligations at Closing.
-----------------------------------------------
The obligations of the Investors under Section 2 of this Agreement are
---------
subject to the fulfillment or waiver, on or before the Closing, of each of the
following conditions, the waiver of which may be given by written, oral or
telephone communication to the Company, its counsel or to counsel to the
Investors:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Company set forth in Section 3 shall be true and correct
---------
in all respects on and as of the Closing Date (except for representations
and warranties that speak as of a specific date and time, which need be
true and correct as of such date and time), and the Company shall have
taken all actions required by this Agreement to be taken by the Company
prior to Closing.
(b) Securities Exemptions. The offer and sale of the Purchased Shares
---------------------
and the Conversion Shares pursuant to this Agreement shall be exempt from
the registration requirements of the 1933 Act and the registration and/or
qualification requirements of all applicable state securities laws.
(c) Proceedings and Documents. All corporate and other proceedings in
-------------------------
connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Investors and to the Investors' counsel, and the Investors
shall have received counterpart originals and certified or other copies of
the following documents:
-12-
<PAGE>
(i) Charter Documents. A copy of the Certificate of
-----------------
Incorporation and the Bylaws of the Company (as amended through the
date of the Closing and including a copy of a Certificate of
Designation setting forth the rights, privileges and preferences of
the Class A Preferred Stock in the form filed with the Secretary of
State of Delaware), certified by the Secretary of the Company as true
and correct copies thereof as of the Closing.
(ii) Secretary's Incumbency Certificate. A certificate of the
----------------------------------
Secretary or an Assistant Secretary or other officer of the Company
certifying the names of the officers of the Company authorized to sign
this Agreement, the certificates for the Purchased Shares and the
other documents, instruments or certificates to be delivered pursuant
to this Agreement by the Company or any of its officers, together with
the true signatures of such officers.
(iii) Corporate Actions. A copy of the resolutions of the Board
-----------------
of Directors evidencing its approval, including the approval of a
majority of the Company's disinterested directors, of this Agreement,
the issuance of Purchased Shares and the other matters contemplated
hereby, certified by the Secretary of the Company to be true, complete
and correct.
(iv) Legal Opinion. An opinion or opinions of Hunton & Williams
-------------
or Krooth & Altman, counsel to the Company, dated as of the Closing
Date, in substantially the form attached hereto as Exhibit B.
---------
(v) Good Standing Certificate. A good standing certificate of
-------------------------
the Company issued by the Secretary of State of the State of Delaware
dated within ten (10) days before the Closing.
(d) Approval by Disinterested Directors. The transactions
-----------------------------------
contemplated by this Agreement and the Stand-By Purchase Agreement shall
have been approved by a majority of the members of the Company's Board of
Directors who are neither employees of the Company nor affiliated with the
Investors.
(e) Listing. The Conversion Shares shall have been approved for
-------
listing on the Nasdaq Stock Market or any other stock exchange or automated
quotation system on which the Common Stock is then listed or included.
(f) Merrill Lynch Transaction. The transactions contemplated by the
-------------------------
Mortgage Loan Purchase Agreement, dated December 18, 1998, by and between
Merrill Lynch Mortgage Capital Inc., a Delaware corporation, and WMF
Capital Corp., a Delaware corporation, shall have been consummated.
(g) Settlement Agreement. The transactions contemplated by the
--------------------
Settlement Agreement and the Termination of Loan Commitment and Mutual
Release Agreement in the forms attached hereto as Exhibit C shall have been
---------
consummated.
-13-
<PAGE>
(h) Form S-3. The Company shall have filed with the SEC a
--------
registration statement relating to the Rights Offering.
(i) Consents. All government and third-party consents necessary for
--------
the execution, delivery and performance by the Company, each Investor and
COMIT of this Agreement and the related agreements shall have been
received.
(j) Registration Rights Agreement Amendment. The amendment to the
---------------------------------------
Registration Rights Agreement contemplated by Section 5.4(b) hereof shall
--------------
have been executed by the Company, the Investors and Harvard.
(k) Certificate. The Investors shall have received a certificate of
-----------
the President or an Executive Vice President of the Company to the effect
that the conditions set forth in subparagraphs (a) and (d) through (j)
hereof have been satisfied and that lenders under the Company's lines of
credit have agreed to forebear until April 1, 1999 from terminating any
such lines of credit, accelerating the Company's obligations to any such
lenders and otherwise exercising any remedies available to such lenders as
the result of any default on the part of the Company.
(l) HSR Act. Any waiting period applicable to the transactions
-------
contemplated by this Agreement under the HSR Act, shall have terminated or
expired.
6.2. Conditions to Company's Obligations at Closing.
----------------------------------------------
The obligations of the Company to the Investor under Section 2 of this
---------
Agreement are subject to the fulfillment or waiver on or before the Closing of
the following conditions, the waiver of which may be given by written, oral or
telephone communication to the Investors, their counsel or to counsel to the
Company:
(a) Representations and Warranties. The representations and
------------------------------
warranties of each Investor set forth in Section 4 shall be true and
---------
correct in all respects on and as of the Closing Date, and the Company
shall have received a certificate of an appropriate officer or partner, as
applicable, of each Investor to such effect.
(b) Payment of Purchase Price. The Investors shall have delivered to
-------------------------
the Company the Demeter Purchase Price, the Phemus Purchase Price and the
Capricorn Purchase Price in accordance with the provisions of Section 2.
---------
(c) Securities Exemptions. The offer and sale of the Purchased Shares
---------------------
pursuant to this Agreement shall be exempt from the registration
requirements of the 1933 Act and the registration and/or qualification
requirements of all other applicable state securities laws.
(d) Proceedings and Documents. All corporate and other proceedings in
-------------------------
connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Company and to the
-14-
<PAGE>
Company's legal counsel, and the Company shall have received all such
counterpart originals and certified or other copies of such documents as it
may reasonably request.
(e) Listing. The issuance of the Purchased Shares shall not violate
-------
or conflict with the Company's listing agreement with the Nasdaq National
Market with regard to the Common Stock or the listing standards or other
applicable rules of the Nasdaq National Market.
(f) Approval by Disinterested Directors. The transactions
-----------------------------------
contemplated by this Agreement and the Stand-By Purchase Agreement shall
have been approved by a majority of the members of the Company's Board of
Directors who are neither employees of the Company nor affiliated with the
Investors.
(g) Delivery and Cancellation of Warrants. The Company shall have
-------------------------------------
received the certificates representing the Warrants for cancellation.
(h) Consents. All government and third-party consents necessary for
--------
the execution, delivery and performance by the Company and COMIT of this
Agreement and the related agreements shall have been received.
(i) HSR Act. Any waiting period applicable to the transactions
-------
contemplated by this Agreement under the HSR Act shall have terminated or
expired.
7. MISCELLANEOUS.
7.1. Survival of Warranties.
----------------------
The representations, warranties and covenants of the Company and the
Investors contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing and shall in no way be
affected by any investigation of the subject matter thereof made by or on behalf
of each Investor, its counsel or the Company or its counsel, as the case may be.
7.2. Successors and Assigns.
----------------------
The terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective successors and assigns of the parties.
Except for assignments by the Investors to affiliates, this Agreement may not be
assigned by any Investor without the prior written consent of the Company or by
the Company without the prior written consent of the Investors.
7.3. Governing Law.
-------------
This Agreement shall be governed by and construed under the internal
laws of the Commonwealth of Virginia as applied to agreements among Virginia
residents entered into and to
-15-
<PAGE>
be performed entirely within Virginia, without reference to principles of
conflict of laws or choice of laws.
7.4. Counterparts.
------------
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
7.5. Headings.
--------
The headings and captions used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement. All references in this Agreement to sections, paragraphs, exhibits
and schedules shall, unless otherwise provided, refer to sections and paragraphs
hereof and exhibits and schedules attached hereto, all of which exhibits and
schedules are incorporated herein by this reference.
7.6. Notices.
-------
Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing and shall be deemed effectively given upon
personal delivery to the party to be notified or one day after deposit with a
national overnight delivery service or three days after deposit with the United
States Post Office, by registered or certified mail, postage prepaid and
addressed as follows:
To the Company:
The WMF Group, Ltd.
1593 Spring Hill Road, Suite 400
Vienna, Virginia 22182
Attention: Shekar Narasimhan
with copies to:
Krooth and Altman
1850 M Street, Suite 400
Washington, DC 20036
Attention: Patrick J. Clancy, Esquire
and
Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219-4074
Attention: Randall S. Parks, Esquire
-16-
<PAGE>
To Demeter:
c/o Charlesbank Capital Partners, LLC
600 Atlantic Avenue, 26th Floor
Boston, Massachusetts 02210
Attention: Tim R. Palmer
Mark A. Rosen
with copies to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Larry Rowe, Esquire
To Phemus:
c/o Charlesbank Capital Partners, LLC
600 Atlantic Avenue, 26th Floor
Boston, Massachusetts 02210
Attention: Tim R. Palmer
Mark A. Rosen
with copies to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Larry Rowe, Esquire
To Capricorn:
Capricorn Investors II, L.P.
30 East Elm Street
Greenwich, Connecticut 06830
Attention: Herbert S. Winokur, Jr.
James M. Better
with copies to:
O'Melveny & Myers LLP
153 East 53rd Street
New York, New York 10022-4611
Attention: Mark E. Thierfelder, Esquire
-17-
<PAGE>
To Harvard:
c/o Charlesbank Capital Partners, LLC
600 Atlantic Avenue, 26th Floor
Boston, Massachusetts 02210
Attention: Tim R. Palmer
Mark A. Rosen
with copies to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Larry Rowe, Esquire
or at such other address as an Investor or the Company may designate by giving
ten days advance written notice to the other parties.
7.7. No Finder's Fees.
----------------
Each party represents that it neither is nor will be obligated for any
finder's or broker's fee or commission in connection with this transaction.
Each Investor agrees to indemnify and to hold harmless the Company from any
liability for any commission or compensation in the nature of a finders' or
broker's fee (and any asserted liability) for which such Investor or any of its
officers, partners, employees, or representatives is responsible. The Company
agrees to indemnify and hold harmless the Investors from any liability for any
commission or compensation in the nature of a finder's or broker's fee (and any
asserted liability) for which the Company or any of its officers, employees or
representatives is responsible.
7.8. Expenses.
--------
The Company shall pay all reasonable fees and expenses of the
Investors in connection with the preparation, execution and delivery of this
Agreement and the issuance of the Purchased Shares and the Conversion Shares and
any filings necessary under the HSR Act.
7.9. Amendments and Waivers.
----------------------
Any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the Investors. Any amendment or waiver effected in
accordance with this Section 7.9 shall be binding upon the Investors and the
-----------
Company.
-18-
<PAGE>
7.10. Severability.
------------
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision(s) shall be excluded from
this Agreement, and the balance of the Agreement shall be interpreted as if such
provision(s) were so excluded and shall be enforceable in accordance with its
terms.
7.11. Entire Agreement.
----------------
This Agreement, together with all exhibits and schedules hereto,
constitutes the entire agreement and understanding of the parties with respect
to the subject matter hereof and supersedes any and all prior negotiations,
correspondence, agreements, understandings, duties or obligations between the
parties with respect to the subject matter hereof. The Schedules hereto shall
be deemed a part of this Agreement for all purposes.
7.12. Further Assurances.
------------------
From and after the date of this Agreement, upon the request of the
Investors or the Company, the Company and the Investors shall execute and
deliver such instruments, documents or other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement.
[SIGNATURE PAGE FOLLOWS]
-19-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
THE COMPANY: THE WMF GROUP, LTD.,
- ------------
a Delaware corporation
By: /s/ Shekar Narasimhan
---------------------
Name: Shekar Narasimhan
Title: President
THE INVESTORS: DEMETER HOLDINGS CORPORATION, a
- --------------
Massachusetts corporation
By: /s/ Michael R. Eisenson
-----------------------
Name: Michael R. Eisenson
Title: Authorized Signatory
By: /s/ Tim R. Palmer
-----------------
Name: Tim R. Palmer
Title: Authorized Signatory
PHEMUS CORPORATION, a Massachusetts
corporation
By: /s/ Michael R. Eisenson
-----------------------
Name: Michael R. Eisenson
Title: Authorized Signatory
By: /s/ Tim R. Palmer
-----------------
Name: Tim R. Palmer
Title: Authorized Signatory
HARVARD PRIVATE CAPITAL HOLDINGS,
INC., a Massachusetts corporation
By: /s/ Michael R. Eisenson
-----------------------
Name: Michael R. Eisenson
Title: Authorized Signatory
By: /s/ Tim R. Palmer
-----------------
Name: Tim R. Palmer
Title: Authorized Signatory
<PAGE>
CAPRICORN INVESTORS II, L.P.,
a Delaware limited partnership
By: Capricorn Holdings, LLC, a Delaware
limited liability company, its General
Partner
By: /s/ Herbert S. Winokur, Jr.
--------------------------
Name: Herbert S. Winokur, Jr.
Title: Manager
<PAGE>
COMIT joins in this Agreement only
with respect to the provisions of the
last paragraph of Section 5.6 hereof.
-----------
COMMERCIAL MORTGAGE INVESTMENT TRUST,
INC., a Virginia corporation
By: /s/ Shekar Narasimhan
---------------------
Name: Shekar Narasimhan
Title: Chairman
<PAGE>
STOCK PURCHASE AGREEMENT
LIST OF SCHEDULES AND EXHIBITS
------------------------------
SCHEDULES
- ---------
Schedule 3.2(c) Options, Warrants, Reserved Shares
Schedule 3.3 Subsidiaries
Schedule 3.7 Legal and Governmental Proceedings
Schedule 3.8 Defaults
Schedule 3.10 Liabilities and Obligations
Schedule 3.11 Changes in Business of the Company
EXHIBITS
- --------
Exhibit A Standby Purchase Agreement
Exhibit B Opinions of Hunton & Williams and Krooth & Altman
Exhibit C Settlement Agreement and Termination of Loan Commitment and
Mutual Release Agreement
<PAGE>
EXHIBIT 10.7
FOURTH AMENDMENT TO
-------------------
CREDIT AND SECURITY AGREEMENT
-----------------------------
THIS FOURTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT (this "Amendment") is
entered into as of this 15th day of November 1998, by and between THE WMF GROUP,
LTD., a Delaware corporation ("WMF Group"); WMF WASHINGTON MORTGAGE CORP., a
Delaware corporation ("Washington"); WMF/HUNTOON, PAIGE ASSOCIATES LIMITED, a
Delaware corporation ("Huntoon"); WMF PROCTOR, LTD., a Michigan corporation
("Proctor"); THE ROBERT C. WILSON COMPANY, a Texas corporation ("Wilson"); THE
ROBERT C. WILSON COMPANY-ARIZONA, an Arizona corporation ("Wilson-Arizona"); and
WMF CARBON MESA ADVISORS, INC., a Delaware corporation ("Carbon Mesa"); (WMF
Group, Washington, Huntoon, Proctor, Wilson, Wilson-Arizona, Carbon Mesa and any
other Subsidiary of WMF Group that may at any time hereafter become a party to
the Agreement are hereafter collectively referred to as the "Borrowers"),
RESIDENTIAL FUNDING CORPORATION, a Delaware corporation ("RFC"), BANK UNITED, a
federal savings bank ("Bank United"), PNC BANK, N.A., a national banking
association ("PNC"); (RFC, Bank United, PNC and any Additional Lender that may
at any time hereafter become party hereto are hereafter referred to as the
"Lenders"), and RFC as credit agent for the Lenders (in such capacity, the
"Credit Agent").
WHEREAS, the Borrowers, the Lenders and the Credit Agent have entered into a
revolving warehouse facility with a present Warehouse Commitment Limit of One
Hundred Fifty Million Dollars ($150,000,000) (the "Warehousing Commitment") and
a Servicing Facility Credit Limit of Fifty Million, Seven Hundred Eleven
Thousand Seven Hundred Forty-Four Dollars ($50,711,744) (the "Servicing Facility
Commitment"), as evidenced by a Credit and Security Agreement (Syndicated
Agreement) dated December 5, 1997, as the same may have been amended or
supplemented (the "Agreement");
WHEREAS, the Borrowers have requested the Lenders to temporarily increase the
Warehousing Commitment and amend certain terms of the Agreement, and the Lenders
have agreed to such temporary increase and amendment subject to the terms and
conditions of this Amendment;
NOW, THEREFORE, for and in consideration of the foregoing and of the mutual
covenants, agreements and conditions hereinafter set forth and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. All capitalized terms used herein and not otherwise defined shall have
their respective meanings set forth in the Agreement.
2. The effective date ("Effective Date") of this Amendment shall be November
15, 1998, provided that the Borrowers have complied with all the terms and
conditions of this Amendment.
3. Section 1.1 of the Agreement shall be amended by adding the following
definition in the appropriate alphabetical order:
"Temporary Increase Rate" means a floating rate of interest which is
-----------------------
equal to 1.50% per annum over LIBOR. The Temporary Increase Rate will be
adjusted as of the effective date of each weekly change in LIBOR. The
Credit Agent's determination of the Temporary Increase Rate as of any date
of determination shall be conclusive and binding, absent manifest error.
4. Section 1.1 of the Agreement shall be amended to delete the following
definition in its entirety, replacing it with the following
-1-
<PAGE>
definition:
"Ordinary Warehousing Rate" means a floating rate of interest which is
-------------------------
equal to 1.00% per annum over LIBOR. The Ordinary Warehousing Rate will be
adjusted as of the effective date of each weekly change in LIBOR. The
Credit Agent's determination of the Warehousing Rate as of any date of
determination shall be conclusive and binding, absent manifest error.
5. For the period from November 15, 1998 through the earlier of (i) the date
of repayment in full of the Advances against the Mortgage Loans described on
Schedule I hereto (the "Scheduled Loans") is required under the Agreement and
(ii) January 15, 1999, the Warehousing Credit Limit shall be $400,000,000 and
RFC's Maximum Warehousing Commitment shall be $366,600,000. Notwithstanding
anything to the contrary set forth in the Agreement:
(a) Warehousing Advances during such period shall be made by the Lenders
holding Warehousing Commitments (i) ratably, based on (A) in the case of
RFC, $116,600,000 ("RFC's Permanent Warehousing Commitment") and (B) in the
case of the other Lenders holding Warehousing Commitments, their respective
Maximum Warehousing Commitments, until such amounts are fully advanced, and
(ii) thereafter, by RFC only up to the amount of its Maximum Warehousing
Commitment; and
(b) As long as the maturity of the Warehousing Commitments has not been
accelerated pursuant to Section 8.2 of the Agreement, payments received by
the Credit Agent in respect of the principal amount of Warehousing Advances
outstanding shall be applied first, to Warehousing Advances made by RFC to
the extent the outstanding principal balance thereof exceeds the RFC
Permanent Warehousing Commitment, and thereafter, to the remaining
Warehousing Advances outstanding, ratably among the Lenders holding
Warehousing Commitments.
On the earlier of January 16, 1999 or the date repayment of the Advances against
the Scheduled Loans is required under the Agreement, the amount by which the
outstanding principal balance of Warehousing Advances exceeds the Warehousing
Credit Limit (as reduced by the expiration of the temporary increase provided
for in this paragraph 5 shall be due and payable to RFC.
6. As of the Effective Date of this Amendment, no further Warehousing
Advances shall be made against Uncommitted Mortgage Loans, and no further
Servicing Facility Advances shall be made.
7. Notwithstanding anything in Section 2.8(a) of the Agreement to the
contrary, except as provided in Section 2.8(f) or Section 2.8(g) of the
Agreement, all outstanding Warehousing Advances against Mortgage Loans covered
by a Purchase Commitment shall bear interest at a rate equal to (a) in an amount
up to the sum of RFC's Permanent Warehousing Commitment plus the Maximum
Warehousing Commitments of the other Lenders holding Warehousing Commitments
minus the aggregate amount of Warehousing Advances outstanding against
Uncommitted Mortgage Loans (the "Combined Warehousing Commitments"), at the
Ordinary Warehousing Rate, and (b) to the extent the aggregate amount of such
Advances exceed the Combined Warehousing Commitments, at the Temporary Increase
Rate. All Warehousing Advances bearing interest at the Temporary Increase Rate
shall be deemed to have been made by RFC.
8. Section 2.9(k) shall be deleted in its entirety and the following section
shall be substituted in lieu thereof:
2.9(k) If at any time the aggregate outstanding principal balance of all
Servicing Facility Advances exceeds the lesser of (i) seventy percent (70%)
of the Servicing Collateral Value of the
-2-
<PAGE>
Pledged Servicing Contracts or (ii) sixty percent (60%) of the Appraisal
Value of the Pledged Servicing Contracts, adjusted to account for Servicing
Contracts sold, created or acquired since the date of the most recent
Appraisal in accordance with the methodology of such Appraisal, the
Borrowers shall prepay the outstanding Servicing Facility Advances in the
amount of such excess.
9. The Second Amended and Restated Promissory Note payable to RFC is amended
and restated in its entirety as set forth in the Third Amended and Restated
Warehousing Promissory Note, in the form of Exhibit A-1 attached to this
-----------
Amendment. All references in this Amendment and in the Agreement to the
Warehousing Promissory Note payable to RFC shall be deemed to refer to the Third
Amended and Restated Warehousing Promissory Note delivered in connection with
this Amendment.
10. The Borrowers shall deliver to the Credit Agent (a) an original of this
Amendment, executed by the Borrowers and all of the Lenders; (b) an executed
Third Amended and Restated Warehousing Promissory Note payable to RFC; (c) an
executed Certificate of Secretary with corporate resolutions for each Borrower;
(d) the minimum amendment fee required pursuant to Section 13.5(b) of the
Agreement for each Lender; (e) for the account of RFC, a Warehousing Commitment
Fee on the temporary increase in the amount of $51,370; (f) for the account of
RFC, a temporary increase fee of $250,000; and (g) a $500 document production
fee.
11. The Borrowers represent, warrant and agree that (a) except as set forth
in the Lenders' letters to the Borrowers dated August 31, 1998, October 13, 1998
and November 13, 1998, and the Borrowers' letter to the Lenders dated September
3, 1998, there exists no Default or Event of Default under the Loan Documents,
(b) the Loan Documents continue to be the legal, valid and binding agreements
and obligations of the Borrowers enforceable in accordance with their terms, as
modified herein, (c) the Lenders are not in default under any of the Loan
Documents and the Borrowers have no offset or defense to their performance or
obligations under any of the Loan Documents, (d) the representations contained
in the Loan Documents remain true and accurate in all respects, and (e) there
has been no material adverse change in the financial condition of the Borrowers
from the date of the Agreement to the date of this Amendment.
12. Except as hereby expressly modified, the Agreement shall otherwise be
unchanged and shall remain in full force and effect, and the Borrowers ratify
and reaffirm all of its obligations thereunder.
13. The Borrowers shall pay all reasonable out-of-pocket costs and expenses
of the Credit Agent (including, without limitation, the reasonable fees and
service charges of Dorsey & Whitney LLP, counsel to the Credit Agent) in
connection with this Amendment.
14. This Amendment may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.
-3-
<PAGE>
IN WITNESS WHEREOF, the Borrowers and the Lenders have caused this Amendment
to be duly executed on their behalf by their duly authorized officers as of the
day and year above written.
BORROWERS:
THE WMF GROUP, LTD.,
a Delaware corporation
By:/s/ Michael D. Ketcham
----------------------
Its: Executive Vice President
-------------------------
WMF WASHINGTON MORTGAGE CORP.,
a Delaware corporation
By:/s/ Michael D. Ketcham
----------------------
Its: Executive Vice President
-------------------------
WMF/HUNTOON, PAIGE ASSOCIATES
LIMITED, a Delaware corporation
By:/s/ Michael D. Ketcham
----------------------
Its: Executive Vice President
-------------------------
WMF PROCTOR, LTD.,
a Michigan corporation
By:/s/ Michael D. Ketcham
----------------------
Its: Executive Vice President
-------------------------
THE ROBERT C. WILSON COMPANY,
a Texas corporation
By:/s/ Michael D. Ketcham
----------------------
Its: Executive Vice President
-------------------------
-4-
<PAGE>
THE ROBERT C. WILSON COMPANY-ARIZONA
an Arizona corporation
By:/s/ Michael D. Ketcham
----------------------
Its: Executive Vice President
-------------------------
WMF CARBON MESA ADVISORS, INC.,
a Delaware corporation
By:/s/ Michael D. Ketcham
----------------------
Its: Executive Vice President
-------------------------
STATE OF Virginia )
) ss
COUNTY OF Fairfax )
On December 3, 1998, before me, a Notary Public, personally appeared
Michael D. Ketcham, the Executive Vice President of THE WMF GROUP, LTD., a
Delaware corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Joanne G. Frye
------------------------------
Notary Public
(SEAL) My Commission Expires: 2-28-99
-5-
<PAGE>
STATE OF Virginia )
) ss
COUNTY OF Fairfax )
On December 3, 1998, before me, a Notary Public, personally appeared Michael
D. Ketcham, the Executive Vice President of WMF WASHINGTON MORTGAGE CORP., a
Delaware corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Joanne G. Frye
------------------------------
Notary Public
(SEAL) My Commission Expires: 2-28-99
STATE OF Virginia )
) ss
COUNTY OF Fairfax )
On December 3, 1998, before me, a Notary Public, personally appeared Michael
D. Ketcham, the Executive Vice President of WMF/HUNTOON, PAIGE ASSOCIATES
LIMITED, a Delaware corporation, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person whose name is subscribed to the
within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by his/her signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
/s/ Joanne G. Frye
------------------------------
Notary Public
(SEAL) My Commission Expires: 2-28-99
-6-
<PAGE>
STATE OF Virginia )
) ss
COUNTY OF Fairfax )
On December 3, 1998, before me, a Notary Public, personally appeared Michael
D. Ketcham, the Executive Vice President of WMF PROCTOR, LTD., a Michigan
corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Joanne G. Frye
------------------------------
Notary Public
(SEAL) My Commission Expires: 2-28-99
STATE OF Virginia )
) ss
COUNTY OF Fairfax )
On December 3, 1998, before me, a Notary Public, personally appeared Michael
D. Ketcham, the Executive Vice President of THE ROBERT C. WILSON COMPANY, a
Texas corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Joanne G. Frye
------------------------------
Notary Public
(SEAL) My Commission Expires: 2-28-99
-7-
<PAGE>
STATE OF Virginia )
) ss
COUNTY OF Fairfax )
On December 3, 1998, before me, a Notary Public, personally appeared Michael
D. Ketcham, the Executive Vice President of THE ROBERT C. WILSON COMPANY-
ARIZONA, an Arizona corporation, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person whose name is subscribed to the
within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by his/her signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
/s/ Joanne G. Frye
-----------------------------------
Notary Public
(SEAL) My Commission Expires:2-28-99
STATE OF Virginia )
) ss
COUNTY OF Fairfax )
On December 3, 1998, before me, a Notary Public, personally appeared Michael
D. Ketcham, the Executive Vice President of WMF CARBON MESA ADVISORS, INC., a
Delaware corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Joanne G. Frye
-----------------------------------
Notary Public
(SEAL) My Commission Expires:2-28-99
-8-
<PAGE>
CREDIT AGENT:
RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation
By:/s/ Lisa F. Carlson
--------------------------------
Its: Director
LENDERS:
Permanent Warehousing RESIDENTIAL FUNDING CORPORATION,
Commitment: $116,600,000
Temporary Maximum Warehousing By:/s/ Lisa F. Carlson
Commitment: $366,600,000 -------------------------------
Its: Director
Maximum Servicing Facility
Commitment: $22,313,167
STATE OF Maryland )
) ss
COUNTY OF Montgomery )
On December 7th, 1998 before me, a Notary Public, personally appeared Lisa
F. Carlson, the Director of RESIDENTIAL FUNDING CORPORATION, a Delaware
corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Alaeta S. Myers
-----------------------------------
Notary Public
(SEAL) My Commission Expires:11/01/00
-9-
<PAGE>
STATE OF Maryland )
) ss
COUNTY OF Montgomery )
On December 7th, 1998, before me, a Notary Public, personally appeared
Lisa F. Carlson the Director of RESIDENTIAL FUNDING CORPORATION, a
Delaware corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Alaeta S. Myers
-----------------------------------
Notary Public
(SEAL) My Commission Expires: 11/01/00
-10-
<PAGE>
Maximum Warehousing BANK UNITED, a federal savings bank
Commitment: $33,400,000
Maximum Servicing Facility By: /s/ Francis Hatteman
Commitment: $10,613,701 --------------------------------
Its: ______________________________
STATE OF Texas )
) ss
COUNTY OF Hollis )
On November 30, 1998, before me, a Notary Public, personally appeared
Francis Hatteman, the _________________ of BANK UNITED, a federal
savings bank, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Patricia A. D'Pulos
-----------------------------------
Notary Public
(SEAL) My Commission Expires: 9-30-00
-11-
<PAGE>
Maximum Warehousing PNC BANK, N.A.,
Commitment: $0.00 a national banking association
By: /s/ Janice Bolling
---------------------------------
Maximum Servicing Facility Its: Vice President
Commitment: $16,734,875 --------------------------------
Notice Address:
500 West Jefferson Street
Suite 1200
Louisville, KY 40202
Attention: Janice Bolling,
Vice President
Telecopier No.: (502) 581-3844
STATE at Large )
--------------
) ss
COUNTY OF ______________ )
On December 3, 1998, before me, a Notary Public, personally appeared Janice
Bolling, the V.P. of PNC BANK, N.A., a national banking association personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person whose name is subscribed to the within instrument and acknowledged to me
that he/she executed the same in his/her authorized capacity, and that by
his/her signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Amy C. Woods
-----------------------------------
Notary Public
(SEAL) My Commission Expires: 6-30-02
-12-
<PAGE>
EXHIBIT 10.8
FIFTH AMENDMENT TO
------------------
CREDIT AND SECURITY AGREEMENT
-----------------------------
THIS FIFTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT (this "Amendment") is
entered into as of this 21st day of December 1998, by and between THE WMF GROUP,
LTD., a Delaware corporation ("WMF Group"); WMF WASHINGTON MORTGAGE CORP., a
Delaware corporation ("Washington"); WMF/HUNTOON, PAIGE ASSOCIATES LIMITED, a
Delaware corporation ("Huntoon"); WMF PROCTOR, LTD., a Michigan corporation
("Proctor"); THE ROBERT C. WILSON COMPANY, a Texas corporation ("Wilson"); THE
ROBERT C. WILSON COMPANY-ARIZONA, an Arizona corporation ("Wilson-Arizona"); and
WMF CARBON MESA ADVISORS, INC., a Delaware corporation ("Carbon Mesa"; WMF
Group, Washington, Huntoon, Proctor, Wilson, Wilson-Arizona, Carbon Mesa and any
other Subsidiary of WMF Group that may at any time hereafter become a party to
the Agreement are hereafter collectively referred to as the "Borrowers"),
RESIDENTIAL FUNDING CORPORATION, a Delaware corporation ("RFC"), BANK UNITED, a
federal savings bank ("Bank United"), PNC BANK, N.A., a national banking
association ("PNC"; RFC, Bank United, PNC and any Additional Lender that may at
any time hereafter become party hereto are hereafter referred to as the
"Lenders"), and RFC as credit agent for the Lenders (in such capacity, the
"Credit Agent").
WHEREAS, the Borrowers, the Lenders and the Credit Agent have entered into a
revolving warehouse facility with a present Warehouse Commitment Limit of One
Hundred Fifty Million Dollars ($150,000,000) (the "Warehousing Commitment")
which has been temporarily increased to Four Hundred Million Dollars
($400,000,000) and a Servicing Facility Credit Limit of Fifty Million, Seven
Hundred Eleven Thousand Seven Hundred Forty-Four Dollars ($50,711,744) (the
"Servicing Facility Commitment"), as evidenced by a Credit and Security
Agreement (Syndicated Agreement) dated December 5, 1997, as the same may have
been amended or supplemented (the "Agreement");
WHEREAS, the Borrowers have requested the Lenders to amend certain terms of
the Agreement, and the Lenders have agreed to such amendment of the Agreement
subject to the terms and conditions of this Amendment;
NOW, THEREFORE, for and in consideration of the foregoing and of the mutual
covenants, agreements and conditions hereinafter set forth and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. All capitalized terms used herein and not otherwise
-1-
<PAGE>
defined shall have their respective meanings set forth in the Agreement.
2. The effective date ("Effective Date") of this Amendment shall be December
22, 1998, the date on which the Borrowers have complied with all the terms and
conditions of this Amendment.
3. Section 1.1 of the Agreement shall be amended by adding the following
definitions in the appropriate alphabetical order:
"Agency Security" means a Mortgage-backed Security issued or guarantied by
---------------
Fannie Mae, Freddie Mac or Ginnie Mae.
"Fannie Mae" means Fannie Mae, a corporation created under the laws of the
----------
United States, and any successor thereto.
"Fannie Mae Loan Loss Reserves" means reserves established by the
-----------------------------
Borrowers to absorb estimated future losses related to Fannie Mae DUS
Mortgage Loans sold by the Borrowers to Fannie Mae.
"Freddie Mac" means Freddie Mac, a corporation created under the laws of
-----------
the United States, and any successor thereto.
"Ginnie Mae" means the Governmental National Mortgage Association, an
----------
agency of the United States government, and any successor thereto.
"WMF Funding" means WMF Funding Corp., a Delaware corporation.
-----------
"Year 2000 Problem" means the risk that computer applications may not be
-----------------
able to properly perform date-sensitive functions after December 31, 1999.
4. Section 1.1 of the Agreement shall be amended to delete the definitions of
"Debt," "Eligible Mortgage Pool," "Equity Closing Date," "Fair Market Value,"
"LIBOR," "Mortgage-backed Securities," "Servicing Acquisition Commitment
Termination Date," "Tangible Net Worth," and "Warehousing Maturity Date," in
their entirety, replacing them with the following definitions:
"Debt" means, with respect to any Person, at any date (a) all
----
indebtedness or other obligations of such Person which, in accordance with
GAAP, would be included in determining total liabilities as shown on the
liabilities side of a balance sheet of such Person at such date; and (b) all
indebtedness or other obligations of such Person for borrowed money or for
the deferred purchase price of property
-2-
<PAGE>
or services; provided that for purposes of this Agreement, there shall be
excluded from Debt at any date Fannie Mae Loan Loss Reserves, Subordinated
Debt not due within one year of such date, deferred taxes arising from
capitalized excess servicing fees and capitalized servicing rights and the
deferred portion of any purchase price payable with respect to a Servicing
Acquisition to the extent payment of said deferred portion by the Borrower
is contingent upon the generation of minimum levels of income to the
Borrower by the seller.
"Eligible Mortgage Pool" means a Mortgage Pool for which (a) an Approved
----------------------
Custodian has issued its initial certification (on the basis of which an
Agency Security is to be issued), (b) there exists a Purchase Commitment
covering such Agency Security, and (c) such Agency Security will be
delivered to the Collateral Agent.
"Equity Closing Date" means any date after July 15, 1998 on which WMF
-------------------
Group receives the proceeds of the sale of any issuance of its capital
stock (other than any conversion of Subordinated Debt to capital stock) or
any Borrower receives proceeds of the issuance of any Subordinated Debt,
excluding, however, WMF Group's receipt of the proceeds of the sale of
$1,250,000 of its common stock to Greenwich Capital Markets, Inc. ("GCM")
in December, 1998, and $1,250,000 of its common stock to GCM in January,
February or March, 1999.
"Fair Market Value" means at any time for a Mortgage Loan or the
-----------------
related Agency Security (if such Mortgage Loan is to be used to back an
Agency Security), (a) if such Mortgage Loan or the related Agency Security
is covered by a Purchase Commitment, the Committed Purchase Price, or (b)
otherwise, the Adjusted Value of such Mortgage Loan or the Mortgage Loans
backing such Agency Security.
"LIBOR" means, for each calendar week, the rate of interest per annum
-----
which is equal to the arithmetic mean of the U.S. Dollar London Interbank
Offered Rates for one (1) month periods of certain U.S. banks as of 11:00
a.m. London time on the first Business Day of each week on which the London
Interbank market is open, as published by Bridge Information Services on
its MoneyCenter system. LIBOR shall be rounded, if necessary, to the next
higher 1/16%. If such U.S. dollar LIBOR rates are not so offered or
published for any period, then during such period LIBOR shall mean the
London Interbank Offered Rate for one (1) month periods published on the
first Business Day of each week on which the London Interbank market is
open, in the Wall Street Journal in its regular column entitled "Money
-----
Rates."
-----
-3-
<PAGE>
"Mortgage-backed Securities" means securities that are secured or
--------------------------
otherwise backed by Mortgage Loans or Co-op Loans.
"Servicing Acquisition Commitment Termination Date" means the earlier
-------------------------------------------------
of (a) January 30, 1998, as such date may be extended from time to time in
writing by all of the Lenders holding Servicing Facility Commitments, in
their sole discretion, and (b) the date the Servicing Facility Commitments
are terminated pursuant to Section 8.2 hereof.
"Tangible Net Worth" means with respect to any Person at any date, the
------------------
excess of the total assets over total liabilities of such Person on such
date, each to be determined in accordance with GAAP consistent with those
applied in the preparation of the financial statements referred to in
Section 4.1(a)(7) hereof, plus Fannie Mae Loan Loss Reserves and that
portion of Subordinated Debt not due within one year of such date, provided
that, for purposes of this Agreement, there shall be excluded from total
assets advances or loans to shareholders, officers, employees or
Affiliates, investments in Affiliates, assets pledged to secure any
liabilities not included in the Debt of such Person, intangible assets and
those other assets which would be deemed by HUD to be non-acceptable in
calculating adjusted net worth in accordance with its requirements in
effect as of such date, as such requirements appear in the "Audit Guide for
Audit of Approved Non-Supervised Mortgagees" and other assets deemed
unacceptable by the Credit Agent in its sole discretion.
"Warehousing Maturity Date" shall mean the earlier of: (a) the close of
-------------------------
business on April 1, 1999, as such date may be extended from time to time
in writing by all the Lenders, in their sole discretion, and (b) the date
the Warehousing Advances become due and payable pursuant to Section 8.2
below.
5. The definitions of "FHLMC," "FNMA" and "GNMA" and in Section 1.1 of the
Agreement shall be deleted in their entirety.
6. All references in the Agreement to "FNMA," "FHLMC" and "GNMA" are
amended to be references to "Fannie Mae," "Freddie Mac" and "Ginnie Mae,"
respectively.
7. Section 2.1(b) of the Agreement is hereby amended to add the following
section immediately after Section 2.1(b)(9)
(10) No Advance shall be made against a Mortgage Loan other
than a Mortgage Loan secured by a Mortgage on real property
located in one of the states of the United States or the District
of Columbia.
-4-
<PAGE>
8. Section 2.8 of the Agreement shall be further amended to add the
following after Section 2.8(g):
2.8(h) If, for any reason, no interest is due on an Advance, the
Borrowers agree to pay to the Lenders an administrative fee equal to one
day of interest on such Advance at the rate of 1-1/2% per annum.
Administrative fees shall be due and payable in the same manner as interest
is due and payable hereunder.
9. Sections 2.9(c) and 2.9(d) of the Agreement shall be deleted in their
entirety and following shall be substituted in lieu thereof:
2.9(c) [INTENTIONALLY OMITTED]
2.9(d) [INTENTIONALLY OMITTED]
10. Sections 2.9(g)(11) of the Agreement shall be deleted in their entirety
and the following shall be substituted in lieu thereof:
(11) Upon sale or other disposition of the Pledged Mortgage or, if a
Pledged Mortgage is included in an Eligible Mortgage Pool, upon sale
or other disposition of the related Agency Securities.
11. Section 2.9(g)(13) of the Agreement shall be deleted in its entirety
and the following shall be substituted in lieu thereof:
(13) On the date on which any of the Borrowers knows, or has reason
to know, or receives notice from the Credit Agent, that one or more of
the representations and warranties set forth in Section 5.15 were
inaccurate or incomplete in any material respect on any date when made
or deemed made.
12. Section 2.9(p) of the Agreement shall be deleted in its entirety and
the following shall be substituted in lieu thereof:
-5-
<PAGE>
2.9(p) The outstanding principal amount of all Servicing
Facility Advances shall be payable in full on April 1, 1999. In
addition, the Special Servicing Facility Advances shall be prepaid
rateably on each Equity Closing Date, by 25% of the amount of proceeds
received by the Borrowers from the sale of capital stock of WMF Group
or the issuance of Subordinated Debt, net of the direct costs of such
sale or issuance.
13. Section 2.12 of the Agreement shall be deleted in its entirety and the
following shall be substituted in lieu thereof:
2.12 Miscellaneous Charges. In addition to all fees payable
---------------------
pursuant to Section 2.11 hereof, the Borrowers agree to reimburse the
Credit Agent for miscellaneous charges and expenses (collectively,
"Miscellaneous Charges") incurred by or on behalf of the Credit Agent in
connection with the handling and administration of Advances, and to
reimburse the Collateral Agent for Miscellaneous Charges incurred by or on
behalf of the Collateral Agent in connection with the handling and
administration of the Collateral. For the purposes hereof, Miscellaneous
Charges shall include, but not be limited to, costs for UCC, tax lien and
judgment searches conducted by the Credit Agent, filing fees, charges for
wire transfers, check processing charges, charges for security delivery
fees, charges for overnight delivery of Collateral, the Funding Bank's
service charges and Designated Bank Charges. Miscellaneous Charges are due
when incurred, but shall not be delinquent if paid within 30 days after
receipt of an invoice or an account analysis statement from the Credit
Agent or the Collateral Agent, as the case may be.
14. Section 5 of the Agreement is amended by adding the following
immediately after Section 5.17:
5.18 Year 2000 Compliance. The Borrowers have conducted a
--------------------
comprehensive review and assessment of the Borrowers' computer applications
and made inquiry of the Borrowers' key suppliers, vendors, customers, and
Investors with respect to the Year 2000 Problem and, based on that review
and inquiry, the Borrowers do not believe the Year 2000 Problem will result
in a material adverse change in the Borrowers' business condition
(financial or otherwise), operations, properties or prospects, or ability
to pay the Obligations.
15. Section 6.2(b) of the Agreement shall be deleted in its entirety and
the following shall be substituted in lieu thereof:
6,2(b) As soon as available and in any event within ninety (90) days
after the close of each fiscal year of WMF
-6-
<PAGE>
Group, statements of income, changes in stockholders' equity and cash flow
of WMF Group and its Subsidiaries, on a consolidated basis for such year,
and the related balance sheet as of the end of such year (setting forth in
comparative form the corresponding figures for the preceding fiscal year),
all in reasonable detail and accompanied by an opinion (which opinion shall
not be qualified due to possible failure to take all appropriate steps to
successfully address the Year 2000 Problem) in form and substance
satisfactory to the Lenders and prepared by an accounting firm reasonably
satisfactory to the Lenders, or other independent certified public
accountants of recognized standing selected by WMF Group and acceptable to
the Lenders, as to said financial statements and a certificate signed by
the chief financial officer of WMF Group stating that said financial
statements fairly present the financial condition and results of operations
of WMF Group and its Subsidiaries as of the end of, and for, such year.
16. Section 6.2(c) of the Agreement shall be deleted in its entirety and
the following shall be substituted in lieu thereof:
6.2(c) Together with each delivery of financial statements required in
Section 6.2(a) for the last month of any fiscal quarter, and each delivery
of financial statements required in Section 6.2(b), an Officer's
Certificate substantially in the form of Exhibit I-MF hereto: (1) setting
------------
forth in reasonable detail all calculations necessary to show that the
Borrowers are in compliance with the requirements of Sections 7.6, 7.7,
7.8, 7.9, 7.10, 7.11 and 7.13 hereof as of the end of such month or year
(or, if the Borrowers are not in compliance, showing the extent of non-
compliance and specifying the period of non-compliance and what actions the
Borrowers have taken, are taking or propose to take with respect thereto);
(2) certifying that the Borrowers were, as of the end of the period, in
compliance and in good standing with applicable HUD, GNMA, or Investor net
worth requirements; (3) certifying that the representation set forth in
Section 5.18 hereof is true and correct as of the date of such certificate
or, if such representation is not true and correct as of such date,
specifying the nature of the problem and what action the Borrowers have
taken, is taking or proposes to take with respect thereto; and (4) stating
that the signers have reviewed the terms of this Agreement and have made,
or caused to be made under their supervision, a review in reasonable detail
of the transactions and conditions of the Borrowers and their Subsidiaries
during the accounting period covered by such financial statements and that
such review has not disclosed the existence during or at the end of such
accounting period, and that the signers do not have knowledge of the
existence as of the date of the Officer's Certificate,
-7-
<PAGE>
of any Default or Event of Default or if any Default or Event of Default
existed or exists, specifying the nature and period of the existence
thereof and what action the Borrowers have taken, are taking and propose to
take with respect thereto.
17. Section 7.13 of the Agreement shall be deleted in its entirety and the
following shall be substituted in lieu thereof:
7.13 Transactions with Affiliates. Directly or indirectly (a) make
----------------------------
any loan, advance, extension of credit or capital contribution to any of
its Affiliates, (b) transfer, sell, pledge, assign or otherwise dispose of
any of its assets to or on behalf of such Affiliates, (c) merge or
consolidate with or purchase or acquire assets from such Affiliates, or (d)
pay management fees to or on behalf of such Affiliates; provided, that
nothing in this Section 7.13 shall restrict transactions between the
Borrowers. Provided that no Default or Event of Default has occurred or is
continuing at the time any transfer or investment is made, this Section
7.13 does not prohibit (i) transfers of Mortgage Loans to Affiliates or to
special-purpose entities created by any Borrower or Affiliate, provided
that each such transfer to an Affiliate that is not a Borrower is on terms
no less favorable to the transferring Borrower than those that would be
available from an unaffiliated purchaser of similar Mortgage Loans and,
with respect to Pledged Mortgages, the Release Amount is paid with respect
thereto prior to or simultaneously with such transfer, (ii) equity
investments by WMF Group in an aggregate amount not to exceed Ten Million
Dollars ($10,000,000) in COMIT, provided that COMIT engages principally in
the business of purchasing and financing Mortgage Loans that do not
customarily qualify for inclusion in pools of Mortgage Loans which back
investment grade securities, (iii) equity investments by WMF Group in an
aggregate amount not to exceed Two Million Five Hundred Thousand Dollars
($2,500,000), in WMF Funding, provided that (A) WMF Funding at all times
(y) remains a wholly-owned subsidiary of WMF Group, and (z) engages
principally in the business of the acquisition or origination and
securitization of Commercial Mortgage Loans, and (B) such investments are
funded solely with the proceeds of equity investments made by GCM in WMF
Group, and (iv) additional equity investments by WMF Group in an aggregate
amount not to exceed Two Million Five Hundred Thousand Dollars ($2,500,000)
in WMF Funding, provided that (A) WMF Funding at all times (y) remains a
wholly-owned subsidiary of WMF Group, and (z) engages principally in the
business of the acquisition or origination and securitization of Commercial
Mortgage Loans, and (B) such investments are made only after the equity
investments by GCM in WMF Group described in clause (iii) (B) above, and
related investments by WMF Group in WMF Funding, have been made.
-8-
<PAGE>
18. Section 8.1 of the Agreement is further amended by adding the
following immediately after Section 8.1(o):
8.1(p) Any Lien for any taxes, assessments or other governmental
charges (i) is filed against any of the Borrowers or any of their property,
or is otherwise enforced against any of the Borrowers or any portion of the
Collateral, or (ii) obtains priority that is equal or greater than the
priority of the Lenders' security interest in any of the Collateral.
19. Section 8.2(d)(5) of the Agreement shall be deleted in its entirety
and the following shall be substituted in lieu thereof:
(5) Enter onto property where any Collateral or books and records
relating thereto are located and take possession thereof with or without
judicial process; and obtain access to the Borrowers' data processing
equipment, computer hardware and software relating to the Collateral and to
use all of the foregoing and the information contained therein in any
manner the Lenders deem necessary for the purpose of effectuating its
rights under this Agreement and any other Loan Document.
20. Section 8.2 of the Agreement shall be further amended by adding the
following section immediately after Section 8.2(j):
8.2(k) The Credit Agent is hereby granted a license or other right
to use, without charge, the Borrowers' computer programs, other programs,
labels, patents, copyrights, rights of use of any name, trade secrets,
trade names, trademarks, service marks and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in
advertising for sale and selling any Collateral and the Borrowers' rights
under all licenses and all other agreements related to the foregoing shall
inure to the Borrowers' benefit until the Obligations are paid in full;
provided, however, that the Credit Agent agrees not to exercise such
-------- -------
license or other right except in conjunction with the exercise of its
remedies after the occurrence and during the continuance of an Event of
Default.
21. Exhibit D-MF/FHA and Exhibit D-MF/CONV/DUS/COND to the Agreement are
---------------- --------------------------
hereby deleted in their entirety and replaced with the new Exhibit D-MF/FHA and
----------------
Exhibit D-MF/CONV/DUS/COND attached to this Amendment. All references in the
- --------------------------
Agreement to Exhibit D-MF/FHA and Exhibit D-MF/CONV/DUS/COND shall be deemed to
---------------- --------------------------
refer to the new Exhibit D-MF/FHA and Exhibit D-MF/CONV/DUS/COND.
---------------- --------------------------
22. The Lenders hereby agree to waive their default rights,
-9-
<PAGE>
with respect to the failure of the Borrowers to comply with Sections 7.11 and
7.13 of the Agreement for the period from August 31, 1998 through the Effective
Date. The foregoing waiver applies only to the specific instances described
herein. It is not a waiver of any subsequent breach of the same provisions of
the Agreement, nor of any breach of any other provision of the Agreement.
Notwithstanding the foregoing, the Lenders reserve all of the rights, powers and
remedies presently available to the Lenders under the Agreement and the Notes,
including the right to cease making Advances to the Borrowers and the right to
accelerate any of the indebtedness owing under the Agreement, if any other
Default occurs under the Agreement.
23. Exhibit I-MF to the Agreement is deleted in its entirety and replaced
------------
with the new Exhibit I-MF attached to this Amendment. All references in this
------------
Amendment and the Agreement to Exhibit I-MF shall be deemed to refer to the new
------------
Exhibit I-MF.
- ------------
24. The Borrowers shall deliver to the Credit Agent (a) an original of this
Amendment, executed by the Borrowers and all of the Lenders; (b) an executed
Certificate of Secretary with corporate resolutions for each Borrower; (c) an
amendment fee in the amount of $160,000, to be shared rateably among the Lenders
holding Servicing Facility Commitments, and (d) a One Thousand Dollar ($1,000)
document production fee.
25. The Borrowers represent, warrant and agree that (a) after giving effect
to paragraph 23 hereof, there exists no Default or Event of Default under the
Loan Documents, (b) the Loan Documents continue to be the legal, valid and
binding agreements and obligations of the Borrowers enforceable in accordance
with their terms, as modified herein, (c) the Lenders are not in default under
any of the Loan Documents and the Borrowers have no offset or defense to their
performance or obligations under any of the Loan Documents, (d) the
representations contained in the Loan Documents remain true and accurate in all
respects, and (e) there has been no material adverse change in the financial
condition of the Borrowers from the date of the Agreement to the date of this
Amendment.
26. Except as hereby expressly modified, the Agreement shall otherwise be
unchanged and shall remain in full force and effect, and the Borrowers ratify
and reaffirm all of its obligations thereunder.
27. The Borrowers shall pay all reasonable out-of-pocket costs and expenses
of the Credit Agent (including, without limitation, the reasonable fees and
service charges of Dorsey & Whitney LLP, counsel to the Credit Agent) in
connection with this Amendment.
-10-
<PAGE>
28. This Amendment may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, the Borrowers and the Lenders have caused this Amendment
to be duly executed on their behalf by their duly authorized officers as of the
day and year above written.
BORROWERS:
THE WMF GROUP, LTD.,
a Delaware corporation
By:/s/ Michael D. Ketcham
--------------------------
Its: Executive Vice President
------------------------
STATE OF Virginia )
) ss
COUNTY OF Fairfax )
On December 23, 1998, before me, a Notary Public, personally appeared Michael
----------- -------
D. Ketcham, the Executive Vice President of THE WMF GROUP, LTD., a Delaware
- ---------- ------------------------
corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Barbara Fox
-------------------------------
Notary Public
(SEAL) My Commission Expires:3/31/2002
---------
-11-
<PAGE>
WMF WASHINGTON MORTGAGE CORP.,
a Delaware corporation
By:/s/ Michael D. Ketcham
----------------------------
Its: Executive Vice President
--------------------------
STATE OF Virginia )
) ss
COUNTY OF Fairfax )
On December 23, 1998, before me, a Notary Public, personally appeared Michael
----------- -------
D. Ketcham, the Executive Vice President of WMF WASHINGTON MORTGAGE CORP., a
- ---------- ------------------------
Delaware corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Barbara Fox
-------------------------------
Notary Public
(SEAL) My Commission Expires:3/31/2002
---------
-12-
<PAGE>
WMF/HUNTOON, PAIGE ASSOCIATES
LIMITED, a Delaware corporation
By:/s/ Michael D. Ketcham
----------------------------
Its: Executive Vice President
-------------------------
STATE OF Virginia )
) ss
COUNTY OF Fairfax )
On December 23, 1998, before me, a Notary Public, personally appeared Michael
----------- -------
D. Ketcham, the Executive Vice President of WMF/HUNTOON, PAIGE ASSOCIATES
- ---------- ------------------------
LIMITED, a Delaware corporation, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person whose name is subscribed to the
within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by his/her signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
/s/ Barbara Fox
-------------------------------
Notary Public
(SEAL) My Commission Expires:3/31/2002
---------
-13-
<PAGE>
WMF PROCTOR, LTD.,
a Michigan corporation
By: /s/ Michael D. Ketcham
---------------------------
Its: Executive Vice President
--------------------------
STATE OF Virginia )
) ss
COUNTY OF Fairfax )
On December 23, 1998, before me, a Notary Public, personally appeared Michael
----------- -------
D. Ketcham, the Executive Vice President of WMF PROCTOR, LTD., a Michigan
- ---------- ------------------------
corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Barbara Fox
------------------------------
Notary Public
(SEAL) My Commission Expires:3/31/2002
---------
-14-
<PAGE>
THE ROBERT C. WILSON COMPANY,
a Texas corporation
By: Michael D. Ketcham
---------------------------
Its: Executive Vice President
--------------------------
STATE OF Virginia )
) ss
COUNTY OF Fairfax )
On December 23, 1998, before me, a Notary Public, personally appeared Michael
----------- -------
D. Ketcham, the Executive Vice President of THE ROBERT C. WILSON COMPANY, a
- ---------- ------------------------
Texas corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Barbara Fox
------------------------------
Notary Public
(SEAL) My Commission Expires:3/31/2002
---------
-15-
<PAGE>
THE ROBERT C. WILSON COMPANY-ARIZONA
an Arizona corporation
By: /s/ Michael D. Ketcham
--------------------------------
Its: Executive Vice President
-------------------------------
STATE OF Virginia )
) ss
COUNTY OF Fairfax )
On December 23, 1998, before me, a Notary Public, personally appeared Michael
----------- -------
D. Ketcham, the Executive Vice President of THE ROBERT C. WILSON COMPANY-
- ---------- ------------------------
ARIZONA, an Arizona corporation, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person whose name is subscribed to the
within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by his/her signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
/s/ Barbara Fox
------------------------------------
Notary Public
(SEAL) My Commission Expires:3/31/2002
--------------
-16-
<PAGE>
WMF CARBON MESA ADVISORS, INC.
a Delaware corporation
By:/s/ Michael D. Ketcham
---------------------------
Its: Executive Vice President
-------------------------
STATE OF Virginia )
) ss
COUNTY OF Fairfax )
On December 23, 1998, before me, a Notary Public, personally appeared Michael
----------- -------
D. Ketcham, the Executive Vice President of WMF CARBON MESA ADVISORS, INC., a
- ---------- ------------------------
Delaware corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Barbara Fox
------------------------------
Notary Public
(SEAL) My Commission Expires:3/31/2002
---------
-17-
<PAGE>
CREDIT AGENT:
RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation
By: /s/ Richard Hay
-----------------------------
Its: Director
LENDERS:
Permanent Warehousing RESIDENTIAL FUNDING CORPORATION,
Commitment: $116,600,000
Temporary Maximum Warehousing By: /s/ Richard Hay
----------------------------
Commitment: $366,600,000
Its: Director
Maximum Servicing Facility
Commitment: $22,313,167
STATE OF _______________ )
) ss
COUNTY OF ______________ )
On _________________, _____ before me, a Notary Public, personally appeared
____________________________, the Director of RESIDENTIAL FUNDING CORPORATION, a
Delaware corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
--------------------------------
Notary Public
(SEAL) My Commission Expires:
----------
-18-
<PAGE>
STATE OF _______________ )
) ss
COUNTY OF ______________ )
On _________________, _____ before me, a Notary Public, personally appeared
____________________________, the Director of RESIDENTIAL FUNDING CORPORATION, a
Delaware corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
-----------------------------------
Notary Public
(SEAL) My Commission Expires:
-------------
-19-
<PAGE>
Maximum Warehousing BANK UNITED, a federal savings bank
Commitment: $33,400,000
Maximum Servicing Facility By: /s/ Sonya S. Gaiure
-------------------------------
Commitment: $10,613,701
Its: Regional Director
------------------------------
STATE OF _______________ )
) ss
COUNTY OF ______________ )
On _________________, _____ before me, a Notary Public, personally appeared
____________________________, the _________________ of BANK UNITED, a federal
savings bank, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
------------------------------
Notary Public
(SEAL) My Commission Expires:
--------
-20-
<PAGE>
Maximum Warehousing PNC BANK, N.A.,
Commitment: $0.00 a national banking association
By:/s/ Sloane Graff
----------------------------
Maximum Servicing Facility Its: Vice President
--------------
Commitment: $16,734,875
Notice Address:
500 West Jefferson Street
Suite 1200
Louisville, KY 40202
Attention: Janice Bolling,
Vice President
Telecopier No.: (502) 581-3844
STATE OF _______________ )
) ss
COUNTY OF ______________ )
On _________________, _____ before me, a Notary Public, personally appeared
____________________________, the ____________ of PNC BANK, N.A., a national
banking association personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal.
/s/ Amy C. Woods
-------------------------------
Notary Public
(SEAL) My Commission Expires:6/30/2002
---------
-21-
