SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 3)*
THE WMF GROUP, LTD.
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(Name of Issuer)
Common Stock, $.01 par value
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(Title of Class of Securities)
929289106
(CUSIP Number)
James M. Better Jeffrey J. Rosen, Esq.
Capricorn Investors II, L.P. O'Melveny & Myers LLP
c/o Capricorn Holdings, LLC The Citicorp Center
30 East Elm Street 153 East 53rd Street, 54th Floor
Greenwich, Connecticut 06830 New York, New York 10022-4611
(203) 861-6600 (212) 326-2000
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
December 31, 1998
---------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box. |_|
Note: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom copies
are to be sent.
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* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("ACT") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, SEE
the NOTES).
CUSIP Number 929289106
---------
Page 1 of 11 Pages
<PAGE>
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Winokur Holdings, Inc.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER OF 7 SOLE VOTING POWER
SHARES ----------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 78,925
EACH REPORT- ----------------------------------
ING PERSON 9 SOLE DISPOSITIVE POWER
WITH ----------------------------------
10 SHARED DISPOSITIVE POWER
78,925
----------------------------------
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
78,925
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.3%*
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14 TYPE OF REPORTING PERSON
CO
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* Assumes 6,164,383 shares of Common Stock outstanding as of December 22,
1998, comprised of (i) 5,299,383 shares of Common Stock outstanding on December
22, 1998, according to the Company's 10-Q/A filed on December 22, 1998, (ii)
727,194 Conversion Shares (as defined below) issuable upon the conversion of all
shares of Class A Preferred Stock (as defined below) held by Capricorn II, (iii)
132,806 Stand-By Shares (as defined below) committed to be purchased by
Capricorn II pursuant to the Stand-By Purchase Agreement (as defined below), and
(iv) 5,000 shares of Common Stock issuable upon exercise of the 1997 Option (as
defined below).
Page 2 of 11 Pages
<PAGE>
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Capricorn Investors II, L.P.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER OF 7 SOLE VOTING POWER
SHARES ----------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 1,701,012
EACH REPORT- ----------------------------------
ING PERSON 9 SOLE DISPOSITIVE POWER
WITH ----------------------------------
10 SHARED DISPOSITIVE POWER
1,701,012
----------------------------------
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,701,012
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
27.6%*
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14 TYPE OF REPORTING PERSON
PN
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* Assumes 6,164,383 shares of Common Stock outstanding as of December 22,
1998, comprised of (i) 5,299,383 shares of Common Stock outstanding on December
22, 1998, according to the Company's 10-Q/A filed on December 22, 1998, (ii)
727,194 Conversion Shares issuable upon the conversion of all shares of Class A
Preferred Stock held by Capricorn II, (iii) 132,806 Stand-By Shares committed to
be purchased by Capricorn II pursuant to the Stand-By Purchase Agreement, and
(iv) 5,000 shares of Common Stock issuable upon exercise of the 1997 Option.
Page 3 of 11 Pages
<PAGE>
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Capricorn Holdings, LLC
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER OF 7 SOLE VOTING POWER
SHARES ----------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 1,701,012
EACH REPORT- ----------------------------------
ING PERSON 9 SOLE DISPOSITIVE POWER
WITH ----------------------------------
10 SHARED DISPOSITIVE POWER
1,701,012
----------------------------------
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,701,012
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
27.6%*
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14 TYPE OF REPORTING PERSON
OO
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* Assumes 6,164,383 shares of Common Stock outstanding as of December 22,
1998, comprised of (i) 5,299,383 shares of Common Stock outstanding on December
22, 1998, according to the Company's 10-Q/A filed on December 22, 1998, (ii)
727,194 Conversion Shares issuable upon the conversion of all shares of Class A
Preferred Stock held by Capricorn II, (iii) 132,806 Stand-By Shares committed to
be purchased by Capricorn II pursuant to the Stand-By Purchase Agreement, and
(iv) 5,000 shares of Common Stock issuable upon exercise of the 1997 Option.
Page 4 of 11 Pages
<PAGE>
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Herbert S. Winokur, Jr.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
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NUMBER OF 7 SOLE VOTING POWER
SHARES ----------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 1,779,937
EACH REPORT- ----------------------------------
ING PERSON 9 SOLE DISPOSITIVE POWER
WITH ----------------------------------
10 SHARED DISPOSITIVE POWER
1,779,937
----------------------------------
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,779,937
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
28.9%*
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14 TYPE OF REPORTING PERSON
IN
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* Assumes 6,164,383 shares of Common Stock outstanding as of December 22,
1998, comprised of (i) 5,299,383 shares of Common Stock outstanding on December
22, 1998, according to the Company's 10-Q/A filed on December 22, 1998, (ii)
727,194 Conversion Shares issuable upon the conversion of all shares of Class A
Preferred Stock held by Capricorn II, (iii) 132,806 Stand-By Shares committed to
be purchased by Capricorn II pursuant to the Stand-By Purchase Agreement, and
(iv) 5,000 shares of Common Stock issuable upon exercise of the 1997 Option.
Page 5 of 11 Pages
<PAGE>
This Amendment No. 3 to Schedule 13D (the "SCHEDULE 13D"), which was
filed on November 25, 1997, by Capricorn Investors, L.P. ("CAPRICORN I"),
Capricorn Holdings, G.P. ("CAPRICORN HOLDINGS, G.P."), Winokur Holdings, Inc.
("WINOKUR HOLDINGS"), Herbert S. Winokur, Jr. ("WINOKUR"), Capricorn Investors
II, L.P. ("CAPRICORN II") and Capricorn Holdings, LLC ("CAPRICORN HOLDINGS,
LLC"), as amended by Amendment No. 1 filed on January 9, 1998 by Winokur
Holdings, Capricorn II, Capricorn Holdings, LLC, and Winokur, and as amended by
Amendment No. 2 filed on October 16, 1998, by Winokur Holdings, Capricorn II,
Capricorn Holdings, LLC, and Winokur, and which relates to shares of Common
Stock, par value $.01 per share ("COMMON STOCK"), of The WMF Group, Ltd. (the
"COMPANY"), hereby amends Items 3, 4, 5, 6 and 7 of the Schedule 13D. Unless
otherwise indicated, all capitalized terms used but not defined herein shall
have the same meaning as set forth in the Schedule 13D.
This Amendment No. 3 assumes that the number of shares of Common Stock
outstanding as of December 22, 1998 was 6,164,383 shares, comprised of (i)
5,299,383 shares of Common Stock outstanding on December 22, 1998, according to
the Company's 10-Q/A filed on December 22, 1998, (ii) 727,194 Conversion Shares
(as defined below) issuable upon the conversion of all shares of Class A
Preferred Stock (as defined below) held by Capricorn II, (iii) 132,806 Stand-By
Shares (as defined below) which Capricorn II has committed to purchase pursuant
to the Stand-By Purchase Agreement (as defined below), and (iv) 5,000 shares of
Common Stock issuable upon exercise of an option acquired by Capricorn II on
December 8, 1997 (the "1997 OPTION")*.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The information previously furnished in response to this item is
amended by adding thereto the following:
On December 31, 1998, pursuant to a Stock Purchase Agreement dated as
of October 16, 1998 and executed on December 31, 1998, among the Company,
Demeter Holdings Corporation, ("DEMETER"), Phemus Corporation ("PHEMUS"),
Harvard Private Capital Holdings, Inc. ("HARVARD") and Capricorn II (in the form
attached hereto as Exhibit 7, the "STOCK PURCHASE AGREEMENT"), Capricorn II
purchased an aggregate of 727,194 shares (the "CAPRICORN SHARES") of non-voting,
convertible preferred stock, par value $.01 per share (the "CLASS A PREFERRED
STOCK") for an aggregate purchase price of $3,335,638.88. Demeter, Phemus and
Capricorn II are hereinafter individually referred to as an "INVESTOR" and,
collectively, as the "INVESTORS".
Pursuant to the Stock Purchase Agreement, the aggregate purchase price
of $3,335,638.88 paid by Capricorn II for the Capricorn Shares was applied by
the Company towards the repayment of $3,335,638.88 in principal of and accrued
interest on outstanding notes purchased by Commercial Mortgage Investment Trust,
Inc. ("CMIT") from the Company on September 4, 1998 (the "CMIT NOTES"). Pursuant
to the Stock Purchase Agreement, simultaneously with the closing of the sale of
the Class A Preferred Stock, CMIT applied the
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* The 1997 Option is subject to adjustments in accordance with the terms
thereof and became exercisable on June 8, 1998, at an exercise price of $9.15
per share. The 1997 Option was granted by the Company to Capricorn II as
compensation for Winokur's service as a director of the Company.
Page 6 of 11 Pages
<PAGE>
proceeds from such repayment of CMIT Notes to redeem 3,219 shares of CMIT's
Class C non-voting preferred stock (the "CMIT SERIES C PREFERRED") held by
Capricorn II.
In connection with the closing of the sale of the Class A Preferred
Stock, on December 31, 1998 Capricorn II executed a Stand-By Purchase Agreement
dated as of October 16, 1998 among the Company, Demeter, Phemus, and Capricorn
II (in the form attached hereto as Exhibit 8, the "STAND-BY PURCHASE AGREEMENT")
pursuant to which Capricorn II committed to purchase from the Company up to an
aggregate of 132,806 Stand-By Shares (as defined below) at a price of $5.00 per
share. The closing of the purchase of any Stand-By Shares is expected to occur
as soon as practicable following the expiration of the exercise period of the
Rights (as defined below) issued in the Rights Offering (as defined below). In
addition, pursuant to the Stock Purchase Agreement Capricorn II also agreed to
the cancellation of warrants (the "WARRANTS") to purchase 240,000 shares of
Common Stock at $11.25 per share held by Capricorn II.
Also, on December 31, 1998 Capricorn II acquired an option to purchase
5,000 shares of Common Stock from the Company (the "1998 OPTION"). The 1998
Option becomes exercisable on July 1, 1999 at an exercise price per share equal
to the fair market value of the Common Stock on December 31, 1998, subject to
adjustments in accordance with the terms of the 1998 Option. The 1998 Option was
granted by the Company to Capricorn II as compensation for Winokur's service as
a director of the Company. In this Amendment No. 3, the shares issuable pursuant
to the 1998 Option are not deemed beneficially owned by the filing persons, as
the 1998 Option becomes exercisable on July 1, 1999.
ITEM 4. PURPOSE OF TRANSACTION
The information previously furnished in response to this item is
amended to read as follows:
Pursuant to the Stock Purchase Agreement, on December 31, 1998
Capricorn II acquired from the Company the Capricorn Shares for an aggregate
purchase price of $3,335,638.88, Demeter acquired from the Company an aggregate
of 2,757,633 shares of Class A Preferred Stock for an aggregate purchase price
of $12,649,262.57, and Phemus acquired from the Company an aggregate of 151,145
shares of Class A Preferred Stock, for an aggregate purchase price of
$693,302.11.
In accordance with the Stock Purchase Agreement, the Company has agreed
to distribute on a pro rata basis transferable rights (each a "RIGHT") to all
holders of record of Common Stock on a record date to be determined by the Board
of Directors of the Company. Such holders will receive 1.072 Rights for each
share of Common Stock held by them on such record date. The number of Rights
issued to each shareholder will be rounded up or down to the nearest whole
number. Each Right will entitle the holder thereof to purchase one share of
Common Stock for $5.00 per share (the "RIGHTS OFFERING"). The Investors agreed
pursuant to the Stock Purchase Agreement that (i) after the date of the Stock
Purchase 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 Securities Exchange Act of
1934, as amended) 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 (iii) neither
Page 7 of 11 Pages
<PAGE>
they nor any of their affiliates (which term, in the case of Capricorn II, will
not include any of its limited partners or the limited partners or general
partners of Capricorn I or any of Capricorn II's affiliates) will purchase or
otherwise acquire from any person other than the Company any other Rights.
Pursuant to the Stand-By Purchase Agreement, the Investors have agreed
to purchase from the Company as soon as practicable following the expiration of
the exercise period of the Rights issued in the Rights Offering up to an
aggregate of 664,028 shares of Common Stock (the "STAND-BY SHARES") 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. Of the Available Shares, each of Capricorn
II, Demeter and Phemus will purchase up to the maximum amount of its respective
individual commitment to purchase Stand-By Shares (132,806, 503,619 and 27,603
shares, respectively). If the number of Available Shares is less than the
maximum number of Stand-By Shares, then each Investor will purchase a number of
Stand-By Shares calculated by multiplying the number of Available Shares by a
fraction, the numerator of which will be the maximum amount of such Investor's
individual commitment to purchase Stand-By Shares and the denominator of which
is the maximum aggregate number of Stand-By Shares.
At the closing of the sale of the Class A Preferred Stock, 1,200,000
Warrants held by Harvard and Capricorn II were automatically canceled and
retired, including 240,000 Warrants held by Capricorn II which were acquired in
accordance with the terms of the Subscription Agreement, dated September 4, 1998
among CMIT, Harvard, Capricorn II, and the Company.
Each share of Class A Preferred Stock is convertible at the option of
the holder thereof at any time into (i) one share of Common Stock, adjusted as
provided in the Certificate of Designations, Preferences and Rights of the Class
A Preferred Stock attached hereto as Exhibit 9 (the "CERTIFICATE OF
DESIGNATIONS"), 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 on such share of Class A Preferred Stock.
The Class A Preferred Stock is subject to mandatory conversion on the earlier of
(i) the date upon which the Company receives notice that the mandatory
conversion has received any necessary approval under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (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. In the mandatory conversion, each share of Class A Preferred Stock
is convertible into one share of Common Stock, adjusted as provided in the
Certificate of Designations. The Class A Preferred Stock is also subject to
optional redemption by the Company for a cash price determined as provided in
the Certificate of Designations. The Common Stock issuable upon conversion
(whether optional or mandatory) of the Class A Preferred Stock is hereinafter
referred to as the "CONVERSION SHARES".
In accordance with the terms of the Stock Purchase Agreement,
simultaneously with the closing of the sale of the Class A Preferred Stock, the
Company applied the proceeds from the sale of the Class A Preferred Stock to
partially repay the CMIT Notes. CMIT applied
Page 8 of 11 Pages
<PAGE>
the proceeds of such partial repayment of CMIT Notes to redeem shares of CMIT
Series C Preferred held by Harvard and Capricorn II (which were sold to Harvard
and Capricorn II to fund the purchase of the CMIT Notes). In addition,
simultaneously with the closing of the Rights Offering, the Company will use the
proceeds of the Rights Offering and the sale of any Stand-By Shares to pay all
remaining amounts outstanding with respect to the CMIT Notes and, to the extent
that any such proceeds remain, as working capital.
Pursuant to the Stock Purchase Agreement, if the CMIT Notes are not
fully repaid simultaneously with the 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, CMIT will tender to the Company any remaining
CMIT Notes and the Company will 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 is to be calculated by dividing the outstanding
principal balance, and any accrued but unpaid interest thereon, of the CMIT
Notes to be converted by $5.00 (the "CMIT CONVERSION SHARES"). Harvard and
Capricorn may exercise the foregoing conversion option by giving written notice
to CMIT and the Company of the principal amount (and such accrued interest) of
CMIT Notes to be so converted within 10 business days following the payment of
amounts outstanding with respect to the CMIT Notes following the closing of the
Rights Offering. The closing of any conversion of CMIT Notes will take place on
the tenth business day following receipt by CMIT and the Company of a notice of
conversion, or within 5 business days after the date upon which all applicable
waiting periods under the HSR Act will have expired or been terminated. Pursuant
to the Stock Purchase Agreement, CMIT agreed that it will apply all of the
proceeds of the repayment of the CMIT Notes to redeem immediately shares of CMIT
Series C Preferred held by the Investors and Harvard as provided in CMIT's
amended and restated articles of incorporation. In the event any portion of the
CMIT Notes are converted into CMIT Conversion Shares as described above, each
share of the CMIT Series C Preferred then held by the Investors and Harvard will
be immediately exchanged for a number of CMIT Conversion Shares equal to (1) the
aggregate number of CMIT Conversion Shares divided by (2) the number of shares
of CMIT 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 CMIT Conversion Shares include any shares of Class A Preferred Stock.
The Conversion Shares, any CMIT Conversion Shares which are shares of
Common Stock and the Stand-By Shares will be Registrable Shares for purposes of
the Registration Rights Agreement, dated June 12, 1998, between the Company,
Harvard and Capricorn II (as amended from time to time, the "REGISTRATION RIGHTS
AGREEMENT"). Pursuant to the Stock Purchase Agreement and the Stand-By Purchase
Agreement, the Company, the Investors and Harvard agreed that the Registration
Rights Agreement will be binding upon and inure to the benefit of Demeter and
Phemus. In connection with the closing of the sale of the Class A Preferred
Stock, the Company, the Investors and Harvard executed an amendment (the
"REGISTRATION RIGHTS AMENDMENT") to the Registration Rights Agreement to confirm
the rights and responsibilities of Demeter and Phemus under the Registration
Rights Agreement. Pursuant to the Registration Rights Agreement, Capricorn and
the other Investors will have the right to cause the Company, subject to certain
exceptions, to register the Registrable Shares under the Securities Act of 1933,
as amended. The Registration Rights Agreement and the Registration Rights
Amendment are attached hereto as Exhibit 10.
Page 9 of 11 Pages
<PAGE>
The acquisition of shares of Class A Preferred Stock and rights to
acquire Common Stock by Capricorn II described herein were effected in
accordance with the stated intention of Capricorn II, Capricorn Holdings, LLC
and Winokur to acquire a significant equity position in the Company and to
influence the management, policies and activities of the Company, as previously
described in Item 4 of the Schedule 13D.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
The information previously furnished in response to this item is
amended to read as follows:
Based upon 5,299,383 shares of Common Stock outstanding as of December
22, 1998, as reported by the Company in its 10-Q/A filed on December 22, 1998,
727,194 Conversion Shares issuable upon the conversion of all shares of Class A
Preferred Stock held by Capricorn II, 132,806 Stand-By Shares committed to be
purchased by Capricorn II pursuant to the Stand-By Purchase Agreement, and
giving effect to the issuance of all 5,000 shares of Common Stock pursuant to
the 1997 Option, (a) Winokur Holdings is the direct beneficial owner of 78,925
shares of Common Stock, and Winokur is the indirect beneficial owner of the
shares of Common Stock held by Winokur Holdings; Capricorn II is the direct
beneficial owner of 1,701,012 shares of Common Stock, and Capricorn Holdings,
LLC and Winokur are the indirect beneficial owners of the shares of Common Stock
held by Capricorn II; and Winokur is the indirect beneficial owner of the
1,779,937 shares of Common Stock held through Winokur Holdings and Capricorn II;
and (b) Winokur Holdings is the direct beneficial owner of shares equal to
approximately 1.3% of the number of shares of Common Stock that were then
outstanding; Capricorn II is the direct beneficial owner of shares equal to
approximately 27.6% of the number of shares of Common Stock that were then
outstanding; Capricorn Holdings, LLC is the indirect beneficial owner of shares
equal to approximately 27.6% of the number of shares of Common Stock that were
then outstanding; and Winokur is the indirect beneficial owner of shares equal
to approximately 28.9% of the number of shares of Common Stock that were then
outstanding.
Based upon 5,299,383 shares of Common Stock outstanding as of December
22, 1998, as reported by the Company in its 10-Q/A filed on December 22, 1998,
727,194 Conversion Shares issuable upon the conversion of all shares of Class A
Preferred Stock held by Capricorn II, 132,806 Stand-By Shares committed to be
purchased by Capricorn II pursuant to the Stand-By Purchase Agreement, and
giving effect to the issuance of all 5,000 shares of Common Stock pursuant to
the 1997 Option, (a) Winokur Holdings and Winokur may be deemed to share the
power to vote or to direct the vote of, and to share the power to dispose or to
direct the disposition of, 78,925 shares of Common Stock held directly by
Winokur Holdings, (b) Capricorn II, Capricorn Holdings, LLC and Winokur may be
deemed to share the power to vote or to direct the vote of, and to share the
power to dispose or to direct the disposition of, 1,701,012 shares of Common
Stock held directly by Capricorn II, and (c) Winokur may be deemed to share the
power to vote or to direct the vote of, and to share the power to dispose or to
direct the disposition of, 1,779,937 shares of Common Stock held through Winokur
Holdings and Capricorn II.
Page 10 of 11 Pages
<PAGE>
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
For information relating to the Stock Purchase Agreement, the Stand-By
Purchase Agreement, the Registration Rights Agreement and the 1998 Option, see
Items 3 and 4 above. The information regarding such agreements set forth in
Items 3 and 4 is qualified in its entirety by the provisions of such agreements,
copies of which are Exhibits 7, 8, 10 and 11, respectively, to this Amendment
No. 3 to Schedule 13D. For information relating the preferences and rights of
the Class A Preferred Stock, see Item 4 above. The information regarding the
preferences and rights of the Class A Preferred Stock set forth in Item 4 is
qualified in its entirety by the description of such preferences and rights set
forth in Exhibit 9 to this Amendment No. 3 to Schedule 13D.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
The information previously furnished in response to this item is
amended to add the following:
Exhibit 7 - Stock Purchase Agreement by and among The WMF Group, Ltd., Harvard
Private Capital Holdings, Inc., Demeter Holdings Corporation,
Phemus Corporation and Capricorn Investors II, L.P. dated as of
October 16, 1998.
Exhibit 8 - Stand-By Purchase Agreement by and among The WMF Group, Ltd.,
Demeter Holdings Corporation, Phemus Corporation, and Capricorn
Investors II, L.P., dated as of October 16, 1998.
Exhibit 9 - Certificate of Designations, Preferences and Rights of Class A
Non-Voting Convertible Preferred Stock of The WMF Group, Ltd.
Exhibit 10 - Registration Rights Agreement by and among The WMF Group, Ltd.,
Harvard Private Capital Holdings, Inc., and Capricorn Investors
II, L.P., dated as of June 12, 1998, and Amendment to Registration
Rights Agreement, dated as of October 16, 1998 by and among The
WMF Group, Ltd., Harvard Private Capital Holdings, Inc., Demeter
Holdings Corporation, Phemus Corporation and Capricorn Investors
II, L.P.
Exhibit 11 - Non-Employee Director Award Agreement made and entered into as of
the 10th day of December, 1998 by and between The WMF Group, Ltd.
and Capricorn Investors II, L.P., and Key Employee Incentive Plan
adopted on October 21, 1997, as amended on December 5, 1997 and
further amended on February 24, 1998, of The WMF Group Ltd.,
constituting Exhibit A thereto.
Page 11 of 11 Pages
<PAGE>
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
January 8, 1999
Date
WINOKUR HOLDINGS, INC.
By: /s/ Herbert S. Winokur, Jr.
--------------------------------------------
Herbert S. Winokur, Jr., President
S-1
<PAGE>
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
January 8, 1999
Date
CAPRICORN INVESTORS II, L.P.
By: Capricorn Holdings, LLC,
its General Partner
By: /s/ Herbert S. Winokur, Jr.
--------------------------------------------
Herbert S. Winokur, Jr., Manager
S-2
<PAGE>
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
January 8, 1999
Date
CAPRICORN HOLDINGS, LLC
By: /s/ Herbert S. Winokur, Jr.
--------------------------------------------
Herbert S. Winokur, Jr., Manager
S-3
<PAGE>
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
January 8, 1999
Date
By: /s/ Herbert S. Winokur, Jr.
--------------------------------------------
Herbert S. Winokur, Jr.
S-4
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").
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<PAGE>
2. CLOSING.
2.1. THE CLOSING.
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
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<PAGE>
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 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
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<PAGE>
duly and validly issued, fully paid and nonassessable. The Company has
authorized and 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
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<PAGE>
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 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
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<PAGE>
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
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
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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 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.
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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.
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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
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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 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
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<PAGE>
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 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
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<PAGE>
Investors' counsel, and the Investors shall have received counterpart
originals and certified or other copies of the following documents:
(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.
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<PAGE>
(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.
(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.
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<PAGE>
(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 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
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<PAGE>
Investors to affiliates, this Agreement may not be assigned by any Investor
without the prior written consent of the Company or by the Company without the
prior written consent of the Investors.
7.3. GOVERNING LAW.
This Agreement shall be governed by and construed under the
internal laws of the Commonwealth of Virginia as applied to agreements among
Virginia residents entered into and to be performed entirely within Virginia,
without reference to principles of conflict of laws or choice of laws.
7.4. COUNTERPARTS.
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
7.5. HEADINGS.
The headings and captions used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement. All references in this Agreement to sections, paragraphs, exhibits
and schedules shall, unless otherwise provided, refer to sections and paragraphs
hereof and exhibits and schedules attached hereto, all of which exhibits and
schedules are incorporated herein by this reference.
7.6. NOTICES.
Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively
given upon personal delivery to the party to be notified or one day after
deposit with a national overnight delivery service or three days after deposit
with the United States Post Office, by registered or certified mail, postage
prepaid and addressed as follows:
To the Company:
The WMF Group, Ltd.
1593 Spring Hill Road, Suite 400
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
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<PAGE>
and
Hunton & Williams
951 East Byrd Street
Richmond, Virginia 23219-4074
Attention: Randall S. Parks, Esquire
To Demeter:
c/o Charlesbank Capital Partners, LLC
600 Atlantic Avenue, 26th Floor
Boston, Massachusetts 02210
Attention: Tim R. Palmer
Mark A. Rosen
with copies to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attention: Larry Rowe, Esquire
To Phemus:
c/o Charlesbank Capital Partners, LLC
600 Atlantic Avenue, 26th Floor
Boston, Massachusetts 02210
Attention: Tim R. Palmer
Mark A. Rosen
with copies to:
Ropes & Gray
One International Place
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
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<PAGE>
with copies to:
O'Melveny & Myers LLP
153 East 53rd Street
New York, New York 10022-4611
Attention: Mark E. Thierfelder, Esquire
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.
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<PAGE>
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]
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<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:________________________________________________
Name: Shekar Narasimhan
Title: President
THE INVESTORS: DEMETER HOLDINGS CORPORATION, a
Massachusetts corporation
By:________________________________________________
Name:
Title:
By:________________________________________________
Name:
Title:
PHEMUS CORPORATION, a Massachusetts
corporation
By:________________________________________________
Name:
Title:
By:________________________________________________
Name:
Title:
HARVARD PRIVATE CAPITAL HOLDINGS,
INC., a Massachusetts corporation
By:________________________________________________
Name:
Title:
By:________________________________________________
Name:
Title:
STOCK PURCHASE AGREEMENT
<PAGE>
CAPRICORN INVESTORS II, L.P.,
a Delaware limited partnership
By: Capricorn Holdings, LLC, a Delaware limited
liability company, its General Partner
By:________________________________________________
Name: Herbert S. Winokur, Jr.
Title: Manager
STOCK PURCHASE AGREEMENT
<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:________________________________________________
Name:
Title:
STOCK PURCHASE AGREEMENT
<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
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 Stand-By Shares shall be several and
not joint. If the number of Available Shares is less than the
<PAGE>
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").
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<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.
-3-
<PAGE>
All of such outstanding shares of capital stock of each
Subsidiary are validly issued, fully paid and nonassessable. Except as set forth
on SCHEDULE 3.3, the Company owns all of the shares of the issued and
outstanding capital stock of the Subsidiaries free and clear of any liens,
claims, encumbrances, charges or rights of third parties of any kind whatsoever.
3.4. DUE AUTHORIZATION; ENFORCEABILITY.
All corporate action on the part of the Company, its officers,
directors and shareholders necessary for the authorization, execution, delivery
and performance of all obligations of the Company under this Agreement, and the
authorization, issuance, reservation for issuance and delivery of the Stand-By
Shares has been taken. This Agreement constitutes a valid and legally binding
obligation of the Company, enforceable in accordance with its terms, except as
may be limited by (i) applicable bankruptcy, insolvency, reorganization or other
laws of general application relating to or affecting the enforcement of
creditors' rights generally and (ii) the effect of rules of law governing the
availability of equitable remedies.
3.5. VALID ISSUANCE OF STOCK; COMPLIANCE WITH SECURITIES LAWS.
(a) The Stand-By Shares, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration
provided for herein, will be duly and validly issued, fully paid and
nonassessable.
(b) Based in part on the representations made by the Investors
in SECTION 4 hereof, the Stand-By Shares will be exempt from the
registration and prospectus delivery requirements of the U.S.
Securities Act of 1933, as amended (the "1933 ACT") and the
registration and qualification requirements of the securities laws of
Massachusetts, Delaware, Virginia and Connecticut.
3.6. CONSENTS.
No further consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority or any third-party on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, EXCEPT FOR such qualifications or filings under
the 1933 Act and the regulations thereunder and all other applicable state
securities laws as may be required in connection with the transactions
contemplated by this Agreement. All such qualifications and filings will, in the
case of qualifications, be effective on the Closing Date and will, in the case
of filings, be made within the time prescribed by law.
3.7. LEGAL AND GOVERNMENTAL PROCEEDINGS.
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
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<PAGE>
Stock or that, if determined adversely to the Company or any Subsidiary, is
reasonably likely, currently or prospectively, individually or in the aggregate,
to have a Material Adverse Effect.
3.8. COMPLIANCE WITH CHARTER DOCUMENTS, CONTRACTS AND LAW.
Except as set forth on SCHEDULE 3.8, the Company and each
Subsidiary is not in violation of its respective articles of incorporation or
bylaws, both as amended, nor in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, lease or other agreement or
instrument to which it is a party or by which it or any of its properties may be
bound. To the best of the Company's knowledge, except for any violations that
individually and in the aggregate would not have a Material Adverse Effect, the
Company and the Subsidiaries are in compliance with all applicable statutes,
laws, regulations and executive orders of the United States of America and all
states, foreign countries or other governmental bodies and agencies having
jurisdiction over the Company's and the Subsidiaries' business or properties.
Neither the Company nor any Subsidiary has received any notice of any such
violation of such statutes, laws, regulations or orders that has not been
remedied prior to the date hereof. The execution, delivery and performance by
the Company of this Agreement and the consummation of the transactions
contemplated hereby will not result in any such violation or default, or be in
conflict with or constitute, with or without the passage of time or the giving
of notice or both, either a default under the Company's Certificate of
Incorporation or Bylaws, or, to the best of the Company's knowledge, any such
violation of any statutes, laws, regulations or orders.
3.9. NO CONFLICTS.
The execution, delivery and performance by the Company of this
Agreement and the consummation of the transactions contemplated hereby will not
violate or conflict with or result in a breach of any provision of, or
constitute a default (or any event that, with notice or lapse of time or both,
would constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any lien upon any of the properties of the Company or
any Subsidiary under, or result in being declared void, voidable or without
further binding effect, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust or any license, franchise, permit,
lease, contract, agreement or other instrument, commitment or obligation to
which the Company or any Subsidiary is a party, or by which the Company, the
Subsidiaries or any of their properties is bound or affected, except for any of
the foregoing matters that would not reasonably be expected, individually or in
the aggregate, to result in a Material Adverse Effect. 3.10. SECURITIES FILINGS.
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
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(b) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading. Each of the consolidated balance sheets of the Company included in
or incorporated by reference into the Company Reports (as amended and including
the related notes and schedules) (i) complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the U.S. Securities Exchange Commission ("SEC") with respect
thereto, (ii) were prepared in all material respects in accordance with
generally accepted accounting principles ("GAAP"), and (iii) fairly presented in
all material respects the consolidated financial position of the Company and its
wholly-owned subsidiaries as of its date in conformity with GAAP. Each of the
consolidated statements of income, retained earnings and cash flows of the
Company included in or incorporated by reference into the Company Reports (as
amended and including any related notes and schedules) (A) complied as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, (B) were
prepared in accordance with GAAP, and (C) fairly presented the results of
operations, retained earnings or cash flows, as the case may be, of the Company
and its subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments that would not be
material in amount or effect) in conformity with GAAP.
The Company's registration statement relating to the Rights
Offering as of its effective date (a) complied as to form in all material
respects with the applicable requirements of the 1933 Act and (b) did not
contain any untrue statement of a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
Except as and to the extent set forth in the Company Reports
and as set forth on SCHEDULE 3.10, neither the Company nor any of its
subsidiaries has any material liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on, or reserved against in, a balance sheet of the Company or in the
notes thereto, prepared in accordance with GAAP consistently applied, or any
other material liabilities (such liabilities being deemed material if the value
of such liabilities, individually or in the aggregate, is greater than $1
million), except liabilities arising in the ordinary course of business since
such date which would not have a Material Adverse Effect.
3.11. NO CHANGES.
Since September 30, 1998, except as set forth on SCHEDULE
3.11, there has been no material adverse change in the business, financial
condition, assets or prospects of the Company.
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:
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4.1. ORGANIZATION, GOOD STANDING AND QUALIFICATION.
Such Investor is a partnership or corporation, as applicable,
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its formation and has all requisite power and authority to own
its properties and assets and to enter into the transactions contemplated by
this Agreement.
4.2. DUE AUTHORIZATION.
All corporate and partnership action on the part of such
Investor as applicable, necessary for the authorization, execution, delivery and
performance of all obligations of such Investor under this Agreement has been
taken. This Agreement constitutes such Investor's valid and legally binding
obligation, enforceable in accordance with its terms except as may be limited by
(i) applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) the effect of rules of law governing the availability of
equitable remedies.
4.3. PURCHASE FOR OWN ACCOUNT.
The Stand-By Shares are being acquired for investment for such
Investor's own account, not as a nominee or agent, and not with a view to the
public resale or distribution thereof within the meaning of the 1933 Act, and
such Investor has no present intention of selling, granting any participation
in, or otherwise distributing the same. Such Investor also represents that it
has not been formed for the specific purpose of acquiring the Stand-By Shares.
4.4. INVESTMENT EXPERIENCE.
Such Investor understands that the purchase of the Stand-By
Shares involves substantial risk. Such Investor: (i) has experience as an
investor in securities and acknowledges that such Investor is able to fend for
itself, can bear the economic risk of its investment in the Stand-By Shares and
has such knowledge and experience in financial or business matters that such
Investor is capable of evaluating the merits and risks of this investment in the
Stand-By Shares and protecting its own interests in connection with this
investment and/or (ii) has a preexisting personal or business relationship with
the Company and certain of its officers, directors or controlling persons of a
nature and duration that enables such Investor to be aware of the character,
business acumen and financial circumstances of such persons.
4.5. ACCREDITED INVESTOR STATUS.
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
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<PAGE>
questions from the Company. Such Investor has carefully reviewed and evaluated
these documents and understands the risks and other considerations relating to
the investment.
4.6. RESTRICTED SECURITIES.
Such Investor understands that the Stand-By Shares may be
characterized as "restricted securities" under the 1933 Act inasmuch as the
Stand-By Shares are being acquired from the Company in a transaction not
involving a public offering and that under the 1933 Act and applicable rules and
regulations thereunder such securities may be resold without registration under
the 1933 Act only in certain limited circumstances. In this connection, such
Investor represents that it is familiar with Rule 144 of the SEC, as presently
in effect, and understands the resale limitations imposed thereby and by the
1933 Act.
5. COVENANTS OF THE PARTIES.
5.1. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS.
(a) Each Investor agrees not to make any disposition of all or
any portion of the Stand-By Shares unless and until:
(i) there is then in effect a registration statement
under the 1933 Act and all applicable state securities laws
covering such proposed disposition and such disposition is
made in accordance with such registration statement; or
(ii) (A) the Investor shall have notified the Company of
the proposed disposition and shall have furnished the Company
with a statement of the circumstances surrounding the proposed
disposition, and (B) the Investor shall have furnished the
Company, at the expense of such Investor or its transferee,
with an opinion of counsel, reasonably satisfactory to the
Company, that such disposition will not require registration
of such securities under the 1933 Act or under any applicable
state securities laws.
(b) The Stand-By Shares shall be Registrable Shares for
purposes of the Registration Rights Agreement, dated June 12, 1998,
between the Company, Harvard and Capricorn (the "REGISTRATION RIGHTS
AGREEMENT"), as amended. By signing and entering into this Agreement,
the Company, the Investors and Harvard each agree that the Registration
Rights Agreement shall be binding upon and inure to the benefit of
Demeter and Phemus. The Company and Demeter and Phemus will execute an
amendment to the 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
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144; or (B) for any transfer of any of the Stand-By Shares by the Investor to an
affiliate of the Investor; PROVIDED that in the foregoing case the transferee
agrees in writing to be subject to the terms of this SECTION 5.1 to the same
extent as if the transferee were the Investor hereunder.
5.2. LEGENDS.
(a) Each Investor acknowledges that the certificates
evidencing the Stand-By Shares will bear the legends set forth below,
in addition to any legend required by any state securities laws:
(i) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS
SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF
TIME.
(ii) THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO
RESTRICTIONS ON TRANSFER PURSUANT TO A STANDBY PURCHASE
AGREEMENT BETWEEN THE INITIAL HOLDER HEREOF AND THE WMF GROUP,
LTD.
(b) The legend set forth in SUBSECTION (A)(I) above shall be
removed by the Company from any certificate evidencing any of the
Stand-By Shares upon effectiveness of a registration statement under
the 1933 Act with respect to the legended security or upon delivery to
the Company of an opinion of counsel, reasonably satisfactory to the
Company, that such security can be freely transferred in a public sale
without such a registration statement being in effect and that such
transfer will not jeopardize the exemption or exemptions from
registration pursuant to which the Company issued the Stand-By Shares.
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<PAGE>
6. CONDITIONS TO CLOSING.
6.1. CONDITIONS TO INVESTORS' OBLIGATIONS AT CLOSING.
The obligations of the Investors under this Agreement are
subject to the fulfillment or waiver, on or before the Closing, of each of the
following conditions, the waiver of which may be given by written, oral or
telephone communication to the Company, its counsel or to counsel to the
Investors:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company set forth in SECTION 3 shall be true and
correct in all respects on and as of the Closing Date (except for
representations and warranties that speak as of a specific date and
time, which need be true and correct as of such date and time), the
Company shall have taken all actions required by this Agreement to be
taken by the Company prior to Closing.
(b) SECURITIES EXEMPTIONS. The offer and sale of the Stand-By
Shares by the Company to the Investors pursuant to this Agreement shall
be exempt from the registration requirements of the 1933 Act and the
registration and/or qualification requirements of all applicable state
securities laws.
(c) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the
Closing and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Investors and to the
Investors' counsel, and the Investors shall have received counterpart
originals and certified or other copies of the following documents:
(i) CERTIFIED CHARTER DOCUMENTS. A copy of the
Certificate of Incorporation and the Bylaws of the Company (as
amended through the date of the Closing), certified by the
Secretary of the Company as true and correct copies thereof as
of the Closing.
(ii) SECRETARY'S INCUMBENCY CERTIFICATE. A certificate
of the Secretary or an Assistant Secretary or other officer of
the Company certifying the names of the officers of the
Company authorized to sign this Agreement, the certificates
for the Stand-By Shares and the other documents, instruments
or certificates to be delivered pursuant to this Agreement by
the Company or any of its officers, together with the true
signatures of such officers.
(iii) CORPORATE ACTIONS. A copy of the resolutions of
the Board of Directors evidencing its approval, including the
approval of a majority of the Company's disinterested
directors, of this Agreement, the issuance of Stand-By Shares
and the other matters contemplated hereby, certified by the
Secretary of the Company to be true, complete and correct.
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<PAGE>
(iv) LEGAL OPINION. An opinion or opinions of Hunton &
Williams or Krooth & Altman, counsel to the Company, dated as
of the Closing Date, in substantially the form attached hereto
as EXHIBIT B.
(v) GOOD STANDING CERTIFICATE. A good standing
certificate of the Company issued by the Secretary of State of
the State of Delaware dated within ten (10) days before the
Closing.
(d) APPROVAL BY DISINTERESTED DIRECTORS. The transactions
contemplated by this Agreement shall have been approved by a majority
of the members of the Company's Board of Directors who are neither
employees of the Company nor affiliated with the Investors.
(e) PRIVATE PLACEMENT. The Private Placement shall have been
completed successfully.
(f) LISTING. The Stand-By Shares shall have been approved for
listing on The Nasdaq Stock Market or any other stock exchange or
automated quotation system on which the Common Stock is then listed or
included.
(g) CONSENTS. All government and third-party consents
necessary for the execution, delivery and performance by the Company
and each Investor of this Agreement and the related agreements shall
have been received.
(h) REGISTRATION RIGHTS AGREEMENT AMENDMENT. The amendment to
the Registration Rights Agreement contemplated by SECTION 5.1(B) hereof
shall have been executed by the Company, the Investors and Harvard.
(i) CERTIFICATE. The Investors shall have received a
certificate of the President or an Executive Vice President of the
Company to the effect that the conditions set forth in subparagraphs
(a) and (d) through (g) hereof have been satisfied and setting forth
the capitalization of the Company as of the Closing Date.
(j) HSR ACT. Any waiting period applicable to the transactions
contemplated by this Agreement under the Hart-Scott-Radino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), shall have
terminated or expired.
6.2. CONDITIONS TO COMPANY'S OBLIGATIONS AT CLOSING.
The obligations of the Company to the Investors of this
Agreement are subject to the fulfillment or waiver on or before the Closing of
the following conditions, the waiver of which may be given by written, oral or
telephone communication to the Investors, their counsel or to counsel to the
Company:
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<PAGE>
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each Investor set forth in SECTION 3.1 shall be true and
correct in all respects on and as of the Closing Date, and the Company
shall have received a certificate of an appropriate officer or partner,
as applicable, of each Investor to such effect.
(b) PAYMENT OF PURCHASE PRICE. Each Investor shall have
delivered to the Company such Investor's aggregate Purchase Price in
accordance with the provisions of SECTIONS 1 AND 2.
(c) SECURITIES EXEMPTIONS. The offer and sale of the Stand-By
Shares by the Company to the Investors pursuant to this Agreement shall
be exempt from the registration requirements of the 1933 Act and the
registration and/or qualification requirements of all other applicable
state securities laws.
(d) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the
Closing and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Company and to the Company's
legal counsel, and the Company shall have received all such counterpart
originals and certified or other copies of such documents as it may
reasonably request.
(e) PRIVATE PLACEMENT. The Private Placement shall have been
completed successfully.
(f) LISTING. The issuance of the Stand-By Shares shall not
violate or conflict with the Company's listing agreement with the
Nasdaq National Market with regard to the Common Stock or the listing
standards or other applicable rules of the Nasdaq National Market.
(g) APPROVAL BY DISINTERESTED DIRECTORS. The transactions
contemplated by this Agreement shall have been approved by a majority
of the members of the Company's Board of Directors who are neither
employees of the Company nor affiliated with the Investors.
(h) CONSENTS. All government and third-party consents
necessary for the execution, delivery and performance by the Company of
this Agreement and the related agreements shall have been received.
(i) HSR ACT. Any waiting period applicable to the transactions
contemplated by this Agreement under the HSR Act shall have terminated
or expired.
7. MISCELLANEOUS.
7.1. SURVIVAL OF WARRANTIES.
The representations, warranties and covenants of the Company
and the Investors contained in or made pursuant to this Agreement shall survive
the execution and delivery of this Agreement and the Closing and shall in no way
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<PAGE>
be affected by any investigation of the subject matter thereof made by or on
behalf of each Investor, its counsel or the Company or its counsel, as the case
may be.
7.2. SUCCESSORS AND ASSIGNS.
The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties. Except for assignments by the Investors to affiliates, this Agreement
may not be assigned by any Investor without the prior written consent of the
Company or by the Company without the prior written consent of the Investors.
7.3. GOVERNING LAW.
This Agreement shall be governed by and construed under the
internal laws of the Commonwealth of Virginia as applied to agreements among
Virginia residents entered into and to be performed entirely within Virginia,
without reference to principles of conflict of laws or choice of laws.
7.4. COUNTERPARTS.
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
7.5. HEADINGS.
The headings and captions used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement. All references in this Agreement to sections, paragraphs, exhibits
and schedules shall, unless otherwise provided, refer to sections and paragraphs
hereof and exhibits and schedules attached hereto, all of which exhibits and
schedules are incorporated herein by this reference.
7.6. NOTICES.
Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively
given upon personal delivery to the party to be notified or one day after
deposit with a national overnight delivery service or three days after deposit
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<PAGE>
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
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
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<PAGE>
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 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
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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]
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<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:
-------------------------------
Name: Shekar Narasimhan
Title President
THE INVESTORS: DEMETER HOLDINGS CORPORATION,
a Massachusetts corporation
By:
-------------------------------
Name:
Title:
By:
-------------------------------
Name:
Title:
PHEMUS CORPORATION,
a Massachusetts corporation
By:
-------------------------------
Name:
Title:
By:
-------------------------------
Name:
Title:
STANDBY PURCHASE AGREEMENT
<PAGE>
CAPRICORN INVESTORS II, L.P.,
a Delaware limited partnership
By: Capricorn Holdings, LLC,
a Delaware limited liability
company, its General Partner
By:
-------------------------------
Name: Herbert S. Winokur, Jr.
Title: Manager
STANDBY PURCHASE AGREEMENT
<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
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
<PAGE>
Directors then in office; and (iii) (A) the Corporation 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.
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SECTION 3. VOTING RIGHTS.
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.
(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.
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(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.
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
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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.
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
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<PAGE>
Transaction that does not make appropriate provision for the rights of the
former holders of Class A Stock hereunder.
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
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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 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.
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<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:
----------------------------------------
Shekar Narasimhan
President and Chief Executive Officer
(Corporate Seal)
ATTEST:
By:
------------------------------------
Barbara Eckstrom
Corporate Secretary
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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.
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<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.
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<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
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Holders of Registrable Shares. In such event, the right of any Holder to include
its Registrable Shares in a registration pursuant to this SECTION 2 shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Shares in the underwriting to the extent
provided herein. All Holders proposing to distribute their Registrable Shares
through such underwriting shall enter into an underwriting agreement in
customary form with the underwriter(s) selected for such underwriting.
Notwithstanding any other provision of this Agreement, if the managing
underwriter(s) determine(s) in good faith that marketing factors require a
limitation of the number of shares to be underwritten, then the managing
underwriter(s) may exclude shares (including Registrable Shares) from the
registration and the underwriting, and the number of shares that may be included
in the registration and the underwriting shall be allocated, FIRST, to the
Company, and SECOND, to each of the shareholders (including the Holders)
requesting inclusion of their shares in such registration statement on a PRO
RATA basis based on the total number of shares such shareholder has requested be
included in such registration statement; PROVIDED, HOWEVER, that the right of
the underwriters to exclude shares (including Registrable Shares) from the
registration and underwriting as described above shall be restricted so that (i)
the number of Registrable Shares included in any such registration statement is
not reduced below twenty-five percent (25%) of the total number of Registrable
Shares requested to be included in the registration statement, and (ii) all
shares that are not Registrable Shares and that are held by persons who are
officers or directors of the Company (or any subsidiary of the Company) shall
first be excluded from such registration and underwriting before any Registrable
Shares are so excluded. If any Holder disapproves of the proposed terms of any
such Underwritten Offering, such Holder may elect to withdraw therefrom by
written notice to the Company and the managing underwriter(s), delivered at
least ten (10) Business Days prior to the date on which the Underwritten
Offering is expected to commence. Any Registrable Shares excluded or withdrawn
from such underwriting shall be excluded and withdrawn from the registration.
For any Holder that is a partnership or corporation, the partners, retired
partners and shareholders of such Holder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of any of
the foregoing persons shall be deemed to be a single "Holder," and any PRO RATA
reduction with respect to such "Holder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "Holder," as defined in this sentence.
(d) HOLDBACK AGREEMENT. By electing to include Registrable Shares in
any registration pursuant to SECTION 2 hereof, the Holder of the Registrable
Shares shall be deemed to have agreed not to effect any public sale or
distribution of securities of the Company of the same or similar class or
classes of the securities included in the Registration Statement or any
securities convertible into or exchangeable or exercisable for such securities,
including a sale pursuant to Rule 144 under the Securities Act, during such
periods as are reasonably requested by the managing underwriter(s), if an
Underwritten Offering, or the Company, in any other registration. Any period up
to 180 days shall be deemed reasonable.
(e) The Company shall not be obligated to effect, or to take any action
to effect any such registration of Registrable Shares pursuant to this Section
2: in any particular jurisdiction in which the Company would be required to
execute a general consent to service of process or to qualify to do business as
a foreign corporation in affecting such registration, qualification, or
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<PAGE>
compliance, unless the Company is already subject to service or required to be
so qualified in such jurisdiction and except as may be required by the
Securities Act.
3. DEMAND REGISTRATION.
If the Company shall receive from one or more Holders a written request
or requests that the Company effect a registration on any available Commission
form covering the resale of the Registrable Shares and any related qualification
or compliance under applicable state securities or "Blue Sky" laws with respect
to all or a part of the Registrable Shares owned by such Holders, then the
Company will:
(a) NOTICE. Promptly give written notice of the proposed registration
and the Holders' request therefor, and any related qualification or compliance,
to all other Holders of Registrable Shares; and
(b) REGISTRATION. As soon as practicable, use commercially reasonable
best efforts to effect such registration and all such qualifications and
compliances as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Holders' Registrable Shares as
are specified in such request, together with all or such portion of the
Registrable Shares of any other Holders joining in such request as are specified
in a written request given within twenty (20) days after receipt of such written
notice from the Company; PROVIDED, HOWEVER, that the Company shall not be
obligated to effect any such registration, qualification or compliance pursuant
to this SECTION 3:
(i) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Shares and such other securities (if any) at an aggregate price
to the public of less than $2,000,000;
(ii) if the Company has effected a registration pursuant to this
SECTION 3 during the 6-month period preceding the current registration request;
(iii) if the Board of Directors of the Company determines in its
good faith judgment that it would be inadvisable or not in the best interest of
the Company for such Registration Statement to be filed or declared effective at
such time, and if the Company shall furnish to the Holders a certificate signed
by the President or Chief Executive Officer of the Company stating that the
Board of Directors has so determined, in such event the Company shall have the
right (subject to the limitation set forth in the last sentence of the second
paragraph of SECTION 6) to defer the filing of such Registration Statement or
delay its effective date for a period of not more than 180 days after receipt of
the request of the Holders under this SECTION 3;
(iv) in any particular jurisdiction in which the Company would be
required to qualify to do business as a foreign corporation or to execute a
general consent to service of process in effecting such registration,
qualification, or compliance, unless the Company is already subject to service
or required to be so qualified in such jurisdiction and except as may be
required by the Securities Act.
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(c) LIMIT ON REQUESTS. Each of the Initial Purchasers (or their
assignees) shall be entitled have effected at its request only one registration
pursuant to this SECTION 3.
(d) OPTION TO FILE A SINGLE REGISTRATION STATEMENT. The Company may at
any time, in its sole discretion, satisfy the obligations set forth in this
SECTION 3 by filing one Registration Statement covering all of the Registrable
Shares and causing such Registration Statement to remain effective until the
date that is two years after the latest Exchange Date.
(e) NO PARTICIPATION. The Company and its officers shall not be
required to participate in any underwritten offering pursuant to this SECTION 3
or to participate in any "road show" or other selling effort relating to any
offering pursuant to this SECTION 3.
4. EXPENSES. As between the Company and the Holders, the Company shall pay
all Registration Expenses in connection with the registration of the Registrable
Shares pursuant to this Agreement. The Holder or Holders shall pay all broker's
commissions and transfer taxes, if any, the fees and disbursements of counsel
for the Holders, and any other expense not specifically allocated to the Company
pursuant to this Agreement relating to the sale or disposition of such Holder's
Registrable Shares pursuant to any Registration Statement.
5. REGISTRATION PROCEDURES.
Subject to SECTIONS 2 and 3 hereof, in connection with the obligations
of the Company with respect to any registration pursuant to this Agreement, the
Company shall use its commercially reasonable best efforts to effect or cause to
be effected the registration of the Registrable Shares under the Securities Act
to permit the sale of such Registrable Shares by the Holder or Holders in
accordance with customary methods of sale or distribution, including through
brokers' transactions and block trades. The Company shall:
(a) prepare and file with the Commission, as specified in this
Agreement, a Registration Statement, which Registration Statement shall comply
as to form in all material respects with the requirements of the applicable form
and include all financial statements required by the Commission to be filed
therewith, and use its commercially reasonable best efforts to cause such
Registration Statement to become effective as soon as possible after filing and
to remain effective, until the earlier of (i) the expiration of 120 days, (ii)
such time as all outstanding Registrable Shares have been sold pursuant to a
Registration Statement or have been transferred pursuant to Rule 144 or
otherwise transferred in a manner that results in the transferred security being
delivered not being subject to transfer restrictions under the Securities Act,
or (iii) such time as there are no longer any outstanding Registrable Shares;
PROVIDED, HOWEVER, that in the event that sales of the Registrable Shares are
suspended pursuant to the last paragraph of this SECTION 5 or pursuant to
SECTION 6, then the 120-day period referred to in subpart (i) of this sentence
shall be tolled until sales of the Registrable Shares may be resumed.
(b) subject to SECTION 5(h) hereof, prepare and file with the
Commission such amendments and post-effective amendments to each such
Registration Statement as may be necessary to keep such Registration Statement
effective for the period described in SECTION 5(a); cause each such Prospectus
contained therein to be supplemented by any required prospectus
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<PAGE>
supplement, and as so supplemented, to be filed pursuant to Rule 424 or any
similar rule that may be adopted under the Securities Act; and comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by each Registration Statement during the applicable period
in accordance with the intended method or methods of distribution by the selling
Holder thereof;
(c) furnish without charge to any Holder named in any Prospectus as
many copies of such Prospectus, and any amendment or supplement thereto and such
other documents as such Holder may reasonably request, in order to facilitate
the public sale or other disposition of the Registrable Shares; the Company
consents to the use of any such Prospectus by such Holder in connection with the
offering and sale of the Registrable Shares covered by any such Prospectus;
(d) use its commercially reasonable best efforts to register or
qualify, or obtain exemption from registration or qualification for, all
Registrable Shares by the time the applicable Registration Statement is declared
effective by the Commission under all applicable state securities or "blue sky"
laws of such jurisdictions as any Holder shall reasonably request in writing,
keep each such registration or qualification or exemption effective during the
period such Registration Statement is required to be kept effective pursuant to
SECTION 5(A) and do any and all other acts and things which may be reasonably
necessary or advisable to enable each Holder to consummate the disposition in
each such jurisdiction of such Registrable Shares owned by such Holder;
(e) notify each Holder promptly and, if requested by any Holder,
confirm such advice in writing (i) when a Registration Statement has become
effective and when any post-effective amendments and supplements thereto become
effective, (ii) of the issuance by the Commission or any state securities
authority of any stop order suspending the effectiveness of a Registration
Statement or the initiation of any proceedings for that purpose, and (iii) of
the happening of any event during the period a Registration Statement is
effective as a result of which such Registration Statement or the related
Prospectus contains any untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading (which advice shall be accompanied by an
instruction to suspend the use of the Prospectus until the requisite changes
have been made);
(f) during the period of time referred to in SECTION 5(A), use its
commercially reasonable best efforts to avoid the issuance of, or, if issued,
obtain the withdrawal of any enjoining order suspending the use or effectiveness
of a Registration Statement or the lifting of any suspension of the
qualification (or exemption from qualification) of any of the Registrable Shares
for sale in any jurisdiction, at the earliest possible moment;
(g) upon request, furnish to each requesting Holder, without charge, at
least one conformed copy of each Registration Statement and any post-effective
amendment thereto (without documents incorporated therein by reference or
exhibits thereto, unless requested);
(h) except as provided in SECTION 7 hereof, upon the occurrence of any
event contemplated by SECTION 5(e)(iii) hereof, use its commercially reasonable
best efforts to promptly prepare a supplement or post-effective amendment to a
Registration Statement or the related
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Prospectus or any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the purchasers of the
Registrable Shares, such Prospectus will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(i) if the Company has listed its Common Stock on an exchange or
automated quotation system, use its commercially reasonable best efforts
(including, without limitation, seeking to cure any deficiencies (within the
Company's control) cited by the exchange or automated quotation system in the
Company's listing application) to list all Registrable Shares on such exchange
or automated quotation system;
(j) prepare and file in a timely manner all documents and reports
pursuant to the Exchange Act which are incorporated by reference into any
Registration Statement;
(k) use its commercially reasonable best efforts to comply with all
applicable rules and regulations of the Commission and make generally available
to its securityholders, as soon as reasonably practicable, earnings statements
covering at least 12 months which satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 (or any similar rule promulgated under the
Securities Act) thereunder;
(l) provide and cause to be maintained a transfer agent for all
Registrable Shares covered by any Registration Statement from and after a date
not later than the effective date of such Registration Statement; and
(m) in connection with any sale or transfer of the Registrable Shares
that will result in such securities no longer being restricted from resale
without registration under the Securities Act, cooperate with the Holders to
facilitate the timely preparation and delivery of certificates representing the
Registrable Shares to be sold, which certificates shall not bear any restrictive
legends, and to enable such Registrable Shares to be in such denominations and
registered in such names as the Holders may request at least two (2) Business
Days prior to any sale of the Registrable Shares.
The Company may require each Holder to furnish to the Company such
information regarding the proposed distribution by such Holder of Registrable
Shares as the Company may from time to time reasonably request in writing and no
Holder shall be entitled to be named as a selling securityholder in any
Registration Statement and no Holder shall be entitled to use the Prospectus
forming a part thereof if such Holder does not provide such information to the
Company.
Upon receipt of written notice from the Company of the happening of any
event of the kind described in SECTION 5(E)(III) hereof, the Holders will
immediately discontinue disposition of Registrable Shares pursuant to a
Registration Statement until the Holders' receipt of the copies of a
supplemented or amended Prospectus. If so requested by the Company, the Holders
will deliver to the Company (at the expense of the Company) all copies in their
possession, other than permanent file copies then in the Holders' possession, of
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the Prospectus covering such Registrable Shares current at the time of receipt
of such notice.
6. BLACK-OUT PERIOD. Subject to the provision of this SECTION 6, following
the effectiveness of a Registration Statement (and the filings with any state
securities commissions), the Company, by written notice to the Holders, may
direct the Holders to suspend sales of the Registrable Shares pursuant to the
Registration Statement, if either of the following events shall occur: (i) the
Board of Directors of the Company determines in good faith that sales pursuant
to such Registration Statement would be inadvisable or not in the best interests
of the Company, or (ii) the suspension of sales is necessary to correct a
material misstatement or omission in the applicable Registration Statement. Upon
the occurrence of such event, the Company shall use its commercially reasonable
best efforts to cause the Registration Statement to become effective or to
promptly amend or supplement the Registration Statement on a post-effective
basis, as applicable, so as to permit the Holders to resume sales of the
Registrable Shares.
In the case of an event which causes the Company to suspend the
effectiveness of a Registration Statement (a "Suspension Event"), the Company
may give written notice (a "Suspension Notice") to the Holders at the addresses
set forth in the stock transfer records of the Company to suspend sales of the
Registrable Shares so that the Company may amend or update the Registration
Statement; PROVIDED, HOWEVER, that such suspension shall continue only for so
long as the Suspension Event or its effect is continuing and the Company is
taking all reasonable steps to terminate suspension of the effectiveness of the
Registration Statement as promptly as possible. In no case shall a suspension of
sales pursuant to this SECTION 6 (which term shall include for this purpose any
deferral of filing or declaration of effectiveness of the applicable
registration statement pursuant to SECTION 3(B)(III)) continue for a total of
more than 180 days out of any 365-day period.
The Holders shall not effect any sales of the Registrable Shares
pursuant to such Registration Statement at any time after receipt of a
Suspension Notice from the Company (and prior to receipt of an End of Suspension
Notice (defined below)). If so requested by the Company, the Holders will
deliver to the Company (at the expense of the Company) all copies in their
possession, other than permanent file copies then in the Holders' possession, of
the Prospectus covering such Registrable Shares at the time of receipt of the
Suspension Notice. The Holders may recommence effecting sales of the Registrable
Shares pursuant to the Registration Statement (or such filings) following
further notice to such effect (an "End of Suspension Notice") from the Company,
which End of Suspension Notice shall be given by the Company to the Holders in
the manner described above promptly following the conclusion of any Suspension
Event.
7. INDEMNIFICATION AND CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless (i) each Initial Purchaser, (ii) each Holder, (iii) each Person,
if any, who controls (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) any of the foregoing (any of the persons
referred to in this clause (iii) being hereinafter referred to as a "Controlling
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Person"), and (iv) the respective officers, directors, partners, employees,
representatives and agents of each Initial Purchaser and each Holder or any
Controlling Person as follows:
(i) from and against any and all loss, claim, liability and
damage whatsoever, as incurred, arising out of (A) violation by the Company of
the Securities Act or applicable state securities laws in connection with an
offering of Registrable Shares hereunder and (B) any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement (or
any amendment thereto) pursuant to which Registrable Shares were registered
under the Securities Act, including all documents incorporated therein by
reference, or the omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or arising out of any untrue statement or alleged untrue statement of a material
fact contained in any Prospectus (or any amendment or supplement thereto),
including all documents incorporated therein by reference, or the omission or
alleged omission to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; PROVIDED, HOWEVER,
that such indemnity with respect to any Prospectus shall not inure to the
benefit of any Holder or Initial Purchaser (or any Controlling Person thereof)
to the extent that any such loss, claim, liability, damage or expense arises out
of such indemnified person's failure to send or give a copy of the revised final
Prospectus, as the same may be then supplemented or amended, to the Person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Shares to such Person if such statement or omission was corrected in such final
Prospectus;
(ii) from and against any and all loss, liability, claim and,
damage whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any governmental
agency or body, commenced or threatened, or of any claim whatsoever based upon
any such untrue statement or omission, if such settlement is effected with the
written consent of the Company, which consent shall not be unreasonably
withheld; and
(iii) from and against any and all expense reasonably incurred
(including reasonable fees and disbursements of one firm of attorneys), in
investigating, preparing or defending against any litigation, or investigation
or proceeding by any governmental agency or body, commenced or threatened, in
each case whether or not a party, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under subparagraph (i) or (ii)
above;
PROVIDED, HOWEVER, that this indemnity agreement does not apply to any
Holder with respect to any loss, liability, claim, damage or expense to the
extent arising out of any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with information
furnished to the Company by such Holder expressly for use in a Registration
Statement (or any amendment thereto) or any Prospectus (or any amendment or
supplement thereto).
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(b) INDEMNIFICATION BY HOLDERS. Each Holder severally agrees to
indemnify and hold harmless the Company, its directors, officers, partners,
employees, representatives and agents (including each officer of the Company who
signed the Registration Statement), and each Person, if any, who controls the
Company, within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, against
(i) any and all loss, liability, claim, damage and expenses
whatsoever, as incurred, arising out of (A) any violation by the Holders of the
Securities Act or applicable state securities laws in connection with the
offering and (B) any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement (or any amendment thereto) pursuant
to which Registrable Shares were registered under the Securities Act, including
all documents incorporated therein by reference, or the omission or alleged
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto), including all documents
incorporated therein by reference, or the omission or alleged omission to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(ii) from and against any and all loss, liability, claim and,
damage whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any governmental
agency or body, commenced or threatened, or of any claim whatsoever based upon
any such untrue statement or omission, if such settlement is effected with the
written consent of such Holder, which consent shall not be unreasonably
withheld; and
(iii) from and against any and all expense reasonably incurred
(including reasonable fees and disbursements of one firm of attorneys), in
investigating, preparing or defending against any litigation, or investigation
or proceeding by any governmental agency or body, commenced or threatened, in
each case whether or not a party, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under subparagraph (i) or (ii)
above;
but only with respect to such untrue statements or omissions, or
alleged untrue statements or omissions, made in a Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with information furnished to the Company by
such Holder expressly for use in such Registration Statement (or any amendment
thereto) or such Prospectus (or any amendment or supplement thereto), and
PROVIDED FURTHER, that no Holder shall be liable for any amount in excess of the
net proceeds received by such Holder from the sale of such Holder's Registrable
Shares pursuant to a Registration Statement or a Prospectus, as the case may be.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Each indemnified party
shall give reasonably prompt notice to each indemnifying party of any action or
proceeding commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve it
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from any liability which it may have under this SECTION 7 except to the extent
that the indemnifying party is actually prejudiced by such failure to give
notice. If the indemnifying party so elects within a reasonable time after
receipt of such notice, the indemnifying party may assume the defense of such
action or proceeding at such indemnifying party's own expense with counsel
chosen by the indemnifying party and approved by the indemnified parties
defendant in such action or proceeding, which approval shall not be unreasonably
withheld; PROVIDED, HOWEVER, that, if such indemnified party or parties
reasonably determine that a conflict of interest exists where it is advisable
for such indemnified party or parties to be represented by separate counsel or
that, upon advice of counsel, there may be legal defenses available to them
which are different from or in addition to those available to the indemnifying
party, then the indemnifying party shall not be entitled to assume such defense
and the indemnified party or parties shall be entitled to one separate counsel
at the indemnifying party's expense. If an indemnifying party is not entitled to
assume the defense of such action or proceeding as a result of the proviso to
the preceding sentence, such indemnifying party's counsel shall be entitled to
conduct such indemnifying party's defense, and counsel for the indemnified party
or parties shall be entitled to conduct the defense of such indemnified party or
parties, it being understood that both such counsel will cooperate with each
other to conduct the defense of such action or proceeding as efficiently as
possible. If an indemnifying party is not so entitled to assume the defense of
such action or does not assume such defense, after having received the notice
referred to in the first sentence of this paragraph, the indemnifying party or
parties will pay the reasonable fees and expenses of not more than one counsel
(and any necessary local counsel) for the indemnified party or parties. In such
event, however, no indemnifying party will be liable for any settlement effected
without the written consent of such indemnifying party. No indemnifying party
shall, without the consent of the indemnified party, consent to entry of any
judgment or enter into a settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation. If an
indemnifying party is entitled to assume, and assumes, the defense of such
action or proceeding in accordance with this paragraph, such indemnifying party
shall not be liable for any fees and expenses for counsel for the indemnified
parties incurred thereafter in connection with such action or proceeding.
(d) CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
this SECTION 7 is for any reason held to be unenforceable, unavailable or
insufficient although applicable in accordance with it terms, the Company and a
Holder shall contribute to the aggregate losses, liabilities, claims, damages
and expenses of the nature contemplated by such indemnity agreement incurred by
the Company and the Holder in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and the Holder on the other.
Relative fault shall be determined by reference to, among other things, whether
an untrue or alleged untrue statement of a material fact or an omission or
alleged omission of a material fact relates to information supplied by or
available to the Company on the one hand, or the Holder, on the other hand, and
by the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. Notwithstanding
the foregoing, no Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. No Holder shall be liable for any amount in excess of the net
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proceeds received from such Holder from the sale of such Holder's Registrable
Shares pursuant to a Registration Statement or a Prospectus, as the case may be.
For purposes of this SECTION 7, each Person, if any, who controls (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
the Holder or the Company (as applicable) and its respective officers,
directors, partners, employees, representatives and agents shall have the same
rights to contribution as the Holder or the Company (as applicable). Each party
entitled to contribution agrees that upon the service of a summons or other
initial legal process upon it in any action instituted against it in respect of
which contribution may be sought, it shall promptly give written notice of such
service to the party or parties from whom contribution may be sought, but the
omission so to notify such party or parties of any such service shall not
relieve the party from whom contribution may be sought from any obligation it
may have hereunder or otherwise.
(e) SURVIVAL. The obligations of the Company and the Holders under this
SECTION 7 shall survive the completion of any offering of Registrable Shares
pursuant to a Registration Statement or otherwise.
8. COVENANTS OF THE HOLDERS. Each of the Holders hereby agrees (a) to
cooperate with the Company and to furnish to the Company all such information
concerning its plan of distribution and ownership interests with respect to its
Registrable Shares in connection with the preparation of a Registration
Statement with respect to such Holder's Registrable Shares and filings with any
state securities commissions as the Company may reasonably request, and (b) to
deliver or cause delivery of the Prospectus contained in such Registration
Statement to any purchaser of the shares covered by such Registration Statement
from the Holder, as required by the Securities Act and any applicable state
securities laws.
9. ADDITIONAL SHARES. The Company, at its option, may register under any
Registration Statement and any filings with any state securities commissions
filed pursuant to this Agreement, any number of unissued shares of Common Stock
or any shares of Common Stock owned by any other shareholder or shareholders of
the Company.
10. TERMINATION OF THE COMPANY'S OBLIGATIONS. The Company shall have no
obligations pursuant to this Agreement with respect to any request or requests
for registration made by any Holder on a date more than two (2) years after the
Exchange Date applicable to such Holder.
11. NO OTHER OBLIGATION TO REGISTER. Except as otherwise expressly provided
in this Agreement, the Company shall have no obligation to the Holders to
register the Registrable Shares under the Securities Act or applicable state
securities laws.
12. MISCELLANEOUS.
(a) REMEDIES. In the event of a breach by the Company or by a Holder of
any of their obligations under this Agreement, each Holder or the Company, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The parties agree that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach of any of the
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provisions of this Agreement and the parties hereby further agree that, in the
event of any action for specific performance in respect of such breach, the
parties shall waive the defense that a remedy at law would be adequate. No
Holder shall have any right to obtain or seek an injunction restraining or
otherwise delaying any registration as a result of any controversy that might
arise with respect to the interpretation or implementation of this Agreement.
(b) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, without the written consent of the Company and of Holders owning not less
than 50% of the then outstanding Registrable Shares; PROVIDED, HOWEVER, that,
for the purposes of this Agreement, Registrable Shares that are owned, directly
or indirectly, by either the Company or an Affiliate of the Company shall not be
deemed to be outstanding. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of a Holder whose securities are being sold pursuant
to a Registration Statement and that does not directly or indirectly affect the
rights of any other Holder may be given by such Holder; PROVIDED, HOWEVER, that
the provisions of this sentence may not be amended, modified, or supplemented
except in accordance with the provisions of the immediately preceding sentence.
(c) NOTICES. All notices and other communications provided for herein
shall be made in writing by hand-delivery, next-day air courier, certified
first-class mail, return receipt requested, telex or telecopy;
(i) if to the Company, as provided in the Purchase Agreement,
(ii) if to the Initial Purchasers, as provided in the Purchase
Agreement, or
(iii) if to any other person who is then the registered Holder
of any Registrable Shares, to the address of such Holder as it appears in the
Common Stock register of the Company.
Except as otherwise provided in this Agreement, all such communications
shall be deemed to have been duly given when (v) delivered by hand, if
personally delivered, (w) one (1) Business Day after being timely delivered to a
next-day air courier, (x) five (5) Business Days after being deposited in the
mail, postage prepaid, if mailed, (y) when answered back, if telexed or (z) when
receipt is acknowledged by the recipient's telecopier machine, if telecopied.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns of each of the
parties and shall inure to the benefit of each Holder. Each Holder shall be
deemed a third party beneficiary of this Agreement. The Company may not assign
its rights or obligations hereunder without the prior written consent of each
Holder. Notwithstanding the foregoing, no assignee of the Company shall have any
of the rights granted under this Agreement until such assignee shall acknowledge
its rights and obligations hereunder by a signed written agreement pursuant to
which such assignee accepts such rights and obligations.
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(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.
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IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the date first written above.
THE WMF GROUP, LTD.
By:
-----------------------------------------
Name:
------------------------------------
Title:
------------------------------------
The foregoing Registration Rights
Agreement is hereby confirmed and
accepted as of the date first above written.
HARVARD PRIVATE CAPITAL HOLDINGS, INC.
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
CAPRICORN INVESTORS II, L.P.
By: Capricorn Holdings, LLC
Its General Partner
By:
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
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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."
<PAGE>
"PHEMUS: Phemus Corporation."
"PURCHASED SHARES: The shares of Common Stock issuable upon
the conversion of the Class A Preferred Stock purchased by Demeter,
Phemus and Capricorn pursuant to the Stock Purchase Agreement, dated as
of October 16, 1998 (the "Stock Purchase Agreement"), by and among the
Company, Demeter, Phemus, Harvard and Capricorn; the shares of Common
Stock purchased by Demeter, Phemus and Capricorn pursuant to the
Standby Purchase Agreement, dated as of October 16, 1998, by and among
the Company, Demeter, Phemus and Capricorn; the shares of Common Stock
issuable to Commercial Mortgage Investment Trust, Inc. ("COMIT") upon
conversion of the Company's subordinated notes held by COMIT pursuant
to Section 5.6 of the Stock Purchase Agreement; and the shares of
Common Stock issuable upon conversion of the Class A Preferred Stock
issuable to COMIT upon conversion of the Company's subordinated notes
held by COMIT pursuant to Section 5.6 of the Stock Purchase Agreement."
2. The definition of "Holder" in Section 1 of the Registration Rights
Agreement shall be deleted in its entirety and shall be replaced by the
following:
"HOLDER: Each registered holder of any Registrable Shares from
time to time, including Demeter, Phemus, the Initial Purchasers and
their respective Affiliates."
3. The definition of "Registrable Shares" in Section 1 of the
Registration Rights Agreement shall be deleted in its entirety and shall be
replaced by the following:
"REGISTRABLE SHARES: The Purchased Shares, the Exchange Shares
and any shares of Common Stock replacing or issued as a dividend on the
Purchased Shares or the Exchange Shares, upon original issuance thereof
and at all times subsequent thereto, until, in the case of any such
share, the earliest to occur of (i) the date on which it has been
registered effectively pursuant to the Securities Act and disposed of
in accordance with the Registration Statement relating to it, (ii) the
date on which it is transferred in compliance with Rule 144 (or any
similar provisions then in effect) or (iii) the date on which it is
sold to the Company."
4. Section 3(c) of the Registration Rights Agreement shall be deleted
in its entirety and shall be replaced by the following:
"LIMIT ON REQUESTS. Each of the Holders (or their assignees)
shall be entitled to have effected at its request pursuant to this
SECTION 3 (i) one registration with respect to Exchange Shares and (ii)
one registration with respect to Purchased Shares."
5. The parties hereby ratify and confirm all other provisions of the
Registration Rights Agreement without amendment.
<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:
----------------------------------------------
Name:
Title:
HARVARD PRIVATE CAPITAL HOLDINGS, INC.
By:
----------------------------------------------
Name:
Title:
By:
----------------------------------------------
Name:
Title:
CAPRICORN INVESTORS II, L.P.
By: Capricorn Holdings, LLC, a Delaware limited
liability company, its General Partner
By:
----------------------------------------
Name:
Title:
PHEMUS CORPORATION
By:
----------------------------------------------
Name:
Title:
By:
----------------------------------------------
Name:
Title:
<PAGE>
DEMETER HOLDINGS CORPORATION
By:
----------------------------------------------
Name:
Title:
By:
----------------------------------------------
Name:
Title:
THE WMF GROUP, LTD.
NON-EMPLOYEE DIRECTOR AWARD AGREEMENT
This Non-Employee Director Award Agreement (the "Agreement") is made
and entered into as of the 10th day of December, 1998, by and between The WMF
Group, Ltd. (hereinafter referred to as the "Company") and Capricorn Investors
II, L.P. (hereinafter referred to as the "Participant"). The Options specified
herein have a grant date of the last day of the calendar year, December 31, 1998
(the "Grant Date").
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by the Company and the Participant, and pursuant
to and subject to all the terms and conditions set forth herein and in that Key
Employee Incentive Plan adopted by the Company as of December 5, 1997 and all
amendments thereto (the "Plan"), a copy of which Plan is attached to this
Agreement as EXHIBIT A, and which Exhibit and all provisions thereof are
incorporated into this Agreement as an integral part thereof, the Company
desires to grant to the Participant, and the Participant desires to accept, an
option to purchase 5,000 shares of the Common Shares of the Company as
specifically provided in this Agreement (the "Option Shares"), and, accordingly,
the Company and the Participant agree upon the terms and provisions specified in
this Agreement.
Unless specifically defined in this Agreement, all capitalized words
and phrases in this Agreement shall have the meaning ascribed to them in the
Plan.
1. GRANT AND ACCEPTANCE OF OPTION; VESTING
(a) Subject to the terms and provisions of this Agreement and the Plan,
the Company has granted to Participant the right and option to purchase Five
Thousand (5,000) shares of Common Shares of the Company at a price per share
equal to the fair market value of the Option Shares on the Grant Date.
Participant hereby accepts the grant and agrees to all of the terms and
provisions of this Agreement and of the Plan. Unless otherwise specifically
provided in this Agreement, the right and option granted herein shall vest and
be exercisable by the Participant six (6) months after the Grant Date.
(b) The specific option (hereinafter referred to as the "Option") which
is granted to Participant is intended to be treated for income tax purposes as a
non-qualified stock option. The granting of a non-qualified stock option will
not be treated as a taxable event so long as the Option does not have an
ascertainable fair market value. Participant acknowledges that when the Option
is exercised, the Participant may recognize income if and to the extent the fair
market value of the Option Shares at the time the Option is exercised is greater
than the Option price. The Option is granted in connection with Participant's
service as a Non-Employee Director.
<PAGE>
2. PERIOD OF OPTION; CERTAIN LIMITATIONS ON RIGHT TO EXERCISE
(a) Unless terminated earlier as otherwise provided in this Agreement,
the Option shall expire at 5:00 PM, Washington, D.C. time, on the tenth (10th)
anniversary of the date of this Agreement, viz., December 31, 2008 (the "Option
Term"). The period of the Option may be reduced only as provided in this
Agreement and in the Plan.
(b) Nothing in this Agreement shall have the effect of accelerating the
six-month period during which Director Options are not exercisable..
(c) If, for any reason other than death or permanent and total
disability, a Non-Employee director ceases to be a member of the Board, each
Director Option held by that Non-Employee Director on the date that the
Non-Employee Director ceases to be a member of the Board may be exercised in
whole or in part at any time within one year after the date of such termination
or until the expiration of the Director Option, whichever is earlier.
(d) If a Non-Employee Director dies or becomes permanently and totally
disabled (within the meaning of Section 422(c)(6) of the Code) while a member of
the Board (or within the period that the Director Options remain exercisable
after the Non-Employee Director ceases to be a member of the Board), each
Director Option then held by that Non-Employee Director may be exercised, in
whole or in part, by the Non-Employee Director, by the Non-Employee Director's
personal representative or by the person to whom the Non-Employee Director
transferred the Director Option by will or the laws of descent and distribution,
or approved assignment, at any time within two years after the date of death or
permanent and total disability of the Non-Employee Director or until the
expiration date of the Director Option, whichever is earlier.
3. LISTING AND REGISTRATION OF SHARES
If at any time the Committee, in its discretion, shall determine that
it is necessary or desirable to list, register or qualify the Option Shares upon
any securities exchange or under any state or federal law, or to obtain the
consent or approval of any governmental regulatory body, as a condition of, or
in connection with, the granting of the Option or the issue or purchase of
shares hereunder, the Option may not be exercised in whole or in part unless and
until such listing, registration, qualification, consent, or approval shall have
been effected or obtained free of any conditions not acceptable to the
Committee.
4. RIGHTS AS A SHAREHOLDER
Neither Participant nor Participant's legal representative shall have
any rights as a shareholder of the Company with respect to any Option Shares
until evidence of ownership is properly issued for those shares.
Page 2
<PAGE>
5. AMENDMENT OF OPTION AGREEMENT
This Agreement may be amended by the Company or the Committee at any
time; provided, however, any change adversely affecting the Participant must
receive the Participant's written consent, unless the Company or the Committee
determines, in its sole discretion, that amendment is necessary or advisable in
light of any change or amendment to the Code or to the U.S. Treasury Regulations
promulgated thereunder, or any federal or state securities law or other law or
regulations, which change occurs after the Grant Date and by its terms applies
to the Option.
6. METHOD OF EXERCISING OPTION
Participant may exercise the Option, or any portion thereof, by
providing the Committee with written notice of the number of shares which
Participant desires to purchase. Participant shall deliver to the Company
consideration in the form of cash or other consideration permitted by the
Committee for the full purchase price of the Option Shares to be acquired. Upon
the payment of such purchase price, the Company shall issue and deliver to
Participant evidence of ownership for such shares and shall register such
evidence of ownership in Participant's name (or, upon Participant's written
request, jointly in Participant's name and the name of Participant's spouse,
with rights of survivorship).
7. CONFLICTING PROVISIONS
The wording of this Agreement is based upon the provisions of the Plan,
under which the Option is issued. There has been no attempt made to repeat all
of the provisions of the Plan verbatim herein. In the event of any conflict
between the terms and conditions of this Agreement and the provisions of the
Plan, the provisions of the Plan shall control in all respects.
Page 3
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Key Employee Incentive
Award Agreement to be duly executed by its authorized officer, and Participant
has set his/her hand and seal, as of the day and year first hereinabove written.
Witness: THE WMF GROUP, LTD.
_____________________________ By: _____________________________________
Shekar Narasimhan
Its: President and Chief Executive Officer
Witness: PARTICIPANT
CAPRICORN INVESTORS II, L.P.
Approved Assignee
_____________________________ By: _____________________________________
Herbert S. Winokur
Authorized Agent
Page 4
<PAGE>
KEY EMPLOYEE INCENTIVE PLAN
OF
THE WMF GROUP LTD.
1. PURPOSE OF THE PLAN AND DEFINITIONS
1.1 PURPOSE. The purpose of this Key Employee Incentive Plan ("the
Plan") of The WMF Group, Ltd. (the "Company") is to:
(a) furnish incentives to individuals chosen to receive
stock-based awards because they are considered capable of responding by
improving operations and increasing profits and shareholder value;
(b) encourage selected persons to accept or continue employment
with the Company; and increase the interest of key executives in the company's
welfare through their participation in the growth in value of the Company's
Shares.
To accomplish these purposes, this Plan provides a means whereby
executives and key employees, board members, and other enumerated persons may
receive Awards.
1.2 DEFINITIONS. For purposes of this Plan, the following terms have
the following meanings:
"AFFILIATE" means a parent or subsidiary entity, to be interpreted in
accordance with the comparable terms "parent" and "subsidiary" corporation in
the applicable provisions (currently Section 424) of the Code at the time this
definition is being applied.
"ASSUMED OPTION" means any option assumed by the Company with respect
to Common Stock as a result of the Separation Agreement between the Company and
NHP, Inc. dated as of December 8, 1997.
"AWARD" means any award under this Plan, including any grant of
Options, Performance Shares or Director Options.
"AWARD AGREEMENT" means, with respect to each Award, the written
agreement executed by the Company and the Participant or other written document
approved by the Committee setting forth the terms and conditions of the Award.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute.
<PAGE>
"COMMISSION" means the Securities and Exchange Commission and any
successor agency.
"COMMITTEE" has the meaning given it in Section 4.1.
"COMMON SHARES" or "SHARES" means shares of the common stock of the
Company, par value $0.01 per share.
"COMPANY" has the meaning given it in Section 1.1.
"DIRECTOR" means a person duly elected or appointed and serving as a
Director of the Company in accordance with the by-laws of the Company.
"DIRECTOR OPTIONS" has the meaning given it in Section 5.3.
"EMPLOYEE" has the meaning ascribed to it for purposes of Section
3401(c) of the Code and the Treasury Regulations adopted under that Section.
"EMPLOYMENT TERMINATION" means that a Participant has ceased, for any
reason and with or without cause, to be an Employee or Director of, or a
consultant to, the Company or any Affiliate of the Company. However, the term
"Employment Termination" shall not include a Non-Employee Director ceasing to be
a Director or a transfer of a Participant from the Company to an Affiliate or
vice versa, or from one Affiliate to another, or a leave of absence duly
authorized by the Company unless the Committee has provided otherwise.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
"EXERCISE NOTICE" has the meaning given it in Section 6.1(h).
"GRANT DATE" has the meaning given it in Section 6.1(d).
"INCENTIVE STOCK OPTION" or "ISO" mean any Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code or successor provision.
"NON-EMPLOYEE DIRECTOR" means a person who qualifies as a "Non-Employee
Director" as defined in Rule 16b-3 and an "outside director" as defined in
Treasury Regulation 1.162-27(e)(3) and any successor Treasury Regulation.
Page 2
<PAGE>
"NON-QUALIFIED STOCK OPTION" or "NQO" means any Option that is not an
Incentive Stock Option.
"OPTION" means an option granted under Section 5.
"PARTICIPANT" means an eligible person who is granted an Award.
"PLAN" means this Key Employee Incentive Plan.
"PERFORMANCE SHARE AWARD" means an Award granted under Section 5.4
"RULE 16B-3" means Rule 16b-3 adopted under Section 16(b) of the
Exchange Act or any successor rule, as it may be amended from time to time, and
references to paragraphs or clauses of Rule 16b-3 refer to the corresponding
paragraphs or clauses of Rule 16b-3 as it exists at the Effective Date or the
comparable paragraph or clause of Rule 16b-3 or successor rule, as that
paragraph or clause may thereafter be amended.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time, and any successor statute.
"SPINOFF" means the distribution of Shares pursuant to the Rights
Agreement dated as of April 21, 1997.
"TEN PERCENT SHAREHOLDER" means any person who, at the time this
definition is being applied, owns directly or indirectly (or is treated as
owning by reason of attribution rules currently set forth in Section 424 of the
Code or any successor statute), shares of the Company constituting more than ten
percent (10%) of the total combined voting power of all classes of outstanding
shares of the Company or of any Affiliate of the Company.
2. ELIGIBLE PERSONS
Every person who, at or as of the Grant Date, is (a) an Employee of the
Company or an Affiliate of the Company, or (b) someone whom the Committee
designates as eligible for an Award (other than for Incentive Stock Options)
because the person (i) performs bona fide consulting or advisory services for
the Company or an Affiliate of the Company (other than services in connection
with the offer or sale of securities in a capital-raising transaction) and (ii)
has a direct and significant effect on the financial development of the Company
or an Affiliate of the Company, shall be eligible to receive Awards hereunder.
Directors of the Company who are not Employees are only eligible to receive
Director Options under Section 5.3.
Page 3
<PAGE>
3. SHARES SUBJECT TO THE PLAN
The total number of Shares that may be issued under Award, all or any
part of which may be issued to any Participant, is eight percent (8.00%) of the
total shares outstanding of the Company plus that number of shares needed to
satisfy the Assumed Options, plus five hundred thousand (500,000) Shares. Such
Shares may consist, in whole or in part, of authorized and unissued Common
Shares or Shares reacquired in private transactions or open market purchases,
but all Shares issued under the Plan, regardless of their source, shall be
counted against the foregoing limitation. Any Shares that are retained by the
Company upon exercise or settlement of an Award in order to satisfy the exercise
price in whole or in part, or to pay withholding taxes due with respect to such
exercise or settlement, shall be treated as issued to the Participant and will
thereafter not be available under the Plan. The number of Shares reserved for
issuance under this Plan is subject to adjustment in accordance with the
provisions for adjustment in this Plan.
4. ADMINISTRATION
4.1 COMMITTEE. This plan shall be administered by a committee (the
"Committee") appointed by the Board. The Committee shall be constituted so that,
as long as Shares are registered under Section 12 of the Exchange Act, each
member of the Committee shall be a Non-Employee Director. The number of persons
that shall constitute the Committee shall be determined from time to time by a
majority of all the members of the Board; provided, however, the Committee shall
not consist of fewer than two persons.
4.2 COMMITTEE'S POWERS. Subject to the express provisions of this
Plan and Rule 16b-3 (so long as it is applicable) and the terms of the Assumed
Options, the Committee shall have the authority, in its sole discretion: (a) to
adopt, amend and rescind administrative and interpretive rules and regulation
relating to the Plan; (b) to determine the eligible persons to whom, and the
time or times at which, Awards shall be granted; (c to determine the number of
Shares that shall be the subject of each Award; (d) to determine the terms and
provisions of each Award Agreement (which need not be identical) and any
amendments thereto, including provisions defining or otherwise relating to (i)
the period or periods and extent of exercisability of any Option, (ii) the
extent to which the transferability of Shares issued or transferred pursuant to
any Award is restricted, (iii) the effect of Employment Termination on an Award,
and (iv) the effect of approved leaves of absence (consistent with applicable
Treasury Regulations); (e) to accelerate the time of exercisability of any
Option; (f) to construe the respective Award Agreements and the Plan; (g) to
make determinations of the fair market value of Shares; (h) to waive any
provision, condition or limitation set forth in an Award Agreement; (i) to
delegate its duties under the Plan to such agents as it may appoint from time to
time, PROVIDED, HOWEVER, that the Committee may not delegate its duties with
respect to making or exercising discretion with respect to Awards to eligible
persons if such delegation would cause Awards not to qualify for the exemptions
provided by Rule 16b-3 (unless the Board expressly determines not to have Awards
under the Plan comply with Rule 16b-3); and (j) to make all other
determinations, perform all other acts and exercise all other powers and
authority necessary or advisable for administering the Plan, including the
delegation of those ministerial acts and responsibilities as
Page 4
<PAGE>
the Committee deems appropriate. Subject to Rule 16b-3 (so long as it is
applicable), the Committee may correct any defect, supply any omission or
reconcile any inconsistency in the Plan, in any Award or in any Award Agreement
in the manner and to the extent it deems necessary or desirable to implement the
Plan, and the Committee shall be the sole and final judge of that necessity or
desirability. The determinations of the Committee on the matters referred to in
this Section 4.4 shall be final and conclusive. Notwithstanding any provision in
the Plan to the contrary, Awards will be made to Non-Employee Directors under
Sections 5.3 and 8 of this Plan. In addition, notwithstanding any provision of
this Plan to the contrary, the Committee may not in any manner exercise
discretion under the Plan with respect to any Awards made to Non-Employee
Directors.
4.3 TERM OF PLAN No awards shall be granted under this Plan after 10
years from the Effective Date of this Plan.
5. GRANT OF OPTIONS
5.1 WRITTEN AGREEMENT. Each option shall be evidenced by an Award
Agreement. The Award Agreement shall specify whether each Option it evidences is
a NQO or an ISO.
5.2 ANNUAL $100,000 LIMITATION ON ISOS. To the extent that the
aggregate "fair market value" of Shares with respect to which ISOs first become
exercisable by a Participant in any calendar year exceeds $100,000 taking into
account ISOs granted under this Plan, the Options covering such additional
Shares becoming exercisable in that year shall cease to be ISOs and thereafter
be NQOs. For this purpose, the "fair market value" of the ISOs shall be
determined as of the Grant Date of the Options. In reducing the number of
Options treated as ISOs to meet this $100,000 limit, the most recently granted
Options shall be reduced first.
5.3 ANNUAL GRANTS TO NON-EMPLOYEE DIRECTORS. On the last day of each
calendar year beginning with the last day of 1997, each Non-Employee Director
who is then a member of the Board shall automatically be granted NQOs to
purchase 5,000 Shares. Each option referred to in the previous sentence is
referred to as a "Director Option." The exercise price of Director Options shall
be the fair market value of the Shares subject to the Option on the date the
Option is granted. Each Director Option shall be fully exercisable commencing
six months after the date of grant and continuing, unless sooner terminated as
provided in this Plan, for 10 years after the date it is granted. If, for any
reason other than death or permanent and total disability, a Non-Employee
Director ceases to be a member of the Board, each Director Option held by that
Non-Employee Director on the date that the Non-Employee Director ceases to be a
member of the Board may be exercised in whole or in part at any time within one
year after the date of such termination or until the expiration of the Director
Option, whichever is earlier. If a Non-Employee Director dies or becomes
permanently and totally disabled (within the meaning of Section 422(c)(6) of the
Code) while a member of the Board (or within the period that the Director
Options remain exercisable after the Non-Employee Director ceases to be a member
of the Board), each Director Option then held by that Non-Employee Director may
be exercised, in whole or in part, by the Non-Employee Director, by the
Non-Employee Director's personal
Page 5
<PAGE>
representative or by the person to whom the Non-Employee Director transferred
the Director Option by will or the laws of descent and distribution, at any time
within two years after the date of death or permanent and total disability of
the Non-Employee Director or until the expiration date of the Director Option,
whichever is earlier. Nothing in this Section 5.3 or in Section 6.1(c) shall
have the effect of accelerating the six-month period during which Director
Options are not exercisable. Each Director Option shall be evidenced by an Award
Agreement.
5.4 GRANTS OF PERFORMANCE SHARE AWARDS. The Committee may, in its
discretion, grant Performance Share Awards to eligible Employees. An Award shall
specify the maximum number of shares of Common Shares (if any) subject to the
Performance Share Award and its terms and conditions. The Committee shall
establish the specified period (a "performance cycle") for the Performance Share
Award and the measure(s) of the performance of the Company (or any part thereof)
or the Participant. The Committee may, during the performance cycle, make such
adjustments to the measure(s) of performance as it may deem appropriate to
compensate for, or reflect, any significant changes that may occur in accounting
practices, tax laws, other laws or regulations that alter or affect the
computation of the measure(s). The Award Agreement shall specify how the degree
of attainment of the measure(s) over the performance cycle is to be determined.
The Committee may provide for full or partial credit, prior to completion of
such performance cycle or the attainment of the performance achievement
specified in the Award, in the event of the Participant's death.
5.5 ASSUMED OPTIONS. As provided in the Separation Agreement between
the Company and NHP, Inc. dated as of December 8, 1997, the Company assumes
obligations with respect to the Assumed Options through this Plan.
6. CERTAIN TERMS AND CONDITIONS OF OPTIONS AND OTHER AWARDS
Each option shall be designated as an ISO or a NQO and shall be subject
to the terms and conditions set forth in Section 6.1. Notwithstanding the
foregoing, the Committee may provide for different terms and conditions in any
Award Agreement or amendment thereto as provided in Section 4.2.
6.1 ALL AWARDS. All Options and other Awards shall be subject to the
following terms and conditions, except as may be otherwise provided in the
Assumed Options:
(a) CHANGES IN CAPITAL STRUCTURE: If the number of outstanding
Shares is increased by means of a share dividend payable in Shares, a share
split or other subdivision or by a reclassification of Shares, then, from and
after the record date for such dividend, subdivision or reclassification, the
number and class of Shares subject
Page 6
<PAGE>
to this Plan (including without limitation its Sections 3, and 5.3) and each
outstanding Award shall be increased in proportion to such increase in
outstanding Shares and the then-applied exercise price of each outstanding Award
shall be correspondingly decreased. If the number of outstanding Shares is
decreased by means of a share split or other subdivision or by a
reclassification of Shares, then, from and after the record date for such split,
subdivision or reclassification, the number and class of Shares subject to this
Plan (including without limitation its Sections 3, and 5.3) and each outstanding
Award shall be decreased in proportion to such decrease in outstanding Shares
and the then-applicable exercise price of each outstanding Award shall be
correspondingly increased.
(b) GRANT DATE: Each Award Agreement shall specify the date as
of which it shall be effective (the "Grant Date").
(c) FAIR MARKET VALUE: For purposes of this Plan, the fair
market value of Shares shall be determined as follows:
(i) If the Shares are listed on any established stock
exchange or a national market system, including, without limitation, the
National Market System of the National Association of Securities Dealers
Automated Quotation System, its fair market value shall be the closing sales
price for the Shares, or the mean between the high bid and low asked prices if
no sales were reported, as quoted on such system or exchange (or, if the Shares
are listed on more than one exchange, then on the largest such exchange) for the
date the value is to be determined (or if there are no sales or bids for such
date, then for the last preceding business day on which there were sales or
bids), as reported in THE WALL STREET JOURNAL or similar publication.
(ii) If the Shares are regularly quoted by a recognized
securities dealer but selling prices are not reported, its fair market value
shall be determined in good faith by the Committee, with reference to the
Company's net worth, prospective earning power, dividend-paying capacity and
other relevant factors, including the goodwill of the Company, the economic
outlook in the Company's industry, the Company's position in the industry and
its management, and the values of stock of other corporations in the same or
similar lines of business.
(d) TIME OF EXERCISE; VESTING: Awards may, in the sole
discretion of the Committee, be exercisable or may vest, and restrictions may
lapse, as the case may be, at such times and in such amounts as may be specified
by the Committee in the grant of the Award.
(e) NONASSIGNABILITY OF RIGHTS: No Award that is a derivative
security (as defined in Rule 16a-1(c) under the Exchange Act) shall be
transferable other than with the consent of the Committee (which consent will
not be granted in the case of ISOs unless the conditions for transfer of ISOs
specified in the Code have been satisfied) or by will or the laws of the descent
and distribution or pursuant to a qualified domestic relations order as defined
by the Code or Title I of ERISA. Awards requiring exercise shall be exercisable
only by the Participant, assignees that were approved by the Committee,
executors, administrators or beneficiaries of the Participant (who are the
permitted transferees hereunder), guardians or members of a committee for an
incompetent Participant, or similar persons duly authorized by law to administer
the estate or assets of a Participant.
(f) NOTICE AND PAYMENT: To the extent it is exercisable, an
Award shall be exercisable only by written or recorded electronic notice of
exercise, in the manner specified by the Committee from time to time, delivered
to the Company or its designated agent during the term of the Award (the
"Exercise Notice"). The Exercise Notice shall: (a) state the number of
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<PAGE>
Shares with respect to which the Award is being exercised; (b) be signed by the
holder of the Award or by the person authorized to exercise the Award pursuant
to Section 6.1(c) and (c) include such other information, instruments and
documents as may be required to satisfy any other condition to exercise set
forth in the Award Agreement. Except as provided below, payment in full, in cash
or check, shall be made for all Shares purchased at the time notice of exercise
of an Award is given to the Company. The proceeds of any payment shall
constitute general funds of the Company. At the time an Award is granted or
before it is exercised, the Committee, in the exercise of its sole discretion,
may authorize any one or more of the following additional methods of payment:
(i) for all Participants, acceptance of such Participants'
full recourse promissory note for some or all of the exercise price of the
Shares being acquired, payable on such terms and bearing such interest rate as
determined by the Committee, and secured in such manner, if at all, as the
Committee shall approve, including, without limitation, by a security interest
in the Shares which are the subject of the Award or other securities;
(ii) for all Participants, delivery by such Participants of
Shares of the Company already owned by such Participants for all or part of the
exercise price of the Award being exercised, provided that the fair market value
of such Shares are equal on the date of exercise to the exercise price of the
Award being exercised, or such portion thereof as the Participants are
authorized to pay and elect to pay by delivery of such Shares;
(iii) for all Participants, surrender by such Participants,
or withholding by the Company from the Shares issuable upon exercise of the
Award, of a number of Shares subject to the Award being exercised with a fair
market value equal to some or all of the exercise price of the Shares being
acquired, together with such documentation as the Committee and the broker, if
applicable, shall require; or
(iv) for all Participants, to the extent permitted by
applicable law, payment may be made pursuant to arrangements with a brokerage
firm under which that brokerage firm, on behalf of such Participants, shall pay
to the Company the exercise price of the Award being exercised (either as a loan
to the Participant or from the proceeds of the sale of Shares issued under that
Award), and the Company shall promptly cause the Shares being purchased under
the Award to be delivered to the brokerage firm. Such transactions shall be
effected in accordance with the procedures that the Committee may establish from
time to time.
If the exercise price is satisfied in whole or in part by the
delivery of Shares pursuant to paragraph (ii) above, the Committee may issue to
the Participant an additional Option, with terms identical to those set forth in
the option agreement governing the exercised Option, except for the exercise
price which shall be the fair market value used for such delivery and the number
of Shares subject to such additional Option shall be the number of Shares so
delivered.
(g) TERMINATION OF EMPLOYMENT: Any Award or portion thereof
which has not vested on or before the date of a Participant's Employment
Termination shall expire on the date
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of Employment Termination. As to an Award or portion thereof that has vested by
the time of Employment Termination, the Committee shall establish, in respect of
each Award when granted, the effect of an Employment Termination on the rights
and benefits thereunder and in so doing may, but need not, make distinctions
based upon the cause of termination (such as retirement, death, disability or
other factors) or which party effected the termination (the employer or the
Employee). Notwithstanding any other provision in this Plan or the Award
Agreement, the Committee may decide in its discretion at the time of any
Employment Termination (or within a reasonable time thereafter) to extend the
exercise period of an Award (but not beyond the period specified in Section
6.2(b) or 6.3(b), as applicable) and not decrease the number of Shares covered
by the Award with respect to which the Award is exercisable or vested.
(h) DEATH: Any Award or portion thereof which has not vested on
or before the date of the Participant's death shall expire on the date of such
Participant's death. As to an Award or portion thereof that has vested by the
date of death of the Participant, such Awards or portions thereof must be
exercised within two years of the date of the Participant's death by a person
authorized under this Plan to exercise such Awards.
(i) PAYMENT OF DIVIDENDS UPON EXERCISE OF OPTIONS: Upon exercise
of an Option, other than an Assumed Option the Participant shall be entitled to
receive a cash payment from the Company equal to the amount of cash dividends
that have been paid from the Grant Date of the Option through the date of
exercise of the Option on that number of Common Shares that is equal to the
number of Common Shares being purchased upon exercise of such Option.
(j) OTHER PROVISIONS: Each Award Agreement may contain such
other terms, provisions and conditions not inconsistent with this Plan, as may
be determined by the Committee, and each ISO granted under this Plan shall
include such provisions and conditions as are necessary to qualify such Option
as an "incentive stock option" within the meaning of Section 422 of the Code,
unless the Committee determined otherwise.
(k) WITHHOLDING AND EMPLOYMENT TAXES: At the time of exercise of
an Award, the lapse of restrictions on an Award or a disqualifying disposition
of Shares issued under an ISO (within the meaning of Section 6.3(c)), the
Participant shall remit to the Company in cash all applicable federal and state
withholding and employment taxes. If and to the extent authorized and approved
by the Committee in its sole discretion, a Participant may elect, by means of a
form of election to be prescribed by the Committee, to have Shares which are
acquired upon exercise of an Award withheld by the Company or tender other
Shares owned by the Participant to the Company at the time the amount of such
taxes is determined, in order to pay the amount of such tax obligations, subject
to such limitations as the Committee determines are necessary or appropriate to
comply with Rule 16b-3 in the case of Participants who are subject to Section
16(b).
(l) NAMED OFFICER PROVISIONS: The Award Agreements (other than
the Assumed Options) for Participants determined by the Committee to be named
officers ("Named Officers") shall contain the following terms and definitions:
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SEVERANCE. If a Named Officer is terminated without "cause"
(as defined below), he or she will be paid his or her then current salary for
two years if he or she is the Chief Executive Officer, for one year if he or she
is an Executive Vice President, for six months if he or she is a Senior Vice
President, or for three months if he or she is a Group Vice President. If there
is a "transfer of control" of the Company (as defined below) and such an
employee is terminated within 180 days of such change, he or she will be paid
his or her then current salary for three years if he or she is the Chief
Executive Officer, for two years if he or she is an Executive Vice President,
for one year if he or she is a Senior Vice President, or for six months if he or
she is a Group Vice President.
CAUSE. With respect to the termination of the Participant's
employment by the Company, "cause" means: (i) the engaging by the Participant in
any act of dishonesty in connection with the performance of his employment
duties and responsibilities, (ii) the final judgment of any United States
federal or state court convicting the Participant of a felony, (iii) the failure
of the Participant to perform his duties or responsibilities as specified by the
Company or any Affiliate of the Company, and (iv) the inability of the
Participant to perform his duties or responsibilities for a period of more than
one hundred twenty (120) consecutive days due to physical or mental illness or
incapacity.
TRANSFER OF CONTROL. For the purposes of this Agreement, a
"transfer of control" shall occur, after the Company's Spinoff, upon: (i) a
transfer of a majority of the Company's voting stock outstanding on the day of
the transfer, (ii) sale of substantially all of the Company's assets, to any
entity or person unaffiliated with the Company, (iii) the consolidation of the
Company with or its merger into any other unaffiliated corporation, or (iv) an
act by the Company, or any entity or person affiliated with the Company, which
results in the dissolution of the Company.
6.2 TERMS AND CONDITION TO WHICH ONLY NQOS ARE SUBJECT. Options
granted under this Plan (other than Assumed Options) which are designated as
NQOs shall be subject to the following terms and conditions:
(a) EXERCISE PRICE. The exercise price of a NQO shall be
determined by the Committee.
(b) OPTION TERM. Unless an earlier expiration date is specified
by the Committee at the Grant Date, each NQO shall expire 10 years after the
Grant Date or, if required by applicable state securities laws in the case of a
NQO granted to a Ten Percent Shareholder, five years after the Grant Date.
6.3 TERMS AND CONDITIONS TO WHICH ONLY ISOS ARE SUBJECT. Options
granted under this Plan (other than Assumed Options) which are designated as
ISOs shall be subject to the following terms and conditions:
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(a) EXERCISE PRICE. The exercise price of an ISO shall be
determined in accordance with the applicable provisions of the Code and shall in
no event be less that 100% of the fair market value of the Shares covered by the
ISO at the Grant Date; PROVIDED, HOWEVER, that the exercise price of an ISO
granted to a Ten Percent Shareholder shall not be less than 110% of such fair
market value.
(b) OPTION TERM. Unless an earlier expiration date is specified
by the Committee at the Grant Date, each ISO shall expire 10 years after the
Grant Date; PROVIDED, HOWEVER, that an ISO granted to a Ten Percent Shareholder
shall expire no later than five year after the Grant Date.
(c) DISQUALIFYING DISPOSITIONS. If Shares acquired by exercise
of an ISO are disposed of within two years after the Grant Date or within one
year after the transfer of the Shares to the optionee, the holder of the Shares
immediately before the disposition shall promptly notify the Company in writing
of the date and terms of the disposition and shall provide such other
information regarding the disposition as the Company may reasonably require and
shall pay the Company any withholding and employment taxes which the Company in
its sole discretion deem applicable to the disposition.
(d) TERMINATION OF EMPLOYMENT. All vested ISOs must be exercised
within three months after an optionee ceases to be an Employee unless such
cessation is due to the employee being disabled (within the meaning of Section
422 (c)(6) of the Code), in which case the ISO shall be exercised within one
year of cessation of employment.
6.4 SURRENDER OF OPTIONS.. The Committee, acting in its sole
discretion, may include a provision in an option agreement allowing the optionee
to surrender the Option covered by the agreement, in whole or in part in lieu of
exercise in whole or in part, on any date that the fair market value of the
Shares subject to the Option exceeds the exercise price and the Option is
exercisable (to the extent being surrendered). The surrender shall be effected
by the delivery of the option agreement, together with a signed statement which
specifies the number of shares as to which the optionee is surrendering the
Option, together with a request for such type of payment. Upon such surrender,
the optionee shall receive (subject to any limitations imposed by Rule 16b-3),
at the election of the Committee, payment in cash or shares, or a combination of
the two, equal to (or equal in fair market value to) the excess of the fair
market value of the Shares covered by the portion of the Option being
surrendered on the date of surrender over the form of payment, taking into
account such factors as it deems appropriate. To the extent necessary to satisfy
Rule 16b-3, the Committee may terminate an optionee's rights to receive payments
in cash for fractional Shares. Any option agreement providing for such surrender
privilege shall also incorporate such additional restrictions on the exercise or
surrender of options as may be necessary to satisfy the conditions of Rule
16b-3.
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7. SECURITY LAWS
Nothing in this Plan or in any Award or Award Agreement shall require
the Company to issue any Shares with respect to any Award if, in the opinion of
counsel for the Company, that issuance could constitute a violation of the
Securities Act, any other law or the rules of any applicable securities exchange
or securities association then in effect. As a condition to the grant or
exercise of an Award, the Company may require the Participant (or, in the event
of the Participant's death, the Participant's legal representatives, heirs,
legatees or distributees) to provide written representations concerning the
Participant's (or such other person's) intentions with regard to the retention
or disposition of the Shares covered by the Award and written covenants as to
the manner of disposal of such Shares as may be necessary or useful to ensure
that the grant, exercise or disposition will not violate the Securities Act, and
other law or any rule of any applicable securities exchange or securities
association then in effect. The Company shall not be required to register any
Shares under the Securities Act or register or qualify any Shares under any
state or other securities laws.
8. AMENDMENT, SUSPENSION AND TERMINATION OF PLAN
The Board may at any time amend, suspend or discontinue this Plan
without shareholder approval, except as required by applicable law; PROVIDED,
HOWEVER, that no amendment, alteration, suspension or discontinuation shall be
made which would impair the rights of any Participant under any Award previously
granted, without the Participant's consent, except to conform this Plan and
Awards granted to the requirements of federal or other tax laws including
without limitation Section 422 of the Code and/or ERISA, or to the requirements
of Rule 16b-3. The Board may choose to require that the Company's shareholders
approve any amendment to this Plan in order to satisfy the requirements of
Section 422 of the Code, Rule 16b-3 or for any other reason.
9. SEVERABILITY
If any provision of this Plan is held to be illegal or invalid for any
reason, that illegality or invalidity shall not affect the remaining portions of
the Plan, but such provision shall be fully severable and the Plan shall be
construed and enforced as if the illegal or invalid provision had never been
included in this Plan. Such an illegal or invalid provision shall be replaced by
a revised provision that most nearly comports to the substance of the illegal or
invalid provision.
10. EFFECTIVE DATE
This Plan was originally adopted by the Board of Directors on October
21, 1997. It was approved in that form by the holders of the Company's voting
shares on December 5, 1997 (the earlier of which is the "Effective Date"). It
was further amended by the Board on December 5, 1997 and February 24, 1998.
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I hereby certify that the foregoing is a full, true and correct copy of
the Key Employee Incentive Plan of The WMF Group Ltd., a Delaware Corporation,
as in effect on the date hereof.
Witness my hand and the seal of the Corporation.
Dated: _________________________ ________________________________
Barbara Ekstrom, Secretary
(SEAL)
