<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
THE WMF GROUP, LTD.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
THE WMF GROUP, LTD.
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 10, 1999
---------------
To the Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders of The WMF
Group, Ltd., a Delaware corporation ("WMF" or the "Company"), will be held in
the Tyson's Room of the Comfort Inn located at 1587 Spring Hill Road, Vienna,
Virginia 22182, on Thursday, June 10, 1999 at 10:00 a.m., local time, for the
following purposes:
1. To elect eight directors.
2. To ratify the selection of KPMG LLP as the Company's independent
public accountants.
3. To approve an amendment to the Company's Key Employee Incentive
Plan ("KEIP").
4. To transact any and all other business that may properly come
before the meeting.
All stockholders of record at the close of business on April 19, 1999 are
entitled to notice of and to vote at this meeting.
Stockholders are requested to sign and date the enclosed proxy and return
it in the enclosed envelope. The envelope requires no postage if mailed in the
United States.
By order of the Board of Directors
/s/ BARBARA EKSTROM
Barbara Ekstrom, Secretary
Vienna, Virginia
April 28, 1999
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED, SELF-ADDRESSED
ENVELOPE SO THAT YOUR SHARES ARE REPRESENTED. NO POSTAGE IS NEEDED IF THE PROXY
IS MAILED WITHIN THE UNITED STATES.
This proxy statement is first being mailed to stockholders on April 28, 1999.
<PAGE>
THE WMF GROUP, LTD.
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF STOCKHOLDERS
June 10, 1999
General
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of The WMF Group, Ltd., a Delaware corporation
incorporated in 1992 ("WMF" or the "Company"), for the Annual Meeting of
Stockholders of WMF to be held at 10:00 a.m., local time, on Thursday, June 10,
1999, in the Tyson's Room of the Comfort Inn located at 1587 Spring Hill Road,
Vienna, Virginia 22182, and any adjournments thereof, for the purposes set forth
in the notice of the meeting.
Stockholders with questions or who would like to receive a free copy of the
Company's 1998 Form 10-K should contact Michael D. Ketcham, Chief Financial
Officer and Treasurer, at the above address or by telephone at (703) 610-1400.
This Proxy Statement is first being distributed to stockholders on or about
April 28, 1999, and the cost of this solicitation is being borne by the Company.
Voting Rights and Outstanding Shares
As of April 19, 1999, the Company had outstanding 11,294,935 shares of its
common stock. Each share of common stock entitles the holder of record thereof
at the close of business on April 19, 1999 to one vote on the matters to be
voted upon at the meeting.
If the enclosed form of proxy is properly signed and returned, the shares
represented thereby will be voted. If the stockholder specifies in the proxy
how the shares are to be voted, they will be voted as specified. If the
stockholder does not specify how the shares are to be voted, they will be voted
(1) to elect the eight nominees listed under "Election of Directors," or the
nominees for which approval has not been withheld, (2) to ratify the selection
of KPMG LLP as independent public accountants for the fiscal 1999 audit and (3)
to approve the amendment to the Company's Key Employee Incentive Plan ("KEIP").
Should any person nominated to serve as a director be unable or unwilling to
serve, those named in the form of proxy for the Annual Meeting intend to vote
for such other person as the Board of Directors may recommend. Any stockholder
has the right to revoke his or her proxy at any time before it is voted by
attending the meeting and voting in person or filing with the Secretary of the
Company a written instrument revoking the proxy or delivering another newly
executed proxy bearing a later date.
As of the date hereof, management of WMF has no knowledge of any business
other than that described in the notice for the Annual Meeting which will be
presented for consideration at such meeting. If any other business should come
before such meeting, the persons appointed by the enclosed form of the proxy
shall have discretionary authority to vote all such proxies as they shall
decide.
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<PAGE>
Quorum, Requested Votes and Method of Tabulation
Consistent with Delaware law and under the Company's By-Laws, 34% of shares
entitled to be cast on a particular matter, present in person or represented by
proxy, constitutes a quorum as to such matter. Accordingly, at least 3,840,278
shares must be present or represented by proxy at the Annual Meeting to
constitute a quorum. Votes cast by proxy or in person at the Annual Meeting
will be counted by persons appointed by the Company to act as election
inspectors for the meeting. The eight nominees for election as directors at the
Annual Meeting who receive the greatest numbers of votes properly cast for the
election of directors shall be elected directors. Ratification of the selection
of the Company's independent public accountants and approval of the amendment to
the KEIP require the affirmative vote of a majority of the shares present in
person or by proxy at the Annual Meeting and entitled to vote.
The election inspectors will count the total number of votes cast "for"
approval of proposals for purposes of determining whether sufficient affirmative
votes have been cast. The election inspectors will count shares represented by
proxies that withhold authority to vote for a nominee for election as a director
or that reflect abstentions or "broker non-votes" (i.e., shares represented at
the meeting held by brokers or nominees as to which (i) instructions have not
been received from the beneficial owners or persons entitled to vote and (ii)
the broker or nominee does not have the discretionary voting power on a
particular matter) as shares that are present for purposes of determining the
presence of a quorum. Abstentions and broker non-votes will not affect the
outcome of any of the proposals.
1. ELECTION OF DIRECTORS
At the Annual Meeting, it is intended that the Company's Board of Directors
be elected to serve until the next Annual Meeting or until their successors
shall have been duly elected and qualified. The following persons have been
nominated as directors by the Board of Directors of the Company. All nominees
except Mr. Cremens are currently directors of the Company.
Name Age Position
- ---- --- --------
J. Roderick Heller III 61 Chairman of the Board
Shekar Narasimhan 45 Director, President and Chief
Executive Officer
Mohammed A. Al-Tuwaijri 43 Director
Michael R. Eisenson 43 Director
Tim R. Palmer 41 Director
John D. Reilly 56 Director
Herbert S. Winokur, Jr. 55 Director
Charles H. Cremens 45 Director Nominee
J. Roderick Heller III has served as Chairman of the Board since 1996. Mr.
Heller is currently the Chairman and Chief Executive Officer of Carnton Capital
Associates, L.L.P., an investment company located in Washington, D.C. He served
as a Director, President and Chief Executive Officer of NHP
-3-
<PAGE>
Incorporated ("NHP") beginning in 1986 and served as Chairman of NHP's Board
from 1988 to 1997. From 1982 until 1985, Mr. Heller served as President and
Chief Executive Officer of Bristol Compressors, Inc., a Bristol, Virginia-based
company involved in the manufacturing of air conditioning compressors. From 1971
until 1982, he was a partner in the Washington, D.C. law firm of Wilmer, Cutler
& Pickering. Mr. Heller is a Director of Auto-Trol Technology Corporation and
City First Bank of D.C. Mr. Heller is Chairman of public television station WETA
and is trustee of numerous housing-related and other non-profit institutions.
Shekar Narasimhan has served as a Director, President and Chief Executive
Officer of the Company since 1992 and as a Director, President and Chief
Executive Officer of WMF Washington Mortgage Corp., a subsidiary of the Company
("Washington Mortgage"), since its incorporation in 1990. Mr. Narasimhan has 20
years of experience in property management and real estate mortgage finance,
primarily for multifamily properties. He has been a member of the Board of
Governors of the Mortgage Bankers Association of America (the "MBA") since 1995
and serves as the Chairman of the MBA's newly formed Commercial/Multifamily
Board. Mr. Narasimhan was the 1996 recipient of the MBA's Burton C. Wood
Legislative Service Award.
Mohammed A. Al-Tuwaijri has served as a Director of the Company since 1992.
He was Chairman of the Company's Board from 1992 to 1996. He served as a
Director of Washington Mortgage from 1990 to 1996 and was Chairman of Washington
Mortgage's Board from 1991 to 1996. He also served as a Director of
WMF/Huntoon, Paige Associates Limited ("WMF/Huntoon, Paige"), another subsidiary
of the Company, from 1991 to 1996. Mr. Al-Tuwaijri has been President of Dar
Al-Majd Consulting Engineers since 1981 and serves as a Director of Al-Thomad
Trading & Contracting.
Michael R. Eisenson has served as a Director of the Company since 1997. He
also served as a Director of NHP from 1990 until May 1997. Since July 1998, Mr.
Eisenson has been a Managing Director and the Chief Executive Officer of
Charlesbank Capital Partners, LLC ("Charlesbank"), a private investment firm
located in Boston and the successor to Harvard Private Capital Group, Inc.
("Harvard Private Capital"). Mr. Eisenson is a co-founder of Charlesbank. From
1986 through June 1998, Mr. Eisenson was the President and Chief Executive
Officer of Harvard Private Capital, which managed the private equity and real
estate portfolios of the Harvard University endowment fund. Charlesbank is the
investment advisor to Demeter Holdings Corporation ("Demeter"), a controlling
stockholder of the Company, and to Phemus Corporation ("Phemus"), an investment
affiliate of Demeter. Mr. Eisenson is a Director of CCC Information Services
Group, Inc., Harken Energy Corporation, ImmunoGen, Inc., Playtex Products, Inc.
and United Auto Group, Inc.
Tim R. Palmer has served as a Director of the Company since 1996. He also
served as a Director of NHP from 1990 until May 1997. Since July 1998, Mr.
Palmer has been a Managing Director of Charlesbank. Mr. Palmer is a co-founder
of Charlesbank. From 1990 to June 1998, Mr. Palmer was a Managing Director of
Harvard Private Capital. From 1987 to 1990, Mr. Palmer was Manager - Business
Development at The Field Corporation, a private investment firm. Mr. Palmer is
a Director of Bell Sports.
John D. Reilly has served as a Director of the Company since 1996. He is
the President of Reilly Investment Corporation, a real estate investment
company, and from 1991 through 1994 he was Executive Director of Reilly Mortgage
Group, Inc., a mortgage banking and servicing company. Mr. Reilly serves as a
Director of Mexico Private Equity Fund. He is also a board member of Maret
School, Victory Housing, Raphael Inc., Manor Apartments and Avondale Park
Apartments.
Herbert S. Winokur, Jr. has served as a Director of the Company since 1997.
He also served as a Director of NHP from 1991 until May 1997. Since 1987, he
has served as the President and Chief
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<PAGE>
Executive Officer of Capricorn Holdings, Inc. Mr. Winokur is also the Managing
General Partner of Capricorn Investors, L.P. and Capricorn Investors II, L.P.,
private investment partnerships concentrating on investments in restructure
situations. Mr. Winokur serves as a Director of DynCorp, Enron Corp., Mrs.
Fields Holdings, Inc., NAC Re Corporation and CCC Information Services Group,
Inc.
Charles H. Cremens is a new nominee to the Board of Directors. Mr. Cremens
is currently self-employed as a consultant and provides consulting services to
the Company. From 1996 to 1997, Mr. Cremens was the Chief Investment Officer
for Beacon Properties Corp., a real estate investment trust that invests in
office properties. Prior to that time, he was employed by Aetna Life Insurance
Company as its head of mortgage and real estate investments.
During the fiscal year ended December 31, 1998, the WMF Board of Directors
held 17 meetings and acted by written consent on four additional occasions.
Each of the directors attended at least 75% of the meetings of the Board and the
committees on which he serves held during such director's term, except for
Messrs. Al-Tuwaijri.
There are two committees of the Board of Directors: (1) a Compensation
Committee and (2) an Audit Committee.
The Compensation Committee reviews salary policies and compensation of
officers and other members of management and approves compensation plans and
awards. The Compensation Committee also administers the Company's Stock Option
Plan, Employee Stock Purchase Plan and Key Employee Incentive Plan. Messrs.
Eisenson and Winokur are the members of the Compensation Committee. During the
fiscal year ended December 31, 1998, the Compensation Committee met on four
occasions. See "Executive Compensation - Compensation Committee Report on
Executive Compensation."
The Audit Committee reviews the Company's annual audit and meets with the
Company's independent accountants to review the Company's internal controls and
financial management practices. The Audit Committee consists of Messrs. Reilly,
Al-Tuwaijri and Palmer. During the fiscal year ended December 31, 1998, the
Audit Committee met on three occasions.
Director Compensation
The Company compensates each director who is not also an executive officer
of the Company ("Non-Management Directors") for all out-of-pocket expenses
related to his service as director. Each Non-Management Director received
options to purchase 5,000 shares of common stock for his services as director in
the year ended December 31, 1998. Those options are exercisable on and after
July 1, 1999. Options granted as compensation for Messrs. Palmer and Eisenson's
services as directors were issued in the name of Demeter. Options granted as
compensation for Mr. Winokur's services as a director were issued in the name of
Capricorn Investors II, L.P. During 1998, Mr. Reilly also received 10,000
shares of restricted stock and an amount equal to $30,000 for his services as a
director. In addition, Mr. Heller received 10,000 shares of restricted stock
and cash compensation in the amount of $50,000 for his services as Chairman of
the Board and as a consultant to the Company.
The Board of Directors recommends a vote FOR each of the nominees to the
Board of Directors.
-5-
<PAGE>
2. PROPOSAL TO RATIFY THE SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
KPMG LLP has served as the Company's independent auditors since December 8,
1997. The Company has again selected KPMG LLP to audit the financial statements
of the Company for fiscal 1999. The Company expects that representatives of
KPMG LLP will be present at the Annual Meeting and available to respond to
appropriate questions, and such representatives will be given the opportunity to
make a statement if they desire to do so.
Arthur Andersen LLP had been the Company's auditors since July 1996 after
the Company was acquired by NHP. The Company decided to terminate its
relationship with Arthur Andersen LLP and re-engage KPMG Peat Marwick LLP, the
Company's auditors prior to the acquisition by NHP. Arthur Andersen LLP's report
on the Company's financial statements for the year ended December 31, 1996
contained no adverse opinion or disclaimer of opinion, nor was it qualified or
modified as to uncertainty, audit scope or accounting principles. During the
same period, and from January 1, 1997 through December 8, 1997, there were no
disagreements with Arthur Andersen LLP on any matter of accounting principles or
practices, financial statement disclosure, auditing scope or procedure, which
disagreement, if not resolved to the satisfaction of Arthur Andersen LLP, would
have caused Arthur Andersen LLP to make reference to the subject matter of the
disagreement in connection with its report.
During the Company's fiscal year ended December 31, 1996, the Company had
not consulted with KPMG LLP on items that (1) concerned the application of
accounting principles to a specific transaction, either completed or proposed,
or the type of audit opinion that might be rendered on the Company's financial
statements or (2) concerned the subject matter of a disagreement or reportable
event with Arthur Andersen LLP.
Arthur Andersen LLP has furnished the Company with a letter addressed to
the Securities and Exchange Commission stating that Arthur Andersen LLP agrees
with the statements, pertaining to them, contained above.
The Board of Directors recommends a vote FOR ratification of the
appointment of KPMG LLP.
3. PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S KEY EMPLOYEE INCENTIVE PLAN
The Company proposes to amend the Company's KEIP to limit the incentive
stock options that may be issued under the KEIP. The KEIP currently permits the
Company to issue a maximum number of shares of restricted stock and shares
issuable pursuant to stock options equal to 8% of the Company's outstanding
shares plus 500,000 shares. The amendment provides that, of that amount, the
Company may issue no more than 368,000 incentive stock options, as that term is
defined in Section 422 of the Internal Revenue Code of 1986, as amended. The
amendment is necessary so that options issued under the KEIP that are intended
to qualify as incentive stock options do, in fact, do so. To date, the Company
has not issued any incentive stock options pursuant to the KEIP.
The Board of Directors recommends a vote FOR ratification of the amendment
to the Company's KEIP.
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<PAGE>
EXECUTIVE OFFICERS
The executive officers and certain other officers of the Company are as
follows:
<TABLE>
<CAPTION>
Name Age Position
- --------------------------------- --- -----------------------------------------------
<S> <C> <C>
Shekar Narasimhan 45 Director, President and Chief Executive Officer
Mitchell D. Clarfield 39 Executive Vice President -- Advisory Services
and Director of National Sales
James L. Clouser 57 Executive Vice President FHA Business
Michael H. Greco 48 Executive Vice President Conduit and
Specialty Lending
Michael D. Ketcham 40 Executive Vice President, Chief Financial
Officer and Treasurer
Douglas J. Moritz 49 Executive Vice President Multifamily
Business
Glenn A. Sonnenberg 42 Executive Vice President -- Advisory Services
and Chief Operating Officer
Clarke B. Welburn 51 Executive Vice President -- Risk Management
Joan C. May 42 Senior Vice President and Chief
Underwriter -- Multifamily
Elizabeth Whitbred-Snyder 44 Senior Vice President -- Operations
and Assistant Secretary
</TABLE>
Information regarding the executive officers of the Company other than Mr.
Narasimhan is set forth below. Information regarding Mr. Narasimhan is set
forth under "Election of Directors," above.
Mitchell D. Clarfield has served as an Executive Vice President of the
Company since 1998. Mr. Clarfield also serves as co-Chief Executive Officer of
WMF Carbon Mesa Advisors, Inc., a subsidiary of the Company. From 1994 to 1998,
Mr. Clarfield was the founder and served as President and Chief Executive
Officer of Carbon Mesa Advisors, Inc. From 1990 to 1993, Mr. Clarfield served
as Senior Vice President of Secured Capital Corp., a Los Angeles-based
investment advisory firm. Prior to that, Mr. Clarfield served as Vice President
in the Commercial Mortgage Trading Group of Drexel Burnham Lambert.
James L. Clouser has served as an Executive Vice President of the Company
since 1997. Mr. Clouser is the President and Chief Executive Officer of
WMF/Huntoon, Paige. He joined WMF/Huntoon, Paige in 1979 and served as
President and Chief Operating Officer of that subsidiary from 1989 until 1999.
Mr. Clouser has 22 years of real estate finance experience. He is active in the
MBA and sits on the Insured Project and Income Producing Loan Subcommittee of
the MBA. Mr. Clouser is a regular speaker at MBA seminars and conventions and
was contributing editor to the MBA Servicing Handbook.
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<PAGE>
Michael H. Greco has served as an Executive Vice President of the Company
since 1998. Mr. Greco is currently the Executive Vice President - Conduit and
Specialty Lending for Washington Mortgage. Since February 1998, Mr. Greco has
served as the President and Chief Executive Officer of WMF Capital Corp. From
1994 to 1998, Mr. Greco served as the Managing Director of Real Estate Capital
Markets at First Union National Bank. From 1991 to 1994, Mr. Greco served as
Senior Vice President at Donaldson, Lufkin & Jenrette, where he was responsible
for commercial mortgage-backed securities.
Michael D. Ketcham has served as Executive Vice President, Chief Financial
Officer and Treasurer of the Company since 1997. Mr. Ketcham has also served as
an Executive Vice President, Chief Financial Officer and Treasurer of Washington
Mortgage since 1996. Prior to joining the Company, Mr. Ketcham served as Vice
President of Corporate Financial Planning at Marriott Corporation and one of its
successor companies, Marriott International, from 1992 to 1994, and as Vice
President of Treasury Development at Marriott International from 1994 to 1996.
Mr. Ketcham joined Marriott Corporation in 1986. He has 17 years of corporate
finance experience.
Douglas J. Moritz has served as an Executive Vice President of the Company
since 1997. He currently serves as Chief Executive Officer - Multifamily
Business of Washington Mortgage. Mr. Moritz joined Washington Mortgage in 1988,
serving as Executive Vice President - Lending from 1990 to 1996. Mr. Moritz has
27 years of experience in the multifamily industry, with 16 years of experience
in multifamily finance. He has served on the Board of Governors of the Mortgage
Bankers Association of Metropolitan Washington, Inc. (the "Association") since
1993, was the Chairman of the Association's Income Property Committee in 1995
and 1996 and served as the Association's President in 1997 and Chairman of the
Board in 1998. Mr. Moritz was a member of the Fannie Mae DUS Lenders' Advisory
Council from 1996 to 1998.
Glenn A. Sonnenberg has served as Executive Vice President and Chief
Operating Officer of the Company since 1998. Mr. Sonnenberg also serves as co-
Chief Executive Officer of WMF Carbon Mesa Advisors, Inc. From 1996 to 1998,
Mr. Sonnenberg served as Managing Director of Carbon Capital Mortgage Partners
and as Principal of Strategic Real Estate Partners. From 1995 to 1996, Mr.
Sonnenberg served as President and Chief Executive Officer of ING Real Estate
Investors. From 1994 to 1995, Mr. Sonnenberg served as Executive Vice
President and co-Chief Executive Officer of Kearny Street Real Estate Company.
From 1980 to 1993, Mr. Sonnenberg was a partner in the Los Angeles law firm of
Allen, Matkins, Leck, Gamble & Mallory.
Clarke B. Welburn has served as Executive Vice President of the Company
since 1997. He also serves as Executive Vice President -- Risk Management for
Washington Mortgage. From 1990 to 1996, he served as Executive Vice President -
- - Credit Policy for Washington Mortgage. Mr. Welburn joined Washington Mortgage
in 1988. Mr. Welburn has 26 years of lending experience.
Joan C. May has served as Senior Vice President of the Company since 1997.
Since 1992, Ms. May has served as Senior Vice President and Chief Underwriter of
Washington Mortgage. Ms. May joined Washington Mortgage in 1989, serving as
Vice President - Underwriting from 1990 to 1992. She has 15 years of real
estate lending experience.
Elizabeth Whitbred-Snyder has served as Senior Vice President of the
Company since 1997. From 1990 to 1997, Ms. Whitbred-Snyder served as Controller
of Washington Mortgage. In addition, Ms. Whitbred-Snyder served as Vice
President of Washington Mortgage from 1990 to 1992. She is a certified public
accountant and has 15 years of financial services experience.
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<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth, as of April 19, 1999, the number and
percentage of outstanding shares of the Company's common stock beneficially
owned by all persons known by the Company to own beneficially more than 5% of
the Company's common stock.
Name and Address of Beneficial Owner Number Percent
- ------------------------------------ --------- --------
Demeter Holdings Corporation (1) 5,425,902 48.04%
600 Atlantic Ave.
Boston, MA 02210
Michael R. Eisenson (2) 5,425,902 48.04%
600 Atlantic Ave.
Boston, MA 02210
Tim R. Palmer (2) 5,425,902 48.04%
600 Atlantic Ave.
Boston, MA 02210
Herbert S. Winokur, Jr. (3) 1,909,065 16.90%
30 East Elm Street
Greenwich, CT 06830
Capricorn Investors II, L.P. (4) 1,730,532 15.32%
30 East Elm Street
Greenwich, CT 06830
- ------------
(1) Includes: (A) 5,134,483 shares of common stock owned directly by Demeter;
(B) 281,419 shares of common stock owned by Phemus, and (C) 10,000 shares
subject to options that are exercisable currently or within 60 days of the
date of this Proxy Statement.
(2) Includes: (A) 5,134,483 shares of common stock held directly by Demeter;
(B) 281,419 shares of common stock owned by Phemus, and (C) 10,000 shares
subject to options that are exercisable currently or within 60 days of the
date of this Proxy Statement. Messrs. Eisenson and Palmer disclaim
beneficial ownership of all the shares held by Demeter and Phemus. Messrs.
Eisenson and Palmer are also directors of the Company, but have not been
listed separately in the following Officers and Directors chart.
(3) Includes: (A) 1,730,532 shares beneficially owned by Capricorn Investors
II, L.P., (B) 163,533 shares beneficially owned by Capricorn Holdings,
Inc., (C) 10,000 shares owned by two revocable trusts benefiting members of
Mr. Winokur's family and (D) 5,000 shares subject to options that are
exercisable currently or within 60 days of the date of this Proxy
Statement.
(4) Includes all shares owned by Capricorn Investors II, L.P., of which
Capricorn Holdings, LLC is the general partner.
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<PAGE>
The following table sets forth, as of April 19, 1999, the number and
percentage of outstanding shares of the Company's common stock beneficially
owned by (i) each director and director nominee who was not listed as a 5%
beneficial owner, (ii) the Chief Executive Officer and each of the five other
most highly compensated executive officers of the Company, including one
executive officer who terminated his employment with the Company during 1998
(the "Named Executive Officers"), and (iii) all directors and executive officers
as a group. The business address of each of the following persons is 1593
Spring Hill Road, Suite 400, Vienna, Virginia 22182, unless otherwise specified.
Name and Address of Beneficial Owner Number Percent
- --------------------------------------- --------- --------
Mohammed A. Al-Tuwaijri (1) 150,040 1.33%
P.O. Box 60212
Tamaneen Street
Riyadh 11545
Saudi Arabia
J. Roderick Heller III (2) 294,970 2.61%
2445 M Street, N.W., Suite 460
Washington DC 20037
John D. Reilly (3) 215,033 1.90%
5335 Wisconsin Avenue, N.W. #440
Washington, D.C. 20015
Shekar Narasimhan (4) 287,522 2.55%
Lawrence A. Brown (5) 11,517 *
Mitchell D. Clarfield (6) 234,045 2.07%
Michael H. Greco (7) 58,172 *
Douglas J. Moritz (8) 22,100 *
Glenn A. Sonnenberg (9) 84,709 *
Charles H. Cremens 0 --
345 Highland Street
Weston, Massachusetts 02493
All directors and executive officers
as a group (17 persons) (10) 8,661,687 76.69%
- ------------------------------------
* Less than 1%
(1) Includes: (A) 145,040 shares of common stock owned by Commonwealth Overseas
Trading Company Limited, over which Mr. Al-Tuwaijri shares voting and
investment power with Mr. Narasimhan, and (B) 5,000 shares subject to
options that are exercisable currently or within 60 days of the date of
this Proxy Statement.
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<PAGE>
(2) Includes: (A) 10,000 shares of restricted stock owned directly by Mr.
Heller that will vest on January 31, 2000; (B) 118,464 shares of
unrestricted common stock owned directly by Mr. Heller; (C) 6,216 shares
of common stock held in trust for Mr. Heller's grandchild, over which Mr.
Heller has sole voting and investment control; (D) 35,000 shares held by
the Heller Family Foundation, over which Mr. Heller shares control of
voting and investment decisions with his children; and (E) 125,290 shares
subject to options that are exercisable currently or within 60 days of the
date of this Proxy Statement.
(3) Includes: (A) 10,000 shares of restricted common stock held by directly Mr.
Reilly, which will vest on January 31, 2000; (B) 200,033 shares of
unrestricted common stock held directly by Mr. Reilly, and (C) 5,000 shares
subject to options that are exercisable currently or within 60 days of the
date of this Proxy Statement. Excludes 23,108 shares held in trust for the
benefit of Mr. Reilly's daughters, over which Mr. Reilly has no voting or
investment control and of which Mr. Reilly disclaims beneficial ownership.
(4) Includes: (A) 20,000 shares of restricted stock which will be forfeited on
June 30, 2000, unless the Company first achieves certain performance goals;
(B) 45,415 shares of unrestricted common stock owned directly by Mr.
Narasimhan; (C) 145,040 shares of common stock owned by Commonwealth
Overseas Trading Company Limited, over which Mr. Narasimhan shares voting
power with Mr. Al-Tuwaijri, and (C) 77,067 shares subject to options that
are exercisable currently or within 60 days of the date of this Proxy
Statement.
(5) Includes: (A) 11,000 shares of common stock held directly by Mr. Brown and
(B) 517 shares of common stock held by Mr. Brown's spouse. Mr. Brown
disclaims beneficial ownership of the shares held by his spouse. Mr. Brown
terminated his employment with the Company on November 13, 1998. The
information on his beneficial ownership of Company securities is based
solely on information filed with the Securities and Exchange Commission and
provided to the Company by Mr. Brown.
(6) Includes: (A) 141,345 shares of unrestricted common stock held directly by
Mr. Clarfield; (B) 25,000 shares of restricted common stock held directly
by Mr. Clarfield, which will be forfeited on June 30, 2000, unless the
Company first meets certain performance goals; (C) 63,500 shares of
unrestricted common stock held by Carbon Mesa Advisors, Inc., which is
owned by Mr. Clarfield and his spouse, and (D) 4,200 shares subject to
options that are exercisable currently or within 60 days of the date of
this Proxy Statement.
(7) Includes: (A) 13,174 shares of common stock held directly by Mr. Greco;
(B) 27,598 shares of common stock held by Mr. Greco's spouse, and (C)
17,400 shares subject to options exercisable currently or within 60 days of
the date of this Proxy Statement.
(8) Includes: (A) 2,833 shares of common stock held directly by Mr. Moritz and
(B) 19,267 shares subject to options that are exercisable currently or
within 60 days of the date of this Proxy Statement.
(9) Includes: (A) 54,509 shares of unrestricted common stock owned directly by
Mr. Sonnenberg; (B) 1,000 shares of unrestricted common stock owned
jointly by Mr. Sonnenberg and his spouse; (C) 25,000 shares of restricted
common stock owned directly by Mr. Sonnenberg, and (D) 4,200 shares subject
to options that are exercisable currently or within 60 days of the date of
this Proxy Statement.
(10) Includes: (A) 5,134,483 shares of common stock beneficially owned by
Demeter; (B) 281,419 shares of common stock beneficially owned by Phemus;
(C) 1,730,532 shares of common stock beneficially owned by Capricorn
Investors II, L.P.; (D) 163,533 shares of common stock beneficially owned
by Capricorn Holdings, Inc.; (E) 11,517 shares of common stock owned by
Mr. Brown, who is no longer an employee of the Company, and (F) 377,457
shares of common stock subject to options that are exercisable currently or
within 60 days of the date of this Proxy Statement.
-11-
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the compensation
paid by the Company for services rendered during the years ended December 31,
1998, 1997 and 1996 to the Named Executive Officers.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation Awards
----------------------------------------------------------------
Restricted All Other
Name and Principal Position Year Salary Bonus(1) Stock($)(2) Options(#)(3) Compensation(4)
- --------------------------- ----- --------- ---------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Shekar Narasimhan 1998 $275,000 $ 0 $120,000 20,000 $ 5,740
President and Chief 1997 250,000 175,000 n/a 84,000 10,383
Executive Officer 1996 240,000 110,000 n/a 26,667 6,533
Lawrence A. Brown (5) 1998 $115,746 $442,050 n/a 54,500 $ 775
Senior Vice President 1997 n/a n/a n/a n/a n/a
1996 n/a n/a n/a n/a n/a
Mitchell D. Clarfield 1998 $131,250 $ 94,061 $150,000 21,000 $ 1,956
Executive Vice 1997 n/a n/a n/a n/a n/a
President 1996 n/a n/a n/a n/a n/a
Michael H. Greco 1998 $129,807 $190,886 n/a 59,500 $ 5,535
Executive Vice 1997 n/a n/a n/a n/a n/a
President 1996 n/a n/a n/a n/a n/a
Douglas J. Moritz 1998 $185,000 $100,000 n/a 5,000 $ 5,740
Executive Vice 1997 175,000 92,500 n/a 21,000 11,075
President 1996 165,000 70,000 n/a 6,667 5,675
Glenn A. Sonnenberg 1998 $131,250 $ 94,061 $150,000 21,000 $ 5,337
Chief Operating Officer 1997 n/a n/a n/a n/a n/a
1996 n/a n/a n/a n/a n/a
</TABLE>
- ------------
(1) The amounts reported for 1996 were paid in 1997, the amounts reported for
1997 were paid in 1998, and the amounts reported for 1998 were paid in
1999.
(2) On December 31, 1998, the Company issued 20,000 shares of restricted stock
to Mr. Narasimhan. The shares will vest only upon a change of control of
the Company resulting in Mr. Narasimhan's termination or the Company's
achieving certain performance goals. If the shares do not vest before
midnight on June 30, 2000, the restricted stock will be forfeited.
On December 31, 1998, the Company issued 25,000 shares of restricted stock
to Mr. Clarfield and 25,000 shares of restricted stock to Mr. Sonnenberg.
These shares will vest (A) if there is a transfer of control of the Company
resulting in the stock owner's termination or (B) if the Company achieves
certain performance goals. If the shares do not vest before midnight on
June 30, 2000, the restricted stock will be forfeited.
In addition to the above terms, the restricted stock awarded to Messrs.
Narasimhan, Clarfield and Sonnenberg may be forfeited under certain other
circumstances. The dollar value of each restricted stock award is based on
The Nasdaq Stock Market closing price per share of WMF common stock on the
date of the award. As of December 31, 1998, the Company had 90,000
outstanding shares of restricted stock with a value of $540,000. Holders
of restricted stock are entitled to receive dividends on those shares, if
the Company issues dividends.
(3) The options to acquire stock reported for 1996 were granted as options to
acquire NHP common stock and were converted into options to acquire shares
of the Company's common stock in connection with the spin-off of the
Company from NHP.
(4) These amounts represent the Company's payment of life insurance premiums
and matching contributions to the Company's 401(k) Retirement Plan.
(5) Mr. Brown terminated his employment with the Company effective November 13,
1998.
-12-
<PAGE>
Stock Options
The following table sets forth certain information regarding options
granted to the Named Executive Officers during the year ended December 31, 1998.
<TABLE>
<CAPTION>
Options Granted in Last Fiscal Year
Potential Realizable
Percent of Value at Assumed
Total Annual Rates of
Options Stock Price
Granted in Appreciation for
Fiscal Market Price Option Term
Options ------ Exercise on Grant Expiration
Name Granted (#) Year (1) Prices (S/sh) Date (S/sh) Date 0%($) 5%($) 10%($)
- ---- ---------- ------- ------------ ---------- ------- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shekar Narasimhan 20,000 (2) 2.4% $26.12 $29.50 3/31/98 $ 3.38 n/a n/a
Lawrence A. Brown 43,500 (3) 5.2% $11.63 $11.63 2/16/08 n/a $7.31 $18.54
87,000 (4) 10.5% $15.00 $11.63 2/16/08 n/a $3.94 $15.17
1,000 (5) 0.1% $11.63 $23.75 6/22/98 $12.12 n/a n/a
10,000 (2) 1.2% $26.12 $29.50 3/31/98 $ 3.38 n/a n/a
Mitchell D. Clarfield 21,000 (6) 2.5% $ 9.15 $ 7.38 4/1/08 n/a $2.87 $ 9.99
Michael H. Greco 43,500 (3) 5.2% $11.63 $11.63 2/16/08 n/a $7.31 $18.54
87,000 (4) 10.5% $15.00 $11.63 2/16/08 n/a $3.94 $15.17
1,000 (5) 0.1% $11.63 $23.75 6/22/98 $12.12 n/a n/a
15,000 (2) 1.8% $26.12 $29.50 3/31/98 $ 3.38 n/a n/a
Douglas J. Moritz 5,000 (2) 0.6% $26.12 $29.50 3/31/98 $ 3.38 n/a n/a
Glenn A. Sonnenberg 21,000 (6) 2.5% $ 9.15 $ 7.38 4/1/08 n/a $2.87 $ 9.99
</TABLE>
- --------------------
(1) Percentages indicated are based on a total of 830,650 options granted to 54
employees during the fiscal year ended December 31, 1998.
(2) These options were fully vested and immediately exercisable on the grant
date of March 26, 1998.
(3) These options vest in five equal installments beginning on February 16,
1998, with the second installment on January 31, 1999, and subsequent
installments on January 31 of each of the following three years. Mr.
Brown's options were forfeited when he terminated his employment with the
Company.
(4) These options were granted on February 16, 1998, subject to vesting over a
four-year period if certain performance criteria were met and the holder's
continued employment by WMF Capital Corp. These options were terminated
when Mr. Brown terminated his employment with the Company and when Mr.
Greco transferred his employment from WMF Capital Corp. to Washington
Mortgage.
(5) These options were fully vested and immediately exercisable on the grant
date of March 23, 1998.
(6) On April 1, 1998, Messrs. Sonnenberg and Clarfield were each granted 21,000
options with an exercise price of $27.25. On November 10, 1998, the
options were repriced to $9.15. The options vest annually in 20%
increments on January 31 of each year, beginning on January 31, 1999.
-13-
<PAGE>
Option Exercises and Holdings
The following table sets forth certain information regarding unexercised
and exercised options held by the Named Executive Officers on December 31, 1998.
Aggregated Option Exercises in 1998
and Year-End 1998 Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised Options In the Money Options at
Acquired on Value at December 31, 1998 December 31, 1998 (2)
Name Exercise(#) Realized($) (1) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ --------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Shekar Narasimhan 9,571 $10,815 60,267 50,400 -- --
Lawrence A. Brown 11,000 $23,670 8,700 0 -- --
Mitchell D. Clarfield n/a n/a 0 21,000 -- --
Michael H. Greco 13,174 $26,127 8,700 34,800 -- --
Douglas J. Moritz 1,500 $ 1,695 15,067 12,600 -- --
Glenn A. Sonnenberg n/a n/a 0 21,000 -- --
</TABLE>
- ------------------
(1) Calculated based on the difference between the strike price of the options
and The Nasdaq Stock Market closing price per share of WMF common stock on
the date of exercise.
(2) Based on The Nasdaq Stock Market closing price of the underlying common
stock on December 31, 1998 of $6.00, minus the exercise price. As of
December 31, 1998, none of the options held by the Named Executive Officers
were in-the-money options.
Report on Repricing of Options
During 1998, the Company repriced a total of 42,000 options granted to
Named Executive Officers. See "Compensation Committee Report on Executive
Compensation," below, for an explanation of the basis for such repricing. The
following table sets forth certain information regarding all repricing of
options held by any of the Company's executive officers between December 8, 1997
and December 31, 1998.
Option Repricings
<TABLE>
<CAPTION>
Number of Market Price
Securities of Common Exercise Length of Original
Underlying Stock at Time Price at Time Option Term
Name and Position of Repriced of Repricing of Repricing New Exercise Remaining at
Executive Officer Date Options (#) ($) ($) Price Time of Repricing
- -------------------- ---- ---------- --------------- ---------------- ----- -----------------
<S> <C> <C> <C> <C> <C> <C>
Mitchell D. Clarfield 11/10/98 21,000 $7.375 $27.25 $9.15 9 years, 5 mos.
Executive Vice President
Glenn A. Sonnenberg 11/10/98 21,000 $7.375 $27.25 $9.15 9 years, 5 mos.
Chief Operating Officer
</TABLE>
-14-
<PAGE>
Employment and Related Contracts
Except as described below, none of the Named Executive Officers has an
employment contract with the Company.
On February 16, 1998, Mr. Greco entered into an eight-year employment
contract with the Company, which is subject to re-negotiation after five years.
Pursuant to the contract, Mr. Greco receives a $150,000 annual base salary and
is eligible for incentive bonuses and stock options. The base salary will be
reviewed annually and may be adjusted, with Mr. Greco's consent. In addition,
Mr. Greco is entitled to receive a $1,326,150 incentive payment in three annual
installments, beginning in 1998. The incentive payment is conditioned on Mr.
Greco's employment with the Company for three years, but the Company must pay
the incentive payment if Mr. Greco resigns because of the Company's material
breach of the employment agreement or if he is terminated without "cause" (as
defined below) during that time. In addition to benefits provided generally to
all of the Company's executive employees, Mr. Greco is entitled to four weeks of
paid vacation per year, liability insurance and a life insurance policy.
On April 1, 1998, Messrs. Clarfield and Sonnenberg each entered into five-
year employment contracts with the Company. Pursuant to the contracts, Messrs.
Clarfield and Sonnenberg each receive a $175,000 annual base salary and are
eligible for incentive bonuses and stock options. During the first two years of
the contracts, Messrs. Clarfield and Sonnenberg will receive up to $65,000 as
advances against incentive bonuses earned during the contract period. The base
salary amount will be reviewed annually and may be adjusted, with the consent of
Messrs. Clarfield and Sonnenberg. In addition to benefits provided generally to
all of the Company's executive employees, Messrs. Clarfield and Sonnenberg are
entitled to four weeks of paid vacation per year, dining or golf club
membership, liability insurance and a life insurance policy.
If Mr. Greco is terminated without cause, he will be paid his then current
salary for one year, plus a pro-rated incentive bonus for the year in which the
termination occurs and vesting of all options he owns at the time of his
termination. If Mr. Clarfield or Mr. Sonnenberg is terminated without cause, he
will be paid his then current salary for one year. Messrs. Clarfield and
Sonnenberg are also entitled to a pro-rated incentive bonus for the year in
which the termination occurs, vesting of all options owned at the time of
termination and incentive compensation for three years following the
termination. The amount of incentive compensation is calculated based on the
incentive bonus pool for the year preceding the termination and the Company's
net income attributable to assets acquired during or immediately after the
employment period.
Messrs. Greco, Clarfield and Sonnenberg are also entitled to the above
severance payments if they resign because the Company has materially breached
their employment agreements. If upon termination without cause or resignation
after the Company's material breach of the employment agreements, Mr. Greco, Mr.
Clarfield or Mr. Sonnenberg wishes to be released from certain non-competition
agreements with the Company, he may waive his right to severance payments. If
Mr. Clarfield or Mr. Sonnenberg is terminated because of a physical or mental
disability which prevents him from performing his duties for 180 days out of any
12-month period, he will be entitled to receive $20,000 per month for 12 months
after his termination.
For purposes of the above paragraphs, "cause" is defined as: (A) the
engaging by the employee in any act of dishonesty, including the appropriation
or attempted appropriation of a material business opportunity of the Company;
(B) the conviction of the employee of a felony, any crime involving moral
turpitude, or any other crime which jeopardizes the Company's liability
insurance; or (C) a material breach of the employment agreement by the
employee, which is not corrected within 30 days.
-15-
<PAGE>
Each of the Named Executive Officers has entered into a Key Employee
Incentive Award Agreement with the Company, pursuant to which the Named
Executive Officer's unvested options will vest immediately and in their entirety
upon a "transfer of control" of the Company (as defined below). Additionally,
the Company provides certain severance arrangements for Messrs. Narasimhan and
Moritz. If such employee is terminated without "cause" (as defined below), that
employee will be paid his then current salary for two years in the case of Mr.
Narasimhan, as Chief Executive Officer ("CEO"), or for one year in the case of
Mr. Moritz.
If a Named Executive Officer's employment is terminated within 180 days of
a "transfer of control" of the Company (as defined below), Mr. Narasimhan, as
the CEO, would be paid his then current salary for three years and Messrs.
Clarfield, Greco, Moritz and Sonnenberg would each be paid their then current
salary for two years. The Company has required each of the Named Executive
Officers to agree to refrain from competing in the business of mortgage
origination and servicing during his employment with the Company and, after such
employment is terminated, for the greater of one year or the period during which
such employee is receiving severance benefits. In addition, the Company has
required such officers to agree to refrain from disclosing confidential
information about the Company during their employment and indefinitely
thereafter.
For purposes of the Key Employee Incentive Award Agreement, "cause" means
(A) the engaging by the employee in any act of dishonesty in connection with the
performance of his or her employment duties and responsibilities, (B) the
conviction of the employee of a felony, (C) the failure of the employee to
perform his or her duties or responsibilities or (D) the inability of the
employee to perform his or her duties or responsibilities for a period of more
than 120 consecutive days due to physical or mental illness or incapacity. For
purposes of the arrangements described in the above paragraph, "transfer of
control" means (i) a transfer of a majority of the Company's voting stock
outstanding on the day of the transfer, (ii) a sale of substantially all of the
Company's assets to any entity or person unaffiliated with the Company, (iii)
the consolidation of the Company with, or its merger into, any unaffiliated
corporation or (iv) the dissolution of the Company.
Compensation Committee Interlocks and Insider Participation
The Board of Directors has created a Compensation Committee which consists
of Messrs. Eisenson and Winokur. The Compensation Committee is charged with
determining the compensation of all executive officers upon consultation with
the Chairman of the Board. No member of the Compensation Committee has ever
been an officer or employee of the Company or any of its subsidiaries. Mr.
Eisenson is an officer of Charlesbank, the investment advisor for Demeter,
which, with its affiliates, controls 48% of the Company's common stock. Mr.
Winokur is an officer of Capricorn Investors II, L.P. ("Capricorn"), which
controls 16.90% of the Company's common stock. Demeter and Capricorn have
engaged in several transactions with the Company during 1998, as described under
"Certain Relationships and Related Transactions."
-16-
<PAGE>
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors (the "Committee") is
composed entirely of non-management directors. The Chief Executive Officer of
the Company initiates recommendations with respect to base salary, bonus and
stock option awards for all executive officers other than himself for the
Committee's review. The Committee determines the compensation paid or awarded to
the Company's executive officers.
The Committee's goal is to attract, motivate, and retain an executive
management team that can take full advantage of the Company's opportunities for
growth and achieve long-term success in an increasingly competitive business
environment, thereby increasing stockholder value. The Committee believes that
linking a significant portion of an executive's current and potential net worth
to the Company's success, as reflected in the stock price, ensures that the
interests of management are closely aligned with that of stockholders.
In deciding on initial base salary for an individual, the Committee
considers determinants of the individual's market value, including experience,
education, accomplishments and reputation, as well as the level of
responsibility to be assumed. The Committee's approach is to offer salaries it
believes to be fair and competitive with those of executives with similar
responsibilities at companies it considers to be comparable in terms of assets,
net revenues and cash flows, based upon such information as the Committee may
acquire from annual reports and proxy materials of such other companies,
business and industry publications, and other sources as may be available from
time to time. In deciding whether to increase the compensation of an
individual, the Committee considers the overall contribution of the employee to
the performance of the Company, experience gained by the employee and market
conditions.
In determining annual bonuses, the Committee considers each individual's
area of responsibility and the specific goals that were achieved in that area of
responsibility. For any given executive officer, such goals may include growth
in the Company's earnings before interest, taxes, depreciation and amortization,
growth in the Company's revenues generated on either an absolute or per unit
basis, and completion of major acquisitions or other significant corporate
transactions that promote achieving the Company's objectives.
In keeping with the Company's belief that executive compensation should be
linked to the Company's success, the Committee limited the number and amount of
bonuses awarded in 1998 to members of the Company's senior management team.
Instead, the Committee awarded Mr. Narasimhan shares of restricted stock, which
will vest upon the Company's stock prices reaching specified goals. (See "Chief
Executive Officer's Compensation" below.) The Company also awarded restricted
stock to two other executive officers, in recognition of their increased
responsibilities during the latter part of 1998.
In addition to base salary and bonuses, the Committee recommends the award
of stock options under the Company's Key Employee Incentive Plan. In that
regard, during the fiscal year ended December 31, 1998, the Committee granted
options to purchase 243,500 shares of common stock to its executive officers.
The Committee also approved the restriking of 42,000 options from an original
exercise price of $27.25 to a new exercise price of $9.15, to conform with the
exercise price of options awarded to other senior officers. Further detail
regarding this repricing is included above under "Report on Option Repricing."
The determination to award options on initial employment is based on the same
factors as initial salary award. The determination to award additional options
or restrike existing options is based primarily on such individual's performance
and as an incentive for future performance.
-17-
<PAGE>
Applying these factors to each individual's case is a judgment process,
exercised by the Committee with the advice of management. Pursuant to their
employment agreements, Messrs. Clarfield and Sonnenberg are compensated in part
based on the financial performance of WMF Carbon Mesa. Pursuant to his
employment agreement, Mr. Greco is compensated in part according to the
financial performance of the capital markets segment of the Company. There is
no other intent to relate compensation to the Company's stock price performance,
either absolute or relative to peer groups, except as that relationship is
implicit in the stock-based compensation plans.
Chief Executive Officer's Compensation. For Mr. Narasimhan's services as
the Company's president and chief executive officer, his compensation has been
determined in accordance with the compensation policies outlined above. In lieu
of a cash bonus for 1998, the Committee awarded Mr. Narasimhan 20,000 shares of
restricted stock, which will vest only if the Company's share price is $12 or
above before December 31, 1999, or $15 or above before June 30, 2000. If those
goals are not met, the restricted stock is automatically forfeited. In light of
the Company's losses and the decline of the Company's stock price in 1998,
neither the Committee nor Mr. Narasimhan thought it would be appropriate for him
to receive a cash bonus. The Committee believes that stockholders' interests
would be best served by linking Mr. Narasimhan's bonus compensation directly to
the Company's stock price.
In addition, Mr. Narasimhan voluntarily took a pay reduction from $275,000
to $225,000 for 1999, to demonstrate his commitment to the Company's cost-
cutting goals and its future.
Compensation Deduction Limit. The Committee has considered the $1 million
limit on deductible executive compensation that is not performance-based. The
Committee does not believe that the $1 million limit will prevent the Company
from deducting any executive compensation expenses established in 1999.
Herbert S. Winokur, Jr.
Michael R. Eisenson
-18-
<PAGE>
Performance Graph
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on the Company's common stock against
the cumulative total return of The Nasdaq National Market Index (the "Nasdaq
Market Index") and the Standard Industrial Classification Industry Index of
Mortgage Bankers & Loan Correspondents (the "SIC Code Index"), for the period
commencing December 7, 1997 and ending December 31, 1998.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
THE WMF GROUP, LTD., NASDAQ MARKET INDEX AND SIC CODE INDEX
[PERFORMANCE GRAPH APPEARS HERE]
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended December 31, 1998, the Company engaged in the
following transactions and is a party to the following agreements with entities
in which its directors, director nominee or executive officers have the
interests described.
Effective March 1, 1999, Mr. Cremens and the Company entered into a
consulting agreement pursuant to which the Company will pay Mr. Cremens $10,000
per month as compensation for consulting services provided to the Company and
its subsidiaries.
In March 1998, the Company acquired substantially all of the assets of
Strategic Real Estate Partners for total consideration of $1,072,000, consisting
of cash and 22,000 shares of WMF common stock. Mr. Sonnenberg was the sole
owner of Strategic Real Estate Partners. Also in March 1998, the Company
acquired a substantial portion of the assets of Carbon Mesa Advisors, Inc.,
which is wholly owned by Mr. Clarfield and his spouse. As consideration for
those assets, Carbon Mesa Advisors received a total of $2,128,000, consisting of
cash and 69,000 shares of WMF common stock.
-19-
<PAGE>
In addition, during 1998 one of the Company's subsidiaries acquired an
option to purchase substantially all of the assets of Carbon Capital Management
for $1.75 million in cash and stock. Mr. Sonnenberg owns 48 percent of Carbon
Capital Management, and Mr. Clarfield owns 48 percent. On April 2, 1999, the
Company and Carbon Capital Management modified the terms of the option, which
the Company then exercised. The Company will purchase the assets of Carbon
Capital Management for a total of $1.75 million in cash, promissory notes and
30,001 shares of WMF common stock.
During 1998, the Company engaged in three transactions with Demeter (or its
affiliate, Harvard Private Capital Holdings, Inc. ("HPCH")), Phemus and
Capricorn. Messrs. Eisenson and Palmer are officers of Charlesbank, which is
the investment advisor to Demeter, Phemus and HPCH. Mr. Winokur is the Managing
General Partner of Capricorn.
. On June 12, 1998, the Company, HPCH and Capricorn created a real
estate Investment trust called "Commercial Mortgage Investment Trust,
Inc." ("COMIT"). The Company owns less than 20 percent of COMIT. WMF
Carbon Mesa Advisors, Inc. manages COMIT. Messrs. Narasimhan,
Eisenson, Palmer and Sonnenberg are directors of COMIT. Messrs.
Sonnenberg and Clarfield are Co-Presidents of COMIT. Mr. Ketcham is
the Executive Vice President, Chief Financial Officer and Treasurer of
COMIT, and Mr. Welburn is the Executive Vice President and Chief
Credit Officer of COMIT.
. On September 4, 1998, COMIT and the Company entered into a Credit
Agreement pursuant to which COMIT loaned the Company $20 million. HPCH
contributed $16 million, and Capricorn contributed $4 million, to
COMIT to fund the loan. In connection with the loan, the Company
issued warrants to COMIT to purchase 1,200,000 shares of WMF common
stock at a price of $11.25 per share. COMIT transferred those warrants
to HPCH and Capricorn. The Company completed repaying the loan on
March 12, 1999, and the warrants have been cancelled.
. On December 31, 1998, Demeter, Phemus and Capricorn purchased
3,635,972 shares of the Company's Class A Non-Voting Convertible
Preferred Stock (the "Class A Stock") for a total purchase price of
approximately $16.7 million. Each share of Class A Stock was converted
to one share of the Company's common stock on January 14, 1999.
Demeter, Phemus and Capricorn further agreed that they would purchase
up to a total of 664,028 shares from the Company, to the extent that
the Company's rights offering was not fully subscribed. On March 19,
1999, Demeter, Phemus and Capricorn purchased a total of 664,028
shares pursuant to that agreement.
-20-
<PAGE>
FINANCIAL INFORMATION
The audited financial statements and related financial and business
information of the Company for its fiscal years ended December 31, 1998, 1997
and 1996 are contained in the Company's Annual Report, a copy of which is being
delivered to Stockholders with this Proxy Statement.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and persons who beneficially own more than 10% of the
Company's common stock to file reports of ownership and changes in ownership
with the Securities and Exchange Commission and the National Association of
Securities Dealers, Inc. Based solely on its review of the copies of such
reports received by it, the Company believes that during the fiscal year ended
December 31, 1998, all filing requirements applicable to its officers, directors
and such 10% beneficial owners were complied with.
ADJOURNMENT OF MEETING
In the event that sufficient votes in favor of the election of the nominees
for director (the "Nominees") or any other matter presented hereunder are not
received by June 10, 1999, the persons named as proxies may propose one or more
adjournments of the meeting to permit further solicitation of proxies. Any such
adjournment will require the affirmative vote of a majority of the shares cast
on the question, in person or by proxy, at the session of the meeting to be
adjourned. The persons named as proxies will vote in favor of such adjournment
those proxies that they are entitled to vote in favor of the Nominees and all
other such matters. They will vote against any such adjournment those proxies
withholding authority to vote on any Nominee and voting against or abstaining
with respect to all other such matters. The Company will pay the costs of any
additional solicitation and of any adjourned meetings.
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 2000 Annual
Meeting of Stockholders must be received by the Company at its principal office
in Vienna, Virginia, not later than December 29, 1999, for inclusion in the
proxy statement for that meeting. In addition, if the Company receives notice
of a stockholder proposal after March 14, 2000, the persons named as proxies in
the proxy statement for the 2000 Annual Meeting will have discretionary voting
authority to vote on such proposal at the 2000 Annual Meeting.
By Order of the Board of Directors,
/s/ BARBARA EKSTROM
Barbara Ekstrom, Secretary
April 28, 1999
THE BOARD OF DIRECTORS HOPES THAT YOU WILL ATTEND THE MEETING. WHETHER OR
NOT YOU PLAN TO ATTEND, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED
PROXY IN THE ACCOMPANYING ENVELOPE PROMPTLY. IF YOU ATTEND THE MEETING, YOU MAY
WITHDRAW YOUR PROXY AND VOTE YOUR OWN SHARES.
-21-
<PAGE>
PROXY
THE WMF GROUP, LTD.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Shekar Narasimhan and Barbara Ekstrom, or
either of them, as attorney-in-fact, with full power of substitution, to vote in
the manner indicated on the reverse side, and with discretionary authority as to
any other matters that may properly come before the meeting, all shares of
common stock of The WMF Group, Ltd. ("WMF"), which the undersigned is entitled
to vote at the annual meeting of stockholders of WMF to be held on June 10, 1999
in the Tyson's Room of the Comfort Inn located at 1587 Spring Hill Road, Vienna,
Virginia 22182, at 10:00 a.m. or any adjournment thereof.
SIDE NOT VALID UNLESS DATED AND SIGNED ON THE REVERSE
The proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy will
be voted FOR the nominees for directors and FOR each of the other proposals.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
<PAGE>
[X] Please mark
votes as in
this example.
The Board of Directors recommends a vote FOR the nominees identified in
Item 1 and FOR Items 2 and 3.
1. Election of Eight directors for a term expiring in 2000 as set forth in the
Proxy Statement.
Nominees: J. Roderick Heller III, Shekar Narasimhan, Mohammed A.
Al-Tuwaijri, Michael R. Eisenson, Tim R. Palmer, John D. Reilly,
Herbert S. Winokur, Jr., Charles H. Cremens.
FOR WITHHELD
ALL FROM ALL
NOMINEES [_____] [____] NOMINEES
[_____] _________________________________________
For all nominee except as noted above
2. Ratification of the Appointment of KPMG LLP as Independent Auditors.
FOR AGAINST ABSTAIN
[ _____ ] [ _____ ] [ _____ ]
3. Approval of an amendment to the Company's Key Employee Incentive Plan.
FOR AGAINST ABSTAIN
[ _____ ] [ _____ ] [ _____ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [__]
Please sign exactly as name appears hereon. When shares are
held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please
give the full corporate name and have a duly authorized
officer sign, stating such officer's title. If a
partnership, please sign in the partnership name by an
authorized person.
Signature:__________________________ Date:______________
Signature:__________________________ Date:______________
