<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE TO
TENDER OFFER STATEMENT
UNDER SECTION 14(d)(1) OR 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 2)
THE WMF GROUP, LTD.
(Name of Subject Company (issuer))
PRUDENTIAL MORTGAGE CAPITAL ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
PRUDENTIAL MORTGAGE CAPITAL COMPANY, LLC
(Names of Filing Persons (offerors))
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
000929289
(CUSIP Number)
RICHARD A. HIBBARD, ESQ.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
FOUR GATEWAY CENTER
NEWARK, NJ 07102-4069
(973) 802-7674
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
Copy to:
STEPHEN J. FRIEDMAN
DEBEVOISE & PLIMPTON
875 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 909-6000
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
---------------------- ----------------------
<S> <C>
$ 112,529,802 $22,505.96
</TABLE>
* For purposes of calculating the filing fee pursuant to Rule 0-11(d), the
Transaction Valuation was calculated on the basis of (i) the purchase of
12,643,798 shares of common stock, par value $.01 per share, of The WMF
Group, Ltd. at (ii) the tender offer price of $8.90 per Share.
** The filing fee, calculated in accordance with Rule 0-11 of the Securities
Exchange Act of 1934, is 1/50th of one percent of the aggregate
Transaction Valuation.
[_] Check the box if any part of the fee is offset as provided by Rule 0-
11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
<TABLE>
<CAPTION>
<S> <C>
Amount Previously Paid: Filing Party:
Form or Registration No.: Date Filed:
</TABLE>
[_] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which
the statement relates:
[X] third-party tender offer subject to Rule 14d-1.
[_] issuer tender offer subject to Rule 13e-4.
[_] going-private transaction subject to Rule 13e-3.
[_] amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting the
results of the tender offer: [_]
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<PAGE>
This Tender Offer Statement on Schedule TO ("Schedule TO") relates to the
offer by Prudential Mortgage Capital Acquisition Corp. ("Purchaser"), a
Delaware corporation and a wholly owned subsidiary of Prudential Mortgage
Capital Company, LLC, a Delaware limited liability company ("Parent"), to
purchase all the outstanding shares of common stock, par value $.01 per share
(the "Common Stock") of The WMF Group, Ltd. ("WMF"), which are not owned by
Parent or its affiliates, at a purchase price of $8.90 per Share, net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated May 23, 2000 (the "Offer
to Purchase") and in the related Letter of Transmittal which are annexed to
and filed with this Schedule TO as Exhibits (a)(1)(A) and (a)(1)(B),
respectively. This Schedule TO is being filed on behalf of Purchaser and
Parent.
All information set forth in the Offer to Purchase filed as Exhibit
(a)(1)(A) to this Schedule TO is incorporated by reference in answer to Items
1 through 11 in this Schedule TO, except those items as to which information
is specifically provided herein.
ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON.
(C)(3) AND (C)(4) None of Parent, Purchaser or, to the best knowledge of
such entities, any of the persons listed on Schedules I or II to the Offer to
Purchase has during the last five years (i) been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) been
a party to any judicial or administrative proceeding (except for matters that
were dismissed without sanction or settlement) that resulted in a judgment,
decree or final order enjoining the person from future violations of, or
prohibiting activities subject to, federal or state securities laws or finding
any violation of such laws.
ITEM 10. FINANCIAL STATEMENTS.
Not applicable.
ITEM 12. EXHIBITS.
(a)(1)(A) -- Offer to Purchase, dated as of May 23, 2000.
(a)(1)(B) -- Form of Letter of Transmittal.
(a)(1)(C) -- Form of Notice of Guaranteed Delivery.
(a)(1)(D) -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(1)(E) -- Form of Letter to Clients for Use by Brokers, Dealers,
Commercial Banks, Trust Companies and other Nominees.
(a)(1)(F) -- Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
(a)(1)(G) -- Text of joint press release, issued by Parent and WMF on May
10, 2000 (incorporated by reference to Schedule TO filed by
Parent and Purchaser on May 10, 2000).
(a)(1)(H) -- Summary Advertisement, published on May 23, 2000.
(b) -- None.
(d)(1)(A) -- Agreement and Plan of Merger, dated as of May 10, 2000, among
Parent, Purchaser and WMF.
(d)(1)(B) -- Stockholders Agreement, dated as of May 10, 2000, among Parent,
Capricorn Investors II, L.P., Capricorn Holdings, Inc., Demeter
Holdings Corporation, Phemus Corporation, Commonwealth Overseas
Trading Company Limited, Mohammed A. Al-Tuwaijri, J. Roderick
Heller, III, John D. Reilly and Shekar Narasimhan.
(d)(1)(C) -- Employment Agreement, dated as of May 10, 2000, among WMF,
Parent and Shekar Narasimhan.
(d)(1)(D) -- Employment Agreement, dated as of May 10, 2000, among WMF,
Parent and Charles H. Cremens.
(g) -- None.
(h) -- None.
2
<PAGE>
SIGNATURE
After due 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.
Dated: May 22, 2000
PRUDENTIAL MORTGAGE CAPITAL
ACQUISITION CORP.
By: /s/ Michael B. Jameson
__________________________________
Name: Michael B. Jameson
Title: Vice President
PRUDENTIAL MORTGAGE CAPITAL COMPANY,
LLC
By: /s/ Michael B. Jameson
__________________________________
Name: Michael B. Jameson
Title: Senior Vice President
3
<PAGE>
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Document
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<S> <C> <C>
(a)(1)(A) -- Offer to Purchase, dated as of May 23, 2000.
(a)(1)(B) -- Form of Letter of Transmittal.
(a)(1)(C) -- Form of Notice of Guaranteed Delivery.
(a)(1)(D) -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(1)(E) -- Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust
Companies and other Nominees.
(a)(1)(F) -- Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9.
(a)(1)(G) -- Text of joint press release, issued by Parent and WMF on May 10, 2000
(incorporated by reference to Schedule TO filed by Parent and Purchaser on May
10, 2000).
(a)(1)(H) -- Summary Advertisement, published on May 23, 2000.
(b) -- None.
(d)(1)(A) -- Agreement and Plan of Merger, dated as of May 10, 2000, among Parent,
Purchaser and WMF.
(d)(1)(B) -- Stockholders Agreement, dated as of May 10, 2000, among Parent, Capricorn
Investors II, L.P., Capricorn Holdings, Inc., Demeter Holdings Corporation,
Phemus Corporation, Commonwealth Overseas Trading Company Limited, Mohammed A.
Al-Tuwaijri, J. Roderick Heller, III, John D. Reilly and Shekar Narasimhan.
(d)(1)(C) -- Employment Agreement, dated as of May 10, 2000, among WMF, Parent and Shekar
Narasimhan.
(d)(1)(D) -- Employment Agreement, dated as of May 10, 2000, among WMF, Parent and Charles
H. Cremens.
(g) -- None.
(h) -- None.
</TABLE>
4
<PAGE>
EXHIBIT (a)(1)(A)
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
THE WMF GROUP, LTD.
at $8.90 Net Per Share
by
PRUDENTIAL MORTGAGE CAPITAL ACQUISITION CORP.,
a wholly owned subsidiary of
PRUDENTIAL MORTGAGE CAPITAL COMPANY, LLC
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THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:OO MIDNIGHT, NEW YORK
CITY TIME, ON TUESDAY, JUNE 20, 2000, UNLESS THE OFFER IS EXTENDED (THE
"EXPIRATION DATE").
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Prudential Mortgage Capital Acquisition Corp., a Delaware corporation,
hereby offers to purchase all outstanding shares of common stock, par value
$.0l per share, of The WMF Group, Ltd. at an offer price of $8.90 per share,
net to the seller in cash, without interest. All shares properly tendered and
not properly withdrawn will be purchased at the offer price, upon the terms
and subject to the conditions of the offer.
If you are the record owner of your shares and you tender your shares to us
in the offer, you will not have to pay brokerage fees or similar expenses. If
you own your shares through a broker or other nominee, and your broker tenders
your shares on your behalf, your broker or nominee may charge you a fee for
doing so. You should consult your broker or other nominee to determine whether
any charges will apply.
Tenders pursuant to the offer may be withdrawn at any time prior to 12:00
midnight, New York City time, on June 20, 2000, the expiration date of the
offer, and if not yet accepted for payment, after July 21, 2000.
The common stock is traded on the Nasdaq National Market under the symbol
"WMFG." On May 19, 2000, the most recent practicable date prior to the
announcement of this offer, the closing per share price of the common stock,
as reported on the Nasdaq National Market, was $8.72. Stockholders are urged
to obtain current market quotations for the shares. See Section 7.
You should evaluate carefully all of the information contained or referred
to in this Offer to Purchase and the related Letter of Transmittal and make
your own decision whether to tender shares pursuant to the offer and, if so,
how many shares to tender. You are urged to consult a tax advisor concerning
any Federal, state, local, or foreign tax consequences of a sale of common
stock pursuant to the offer.
Under no circumstances will interest be paid on the offer price for tendered
shares, whether or not we exercise our right to extend the offer.
The Board of Directors of The WMF Group, Ltd. has unanimously approved the
merger agreement (as described below) and the transactions contemplated by the
merger agreement, including the offer and the merger (as described below), and
determined that the terms of the offer and the merger and the other
transactions contemplated by the merger agreement are advisable, fair to, and
in the best interests of, the stockholders of The WMF Group, Ltd. and
recommends that the stockholders of The WMF Group, Ltd. accept and tender
their shares pursuant to the offer. You must, however, make your own decision
whether to tender shares and, if so, how many shares to tender.
The offer is conditioned upon, among other things, (1) any applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
having expired or been terminated, and (2) there being validly tendered and
not properly withdrawn prior to the Expiration Date shares owned by each of
Capricorn Investors II, L.P., Capricorn Holdings, Inc., Demeter Holdings
Corporation, Phemus Corporation, Commonwealth Overseas Trading Company
Limited, Mohammed A. Al-Tuwaijri, J. Roderick Heller, III, John D. Reilly and
Shekar Narasimhan. Each of these stockholders has signed an agreement with
Prudential Mortgage Capital Company, LLC that obligates them to tender their
shares, representing in total approximately 65% of the outstanding shares on a
fully diluted basis, in the offer. The offer is also subject to the other
conditions contained in this Offer to Purchase. See sections 14 and 15 of this
Offer to Purchase.
Questions and requests for assistance may be directed to Morrow & Co., Inc.
(the "Information Agent") or to Prudential Securities Incorporated (the
"Dealer Manager") at their respective addresses and telephone numbers set
forth on the back cover of this Offer to Purchase. Additional copies of this
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed
Delivery and the other related material may be obtained from the Information
Agent at its address and telephone number set forth on the back cover of this
Offer to Purchase. Stockholders may also contact their broker, dealer,
commercial bank, trust company or other nominee for copies of these documents.
The Dealer Manager for the Offer is:
Prudential Securities Incorporated
May 23, 2000
<PAGE>
IMPORTANT
If you wish to tender all or any portion of your shares, you must take the
steps set forth in either (i) or (ii) below prior to the Expiration Date:
(i)(a) complete and sign the Letter of Transmittal (or a facsimile
thereof) in accordance with the instructions in the Letter of Transmittal,
have your signature thereon guaranteed if required by Instruction 1 to the
Letter of Transmittal, deliver the Letter of Transmittal (or such
facsimile), or, in the case of a book-entry transfer effected pursuant to
the procedure set forth in Section 2 of this Offer to Purchase, an "Agent's
Message," (as defined herein) and any other required documents to the
Depositary, and
(b) deliver the certificates for such shares to the Depositary (as
defined herein) along with the Letter of Transmittal (or facsimile) or
deliver such shares pursuant to the procedure for book-entry transfer set
forth in Section 2 of this Offer to Purchase; or
(ii) request your broker, dealer, bank, trust company or other nominee to
effect the transaction for you.
If you have shares registered in the name of a broker, dealer, bank, trust
company or other nominee, you must contact such broker, dealer, bank, trust
company or other nominee if you desire to tender your shares.
If you wish to tender shares and your certificates for shares are not
immediately available or the procedure for book-entry transfer cannot be
completed on a timely basis, or time will not permit all required documents to
reach the Depositary prior to the Expiration Date, your tender may be effected
by following the procedure for guaranteed delivery set forth in Section 2 of
this Offer to Purchase.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
SUMMARY TERM SHEET...................................................... 1
INTRODUCTION............................................................ 5
THE TENDER OFFER........................................................ 7
1. Terms of the Offer.............................................. 7
2. Procedure for Tendering Shares.................................. 9
3. Withdrawal Rights............................................... 11
4. Acceptance for Payment and Payment.............................. 12
5. Certain U.S. Federal Income Tax Consequences.................... 13
6. Price Range of the Shares; Dividends on the Shares.............. 14
7. Effect of the Offer on the Market for the Shares; Share
Quotation; Exchange Act Registration; Margin Regulations....... 14
8. Certain Information Concerning WMF.............................. 15
Certain Information Concerning the Purchaser and Prudential
9. Mortgage........................................................ 17
10. Source and Amount of Funds...................................... 17
11. Contacts and Transactions with WMF; Background of the Offer..... 17
12. Purpose of the Offer; Plans for WMF; The Merger Agreement; The
Stockholders Agreement; Employment Agreements.................. 19
13. Dividends and Distributions..................................... 29
14. Certain Conditions of the Offer................................. 30
15. Certain Legal Matters........................................... 32
16. Fees and Expenses............................................... 34
17. Miscellaneous................................................... 35
SCHEDULE I EXECUTIVE OFFICERS OF PRUDENTIAL MORTGAGE CAPITAL COMPANY,
LLC AND DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER.............. I-1
SCHEDULE II INFORMATION CONCERNING THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA AND THE DIRECTORS AND EXECUTIVE OFFICERS OF THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA........................................... II-1
</TABLE>
i
<PAGE>
SUMMARY TERM SHEET
Prudential Mortgage Capital Acquisition Corp. is offering to purchase all of
the outstanding shares of common stock of The WMF Group, Ltd. for $8.90 per
share, net to you in cash. The following are some of the questions you, as a
stockholder of WMF, may have and answers to those questions. We urge you to
read the remainder of this Offer to Purchase and the Letter of Transmittal
carefully because additional important information is contained in the
remainder of this Offer to Purchase and the Letter of Transmittal.
WHO IS OFFERING TO BUY MY SHARES?
Our name is Prudential Mortgage Capital Acquisition Corp. We are a Delaware
corporation formed for the purpose of making this offer. We are a wholly owned
subsidiary of Prudential Mortgage Capital Company, LLC, a Delaware limited
liability company, which is referred to in this Offer to Purchase as
"Prudential Mortgage." See Section 9 of this Offer to Purchase--"CERTAIN
INFORMATION CONCERNING THE PURCHASER AND PRUDENTIAL MORTGAGE."
WHAT SHARES ARE BEING SOUGHT IN THE OFFER?
We are offering to purchase all of the outstanding shares of common stock of
WMF. See "INTRODUCTION" and Section 1 of this Offer to Purchase--"TERMS OF THE
OFFER."
HOW MUCH ARE YOU OFFERING TO PAY, WHAT IS THE FORM OF PAYMENT AND WILL I HAVE
TO PAY ANY FEES OR COMMISSIONS?
We are offering to pay $8.90 per share, net to you, in cash. If you are the
record owner of your shares and you tender your shares to us in the offer, you
will not have to pay brokerage fees or similar expenses. If you own your shares
through a broker or other nominee, and your broker tenders your shares on your
behalf, your broker or nominee may charge you a fee for doing so. You should
consult your broker or nominee to determine whether any charges will apply. See
"INTRODUCTION" and Section 1 of this Offer to Purchase--"TERMS OF THE OFFER."
DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT?
Prudential Mortgage and one or more of its affiliates will provide the
Purchaser with sufficient funds to acquire all tendered shares and shares to be
acquired in the merger which is expected to follow the successful completion of
the offer. The offer is not conditioned upon any financing arrangements. See
Section 10 of this Offer to Purchase--"SOURCE AND AMOUNT OF FUNDS."
IS YOUR FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER IN THE OFFER?
We do not think our financial condition is relevant to your decision whether
to tender shares and accept the offer because: (1) the offer is being made for
all outstanding shares solely for cash that we, or one of our affiliates has on
hand, (2) the offer is not subject to any financing condition, and (3) if we
consummate the offer, we will acquire all remaining shares for the same cash
price in the merger.
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER?
Unless the offer is extended, you will have until 12:00 midnight, New York
City time, on Tuesday, June 20, 2000, to decide whether to tender your shares
in the offer. Further, if you cannot deliver everything that is required in
order to make a valid tender by that time, you may be able to use a guaranteed
delivery procedure, which is described later in this Offer to Purchase. See
Sections 1 and 2 of this Offer to Purchase--"TERMS OF THE OFFER" and--
"PROCEDURE FOR TENDERING SHARES--Guaranteed Delivery."
1
<PAGE>
CAN THE OFFER BE EXTENDED AND UNDER WHAT CIRCUMSTANCES?
Yes. We have agreed with WMF that we may extend the offer if, among other
things, at the time the offer is scheduled to expire (including at the end of
an earlier extension) any of the offer conditions is not satisfied (or waived
by us); if we are legally required to extend the offer; or if all of the
conditions to the offer are satisfied or waived, but less than 90% of the
outstanding shares are validly tendered and not properly withdrawn prior to the
initial expiration date of the offer, for a period not to exceed twenty days
following the initial expiration date of the offer. See Section 1 of this Offer
to Purchase --"TERMS OF THE OFFER."
We may also elect to provide a "subsequent offering period" for the offer. A
subsequent offering period, if one is included, will be an additional period of
time beginning after we have purchased shares tendered during the offer, during
which stockholders may tender their shares and receive the offer consideration.
We do not currently intend to provide a subsequent offering period, although we
reserve the right to do so. See Section 1 of this Offer to Purchase--"TERMS OF
THE OFFER."
HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?
If we extend the offer, we will inform Wilmington Trust Company (which is the
depositary for the offer) of that fact and will make a public announcement of
the extension, by not later than 9:00 a.m., New York City time, on the day
after the day on which the offer was scheduled to expire. See Section 1 of this
Offer to Purchase--"TERMS OF THE OFFER."
WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER?
We are not obligated to purchase any tendered shares unless there have been
validly tendered and not properly withdrawn prior to the expiration date of the
offer shares owned by each of Capricorn Investors II, L.P., Capricorn Holdings,
Inc., Demeter Holdings Corporation, Phemus Corporation, Commonwealth Overseas
Trading Company Limited, Mohammed A. Al-Tuwaijri, J. Roderick Heller, III, John
D. Reilly and Shekar Narasimhan. Each of these stockholders has signed an
agreement with us that obligates them to tender their shares, representing in
total approximately 65% of the outstanding shares on a fully diluted basis, in
the offer. See "INTRODUCTION" and Section 12 of this Offer to Purchase--
"PURPOSE OF THE OFFER; PLANS FOR WMF; THE MERGER AGREEMENT; THE STOCKHOLDERS
AGREEMENT."
In addition, the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 must have expired or been terminated. The offer is
also subject to a number of other conditions. See Section 14 of this Offer to
Purchase--"CERTAIN CONDITIONS OF THE OFFER." These conditions include (i) that
all required notices relating to the offer and merger have been provided to
GNMA (as defined herein) and FHA (as defined herein) and no objections have
been received from GNMA or FHA and (ii) that all required approvals and
consents relating to the offer and merger have been received from Fannie Mae
(as defined herein).
HOW DO I TENDER MY SHARES?
To tender shares, you must take the steps set forth in either (i) or (ii)
below prior to the expiration of the offer:
(i)(a) complete, sign and deliver the Letter of Transmittal or, in the
case of a book-entry transfer, deliver an "agent's message," and deliver
any other required documents to the depositary, and
(b) deliver the certificates for your shares to the depositary or
deliver your shares pursuant to the procedure for book-entry transfer; or
2
<PAGE>
(ii) request your broker, dealer, bank, trust company or other nominee to
effect the transaction for you.
If your shares are held in street name, the shares can be tendered only by
your nominee through The Depository Trust Company. If you cannot deliver
something that is required to the depositary by the expiration of the offer,
you may get a little extra time to do so by having a broker, a bank or other
fiduciary, which is a member of the Securities Transfer Agents Medallion
Program or other eligible institution, guarantee that the missing items will be
received by the depositary within three Nasdaq National Market trading days.
However, the depositary must receive the missing items within that three Nasdaq
trading day period. See Section 2 of this Offer to Purchase--"PROCEDURE FOR
TENDERING SHARES."
UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED SHARES?
You can withdraw shares at any time until the offer has expired and, if we
have not accepted your shares for payment by July 21, 2000, you can withdraw
them at any time after such date. If we decide to provide a subsequent offering
period, we will accept shares tendered during that period immediately and thus
you will not be able to withdraw shares tendered during any subsequent offering
period. See Sections 1 and 3 of this Offer to Purchase--"TERMS OF THE OFFER"
and "WITHDRAWAL RIGHTS."
HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES?
To withdraw shares, you must deliver a written notice of withdrawal, or a
facsimile of one, with the required information to the depositary while you
still have the right to withdraw the shares. See Sections 1 and 3 of this Offer
to Purchase--"TERMS OF THE OFFER" and "WITHDRAWAL RIGHTS."
WHAT DOES THE WMF BOARD OF DIRECTORS THINK OF THE OFFER?
The Purchaser is making the offer pursuant to a merger agreement with WMF.
The Board of Directors of WMF unanimously approved the merger agreement, the
Purchaser's offer and its proposed merger with WMF. The WMF Board of Directors
has determined that the offer and the merger are advisable, fair to, and in the
best interests of, WMF's stockholders and it recommends that stockholders
accept the offer and tender their shares. See Section 11 of this Offer to
Purchase--"CONTACTS AND TRANSACTIONS WITH WMF; BACKGROUND OF THE OFFER." WMF
has prepared a Solicitation and Recommendation Statement containing additional
information regarding the WMF Board of Directors' determination and
recommendation, which is being sent to you contemporaneously with this Offer to
Purchase.
WILL THE TENDER OFFER BE FOLLOWED BY A MERGER IF ALL THE SHARES ARE NOT
TENDERED IN THE OFFER?
Stockholders owning approximately 65% in total of the outstanding shares on a
fully diluted basis have already agreed to tender their shares to us. Under the
Delaware General Corporation Law and WMF's certificate of incorporation, if we
acquire, through the offer or otherwise, at least a majority of the outstanding
shares (which will be the case if the stockholders who have already agreed to
tender their shares to us tender and we accept for payment the shares tendered
pursuant to the offer), we would have sufficient voting power to effect the
merger through our sole written consent and without the affirmative vote of any
other stockholder of WMF or the holding of a meeting of stockholders. If that
merger takes place, we will own all of the shares of WMF and all other
stockholders of WMF will receive the same price paid in the offer, that is,
$8.90 per share in cash (or any other higher price per share which is paid in
the offer). See "INTRODUCTION" and Section 12 of this Offer to Purchase --
"PURPOSE OF THE OFFER; PLANS FOR WMF; THE MERGER AGREEMENT; THE STOCKHOLDERS
AGREEMENT." There are no appraisal rights available in connection with the
offer.
3
<PAGE>
However, if the merger takes place, stockholders who have not sold their shares
in the offer will have appraisal rights under Delaware law. See Section 12 of
this offer to purchase--"PURPOSE OF THE OFFER; PLANS FOR WMF; THE MERGER
AGREEMENT; THE STOCKHOLDERS AGREEMENT--Appraisal Rights."
IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES?
If the merger takes place, stockholders who do not tender their Shares in the
offer will receive in the merger the same amount of cash per share ($8.90)
which they would have received had they tendered their shares in the offer.
However, until the merger is consummated, or if the merger were not to take
place for some reason, the number of stockholders of WMF and the shares of WMF
which are still in the hands of the public may be so small that there will no
longer be an active public trading market (or, possibly, any public trading
market) for the shares. Also, the shares may no longer be eligible to be traded
on the Nasdaq National Market or any other securities exchange, and WMF may
cease making filings with the Securities and Exchange Commission or otherwise
cease being required to comply with the Securities and Exchange Commission's
rules relating to publicly held companies. See Sections 7 and 12 of this Offer
to Purchase--"EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; SHARE
QUOTATION; EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS" and "PURPOSE OF THE
OFFER; PLANS FOR WMF; THE MERGER AGREEMENT; THE STOCKHOLDERS AGREEMENT."
WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?
On May 9, 2000, the last trading day before Prudential Mortgage and WMF
announced that they had signed the merger agreement, the closing price of the
shares reported by The Nasdaq National Market was $6.00 per share. On May 19,
2000, the most recent practicable date prior to the announcement of our offer,
the closing price of the shares reported on The Nasdaq National Market was
$8.72. We advise you to obtain a recent quotation for shares of WMF in deciding
whether to tender your shares. See Section 6 of this Offer to Purchase--"PRICE
RANGE OF THE SHARES; DIVIDENDS ON THE SHARES."
WILL TAXES BE WITHHELD FROM THE PAYMENTS I RECEIVE FOR TENDERING MY SHARES?
Any tendering stockholder (or other payee) required to complete a Letter of
Transmittal who fails to complete fully and sign the box captioned "Substitute
Form W-9" included in the Letter of Transmittal, and to make the other required
certifications specified on the Substitute Form W-9, may be subject to a
required federal income tax withholding of 31% of the gross proceeds paid to
the stockholder (or other payee) in the offer. See Section 5 of this Offer to
Purchase--"Certain U.S. Federal Income Tax Consequences." Certain stockholders
(including, among others, all corporations and certain foreign individuals and
entities) are not subject to this withholding. You are urged to consult your
own tax advisor if you have questions concerning the tax implications of the
offer or the merger to you.
WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?
You can call Morrow & Co., Inc. toll free at (800) 566-9061 or Prudential
Securities Incorporated toll free at (888) 713-4198. Morrow & Co., Inc. is
acting as the information agent for our offer. Prudential Securities
Incorporated is acting as dealer manager for our offer. See the back cover of
this Offer to Purchase.
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To the Holders of Common Stock of WMF.
INTRODUCTION
Prudential Mortgage Capital Acquisition Corp., a Delaware corporation (the
"Purchaser") and a wholly owned subsidiary of Prudential Mortgage Capital
Company, LLC, a Delaware limited liability company ("Prudential Mortgage"),
hereby offers to purchase all the issued and outstanding shares (the "Shares")
of Common Stock, par value $.01 per share (the "Common Stock"), of The WMF
Group, Ltd., a Delaware corporation ("WMF"), at a purchase price of $8.90 per
Share, net to the seller in cash, without interest thereon (the "Offer
Price"), upon the terms and subject to the conditions set forth in this Offer
to Purchase and in the related Letter of Transmittal (which, together with any
amendments or supplements hereto or thereto, collectively constitute the
"Offer").
If you are the record owner of your Shares and you tender your Shares to us
in the Offer, you will not have to pay brokerage fees or similar expenses. If
you own your Shares through a broker or other nominee, and your broker tenders
your Shares on your behalf, your broker or nominee may charge you a fee for
doing so. You should consult your broker or nominee to determine whether any
charges will apply. The Purchaser will pay all fees and expenses of Prudential
Securities Incorporated, which is acting as Dealer Manager (the "Dealer
Manager"), Wilmington Trust Company, which is acting as the Depositary (the
"Depositary"), and Morrow & Co., Inc., which is acting as the Information
Agent (the "Information Agent"), incurred in connection with the Offer. See
Section 16.
The Board of Directors of WMF (the "WMF Board") has unanimously approved the
Merger Agreement (as defined herein) and the other transactions contemplated
by the Merger Agreement, including the Offer and the Merger (as defined
herein), and determined that the terms of the Offer and the Merger and the
other transactions contemplated by the Merger Agreement are advisable, fair
to, and in the best interests of, stockholders of WMF and recommends that
stockholders of WMF accept the Offer and tender their Shares pursuant to the
Offer. The factors considered by the WMF Board in arriving at its decision to
approve the Merger Agreement and the other transactions contemplated thereby
and to recommend that stockholders of WMF accept the Offer and tender their
Shares pursuant to the Offer are described in WMF's
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
to be filed with the Securities and Exchange Commission (the "Commission") and
sent to you contemporaneously with this Offer to Purchase.
Credit Suisse First Boston Incorporated ("CSFB") has acted as WMF's
financial advisor. The opinion of CSFB dated May 10, 2000, that, as of such
date, the consideration to be received in the Offer and the Merger by WMF's
stockholders is fair to the holders of Shares from a financial point of view,
will be set forth in full as an exhibit to the Schedule 14D-9. You should read
that opinion carefully in its entirety.
We are not required to purchase Shares unless, among other things, (1) any
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act") has expired or been terminated, and (2) there have
been validly tendered and not properly withdrawn prior to the Expiration Date
Shares owned by each of Capricorn Investors II, L.P., Capricorn Holdings,
Inc., Demeter Holdings Corporation, Phemus Corporation, Commonwealth Overseas
Trading Company Limited, Mohammed A. Al-Tuwaijri, J. Roderick Heller, III,
John D. Reilly and Shekar Narasimhan, representing in total approximately 65%
of the outstanding Shares on a fully diluted basis (the "Minimum Condition").
WMF Washington Mortgage Corp. ("Washington Mortgage"), a wholly-owned
subsidiary of WMF, is a Federal Housing Administration ("FHA") approved
mortgagee and is approved by the Federal National Mortgage Association
("Fannie Mae") to participate as seller/servicer in Fannie Mae's multifamily
Delegated Underwriting and Servicing program. WMF/Huntoon, Paige Associates
Limited ("WMF/Huntoon"), a wholly-owned subsidiary of Washington Mortgage is
an FHA-approved mortgagee, a Government National Mortgage Association ("GNMA")
issuer, and a Fannie Mae approved seller/servicer. The closing of the Offer is
also conditional on (1) all required notices relating to the transactions
contemplated by the Merger Agreement having
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been provided to each of GNMA and FHA, no objections having been received from
GNMA or FHA which would cause WMF and its subsidiaries not to be eligible to
issue mortgage-backed securities guaranteed by GNMA or to originate, purchase,
hold and service FHA-insured mortgage loans in the same manner as on the date
of the Merger Agreement and (2) all required approvals, consents, licenses,
accreditations, registrations and qualifications relating to the transactions
contemplated by the Merger Agreement having been received from Fannie Mae for
WMF and its subsidiaries to be able to originate, purchase, hold and service
mortgage loans to be sold to Fannie Mae in the same manner as on the date of
the Merger Agreement. See Section 14 and Section 15 "CERTAIN LEGAL MATTERS--
GNMA, FHA and Fannie Mae Notifications and Approvals."
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of May 10, 2000 (the "Merger Agreement"), among the Purchaser, Prudential
Mortgage and WMF. The Merger Agreement provides, among other things, for the
making of the Offer by the Purchaser and further provides that, following the
consummation of the Offer, upon the terms and subject to the conditions of the
Merger Agreement and the General Corporation Law of the State of Delaware (the
"DGCL"), the Purchaser will be merged with and into WMF (the "Merger") with
WMF surviving the Merger as a wholly owned subsidiary of Prudential Mortgage.
In the Merger, each issued Share (other than Shares owned by the Purchaser,
Prudential Mortgage or WMF or their respective subsidiaries, or by
stockholders, if any, who are entitled to and properly exercise appraisal
rights under Delaware law) will be converted into the right to receive an
amount in cash equal to the price per Share paid pursuant to the Offer,
without interest thereon.
Simultaneously with the execution of the Merger Agreement, Prudential
Mortgage entered into a Stockholders Agreement, dated as of May 10, 2000 (the
"Stockholders Agreement"), with each of Capricorn Investors II, L.P.,
Capricorn Holdings, Inc., Demeter Holdings Corporation, Phemus Corporation,
Commonwealth Overseas Trading Company Limited, Mohammed A. Al-Tuwaijri, J.
Roderick Heller, III, John D. Reilly and Shekar Narasimhan (collectively, the
"Selling Stockholders"), pursuant to which each Selling Stockholder has agreed
to tender Shares, representing in total approximately 65% of the outstanding
Shares on a fully diluted basis, in the Offer at a price per Share equal to
the Offer Price. Pursuant to the Stockholders Agreement, the Selling
Stockholders have also agreed that, among other things, they will not transfer
their Shares subject to the Stockholders Agreement other than to the Purchaser
and will vote their Shares subject to the Stockholders Agreement in favor of
the Merger and against any competing transactions.
WMF has informed us that, as of May 10, 2000, there were 10,958,302 Shares
issued and outstanding and 1,685,496 Shares reserved for issuance upon the
exercise of outstanding options, warrants or other rights to purchase Shares
from WMF. Based upon the foregoing and assuming that no Shares are otherwise
issued after May 10, 2000, there would be 12,643,798 Shares outstanding on a
fully diluted basis and, upon satisfaction of the Minimum Condition, the
Purchaser will own 65% of such Shares outstanding on a fully diluted basis. If
the Minimum Condition and other conditions to the Offer are satisfied and the
Offer is consummated, we will own a sufficient number of Shares to ensure that
the Merger will be approved and will be able to cause the Merger to occur
without the consent of any other WMF stockholders.
We made the filing pursuant to the HSR Act applicable to the Offer on May
19, 2000. Accordingly, the waiting period under the HSR Act should expire on
June 3, 2000, unless the waiting period is extended as described in Section
15.
Certain U.S. federal income tax consequences of the sale of Shares pursuant
to the Offer and the conversion of Shares pursuant to the Merger are described
in Section 5.
This Offer to Purchase and the related Letter of Transmittal contain
important information that should be read before any decision is made with
respect to the Offer.
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THE TENDER OFFER
1. Terms of the Offer
Upon the terms and subject to the conditions of the Offer, we will accept
for payment and pay for all Shares validly tendered prior to the Expiration
Date and not theretofore properly withdrawn in accordance with Section 3. The
term "Expiration Date" means 12:00 midnight, New York City time, on Tuesday,
June 20, 2000 unless and until we shall have extended the period of time
during which the Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date on which the Offer, as so extended by us,
will expire. As used in this Offer to Purchase, "business day" means any day,
other than Saturday, Sunday or a Federal holiday, and shall consist of the
time period from 12:01 a.m. through 12:00 midnight New York City time.
In the Merger Agreement, we agreed that we will not (i) reduce the number of
Shares to be purchased in the Offer, (ii) reduce the Offer Price, (iii)
materially modify or add to the conditions to the Offer, including any change
to the Minimum Condition, (iv) change the form of consideration payable in the
Offer, (v) except as provided below, or as may be required by any rule,
regulation, interpretation or position of the Commission, change the
Expiration Date of the Offer or (vi) amend any other condition of the Offer in
any material respect in a manner adverse to the holders of the Shares. The
Merger Agreement provides that, without the consent of WMF, we may extend the
Offer beyond its scheduled expiration date in the following events: (i) if at
any Expiration Date, any of the conditions to the Offer shall not have been
satisfied or waived, until such conditions are satisfied or waived; (ii) for
any period required by applicable law; and (iii) if all of the conditions to
the Offer are satisfied or waived, but the number of Shares validly tendered
and not properly withdrawn is less than the amount necessary to effect a
parent-subsidiary merger pursuant to Section 253 of the DGCL, for a period not
to exceed twenty days following the initial Expiration Date of the Offer. In
addition, we have agreed that, in the event that (i) the Minimum Condition has
not been satisfied or (ii) any condition set forth in paragraph (a), (d) or
(e) of Section 14 of this Offer to Purchase is not satisfied or waived at the
scheduled Expiration Date of the Offer, at the reasonable request of WMF, we
shall extend the Expiration Date of the Offer in increments of five business
days each until the earliest to occur of (1) the satisfaction or waiver of
such condition, (2) our reasonably determining that such condition to the
Offer is not capable of being satisfied on or prior to the thirtieth day
following the initial expiration date of the Offer, (3) the termination of the
Merger Agreement in accordance with its terms and (4) the thirtieth day
following the initial Expiration Date of the Offer.
Subject to the terms of the Merger Agreement (which, as described above,
prohibit certain amendments) and the applicable rules and regulations of the
Commission, the Purchaser reserves the right (but shall not be obligated
except as described in this Section 1), at any time and from time to time, and
regardless of whether or not any of the events or facts set forth in Section
14 of this Offer to Purchase shall have occurred, (a) to extend the period of
time during which the Offer is open, and thereby delay acceptance for payment
of and the payment for any Shares, by giving oral or written notice of such
extension to the Depositary, (b) to elect to provide a Subsequent Offering
Period (as defined herein) or the Offer as permitted by the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and (c) to amend the
Offer in any other respect by giving oral or written notice of such amendment
to the Depositary.
Under no circumstances will interest be paid on the purchase price for
tendered Shares, whether or not the Purchaser exercises its right to extend
the Offer.
If by 12:00 midnight, New York City time, on Tuesday, June 20, 2000 (or any
date or time then set as the Expiration Date), any or all of the conditions to
the Offer have not been satisfied or waived, we reserve the right (but shall
not be obligated except as described in this Section 1), subject to the terms
and conditions contained in the Merger Agreement and to the applicable rules
and regulations of the Commission, (a) to terminate the Offer and not accept
for payment or pay for any Shares and promptly return all tendered Shares to
tendering stockholders, (b) to elect to provide a Subsequent Offering Period
for the Offer, (c) to waive all the unsatisfied conditions and accept for
payment and pay for all Shares validly tendered prior to the Expiration Date
and not
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theretofore withdrawn, (d) to extend the Offer and, subject to the right of
stockholders to withdraw Shares until the Expiration Date, retain the Shares
that have been tendered during the period or periods for which the Offer is
extended or (e) to amend the Offer.
Any extension, waiver, amendment or termination will be followed as promptly
as practicable by public announcement thereof. In the case of an extension,
the Exchange Act requires that the announcement be issued no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. Subject to applicable law under the Exchange Act
rules, which require that any material change in the information published,
sent or given to stockholders in connection with the Offer be promptly
disseminated to stockholders in a manner reasonably designed to inform
stockholders of such change, and without limiting the manner in which we may
choose to make any public announcement, we will not have any obligation to
publish, advertise or otherwise communicate any such public announcement other
than by making a release to the Dow Jones News Service.
If we extend the Offer or if we are delayed in our acceptance for payment of
or payment (whether before or after our acceptance for payment of Shares) for
Shares or we are unable to pay for Shares pursuant to the Offer for any
reason, then, without prejudice to our rights under the Offer, the Depositary
may retain tendered Shares on behalf of us, and such Shares may not be
withdrawn except to the extent tendering stockholders are entitled to
withdrawal rights as described in Section 3. However, our ability to delay the
payment for Shares that we have accepted for payment is limited by the
Exchange Act, which requires that a bidder pay the consideration offered or
return the securities deposited by or on behalf of holders of securities
promptly after the termination or withdrawal of such bidder's offer, and by
the terms of the Merger Agreement, which require that we pay for Shares
accepted for payment as soon as reasonably practicable after the Expiration
Date.
If we make a material change in the terms of the Offer or the information
concerning the Offer or waive a material condition of the Offer, we will
disseminate additional tender offer materials and extend the Offer to the
extent required under the Exchange Act. The minimum period during which an
offer must remain open following material changes in the terms of such offer
or information concerning such offer, other than a change in price or a change
in the percentage of securities sought, will depend upon the facts and
circumstances then existing, including the relative materiality of the changed
terms or information. In the Commission's view, an offer should remain open
for a minimum of five business days from the date the material change is first
published, sent or given to stockholders, and, with respect to a change in
price or, subject to certain limitations, a change in the percentage of
securities sought, a minimum of ten business days may be required to allow for
adequate dissemination and investor response.
Under the Exchange Act, we may, subject to certain conditions, provide a
subsequent offering period of from 3 business days to 20 business days in
length following the expiration of the Offer ("Subsequent Offering Period"). A
Subsequent Offering Period would be an additional period of time, following
the expiration of the Offer and the purchase of Shares in the Offer, during
which stockholders may tender Shares not tendered into the Offer. A Subsequent
Offering Period, if one is included, is not an extension of the Offer, which
already will have been completed.
During a Subsequent Offering Period, tendering stockholders will not have
withdrawal rights and we will immediately accept and promptly purchase and pay
for any Shares tendered at the same price paid in the Offer. The Exchange Act
provides that we may provide a Subsequent Offering Period so long as, among
other things, (i) the initial 20 business day period of the Offer has expired,
(ii) we offer the same form and amount of consideration for Shares in the
Subsequent Offering Period as in the initial Offer, (iii) we immediately
accept and promptly pay for all securities tendered during the Offer prior to
its expiration, (iv) we announce the results of the Offer, including the
approximate number and percentage of Shares deposited in the Offer, no later
than 9:00 a.m. New York City time on the next business day after the
Expiration Date and immediately begin the Subsequent Offering Period and (v)
we immediately accept and promptly pay for Shares as they are tendered during
the Subsequent Offering Period. Any decision to provide a Subsequent Offering
Period will be announced at least 5 business days prior to the Expiration
Date.
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We do not currently intend to provide a Subsequent Offering Period for the
Offer, although we reserve the right to do so in our sole discretion.
WMF has provided us with WMF's stockholder lists and security position
listing for the purpose of disseminating the Offer to holders of Shares. We
will mail this Offer to Purchase, the related Letter of Transmittal and other
relevant materials to record holders of Shares, and will furnish the same to
brokers, dealers, banks, trust companies and similar persons whose names, or
the names of whose nominees, appear on the stockholder lists, or, if
applicable, who are listed as participants in a clearing agency's security
position listing, for subsequent transmittal to beneficial owners of Shares.
The Schedule 14D-9 is being sent to WMF stockholders contemporaneously with
this Offer to Purchase.
2. Procedure for Tendering Shares
Valid Tender. In order for you to validly tender Shares pursuant to the
Offer, you must take the steps set forth in either (i) or (ii) below before
the Expiration Date:
(i) the Depositary must receive, at one of its addresses set forth on the
back cover of this Offer to Purchase, prior to the Expiration Date:
(a) Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, together with any required signature
guarantees, or, in the case of a book-entry transfer effected pursuant
to the procedure set forth in this Section 2, an Agent's Message (as
defined herein), and any other required documents, and
(b) the certificates for your Shares, or you must cause your Shares
to be delivered pursuant to the procedure for book-entry transfer set
forth in this Section 2 (and a Book-Entry Confirmation (as defined
below) must be received by the Depositary); or
(ii) If you cannot timely perform (i) above, you must comply with the
guaranteed delivery procedures described below.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at The Depository Trust Company (the "Book-Entry Transfer
Facility") for purposes of the Offer within two business days after the date
of this Offer to Purchase. Any financial institution that is a participant in
the Book-Entry Transfer Facility may tender Shares in accordance with the
Book-Entry Transfer Facility Automated Tender Offer Program ("ATOP"). If ATOP
is available to such participants, they may tender Shares by causing the Book-
Entry Transfer Facility to transfer Shares into the Depositary's account in
accordance with the Book-Entry Transfer Facility's procedures for transfer. A
stockholder tendering through ATOP must expressly acknowledge that the
stockholder has received and agreed to be bound by the Letter of Transmittal
and that the Letter of Transmittal may be enforced against such stockholder.
In order to tender Shares by means of ATOP, the procedures for ATOP delivery
must be duly and timely completed prior to 5:00 p.m. New York City time, on
the Expiration Date. However, although you may cause delivery of Shares to be
effected through book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facility, the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message, and any other required documents, must, in
any case, be transmitted to, and received by, the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date, or you must comply with the guaranteed delivery procedures
described below. The confirmation of a book-entry transfer of Shares into the
Depositary's account at the Book-Entry Transfer Facility as described above is
referred to herein as a "Book-Entry Confirmation."
Delivery of documents to the Book-Entry Transfer Facility in accordance with
the Book-Entry Transfer Facility's procedures does not constitute delivery to
the Depositary.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility
has received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that we may
enforce such agreement against the participant.
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The method of delivery of Shares, the Letter of Transmittal and all other
required documents, including delivery through the Book-Entry Transfer
Facility, is at your sole election and risk. Your Shares will be deemed
delivered only when actually received by the Depositary (including, in the
case of a Book-Entry Transfer, by Book-Entry Confirmation). If delivery is by
mail, registered mail with return receipt requested, properly insured, is
recommended. In all cases, you should allow sufficient time to ensure timely
delivery.
Signature Guarantees. Signatures on your Letter of Transmittal must be
guaranteed unless (a) the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section 2, includes any
participant in the Book-Entry Transfer Facility's system whose name appears on
a security position listing as the owner of the Shares) of Shares tendered
therewith and such registered holder has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (b) your Shares are tendered for
the account of a financial institution (including most commercial banks,
savings and loan associations and brokerage houses) that is a participant in
the Security Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(such participant, an "Eligible Institution"). If a signature guarantee is
required, it must be provided by an Eligible Institution. See Instructions 1
and 5 to the Letter of Transmittal. If the certificates for Shares are
registered in the name of a person other than the signer of the Letter of
Transmittal, or if payment is to be made or certificates for Shares not
tendered or not accepted for payment are to be returned to a person other than
the registered holder of the certificates surrendered, the tendered
certificates must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name or names of the registered holders or
owners appear on the certificates, with the signatures on the certificates or
stock powers guaranteed as described above. See Instructions 1 and 5 to the
Letter of Transmittal.
Guaranteed Delivery. If you wish to tender Shares pursuant to the Offer and
your certificates for Shares are not immediately available or you cannot
complete the procedures for book-entry transfer on a timely basis or time will
not permit all required documents to reach the Depositary prior to the
Expiration Date, your tender may be effected if all the following conditions
are met:
(i) your tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by us, is received by the
Depositary, as provided below, prior to the Expiration Date; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation with respect to all such Shares),
together with a Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or, in
the case of a book-entry transfer, an Agent's Message, and any other
required documents are received by the Depositary within three trading days
after the date of execution of such Notice of Guaranteed Delivery. A
"trading day" is any day on which the Nasdaq National Market operated by
the National Association of Securities Dealers, Inc. (the "NASD") is open
for business.
You may deliver the Notice of Guaranteed Delivery to the Depositary by hand
or transmit it by telegram, facsimile transmission or mail to the Depositary.
You must include a guarantee by an Eligible Institution in the form set forth
in such Notice of Guaranteed Delivery.
The valid tender of Shares by you pursuant to one of the procedures
described above will constitute a binding agreement between you and the
Purchaser upon the terms and subject to the conditions of the Offer.
Appointment. By executing a Letter of Transmittal (or a facsimile thereof),
you will irrevocably appoint our designees as your attorneys-in-fact and
proxies in the manner set forth in the Letter of Transmittal, each with full
power of substitution, to the full extent of your rights with respect to the
Shares tendered by you and accepted for payment by us and with respect to any
and all other Shares or other securities or rights issued or issuable in
respect of such Shares on or after May 16, 2000. All such proxies will be
considered coupled with an interest in the tendered Shares. Such appointment
will be effective when, and only to the extent that, we accept for payment
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Shares tendered by you as provided herein. Upon such appointment, all prior
powers of attorney, proxies and consents given by you with respect to such
Shares or other securities or rights will, without further action, be revoked
and you may not give any subsequent powers of attorney, proxies, consents or
revocations (which, if given, will not be effective). Our designees will
thereby be empowered to exercise all your voting and other rights with respect
to such Shares and other securities or rights in respect of any annual,
special or adjourned meeting of the stockholders of WMF, actions by written
consent in lieu of any such meeting or otherwise, as they in their sole
discretion deem proper. We reserve the right to require that, in order for
Shares to be deemed validly tendered, immediately upon our acceptance for
payment of such Shares, we must be able to exercise full voting, consent and
other rights with respect to such Shares and other securities or rights,
including voting at any meeting of stockholders.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by us in our sole discretion, which determination will be
final and binding. We reserve the absolute right to reject any or all tenders
that we determine are not in proper form or the acceptance for payment of or
payment for which may, in the opinion of our counsel, be unlawful. We also
reserve the absolute right to waive any defect or irregularity in the tender
of any Shares of any particular stockholder whether or not similar defects or
irregularities are waived in the case of other stockholders. No tender of
Shares will be deemed to have been validly made until all defects or
irregularities relating thereto have been cured or waived. None of the
Purchaser, Prudential Mortgage, the Depositary, the Information Agent, the
Dealer Manager or any other person will be under any duty to give notification
of any defects or irregularities in tenders or incur any liability for failure
to give any such notification. Our interpretation of the terms and conditions
of the Offer (including the Letter of Transmittal and the instructions
thereto) will be final and binding.
Backup Withholding. In order to avoid "backup withholding" of U.S. federal
income tax on payments of cash pursuant to the Offer, when surrendering Shares
in the Offer, you must, unless an exemption applies, provide the Depositary
with your correct taxpayer identification number ("TIN") on a Substitute Form
W-9, included in the Letter of Transmittal, and certify under penalties of
perjury that such TIN is correct and that you are not subject to backup
withholding. If you do not provide your correct TIN or fail to provide the
certifications described above, the Internal Revenue Service (the "IRS") may
impose a penalty on you and payment of cash to you pursuant to the Offer may
be subject to backup withholding of 31%. If you surrender Shares pursuant to
the Offer, you should complete and sign the main signature form of the Letter
of Transmittal and the Substitute Form W-9 included as part of the Letter of
Transmittal to provide the information and certification necessary to avoid
backup withholding (unless an applicable exemption exists and is proved in a
manner satisfactory to us and the Depositary). Certain stockholders
(including, among others, all corporations and certain foreign individuals and
entities) are not subject to backup withholding. Noncorporate foreign
stockholders should complete and sign the main signature form and a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 9 to the
Letter of Transmittal.
3. Withdrawal Rights
Except as otherwise provided in this Section 3, tenders of Shares are
irrevocable. You may withdraw Shares that you have previously tendered
pursuant to the Offer pursuant to the procedures set forth below at any time
prior to the Expiration Date and, unless theretofore accepted for payment and
paid for by us pursuant to the Offer, you may also withdraw your previously
tendered Shares at any time after July 21, 2000.
In order for your withdrawal to be effective, a written notice of withdrawal
must be timely received by the Depositary at one of its addresses set forth on
the back cover of this Offer to Purchase. Any such notice must specify the
name of the person having tendered the Shares to be withdrawn, the number of
Shares to be withdrawn and the name of the registered holder of the Shares to
be withdrawn, if different from the name of the person who tendered the
Shares. If certificates for Shares have been delivered or otherwise identified
to the Depositary, then, prior to the physical release of such certificates,
you must submit the serial numbers shown on the particular certificates to be
withdrawn to the Depositary and, unless such Shares have been tendered by an
Eligible Institution, the signatures on the notice of withdrawal must be
guaranteed by an Eligible Institution. If
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your Shares were delivered pursuant to the procedures for book-entry transfer
described in Section 2, your notice of withdrawal must also specify the name
and number of the account at the Book-Entry Transfer Facility to be credited
with the withdrawn Shares and otherwise comply with the Book-Entry Transfer
Facility's procedures. You may not rescind a withdrawal of tenders of Shares,
and any Shares that you properly withdraw will thereafter be deemed not
validly tendered for purposes of the Offer. However, you may retender
withdrawn Shares by again following one of the procedures described in Section
2 at any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by us in our sole discretion, which
determination will be final and binding. None of the Purchaser, Prudential
Mortgage, the Depositary, the Information Agent, the Dealer Manager or any
other person will be under any duty to give you notification of any defects or
irregularities in your notice of withdrawal or incur any liability for failure
to give any such notification.
In the event we provide a Subsequent Offering Period following the Offer, no
withdrawal rights will apply to Shares tendered during such Subsequent
Offering Period or to Shares tendered in the Offer and accepted for payment.
4. Acceptance for Payment and Payment
Upon the terms and subject to the conditions of the Offer (including, if we
extend or amend the Offer, the terms and conditions of any such extension or
amendment), we will accept for payment and will pay promptly after the
Expiration Date for all Shares validly tendered prior to the Expiration Date
and not properly withdrawn in accordance with Section 3. We expressly reserve
the right to delay acceptance for payment of or payment for Shares in order to
comply in whole or in part with any applicable law, including, without
limitation, the HSR Act. Any such delays will be effected in compliance with
the Exchange Act (relating to a bidder's obligation to pay for or return
tendered securities promptly after the termination or withdrawal of such
bidder's offer).
We filed a Notification and Report Form with respect to the Offer under the
HSR Act on May 19, 2000. Accordingly, the waiting period under the HSR Act
with respect to the Offer should expire at 11:59 p.m., New York City time, on
June 3, 2000. However, the Antitrust Division of the Department of Justice
(the "Antitrust Division") or the Federal Trade Commission (the "FTC") may
extend the waiting period by requesting us to provide additional information
or documentary material. If such a request is made, such waiting period will
expire at 11:59 p.m., New York City time, on the 10th day after substantial
compliance by us with such request. See Section 15 for additional information
concerning the HSR Act and the applicability of United States antitrust laws
to the Offer.
In all cases, we will pay for Shares accepted for payment pursuant to the
Offer only after timely receipt by the Depositary of (a) certificates for (or
a timely Book-Entry Confirmation with respect to) such Shares, (b) a Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed,
with any required signature guarantees, or, in the case of a book-entry
transfer, an Agent's Message, with respect to such Shares and (c) any other
documents required by the Letter of Transmittal. The per Share consideration
paid to any stockholder pursuant to the Offer will be the highest per Share
consideration paid to any other stockholder pursuant to the Offer.
Accordingly, tendering stockholders may be paid at different times depending
upon when certificates for Shares or Book-Entry Confirmations with respect to
Shares are actually received by the Depositary.
For purposes of the Offer, we will be deemed to have accepted for payment,
and thereby purchased, Shares properly tendered and not withdrawn as, if and
when we give oral or written notice to the Depositary of our acceptance for
payment of such Shares. We will pay for Shares accepted for payment pursuant
to the Offer by depositing the purchase price therefor with the Depositary.
The Depositary will act as an agent for tendering stockholders for the purpose
of receiving payment from us, and transmitting payment to tendering
stockholders. Under no circumstances will we pay interest on the purchase
price for the Shares, regardless of any extension of the Offer or any delay in
making such payment.
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<PAGE>
If we do not purchase any Shares tendered by you pursuant to the Offer for
any reason, we will return the certificates for any such Shares, without
expense to you (or, in the case of Shares delivered by book-entry transfer of
such Shares into the Depositary's account at the Book-Entry Transfer Facility
pursuant to the procedures described in Section 2, such Shares will be
credited to an account maintained at the Book-Entry Transfer Facility),
promptly after the expiration or termination of the Offer.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to Prudential Mortgage, or to one or more direct or
indirect wholly owned subsidiaries of The Prudential Insurance Company of
America, the right to purchase Shares tendered pursuant to the Offer, but any
such transfer or assignment will not relieve the Purchaser of its obligations
under the Offer and will in no way prejudice the rights of tendering
stockholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer.
5. Certain U.S. Federal Income Tax Consequences
Your receipt of cash pursuant to the Offer or the Merger will be a taxable
transaction for U.S. federal income tax purposes, and may also be a taxable
transaction under applicable state, local or foreign income or other tax laws.
Generally, for U.S. federal income tax purposes, if you sell or exchange your
Shares in the Offer or the Merger, you will recognize gain or loss equal to
the difference between the amount of cash received pursuant to the Offer or
the Merger and your tax basis in the Shares tendered by you and purchased
pursuant to the Offer or converted into cash in the Merger, as the case may
be. Gain or loss will be calculated separately for each block of Shares
tendered and purchased pursuant to the Offer or converted into cash in the
Merger, as the case may be.
If Shares are held by you as capital assets, gain or loss recognized by you
generally will be capital gain or loss, which will be long-term capital gain
or loss if your holding period for the Shares exceeds one year at the time of
the sale or Merger. If you are an individual, the maximum rate of tax on long-
term capital gain will be 20%. The deduction of capital losses is subject to
certain limitations. Stockholders should consult their own tax advisors in
this regard.
If you tender Shares you may be subject to 31% backup withholding unless you
provide your TIN and certify that such number is correct or properly certify
that you are awaiting a TIN, or unless an exemption applies. Exemptions are
available for stockholders that are corporations and for certain foreign
individuals and entities. If you do not furnish a required TIN, you may be
subject to a penalty imposed by the IRS. See "Backup Withholding" under
Section 2.
If backup withholding applies to you, the Depositary is required to withhold
31% from payments to you. Backup withholding is not an additional tax. Rather,
the amount of the backup withholding can be credited against the U.S. federal
income tax liability of the person subject to the backup withholding, provided
that the required information is given to the IRS. If backup withholding
results in an overpayment of tax, a refund can be obtained by the stockholder
by filing a federal income tax return.
The foregoing U.S. federal income tax discussion may not be applicable with
respect to Shares received pursuant to the exercise of employee stock options
or otherwise as compensation or with respect to holders of Shares who are
subject to special tax treatment under the Code, such as non-U.S. persons,
life insurance companies, tax-exempt organizations and financial institutions,
and may not apply to a holder of Shares in light of individual circumstances.
The discussion is based upon present law, which is subject to change, possibly
with retroactive effect. You are urged to consult your own tax advisor to
determine the particular tax consequences of the Offer and the Merger to you
(including the application and effect of the alternative minimum tax and of
state, local or foreign income and other tax laws).
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<PAGE>
6. Price Range of the Shares; Dividends on the Shares
The Shares are traded in the over-the-counter market and prices are quoted
on the Nasdaq National Market under the symbol "WMFG." The following table
sets forth, for each of the periods indicated, the high and low sales price
per Share as quoted by the Nasdaq National Market based on published financial
sources.
WMF
<TABLE>
<CAPTION>
Sales
Quotation
--------------
High Low
---- ----
<S> <C> <C>
Fiscal Year Ended December 31, 1998:
First Quarter......................................... $32 1/2 $11 1/8
Second Quarter........................................ $28 1/4 $19 5/8
Third Quarter......................................... $ 29 $ 5
Fourth Quarter........................................ $ 8 1/4 $ 3 3/8
Fiscal Year Ended December 31, 1999:
First Quarter......................................... $ 6 1/2 $ 4 3/4
Second Quarter........................................ $ 6 7/8 $ 3 15/16
Third Quarter......................................... $ 6 1/4 $ 3 7/16
Fourth Quarter........................................ $ 6 $ 2 7/16
Fiscal Year Ended December 31, 2000:
First Quarter......................................... $ 8 $ 5
Second Quarter (through May 19, 2000)................. $ 8 23/32 $ 4 7/8
</TABLE>
On May 9, 2000, the last full trading day before the first public
announcement of the intention to commence the Offer, the closing price of the
Shares on the Nasdaq National Market was $6.00 per Share. On May 19, the most
recent practicable date before commencement of the Offer, the closing price of
the Shares on the Nasdaq National Market was $8.72 per share. YOU ARE URGED TO
OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
According to WMF Annual Report on Form 10-K for the fiscal year ended
December 31, 1999, WMF has never paid any dividends on the Shares.
7. Effect of the Offer on the Market for the Shares; Share Quotation; Exchange
Act Registration; Margin Regulations
Market for the Shares. The purchase of Shares pursuant to the Offer will
reduce the number of holders of Shares and the number of Shares that might
otherwise trade publicly and could adversely affect the liquidity and market
value of the remaining Shares held by the public.
Share Quotation. Depending upon the number of Shares purchased pursuant to
the Offer, the Shares may no longer meet the requirements for continued
inclusion in the Nasdaq National Market. If, as a result of the purchase of
Shares pursuant to the Offer, the Shares no longer meet the criteria for
continuing inclusion in the Nasdaq National Market, the market for the Shares
could be adversely affected. According to the Nasdaq National Market's
published guidelines, the Shares would not be eligible for continued listing
if, among other things, the number of Shares publicly held falls below
750,000, the number of beneficial holders of Shares falls below 400 (round lot
holders) or the aggregate market value of such publicly held Shares does not
exceed $5 million. If the Shares were no longer eligible for inclusion in the
Nasdaq National Market, they may nevertheless continue to be included in the
Nasdaq SmallCap Market unless, among other things, the public float was less
than 500,000 shares, or there were fewer than 300 stockholders (round lot
holders) in total, or the market value of the public float was less than $1
million.
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<PAGE>
In the event that the Shares no longer meet the requirements of the NASD for
continued inclusion in any tier of the Nasdaq Stock Market, it is possible
that the Shares would continue to trade in the over-the-counter market and
that price quotations would be reported by other sources. The extent of the
public market for the Shares and the availability of such quotations would,
however, depend upon the number of holders of Shares remaining at such time,
the interests in maintaining a market in Shares on the part of securities
firms, the possible termination of registration of the Shares under the
Exchange Act, as described below, and other factors.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of WMF to the Commission if the Shares are neither
listed on a national securities exchange nor held by 300 or more holders of
record. Termination of registration of the Shares under the Exchange Act would
substantially reduce the information required to be furnished by WMF to its
stockholders and to the Commission and would make certain provisions of the
Exchange Act no longer applicable to WMF, such as the short-swing profit
recovery provisions of the Exchange Act, the requirement of furnishing a proxy
statement in connection with stockholders' meetings and the related
requirement of furnishing an annual report to stockholders and the
requirements under the Exchange Act with respect to "going private"
transactions. Furthermore, the ability of "affiliates" of WMF and persons
holding "restricted securities" of WMF to dispose of such securities pursuant
to certain "safe harbor" rules under the Securities Act of 1933 may be
impaired or eliminated. The Purchaser may seek to cause WMF to apply for
termination of registration of the Shares under the Exchange Act as soon after
the completion of the Offer as the requirements for such termination are met.
If registration of the Shares is not terminated prior to the Merger, then
the Shares will be delisted from all stock exchanges and the registration of
the Shares under the Exchange Act will be terminated following the
consummation of the Merger.
Margin Regulations. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of
allowing brokers to extend credit on the collateral of the Shares. Depending
upon factors similar to those described above regarding listing and market
quotations, it is possible that, following the Offer, the Shares would no
longer constitute "margin securities" for the purposes of the margin
regulations of the Federal Reserve Board and therefore could no longer be used
as collateral for loans made by brokers.
8. Certain Information Concerning WMF
WMF is a Delaware corporation with its executive offices at 1593 Spring Hill
Road, Suite 400, Vienna, Virginia 22182. According to the WMF 1999 Annual
Report on Form 10-K, WMF is one of the largest commercial mortgage financial
services companies in the United States, as measured by servicing portfolio
size, according to a survey published by the Mortgage Bankers Association of
America. WMF has been the nation's largest originator of Fannie Mae and FHA
insured multifamily and healthcare loans and has originated more than $11
billion in conventional and FHA-insured multifamily and commercial loans since
1996. WMF had a servicing portfolio of approximately $13.4 billion at December
31, 1999. WMF has approximately 270 employees and operates 18 offices
nationwide. WMF has three principal lines of business: (i) mortgage banking,
which includes the origination and servicing of loans: (ii) advisory services,
which includes the investment and asset management of commercial mortgage
funds; and (iii) capital markets.
On April 1, 1996, NHP Incorporated ("NHP") purchased WMF and renamed it "NHP
Financial Services, Inc." In early 1997, NHP was acquired by Apartment
Investment and Management Co. ("AIMCO"). As a condition of that purchase,
AIMCO required NHP to spin-off WMF. On December 8, 1997, WMF became an
independent, publicly traded company. WMF's primary shareholders are Demeter
Holdings Corporation ("Demeter"), Phemus Corporation ("Phemus") and Capricorn
Investors II, L.P. ("Capricorn"). These primary shareholders, together with
Capricorn Holdings, Inc., Commonwealth Overseas Trading Company Limited,
Mohammed A. Al Tuwaijri, J. Roderick Heller, III, John D. Reilly and Shekar
Narasimhan own approximately 65% of the outstanding Shares on a fully diluted
basis.
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<PAGE>
On March 17, 2000, WMF had approximately 263 stockholders of record.
Set forth below is certain selected financial information with respect to
WMF and its subsidiaries excerpted from the information contained in the WMF
1999 Annual Report on Form 10-K and the WMF Quarterly Report on Form 10-Q for
the period ended March 31, 2000. More comprehensive financial information is
included in the WMF 1999 Annual Report on Form 10-K, the WMF Quarterly Report
on Form 10-Q for the period ended March 31, 2000 and the other documents filed
by WMF with the Commission, and the following summary is qualified in its
entirety by reference to the WMF 1999 Annual Report on Form 10-K, the WMF
Quarterly Report on Form 10-Q for the period ended March 31, 2000 and such
other documents and all the financial information (including any related
notes) contained therein. The WMF 1999 Annual Report on Form 10-K, the WMF
Quarterly Report on Form 10-Q for the period ended March 31, 2000 and such
other documents should be available for inspection and copies thereof should
be obtainable in the manner set forth below under "--Available Information."
Selected Consolidated Financial Data
(In Thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31, Year Ended December 31,
------------------ ----------------------------
2000 1999 1999 1998 1997
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating Results:
Total revenue.............. $ 14,271 $ 13,102 $ 67,856 $ 72,541 $ 44,645
Total expenses............. 12,030 14,877 62,529 124,929 39,874
Net income (loss).......... 1,184 (1,258) 1,155 (33,322) 2,442
Net income (loss) per
common share--Basic....... 0.11 (0.15) 0.11 (6.38) 0.57
Weighted average common
shares outstanding--
Basic..................... 10,750 8,144 10,346 5,244 4,272
Net income (loss) per
common shares--Diluted.... 0.11 (0.15) 0.11 (6.38) 0.55
Weighted average common
shares outstanding--
Diluted................... 11,041 8,144 10,587 5,224 4,452
Financial Position:
Mortgage loans held for
sale...................... $ 56,211 $105,409 $ 15,381 $ 34,217 $ 49,431
Servicing rights, net...... 33,491 27,417 33,476 26,243 26,796
Total assets............... 153,426 214,890 111,261 144,527 119,331
Total debt................. 93,719 148,686 52,228 79,151 59,904
Stockholders' equity....... 38,982 36,723 37,938 27,378 38,825
Other Information:
Cash flows provided by (used
in):
Operating activities....... $(37,492) $(74,309) $ 25,046 $ 15,569 $ (1,040)
Investing activities....... (3,853) (4,741) (12,771) (52,722) (21,522)
Financing activities....... 41,071 80,139 (19,071) 37,602 26,529
EBITDA( 1)................. 5,212 945 16,792 (41,168) 11,439
</TABLE>
- --------
(1) EBITDA is a non Generally Accepted Accounting Principles ("GAAP")
presentation of WMF's performance and consists of income (loss) from
operations before non-operating interest expense, income taxes,
depreciation and amortization. EBITDA is included because it is used in
the industry as a measure of a company's operating performance and
provides information in addition to that supplied by GAAP-based data
regarding the ability of WMF's business to generate cash, but should not
be considered as an alternative either (i) to income (loss) from
operations (determined in accordance with GAAP) as measure of
profitability or (ii) to cash flows from operating activities (determined
in accordance with GAAP). EBITDA does not take into account WMF's debt
service requirements and other commitments and, accordingly, it is not
necessarily indicative of amounts that may be available for discretionary
uses. EBITDA as measured by WMF may not be comparable to EBITDA as
measured by other companies.
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<PAGE>
Available Information. WMF is subject to the informational requirements of
the Exchange Act and, in accordance therewith, is required to file reports
relating to its business, financial condition and other matters. Information
as of particular dates concerning WMF's directors and officers, their
remuneration, stock options and other matters, the principal holders of WMF's
securities and any material interest of such persons in transactions with WMF
is required to be disclosed in WMF's reports filed with the Commission. Such
information should be available for inspection at the public reference
facilities of the Commission at 450 Fifth Street, N.W., Washington, DC 20549,
and at the regional offices of the Commission located at Seven World Trade
Center, 13th Floor, New York, NY 10048 and Citicorp Center, 500 West Madison
Street (Suite 1400) Chicago, IL 60661. Copies of such information should be
obtainable, by mail, upon payment of the Commission's customary charges, by
writing to the Commission's principal office at 450 Fifth Street, N.W.,
Washington, DC 20549. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. Such reports, proxy
and information statements and other information may be found on the
Commission's Web site address, http://www.sec.gov. Such material should also
be available for inspection at the offices of Nasdaq Operations, 1735 K
Street, N.W., Washington, DC 20006.
Except as otherwise stated in this Offer to Purchase, the information
concerning WMF contained herein has been taken from or based upon publicly
available documents on file with the Commission and other publicly available
information. Although the Purchaser and Prudential Mortgage do not have any
knowledge that any such information is untrue, neither the Purchaser nor
Prudential Mortgage takes any responsibility for the accuracy or completeness
of such information or for any failure by WMF to disclose events that may have
occurred and may affect the significance or accuracy of any such information.
9. Certain Information Concerning the Purchaser and Prudential Mortgage
The Purchaser, a Delaware corporation which is a wholly owned subsidiary of
Prudential Mortgage, was organized to acquire WMF and has not conducted any
unrelated activities since its organization. The principal office of the
Purchaser is located at the principal office of Prudential Mortgage. All
outstanding shares of capital stock of the Purchaser are owned by Prudential
Mortgage.
Prudential Mortgage is a Delaware limited liability company with its
principal offices located at Four Gateway Center, Newark, NJ 07102-4069.
Prudential Mortgage is the commercial real estate lending division of The
Prudential Insurance Company of America. Prudential Mortgage is one of the
nation's largest providers of commercial mortgage loans, with more that $17
billion under management.
Available Information. Prudential Mortgage is not subject to the
informational requirements of the Exchange Act and does not file reports with
the Commission relating to its business, financial condition and other
matters.
10. Source and Amount of Funds
The Purchaser estimates that the total amount of funds required to purchase
pursuant to the Offer the number of Shares that are outstanding on a fully
diluted basis and to pay other costs, fees and expenses related to the Offer
and the Merger will be approximately $104 million. The Purchaser plans to
obtain all funds needed for the Offer through an advance from Prudential
Mortgage to the Purchaser at the time Shares tendered pursuant to the Offer
are accepted for payment.
11. Contacts and Transactions with WMF; Background of the Offer
During late 1998 and early 1999, WMF was recapitalized following substantial
losses in its WMF Capital Corp. subsidiary. During that period and following
the completion of the recapitalization in March 1999, management of WMF began
to reevaluate WMF's business strategy in light of WMF's changed circumstances
and changes in its market. On June 17, 1999, WMF engaged CSFB as its financial
advisor with respect to identifying potential strategic transactions involving
WMF and a third party. Over the next several months,
17
<PAGE>
management of WMF, with the assistance of CSFB, evaluated a variety of
possible acquisition, merger and sale transactions. As a part of this process,
preliminary discussions were held with 9 potential strategic partners and with
13 other parties identified by management of WMF and CSFB as being likely to
be interested in and able to consummate such a transaction. None of these
discussions resulted in an offer at a higher price than the Prudential
Mortgage Offer.
During the fall of 1999, representatives of Prudential Mortgage expressed to
CSFB their interest in acquiring a company in the Fannie Mae Delegated
Underwriting and Servicing program with mortgage servicing capabilities. In
the fall of 1999, with the permission of WMF, representatives of CSFB spoke
with representatives of Prudential Mortgage regarding WMF's industry and
provided Prudential Mortgage with publicly available information about WMF.
On October 26, 1999, WMF publicly announced that it had engaged CSFB as its
financial advisor. In early November of 1999, David Twardock, President of
Prudential Mortgage, met with each of Shekar Narasimhan, Chairman and Chief
Executive Officer of WMF, and a representative of Phemus and Demeter, met to
discuss a potential acquisition of WMF by Prudential Mortgage.
On November 10, 1999, the WMF Board of Directors held a meeting at which,
among other things, management of WMF and CSFB provided an overview of recent
developments in the commercial mortgage banking industry and identified and
discussed certain strategic alternatives available to WMF.
On November 15, 1999, WMF and Prudential Mortgage executed a confidentiality
agreement pursuant to which Prudential Mortgage agreed, among other things,
not to disclose certain non-public information provided by WMF and its
representatives to Prudential Mortgage in connection with Prudential
Mortgage's evaluation of a possible acquisition of WMF. Beginning in November
1999, WMF provided certain financial and operational information about WMF's
business to Prudential Mortgage and Prudential Securities Incorporated,
Prudential Mortgage's financial advisor.
On January 17, 2000, David Twardock met with Shekar Narasimhan to discuss
various aspects of a potential acquisition.
On January 31, 2000, Prudential Mortgage submitted a non-binding letter of
intent with respect to the potential acquisition of WMF. Prudential Mortgage
and WMF negotiated certain terms of the transaction as described in the letter
of intent, and on February 10, 2000, Prudential Mortgage submitted a revised
letter of intent. Following further discussions, Prudential Mortgage and WMF
signed an exclusivity agreement on February 14, 2000, pursuant to which WMF
agreed not to solicit or discuss other acquisition proposals until March 13,
2000. WMF subsequently agreed to extensions of this exclusivity period.
From February 22, 2000 to March 3, 2000, representatives of Prudential
Mortgage, The Prudential Insurance Company of America, outside legal counsel
Debevoise & Plimpton, Prudential Securities Incorporated and outside
accounting advisors PricewaterhouseCoopers conducted due diligence at the WMF
corporate headquarters in Vienna, Virginia. Prudential Mortgage and its
advisors continued their due diligence investigations of WMF during March and
April.
On March 2, 2000, the WMF Board of Directors held a meeting at which the
directors were updated on the status of due diligence and negotiations with
Prudential Mortgage. The WMF Board was also provided with a preliminary
overview of Prudential Mortgage's proposal and its financial implications. The
meeting included a presentation by CSFB that included a preliminary financial
analysis of the proposed transaction, based on the price ranges and
transaction terms discussed by the parties to date, and a review of market
conditions and recent developments in the commercial mortgage banking
industry. At the conclusion of these briefings, the Board of Directors
authorized management to continue negotiations with Prudential Mortgage.
During March and April, representatives of WMF, Phemus, Demeter and
Prudential Mortgage held numerous telephonic meetings to negotiate the terms
of a possible acquisition of WMF by Prudential Mortgage.
18
<PAGE>
On March 23, 2000, representatives of WMF, Phemus, Demeter and Prudential
Mortgage met to discuss transaction terms. On April 11 and April 26,
representatives of WMF, Phemus, Demeter and Prudential Mortgage, as well as
their outside legal counsel, met to discuss the terms of the proposed Merger
Agreement and Stockholders Agreement. The principal issues discussed during
these in-person negotiating sessions included the purchase price, the nature
and extent of the parties' representations and warranties, the conditions to
the Offer and the Merger, the parties' respective rights to terminate the
Merger Agreement, the circumstances in which Prudential Mortgage would require
the payment of a termination fee and the amount of that fee, Prudential
Mortgage's commitments with respect to the treatment of certain employee
benefit plans and other employment-related matters. Prudential Mortgage and
the Selling Stockholders also negotiated the terms of the Stockholders
Agreement. In addition, Prudential Mortgage, WMF and representatives of their
respective legal counsel negotiated for insurance coverage of certain
representations and warranties.
On April 20, 2000, the Committee on Finance and Dividends of the Board of
Directors of The Prudential Insurance Company of America unanimously approved
a possible acquisition of WMF by Prudential Mortgage.
From May 1 through May 8, 2000, representatives of Prudential Mortgage, The
Prudential Insurance Company of America, WMF and Phemus and Demeter and their
respective legal counsel held telephonic discussions to finalize their
negotiation of the Merger Agreement and Stockholders Agreement, as well as an
insurance policy relating to certain representations and warranties.
On May 9, 2000, the WMF Board of Directors held a meeting at which
management of WMF and their legal counsel summarized the negotiations between
Prudential Mortgage and WMF and terms of the Merger Agreement, Stockholders
Agreement and employment arrangements for Mr. Narasimhan and Charles H.
Cremens, President and Chief Operating Officer of WMF. CSFB also presented its
financial analysis with respect to the proposed transaction and orally advised
the Board of its opinion to the effect that, as of such date and based upon
and subject to certain matters, the cash consideration of $8.90 per share to
be received in the Offer and Merger was fair from a financial point of view to
the WMF stockholders. This opinion was confirmed by a written opinion of CSFB
dated May 10, 2000. After discussion, the WMF Board of Directors unanimously
approved the Offer and Merger Agreement and determined that the terms of the
Offer and the Merger are advisable, fair to and in the best interests of, WMF
and its stockholders. The WMF Board further determined to recommend that
holders of the Shares tender their Shares pursuant to the Offer and approve
and adopt the Merger Agreement.
Prudential Mortgage's sole member, The Prudential Insurance Company of
America, approved the Offer and the Merger Agreement effective as of May 10,
2000.
On May 10, 2000, Prudential Mortgage, the Purchaser and WMF executed the
Merger Agreement, and Prudential Mortgage and the Selling Stockholders
executed the Stockholders Agreement. Prudential Mortgage and WMF publicly
announced the Offer and Merger on the morning of May 10, 2000.
12. Purpose of the Offer; Plans for WMF; The Merger Agreement; The
Stockholders Agreement; Employment Agreements
PURPOSE
The purpose of the Offer and the Merger is to acquire control of, and the
entire equity interest in, WMF. The Offer, as the first step in the
acquisition of WMF, is intended to facilitate the acquisition of all
outstanding Shares. The purpose of the Merger is to acquire all of the capital
stock of WMF not purchased pursuant to the Offer or otherwise. If the
Purchaser owns a majority of the issued and outstanding Shares following the
consummation of the Offer, it will have the ability under the DGCL to approve
the Merger through a written consent without the affirmative vote of any other
stockholders of WMF.
19
<PAGE>
PLANS FOR WMF
In connection with the Offer, Prudential Mortgage has reviewed, and will
continue to review, various possible business strategies that WMF may pursue
in the event that the Purchaser acquires control of WMF, whether pursuant to
the Offer, the Merger or otherwise. Such strategies could include, among other
things, changes in WMF's business, corporate structure, capitalization or
management.
Prudential Mortgage said it expects to work closely with current management
of WMF's commercial mortgage brokerage unit to determine the best way to
divest itself of that unit while maintaining an ongoing strategic
relationship.
THE MERGER AGREEMENT
The Merger Agreement provides that, following the satisfaction or waiver of
the conditions described below under "--Conditions to the Merger," the
Purchaser will be merged with and into WMF, and each issued Share (other than
(i) Shares owned by the Purchaser, Prudential Mortgage or WMF or their
respective subsidiaries, or (ii) dissenting Shares) will be cancelled and
converted into the right to receive from the Surviving Corporation an amount
in cash equal to $8.90. The "Surviving Corporation"of the Merger will be WMF.
Vote Required To Approve Merger. The DGCL requires the WMF Board and the
holders of a majority of the outstanding Shares to approve the Merger and the
Merger Agreement. The WMF Board has given its approval; consequently, only the
approval by WMF's stockholders is required. Under the DGCL and WMF's
certificate of incorporation, if we acquire, through the Offer or otherwise,
at least a majority of the outstanding Shares (which will be the case if the
Minimum Condition is satisfied and we accept for payment the Shares tendered
pursuant to the Offer), we would have sufficient voting power to effect the
Merger through our sole written consent and without the affirmative vote of
any other stockholder of WMF or the holding of a meeting of stockholders.
Conditions to the Merger. The Merger Agreement provides that the respective
obligations of each of the Purchaser, Prudential Mortgage and WMF to effect
the Merger are subject to the satisfaction or waiver of the following
conditions: (a) the Purchaser shall have purchased all Shares duly tendered
and not withdrawn pursuant to the terms of the Offer and subject to the terms
thereof; provided that the obligation of Prudential Mortgage and the Purchaser
to effect the Merger is not conditioned on the fulfillment of the condition
set forth in this subsection (a) if the failure of the Purchaser to purchase
the Shares pursuant to the Offer shall have constituted a breach of the Offer
or of the Merger Agreement; (b) there shall not be in effect any statute, rule
or regulation enacted, promulgated or deemed applicable by any governmental
entity of competent jurisdiction that makes consummation of the Merger illegal
and no temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Merger shall be in
effect; provided, however, that each of the parties shall use its best efforts
to prevent the entry of any such injunction or other order and to appeal as
promptly as possible any injunction or other order that may be entered; (c) if
required by applicable law, the Merger Agreement shall have been approved and
adopted by the affirmative vote of the holders of the requisite number of
shares of WMF Common Stock in accordance with applicable law; and (d) any
waiting period (and any extension thereof) under the HSR Act applicable to the
Merger shall have expired or been terminated.
Termination of the Merger Agreement. The Merger Agreement may be terminated
at any time prior to the effective time of the Merger (the "Effective Time")
whether before or after approval by the stockholders of WMF:
(a) by mutual consent of the sole member of Prudential Mortgage and the
Board of Directors of WMF;
(b) by either Prudential Mortgage or WMF if (i) the Offer shall have not
been consummated by 12:00 midnight on July 31, 2000 (the "Offer Termination
Date"), or (ii) the Effective Time shall not have occurred by October 31,
2000 (the earlier of such date and the Offer Termination Date, the
"Termination Date"); provided, however, that (A) the passage of such period
shall be tolled for any part thereof during which any party shall be
subject to a nonfinal order, decree, ruling or action restraining,
enjoining or otherwise prohibiting the consummation of the Merger or Offer
and (B) such July 31 date may be extended to a date not later than August
31, 2000, by Prudential Mortgage or WMF prior to termination of the Merger
Agreement, by notice in writing to the other, if on July 31, 2000, the
Offer has not been consummated
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because any applicable waiting period under the HSR Act has not expired or
been terminated or because of the failure of the condition in paragraph (a)
in Section 14 of this Offer to Purchase or the absence of third party
consents which can reasonably be expected to be obtained within 30 days,
provided, further, that a party may not terminate the Merger Agreement
pursuant to this subsection (b) if such party has committed a breach of any
representation, warranty, covenant or agreement set forth in the Merger
Agreement, which has been the cause of or resulted in the failure of the
Offer to be consummated or the Effective Time to occur;
(c) by Prudential Mortgage or WMF, if the Offer shall expire or terminate
in accordance with its terms without any Shares having been purchased
thereunder due to a failure of any of the conditions set forth in Section
14 to be satisfied, provided that neither Prudential Mortgage nor WMF may
terminate the Merger Agreement as described in this paragraph (c) if such
termination or expiration has been caused or resulted from the failure by
Prudential Mortgage or WMF, respectively, to perform in any material
respect any of its covenants or agreements contained in the Merger
Agreement;
(d) by WMF, if Prudential Mortgage or the Purchaser shall have failed to
commence the Offer within a reasonable time (but no more than 10 business
days) after the date of the Merger Agreement; provided, that WMF may not
terminate the Merger Agreement as described in this paragraph (d) if WMF
has failed to perform in any material respect any of its covenants or
agreements contained in the Merger Agreement which has been the cause or
resulted in the failure of Prudential Mortgage or the Purchaser to commence
the Offer;
(e) by WMF, if Prudential Mortgage or the Purchaser breaches or fails to
perform in any material respect any of its representations, warranties or
covenants contained in the Merger Agreement, which breach or failure to
perform cannot be or has not been cured within 10 business days after the
giving of notice to Prudential Mortgage of such breach, except such
failures which are not reasonably likely to materially and adversely affect
Prudential Mortgage, or the Purchaser's ability to complete the Offer or
the Merger;
(f) by either Prudential Mortgage, the Purchaser or WMF, if any court of
competent jurisdiction in the United States or other governmental agency of
competent jurisdiction shall have issued an order, decree or ruling or
taken any other action (which order, decree, ruling or other action the
parties hereto shall use their respective reasonable best efforts to lift)
restraining, permanently enjoining or otherwise prohibiting the
consummation of the Offer or the Merger, and such order, decree, ruling or
other action has become final and non-appealable;
(g) by Prudential Mortgage or the Purchaser if, prior to the purchase of
shares of WMF Common Stock pursuant to the Offer, the Board of Directors of
WMF shall have withdrawn, or modified or changed in a manner adverse to
Prudential Mortgage or the Purchaser, its approval or recommendation of the
Offer, the Merger Agreement or the Merger or shall have publicly
recommended a Superior Proposal (as defined in the Merger Agreement) or
shall have resolved to do either of the foregoing;
(h) by WMF, if, prior to the purchase of Shares pursuant to the Offer,
(i) the Board of Directors of WMF shall have determined in good faith,
after receiving advice of its independent legal counsel, that it is
consistent with its fiduciary duties to WMF's stockholders under applicable
law, to terminate the Merger Agreement in order to enter into an agreement
with respect to or to consummate a transaction constituting a Superior
Proposal, (ii) WMF shall have given notice to the Purchaser advising the
Purchaser that WMF has received a Superior Proposal from a third party,
specifying the material terms and conditions (including the identity of the
third party), and that WMF intends to terminate the Merger Agreement as
described in this paragraph (h), (iii) either (A) the Purchaser shall not
have revised its proposal for the Offer and the Merger within five (5)
business days from the time on which such notice is deemed to have been
given to Prudential Mortgage or (B) if the Purchaser within such period
shall have revised its proposal for the Offer and the Merger, the Board of
Directors of WMF, after receiving advice from CSFB, shall have determined
that the third party's Acquisition Proposal (as defined below) remains a
Superior Proposal, and (iv) WMF, at the time of such termination, has
complied in all respects with the "No Solicitation" provisions described
below and pays the Expenses (as defined in the Merger Agreement) and the
Termination Fee (as defined below) in accordance with the "Termination Fee;
Fees and Expenses" provisions described below; or
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(i) if approval by WMF stockholders is required by law, by either the
Purchaser or WMF if, upon a vote at a duly held WMF stockholders meeting or
any adjournment thereof at which such WMF stockholder approval shall have
been voted upon, such approval shall not have been obtained.
No Solicitation. The Merger Agreement provides that neither WMF nor any of
its subsidiaries nor any of their respective officers, directors, employees,
agents or representatives (including, without limitation, investment bankers,
attorneys and accountants) shall, directly or indirectly, (i) solicit,
initiate or encourage or (ii) enter into any discussions or negotiations with,
in any way continue any discussions or negotiations commenced before the date
of the Merger Agreement with, or disclose directly or indirectly any
information not customarily disclosed concerning its business and properties
to, or afford any access to its properties, books and records to, any
corporation, partnership or other person or group in connection with any
inquiry or proposal (an "Acquisition Proposal") regarding a sale of any shares
of the capital stock of WMF or any of its subsidiaries or a merger,
consolidation or sale or spin-off of all or a substantial portion of the
assets of WMF or any subsidiary of WMF, or a liquidation or a recapitalization
of WMF or any of its subsidiaries, or any similar transaction. WMF agreed to
notify Prudential Mortgage immediately, orally and in writing, if any
discussions or negotiations are sought to be initiated, any inquiry or
proposal is made, or any such information is requested, with respect to an
Acquisition Proposal or potential Acquisition Proposal or if any Acquisition
Proposal is received or if WMF has been informed that an Acquisition Proposal
is forthcoming, and agreed to include in such notification the identity of the
other party or parties and the material terms and conditions of any such
request, inquiry or Acquisition Proposal. Except as expressly provided below,
the Merger Agreement also provides that the Board of Directors of WMF shall
not take any action to withdraw or modify in a manner adverse to Prudential
Mortgage or the Purchaser, or take a public position inconsistent with, its
approvals or recommendation of the Offer, the Merger, the Merger Agreement or
the Stockholders Agreement or to recommend another Acquisition Proposal and
shall not resolve to do any of the foregoing. WMF agreed to keep Prudential
Mortgage informed in reasonable detail of the status (including amendments or
proposed amendments) of any such request, inquiry or Acquisition Proposal.
Upon execution of the Merger Agreement, WMF agreed to cease any existing
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal and request each person which has heretofore
executed a confidentiality agreement in connection with its consideration of
acquiring WMF or any of its subsidiaries or any portion thereof to return all
confidential information heretofore furnished to such person by or on behalf
of WMF.
The Merger Agreement further provides that, notwithstanding anything to the
contrary contained in the Merger Agreement, WMF and its Board of Directors (i)
may participate in discussions or negotiations with or furnish information to
any third party that has made an unsolicited Acquisition Proposal in writing
after the date of the Merger Agreement (a "Potential Acquirer") if the Board
reasonably determines in good faith (A) that such Acquisition Proposal is
reasonably likely to result in a Superior Proposal (as defined in the Merger
Agreement) and (B) after receiving advice of its independent legal counsel,
that participation in such discussions or negotiations or furnishing such
information is consistent with its fiduciary duties to WMF's stockholders
under applicable law, and (ii) shall be permitted to take and disclose to
WMF's stockholders a position with respect to any tender or exchange offer by
a third party, or amend or withdraw such position, or make any other
disclosure to WMF's shareholders as the Board determines in good faith, after
receiving advice of its independent legal counsel, is consistent with its
fiduciary duties to WMF's stockholders under applicable law. Any non-public
information furnished to a Potential Acquirer shall be pursuant to a
confidentiality agreement containing standard terms for confidentiality
agreements entered into in such circumstances, which terms shall be no more
favorable to the Potential Acquirer than the terms of the confidentiality
agreement between WMF and Prudential Mortgage are to Prudential Mortgage.
In addition, the Board of Directors of WMF agreed that it will not, except
as provided in the following sentence, (i) withdraw or modify or propose to
withdraw or modify, in any manner adverse to Prudential Mortgage, the approval
or recommendation of such Board of Directors of the Merger Agreement, the
Offer or the Merger or (ii) approve or recommend, or propose to approve or
recommend, any Acquisition Proposal. In the event that, after WMF has received
a bona fide Superior Proposal not solicited in violation of the Merger
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Agreement, the Board determines (after receiving the advice of its independent
counsel) prior to the consummation of the Offer (or, if the Offer is
consummated and extended, the initial consummation of the Offer) that to do so
is consistent with its fiduciary duties, the Board may (x) withdraw or modify
its approval or recommendation of the Merger Agreement, the Offer and the
Merger, and (y) approve or recommend such a Superior Proposal (as defined in
the Merger Agreement).
Termination Fee; Fees and Expenses. The Merger Agreement provides that WMF
shall pay, or cause to be paid, in same day funds to Prudential Mortgage the
sum of (i) Prudential Mortgage's Expenses (as defined in the Merger Agreement,
in an amount not to exceed $l,000,000) and (ii) $3,075,000 (the "Termination
Fee") upon demand if (A) WMF terminates the Merger Agreement pursuant to
paragraph (h) of the "Termination of the Merger Agreement" provisions
described above, (B) Prudential Mortgage or the Purchaser terminates the
Merger Agreement pursuant to paragraph (g) of the "Termination of the Merger
Agreement" provisions described above, or (C) Prudential Mortgage or WMF
terminates the Merger Agreement pursuant to paragraph (c) of the "Termination
of the Merger Agreement" provisions described above (other than as a result of
any applicable waiting period under the HSR Act having not expired or been
terminated or the failure of any of the conditions set forth in any of clause
(a), (b), (c)(i), (f) or (g) of Section 14 of this Offer to Purchase, or
clause (d) of Section 14 of this Offer to Purchase if the breach of
representation or warranty giving rise to the failure of the condition set
forth in clause (d) of Section 14 of this Offer to Purchase would also give
rise to a failure of the condition set forth in clause (f) of Section 14 of
this Offer to Purchase or in the ability of Prudential Mortgage or the
Purchaser to terminate the Merger Agreement under paragraph (f) of the
"Termination of the Merger Agreement" provisions described above), and, within
nine (9) months after any termination referred to in the immediately preceding
clause (C), any person publicly announces (x) a merger, consolidation or other
business combination with WMF or a subsidiary of WMF, or (y) the purchase of
50% or more (in voting power) of the voting securities of WMF or of 50% or
more (in market value) of the assets of WMF and its subsidiaries, on a
consolidated basis, and such transaction shall within twelve months following
such announcement be consummated on substantially the terms theretofore
announced.
The Merger Agreement further provides that WMF shall pay, or cause to be
paid, in same day funds to Prudential Mortgage, Prudential Mortgage's Expenses
(as defined in the Merger Agreement) upon demand if (i) Prudential Mortgage or
the Purchaser or WMF terminates the Merger Agreement pursuant to paragraph (f)
of the "Termination of the Merger Agreement" provisions described above at any
time after any third-party Acquisition Proposal has been made, (ii) Prudential
Mortgage or WMF terminates the Merger Agreement pursuant to paragraph (c) of
the "Termination of the Merger Agreement" provisions described above as a
result of any applicable waiting period under the HSR Act having not expired
or been terminated or a failure of any of the conditions set forth in any of
clause (a), (b), (c)(i), (f) or (g) of Section 14 of this Offer to Purchase,
or clause (d) of Section 14 of this Offer to Purchase if the breach of
representation or warranty giving rise to the failure of the condition set
forth in clause (d) of Section 14 of this Offer to Purchase would also give
rise to a failure of the condition set forth in clause (f) of Section 14 of
this Offer to Purchase or in the ability of Prudential Mortgage or the
Purchaser to terminate the Merger Agreement under paragraph (f) of the
"Termination of the Merger Agreement" provisions described above or (iii)
Prudential Mortgage or WMF terminates the Merger Agreement pursuant to
paragraph (b) of the "Termination of the Merger Agreement" provisions
described above, and, within nine (9) months after any termination referred to
in the immediately preceding clause (i), (ii) or (iii), any person publicly
announces (x) a merger, consolidation or other business combination with WMF
or a subsidiary of WMF, or (y) the purchase of 50% or more (in voting power)
of the voting securities of WMF or of 50% or more (in market value) of the
assets of WMF and its subsidiaries, on a consolidated basis, and such
transaction shall within twelve months following such announcement be
consummated on substantially the terms theretofore announced. Except as set
forth above in this paragraph, all other costs and expenses incurred in
connection with the Merger Agreement and the transactions are to be paid by
the party incurring such expenses, whether or not any transaction is
consummated.
Conduct of Business. The Merger Agreement provides that from the date of the
Merger Agreement until its termination or the time the directors designated by
the Purchaser have been elected to, and shall constitute a majority of, the
Board of Directors of WMF, WMF and its subsidiaries will each conduct its
operations
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(i) according to its ordinary course of business consistent with past practice
or (ii) according to corporate policies agreed on by the parties to the Merger
Agreement. The Merger Agreement further provides, among other things, that
neither WMF nor any of its subsidiaries will, without the prior written
consent of Prudential Mortgage: (a) amend its certificate of incorporation or
by-laws (or equivalent instruments); (b) issue or sell its securities; (c)
alter its ownership structure; (d) incur certain indebtedness; (e) transfer
any business, assets, rights to service loans or loans; (f) cancel any
correspondent relationships; (g) change any material contracts; (h) originate
any DUS Loans (as defined in the Merger Agreement) with a greater risk level
than Fannie Mae Risk Level I or originate or underwrite any Loans under
origination and underwriting standards other than those in place on the date
of the Merger Agreement; (i) permit any material insurance policy naming it as
a beneficiary or a loss payable payee to be canceled or terminated; (j)
increase compensation and benefits to its officers or certain employees or
adopt new benefit plans or amend existing benefit plans; (k) change in any
material respect any of the accounting principles used by it; (1) enter into
any material commitment or transaction outside the ordinary course of
business; (m) transfer any business or material portion thereof; (n) make any
further investment in WMF Carbon Mesa Advisors, Inc.; (o) enter into any new
line of business; (p) acquire or agree to acquire, by merging or consolidating
with, by purchasing an equity interest in or a portion of the assets of, or by
any other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or agree
to acquire any assets of any other person; (q) acquire any servicing right in
a "bulk" transaction; (r) take any action, engage in any transaction or enter
into any agreement which would cause any of the representations or warranties
made by WMF in the Merger Agreement to be untrue as of the closing date; (s)
purchase or acquire, or offer to purchase or acquire, any shares of capital
stock of WMF; (t) take any action, including without limitation, any
amendments to WMF certificate of incorporation, which would, directly or
indirectly, restrict or impair the ability of Prudential Mortgage to vote, or
otherwise to exercise the rights and receive the benefits of a stockholder
with respect to, securities of WMF that may be acquired or controlled by
Prudential Mortgage or the Purchaser or permit any stockholder to acquire
securities of WMF on a basis not available to Prudential Mortgage in the event
that Prudential Mortgage were to acquire securities of WMF; (u) terminate the
employment of any production or management personnel identified by Prudential
Mortgage to WMF in a facsimile communication from a Senior Vice President of
Prudential Mortgage to the Chairman and Chief Executive Officer of WMF dated
May 8, 2000; (v) or amend any Tax Return (as defined in the Merger Agreement)
previously filed or agree to settle or compromise any government audit,
assessment, dispute or other proceedings with respect to Taxes (as defined in
the Merger Agreement).
Board of Directors. The Merger Agreement provides that promptly upon the
purchase of and payment for Shares by the Purchaser pursuant to the Offer, the
Purchaser shall be entitled to designate up to such number of directors,
rounded up to the next whole number, on the WMF Board as will give the
Purchaser representation on the WMF Board equal to the product of the total
number of directors on the WMF Board (giving effect to the directors elected
pursuant to this provision) multiplied by the percentage that the aggregate
number of Shares beneficially owned by the Purchaser and its affiliates bears
to the total number of Shares then outstanding. WMF has agreed that it will
promptly take all actions necessary to cause the Purchaser's designees to be
so elected as directors of WMF, including increasing the size of the WMF Board
or securing the resignations of incumbent directors or both. The Merger
Agreement provides that at such times, WMF shall cause persons designated by
the Purchaser to constitute the same percentage of (i) each committee of the
WMF Board, (ii) each board of directors of each subsidiary and (iii) each
committee of each such board, in each case only to the extent permitted by
applicable law. The Merger Agreement further provides that Prudential
Mortgage, the Purchaser and WMF shall cause two members of the WMF's Board of
Directors to be persons who were members of WMF's Board of Directors on the
date of the Merger Agreement, and who shall initially be John D. Reilly and
Shekar Narasimhan (the "Continuing Directors") so long as there are at least
two such persons who are willing to serve as Continuing Directors; provided,
that subsequent to the acceptance, purchase and payment for shares of WMF
Common Stock representing greater than 50% of the voting power represented by
the outstanding Shares pursuant to the Offer, Prudential Mortgage shall always
have its designees represent at least a majority of the entire Board of
Directors.
Stock Options. At the Effective Time, each outstanding option to purchase
Shares or other similar interest (collectively, the "Options") granted under
any WMF stock plan, whether or not then exercisable or vested, will
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be cancelled and, in exchange therefor, each holder of such Option shall
receive an amount in cash in respect thereof, if any, equal to the product of
(i) the excess, if any, of $8.90 over the per Share exercise price thereof and
(ii) the number of Shares subject thereto. Following the acquisition of Shares
pursuant to the Offer and prior to the Effective Time, except to the extent
provided in the Merger Agreement for Performance Shares (as defined in the
Merger Agreement), WMF agreed to take all steps to ensure that neither WMF nor
any of its subsidiaries is or will be bound by, or have any further obligation
(including but not limited to the obligation to pay severance amounts)
whatsoever in respect of, any Options or any other options, warrants, rights
(including without limitation stock appreciation rights) or agreements which
would entitle any person, other than Prudential Mortgage or its affiliates, to
own any capital stock of the Surviving Corporation or any of its subsidiaries
or to receive any payment in respect thereof or related thereto.
Employee Benefit Matters. The Merger Agreement provides that following the
Effective Time, Prudential Mortgage shall cause WMF and/or The Prudential
Insurance Company of America ("PICA") to provide each then current employee of
WMF who was an employee of WMF as of the Effective Time (the "Company
Employee") with benefits under employee benefit plans (as such term is defined
in Section 3(3) of Employee Retirement Income Security Act of 1974, as
amended) ("Benefit Plans"), that are similar to the benefits received by (i)
similarly situated Company Employees under Benefit Plans sponsored by WMF
immediately prior to the Effective Time subject to the terms and conditions of
such WMF Benefit Plans, as in effect from time to time, or (ii) similarly
situated employees of Prudential Mortgage under Benefit Plans sponsored by
PICA on or after the Effective Time, subject to the terms and conditions of
such PICA Benefit Plans, as in effect from time to time. The Merger Agreement
further provides that active service with WMF prior to the Effective Time
shall be recognized for purposes of determining eligibility to participate in
and vesting of benefits under (but not for purposes of determining benefit
accrual under or eligibility to receive post-retirement welfare benefits
under) the Benefit Plans of WMF or PICA on or after the Effective Time;
provided, that active service with WMF prior to the Effective Time shall not
be recognized if such recognition of service would result in a duplication of
benefits under the Benefit Plans of WMF or PICA. Nothing in the Merger
Agreement shall be construed as limiting in any way (i) the right of
Prudential Mortgage or WMF (as the case may be) to terminate the employment of
any Company Employee after the Effective Time or (ii) the right of PICA or WMF
(as the case may be) to amend or terminate any Benefit Plan of PICA or WMF
(including without limitation, to change the level of benefits provided
thereunder or the requirements for eligibility to participate thereunder) in
accordance with the terms thereof. Following the acquisition of Shares
pursuant to the Offer, and prior to the Effective Time, WMF agreed to take, by
action of WMF's Board of Directors (or an appropriate committee thereof), all
actions reasonably necessary and appropriate, in the opinion of Prudential
Mortgage, to ensure that any Company Employee who commences participation, on
or after the Effective Time, in any Benefit Plan of PICA does not receive
duplicate benefits under any Benefit Plan of WMF.
Indemnification and Insurance. The Merger Agreement provides that for a
period of six years after the Effective Time, Prudential Mortgage shall, and
shall cause the Surviving Corporation to, indemnify, defend and hold harmless
the present and former officers, directors, employees and agents of WMF and
its subsidiaries (collectively, the "Indemnified Parties") from and against,
and pay or reimburse the Indemnified Parties for, all losses, obligations,
expenses, claims, damages or liabilities (whether or not resulting from third-
party claims and including interest, penalties, out-of-pocket expenses and
attorneys' fees incurred in the investigation or defense of any of the same or
in asserting any of their rights hereunder) with respect to actions or
omissions arising out of such individuals' services as officers, directors,
employees or agents of WMF or any of its subsidiaries or as trustees or
fiduciaries of any plan for the benefit of employees of WMF or any of its
subsidiaries occurring on or prior to the Effective Time (including, without
limitation, the transactions contemplated by the Merger Agreement) to the full
extent permitted or required under applicable law and, in the case of
indemnification by the Surviving Corporation, to the extent permitted under
the provisions of WMF certificate of incorporation and WMF by-laws, each as in
effect at the date of the Merger Agreement (which provisions shall not be
amended in any manner which adversely affects any Indemnified Party, for a
period of six years), including provisions relating to advances of expenses
incurred in the defense of any action or suit; provided that in the event any
claim or claims are asserted or made within such six-year period, all rights
to indemnification in respect of each such claim shall continue until final
disposition of such claim.
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The Merger Agreement further provides that, in any case in which approval by
the Surviving Corporation is required to effectuate any indemnification,
Prudential Mortgage shall cause the Surviving Corporation to direct, at the
election of the Indemnified Party, that the determination of any such approval
shall be made by independent counsel selected by the Indemnified Party.
Prudential Mortgage will cause to be maintained for a period of not less than
six years from the Effective Time WMF's current directors' and officers'
insurance and indemnification policy to the extent that it provides coverage
for events occurring prior to the Effective Time ("D&O Insurance") for all
persons who are directors and officers of WMF on the date of the Merger
Agreement, so long as the annual premium therefor would not be in excess of
150% of the last annual premium paid prior to the date of the Merger Agreement
(the "Maximum Premium"); provided, however, that if the annual premium
therefor would exceed the Maximum Premium, Prudential Mortgage shall purchase
as much coverage as is available for the Maximum Premium; provided, further,
that Prudential Mortgage may, in lieu of maintaining such existing D&O
Insurance as provided above, cause coverage to be provided under any policy
maintained for the benefit of Prudential Mortgage or any of its subsidiaries
or any policy specifically obtained for this purpose, so long as the terms
thereof are no less advantageous to the intended beneficiaries thereof than
the existing D&O Insurance for a period of not less than six (6) years from
the Effective Time. If the existing D&O Insurance expires, is terminated or
canceled during such six (6) year period, Prudential Mortgage will obtain as
much D&O Insurance as can be obtained for the remainder of such period for an
annualized premium equal to the Maximum Premium, on terms and conditions no
less advantageous to the covered persons than the existing D&O Insurance.
Reasonable Best Efforts; Notification. The Merger Agreement provides that
each of WMF, Prudential Mortgage and the Purchaser agrees to cooperate and use
their respective reasonable best efforts consistent with applicable legal
requirements to take, or cause to be taken, all action, and to do, or cause to
be done, all things necessary or proper and advisable under applicable laws
and regulations to ensure that the conditions set forth in Section 14 of this
Offer to Purchase and the "Conditions to the Merger" provisions described
above are satisfied and to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by the Merger
Agreement. WMF agreed to pay the non-refundable deposit and the premium
payable under, and in accordance with the terms of, that certain
Representations and Warranties Insurance Policy, effective on May 10, 2000,
between The Reliance Insurance Company of Illinois, as Insurer, and the
insured named therein. This policy insures the Purchaser against losses
relating to breaches of certain representations and warranties. The Merger
Agreement further provides that each of WMF, Prudential Mortgage and the
Purchaser shall give prompt notice to each other party of any notice of, or
other communication relating to, a material default or event that, with notice
or lapse of time or both, would become a material default, received by such
party subsequent to the date of the Merger Agreement and prior to the
Effective Time, under any material contract to which such party is a party or
is subject. The Merger Agreement further provides that each of WMF and
Prudential Mortgage shall give prompt notice to the other party of (a) any
notice or other communication from any third party alleging that the consent
of such third party is or may be required in connection with the transactions
contemplated by the Merger Agreement and (b) the occurrence, or non-
occurrence, of any events the occurrence, or non-occurrence, of which would
cause either (i) a representation or warranty contained in the Merger
Agreement to be untrue or inaccurate in any material respect at any time until
Shares are accepted for payment pursuant to the Offer or (ii) any of the
conditions in Section 14 of this Offer to Purchase or any covenant, condition
or agreement to be complied with or satisfied under the Merger Agreement to be
unsatisfied in any material respect at any time until Shares are purchased
pursuant to the Offer, provided, however, that the delivery of any notice
pursuant to the Merger Agreement will not limit or otherwise affect the
remedies available under the Merger Agreement to the party receiving the
notice.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties from each of the parties.
Amendment; Waiver. The Merger Agreement may be amended, modified or
supplemented only by written agreement of Prudential Mortgage, the Purchaser
and WMF at any time prior to the Effective Time with respect to any of the
terms contained herein, provided, that after the Merger Agreement is adopted
by the WMF's stockholders, no such amendment or modification shall be made
that reduces the amount or changes the form of
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the Merger Consideration or otherwise materially and adversely affects the
rights of WMF's stockholders hereunder, without the further approval of such
stockholders. The Merger Agreement also provides that any failure of
Prudential Mortgage or the Purchaser, on the one hand, or WMF, on the other
hand, to comply with any obligation, covenant, agreement or condition herein
may be waived by WMF or Prudential Mortgage, respectively, only by a written
instrument signed by the party granting such waiver.
The foregoing summary of the Merger Agreement is qualified in its entirety
by reference to the Merger Agreement, a copy of which is filed as Exhibit
(d)(l)(A) to the Schedule TO. The Merger Agreement should be read in its
entirety for a more complete description of the matters summarized above.
THE STOCKHOLDERS AGREEMENT
Pursuant to the terms and conditions of the Stockholders Agreement, each
Selling Stockholder has agreed to tender Shares in the Offer.
In the Stockholders Agreement, each Selling Stockholder has further agreed
that, until the termination of the Stockholders Agreement, such Selling
Stockholder will vote its Shares subject to the Stockholders Agreement (i) in
favor of the adoption by WMF of the Merger Agreement and the approval of the
terms thereof and each of the transactions contemplated thereby; and (ii)
against any (x) Acquisition Proposal or (y) any amendment of WMF's certificate
of incorporation or by-laws or other proposal, which transaction or amendment
or other proposal would be reasonably likely to impede, frustrate, prevent or
nullify the Merger or the Merger Agreement, or any of the other transactions
contemplated by the Merger Agreement or change in any manner the voting rights
of the Shares (the Selling Stockholders further agreed not to enter into any
agreement inconsistent with the foregoing).
In addition, each Selling Stockholder has further agreed that it will not,
prior to the earliest of (i) the Effective Time and (ii) the termination of
the Merger Agreement in accordance with its terms, (x) sell, transfer, give,
pledge, assign or otherwise dispose of (including by gift) (collectively,
"Transfer"), consent to any Transfer of, or enter into any contract, option or
other arrangement with respect to the Transfer of any or all of such Selling
Stockholder's Shares that are subject to the terms of the Stockholders
Agreement or any interest therein or (y) enter into any voting arrangement,
whether by proxy, voting agreement or otherwise, in connection with any
Acquisition Proposal and agrees not to commit or agree to take any of the
foregoing actions other than Transfers to its affiliates provided that such
transferee agrees to be bound by the terms of the Stockholders Agreement, and
Transfers pursuant to the terms of Section 3(d) of the Stockholders Agreement.
The Stockholders Agreement shall terminate upon the earlier of (a) the
Effective Time and (b) the date upon which the Merger Agreement is terminated
in accordance with its terms.
The foregoing summary of the Stockholders Agreement is qualified in its
entirety by reference to the Stockholders Agreement, a copy of which is filed
as Exhibit (d)(l)(B) to the Schedule TO. The Stockholders Agreement should be
read in its entirety for a more complete description of the matters summarized
above.
EMPLOYMENT AGREEMENTS
Prudential Mortgage and WMF have entered into the employment agreements
described below with Shekar Narasimhan and Charles H. Cremens. Both agreements
will become effective as of the Effective Time.
Narasimhan Employment Agreement. The term of the agreement will end on the
second anniversary of the Effective Time. However, the agreement may be
terminated by any of the parties upon 60 days' notice. Pursuant to the
agreement, Mr. Narasimhan will serve as Managing Director of WMF. Mr.
Narasimhan will be paid an annual base salary of $240,000 and an annual
incentive bonus for 2000 of at least $135,000. Mr. Narasimhan will also
receive a $150,000 award for the 2000-2002 performance period under the
Prudential Global Asset Management Long Term Incentive Plan. In the event Mr.
Narasimhan's employment is terminated by WMF or Prudential Mortgage and he is
eligible for severance under Prudential Mortgage's severance policy or plans,
Mr. Narasimhan will be entitled to a severance payment that is equal to the
greater of $240,000 or the amount that
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would be payable to Mr. Narasimhan under the severance policy or plans
sponsored by Prudential Mortgage, as in effect on the date of Mr. Narasimhan's
termination of employment. If Mr. Narasimhan's employment is terminated during
the 180-day period following the Effective Time, however, Mr. Narasimhan's
severance benefit will be the amount that he would have received under the Key
Employee Incentive Plan of WMF, if applicable.
Mr. Narasimhan will also receive $525,000 in return for his agreement to be
bound by (i) a covenant not to directly or indirectly compete with WMF or
Prudential Mortgage, (ii) a covenant not to directly or indirectly solicit
customers or clients of WMF or Prudential Mortgage, (iii) a covenant not to
directly or indirectly solicit or induce any employee of WMF or Prudential
Mortgage to leave the employ of WMF and (iv) a covenant not to directly or
indirectly hire or employ, or assist in hiring or employing, any individual
who was employed by WMF or Prudential Mortgage unless a period of 60 days has
elapsed since the date on which such individual's employment with WMF or
Prudential Mortgage is terminated. Mr. Narasimhan will be bound by the
covenant not to compete and the covenant not to solicit clients and customers
of WMF or Prudential Mortgage during the term of his employment and for a
period of (i) two years thereafter, if Mr. Narasimhan's employment terminates
for any reason prior to the first anniversary of the Effective Time, or (ii)
one year thereafter, if Mr. Narasimhan's employment terminates for any reason
on or after the first anniversary of the Effective Time. Mr. Narasimhan will
be bound by the covenant not to solicit employees of WMF or Prudential
Mortgage and the covenant not to hire former employees of WMF or Prudential
Mortgage during the term of his employment and for a period of two years
thereafter if Mr. Narasimhan's employment terminates for any reason. The
agreement also requires that Mr. Narasimhan not disclose, at any time during
or after his employment, any confidential information regarding WMF,
Prudential Mortgage or any of their affiliates.
Cremens Employment Agreement. The term of the agreement will end on the six-
month anniversary of the Effective Time ("End Date"). However, the agreement
may be terminated by any of the parties upon 60 days' notice. Mr. Cremens will
have primary responsibility for the possible sale of WMF's mortgage brokerage
business. Mr. Cremens will be paid a monthly base salary of $20,000, a
retention bonus of $375,000 (payable within 14 days after the End Date) unless
he terminates his employment or he should die prior to that date, and, if
applicable, a success bonus of $150,000 upon the successful sale of WMF's
commercial brokerage business. In the event that Mr. Cremens' employment is
terminated by WMF or Prudential Mortgage following the Effective Time and
prior to the End Date, and he is eligible for severance under Prudential
Mortgage's severance policy or plans, Mr. Cremens will receive severance under
such policy or plans. Any severance received by Mr. Cremens will be offset by
any salary, retention bonus and success bonus received by Mr. Cremens under
the agreement. For the term of the agreement, Mr. Cremens will also receive
incremental term life insurance coverage in the amount of $635,000.
Mr. Cremens will also receive $500,000 in return for his agreement to be
bound by (i) a covenant not to directly or indirectly compete with WMF or
Prudential Mortgage, (ii) a covenant not to directly or indirectly solicit
customers or clients of WMF or Prudential Mortgage, (iii) a covenant not to
directly or indirectly solicit or induce any employee of WMF or Prudential
Mortgage to leave the employ of WMF and (iv) a covenant not to directly or
indirectly hire or employ, or assist in hiring or employing, any individual
who was employed by WMF or Prudential Mortgage unless a period of 60 days has
elapsed since the date on which such individual's employment with WMF or
Prudential Mortgage is terminated. Mr. Cremens will be bound by the covenant
not to compete and the covenant not to solicit clients and customers of WMF or
Prudential Mortgage for the period beginning with the Effective Time and
ending on (i) the End Date, if his employment is terminated by the Company
prior the End Date, or (ii) the six month anniversary of the termination of
Mr. Cremens' employment if such employment terminates for any other reason.
Mr. Cremens will be bound by the covenant not to solicit employees of WMF or
Prudential Mortgage during the term of his employment and for a period of six
months thereafter if Mr. Cremens' employment terminates for any reason. The
agreement also requires that Mr. Cremens not disclose, at any time during or
after his employment, any confidential information regarding WMF, Prudential
Mortgage or any of their affiliates.
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The foregoing summary of Mr. Narasimhan's and Mr. Cremens' employment
agreements is qualified in its entirety by reference to the form of such
employment agreements, copies of which are filed as Exhibit (d)(1)(C) and
(d)(1)(D) to the Schedule TO, respectively. Mr. Narasimhan's and Mr. Cremens'
employment agreements should each be read in its entirety for a more complete
description of the matters summarized above.
APPRAISAL RIGHTS
The holders of Shares do not have appraisal rights as a result of the Offer.
However, if the Merger is consummated, holders of Shares at the Effective Time
will have certain rights pursuant to the provisions of Section 262 of the DGCL
("Section 262") to dissent and demand appraisal of their Shares. Under Section
262, dissenting stockholders who comply with the applicable statutory
procedures will be entitled to receive a judicial determination of the fair
value of their Shares (exclusive of any element of value arising from the
accomplishment or expectation of the Merger) and to receive payment of such
fair value in cash, together with a fair rate of interest, if any. Any such
judicial determination of the fair value of Shares could be based upon factors
other than, or in addition to, the price per Share to be paid in the Merger or
the market value of the Shares. The value so determined could be more or less
than the price per Share to be paid in the Merger.
The foregoing summary of Section 262 does not purport to be complete and is
qualified in its entirety by reference to Section 262. FAILURE TO FOLLOW THE
STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR PERFECTING APPRAISAL RIGHTS MAY
RESULT IN THE LOSS OF SUCH RIGHTS.
GOING PRIVATE TRANSACTIONS
The Commission has a rule under the Exchange Act, which is applicable to
certain "going private" transactions. The Purchaser does not believe that this
rule will be applicable to the Merger unless the Merger is consummated more
than one year after the termination of the Offer. If applicable, this rule
requires, among other things, that certain financial information concerning
the fairness of the Merger and the consideration offered to minority
stockholders in the Merger be filed with the Commission and disclosed to
stockholders prior to the consummation of the Merger.
Except as otherwise described in this Offer to Purchase, the Purchaser and
Prudential Mortgage have no current plans or proposals that would relate to,
or result in, an extraordinary corporate transaction involving WMF, such as a
merger, reorganization or liquidation involving WMF or any of its
subsidiaries, a purchase, sale or transfer of a material amount of assets of
WMF or any of its subsidiaries, any change in the present Board of Directors
or management of WMF including, but not limited to, any plans or proposals to
change the number or term of directors or to fill any existing vacancies on
the Board of Directors, any material change in WMF's present capitalization or
dividend policy, any other material change in WMF's corporate structure or
business, causing a class of securities of WMF to be delisted from a national
securities exchange or to cease to be authorized to be quoted in an inter-
dealer quotation system of a registered national securities association or a
class of equity securities of WMF becoming eligible for termination of
registration under the Exchange Act.
13. Dividends and Distributions
If on or after the date of the Merger Agreement WMF (a) splits, combines or
otherwise changes the Shares or its capitalization, (b) acquires Shares or
otherwise causes a reduction in the number of Shares, (c) issues or sells
additional Shares (other than the issuance of Shares reserved for issuance as
of the date of the Merger Agreement under option and employee stock purchase
plans in accordance with their terms as publicly disclosed as of the date of
the Merger Agreement) or any shares of any other class of capital stock, other
voting securities or any securities convertible into or exchangeable for, or
rights, warrants or options, conditional or otherwise, to acquire, any of the
foregoing or (d) discloses that it has taken such action, then, without
prejudice to the Purchaser's rights under Section 14, the Purchaser, in its
sole discretion, may make such adjustments in the purchase price and other
terms of the Offer as it deems appropriate to reflect such split, combination
or other
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change or action, including, without limitation, the Minimum Condition or the
number or type of securities offered to be purchased.
If on or after the date of the Merger Agreement WMF declares or pays any
dividend on the Shares or any distribution (including, without limitation, the
issuance of additional Shares pursuant to a stock dividend or stock split, the
issuance of other securities (other than the issuance of Shares reserved for
issuance as of the date of the Merger Agreement under option and employee
stock purchase plans in accordance with their terms as publicly disclosed as
of the date of the Merger Agreement) or the issuance of rights for the
purchase of any securities) with respect to the Shares that is payable or
distributable to stockholders of record on a date prior to the transfer into
the name of the Purchaser or its nominees or transferees on WMF's stock
transfer records of the Shares purchased pursuant to the Offer, and if Shares
are purchased in the Offer, then, without prejudice to the Purchaser's rights
under Section 14, (a) the purchase price per Share payable by the Purchaser
pursuant to the Offer shall be reduced by the amount of any such cash dividend
or cash distribution and (b) any such non-cash dividend, distribution,
issuance, proceeds or rights to be received by the tendering stockholders will
(i) be received and held by the tendering stockholders for the account of the
Purchaser and will be required to be promptly remitted and transferred by each
tendering stockholder to the Depositary for the account of the Purchaser,
accompanied by appropriate documentation of transfer or (ii) at the direction
of the Purchaser, be exercised for the benefit of the Purchaser, in which case
the proceeds of such exercise will promptly be remitted to the Purchaser.
Pending such remittance and subject to applicable law, the Purchaser will be
entitled to all rights and privileges as owner of any such non-cash dividend,
distribution, issuance, proceeds or rights and may withhold the entire
purchase price or deduct from the purchase price the amount or value thereof,
as determined by the Purchaser in its sole discretion.
14. Certain Conditions of the Offer
Notwithstanding any other provision of the Offer, the Purchaser shall not be
required to accept for payment, or, subject to any applicable rules and
regulations of the Commission under the Exchange Act (relating to the
Purchaser's obligation to pay for or return tendered shares promptly after the
termination or withdrawal of the Offer), to pay for any Shares not theretofore
accepted for payment or paid for, and the Purchaser may (subject to the terms
of the Merger Agreement) amend or terminate the Offer as to, and may postpone
the acceptance of, and payment for, such Shares not theretofore accepted for
payment or paid for (subject to any such applicable rules and regulations of
the Commission) unless (i) any applicable waiting period under the HSR Act
shall have expired or been terminated, (ii) the Minimum Condition shall have
been satisfied and (iii) at any time on or after the date of the Merger
Agreement and at or before the time that the particular Shares are accepted
for payment (whether or not any other Shares shall theretofore have been
accepted for payment or paid for pursuant to the Offer) none of the following
conditions shall occur and be continuing:
(a) there shall have been any action or proceeding brought by any
governmental authority before any Federal, state or foreign court, or any
order or preliminary or permanent injunction entered in any action or
proceeding before any Federal, state or foreign court or governmental,
administrative or regulatory authority or agency having jurisdiction over
WMF or Prudential Mortgage, or any statute, rule, regulation, legislation,
interpretation, judgment or order enacted, entered, enforced, promulgated,
amended, issued by any legislative body, court, government or governmental,
administrative or regulatory authority or agency located or having
jurisdiction within the United States or any country or economic region in
which either WMF or Prudential Mortgage, directly or indirectly, has
material assets or operations, which would reasonably be expected to have
the effect of: (i) making illegal or prohibiting the making of the Offer,
the acceptance for payment of, payment for, or ownership, directly or
indirectly, of all or a material portion of the Shares by Prudential
Mortgage or the Purchaser, or the consummation of any of the transactions
contemplated by the Merger Agreement or the Stockholders Agreement; (ii)
(A) prohibiting or materially limiting the ownership or operation by
Prudential Mortgage, the Purchaser or any of Prudential Mortgage's
subsidiaries, of all or any material portion of the business or assets of
WMF and its subsidiaries taken as a whole, or of Prudential Mortgage and
its subsidiaries taken as a whole, or (B) compelling the Purchaser,
Prudential Mortgage or any of Prudential Mortgage's subsidiaries to dispose
of or hold separate all or any
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material portion of the business or assets of WMF and its subsidiaries
taken as a whole or of Prudential Mortgage and its subsidiaries taken as a
whole, in each case as a result of the transactions contemplated by the
Offer or the Merger Agreement or the Stockholders Agreement; (iii) imposing
limitations on the ability of the Purchaser, Prudential Mortgage or any of
Prudential Mortgage's subsidiaries effectively to acquire or hold or to
exercise full rights of ownership of the Shares including, without
limitation, the right to vote any Shares acquired or owned by Prudential
Mortgage or the Purchaser or any of Prudential Mortgage's subsidiaries on
all matters properly presented to the stockholders of WMF, including,
without limitation, the adoption and approval of the Merger Agreement and
the Merger or the right to vote any shares of capital stock of any
subsidiary directly or indirectly owned by WMF; or (iv) requiring
divestiture by Prudential Mortgage or the Purchaser, directly or
indirectly, of any Shares;
(b) there shall have occurred (i) a declaration of a banking moratorium
or any suspension of payments in respect of banks in the United States
which would reasonably be expected to have a material adverse effect on WMF
or materially adversely affect (or materially delay) the consummation of
the Offer, (ii) any limitation (whether or not mandatory) by any government
or governmental, administrative or regulatory authority or agency, domestic
or foreign, on, or any other event that materially adversely affects, the
extension of credit by banks or other lending institutions which would
reasonably be expected to have a material adverse effect on WMF or
materially adversely affect (or materially delay) the consummation of the
Offer, (iii) a commencement of a war or armed hostilities or other national
or international calamity directly or indirectly involving the United
States which would reasonably be expected to have a material adverse effect
on WMF or materially adversely affect (or materially delay) the
consummation of the Offer or (iv) in the case of any of the foregoing
existing at the time of the execution of the Merger Agreement, a material
acceleration or worsening thereof which acceleration or worsening is
reasonably expected to have a material adverse effect or to materially
adversely affect the consummation of the Offer;
(c) (i) it shall have been publicly disclosed or the Purchaser shall have
otherwise learned that beneficial ownership (determined for the purposes of
this paragraph as set forth under the Exchange Act) of 15% or more of the
outstanding Shares has been acquired by any corporation (including WMF or
any of its subsidiaries or affiliates), partnership, person or other entity
or group (as defined in the Exchange Act), other than Prudential Mortgage
or any of its affiliates or the Selling Stockholders, and such Shares have
not been tendered in the Offer, or (ii) (A) the Board of Directors of WMF
or any committee thereof shall have withdrawn or modified in a manner
adverse to Prudential Mortgage or the Purchaser the approval or
recommendation of the Offer, the Merger or the Merger Agreement, or
approved or recommended any takeover proposal or any other acquisition of
Shares other than the Offer and the Merger, (B) any such corporation,
partnership, person or other entity or group shall have entered into a
definitive agreement or an agreement in principle with WMF with respect to
a tender offer or exchange offer for any Shares or a merger, consolidation
or other business combination with or involving WMF or any of its
subsidiaries or (C) the Board of Directors of WMF or any committee thereof
shall have resolved to do any of the foregoing;
(d) any of the representations and warranties of WMF set forth in the
Merger Agreement that are qualified as to materiality shall not be true and
correct or any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each
case as if such representations and warranties (other than representations
and warranties made as of a specified date) were made at the time of such
determination except, in each case, for changes specifically permitted by
the Merger Agreement;
(e) WMF shall have failed to perform in any respect any material
obligation or to comply in any respect with any material agreement or
material covenant of WMF to be performed or complied with by it under the
Merger Agreement prior to the time of such determination:
(f) WMF and its subsidiaries shall not have obtained and delivered to
Prudential Mortgage written evidence that (i) all required notices relating
to the transactions contemplated by the Merger Agreement have been provided
to each of GNMA and FHA and (as certified by the Chairman and Chief
Executive Officer of WMF) that no objections have been received from GNMA
or FHA which would cause WMF
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and its subsidiaries not to be eligible to issue mortgage-backed securities
guaranteed by GNMA or to originate, purchase, hold and service FHA-insured
mortgage loans in the same manner as on the date of the Merger Agreement
and (ii) all required approvals, consents, licenses, accreditations,
registrations and qualifications relating to the transactions contemplated
by the Merger Agreement have been received from Fannie Mae for WMF and its
subsidiaries to be able to originate, purchase, hold and service mortgage
loans to be sold to Fannie Mae in the same manner as on the date of the
Merger Agreement; or
(g) the Merger Agreement shall have been terminated in accordance with
its terms or the Offer shall have been terminated with the written consent
of WMF.
The foregoing conditions are for the sole benefit of the Purchaser and may
be asserted by the Purchaser regardless of the circumstances giving rise to
any such condition or may be waived by the Purchaser in whole or in part at
any time and from time to time in its sole discretion (subject to the terms of
the Merger Agreement). The failure by the Purchaser at any time to exercise
any of the foregoing rights shall not be deemed a waiver of any such right,
the waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances, and each such right shall be deemed an ongoing right that may
be asserted at any time and from time to time.
15. Certain Legal Matters
Except as described in this Section 15, based on a review of publicly
available filings made by WMF with the Commission and other publicly available
information concerning WMF and discussions of representatives of Prudential
Mortgage with representatives of WMF, none of the Purchaser, Prudential
Mortgage or WMF is aware of any license or regulatory permit that appears to
be material to the business of WMF and its subsidiaries, taken as a whole,
that might be adversely affected by the Purchaser's acquisition of Shares (and
the indirect acquisition of the stock of WMF's subsidiaries) as contemplated
herein or of any approval or other action by any Governmental Entity that
would be required or desirable for the acquisition or ownership of Shares by
the Purchaser as contemplated herein. Should any such approval or other action
be required or desirable, the Purchaser and Prudential Mortgage currently
contemplate that such approval or other action will be sought, except as
described below under "--State Takeover Laws." While (except as otherwise
expressly described in this Section 15) the Purchaser does not presently
intend to delay the acceptance for payment of or payment for Shares tendered
pursuant to the Offer pending the outcome of any such matter, there can be no
assurance that any such approval or other action, if needed, would be obtained
or would be obtained without substantial conditions or that failure to obtain
any such approval or other action might not result in consequences adverse to
WMF's business or that certain parts of WMF's business might not have to be
disposed of if such approvals were not obtained or such other actions were not
taken or in order to obtain any such approval or other action. If certain
types of adverse action are taken with respect to the matters discussed below,
the Purchaser could decline to accept for payment or pay for any Shares
tendered. See Section 14 for a description of certain conditions to the Offer.
State Takeover Laws. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable
to attempts to acquire securities of corporations that are incorporated or
have assets, stockholders, executive offices or places of business in such
states. In Edgar v. MITE Corp., the Supreme Court of the United States held
that the Illinois Business Takeover Act, which involved state securities laws
that made the takeover of certain corporations more difficult, imposed a
substantial burden on interstate commerce and therefore was unconstitutional.
In CTS Corp. v. Dynamics Corp. of America, however, the Supreme Court of the
United States held that a state may, as a matter of corporate law and, in
particular, those laws concerning corporate governance, constitutionally
disqualify a potential acquirer from voting on the affairs of a target
corporation without prior approval of the remaining stockholders, provided
that such laws were applicable only under certain conditions. Subsequently, a
number of federal courts ruled that various state takeover statutes were
unconstitutional insofar as they apply to corporations incorporated outside
the state of enactment.
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Based on information supplied by WMF, the Purchaser does not believe that
any state takeover statutes or similar laws purport to apply to the Offer or
the Merger. WMF has opted not to be subject to Section 203 of the DGCL.
Neither the Purchaser nor Prudential Mortgage has currently complied with any
other state takeover statute or regulation. The Purchaser reserves the right
to challenge the applicability or validity of any state takeover law
purportedly applicable to the Offer or the Merger and nothing in this Offer to
Purchase or any action taken in connection with the Offer or the Merger is
intended as a waiver of such right. If it is asserted that any state takeover
statute is applicable to the Offer or the Merger and an appropriate court does
not determine that it is inapplicable or invalid as applied to the Offer or
the Merger, the Purchaser might be required to file certain information with,
or to receive approvals from, the relevant state authorities, and the
Purchaser might be unable to accept for payment or pay for Shares tendered
pursuant to the Offer, or be delayed in consummating the Offer or the Merger.
In such case, the Purchaser may not be obligated to accept for payment or pay
for any Shares tendered pursuant to the Offer. See Section 14.
Section 203 of the DGCL, in general, prohibits a Delaware corporation such
as WMF from engaging in a "Business Combination" (defined as a variety of
transactions, including mergers) with an "Interested Stockholder" (defined
generally as a person that is the beneficial owner of 15% or more of a
corporation's outstanding voting stock) for a period of three years following
the time that such person became an Interested Stockholder unless, among other
things, prior to the time such person became an Interested Stockholder, the
board of directors of the corporation approved either the Business Combination
or the transaction that resulted in the stockholder's becoming an Interested
Stockholder.
Antitrust. Under the provisions of the HSR Act applicable to the Offer, the
acquisition of Shares under the Offer may be consummated after the expiration
of a 15-calendar day waiting period commenced by the filing by Prudential
Mortgage of a Notification and Report Form with respect to the Offer, unless
Prudential Mortgage receives a request for additional information or
documentary material from the Antitrust Division or the FTC or unless early
termination of the waiting period is granted.
Prudential Mortgage effected an appropriate filing on May 19, 2000. If,
within the initial 15-day waiting period, either the Antitrust Division or the
FTC requests additional information or material concerning the Offer, the
waiting period will be extended and would expire at 11:59 p.m., New York City
time, on the tenth calendar day after the date of substantial compliance with
such request. Only one extension of the waiting period pursuant to a request
for additional information is authorized by the HSR Act. Thereafter, such
waiting period may be extended only by court order or with the consent of the
filing parties. In practice, complying with a request for additional
information or material can take a significant amount of time. In addition, if
the Antitrust Division or the FTC raises substantive issues in connection with
a proposed transaction, the parties frequently engage in negotiations with the
relevant governmental agency concerning possible means of addressing those
issues and may agree to delay consummation of the transaction while such
negotiations continue. Expiration or termination of the applicable waiting
period under the HSR Act is a condition to the Purchaser's obligation to
accept for payment and pay for Shares tendered pursuant to the Offer.
The Merger will not require an additional filing under the HSR Act if the
Purchaser owns 50% or more of the outstanding Shares at the time of the Merger
or if the Merger occurs within one year after the HSR Act waiting period
applicable to the Offer expires or is terminated.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's proposed
acquisition of WMF. At any time before or after the Purchaser's acquisition of
Shares pursuant to the Offer, the Antitrust Division or the FTC could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the purchase of Shares pursuant
to the Offer or the consummation of the Merger or seeking the divestiture of
Shares acquired by the Purchaser or the divestiture of substantial assets of
WMF or its subsidiaries or Prudential Mortgage or its subsidiaries. Private
parties may also bring legal action under the antitrust laws under certain
circumstances. There can be no assurance that a challenge to the Offer on
antitrust grounds will not be made or, if such a challenge is made, of the
result thereof.
33
<PAGE>
GNMA, FHA and Fannie Mae Notifications and Approvals. The FHA of the US
Department of Housing and Urban Development ("HUD") requires written
notification within ten days of any change of ownership, control, name,
management personnel, or business operations of an approved FHA mortgagee.
Although HUD's change of control provisions do not, on their face, cover
indirect changes of control, it is prudent to provide written notification
within 10 days of an indirect change of ownership of an approved mortgagee.
GNMA requires that a GNMA approved issuer must notify GNMA at least thirty
days prior to the effective date of any changes in the issuer's status,
including but not limited to changes in its relationship with government
agencies, or any direct or indirect change in ownership or control of the
issuer. In the event of a change in the ownership or control of an approved
issuer, the issuer must reconfirm in writing that, following the proposed
change, it will continue to meet all of the GNMA issuer eligibility
requirements. If, following the change of control or ownership, the issuer
will be affiliated with other GNMA approved issuers, then GNMA will require
that the affiliated issuers execute a cross default agreement for the benefit
of GNMA.
Fannie Mae requires that, if a Fannie Mae approved lender makes or
experiences any basic change in its ownership, whether direct or indirect, or
any changes in its staff, facilities, financial condition, business
operations, structure, organization, activities or purpose, the lender must
immediately notify Fannie Mae. A Fannie Mae Delegated Underwriting and
Servicing lender also must obtain Fannie Mae's prior written approval before
requesting any additional Fannie Mae commitments.
WMF Washington Mortgage Corp. ("Washington Mortgage"), a wholly-owned
subsidiary of WMF, is an FHA-approved mortgagee and is approved by Fannie Mae
to participate as a seller/servicer in Fannie Mae's multifamily Delegated
Underwriting and Servicing program. It is a condition to the Offer that
Washington Mortgage notify FHA of the change in control of WMF, and that
Fannie Mae consent to the change in control of WMF. Washington Mortgage has
commenced the process to provide the required notice to FHA and to obtain the
required Fannie Mae consent.
WMF/Huntoon, Paige Associates Limited ("WMF/Huntoon"), a wholly-owned
subsidiary of Washington Mortgage is an FHA-approved mortgagee, a GNMA issuer,
and a Fannie Mae approved seller/servicer. It is a condition to the Offer that
WMF/Huntoon notify FHA and GNMA of the change in control of WMF, and that
Fannie Mae consent to the change in control of WMF. WMF/Huntoon has commenced
the process to provide the required notices to FHA and GNMA and to obtain the
required Fannie Mae consent.
16. Fees and Expenses
Prudential Securities Incorporated has been engaged to act as financial
advisor to Prudential Mortgage in connection with its acquisition of WMF and
is acting as Dealer Manager in connection with the Offer. Prudential
Securities Incorporated is being compensated as financial advisor and is not
receiving any additional compensation for acting as Dealer Manager. Prudential
Mortgage has also agreed to reimburse Prudential Securities Incorporated for
its expenses, including the fees and reasonable expenses of its counsel in
connection with its engagement, and to indemnify Prudential Securities
Incorporated and certain related persons against certain liabilities and
expenses, including certain liabilities under federal securities laws.
Prudential Securities Incorporated is a wholly-owned subsidiary of The
Prudential Insurance Company of America. Prudential Securities Incorporated is
an affiliate of Prudential Mortgage. Prudential Securities Incorporated has
rendered various investment banking and other advisory services including the
engagement described above, to Prudential Mortgage and its affiliates in the
past and is expected to continue to render such services for which it has
received and will continue to receive customary compensation from Prudential
Mortgage and its affiliates.
The Purchaser and Prudential Mortgage have retained Morrow & Co., Inc. to
act as the Information Agent and Wilmington Trust Company to serve as the
Depositary in connection with the Offer. The Information Agent and the
Depositary each will receive reasonable and customary compensation for their
services, be reimbursed for certain reasonable out-of-pocket expenses and be
indemnified against certain liabilities and expenses in connection therewith,
including certain liabilities and expenses under the U.S. federal securities
laws.
34
<PAGE>
Neither the Purchaser nor Prudential Mortgage will pay any fees or
commissions to any broker or dealer or other person (other than the Dealer
Manager and the Information Agent) in connection with the solicitation of
tenders of Shares pursuant to the Offer. Brokers, dealers, banks and trust
companies will be reimbursed by the Purchaser upon request for customary
mailing and handling expenses incurred by them in forwarding material to their
customers.
17. Miscellaneous
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of
such jurisdiction. Neither the Purchaser nor Prudential Mortgage is aware of
any jurisdiction in which the making of the Offer or the acceptance thereof
would not be in compliance with the laws of such jurisdiction. To the extent
the Purchaser or Prudential Mortgage becomes aware of any state law that would
limit the class of offerees in the Offer, the Purchaser will amend the Offer
and, depending on the timing of such amendment, if any, will extend the Offer
to provide adequate dissemination of such information to holders of Shares
prior to the expiration of the Offer. In any jurisdiction the securities, blue
sky or other laws of which require the Offer to be made by a licensed broker
or dealer, the Offer is being made on behalf of the Purchaser by the Dealer
Manager or one or more registered brokers or dealers licensed under the laws
of such jurisdiction.
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser or Prudential Mortgage not contained
herein or in the letter of transmittal and, if given or made, such information
or representation must not be relied upon as having been authorized.
The Purchaser and Prudential Mortgage have filed with the Commission the
Schedule TO pursuant to Rule 14d-3 under the Exchange Act, together with
exhibits, furnishing certain additional information with respect to the Offer,
and may file amendments thereto. In addition, WMF has filed the Schedule 14D-9
pursuant to Rule 14d-9 under the Exchange Act, together with exhibits, setting
forth its recommendation with respect to the Offer and the reasons for such
recommendation and furnishing certain additional related information. WMF's
Schedule 14D-9 is being sent to WMF stockholders contemporaneously with this
Offer to Purchase. The Schedule TO and 14D-9 and any amendments thereto,
including exhibits, should be available for inspection and copies should be
obtainable in the manner set forth in Section 8 (except that such material
will not be available at the regional offices of the Commission).
Prudential Mortgage Capital
Acquisition Corp.
May 23, 2000
35
<PAGE>
SCHEDULE I
EXECUTIVE OFFICERS OF PRUDENTIAL MORTGAGE CAPITAL COMPANY, LLC AND DIRECTORS
AND EXECUTIVE OFFICERS OF THE PURCHASER
1. EXECUTIVE OFFICERS OF PRUDENTIAL MORTGAGE CAPITAL COMPANY, LLC. The
following table sets forth the name of each executive officer of Prudential
Mortgage. (As a limited liability company, Prudential Mortgage does not have
any directors). The business address of each such person is c/o Prudential
Mortgage Capital Company, LLC, Four Gateway Center, Newark, NJ 07102-4069 and
each such person is a citizen of the United States of America.
<TABLE>
<CAPTION>
Present Principal Occupation or Employment;
Name Material Positions Held During the Past Five Years
- ---- ---------------------------------------------------------
<S> <C>
David A. Twardock.... Mr. Twardock has served as President of Prudential
Mortgage since 1998. He served as Senior Managing
Director of Prudential Realty Group from 1995 to 1998.
Mr. Twardock has also served as a Director of the
Purchaser since April 2000.
James W. McCarthy.... Mr. McCarthy has served as Vice President of Planning and
Analysis of Prudential Mortgage since 1999. He served as
Vice President of Prudential Realty Group from 1996 to
1998. From 1995 to 1996 he served as a Director in PICA's
Portfolio Management Group.
John C. Kelly........ Mr. Kelly has served as chief legal officer of Prudential
Mortgage since 1997 and as Secretary of Prudential
Mortgage since 1999. Since 1988 he has served as a member
of PICA's Law Department providing legal support to
various real estate and commercial mortgage investment
units of PICA.
Duane H. Tucker...... Mr. Tucker has served as Managing Director of Capital
Markets Operations of Prudential Mortgage since 1998. He
served as Senior Vice President of Capital Markets
Operations from 1996 to 1998 and as Vice President from
1995 to 1996.
</TABLE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER. The following table
sets forth the name and position with the Purchaser of each director and
executive officer of the Purchaser. All such positions have been held since
the Purchaser's incorporation on April 13, 2000. The business address of each
such person is Prudential Mortgage Capital Acquisition Corp. c/o Prudential
Mortgage Capital Company, LLC, Four Gateway Center, Newark, NJ 07102-4069.
Further information concerning David A. Twardock who also serves as an
executive officer of Prudential Mortgage, is provided above.
<TABLE>
<S> <C>
David A. Twardock.... President and Director
Michael B. Jameson... Mr. Jameson has served as Senior Vice President of
Prudential Mortgage since 1998. He was employed in
Prudential Realty Group from 1995 to 1996, and since then
has been employed in Prudential Mortgage. Mr. Jameson has
also served as Vice President and Director of the
Purchaser since April 2000.
Robert L. Fitts...... Mr. Fitts has served as Principal in Operations and
Finance at Prudential Mortgage since April 2000, prior to
which he served as Vice President of
Securitization/Operations since joining Prudential
Mortgage in September 1997. From 1993 to September 1997,
Mr. Fitts was employed with the Archon Group, a real
estate asset management subsidiary of Goldman, Sachs &
Co., serving as Assistant Director in Structured Finance
and also as investment manager. Mr. Fitts has also served
as Vice President and Director of the Purchaser since
April 2000.
</TABLE>
I-1
<PAGE>
SCHEDULE II
INFORMATION CONCERNING THE PRUDENTIAL INSURANCE COMPANY OF AMERICA AND THE
DIRECTORS AND EXECUTIVE OFFICERS OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
1. INFORMATION CONCERNING THE PRUDENTIAL INSURANCE COMPANY OF AMERICA.
Prudential Mortgage is a wholly owned subsidiary of The Prudential Insurance
Company of America, a New Jersey mutual life insurance company ("PICA"). The
principal executive offices of PICA are located at 751 Broad Street, Newark,
NJ 07102-3777.
2. DIRECTORS AND EXECUTIVE OFFICERS OF PICA. The following table sets forth
the name and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years of each
director and executive officer of PICA. Unless otherwise indicated below, each
occupation set forth opposite each person refers to employment with PICA. The
business address of each such person is c/o The Prudential Insurance Company
of America, 751 Broad Street, Newark, NJ 07102-3777. Except as otherwise set
forth below, each such person is a citizen of the United States of America.
PRINCIPAL OCCUPATION AND FIVE-YEAR EMPLOYMENT HISTORY
<TABLE>
<CAPTION>
Name Age* Title Other Directorships*
---- ---- ----- --------------------
<C> <C> <S> <C>
Arthur F. Ryan....... 57 Chairman, Chief None
Executive Officer and
President
Franklin E. Agnew.... 66 Director Erie Plastics, Inc.
Frederic K. Becker... 64 Director Wilentz Goldman & Spitzer, P.A.
Gilbert F. Casellas.. 47 Director The Swarthmore Group, Inc.
James G. Cullen...... 57 Director Agilent Technologies, Inc.
Bell Atlantic Corporation
Johnson & Johnson
Carolyne K. Davis.... 68 Director Beckman Coulter Instruments, Inc.
Beverly Enterprises
Minimed Incorporated
Science Applications International
Corporation
Rodger A. Enrico..... 55 Director PepsiCo, Inc.
A.H. Belo Corporation
Electronic Data Systems
Target Corporation
Allan D. Gilmour..... 66 Director DTE Energy Company
MediaOne Group, Inc.
The Dow Chemical Company
Whirlpool Corporation
William H. Gray III.. 58 Director CBS Corporation
Electronic Data Systems
Ezgov.com, Inc.
Municipal Bond Investors Assurance
Corporation
Rockwell International Corporation
The Chase Manhattan Corporation
The Chase Manhattan Bank
Warner-Lambert Company
</TABLE>
* As of May 17, 2000
II-1
<PAGE>
<TABLE>
<CAPTION>
Name Age* Title Other Directorships*
---- ---- ----- --------------------
<C> <C> <S> <C>
Jon F. Hanson........ 63 Director Consolidated Delivery and
Logistics
Hampshire Management Company
James E. Hanson Management Company
Neuman Distributors, Inc.
United Water Resources
Glen H. Hiner........ 65 Director Owens Corning
Dana Corporation
Kohler, Co.
Constance J. Horner.. 58 Director Foster Wheeler Corporation
Ingersoll-Rand Company
Pfizer, Inc.
Gaynor N. Kelley..... 69 Director Alliant Techsystems
Hercules Incorporated
Burton G. Malkiel.... 67 Director Baker Fentress & Company
Banco Bilbao Vizcaya Gestinova
NeuVis, Inc.
Select Sector SPDR Trusts
The Jeffrey Company
Vanguard Group, Inc.
Ida F.S. Schmertz.... 65 Director None
Charles R. Sitter.... 59 Director None
Donald L. Staheli.... 68 Director None
Richard M. Thomson... 66 Director The Toronto-Dominion Bank
CGC, Inc.
Canada Pension Plan Investment
Board
Canadian Occidental Petroleum Ltd.
INCO, Limited
Ontario Power Generation, Inc.
S.C. Johnson & Son, Inc.
The Thomson Corporation
TrizecHahn Corporation
James A. Unruh....... 59 Director Apex Micro Systems
Moss Software, Inc.
P. Roy Vagelos....... 70 Director Advanced Medicines, Inc
Regeneron Pharmaceuticals, Inc.
Stanley C. Van Ness.. 66 Director Jersey Central Power & Light
Paul A. Volcker...... 72 Director Nestle, S.A.
TIAA-CREF
Joseph H. Williams... 67 Director The Williams Company, Inc.
AEA Investors, Inc.
The Orvis Company
Vivian L. Banta...... 49 Executive Vice None
President, Individual
Financial Services
Michele S. Darling... 46 Executive Vice None
President, Corporate
Governance and Human
Resources
Robert C. Golden..... 53 Executive Vice None
President, Operations &
Systems
</TABLE>
* As of May 17, 2000
II-2
<PAGE>
<TABLE>
<CAPTION>
Name Age* Title Other Directorships*
---- ---- ----- --------------------
<C> <C> <S> <C>
Mark B. Grier............ 47 Executive Vice Rochester Gas and Electric
President, Financial Corporation Annuity and Life Re
Management (Holding), Ltd.
Jean D. Hamilton......... 53 Executive Vice None
President. Institutional
Rodger A. Lawson......... 53 Executive Vice None
President, International
Investment and Global
Marketing Communications
Kiyofumi Sakaguchi....... 57 Executive Vice None
President, International
Insurance
John R. Strangfeld, Jr... 46 Executive Vice Schroder Ventures Investment Trust
President, Global Asset (U.K.)
Management
Hardwick Simmons......... 60 President and Chief None
Executive Officer,
Prudential Securities
Incorporated
Richard J. Carbone....... 52 Senior Vice President None
and Chief Financial
Officer
John M. Liftin........... 56 Senior Vice President None
and General Counsel
</TABLE>
- --------
* As of May 17, 2000
II-3
<PAGE>
Biographical information about PICA's directors and executive officers
follows.
Arthur F. Ryan joined PICA as the Chairman of the Board, Chief Executive
Officer and President in December, 1994. Mr. Ryan was with Chase Manhattan
Bank from 1972 to 1994, serving in various executive positions including
President and Chief Operating Officer, from 1990 to 1994 and Vice Chairman
from 1985 to 1990.
Franklin E. Agnew was appointed by the Chief Justice of the New Jersey
Supreme Court as a director of PICA in June, 1994. He has been an independent
business consultant since January, 1987. Mr. Agnew was the Chief Financial
Officer of H.J. Heinz Co. from July, 1971 to June, 1986.
Frederic K. Becker was appointed by the Chief Justice of the New Jersey
Supreme Court as a director of PICA in June, 1994. He has served as President
of the law firm of Wilentz Goldman & Spitzer since 1989 and has been with the
firm since 1960.
Gilbert F. Casellas was elected as a director of PICA in April, 1998. He has
served as the President and Chief Operating Officer of The Swarthmore Group,
Inc. (investment company) since January, 1999. Mr. Casellas was a partner in
the law firm of McConnell Valdes LLP from 1998 to 1999; Chairman, U.S. Equal
Employment Opportunity Commission from 1994 to 1998; and General Counsel, U.S.
Department of Air Force from 1993 to 1994.
James G. Cullen was appointed by the Chief Justice of the New Jersey Supreme
Court as a director of PICA in April, 1994. He has served as the President and
Chief Operating Officer of Bell Atlantic Corporation (global
telecommunications) since December, 1998. Mr. Cullen was the President and
Chief Executive Officer, Telecom Group, Bell Atlantic Corporation from 1997 to
1998; Vice Chairman from 1995 to 1997; and President from 1993 to 1995 of Bell
Atlantic Corporation. He joined the Bell Atlantic division of AT&T in 1964 and
served in various positions with both companies.
Carolyne K. Davis was elected a director PICA in April, 1989. She has been
an Independent Health Care Advisor since 1997. Dr. Davis was a Scholar in
Resident at Cornell University from 1997 to 1999 and a Health Care Advisor
with Ernst & Young, LLP from 1985 to 1997. She was Administrator, Health Care
Financing Administration, Department of Health and Human Services from 1981 to
1985.
Roger A. Enrico was elected as a director of PICA in April, 1994. He has
served as the Chairman and Chief Executive Officer of PepsiCo, Inc. (consumer
beverages and packaged foods) since 1996. Mr. Enrico joined PepsiCo in 1971
serving in various executive management positions; including Vice Chairman and
Chief Executive Officer, PepsiCo, Inc. in 1996 and Chairman and Chief
Executive Officer, PepsiCo Worldwide Restaurants from 1994 to 1996.
Allan D. Gilmour was elected as a director in April, 1995. He retired as the
Vice Chairman of Ford Motor Company in 1995. During his 34-year career with
Ford Motor Company (automotive industry), Mr. Gilmour held a number of
executive positions, including that of Chief Financial Officer and President
of Ford Automotive Group.
William H. Gray III was elected as a director of PICA in September, 1991. He
has served as President and Chief Executive Officer of The College Fund/UNCF
(philanthropic foundation) since 1991. Mr. Gray was a U.S. Congressman from
1979 to 1991.
Jon F. Hanson was appointed by the Chief Justice of the New Jersey Supreme
Court as director of PICA in April, 1991. He has served as the Chairman of
Hampshire Management Company (real estate broker and property management)
since 1976. Mr. Hanson served as the Chairman and Commissioner of the New
Jersey Sports and Exposition Authority from 1982 to 1990.
II-4
<PAGE>
Glen H. Hiner was been a director of PICA in April, 1997. He is the Chairman
and Chief Executive Officer of Owens Corning (advanced glass and building
material systems) having served in that capacity since joining the Company in
1992. Prior to joining Owens, Mr. Hiner worked at General Electric Company
starting in 1957. He served as Senior Vice President and Group Executive,
Plastics Group from 1983 to 1991.
Constance J. Horner was elected as a director of PICA in April, 1994. She
has been a Guest Scholar at The Brookings Institution (non-partisan research
institute) since 1993, after serving Assistant to the President and Director,
Presidential Personnel from 1991 to 1993; Deputy Secretary, Department of
Health and Human Services from 1989 to 1991; and Director, U.S. Office of
Personnel Management from 1985 to 1989. Ms. Homer was a Commissioner, U.S.
Commission on Civil Rights from 1993 to 1998 and taught at John Hopkins
University and Princeton University in 1994 and 1995.
Gaynor N. Kelley was elected as a director of PICA in April, 1997. He
retired as the Chairman of The Perkin-Elmer Corporation (development,
manufacture and marketing of analytical instruments and life science systems)
in 1996 after having served in that position from 1990. Prior to that, Mr.
Kelley held other executive management positions with Perkin-Elmer, having
joined the company in 1950.
Burton G. Malkiel was elected as a director of PICA in April, 1978. He is
the Chemical Bank Chairman's Professor of Economics at Princeton University,
where he has served on the faculty from 1988 to the present and at other times
since 1964. He was the Dean of the School of Organization and Management at
Yale University from 1981 to 1988, and he was a member of the President's
Council of Economic Advisors from 1975 to 1977.
Ida F.S. Schmertz was appointed by the Chief Justice of the New Jersey
Supreme Court as director of PICA in April, 1997. She has been a Principal of
Investment Strategies International (investment consultant) since 1994. Ms.
Schmertz was with American Express Company from 1979 to 1994, holding several
management positions including Senior Vice President, Corporate Affairs.
Charles R. Sitter was elected as a director of PICA in April, 1995. He
retired as the President of Exxon Corporation (oil and gas industry) in 1996.
Mr. Sitter joined Exxon in 1957 and held various financial and management
positions with Exxon in the United States, Europe, Asia and Australia.
Donald L. Staheli was elected as a director of PICA in April, 1995. He
served as Chairman and Chief Executive Officer of Continental Grain Company
(international agribusiness and financial services) from June, 1994 until his
retirement in July, 1997 and as President and Chief Executive Officer from
April, 1988 to June, 1994. Mr. Staheli began his career at Continental Grain
in 1969.
Richard M. Thomson was elected as a director of PICA in April, 1976. He
retired as the Chairman and Chief Executive Officer of The Toronto-Dominion
Bank (banking and financial services) in 1998 after having served as Chairman
and Chief Executive Officer since 1978. Prior to that time he held other
management positions at The Toronto-Dominion Bank, which he joined in 1957.
Mr. Thomson is a citizen of Canada.
James A. Unruh was elected as a director of PICA in April, 1996. He has been
a Principal Member of Alerion Capital Group, LLC (venture capital group) since
1998. Mr. Unruh was with Unisys Corporation (information technology services,
hardware and software) (from 1987 to 1997) serving as Chairman and Chief
Executive Officer from 1990 to 1997.
P. Roy Vagelos, M.D. was elected as a director of PICA in April, 1989. He
retired as the Chairman, Chief Executive Officer and President of Merck & Co.,
Inc. (pharmaceuticals) in 1995 after serving in that position since 1985.
Prior to that, Dr. Vagelos was the Senior Vice President, Research Division of
Merck Sharp and Dome Laboratories which he joined in 1975.
Stanley C. Van Ness was appointed by the Chief Justice of the New Jersey
Supreme Court as director in April, 1990. He has been a partner in the law
firm of Herbert, Van Ness, Cayci & Goodell since 1998. From 1990 to 1998, Mr.
Van Ness was a partner in the law firm of Picco Herbert Kennedy and from 1984
to 1990 was
II-5
<PAGE>
a partner with Jamieson, Moore, Peskin and Spicer. He was a professor at Seton
Hall University Law School from 1982 to 1984. Prior to that time he worked for
the State of New Jersey, where he served as the first Public Advocate.
Paul A. Volcker was elected as a director of PICA in July, 1988. He has been
a business consultant to various companies since 1997. Mr. Volcker was the
Chairman and Chief Executive Officer of Wolfensohn & Co., Inc. from 1995 to
1996 and Chairman of James D. Wolfensohn, Inc. (investment banking firm) from
1988 to 1995. From 1979 to 1988, Mr. Volcker was the Chairman of the Board of
Governors of the Federal Reserve System, President of the Federal Reserve Bank
of New York from 1975 to 1979 and Undersecretary of the U.S. Department of
Treasury.
Joseph H. Williams was elected as a director of PICA in April, 1994. He
currently serves as a Director of The Williams Companies, Inc. (energy and
communication technologies). Mr. Williams joined Williams in 1959 serving
Chairman and Chief Executive Officer from 1979 to 1993, when he retired.
Vivian L. Banta was appointed Executive Vice President, Individual Financial
Services of PICA in March, 2000. She served as Senior Vice President,
Individual Financial Services from January, 2000 to March, 2000. Prior to
joining PICA she was an independent consultant from 1997 to 1999 and served as
Executive Vice President, Global Investor Services, Group Executive for Chase
Manhattan Bank from 1991 to 1997.
Michele S. Darling was appointed Executive Vice President, Corporate
Governance and Human Resources of PICA in March, 2000. She served as Executive
Vice President, Human Resources from February, 1997 to March, 2000. Prior to
joining PICA she was the Executive Vice President, Human Resources, Canadian
Imperial Bank of Commerce from 1990 to 1997. Ms. Darling is a citizen of
Canada.
Robert C. Golden was appointed Executive Vice President, Operations and
Systems of PICA in June, 1997. Previously, he served as Executive Vice
President and Chief Administrative Officer for Prudential Securities since
October, 1976.
Mark B. Grier was appointed Executive Vice President, Financial Management
of PICA in March, 2000. He was Executive Vice President, Corporate Governance
from October, 1998 to March, 2000, Executive Vice President, Financial
Management from June, 1997 to October, 1998 and the Chief Financial Officer
from May, 1995 to June, 1997. Prior to joining PICA, Mr. Grier was an
executive with Chase Manhattan Corporation.
Jean D. Hamilton was appointed Executive Vice President, Institutional of
PICA in October, 1998. She was the President of the PICA Diversified Group
from February, 1995 to October, 1998 and has held several other senior
management positions since joining PICA in 1988. Previously, Ms. Hamilton was
an executive with First National Bank of Chicago.
Rodger A. Lawson was appointed Executive Vice President, International
Investment and Global Marketing Communications of PICA in October, 1998. He
was Executive Vice President, Marketing and Planning of PICA from June, 1996
to October, 1998. Prior to joining PICA, Mr. Lawson was the President and
Chief Executive Officer, VanEck Global from April 1994 to June 1996; Managing
Director and Partner, President and Chief Executive Officer of Global Private
Banking and Mutual Funds, Bankers Trust from January 1992 to April 1994;
Managing Director and Chief Executive Officer, Fidelity Investment form May,
1985 to May, 1991 and President and Chief Executive Officer, Dreyfus
Corporation from March, 1982 to May, 1985.
Kiyofumi Sakaguchi was appointed Executive Vice President, International
Insurance of PICA in September, 1998. Mr. Sakaguchi has served as the
executive in charge of PICA's international insurance operations since 1995
and has held various senior management positions in that area since joining
PICA in March, 1980. Mr. Sakaguchi had previously worked in the insurance
industry in Japan and the United States with Sakaguchi & Associates from 1977
to 1980 and Occidental International Enterprises, Inc from 1974 to 1977. Mr.
Sakaguchi is a citizen of Japan.
II-6
<PAGE>
John R. Strangfeld, Jr. was appointed Executive Vice President, Global Asset
Management of PICA in October, 1998. He has been with PICA since July, 1977,
serving in various management positions, including the executive in charge of
PICA's Asset Management Group since 1996; Senior Managing Director, The
Private Asset Management Group from 1995 to 1996; and Chairman, PRICOA Europe
from 1989 to 1995.
Hardwick Simmons joined Prudential Securities Incorporated in June, 1991. He
was with Shearson Lehman Brothers Inc. from 1966 to 1990 in various management
positions, including President, Private Client Group and Senior Executive Vice
President.
Richard J. Carbone was appointed Senior Vice President and Chief Financial
Officer of PICA in July, 1997. Prior to that, Mr. Carbone was the Global
Controller and Managing Director of Salomon, Inc. from June, 1995 to June,
1997, and Controller and Managing Director of Bankers Trust from April, 1988
to June, 1995.
John M. Liftin was appointed Senior Vice President and General Counsel of
PICA in April, 1998. Prior to that Mr. Liftin was an independent consultant
from 1997 to 1998 and the Senior Vice President and General Counsel of Kidder,
Peabody Group, Inc. from 1987 to 1996. Prior to that time, he was a partner in
the law firm of Rogers & Wells.
II-7
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each
stockholder of WMF or his or her broker, dealer, commercial bank, trust
company or other nominee to the Depositary as follows:
The Depositary for the Offer is:
Wilmington Trust Company
By Mail: By Facsimile By Hand or Overnight
Wilmington Trust Company Transmission: Courier:
P.O. Box 8861 (for Eligible Wilmington Trust Company
Corporate Trust Institutions only) 1105 North Market Street
Operations (302) 651-1079 1st Floor
Wilmington, DE 19885 Wilmington, DE 19801
Attn: Corporate Trust
Operations
To Confirm Facsimile Transmissions:
(For Eligible Institutions Only)
(302) 65l-8869
Questions and requests for assistance may be directed to Morrow & Co., Inc.
(the "Information Agent") or to Prudential Securities Incorporated (the
"Dealer Manager") at their respective addresses and telephone numbers set
forth below. Additional copies of the Offer to Purchase, the Letter of
Transmittal, the Notice of Guaranteed Delivery and the other related material
may be obtained from the Information Agent at its address and telephone number
set forth below. Stockholders may also contact their broker, dealer,
commercial bank, trust company or other nominee for copies of these documents.
The Information Agent for the Offer is:
MORROW & CO., INC.
445 Park Avenue 5th Floor
New York, New York 10022
Call Collect (212) 754-8000
Banks and Brokerage Firms Call: (800) 662-5200
Shareholders Please Call: (800) 566-9061
The Dealer Manager for the Offer is:
Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Toll Free (888) 713-4198
<PAGE>
EXHIBIT (a)(1)(B)
Letter of Transmittal
to tender Shares of Common Stock
of
THE WMF GROUP, LTD.
at $8.90 Net Per Share
pursuant to the Offer to Purchase dated May 23, 2000
by
PRUDENTIAL MORTGAGE CAPITAL ACQUISITION CORP.
a wholly owned subsidiary of
PRUDENTIAL MORTGAGE CAPITAL COMPANY, LLC
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME ON TUESDAY, JUNE 20, 2000,
UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
The Depositary for the Offer is:
Wilmington Trust Company
By Mail: By Facsimile By Hand/Overnight
Transmission: Courier:
Wilmington Trust Company (for Eligible
P.O. Box 8861 Institutions only) Wilmington Trust Company
Corporate Trust (302) 651-1079 1105 North Market Street,
Operations 1st Floor
Wilmington, DE 19885 Wilmington, DE 19801
Attn: Corporate Trust
Operations
To Confirm Facsimile Transmissions:
(for Eligible Institutions only)
(302) 651-8869
Delivery of this Letter of Transmittal to an address, or transmission of
instructions via facsimile to a number, other than as set forth above does not
constitute a valid delivery. The instructions accompanying this Letter of
Transmittal should be read carefully before this Letter of Transmittal is
completed.
Capitalized terms used but not defined in this Letter of Transmittal shall
have the meanings ascribed to them in the Offer to Purchase (as defined
below).
This Letter of Transmittal is to be used if certificates for Shares (as
defined below) are to be forwarded herewith or, unless an Agent's Message is
utilized, if delivery of Shares is to be made by book-entry transfer to an
account maintained by the Depositary (as defined below) at the Book-Entry
Transfer Facility pursuant to the procedures described in Section 2 of the
Offer to Purchase. See Instruction 2. Stockholders who deliver Shares by book-
entry transfer are referred to herein as "Book-Entry Stockholders."
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver either the certificates for, or a Book-Entry Confirmation
with respect to, their Shares and all other documents required hereby to the
Depositary prior to the Expiration Date must tender their Shares in accordance
with the guaranteed delivery procedures described in Section 2 of the Offer to
Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER
FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
<PAGE>
DESCRIPTION OF SHARES TENDERED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Name(s) and Address(es) of
Registered Holder(s)
(Please fill in exactly as
name(s) appear(s) on Share Number of Shares Number of
Share Certificate(s) Certificate Represented by Shares
(attach list if necessary) Number(s)(1) Certificate(s)(1) Tendered(2)
- -------------------------------------------------------------------------
<S> <C> <C> <C>
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
Total Shares Tendered
- -------------------------------------------------------------------------
</TABLE>
(1) Need not be completed by stockholders who deliver Shares by book-entry
transfer.
(2) Unless otherwise indicated, it will be assumed that all Shares
representing certificates delivered to the Depositary are being
tendered. See Instruction 4.
[_] CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN
HAVE BEEN LOST OR DESTROYED AND SEE INSTRUCTION 11.
Number of Shares represented by lost or destroyed certificates: _________
BOOK-ENTRY TRANSFER
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE
BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution ___________________________________________
Account Number __________________________________________________________
Transaction Code Number _________________________________________________
GUARANTEED DELIVERY
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Owners(s) _________________________________________
Date of Execution of Notice of Guaranteed Delivery ______________________
Name of Institution that Guaranteed Delivery ____________________________
If delivered by book-entry transfer:
Account Number at Book-Entry Transfer Facility __________________________
Transaction Code Number _________________________________________________
2
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Prudential Mortgage Capital Acquisition
Corp., a Delaware corporation (the "Purchaser") which is a wholly owned
subsidiary of Prudential Mortgage Capital Company, LLC, a Delaware limited
liability company, the above-described shares (the "Shares") of common stock,
par value $.01 per share, of The WMF Group, Ltd., a Delaware corporation
("WMF"), upon the terms and subject to the conditions set forth in the
Purchaser's Offer to Purchase dated May 23, 2000 (the "Offer to Purchase"),
and this Letter of Transmittal (which, together with any amendments or
supplements thereto or hereto, collectively constitute the "Offer"), receipt
of which is hereby acknowledged.
Upon the terms of the Offer, subject to, and effective upon, acceptance for
payment of, and payment for, the Shares tendered herewith in accordance with
the terms of the Offer, the undersigned hereby sells, assigns and transfers
to, or upon the order of, the Purchaser all right, title and interest in and
to all the Shares that are being tendered hereby (and any and all other Shares
or other securities or rights issued or issuable in respect thereof on or
after May 16, 2000), and irrevocably constitutes and appoints Wilmington Trust
Company (the "Depositary"), the true and lawful agent and attorney-in-fact of
the undersigned, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to the full
extent of the undersigned's rights with respect to such Shares (and any such
other Shares or securities or rights), (a) to deliver certificates for such
Shares (and any such other Shares or securities or rights) or transfer
ownership of such Shares (and any such other Shares or securities or rights)
on the account books maintained by the Book-Entry Transfer Facility, together,
in any such case, with all accompanying evidences of transfer and authenticity
to, or upon the order of, the Purchaser, (b) to present such Shares (and any
such other Shares or securities or rights) for transfer on WMF's books and (c)
except as otherwise provided below, to receive all benefits and otherwise
exercise all rights of beneficial ownership of such Shares (and any such other
Shares or securities or rights), all in accordance with the terms of the
Offer.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the tendered Shares
(and any and all other Shares or other securities or rights issued or issuable
in respect of such Shares on or after May 16, 2000), and, when the same are
accepted for payment by the Purchaser, the Purchaser will acquire good title
thereto, free and clear of all liens, restrictions, claims and encumbrances,
and the same will not be subject to any adverse claim. The undersigned will,
upon request, execute any additional documents deemed by the Depositary or the
Purchaser to be necessary or desirable to complete the sale, assignment and
transfer of the tendered Shares (and any and all such other Shares or
securities or rights).
All authority conferred or agreed to be conferred pursuant to this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated in the Offer to Purchase this tender is irrevocable.
The undersigned hereby irrevocably appoints David A. Twardock, Michael B.
Jameson and Robert L. Fitts and each of them, and any other designees of the
Purchaser, the attorneys-in-fact and proxies of the undersigned, each with
full power of substitution, to vote at any annual, special or adjourned
meeting of WMF's stockholders or otherwise in such manner as each such
attorney-in-fact and proxy or his substitute shall in his sole discretion deem
proper with respect to, to execute any written consent concerning any matter
as each such attorney-in-fact and proxy or his substitute shall in his sole
discretion deem proper with respect to, and to otherwise act as each such
attorney-in-fact and proxy or his substitute shall in his sole discretion deem
proper with respect to, the Shares tendered hereby that have been accepted for
payment by the Purchaser prior to the time any such action is taken and with
respect to which the undersigned is entitled to vote (and any and all other
Shares or other securities or rights issued or issuable in respect of such
Shares on or after May 16, 2000). This appointment is
3
<PAGE>
effective when, and only to the extent that, the Purchaser accepts for payment
such Shares as provided in the Offer to Purchase. This power of attorney and
proxy are irrevocable and are granted in consideration of the acceptance for
payment of such Shares in accordance with the terms of the Offer. Upon such
acceptance for payment, all prior powers of attorney, proxies and consents
given by the undersigned with respect to such Shares (and any such other
Shares or securities or rights) will, without further action, be revoked and
no subsequent powers of attorney, proxies, consents or revocations may be
given (and, if given, will not be effective) by the undersigned.
The undersigned understands that the valid tender of Shares pursuant to any
of the procedures described in Section 2 of the Offer to Purchase and in the
Instructions hereto will constitute a binding agreement between the
undersigned and the Purchaser upon the terms and subject to the conditions of
the Offer.
Unless otherwise indicated herein under "Special Payment Instructions," please
issue the check for the Offer Price and/or return any certificates for Shares
not tendered or accepted for payment in the name(s) of the registered
holder(s) appearing under "Description of Shares Tendered." Similarly, unless
otherwise indicated under "Special Delivery Instructions," please mail the
check for the Offer Price and/or return any certificates for Shares not
tendered or accepted for payment (and accompanying documents, as appropriate)
to the address(es) of the registered holder(s) appearing above under
"Description of Shares Tendered." In the event that both "Special Delivery
Instructions" and "Special Payment Instructions" are completed, please issue
the check for the Offer Price and/or return any certificates for Shares not
tendered or accepted for payment (and any accompanying documents, as
appropriate) in the name of, and deliver such check and/or return such
certificates (and any accompanying documents, as appropriate) to, the person
or persons so indicated. Please credit any Shares tendered herewith by book-
entry transfer that are not accepted for payment by crediting the account at
the Book-Entry Transfer Facility designated above. The undersigned recognizes
that the Purchaser has no obligation pursuant to "Special Payment
Instructions" to transfer any Shares from the name of the registered holder
thereof if the Purchaser does not accept for payment any of the Shares so
tendered.
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 5, 6 and 7) (See Instructions 5, 6 and 7)
To be completed ONLY if To be completed ONLY if
certificates for Shares not certificates for Shares not
tendered or not accepted for tendered or not accepted for
payment and/or the check for the payment and/or the check for the
Offer Price of Shares accepted for Offer Price of Shares accepted for
payment are to be issued in the payment are to be sent to someone
name of someone other than the other than the undersigned, or to
undersigned. the undersigned at an address
other than that above.
Issue to: [_] Check [_]
Certificate(s) Mail to: [_] Check [_]
Certificate(s)
Name ______________________________
(Please Print) Name ______________________________
(Please Print)
Address ___________________________
Address ___________________________
___________________________________
(Include Zip Code) ___________________________________
(Include Zip Code)
___________________________________
(Taxpayer Identification or Social
Security Number)
4
<PAGE>
SIGN HERE
(Also Complete Substitute Form W-9 Below)
.......................................................................
.......................................................................
(Signature(s) of Stockholder(s))
Dated: ................................................................
(Must be signed by registered holder(s) as name(s) appear(s) on the
Certificate(s) for the Shares or on a security position listing or by
person(s) authorized to become registered holder(s) by certificates
and documents transmitted herewith. If signature is by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative
capacity, please provide the following information and see Instruction
5.)
Name(s): ..............................................................
(Please Print)
Capacity (full title): ................................................
Address: ..............................................................
(Include Zip Code)
Daytime Area Code and Telephone No.: ..................................
Taxpayer Identification or Social Security No.: .......................
(See Substitute Form W-9)
GUARANTEE OF SIGNATURE(S)
(If Required -- See Instructions 1 and 5)
Authorized Signature ..................................................
Name ..................................................................
(Please Print)
Name of Firm ..........................................................
Address ...............................................................
(Include Zip Code)
Daytime Area Code and Telephone No. ...................................
Dated: ................................................................
5
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. Your signature on this Letter of Transmittal
must be guaranteed unless (a) this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this Instruction 1, includes
any participant in the Book-Entry Transfer Facility's system whose name
appears on a security position listing as the owner of the Shares) of Shares
tendered herewith and such registered holder(s) has not completed either the
box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" on this Letter of Transmittal or (b) such Shares are
tendered for the account of a financial institution (including most commercial
banks, savings and loan associations and brokerage houses) that is a
participant in the Security Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program (such participant, an "Eligible Institution"). If a
signature guarantee is required, it must be provided by an Eligible
Institution. See Instruction 5.
2. Requirements of Tender. This Letter of Transmittal is to be completed by
stockholders either if certificates are to be forwarded herewith or, unless an
Agent's Message (as defined below) is utilized, if delivery of Shares is to be
made pursuant to the procedures for book-entry transfer set forth in Section 2
of the Offer to Purchase. For a stockholder validly to tender Shares pursuant
to the Offer, either (a) a Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, together with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message, and
any other required documents, must be received by the Depositary at one of its
addresses set forth herein prior to the Expiration Date and either
certificates for tendered Shares must be received by the Depositary at one of
such addresses or Shares must be delivered pursuant to the procedures for
book-entry transfer described herein (and a Book-Entry Confirmation received
by the Depositary), in each case prior to the Expiration Date, or (b) the
tendering stockholder must comply with the guaranteed delivery procedures
described below and in Section 2 of the Offer to Purchase.
If your Shares are not immediately available or you cannot deliver your
certificates and all other required documents to the Depositary or complete
the procedures for book-entry transfer prior to the Expiration Date, your
tender may be effected if all the following conditions are met:
(i) your tender is made by or through an Eligible Institution;
(ii) you ensure that a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form provided by us, is received
by the Depositary, as provided below, prior to the Expiration Date; and
(iii) you ensure that the certificates for all tendered Shares, in proper
form for transfer (or a Book-Entry Confirmation with respect to all such
Shares), together with a Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message,
and any other required documents are received by the Depositary within
three trading days after the date of execution of such Notice of Guaranteed
Delivery. A "trading day" is any day on which the Nasdaq National Market
operated by the National Association of Securities Dealers, Inc. is open
for business.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
The method of delivery of shares, the Letter of Transmittal and all other
required documents, including delivery through the Book-Entry Transfer
facility, is at the election and risk of the tendering stockholder. Shares
will be deemed delivered only when actually received by the Depositary
(including, in the case of a Book-Entry Transfer, by Book-Entry Confirmation).
If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. In all cases, sufficient time should be
allowed to ensure timely delivery.
6
<PAGE>
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution
of this Letter of Transmittal (or facsimile hereof), waive any right to
receive any notice of the acceptance of their Shares for payment.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
signed schedule and attached hereto.
4. Partial Tenders (Applicable to certificated stockholders only). If fewer
than all the Shares evidenced by any certificate submitted are to be tendered,
fill in the number of Shares that are to be tendered in the box entitled
"Number of Shares Tendered." In any case, new certificate(s) for the remainder
of the Shares that were evidenced by the old certificate(s) will be sent to
the registered holder, unless otherwise provided in the appropriate box on
this Letter of Transmittal, as soon as practicable after the acceptance for
payment of, and payment for, the Shares tendered herewith. All Shares
represented by certificates delivered to the Depositary will be deemed to have
been tendered unless otherwise indicated.
5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder of the Shares
tendered hereby, the signature must correspond with the name as written on the
face of the certificate(s) without any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and proper evidence satisfactory
to the Purchaser of their authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered owner(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to, or
certificates for Shares not tendered or accepted for payment are to be issued
to, a person other than the registered owner(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the certificates listed, the certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered owner or owners appear on the
certificates. Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
6. Stock Transfer Taxes. The Purchaser will pay any stock transfer taxes
with respect to the transfer and sale of Shares to it or its order pursuant to
the Offer. If, however, payment of the Offer Price is to be made to, or if
certificates for Shares not tendered or accepted for payment are to be
registered in the name of, any person(s) other than the person(s) signing this
Letter of Transmittal, the amount of any stock transfer taxes (whether imposed
on the registered owner(s) or such person(s)) payable on account of the
transfer to such person(s) will be deducted from the Offer Price unless
satisfactory evidence of the payment of such taxes or exemption therefrom is
submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter of
Transmittal.
7
<PAGE>
7. Special Payment and Delivery Instructions. If a check is to be issued in
the name of, and/or certificates for Shares not accepted for payment are to be
returned to, a person other than the signer of this Letter of Transmittal or
if a check is to be sent and/or such certificates are to be returned to a
person other than the signer of this Letter of Transmittal or to an address
other than that shown above, the appropriate boxes on this Letter of
Transmittal should be completed.
8. Waiver of Conditions. The Purchaser reserves the right, subject to the
terms and conditions contained in the Offer to Purchase and to the applicable
rules and regulations of the Commission, to waive any of the specified
conditions of the Offer, in whole or in part, in the case of any Shares
tendered.
9. 31% Backup Withholding. In order to avoid backup withholding of Federal
income tax on payments of cash pursuant to the Offer, when surrendering Shares
in the Offer, you must unless an exemption applies, provide the Depositary
with your correct taxpayer identification number ("TIN") on Substitute Form W-
9 below in this Letter of Transmittal and certify under penalties of perjury
that such TIN is correct and that you are not subject to backup withholding.
If you do not provide your correct TIN or fail to provide the certifications
described above, the Internal Revenue Service (the "IRS") may impose a $50
penalty on you and payment of cash to you pursuant to the Offer may be subject
to backup withholding of 31%.
Backup withholding is not an additional income tax. Rather, the amount of
the backup withholding can be credited against the U.S. federal income tax
liability of the person subject to the backup withholding, provided that the
required information is given to the IRS. If backup withholding results in an
overpayment of tax, a refund can be obtained by the stockholder upon filing an
income tax return.
You are required to give the Depositary the TIN (i.e., social security
number or employer identification number) of the record owner of the Shares.
If the Shares are held in more than one name or are not in the name of the
actual owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
number to report.
The box in Part 3 of the Substitute Form W-9 may be checked if the tendering
stockholder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is checked, the
stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% on all payments made prior to the time a properly certified TIN
is provided to the Depositary. However, such amounts will be refunded to such
stockholder if a TIN is provided to the Depositary within 60 days.
Certain stockholders (including, among others, all corporations and certain
foreign individuals and entities) are not subject to backup withholding.
Noncorporate foreign stockholders should complete and sign the main signature
form and a Form W-8, Certificate of Foreign Status, a copy of which may be
obtained from the Depositary, in order to avoid backup withholding. See the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for more instructions.
10. Requests for Assistance or Additional Copies. Questions and requests for
assistance may be directed to Morrow & Co., Inc. (the "Information Agent") or
to Prudential Securities Incorporated (the "Dealer Manager") at their
respective addresses and telephone numbers set forth on the back cover of this
Letter of Transmittal. Additional copies of the Offer to Purchase, this Letter
of Transmittal, the Notice of Guaranteed Delivery and the other related
materials may be obtained from the Information Agent at its address and
telephone number set forth on the back cover of this Letter of Transmittal.
Stockholders may also contact their broker, dealer, commercial bank, trust
company or other nominee for copies of these documents.
11. Lost, Destroyed or Stolen Certificates. If any certificate representing
Shares has been lost, destroyed or stolen, the stockholder should promptly
notify the Depositary by checking the box immediately following the box
"Description of Shares Tendered" and indicating the number of Shares
represented by lost or destroyed
8
<PAGE>
certificates. The stockholder will then be instructed as to the steps that
must be taken in order to replace the certificate. This Letter of Transmittal
and related documents cannot be processed until the procedures for replacing
lost or destroyed certificates have been followed.
IMPORTANT: This Letter of Transmittal (or a facsimile hereof), together with
any required signature guarantees, or, in the case of a Book-Entry Transfer,
an Agent's Message, and any other required documents, must be received by the
Depositary prior to the Expiration Date and either certificates for tendered
shares must be received by the Depositary or shares must be delivered pursuant
to the procedures for Book-Entry Transfer, in each case prior to the
Expiration Date, or the tendering stockholder must comply with the procedures
for Guaranteed Delivery.
9
<PAGE>
PAYOR'S NAME: WILMINGTON TRUST COMPANY
- --------------------------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR
TIN IN THE BOX AT THE RIGHT ----------------------
SUBSTITUTE AND CERTIFY BY SIGNING AND Social Security
Form W-9 DATING BELOW. Number(s)
or
----------------------
Taxpayer
Identification
Number(s)
-----------------------------------------------------------
Part 2--CERTIFICATIONS--Under penalties of perjury,
I certify that:
Department of (1) The number shown on this form is my correct
the Treasury Taxpayer Identification Number (or I am waiting
Internal for a number to be issued to me) and
Revenue Service (2) I am not subject to backup withholding because (a)
I am exempt from backup withholding or (b) I have
not been notified by the Internal Revenue Service
("IRS") that I am subject to backup withholding as
a result of a failure to report all interest or
dividends or (c) the IRS has notified me that I am
Payer's Request for no longer subject to backup withholding.
Taxpayer -----------------------------------------------------------
Identification CERTIFICATION INSTRUCTIONS--You must
Number ("TIN") cross out item (2) in Part 2 above if
you have been notified by the IRS that
you are subject to backup withholding Part 3
because of under reporting interest or Awaiting
dividends on your tax returns. However, TIN [_]
if after being notified by the IRS that Part 4
you were subject to backup withholding Exempt
you received another notification from TIN [_]
the IRS stating you are no longer sub-
ject to backup withholding, do not
cross out such item (2). If you are ex-
empt from backup withholding, check the
box in Part 4.
Signature: ______________ Date: ______
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAX-
PAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL INFOR-
MATION.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 3 OF SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or
delivered an application to receive a taxpayer identification number to
the appropriate Internal Revenue Service Center or Social Security
Administration Office or (b) I intend to mail or deliver an application in
the near future. I understand that if I do not provide a taxpayer
identification number to the Depositary, all reportable payments made to
me may be subject to a 31% backup withholding tax.
Signature _________________________ Date ______________________________
- --------------------------------------------------------------------------------
10
<PAGE>
The Information Agent for the Offer is:
MORROW & CO., INC.
445 Park Avenue 5th Floor
New York, New York 10022
Call Collect (212) 754-8000
Banks and Brokerage Firms Call: (800) 662-5200
Shareholders Please Call: (800) 566-9061
The Dealer Manager for the Offer is:
Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Toll Free (888) 713-4198
<PAGE>
EXHIBIT (a)(1)(c)
Notice of Guaranteed Delivery
for
Tender of shares of common stock
of
THE WMF GROUP, LTD.
to
PRUDENTIAL MORTGAGE CAPITAL ACQUISITION CORP.
a wholly owned subsidiary of
PRUDENTIAL MORTGAGE CAPITAL COMPANY, LLC
(Not to be used for signature guarantees)
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME ON TUESDAY, JUNE 20, 2000,
UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
As set forth in Section 2 of the Offer to Purchase (as defined below), this
form or one substantially equivalent hereto must be used to accept the Offer
(as defined below) if certificates for shares of Common Stock, par value $.01
per share (the "Shares"), of The WMF Group, Ltd., a Delaware corporation, are
not immediately available or if the procedure for book-entry transfer cannot
be completed on a timely basis or time will not permit all required documents
to reach the Depositary prior to the Expiration Date. This form may be
delivered by hand to the Depositary or transmitted by telegram, facsimile
transmission or mail to the Depositary and must include a guarantee by an
Eligible Institution (as defined in Section 2 of the Offer to Purchase). See
Section 2 of the Offer to Purchase.
The Depositary for the Offer is:
Wilmington Trust Company
By Mail: By Facsimile By Hand/Overnight
Transmission: Courier:
Wilmington Trust Company (for Eligible
PO Box 8861 Institutions Only) Wilmington Trust Company
Corporate Trust 1105 North Market Street,
Operations (302) 651-1079 1st Floor
Wilmington, DE 19885 Wilmington, DE 19801
Attn: Corporate Trust
Operations
To Confirm Facsimile Transmissions:
(For Eligible Institutions Only)
(302) 651-8869
Delivery of this Instrument to an address, or transmission of instructions
via a facsimile number, other than as set forth above does not constitute a
valid delivery.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Prudential Mortgage Capital Acquisition
Corp., a Delaware corporation (the "Purchaser"), which is a wholly owned
subsidiary of Prudential Mortgage Capital Company, LLC, a Delaware limited
liability company, upon the terms and subject to the conditions set forth in
the Purchaser's Offer to Purchase dated May 23, 2000 (the "Offer to
Purchase"), and the related Letter of Transmittal (which, together with any
amendments or supplements thereto, collectively constitute the "Offer"),
receipt of which is hereby acknowledged, the number of Shares set forth below,
all pursuant to the guaranteed delivery procedures described in Section 2 of
the Offer to Purchase.
Number of Shares Tendered: _____________________________________________
Name(s) of Record Holder(s) ____________________________________________
________________________________________________________________________
Please Print
Address(es) ____________________________________________________________
Daytime Area Code and Tel. No.: ________________________________________
Certificate Nos. (if available): _______________________________________
Signature(s): __________________________________________________________
________________________________________________________________________
Dated: _________________________________________________________________
If Shares will be tendered by book-entry transfer:
Account Number at Book-Entry Transfer Facility
________________________________________________________________________
2
<PAGE>
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a participant in the Security Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Guarantee Program
or the Stock Exchange Medallion Program, hereby guarantees to deliver to
the Depositary either the certificates representing the Shares tendered
hereby, in proper form for transfer, or a Book-Entry Confirmation (as
defined in the Offer to Purchase) with respect to such Shares, in any such
case together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature
guarantees, or an Agent's Message (as defined in the Offer to Purchase),
and any other required documents, within three trading days (as defined in
the Offer to Purchase) after the date hereof.
The Eligible Institution that completes this form must communicate this
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown
herein. Failure to do so could result in a financial loss to such Eligible
Institution.
Name of Firm: _____________________________________________________________
___________________________________________________________________________
Authorized Signature
Name: _____________________________________________________________________
Please Print
Title: ____________________________________________________________________
Address: __________________________________________________________________
Zip Code
Area Code and Tel No.: ____________________________________________________
Dated: ____________________________________________________________________
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES
FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
3
<PAGE>
EXHIBIT (a)(1)(D)
Offer to Purchase for Cash
all outstanding Shares of Common Stock
of
THE WMF GROUP, LTD.
at
$8.90 net per Share
by
PRUDENTIAL MORTGAGE CAPITAL ACQUISITION CORP.,
a wholly owned subsidiary of
PRUDENTIAL MORTGAGE CAPITAL COMPANY, LLC
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, TUESDAY, JUNE 20, 2000,
UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
May 23, 2000
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Prudential Mortgage Capital Acquisition Corp., a
Delaware corporation (the "Purchaser") and a wholly owned subsidiary of
Prudential Mortgage Capital Company, LLC, a Delaware limited liability company
("Prudential Mortgage"), to act as Dealer Manager in connection with the
Purchaser's offer to purchase all outstanding shares of common stock, par
value $.01 per share (the "Shares"), of The WMF Group, Ltd., a Delaware
corporation ("WMF"), at $8.90 per Share, net to the seller in cash, upon the
terms and subject to the conditions set forth in the Purchaser's Offer to
Purchase dated May 23, 2000 (the "Offer to Purchase"), and the related Letter
of Transmittal (which, together with any supplements or amendments thereto,
collectively constitute the "Offer").
Please furnish copies of the enclosed materials to those of your clients for
whom you hold Shares registered in your name or in the name of your nominee.
Enclosed herewith are copies of the following documents:
1. Offer to Purchase dated May 23, 2000;
2. Letter of Transmittal for your use in accepting the Offer and tendering
Shares and for the information of your clients;
3. Notice of Guaranteed Delivery;
4. A printed form of letter that may be sent to your clients for whose
account you hold Shares registered in your name or in the name of your
nominee, with space provided for obtaining such client's instructions with
regard to the Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9;
6. Letter to Stockholders of WMF from the Chairman of the Board of Directors
of WMF, accompanied by WMF's Solicitation/Recommendation Statement on Schedule
14D-9; and
1
<PAGE>
7. Return envelope addressed to Wilmington Trust Company, the Depositary.
The Offer is conditioned upon, among other things, (1) any applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
having expired or been terminated, and (2) there being validly tendered and
not properly withdrawn prior to the expiration date Shares owned beneficially
or of record by each of Capricorn Investors II, L.P., Capricorn Holdings,
Inc., Demeter Holdings Corporation, Phemus Corporation, Commonwealth Overseas
Trading Company Limited, Mohammed A. Al-Tuwaijri, J. Roderick Heller, III,
John D. Reilly and Shekar Narasimhan. Certain other conditions to the offer
are described in Section 14 of the Offer to Purchase.
We urge you to contact your clients promptly. Please note that the Offer and
withdrawal rights will expire at 12:00 midnight, New York City time, on
Tuesday, June 20, 2000, unless extended.
The Offer is being made pursuant to the Agreement and Plan of Merger dated
as of May 10, 2000 (the "Merger Agreement"), among the Purchaser, Prudential
Mortgage and WMF pursuant to which, following the consummation of the Offer
and the satisfaction or waiver of certain conditions, the Purchaser will be
merged with and into WMF, with WMF surviving the merger as a wholly owned
subsidiary of Prudential Mortgage (the "Merger"). In the Merger, each
outstanding Share (other than Shares owned by WMF or any direct or indirect
wholly owned subsidiary of WMF or by stockholders, if any, who are entitled to
and who properly exercise appraisal rights under Delaware law) will be
converted into the right to receive $8.90 per Share, without interest, as set
forth in the Merger Agreement and described in the Offer to Purchase.
The Board of Directors of WMF has approved the Merger Agreement and the
transactions contemplated by the Merger Agreement, including the Offer and the
Merger, and determined that the terms of the Offer and the Merger and the
other transactions contemplated by the Merger Agreement are advisable, fair
to, and in the best interests of, the stockholders of WMF and recommends that
the stockholders of WMF accept and tender their Shares pursuant to the Offer.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by Wilmington Trust Company (the
"Depositary") of (a) certificates for (or a timely Book-Entry Confirmation (as
defined in the Offer to Purchase) with respect to) such Shares, (b) a Letter
of Transmittal (or a facsimile thereof), properly completed and duly executed,
with any required signature guarantees, or, in the case of a book-entry
transfer effected pursuant to the procedures described in Section 2 of the
Offer to Purchase, an Agent's Message (as defined in the Offer to Purchase),
and (c) any other documents required by the Letter of Transmittal.
Accordingly, tendering stockholders may be paid at different times depending
upon when certificates for Shares or Book-Entry Confirmations with respect to
Shares are actually received by the Depositary. THE PURCHASER WILL NOT HAVE
ANY OBLIGATION TO PAY INTEREST ON THE PURCHASE PRICE FOR TENDERED SHARES,
WHETHER OR NOT THE PURCHASER EXERCISES ITS RIGHT TO EXTEND THE OFFER.
Neither the Purchaser nor Prudential Mortgage will pay any fees or
commissions to any broker or dealer or other person (other than the
undersigned and the Information Agent as described in the Offer to Purchase)
in connection with the solicitation of tenders of Shares pursuant to the
Offer. You will be reimbursed upon request for customary mailing and handling
expenses incurred by you in forwarding the enclosed offering materials to your
customers.
Questions and requests for assistance may be directed to Morrow & Co., Inc.
(the "Information Agent") or to the undersigned at their respective addresses
and telephone numbers set forth on the back cover of the Offer to Purchase.
Additional copies of the Offer to Purchase, the Letter of Transmittal, the
Notice of Guaranteed
2
<PAGE>
Delivery and the other related materials may be obtained from the Information
Agent at its address and telephone number set forth on the back cover of the
Offer to Purchase. Stockholders may also contact their broker, dealer,
commercial bank, trust company or other nominee for copies of these documents.
Very truly yours,
Prudential Securities Incorporated
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR
ANY OTHER PERSON THE AGENT OF THE PURCHASER, PRUDENTIAL MORTGAGE, THE DEALER
MANAGER, THE DEPOSITARY (AS DEFINED IN THE OFFER TO PURCHASE), THE INFORMATION
AGENT OR ANY AFFILIATE THEREOF OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE
ANY INFORMATION OR USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF ANY OF
THEM WITH RESPECT TO THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE
STATEMENT CONTAINED THEREIN.
3
<PAGE>
EXHIBIT (a)(1)(E)
Offer to Purchase for Cash
all outstanding Shares of Common Stock
of
THE WMF GROUP, LTD.
at
$8.90 net per Share
by
PRUDENTIAL MORTGAGE CAPITAL ACQUISITION CORP.,
a wholly owned subsidiary of
PRUDENTIAL MORTGAGE CAPITAL COMPANY, LLC
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, JUNE 20, 2000,
UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
May 23, 2000
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated May 23, 2000
(the "Offer to Purchase"), and a related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute
the "Offer") relating to the Offer by Prudential Mortgage Capital Acquisition
Corp., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary
of Prudential Mortgage Capital Company, LLC, a Delaware limited liability
company ("Prudential Mortgage"), to purchase shares of common stock, par value
$.01 per share (the "Shares"), of The WMF Group, Ltd., a Delaware corporation
("WMF"), at $8.90 per Share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer. Also enclosed is the Letter
to stockholders of WMF from the Chairman of the Board of Directors of WMF
accompanied by WMF's Solicitation/Recommendation Statement on Schedule 14D-9.
We are the holder of record of Shares held by us for your account. A tender
of such Shares can be made only by us as the holder of record and pursuant to
your instructions. The Letter of Transmittal is furnished to you for your
information only and cannot be used to tender Shares held by us for your
account.
We request instructions as to whether you wish to tender any of or all the
Shares held by us for your account, pursuant to the terms and conditions set
forth in the Offer.
Your attention is directed to the following:
1. The offer price is $8.90 per Share, net to the seller in cash, upon
the terms and subject to the conditions set forth in the Offer.
2. The Offer is being made for all outstanding Shares.
3. The Offer is being made pursuant to the Agreement and Plan of Merger
dated as of May 10, 2000 (the "Merger Agreement"), among the Purchaser,
Prudential Mortgage and WMF pursuant to which, following the consummation
of the Offer and the satisfaction or waiver of certain conditions, the
Purchaser will be merged with and into WMF, with WMF surviving the merger
as a wholly owned subsidiary of
<PAGE>
Prudential Mortgage (the "Merger"). In the Merger, each outstanding Share
(other than Shares owned by WMF or any direct or indirect wholly owned
subsidiary of WMF or by stockholders, if any, who are entitled to and who
properly exercise appraisal rights under Delaware law) will be converted
into the right to receive $8.90 per Share, without interest, as set forth
in the Merger Agreement and described in the Offer to Purchase.
4. The Board of Directors of WMF has unanimously approved the Merger
Agreement, and the transactions contemplated by the Merger Agreement,
including the Offer and the Merger, and determined that the Offer and the
Merger and the other transactions contemplated by the Merger Agreement are
advisable, fair to, and in the best interests of, the stockholders of WMF
and recommends that the stockholders of WMF accept and tender their Shares
pursuant to the Offer.
5. The Offer is conditioned upon, among other things, (1) any applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 having expired or been terminated, and (2) there being validly
tendered and not properly withdrawn prior to the Expiration Date Shares
owned by each of Capricorn Investors II, L.P., Capricorn Holdings, Inc.,
Demeter Holdings Corporation, Phemus Corporation, Commonwealth Overseas
Trading Company Limited, Mohammed A. Al-Tuwaijri, J. Roderick Heller, III,
John D. Reilly and Shekar Narasimhan representing in total approximately
65% of the outstanding Shares on a fully diluted basis. Certain other
conditions to the Offer are described in Section 14 of the Offer to
Purchase.
6. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Tuesday, June 20, 2000, unless the Offer is extended by
the Purchaser.
7. The Purchaser will pay any stock transfer taxes with respect to the
transfer and sale of Shares to it or its order pursuant to the Offer,
except as otherwise provided in Instruction 6 of the Letter of Transmittal.
If you wish to have us tender any of or all your Shares, please so instruct
us by completing, executing, detaching and returning to us the instruction
form set forth below. An envelope to return your instructions to us is
enclosed. If you authorize us to tender your Shares, all such Shares will be
tendered unless otherwise specified below. Your instructions to us should be
forwarded promptly to permit us to submit a tender on your behalf prior to the
Expiration Date.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by Wilmington Trust Company (the
"Depositary"), of (a) certificates for (or a timely Book-Entry Confirmation
(as defined in the Offer to Purchase) with respect to) such Shares, (b) a
Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or, in the case of a book-
entry transfer effected pursuant to the procedures described in Section 2 of
the Offer to Purchase, an Agent's Message (as defined in the Offer to
Purchase), and (c) any other documents required by the Letter of Transmittal.
Accordingly, tendering stockholders may be paid at different times depending
upon when certificates for Shares or Book-Entry Confirmations with respect to
Shares are actually received by the Depositary. Under no circumstances will
interest be paid on the offer price for tendered Shares, whether or not the
Purchaser exercises its right to extend the Offer.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares in any jurisdiction in which the making or
acceptance of the Offer would not be in compliance with the laws of such
jurisdiction.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
THE WMF GROUP, LTD.
BY
PRUDENTIAL MORTGAGE CAPITAL ACQUISITION CORP.,
A WHOLLY OWNED SUBSIDIARY OF
PRUDENTIAL MORTGAGE CAPITAL COMPANY, LLC
The undersigned acknowledges receipt of your letter enclosing the Offer to
Purchase, dated May 23, 2000, of Prudential Mortgage Capital Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of Prudential
Mortgage Capital Company, LLC, a Delaware limited liability company, and the
related Letter of Transmittal, relating to shares of common stock, par value
$.01 per share of The WMF Group, Ltd., a Delaware corporation (the "Shares").
This will instruct you to tender the number of Shares indicated below held
by you for the account of the undersigned upon the terms and subject to the
conditions set forth in such Offer to Purchase and the related Letter of
Transmittal.
Dated: Signature(s)
_____________________________________ _____________________________________
Number of Shares to be Tendered* _____________________________________
______________________________ Shares _____________________________________
_____________________________________
Please Print names(s)
Address
_____________________________________
_____________________________________
_____________________________________
_____________________________________
(Include Zip Code)
Area Code and Telephone No.
_____________________________________
Taxpayer Identification or Social
Security No.
_____________________________________
- --------
* Unless otherwise indicated, it will be assumed that all your Shares are to
be tendered.
3
<PAGE>
EXHIBIT (a)(1)(F)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number for the Payee
(You) to Give the Payer--Social Security Numbers have nine digits separated by
two hyphens: i.e., 000-00-0000. Employer identification numbers have nine
digits separated by only one hyphen: i.e., 00-0000000. The table below will
help determine the number to give the payer. All "Section" references are to
the Internal Revenue Code of 1986, as amended. "IRS" is the Internal Revenue
Service.
- -------------------------------------
<TABLE>
<CAPTION>
Give the
SOCIAL SECURITY
For this type of account: number of--
- -------------------------------------------------
<S> <C>
1. Individual The individual
2. Two or more individuals The actual owner of
(joint account) the account or, if
combined funds, the
first individual on
the account(1)
3. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
4.a The usual revocable The grantor-
savings trust account trustee(1)
(grantor is also
trustee)
b So-called trust account The actual owner(1)
that is not a legal or
valid trust under state
law
5. Husband and wife (joint The actual owner of
account) the account or, if
joint funds, either
person(1)
6. Sole proprietorship The owner(3)
account
</TABLE>
- -------------------------------------
- -------------------------------------
<TABLE>
<CAPTION>
Give the EMPLOYER
IDENTIFICATION
For this type of account: number of--
- ------------------------------------------------
<S> <C>
7. A valid trust, estate, The legal entity(4)
or pension trust
8. Corporate The corporation
9. Association, club, The organization
religious, charitable,
educational, or other
tax-exempt organization
10. Partnership The partnership
11. A broker or registered The broker or
nominee nominee
12. Account with the The public entity
Department of
Agriculture in the name
of a public entity (such
as a state or local
government, school
district, or prison)
that receives
agricultural program
payments
</TABLE>
- -------------------------------------
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a social security number, that
person's number must be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business
or "doing business as" name. You may use either your social security
number or your employer identification number (if you have one).
(4) List first and circle the name of the legal trust, estate, or pension
trust. (Do not furnish the taxpayer identification number of the personal
representative or trustee unless the legal entity itself is not designated
in the account title.)
Note: If no name is circled when there is more than one name listed, the
number will be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2
Obtaining a Number
If you don't have a taxpayer identification number, obtain Form SS-5,
Application for a Social Security Card at the local Social Security
Administration office, or Form SS-4, Application for Employer Identification
Number, by calling 1 (800) TAX-FORM, and apply for a number.
Payees Exempt from Backup Withholding
Payees specifically exempted from withholding include:
. An organization exempt from tax under Section 501(a), an individual
retirement account (IRA), or a custodial account under Section 403(b)(7),
if the account satisfies the requirements of Section 401(f)(2).
. The United States or a state thereof, the District of Columbia, a
possession of the United States, or a political subdivision or wholly-
owned agency or instrumentality of any one or more of the foregoing.
. An international organization or any agency or instrumentality thereof.
. Foreign government and any political subdivision, agency or
instrumentality thereof.
Payees that may be exempt from backup withholding include:
. A corporation.
. A financial institution.
. A dealer in securities or commodities required to register in the United
States, the District of Columbia, or a possession of the United States.
. A real estate investment trust.
. A common trust fund operated by a bank under Section 584(a).
. An entity registered at all times during the tax year under the Investment
Company Act of 1940.
. A middleman known in the investment community as a nominee or who is
listed in the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List.
. A futures commission merchant registered with the Commodity Futures
Trading Commission.
. A foreign central bank of issue.
Payments of dividends and patronage dividends generally exempt from backup
withholding include:
. Payments to nonresident aliens subject to withholding under Section 1441.
. Payments to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident alien partner.
. Payments of patronage dividends not paid in money.
. Payments made by certain foreign organizations.
. Section 404(k) payments made by an ESOP.
Payments of interest generally exempt from backup withholding include:
. Payments of tax-exempt interest (including exempt-interest dividends under
Section 852).
. Payments described in Section 6049(b)(5) to nonresident aliens.
. Payments on tax-free covenant bonds under Section 1451.
. Payments made by certain foreign organizations.
Certain payments, other than payments of interest, dividends, and patronage
dividends, that are exempt from information reporting are also exempt from
backup withholding. For details, see Sections 6041, 6041A, 6042, 6044, 6045,
6049, 6050A and 6050N and the regulations thereunder.
EXEMPT PAYEES SHOULD COMPLETE A SUBSTITUTE FORM W-9 TO AVOID POSSIBLE
ERRONEOUS BACKUP WITHHOLDING. Furnish your taxpayer identification number,
write "EXEMPT" on the form, sign and date the form and return it to the payer.
Privacy Act Notice.--Section 6109 requires you to provide your correct
taxpayer identification number to payers who must report the payments to the
IRS. The IRS uses the numbers for identification purposes and to help verify
the accuracy of your return and may also provide this information to various
government agencies for tax enforcement or litigation purposes. Payers must be
given the numbers whether or not recipients are required to file tax returns.
Payers must generally withhold 31% of taxable interest, dividend, and certain
other payments to a payee who does not furnish a taxpayer identification
number to a payer. Certain penalties may also apply.
Penalties
(1) Failure to Furnish Taxpayer Identification Number.--If you fail to furnish
your taxpayer identification number to a payer, you are subject to a penalty
of $50 for each such failure unless your failure is due to reasonable cause
and not to willful neglect.
(2) Civil Penalty for False Information With Respect To Withholding.--If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
(3) Criminal Penalty for Falsifying Information.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
EXHIBIT (a)(1)(H)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The offer is made solely pursuant to the Offer to Purchase,
dated May 23, 2000, and the related Letter of Transmittal and is not being made
to (nor will tenders be accepted from or on behalf of) holders of shares in any
jurisdiction in which the making of the offer or the acceptance thereof would
not be in compliance with the laws of such jurisdiction. In any jurisdictions
where securities, blue sky or other laws require the offer to be made by a
licensed broker or dealer, the offer shall be deemed to be made on behalf of the
Purchaser by Prudential Securities Incorporated or one or more registered
brokers or dealers licensed under the laws of such jurisdictions.
Notice of Offer to Purchase for Cash All Outstanding Shares of Common Stock of
The WMF Group, Ltd. at $8.90 Net Per Share by Prudential Mortgage Capital
Acquisition Corp., a wholly owned subsidiary of Prudential Mortgage Capital
Company, LLC
Prudential Mortgage Capital Acquisition Corp., a Delaware corporation (the
"Purchaser"), which is a wholly owned subsidiary of Prudential Mortgage Capital
Company, LLC, a Delaware limited liability company ("Prudential Mortgage"), is
offering to purchase all outstanding shares of Common Stock, par value $.01 per
share (the "Shares"), of The WMF Group, Ltd., a Delaware corporation ("WMF"), at
a price of $8.90 per Share, net to the seller in cash, without interest thereon,
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated May 23, 2000, and in the related Letter of Transmittal (which, together
with any amendments or supplements thereto, collectively constitute the
"Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, JUNE 20, 2000, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, (1) any applicable waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 having
expired or been terminated, and (2) there being validly tendered and not
properly withdrawn prior to the expiration of the Offer Shares owned by each of
Capricorn Investors II, L.P., Capricorn Holdings, Inc., Demeter Holdings
Corporation, Phemus Corporation, Commonwealth Overseas Trading Company Limited,
Mohammed A. Al-Tuwaijri, J. Roderick Heller, III, John D. Reilly and Shekar
Narasimhan. Each of these stockholders has signed an agreement with Prudential
Mortgage that obligates them to tender their Shares, representing in total
approximately 65% of the outstanding Shares on a fully diluted basis, in the
Offer. Certain other conditions to the Offer are described in Sections 14 and 15
of the Offer to Purchase.
The Offer is being made pursuant to an Agreement and Plan of Merger dated as of
May 10, 2000 (the "Merger Agreement"), among Prudential Mortgage, the Purchaser
and WMF pursuant to which, following the consummation of the Offer, upon the
terms and subject to the conditions of the Merger Agreement and the General
Corporation Law of the State of Delaware, the Purchaser will be merged with and
into WMF (the "Merger").
<PAGE>
In the Merger, each issued and outstanding Share (other than Shares owned by
Prudential Mortgage, the Purchaser or WMF or their respective subsidiaries, or
by stockholders, if any, who are entitled to and properly exercise appraisal
rights under Delaware law) will be converted into the right to receive $8.90 in
cash, without interest. The Board of Directors of WMF has unanimously approved
the Merger Agreement and the transactions contemplated by the Merger Agreement,
including the Offer and the Merger, and determined that the terms of the Offer
and the Merger and the other transactions contemplated by the Merger Agreement
are advisable, fair to, and in the best interests of the stockholders of WMF and
recommends that the stockholders of WMF accept and tender their Shares pursuant
to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered and not withdrawn as,
if and when the Purchaser gives oral or written notice to the Depositary of the
Purchaser's acceptance for payment of such Shares. The Purchaser will pay for
Shares accepted for payment by depositing the purchase price therefor with the
Depositary. The Depositary will act as an agent for tendering stockholders for
the purpose of receiving payment from the Purchaser and transmitting payment to
tendering stockholders. In all cases, payment for Shares accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of (a) certificates for (or a timely Book-Entry Confirmation (as defined in the
Offer to Purchase) with respect to) such Shares (b) a Letter of Transmittal (or
a facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message (as defined in the Offer to Purchase) and (c) any other documents
required by the Letter of Transmittal.
The term "Expiration Date" means 12:00 midnight, New York City time, on Tuesday,
June 20, 2000, unless and until the Purchaser, in its sole discretion (but
subject to the terms of the Merger Agreement), shall have extended the period of
time during which the Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date on which the Offer, as so extended by the
Purchaser, shall expire. Subject to the terms of the Merger Agreement (which
prohibit certain amendments to the Offer) and the applicable rules and
regulations of the Securities and Exchange Commission, the Purchaser reserves
the right (but, except as otherwise provided, shall not be obligated), at any
time and from time to time, and regardless of whether or not any of the events
or facts set forth in Section 14 of the Offer to Purchase shall have occurred,
(i) to extend the period of time during which the Offer is open, and thereby
delay acceptance for payment of and the payment for any Shares, by giving oral
or written notice of such extension to the Depositary, (ii) to elect to provide
a Subsequent Offering Period (as described below), and (iii) to amend the Offer
in any other respect by giving oral or written notice of such amendment to the
Depositary. Under no circumstances will interest be paid on the purchase price
for tendered Shares, whether or not the Purchaser exercises its right to extend
the Offer. Any such extension will be followed by a public announcement thereof
no later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date. During any such extension, all Shares
previously tendered and not withdrawn will remain subject to the Offer, subject
to the right of a tendering stockholder to withdraw such stockholder's Shares.
Except as otherwise provided below, tenders of Shares are irrevocable. Shares
tendered pursuant to the Offer may be withdrawn pursuant to the procedures set
forth below at any time prior to the Expiration Date and, unless theretofore
accepted for payment and paid for by the Purchaser pursuant to the Offer, may
also be withdrawn at any time after July 21, 2000. For a withdrawal to be
effective, a written notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of the Offer to
Purchase and must specify the name of the person having tendered the Shares to
be withdrawn, the number of Shares to be withdrawn
<PAGE>
and the name of the registered holder of the Shares to be withdrawn, if
different from the name of the person who tendered the Shares. If certificates
for Shares have been delivered or otherwise identified to the Depositary, then,
prior to the physical release of such certificates, the serial numbers shown on
such certificates must be submitted to the Depositary and, unless such Shares
have been tendered by an Eligible Institution (as defined in Section 2 of the
Offer to Purchase), the signatures on the notice of withdrawal must be
guaranteed by an Eligible Institution. If Shares have been delivered pursuant to
the procedures for book-entry transfer described in Section 2 of the Offer to
Purchase, any notice of withdrawal must also specify the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawn
Shares and otherwise comply with the Book-Entry Transfer Facility's procedures.
Withdrawals of tenders of Shares may not be rescinded, and any Shares properly
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offer. However, withdrawn Shares may be retendered by again following one of the
procedures described in Section 2 of the Offer to Purchase at any time prior to
the Expiration Date. All questions as to the form and validity (including time
of receipt) of notices of withdrawal will be determined by the Purchaser in its
sole discretion, which determination will be final and binding.
Under the Securities Exchange Act of 1934, as amended (the Exchange Act), the
Purchaser has the right, but is not required, to provide for a subsequent
offering period of from 3 business days to 20 business days following the
expiration of the Offer (a Subsequent Offering Period), subject to certain
conditions. A Subsequent Offering Period is an additional period of time from 3
business days up to 20 business days, following the expiration of the Offer,
during which stockholders of WMF may tender, but not withdraw, Shares not
tendered in the Offer. A Subsequent Offering Period, if one is provided, is not
an extension of the Offer.
The Purchaser does not currently intend to provide for a Subsequent Offering
Period following the Expiration Date, although it reserves the right to do so in
its sole discretion by giving oral or written notice of such Subsequent Offering
Period to the Depositary. Any decision to provide a Subsequent Offering Period
will be announced at least 5 business days prior to the Expiration Date and will
not extend the Expiration Date. The Purchaser will announce the approximate
number and percentage of Shares deposited as of the Expiration Date no later
than 9:00 a.m., New York City time, on the next business day following the
Expiration Date, and such securities will be immediately accepted and promptly
paid for. All conditions to the Offer must be satisfied or waived prior to the
commencement of any Subsequent Offering Period. See Section 1 of the Offer to
Purchase.
WMF has provided the Purchaser with the WMF's stockholder lists and security
position listing for the purpose of disseminating the Offer to holders of
Shares. The Offer to Purchase, the Letter of Transmittal and other related
materials will be mailed to record holders of Shares and will be furnished to
brokers, dealers, banks, trust companies and similar persons whose names, or the
names of whose nominees, appear on the stockholder lists or, if applicable, who
are listed as participants in a clearing agency's security position listing for
subsequent transmittal to beneficial owners of Shares. The information required
to be disclosed by Rule 14d-6(d)(1) of the Exchange Act is contained in the
Offer to Purchase and is incorporated herein by reference.
THE OFFER TO PURCHASE AND LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION
WHICH YOU SHOULD READ BEFORE YOU MAKE ANY DECISION WITH RESPECT TO THE OFFER.
Questions and requests for assistance may be directed to Morrow & Co., Inc. (the
Information Agent) or to Prudential Securities Incorporated (the Dealer Manager)
at their respective addresses and telephone numbers set forth below. Additional
copies of the Offer to Purchase, the Letter of Transmittal, the Notice of
Guaranteed Delivery and the other related material may be obtained from the
Information Agent at its address
<PAGE>
and telephone number set forth below. Stockholders may also contact their
broker, dealer, commercial bank, trust company or other nominee for copies of
these documents.
The Information Agent for the Offer is:
MORROW & CO., INC.
445 Park Avenue, 5th Floor
New York, New York 10022
Call Collect (212) 754-8000
Banks and Brokerage Firms Call: (800) 662-5200
Shareholders Please Call: (800) 566-9061
The Dealer Manager for the Offer is:
Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Toll Free (888) 713-4198
May 23, 2000
<PAGE>
EXHIBIT (d)(1)(A)
=======================================================================
AGREEMENT AND PLAN OF MERGER
AMONG
PRUDENTIAL MORTGAGE CAPITAL COMPANY, LLC
PRUDENTIAL MORTGAGE CAPITAL ACQUISITION CORP.
AND
THE WMF GROUP, LTD.
Dated as of May 10, 2000
=======================================================================
<PAGE>
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
(Not Part of the Agreement)
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
THE TENDER OFFER .............................................................. 2
1.1. The Offer........................................................... 2
1.2. Company Action...................................................... 3
1.3. Board of Directors.................................................. 4
ARTICLE II
THE MERGER..................................................................... 6
2.1. The Merger.......................................................... 6
2.2. Certificate of Incorporation........................................ 6
2.3. By-Laws............................................................. 6
2.4. Directors and Officers.............................................. 7
2.5. Effective Time...................................................... 7
ARTICLE III
CONVERSION OF SHARES........................................................... 7
3.1. Company Common Stock................................................ 7
3.2. Dissenting Shares................................................... 8
3.3. Purchaser Common Stock.............................................. 9
3.4. Exchange of Shares.................................................. 9
3.5. Employee Stock Options.............................................. 11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................. 13
4.1. Organization........................................................ 13
4.2. Capitalization...................................................... 13
4.3. Authorization of this Agreement; Recommendation of Merger........... 15
4.4. Consents and Approvals.............................................. 15
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
4.5. No Conflicts....................................................... 16
4.6. Compliance......................................................... 17
4.7. Financial Statements and SEC Reports; No Undisclosed Liabilities... 18
4.8. Certain Contracts and Arrangements................................. 18
4.9. Offer Documents; Proxy/Information Statement; Other Information;
Schedule 14D-9..................................................... 19
4.10. Title to Property.................................................. 20
4.11. Intellectual Property.............................................. 20
4.12. Labor Relations; Employees......................................... 22
4.13. Employee Agreements and Plans...................................... 23
4.14. Mortgage Business.................................................. 26
4.15. Absence of Certain Changes......................................... 33
4.16. Litigation......................................................... 34
4.17. Taxes.............................................................. 34
4.18. Environmental Matters.............................................. 35
4.19. Board Approval; State Takeover Statutes; Stockholder Vote.......... 36
4.20. Rights Agreement................................................... 36
4.21. Finders and Investment Bankers..................................... 37
4.22. Transaction Costs.................................................. 37
4.23. Opinion of Financial Advisor....................................... 37
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE PURCHASER................. 37
5.1. Organization....................................................... 37
5.2. Authorization of this Agreement.................................... 38
5.3. Consents and Approvals; No Violations.............................. 38
5.4. Offer Documents.................................................... 39
5.5. Proxy/Information Statement; Other Information..................... 39
5.6. Financial Ability to Perform....................................... 40
5.7. Finders and Investment Bankers..................................... 40
ARTICLE VI
COVENANTS...................................................................... 40
6.1. Conduct of the Business of the Company............................. 40
6.2. Access to Information.............................................. 43
6.3. Stockholder Approval............................................... 44
6.4. Reasonable Best Efforts............................................ 45
6.5. Consents........................................................... 45
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
6.6. Public Announcements............................................... 46
6.7. Consent of the Parent.............................................. 46
6.8. No Solicitation.................................................... 46
6.9. Indemnification; Insurance......................................... 48
6.10. Employment and Benefit Plans....................................... 50
6.11. Stock Options; Stock Plans......................................... 50
6.12. Transfer Taxes..................................................... 51
6.13. Anti-takeover Statutes............................................. 51
6.14. Notification of Certain Matters.................................... 51
6.15. Amendment to Schedule TO, Proxy/Information Statement and
Schedule 14D-9..................................................... 52
6.16. Continuing Services with Respect to Tax Matters.................... 52
6.17. Supplemental Schedules............................................. 53
ARTICLE VII
CLOSING CONDITIONS............................................................. 53
7.1. Conditions to the Obligations of the Parent, the Purchaser and the
Company............................................................ 53
ARTICLE VIII
CLOSING........................................................................ 54
8.1. Time and Place..................................................... 54
8.2. Filings at the Closing............................................. 54
ARTICLE IX
TERMINATION AND ABANDONMENT.................................................... 54
9.1. Termination........................................................ 54
9.2. Procedure and Effect of Termination................................ 56
9.3. Fees and Expenses.................................................. 57
ARTICLE X
MISCELLANEOUS.................................................................. 58
10.1. Amendment and Modification......................................... 58
10.2. Waiver of Compliance; Consents..................................... 58
10.3. Survival of Warranties............................................. 59
10.4. Notices............................................................ 59
10.5. Assignment; Parties in Interest.................................... 60
10.6. Specific Performance............................................... 61
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
10.7. Governing Law...................................................... 61
10.8. Counterparts....................................................... 61
10.9. Interpretation..................................................... 61
10.10. Entire Agreement.................................................. 62
10.11. Jurisdiction...................................................... 62
ANNEX A............................................................................. 1
</TABLE>
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER, dated as of May 10, 2000, among
Prudential Mortgage Capital Company, LLC, a Delaware limited liability company
(the "Parent"), Prudential Mortgage Capital Acquisition Corp., a Delaware
corporation that is a wholly-owned subsidiary of Parent (the "Purchaser"), and
The WMF Group, Ltd., a Delaware corporation (the "Company") (the "Agreement" or
the "Merger Agreement").
WHEREAS, the sole member or the respective Boards of Directors of the
Parent, the Purchaser and the Company, as the case may be, have approved the
acquisition of the Company;
WHEREAS, in contemplation thereof it is proposed that the Purchaser
will make a tender offer (the "Offer") to purchase for cash all of the issued
and outstanding shares (the "Shares") of common stock, $.01 par value per share,
of the Company (the "Company Common Stock"), subject to the terms and conditions
of this Agreement, at a price of $8.90 per share net to the seller in cash (such
price, or such higher price per share as may be paid in the Offer, being
referred to herein as the "Offer Price");
WHEREAS, to complete such acquisition, the sole member or the
respective Boards of Directors of the Parent, the Purchaser and the Company, as
the case may be, have approved the merger of the Purchaser into the Company (the
"Merger"), pursuant to and subject to the terms and conditions of this
Agreement;
WHEREAS, the Board of Directors of the Company has unanimously
determined that each of the Offer and the Merger are advisable, fair to, and in
the best interests of, the holders of the Shares, approved the Offer and the
Merger and recommended the acceptance of the Offer and approval and adoption of
this Agreement by the stockholders of the Company; and
WHEREAS, certain principal stockholders of the Company (the
"Stockholders") are entering contemporaneously herewith into a Stockholders
Agreement dated the date hereof (the "Stockholders Agreement") providing that,
among other things, each such Stockholder will tender all shares of Company
Common Stock owned by such Stockholder at the Offer Price pursuant to the Offer.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto agree as follows:
<PAGE>
ARTICLE I
THE TENDER OFFER
1.1 The Offer. (a) Provided that this Agreement shall not have been
---------
terminated in accordance with Article IX hereof and no event shall have occurred
which would result in a failure to satisfy any of the conditions set forth in
Annex A hereto (the "Offer Conditions") within a reasonable time (but not more
than ten business days) after the public announcement of the execution of this
Agreement, the Purchaser shall, and the Parent shall cause the Purchaser to,
commence the Offer. The Offer shall be made by means of an offer to purchase
(the "Offer to Purchase") containing the terms set forth in this Agreement and
the conditions set forth in Annex A hereto. The obligations of the Purchaser
and the Parent to consummate the Offer and to accept for payment and purchase
the Shares tendered shall be subject only to the Offer Conditions. The initial
expiration date of the Offer shall be the 20th business day following
commencement of the Offer. The Purchaser expressly reserves the right to modify
the terms of the Offer, provided, however, that without the consent of the
-------- -------
Company, the Purchaser shall not, and the Parent shall not permit the Purchaser
to (i) reduce the number of shares of Company Common Stock to be purchased in
-
the Offer, (ii) reduce the Offer Price, (iii) materially modify or add to the
-- ---
Offer Conditions, including any change to the Minimum Condition (as defined in
Annex A), (iv) change the form of consideration payable in the Offer, (v) except
-- -
as provided below, or as may be required by any rule, regulation, interpretation
or position of the United States Securities and Exchange Commission (the "SEC"),
change the expiration date of the Offer or (vi) amend any other condition of the
--
Offer in any material respect in a manner adverse to the holders of the Shares.
Notwithstanding anything in this Agreement to the contrary, the Purchaser shall
have the right, without the prior consent of the Company, to extend the offer
beyond its scheduled expiration date in the following events: (x) if at any
-
expiration date, any of the conditions to the Offer shall not have been
satisfied or waived, until such conditions are satisfied or waived; (y) for any
-
period required by applicable law; and (z) if all of the conditions to the Offer
-
are satisfied or waived, but the number of Shares validly tendered and not
withdrawn is less than the amount necessary to effect a parent-subsidiary merger
pursuant to Section 252 of the Delaware General Corporation, for a period not to
exceed twenty days following the initial expiration date of the Offer. The
Offer Conditions are for the sole benefit of the Parent and the Purchaser and
may be asserted by the Parent and the Purchaser regardless of the circumstances
giving rise to any such Offer Conditions and, subject to the preceding sentence,
may be waived by the Purchaser in whole or in part. Subject only to the Offer
Conditions, the Purchaser shall, and the Parent shall cause the Purchaser to,
pay for all of the Shares validly tendered and not withdrawn pursuant to the
Offer (including any subsequent offering period) as soon as legally permissible.
In the event that (i) the Minimum Condition (as defined in Annex A) has not been
satisfied or (ii) any condition set forth in paragraph (a), (d) or (e) of Annex
A is not satisfied or waived at the scheduled
2
<PAGE>
expiration date of the Offer, at the reasonable request of the Company,
Purchaser shall, and Parent shall cause Purchaser to, extend the expiration date
of the Offer in increments of five business days each until the earliest to
occur of (1) the satisfaction or waiver of such condition, (2) Parent
- -
reasonably determining that such condition to the Offer is not capable of being
satisfied on or prior to the thirtieth day following the initial expiration date
of the Offer, (3) the termination of this Agreement in accordance with its terms
-
and (4) the thirtieth day following the initial expiration date of the Offer.
-
(b) Provided that this Agreement shall not have been terminated in
accordance with Article IX hereof and no event shall have occurred which would
result in a failure to satisfy any of the Offer Conditions, the Parent and the
Purchaser will file with the SEC, as soon as practicable after the date hereof,
a Tender Offer Statement on Schedule TO (together with all supplements or
amendments thereto, and including all exhibits, the "Offer Documents"). Each of
Parent, Purchaser and the Company shall promptly correct any information
provided by it for use, or incorporated by reference, in the Offer Documents if
and to the extent that such information shall have become false or misleading in
any material respect, and each of Parent and Purchaser shall take all steps
necessary to amend or supplement the Offer Documents and to cause the Offer
Documents as so amended or supplemented to be filed with the SEC and to be
disseminated to the Company's shareholders, in each case as and to the extent
required by applicable Federal securities laws. The Parent and the Purchaser
shall give the Company and its counsel a reasonable opportunity to review and
comment on the Offer Documents prior to their being filed with the SEC or
disseminated to the stockholders of the Company. The Parent and the Purchaser
will furnish the Company and its counsel in writing with any comments that the
Parent, the Purchaser or their counsel may receive from the SEC or its staff
with respect to the Offer Documents, promptly after receipt of such comments and
shall provide the Company and its counsel with a reasonable opportunity to
participate in the response of the Parent or the Purchaser to such comments.
1.2 Company Action. (a) In connection with the Offer, the Company
--------------
shall cause its transfer agent as promptly as reasonably possible to furnish the
Purchaser with mailing labels, security position listings and any available
listings or computer files containing the names and addresses of record holders
of the Shares as of a recent date, and shall furnish the Purchaser with such
additional information (including, but not limited to, updated lists of holders
of Company Common Stock and their addresses, mailing labels and lists of
security positions) and offer such other assistance as the Parent or the
Purchaser may reasonably request in communicating the Offer to the Company's
stockholders. The information contained in any such labels, listings and files
shall be used solely for the purpose of communicating the Offer or disseminating
any other documents necessary to consummate the Merger as contemplated by the
Offer and shall otherwise be subject to the Confidentiality Agreement, dated
November 15, 1999, between the
3
<PAGE>
Company and the Parent (the "Confidentiality Agreement"). If this Agreement
shall be terminated, the Purchaser will deliver to the Company all copies of
information provided to it hereunder that remain in its possession at such time.
(b) The Company hereby consents to the Offer and the Merger, and
represents and warrants to the Parent and the Purchaser that (i) the Board of
-
Directors of the Company (at a meeting duly called and held at which a quorum
was present) as part of its approval of this Agreement has unanimously (1)
-
approved the Offer and the Merger, (2) determined that each of the Offer and the
-
Merger is advisable, fair to and in the best interests of the stockholders of
the Company and (3) resolved to recommend acceptance of the Offer and approval
-
and adoption of this Agreement by the stockholders of the Company and (ii)
--
Credit Suisse First Boston Incorporated ("CSFB") has delivered to the Board of
Directors of the Company its opinion that the consideration to be received by
the holders of Company Common Stock pursuant to the Offer and the Merger is fair
to the holders of Company Common Stock from a financial point of view, subject
to the assumptions and qualifications contained in such opinion. Concurrently
with the commencement of the Offer, the Company shall file a Tender Offer
Solicitation/Recommendation Statement on Schedule 14D-9 (together with any
amendments or supplements thereto, and including all exhibits, the "Schedule
14D-9") with respect to the Offer which shall contain (subject to the conditions
specified in Section 6.8(d)) the recommendations of the Board of Directors
referred to in clause (i) of the preceding sentence. The Board of Directors of
the Company will not withdraw, modify or amend such recommendations, unless the
conditions specified in Section 6.8(d) have been satisfied. The Parent, the
Purchaser and their counsel will be given a reasonable opportunity to review the
Schedule 14D-9 and all amendments or supplements thereto prior to their filing
with the SEC or dissemination to the holders of Shares. The Company shall
furnish to the Parent and the Purchaser a copy of the resolutions referred to in
the first sentence of this subsection (b), certified by an appropriate officer
of the Company.
1.3 Board of Directors. (a) In the event that the Purchaser
------------------
acquires at least a majority of the outstanding Shares pursuant to the Offer, if
requested by the Parent, following the acceptance for payment of shares of
Company Common Stock and payment by the Purchaser for such shares in accordance
with the Offer, the Company shall take all actions necessary to entitle the
Purchaser to designate such number of directors on the Board of Directors of the
Company, rounded up to the next whole number, as will give the Purchaser
representation on such Board of Directors equal to at least that number of
directors which equals the product of the total number of directors on the Board
of Directors (giving effect to the directors elected pursuant to this sentence)
multiplied by the percentage that such number of shares of Company Common Stock
so accepted for payment and paid for, purchased or otherwise acquired or owned
by the Purchaser or the Parent bears to the number of shares of Company Common
Stock
4
<PAGE>
outstanding and the Company and its Board of Directors shall, at such time, take
any and all such action needed to cause the Purchaser's designees to be
appointed to the Company's Board of Directors (including increasing the size of
the Board of Directors and/or causing directors to resign). In addition, at the
same time that the Purchaser is entitled to representation on the Board of
Directors pursuant to the preceding provisions, the Company, if so requested,
will cause persons designated by the Purchaser to constitute the same percentage
of each committee of the Board of Directors, each board of directors of each
subsidiary of the Company and each committee of each such board.
(b) The Company's obligations with respect to the election of the
Purchaser's designees to the Board of Directors of the Company shall be subject
to Section 14(f) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and Rule 14f-1 promulgated thereunder. The Company shall
promptly take all actions required pursuant to Section 14(f) and Rule 14f-1 in
order to fulfill its obligations under this Section 1.3 and shall include in the
Schedule 14D-9 such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1. The Parent and the
Purchaser will supply to the Company in writing and shall be solely responsible
for any information with respect to any of them and their nominees,
officers, directors and affiliates required by Section 14(f) and Rule 14f-1.
(c) Notwithstanding any other provision of this Section 1.3, the
Parent, the Purchaser and the Company shall cause two members of the Company's
Board of Directors to be persons who were members of the Company's Board of
Directors on the date hereof, and who shall initially be John D. Reilly and
Shekar Narasimhan (the "Continuing Directors") so long as there are at least two
such persons who are willing to serve as Continuing Directors; provided, that
--------
subsequent to the acceptance, purchase and payment for shares of Company Common
Stock representing greater than 50% of the voting power represented by the
outstanding shares of Company Common Stock pursuant to the Offer, the Parent
shall always have its designees represent at least a majority of the entire
Board of Directors. In the event that any Continuing Director(s) resign(s) from
the Board of Directors, the Parent, the Purchaser and the Company shall permit
the remaining Continuing Director(s) to appoint his or their successors in his
or their reasonable discretion. Following the election or appointment of the
Purchaser's designees pursuant to this Section 1.3 and prior to the Effective
Time, any amendment to this Agreement, any termination of this Agreement by the
Company, any extension by the Company of the time for the performance of any of
the obligations or other acts of the Parent or the Purchaser and any waiver of
any of the Company's rights under this Agreement will require the concurrence of
each of the Continuing Directors or their appointees. If at any time the
Continuing Directors reasonably deem it necessary to consult with independent
counsel in connection with their duties as Continuing Directors or actions to be
taken by the Company, the Continuing Directors may retain counsel for such
purpose and the Company will pay the reasonable fees and expenses incurred in
connection therewith.
5
<PAGE>
ARTICLE II
THE MERGER
2.1 The Merger. (a) Upon the terms and subject to the satisfaction
----------
or waiver, if permissible, of the conditions set forth in Article VII hereof, as
promptly as practicable following the consummation of the Offer, in accordance
with the provisions of this Agreement and the General Corporation Law of the
State of Delaware, as amended (the "GCL"), the parties hereto shall cause the
Purchaser to be merged with and into the Company, and the Company shall be the
surviving corporation (hereinafter sometimes called the "Surviving Corporation")
and shall continue its corporate existence under the laws of the State of
Delaware. At the Effective Time, the separate existence of the Purchaser shall
cease.
(b) The name of the Surviving Corporation shall be Prudential
Mortgage Capital Holding Corp. The Surviving Corporation shall possess all the
rights, privileges, immunities, powers and franchises of the Purchaser and the
Company and shall by operation of law become liable for all the debts,
liabilities and duties of the Company and the Purchaser. The Merger shall have
the other effects provided for in the applicable provisions of the GCL.
2.2 Certificate of Incorporation. At the Effective Time, the
----------------------------
certificate of incorporation of the Company shall be amended and restated to
conform to the certificate of incorporation of the Purchaser, as in effect
immediately prior to the Effective Time except as qualified by Section 6.9(a),
and shall become the certificate of incorporation of the Surviving Corporation
(the "Certificate of Incorporation").
2.3 By-Laws. At the Effective Time, the by-laws of the Company shall
-------
be amended and restated to conform to the by-laws of the Purchaser, as in effect
immediately prior to the Effective Time except as qualified by Section 6.9(a),
and shall become the by-laws of the Surviving Corporation (the "By-Laws") until
thereafter amended, altered or repealed as provided therein and by law.
2.4 Directors and Officers. At the Effective Time, the directors of
----------------------
the Purchaser immediately prior to the Effective Time shall be appointed the
directors of the Surviving Corporation, each of such directors to hold office,
subject to the applicable provisions of the Certificate of Incorporation and By-
Laws of the Surviving Corporation, until the next annual stockholders' meeting
of the Surviving Corporation and until their respective successors shall be duly
elected or appointed and qualified.
2.5 Effective Time. The Merger shall become effective at the date
--------------
and time when a properly executed certificate of merger or certificate of
ownership and
6
<PAGE>
merger (either such document being referred to hereinafter as the "Delaware
Certificate of Merger"), together with any other documents required by law to
effectuate the Merger, shall be filed with the Secretary of State of the State
of Delaware in accordance with the GCL, or such other date and time as shall be
designated in the Delaware Certificate of Merger. The Delaware Certificate of
Merger shall be filed in Delaware in accordance with the GCL as soon as
practicable after the Closing. The date and time when the Merger shall become
effective is herein referred to as the "Effective Time."
ARTICLE III
CONVERSION OF SHARES
3.1 Company Common Stock. (a) Each Share issued and outstanding
--------------------
immediately prior to the Effective Time (except for Shares then owned
beneficially or of record by the Parent or the Purchaser or any other subsidiary
of the Parent and except for Dissenting Shares (as defined in Section 3.2)),
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive the Offer Price (referred to
hereinafter as the "Merger Consideration") in cash payable to the holder
thereof, without interest thereon and net of applicable withholding taxes, upon
surrender of the certificate representing such Share.
(b) Each Share issued and outstanding immediately prior to the
Effective Time which is then owned beneficially or of record by the Parent or
the Purchaser or any other subsidiary of the Parent shall, by virtue of the
Merger and without any action on the part of the holder thereof, be cancelled
and retired and cease to exist, without any conversion thereof.
(c) Each Share issued and held in the Company's treasury immediately
prior to the Effective Time shall, by virtue of the Merger, be cancelled and
retired and cease to exist, without any conversion thereof.
(d) At the Effective Time the holders of certificates representing
Shares (including restricted Shares) shall cease to have any rights as
stockholders of the Company and, except as aforesaid, their sole right shall be
the right to surrender any such certificate in exchange for payment of the
Merger Consideration or, in the case of a Dissenting Stockholder (as defined
below), to perfect his or her right to receive payment for Shares pursuant to
the law of the State of Delaware if such holder has validly perfected and not
withdrawn the right to receive payment for his or her shares.
3.2 Dissenting Shares. Notwithstanding anything in this Agreement to
-----------------
the contrary but only to the extent required by the GCL, shares of Company
Common Stock that are issued and outstanding immediately prior to the Effective
Time and are
7
<PAGE>
held by holders of Company Common Stock who comply with all the provisions of
law of the State of Delaware concerning the right of holders of Company Common
Stock to dissent from the Merger ("Dissenting Stockholders") and require
appraisal of their shares of Company Common Stock ("Dissenting Shares") shall
not be converted into the right to receive the Merger Consideration but shall
become the right to receive such consideration as may be determined to be due
such Dissenting Stockholder pursuant to the law of the State of Delaware;
provided, however, that (i) if any Dissenting Stockholder shall subsequently
- -------- ------- -
deliver a written withdrawal of his or her demand for appraisal (with the
written approval of the Surviving Corporation, if such withdrawal is not
tendered within 60 days after the Effective Time), or (ii) if any Dissenting
--
Stockholder fails to establish and perfect his or her entitlement to appraisal
rights as provided by applicable law, or (iii) if within 120 days of the
---
Effective Time neither any Dissenting Stockholders nor the Surviving Corporation
has filed a petition demanding a determination of the value of all shares of
Company Common Stock outstanding at the Effective Time and held by Dissenting
Stockholders in accordance with applicable law, then such Dissenting Stockholder
or Stockholders, as the case may be, shall forfeit the right to appraisal of
such shares and such shares shall thereupon be deemed to have been converted
into the right to receive, as of the Effective Time, the Merger Consideration
less any applicable withholding tax, without interest. The Company shall give
the Parent and the Purchaser (A) prompt notice of any written demands for
-
appraisal, withdrawals of demands for appraisal and any other related
instruments received by the Company, and (B) the opportunity to direct all
-
negotiations and proceedings with respect to demands for appraisal. The Company
will not voluntarily make any payment with respect to any demands for appraisal
and will not, except with the prior written consent of the Parent, settle or
offer to settle any demand.
3.3 Purchaser Common Stock. Each share of common stock, par value
----------------------
$.01 per share of the Purchaser ("Purchaser Common Stock") issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and exchangeable for one fully paid and non-assessable share of common
stock, par value $.01 per share of the Surviving Corporation ("Surviving
Corporation Common Stock"). From and after the Effective Time, each outstanding
certificate theretofore representing shares of Purchaser Common Stock shall be
deemed for all purposes to evidence ownership of and to represent the same
number of shares of Surviving Corporation Common Stock.
3.4 Exchange of Shares. (a) Prior to the Effective Time, the
------------------
Purchaser shall, and the Parent shall cause the Purchaser to, deposit in trust
with the depositary for the Offer, or with a bank or trust company in the United
States, designated by the Purchaser and reasonably acceptable to the Company
(the "Exchange Agent"), cash in an aggregate amount equal to the product of (i)
-
the number of Shares issued and outstanding immediately prior to the Effective
Time (other than any such Shares owned beneficially or of record by the Parent
or the Purchaser or any other subsidiary of the Parent and other
8
<PAGE>
than Dissenting Shares), and (ii) the Merger Consideration (such amount being
--
hereinafter referred to as the "Exchange Fund"). The Exchange Agent shall,
pursuant to irrevocable instructions, make the payments provided for in Section
3.1(a) of this Agreement out of the Exchange Fund. The Exchange Agent shall
invest the Exchange Fund as the Parent directs, in direct obligations of the
United States of America, obligations for which the full faith and credit of
the United States of America is pledged to provide for the payment of all
principal and interest, commercial paper obligations receiving the highest
rating from either Moody's Investors Services, Inc. or Standard & Poor's
Corporation, or certificates of deposit, bank repurchase agreements or banker's
acceptances of commercial banks with capital exceeding $10,000,000,000. If for
any reason (including losses) the Exchange Fund is inadequate to pay the amounts
to which holders of shares of Company Common Stock shall be entitled under this
Section 3.4, Parent shall take all steps necessary to enable or cause the
Surviving Corporation promptly to deposit in trust additional cash with the
Exchange Agent sufficient to make all payments required under this Agreement,
and Parent and the Surviving Corporation shall in any event be liable for
payment thereof. The Exchange Fund shall not be used for any purpose except as
expressly provided in this Agreement.
(b) Promptly after the Effective Time, but in no event later than
five (5) business days following such date, the Surviving Corporation shall
cause the Exchange Agent to mail to each record holder (other than the Parent,
the Purchaser or any other subsidiary of the Parent) as of the Effective Time of
an outstanding certificate or certificates which immediately prior to the
Effective Time represented Shares (the "Certificates"), a form letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates for payment therefor. Upon surrender to the
Exchange Agent of a Certificate, together with such letter of transmittal duly
executed and completed in accordance with the instructions thereon, and any
other items specified by the letter of transmittal, the holder of such
Certificate shall be entitled to receive in exchange therefor cash in an amount
equal to the product of the number of Shares represented by such Certificate and
the Merger Consideration, less any applicable withholding tax, and such
Certificate shall forthwith be cancelled. No interest shall be paid or accrued
on the cash payable upon the surrender of the Certificates. If payment is to be
made to a person other than the person in whose name the Certificate surrendered
is registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the person requesting such payment shall pay any tax required by reason
of the payment to a person other than the registered holder of the Certificate
surrendered or establish to the satisfaction of the Exchange Agent and the
Surviving Corporation that such tax has been paid or is not applicable. Until
surrendered in accordance with the provisions of this Section 3.4, each
Certificate (other than Certificates representing Shares owned beneficially or
of record by
9
<PAGE>
the Parent, the Purchaser or any other subsidiary of the Parent and other than
Certificates representing Dissenting Shares in respect of which appraisal rights
are perfected) shall be deemed to represent, for all purposes, only the right to
receive the Merger Consideration in cash multiplied by the number of Shares
evidenced by such Certificate less any applicable withholding tax, without any
interest thereon. If any holder of Shares shall be unable to surrender such
holder's Certificates because such Certificates have been lost, mutilated or
destroyed, such holder may deliver in lieu thereof an affidavit and indemnity
bond in form and substance and with surety reasonably satisfactory to the
Surviving Corporation. If payment is to be made to a person other than the
person in whose name the surrendered Certificate is registered, it shall be a
condition of payment that the Certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the person requesting
such payment shall pay any transfer or other taxes required by reason of the
payment to a person other than the registered holder of the surrendered
Certificate or establish to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable.
(c) After the Effective Time, there shall be no transfers on the
stock transfer books of the Surviving Corporation of the Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates (other than Certificates representing Shares owned
beneficially or of record by the Parent, the Purchaser or any other subsidiary
of the Parent and other than Dissenting Shares) are presented to the Surviving
Corporation, they shall be delivered to the Exchange Agent and cancelled and
exchanged for cash as provided in this Article III. At the close of business on
the day of the Effective Time the stock ledger of the Company with respect to
Company Common Stock shall be closed.
(d) All cash, certificates and other instruments in the possession of
the Exchange Agent that constitute any portion of the Exchange Fund (other than
net earnings on the Exchange Fund which shall be paid to the Parent) which
remains unclaimed by the stockholders of the Company for six (6) months after
the Effective Time (including any interest received with respect thereto) shall
be repaid promptly to the Surviving Corporation, upon demand. Any stockholders
of the Company who have not theretofore complied with Section 3.4(b) shall
thereafter look only to the Surviving Corporation (subject to applicable
abandoned property, escheat or other similar laws) for payment of their claim
for the Merger Consideration, without any interest thereon and less any
applicable withholding taxes, but shall have no greater rights against the
Surviving Corporation than may be accorded to general creditors of the Surviving
Corporation under applicable law. Notwithstanding the foregoing, neither the
Exchange Agent nor any party hereto shall be liable to a holder of shares of
Company Common Stock for any Merger Consideration delivered to a public official
pursuant to applicable abandoned property, escheat and similar laws.
10
<PAGE>
(e) The Surviving Corporation shall pay all charges and expenses,
including those of the Exchange Agent, in connection with the exchange of cash
for Shares.
3.5 Employee Stock Options. (a) Following the acquisition of Shares
----------------------
pursuant to the Offer and prior to the Effective Time, the Board of Directors of
the Company (or, if appropriate, any committee thereof) shall adopt appropriate
resolutions and take all other actions reasonably necessary, in the opinion of
the Purchaser, to provide for the cancellation, effective at the Effective Time,
subject to the payment provided for in the next sentence being made, of all the
outstanding stock options to purchase the Company Common Stock (the "Options")
heretofore granted under any stock option plan or stock incentive plan,
including, but not limited to, the Key Employee Incentive Plan (the "KEIP"), of
the Company (the "Stock Plans") and all rights (including but not limited to
rights to severance payments) ancillary to any such Option. As of the Effective
Time, each Option, whether or not then vested or exercisable, shall no longer be
exercisable for the purchase of shares of Company Common Stock but shall entitle
each holder thereof, in cancellation and full settlement therefor, to a payment
in cash (subject to any applicable withholding taxes, the "Cash Payment"), as
soon as practicable after the Effective Time, equal to the product of (x) the
-
total number of shares of Company Common Stock subject to such Option, whether
or not then vested or exercisable, and (y) the excess of the Merger
-
Consideration, if any, over the exercise price per share of the Company Common
Stock subject to such Option. Following the acquisition of Shares pursuant to
the Offer and prior to the Effective Time, except to the extent provided in
Section 3.5(c) in respect of the Performance Shares (as defined in Section
3.5(c)), the Company will take all steps to ensure that neither the Company nor
any of its subsidiaries is or will be bound by, or have any further obligation
(including but not limited to the obligation to pay severance amounts)
whatsoever in respect of, any Options or any other options, warrants, rights
(including without limitation stock appreciation rights) or agreements which
would entitle any person, other than the Parent or its affiliates, to own any
capital stock of the Surviving Corporation or any of its subsidiaries or to
receive any payment in respect thereof or related thereto.
(b) All Stock Plans and any other plan, program or arrangement
providing for the issuance or grant or any other interest in respect of the
capital stock of the Company or any subsidiary shall terminate as of the
Effective Time and the provisions in any other Benefit Plan (as defined in
Section 4.13) providing for the issuance, transfer or grant of any capital stock
of the Company or any interest in any capital stock of the Company shall be
amended following the acquisition of Shares pursuant to the Offer and prior to
the Effective Time to provide that, at the Effective Time, no participant or
beneficiary thereunder shall have any continuing rights to acquire, hold,
transfer or grant any capital stock of the Company or any interest in capital
stock of the Company (other than in respect of cash payments through the Offer
or the Merger), and, during such
11
<PAGE>
period, the Company shall take all necessary action to ensure that following the
Effective Time no holder of an Option or of restricted Shares of the Company or
any participant in any Stock Plans shall have any right thereunder to acquire
any capital stock of the Company, the Parent or the Surviving Corporation or,
except to the extent provided in Schedule 3.5(c), any rights (including but not
limited to rights to severance payments) ancillary to any such right or award,
subject in each case to the receipt of the cash payment provided for herein
being made.
(c) Subject to the following sentence, awards of restricted Shares
(other than awards of restricted Shares granted to Shekar Narasimhan, Mitchell
D. Clarfield and Glenn A. Sonnenberg (the "Performance Shares")) granted prior
to the Effective Time shall become fully vested as of the Effective Time and the
Shares underlying such awards shall then be surrendered in exchange for the
Merger Consideration in accordance with Section 3.1(d). The Performance Shares
may be surrendered for the Merger Consideration in accordance with Section
3.1(d) only if such Performance Shares have vested on or before June 30, 2000 in
accordance with the terms thereof; provided, that, if the Performance Shares do
-------- ----
not vest on or before June 30, 2000, such Performance Shares shall be forfeited
and shall not be exchanged for the Merger Consideration.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in a letter from the Company delivered to the
Parent prior to execution of this Agreement (which letter contains appropriate
references to identify the representations and warranties herein to which the
information in such letter relates) (the "Company Disclosure Letter") or in the
sections headed "Business," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Financial Statements and Supplementary
Data" of the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999, the Company represents and warrants to the Parent and the
Purchaser as follows:
4.1 Organization. (a) Each of the Company and its subsidiaries is a
------------
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority to own, lease and operate its properties and to conduct its
business as now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power and authority would not,
individually or in the aggregate, have a material adverse effect on the
business, financial condition, results of operations or prospects of the Company
or of either of the Federal National Mortgage Association ("Fannie Mae")
origination and servicing business or the Federal Housing Administration ("FHA")
origination and servicing business of the Company and its subsidiaries, or on
the
12
<PAGE>
Company's ability to perform its obligations or to consummate the transactions
under this Agreement (a "Material Adverse Effect"). Each of the Company and its
subsidiaries is duly qualified or licensed and in good standing to do business
as a foreign corporation in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification necessary, except where the failure to be so qualified or
licensed and in good standing would not, individually or in the aggregate, have
a Material Adverse Effect.
(b) Each of the organizational documents of each of the Company and
its subsidiaries is in full force and effect and neither the Company nor any of
its subsidiaries is in violation of any of the provisions of its organizational
documents. The respective certificates of incorporation and by-laws or other
organizational documents of the subsidiaries of the Company do not contain any
provision limiting or otherwise restricting the ability of the Company to
control such subsidiaries.
4.2 Capitalization. (a) The authorized capital stock of the Company
--------------
consists of 25,000,000 shares of Company Common Stock, par value $.01 and
12,500,000 shares of preferred stock, par value $.01 (the "Preferred Stock").
As of the date hereof there are (i) 10,958,302 shares of Company Common Stock
issued and outstanding (including 261,125 restricted shares which include 70,000
Performance Shares), (ii) 494,792 shares of Company Common Stock reserved for
--
issuance under future grants of options under the Company's Stock Plans, (iii)
---
1,035,496 shares of Company Common Stock subject to options outstanding under
the Company's Stock Plans, (iv) 250,000 shares, 100,000 shares, 150,000 shares
--
and 150,000 shares of Company Common Stock subject to outstanding warrants to
purchase such shares at a price of $6.25 per share, $5.90 per share, $9.70 per
share, and $7.00 per share, respectively, and (v) 342,215 shares of Company
-
Common Stock held in the Company's treasury. There are no shares of Preferred
Stock issued and outstanding. All issued and outstanding shares of capital
stock of the Company are duly authorized, validly issued, fully paid and
nonassessable and are not subject to, nor were they issued in violation of, any
preemptive rights. Except as set forth above or as contemplated by this
Agreement, there are not now any existing, authorized or outstanding options,
warrants, calls, subscriptions, claims of any character, preemptive rights or
other rights or other agreements, convertible or exchangeable securities, or
commitments, or obligations contingent or otherwise, whatsoever obligating the
Company or any of its subsidiaries to issue, transfer, deliver or sell or cause
to be issued, transferred, delivered or sold any additional shares of capital
stock of the Company or any of its subsidiaries, or obligating the Company or
any of its subsidiaries to issue shares of Company Common Stock, any other
shares of capital stock or any securities convertible into, exchangeable for, or
evidencing the right to subscribe for or otherwise to acquire, any shares of the
capital stock of the Company. The Company Disclosure Letter sets forth the
number of Options and the exercise price for each Option. The Company has no
authorized or outstanding bonds, debentures, notes, or other indebtedness the
holders
13
<PAGE>
of which have the right to vote (or convertible or exchangeable into or
exercisable for securities having the right to vote) with the stockholders of
the Company or any of its subsidiaries on any matter. After the Effective Time
and subject to the payment provided for in Section 3.1(a) being made, the
Surviving Corporation will have no obligation to issue, transfer or sell any
shares of common stock of the Surviving Corporation pursuant to any Benefit Plan
(as defined in Section 6.10).
(b) All of the outstanding shares of capital stock of each of the
Company's subsidiaries have been duly authorized and validly issued, are fully
paid and non-assessable, are not subject to, nor were they issued in violation
of, any preemptive rights, and are owned, of record and beneficially, by the
Company, free and clear of any liens, encumbrances, options or claims
whatsoever. No shares of capital stock of any of the Company's subsidiaries are
reserved for issuance, except to the Company or another subsidiary of the
Company. There are no outstanding options, warrants, rights, subscriptions,
claims of any character, agreements, obligations, convertible or exchangeable
securities, or other commitments, contingent or otherwise, relating to the
capital stock of any subsidiary of the Company, pursuant to which such
subsidiary is or may become obligated to issue any shares of capital stock of
such subsidiary or any securities convertible into, exchangeable for, or
evidencing the right to subscribe for, any shares of such subsidiary, other than
such rights granted to the Company or a subsidiary of the Company. There are no
material restrictions of any kind which prevent the payment of dividends by any
of the Company's subsidiaries.
(c) There are no voting trusts or other agreements or understandings
to which the Company or any of its subsidiaries is a party with respect to the
voting of the capital stock of the Company or any of its subsidiaries. None of
the Company or its subsidiaries is or will be required to redeem, repurchase or
otherwise acquire shares of capital stock of the Company, or any of its
subsidiaries, respectively, as a result of the transactions contemplated by this
Agreement or the Stockholders Agreement.
4.3 Authorization of this Agreement; Recommendation of Merger. The
---------------------------------------------------------
Company has all requisite corporate power and authority to execute and deliver
this Agreement and, subject to approval by the stockholders of the Company to
the extent required by law, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized and approved by the Company's Board of
Directors and, except for the approval of this Agreement by the stockholders of
the Company to the extent required by law, no other corporate proceedings on the
part of the Company are necessary to authorize this Agreement or consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Company, and constitutes a valid and binding
agreement of the Company, subject to approval and adoption of this Agreement
14
<PAGE>
by the Company's stockholders to the extent required by law, and (assuming due
and valid authorization, execution and delivery hereof by the other parties
thereto and the enforceability of this Agreement against them) is enforceable
against the Company in accordance with its terms, except to the extent that
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws of general applicability
relating to or affecting the enforcement of creditors' rights and by the effect
of general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
4.4 Consents and Approvals. Except for (i) filings required under
---------------------- -
the Exchange Act in connection with this Agreement and the transactions
contemplated hereby, (ii) the filing of a Pre-Merger Notification and Report
--
Form by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 and the rules and regulations thereunder (together, the "HSR Act") with the
Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division") and such filings as may be
required under any other Antitrust Laws, (iii) the filing and recordation of
---
appropriate merger documents as required by the GCL and, if applicable, the laws
of other states in which the Company is qualified to do business, (iv) filings
--
under the securities or blue sky laws or takeover statutes of the various
states, (v) filings with the Department of Housing and Urban Development, FHA
-
and the Government National Mortgage Association ("GNMA") as set forth in
Schedule 4.4 to the Company Disclosure Letter, (vi) filings with Fannie Mae, the
--
Federal Home Loan Mortgage Corporation ("Freddie Mac") and the state regulatory
authorities set forth in Schedule 4.4 to the Company Disclosure Letter, and
(vii) filings in connection with any applicable transfer or other taxes in any
---
applicable jurisdiction, no filing with, and no permit, authorization, consent
or approval of, any court, arbitral tribunal, administrative commission,
governmental or regulatory body, agency or authority whether domestic or foreign
(each, a "Governmental Entity"), is necessary for the consummation by the
Company of the transactions contemplated by this Agreement, the failure to make
or obtain which would have a Material Adverse Effect or would prevent or
materially delay consummation of the transactions contemplated by this
Agreement. All filings with, or permits, authorizations, consents and approvals
of, any Governmental Entity (but not including, for the avoidance of doubt,
Fannie Mae, FHA or GNMA, the approvals of which are addressed separately in
Section 4.14(a) and clause (f) of Annex A), in each case as necessary to conduct
the mortgage lending and servicing business of the Company and its subsidiaries
in all material respects as presently conducted will have been made or obtained
prior to the acceptance for payment of any Shares pursuant to the Offer.
"Antitrust Law" means the Sherman Act, as amended, the Clayton Act, as amended,
the HSR Act, the Federal Trade Commission Act, as amended, and all other federal
and state statutes, rules, regulations, orders, decrees, administrative and
judicial doctrines, and other laws, whether domestic or foreign, that are
designed or intended to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade.
15
<PAGE>
4.5 No Conflicts. Neither the execution and delivery of this
------------
Agreement nor the consummation of the transactions contemplated hereby nor
compliance by the Company with any of the provisions hereof will (i) conflict
-
with or result in any violation of any provision of the restated certificate of
incorporation of the Company (the "Company Certificate of Incorporation") or the
by-laws of the Company (the "Company By-Laws"), or the certificate of
incorporation or by-laws (or equivalent instruments) of any of its subsidiaries,
(ii) result in a violation or breach of, or constitute (with or without due
--
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, or result in the creation of
any mortgage, lien, security interest, pledge, charge, encumbrance or other
adverse claim of any kind (collectively, "Liens") upon any of the properties or
assets of the Company or any of its subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which any of them or any of their properties or
assets is bound or (iii) violate any statute, rule, regulation, order,
---
injunction, writ or decree of any Governmental Entity applicable to the Company
or any of its subsidiaries or by which the Company or any of its subsidiaries or
any of their respective assets or properties may be bound, excluding from the
foregoing clauses (ii) and (iii) conflicts, violations, breaches or defaults
which would not, either individually or in the aggregate, have a Material
Adverse Effect or prevent or materially delay consummation of the transactions
contemplated by this Agreement.
4.6 Compliance. (a) The Company and each of its subsidiaries are in
----------
compliance with all constitutions, treaties, statutes, laws (including common
laws), codes, rules, regulations, decisions, judgments, ordinances or orders,
whether domestic or foreign, (collectively, "Laws") of any Governmental Entity
applicable to the business and operations of the Company and its subsidiaries or
any of their respective properties or assets (other than Environmental Laws
which are covered in Section 4.18 and employment/labor laws which are covered in
Section 4.12), except for such non-compliance as would not have, individually or
in the aggregate, a Material Adverse Effect or prevent or materially delay
consummation of the transactions contemplated by this Agreement.
(b) Each of the Company and its subsidiaries has in effect all
federal, state and local governmental approvals, authorizations, certificates,
filings, franchises, licenses, notices, permits and rights ("Permits") necessary
for it to own, lease or operate its properties and assets and to carry on its
business as now conducted, and there has occurred no default under any such
Permit, except such as would not, individually or in the aggregate, have a
Material Adverse Effect or prevent or materially delay consummation of the
transactions contemplated by this Agreement.
16
<PAGE>
(c) Except for any matters set forth in Schedule 4.5 to the Company
Disclosure Letter, neither the Company nor any of its subsidiaries is in default
or violation of, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or its or any of their respective properties are bound or
affected, except for any such defaults or violations which would not have a
Material Adverse Effect or prevent or materially delay consummation of the
transactions contemplated by this Agreement.
(d) Neither the Company nor any of its subsidiaries has been
convicted of any crime described in Section 411 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or in Part I (g) of
Prohibited Transaction Class Exemption 84-14, 49 Fed. Reg. 9494 (1984), within
the thirteen years preceding the date of the Merger.
4.7 Financial Statements and SEC Reports; No Undisclosed Liabilities.
----------------------------------------------------------------
(a) The Company has timely filed all forms, reports and documents with the SEC
since August 14, 1997 required to be filed by it pursuant to the Securities Act
of 1933, as amended, and the rules and regulations promulgated thereunder (the
"Securities Act"), and the Exchange Act and the rules and regulations
promulgated thereunder, all of which have complied in all material respects with
all applicable requirements of the Securities Act and the Exchange Act and the
rules and regulations promulgated thereunder (such forms, reports, registration
statements and other filings and financials, together with any exhibits, any
amendments thereto and information incorporated by reference therein, filed with
the SEC prior to the date hereof, are sometimes collectively referred to as the
"Disclosure Statements"). None of the subsidiaries is required to file any
forms, reports or other documents with the SEC pursuant to Section 12 or 15 of
the Exchange Act. None of such Disclosure Statements, at the time filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated balance sheets and the related consolidated
statements of income, cash flows and stockholder's equity (including the notes
thereto) of the Company and its subsidiaries contained or incorporated by
reference in the Disclosure Statements, were prepared from, and are in
accordance with, the books and records of the Company and its consolidated
subsidiaries, complied as of their respective dates in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, and presented fairly the
consolidated financial position of the Company and its subsidiaries as of their
respective dates, and the consolidated results of their income and their cash
flows for the periods presented therein, in conformity with United States
generally accepted accounting principles ("GAAP") applied on a consistent basis,
except as otherwise noted therein and, in the case of unaudited
17
<PAGE>
quarterly financial statements, as permitted by Form 10-Q under the Exchange
Act, and subject in the case of quarterly financial statements to normal year-
end audit adjustments.
(b) Except for liabilities and obligations incurred in connection
with the consummation of the transactions contemplated hereby, there is no
liability of the Company or any subsidiary thereof of any nature, whether
direct, indirect, known, unknown, absolute, accrued, contingent or otherwise,
which, individually or in the aggregate, is material to the Company and its
subsidiaries, taken as a whole, other than liabilities (i) shown on the December
-
31, 1999 audited consolidated balance sheet (or the notes thereto) of the
Company and its subsidiaries included in the Company's Annual Report on Form 10-
K for the fiscal year ending December 31, 1999 or (ii) incurred in the ordinary
--
course of business consistent with past practice since December 31, 1999.
4.8 Certain Contracts and Arrangements. (a) The term "Company
----------------------------------
Contract" means each contract to which the Company or any of its subsidiaries is
a party or by which it is bound which: (i) has been or would be required to be
-
filed by the Company as an exhibit to a Disclosure Statement under Item 10 of
Rule 601 of Regulation S-K under the Exchange Act, or (ii) (x) the loss of which
-- -
would have a Material Adverse Effect, or (y) pursuant to which the Company or
-
any of its subsidiaries expects to or is scheduled to receive (assuming full
performance pursuant to the terms thereof) revenue of $500,000 or more during
the 12-month period following the date of this Agreement.
(b) Neither the Company nor any of its subsidiaries is a party to or
is bound by any contract which contains covenants limiting the freedom of the
Company or any of its subsidiaries to engage in any line of business in any
geographic area or to compete with any person or entity or restricting the
ability of the Company or any of its subsidiaries to acquire equity securities
of any person or entity.
(c) With respect to each of the Company Contracts, (i) the Company
-
(or any of its subsidiaries) is not in default, and to the knowledge of the
Company no other party thereto is in default or has made a claim of default
thereunder, and no event has occurred which, with the passage of time or the
giving of notice (or both), would constitute a default thereunder, or would
permit modification, acceleration or termination thereof, except such as would
not have a Material Adverse Effect and (ii) the consummation of the transactions
--
contemplated by this Agreement will not give rise to a right of the other party
or parties thereto to terminate such contract or impose liability under the
terms thereof on the Company or any of its subsidiaries.
(d) Neither the Company nor any of its subsidiaries is a party to any
swap, hedge or other derivative instrument or contract other than as set forth
in Schedule 4.8(d) to the Company Disclosure Letter.
18
<PAGE>
4.9 Offer Documents; Proxy/Information Statement; Other Information;
----------------------------------------------------------------
Schedule 14D-9. None of the information supplied in writing by the Company
- --------------
specifically for inclusion in the documents pursuant to which the Offer will be
made, including the Offer Documents will, at the respective times the Offer
Documents or any amendments or supplements thereto are filed with the SEC,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Schedule 14D-9 on the date filed with the SEC will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the foregoing shall not apply to the extent
-------- -------
that any such untrue statement of a material fact or omission to state a
material fact was made by the Company in reliance upon and in conformity with
written information furnished to the Company by the Parent or the Purchaser
specifically for use in the Schedule 14D-9. No proxy solicitation materials or
information statement distributed by the Company to its stockholders and/or
filed with the SEC in connection with the Merger, including any amendments or
supplements thereto (collectively, the "Proxy/Information Statement") will, at
the time the Proxy/Information Statement is mailed to the Company's
stockholders, contain any untrue statement of a material fact, or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading or, at the time of the meeting of stockholders to which the
Proxy/Information Statement, as then amended or supplemented, relates or at the
Effective Time omit to state any material fact necessary to correct any
statement which has become false or misleading in any earlier communication with
respect to the solicitation of any proxy for such meeting; except that no
representation is made by the Company with respect to information furnished in
writing to the Company by the Parent or the Purchaser specifically for use in
the Proxy/Information Statement. The Schedule 14D-9 and the Proxy/Information
Statement each will comply in all material respects, both as to form and
otherwise, with the requirements of the Exchange Act and the rules and
regulations thereunder.
4.10 Title to Property. Each of the Company and its subsidiaries
-----------------
owns, has valid leasehold interest in or valid contractual rights to use, all of
the assets, tangible and intangible, used by, or necessary for the conduct of,
its business, except where the failure to have such valid leasehold interests or
such valid contractual rights would not, individually or in the aggregate, have
a Material Adverse Effect and, in the case of owned assets, owns such assets
free and clear of any Liens, except for such Liens that would not, individually
or in the aggregate, have a Material Adverse Effect.
4.11 Intellectual Property. (a) Schedule 4.11(a) to the Company
---------------------
Disclosure Letter sets forth all trademark registrations and applications owned
by the
19
<PAGE>
Company and its subsidiaries, and all material common law trademarks and trade
names used in the business of the Company and its subsidiaries as currently
conducted and as contemplated to be conducted (the "Business").
(b) The Company and its subsidiaries own all right, title and
interest in and to the trademarks set forth in Schedule 4.11(a) to the Company
Disclosure Letter as used in the Business (the "Company Marks"). No claim or
demand has been received by the Company or any of its subsidiaries from any
person, and to the knowledge of the Company no proceeding is pending or
threatened, which challenges the rights of the Company or any of the
subsidiaries in respect of the Company Marks or any other Intellectual Property
owned by the Company and its subsidiaries.
(c) Except as set forth in Schedule 4.11(c) to the Company Disclosure
Letter, neither the Company nor any of the subsidiaries has granted any license
or right to use, option, release or covenant not to sue or non-assertion
assurance to any third person with respect to, or granted any outstanding lien
or security interest in, any of the Company Marks or other Intellectual Property
owned by the Company and any of its subsidiaries. Except as set forth in
Schedule 4.11(c) to the Company Disclosure Letter, there is no existing or
contemplated agreement, understanding, or grant of permission between the
Company or any of the subsidiaries and any third person that encumbers or
otherwise affects the Company's exclusive right to use the Company Marks or
other Intellectual Property owned by the Company and any of its subsidiaries.
(d) The Intellectual Property that is owned by the Company and its
subsidiaries and the Intellectual Property used pursuant to licenses,
sublicenses, agreements or permissions set forth in Schedule 4.11(d) to the
Company Disclosure Letter constitutes all of the Intellectual Property necessary
to the conduct of the Business; provided, however, that Schedule 4.11(d) need
not list individually commercially available software used pursuant to
shrinkwrap licenses so long as such software licenses continue to be in effect,
without change, after the Merger. Immediately after the Merger, the Surviving
Corporation shall own or have the right to use all of the Intellectual Property
currently used in the Business, in each case free from any Liens, except where
the existence of Liens would not have a Material Adverse Effect and, otherwise
on the same terms and conditions as in effect prior to the Merger.
(e) The conduct of the Business did not and does not infringe upon,
conflict in any material way with or misappropriate any Intellectual Property of
any third party. There are not any open claims known to the Company or any of
its subsidiaries from third parties that the Company and its subsidiaries
infringe their Intellectual Property rights.
20
<PAGE>
(f) To the knowledge of the Company, none of the Intellectual
Property used in the Business is being infringed or used by any third party
without the permission of the Company.
(g) None of the material Intellectual Property (including the Company
Marks) owned by the Company or any subsidiary or used in the Business is subject
to any outstanding order, ruling, decree, judgment or stipulation by or with any
court or other Governmental Entity.
(h) Schedule 4.11(h) to the Company Disclosure Letter sets forth all
material worldwide trademark, copyright, and patent applications and
registrations owned by the Company and its subsidiaries, and the same are
validly subsisting in full force and effect and have not been adjudged invalid
or unenforceable, in whole or in part. The Company and its subsidiaries have
taken all reasonably necessary actions to ensure protection of the Intellectual
Property owned by the Company or any subsidiary or used in the Business
(including maintaining the secrecy of all confidential Intellectual Property).
As used herein, "Intellectual Property" shall mean all material
patents and applications, including all reissues, continuations, divisions,
continuations-in-part, renewals or extensions thereof; trademarks, service
marks, trade names, trade dress, domain names, logos, business and product
names, slogans, and registrations and applications for registration or renewal
thereof; copyrights and registrations or renewals thereof; Software; inventions,
processes, designs, formulae, trade secrets, know-how, confidential and
technical information; all other intellectual property and proprietary rights;
copies and tangible embodiments thereof (in whatever form or medium, including
electronic media); and licenses of any of the foregoing.
As used herein, "Software" shall mean all computer software, including
but not limited to, application software and system software, including all
source code and object code versions thereof, in any and all forms and media,
whether recorded on paper, magnetic media or other electronic or non-electronic
media (including data and related documentation, user manuals, training
materials, flow charts, diagrams, descriptive tests and programs, computer
print-outs, underlying tapes, computer databases and similar items), integrated
circuits, embedded systems, and other electro-mechanical or processor based
systems.
4.12 Labor Relations; Employees. (a) The Company and its
--------------------------
subsidiaries are not (either individually or jointly) parties to or bound by any
collective bargaining agreement and none of the employees of the Company or its
subsidiaries are represented by any labor organization and, to the knowledge of
the Company or its subsidiaries, no union claims to represent these employees
have been made. There have been no union
21
<PAGE>
organizing activities or requests for union representation with respect to
employees of the Company or its subsidiaries within the past five years. Since
January 1, 1995, there has not occurred or been threatened any strike, slowdown,
picketing, work stoppage, concerted refusal to work overtime or other similar
labor activity with respect to employees of the Company or its subsidiaries.
There are no pending or, to the knowledge of the Company or its subsidiaries,
threatened unfair labor practice charges against the Company or its
subsidiaries.
(b) The Company and each of its subsidiaries have not during the past
two years effectuated a "plant closing" or "mass layoff" (as defined in the
Worker Adjustment and Retraining Notification Act) affecting any of their sites
of employment or one or more facilities or operating units within any site of
employment or facility, nor will the Company or its subsidiaries take any such
action within the 90 day period prior to the Effective Time.
(c) The Company and each of its subsidiaries have complied in all
material respects with all applicable laws pertaining to the employment or
termination of employment of their respective employees, including all such laws
relating to labor relations, equal employment opportunities, fair employment
practices, prohibited discrimination or distinction and other similar employment
activities.
(d) Except as set forth in Schedule 4.12(d) to the Company Disclosure
Letter, there is no pending or, to the knowledge of the Company or its
subsidiaries, threatened litigation by or on behalf of any present or former
employee (or independent contractor) of the Company the outcome of which would
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect or any existing liability pertaining in any manner to the
employment (or in the case of an independent contractor, retention of services)
and/or termination of such employment (or in the case of an independent
contractor, termination of such services) by the Company of such present or
former employee (or independent contractor) which would reasonably be expected
to have a Material Adverse Effect.
(e) The Company has previously provided the Parent with a true,
correct and complete list, as of the date of this Agreement, of the name and
rate of base salary (or other form of base compensation) payable to each person
who, on the date hereof, is an employee of the Company and/or any subsidiary.
There is no individual who provides services to the Company or any subsidiary
who is classified as independent contractor who, under applicable Federal income
tax laws, rules or regulations, should be characterized as an employee.
4.13 Employee Agreements and Plans. (a) Except as set forth in
-----------------------------
Schedule 4.13(a) to the Company Disclosure Letter, there are no employee or
retiree
22
<PAGE>
compensation or benefit plans, arrangements, contracts or agreements (including,
without limitation, stock option plans or other equity plans, employment
agreements, change of control, bonus, deferred compensation, retention,
severance and other similar arrangements or agreements) of any type (including
but not limited to plans described in Section 3(3) of ERISA), whether written or
unwritten, (i) maintained, or contributed to, by the Company, any of its
subsidiaries or any other trade or business, whether or not incorporated (an
"ERISA Affiliate"), that together with the Company or any of its subsidiaries
would be deemed a "single employer" within the meaning of Section 414 of the
Internal Revenue Code of 1986, as amended (the "Code") or Section 4001(b) of
ERISA for the benefit of any employee or former employee of the Company or any
of its subsidiaries, (ii) with respect to which the Company, any of its
--
subsidiaries or any ERISA Affiliate has or has had, within the preceding six
years, an obligation to contribute or (iii) with respect to which the Company or
---
any of its subsidiaries or any ERISA Affiliate has, has had or may have a
liability for the benefit of any employee or former employee of the Company or
any of its subsidiaries (a "Company Benefit Plan"). Neither the Company, any of
its subsidiaries nor any ERISA Affiliate has any formal plan or any commitment
or has communicated to any current or former employee any intention, whether
legally binding or not, to create or to modify in any material way any Company
Benefit Plan. Except as set forth in Schedule 4.13(a) to the Company Disclosure
Letter, the Company and its subsidiaries have the right to terminate any Company
Benefit Plan that is a welfare benefit plan within the meaning of Section 3(1)
of ERISA at any time, and following such termination shall have no liability or
obligation thereunder except to the extent that any claims related to events
occurring prior to such termination have not been paid.
(b) With respect to each Company Benefit Plan, the Company has
provided to the Parent accurate and complete copies of all written plans,
descriptions of unwritten plans, summary plan descriptions, summaries of
material modifications, trust agreements, insurance contracts or other funding
arrangements and other related agreements including all amendments to the
foregoing; the two most recent IRS Forms 5500 and Forms 990-T, annual reports,
including all Schedules and attachments thereto; the most recent annual and
periodic accounting of plan assets; the most recent determination letter
received from the United States Internal Revenue Service (the "Service"); all
material communications received from or sent to the Service, the Pension
Benefit Guaranty Corporation or the Department of Labor or any other
governmental agency or body having jurisdiction over any Company Benefit Plan
(including a written description of any oral communication); any actuarial study
of post-employment life or medical benefits provided under any such Company
Benefit Plan, if any; statements or other communications regarding withdrawal or
other multiemployer plan liabilities; and the two most recent actuarial reports,
to the extent any of the foregoing may be applicable to a particular Company
Benefit Plan.
23
<PAGE>
(c) Except as set forth in Schedule 4.13(c) to the Company Disclosure
Letter, the consummation of the transactions contemplated by this Agreement,
whether alone or in combination with other events, will not entitle any present
or former employee of the Company or any of its subsidiaries (or any beneficiary
thereof) to severance pay or other termination benefits or accelerate the time
of payment or vesting, or increase the amount, of compensation or benefits due
to any individual and does not constitute, whether alone or in combination with
other events, a triggering event under any Company Benefit Plan, policy,
arrangement, statement, commitment or agreement, which will or may result in any
payment, acceleration, vesting or increase in benefits to any employee or former
employee or director of the Company or any of its subsidiaries.
(d) No Company Benefit Plan is a "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA or a "multiple employer plan" within the
meaning of Section 4063 or 4064 of ERISA.
(e) Except as set forth in Schedule 4.13(e) to the Company Disclosure
Letter, (i) neither the Company nor any of its subsidiaries has incurred or
reasonably expects to incur (either directly or indirectly, including as a
result of any indemnification obligation) any liability or obligation under or
pursuant to Title I or IV of ERISA (or any comparable provision of the law of
any jurisdiction other than the United States) or the penalty, excise tax or
joint and several liability provisions of the Code relating to employee benefit
plans or the funding arrangements underlying such employee benefit plans, and no
event, transaction or condition has occurred or exists which could result in any
such liability of the Company or any of its subsidiaries or, following the
Closing, the Parent or the Surviving Corporation or any of their affiliates,
(ii) each Company Benefit Plan intended to be qualified under Section 401(a) of
--
the Code, the trust (if any) forming a part thereof, and each voluntary
employees' beneficiary association intended to be qualified under Section 501(a)
of the Code that is used as a funding vehicle for any Company Benefit Plan has
received a favorable determination letter from the Service as to its
qualification under the Code and no fact or condition exists or has occurred
which could reasonably be expected to result in the disqualification of any such
Company Benefit Plan or adversely affect the tax-exempt status of any such
trust, (iii) there are no pending or threatened claims by or on behalf of any of
---
the Company Benefit Plans, by or on behalf of any present or former employee of
the Company or any of its subsidiaries with respect to any of the Company
Benefit Plans or otherwise involving any such Company Benefit Plan or the assets
of any Company Benefit Plan (other than routine claims for benefits), (iv) all
--
contributions, premiums and benefit payments required to be made or paid by the
Company or any of its subsidiaries in respect of any Company Benefit Plan,
insurance contract or other funding arrangement, or pursuant to any applicable
law or collective bargaining agreement have been paid within the earliest time
prescribed by such Company Benefit Plan, funding arrangement or law and (v) no
-
Company Benefit Plan is subject to the minimum funding requirements of Section
412 of
24
<PAGE>
the Code or Section 302 of ERISA or Title IV of ERISA. Each of the Company
Benefit Plans has been operated and administered in all respects in compliance
with its terms and all laws, including but not limited to ERISA and the Code.
(f) No employee is or may become entitled to post-employment benefits
under any Company Benefit Plan by reason of employment with the Company or any
of its subsidiaries, including, without limitation, death or medical benefits
(whether or not insured), other than (i) coverage provided pursuant to the terms
of any Company Benefit Plan specifically identified as providing such coverage
in Schedule 4.13(f) to the Company Disclosure Letter or (ii) benefits or
--
coverage required by law, including, without limitation, Section 4980B of the
Code and Sections 601 through 609 of ERISA.
(g) Neither the Company nor any of its subsidiaries has made any
payments, is obligated to make any payments, or is party to an agreement that
under certain circumstances could obligate it to make any payments which would
be nondeductible under Section 280G or 162(m) of the Code.
(h) There are no outstanding stock appreciation rights or limited
stock appreciation rights in respect of the Company Common Stock.
(i) Schedule 4.13(i) to the Company Disclosure Letter sets forth (i)
the names of each employee, consultant and other individual who received an
award under any of the Stock Plans and with whom the Company or any affiliate
has entered into any award agreement under any of the Stock Plans that also
provide, as part of the award, for severance payments or benefits upon the
termination of such employee's, consultant's or individual's employment or other
service relationship with the Company, and (ii) the amounts of severance
--
payments to which each such employee, consultant or other person would be
entitled under the terms of such award.
(j) Except as otherwise set forth in Schedule 4.13(j) to the Company
Disclosure Letter, no employee who is or may become entitled to severance
payments under any employment agreement entered into with the Company or any of
its subsidiaries shall be or become entitled to severance payments under any
other Company Benefit Plan.
(k) Except as otherwise set forth in Schedule 4.13(k) to the Company
Disclosure Letter, each Company Benefit Plan affecting the terms and conditions
of any employee's employment with the Company or any subsidiary may be amended
or terminated by the Company or a subsidiary at any time without notice or other
limitation, including following the consummation of the transactions
contemplated hereby.
25
<PAGE>
4.14 Mortgage Business.
-----------------
(a) Each subsidiary of the Company that services or originates loans
(i) is and, after giving effect to the transactions contemplated by this
-
Agreement, will be, an approved and fully licensed either (1) FHA-approved
-
mortgagee and servicer for FHA-insured loans, (2) Delegated Underwriting and
-
Servicing ("DUS") seller/servicer of multi-family first and second mortgages for
Fannie Mae, or (3) GNMA issuer and servicer of GNMA-guaranteed mortgage-backed
-
securities, as the case may be, and (ii) is in good standing with each of the
--
FHA, Fannie Mae and GNMA and all authorities and servicers for the state bond
programs in which it participates. Each subsidiary of the Company referred to
in clause (i)(2) of the preceding sentence meets, and giving effect to the
transactions contemplated by this Agreement, will meet, all applicable Fannie
Mae requirements so as to be able to originate, purchase, hold and service
mortgage loans to be sold to Fannie Mae; and each subsidiary of the Company
referred to in clauses (i)(1) or (3) of the preceding sentence meets, and giving
effect to the transactions contemplated by this Agreement, will meet, all
requirements of law and governmental regulations so as to be eligible to
originate, purchase, hold and service FHA-insured mortgage loans and to issue
mortgage-backed securities guaranteed by GNMA, as the case may be, in each case
to the same extent that the Company currently originates, purchases, holds and
services loans and issues mortgage backed securities guaranteed by GNMA. There
is no pending or, to the Company's knowledge, threatened cancellation or
reduction of any loan purchase commitment or other loan sale contract to which
the Company or any of its subsidiaries is a party, and the obligations of the
Company and its subsidiaries under each such contract are being performed in
accordance with its terms. There is no prior consent required to be given by
GNMA or the FHA in connection with the Offer, the Merger or the other
transactions contemplated by this Agreement in order to continue in full force
and effect the respective licenses of the Company and its subsidiaries.
(b) All loans held for the account of the Company and its
subsidiaries, whether or not for future sale or delivery to an investor (the
"Owned Loans"), are owned by the Company or one of its subsidiaries free and
clear of any Lien, other than (i) Liens in favor of the Company's lender banks
-
pursuant to warehouse lines of credit as set forth in Schedule 4.14(b) to the
Company Disclosure Letter and (ii) forward sale commitments or similar
--
agreements to sell any such loans to investors as set forth in Schedule 4.14(b)
to the Company Disclosure Letter, and all Owned Loans meet all applicable
requirements for sale to any intended Investors (as defined below). Each
mortgage or deed of trust securing an Owned Loan, or an assignment thereof, if
applicable, has been duly recorded in the name of the Company or one of its
subsidiaries as mortgagee. Neither the Company nor any of its subsidiaries has
released any security for any Owned Loan, except upon receipt of reasonable
consideration for such release (as documented in the applicable Owned Loan
file), or accepted prepayment of any such Owned Loan which has not been promptly
applied to such Owned Loan.
26
<PAGE>
(c) Each Owned Loan, each loan which was originated by the Company or
one of its subsidiaries and subsequently transferred to a third party (the
"Transferred Loans") and each loan which is being serviced by the Company or one
of its subsidiaries for the account of others (the "Serviced Loans", and
together with the Owned Loans and the Transferred Loans, the "Loans") was (i)
-
underwritten and originated (to the best knowledge of the Company in the case of
Loans not originally underwritten or originated by the Company or one of its
subsidiaries) and (ii) (in the case of Serviced Loans) is being serviced and the
--
loan documents and loan files maintained by the Company or one of its
subsidiaries with respect thereto are being maintained in each case materially
in compliance with all applicable laws and regulations and, if applicable, (1)
-
the requirements of the "Investor" (which term means (A) Fannie Mae, GNMA, the
-
trustee for any CMBS, or any other person, as the case may be, that owns any of
the Loans or holds beneficial title to the Loans, and (B) any person who owns
-
servicing rights for Loans serviced or master serviced by the Company or one of
its subsidiaries pursuant to a Loan Servicing Agreement, as defined below) which
originated or acquired or is expected to acquire such Loan (or, if there is no
such Investor, in accordance with underwriting, servicing and file maintenance
standards which are substantially comparable to those of Fannie Mae), (2) the
-
requirements of each person who insures or guarantees all or any portion of the
risk of loss upon borrower default on any of the Loans, including, without
limitation, the FHA and any private mortgage insurer, and (3) the requirements
-
of all providers of life, hazard, flood, disability, environmental, title or
other insurance with respect to any of the Loans or the collateral therefor
(each, an "Insurer"). Neither the Company nor any of its subsidiaries has done
or failed to do, or caused to be done or omitted to be done, any act, the effect
of which would operate to invalidate or materially impair (aa) any approvals of
--
Fannie Mae, GNMA or any other agency or of the FHA to insure, (bb) any private
--
mortgage insurance or commitment of any private mortgage insurer to insure, (cc)
--
any title insurance policy, (dd) any hazard insurance policy, (ee) any
-- --
environmental insurance policy, (ff) any flood insurance policy, (gg) any
-- --
fidelity bond, direct surety bond, errors and omissions or other insurance
policy required by any of Fannie Mae, the FHA or GNMA, Investor or Insurer, (hh)
--
any surety or guaranty agreement, (ii) any guaranty issued by GNMA, Fannie Mae
--
or Freddie Mac to the Company or any of its subsidiaries or to bond purchasers
respecting GNMA bonds or mortgage backed securities issued by the Company or any
of its subsidiaries and other like guaranties, (jj) the rights of the Company or
--
any of its subsidiaries under any Loan Servicing Agreement (as defined below) or
loan purchase commitment, (kk) the obligations of the mortgagor under the
--
mortgage document, or (ll) title priority of the mortgage. None of Fannie Mae,
--
GNMA the FHA or any other agency, nor any Investor or Insurer has (x) notified
-
the Company or any of its subsidiaries, or to the knowledge of the Company
claimed, that the Company or any of its subsidiaries has violated or has not
complied with the applicable underwriting or servicing standards with respect to
Loans sold or serviced by the Company or any of its subsidiaries or (y) imposed
-
restrictions on the activities (including commitment authority) of the Company
or any of its subsidiaries.
27
<PAGE>
(d) The loan documents relating to a Loan maintained in the loan
files of the Company were materially in compliance with all applicable laws and
regulations at the time of the origination or modification of such Loan, as the
case may be. The loan files maintained by the Company contain originals (or,
where necessitated by the terms of the applicable mortgage servicing agreements,
contain true, correct and complete copies) of the documents relating to each
Loan and the information contained in such loan files with respect to each such
Loan is true, complete and accurate and in compliance with all applicable laws
and regulations. To the knowledge of the Company, the terms of the note, bond,
deed of trust and mortgage for each such Loan have not been impaired, waived,
altered or modified in any respect from the date of their origination except by
a written instrument which written instrument has been recorded if recordation
is necessary to protect the interests of the owner thereof and duly noted in the
loan file and on the Servicing Tape (as defined below).
(e) All of the contracts pursuant to which the Company or any of its
subsidiaries has the right and/or obligation to service Serviced Loans (each, a
"Loan Servicing Agreement") are (i) valid and binding obligations of the Company
-
or the relevant subsidiary, and to the knowledge of the Company, of all the
other parties thereto, (ii) in full force and effect, (iii) enforceable in
-- ---
accordance with their terms (except where enforcement thereof may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and by general equity principles) and (iv) owned by
--
the Company or one of its subsidiaries free and clear of any Lien. The
aggregate principal balance of the Fannie Mae, FHA and GNMA Serviced Loans at
December 31, 1999 was approximately $9.3 billion, and such balance will be no
less than $8.37 billion at the consummation of the Offer. Schedule 4.14(e) to
the Company Disclosure Letter sets forth a true and complete list of all such
Loan Servicing Agreements. There is no material default by the Company or any
of its subsidiaries or, to the knowledge of the Company, claim of default
against the Company or any of its subsidiaries by any party under any such Loan
Servicing Agreement, and to the knowledge of the Company no event has occurred
which with the passage of time or the giving of notice or both would constitute
a default by any party under any such Loan Servicing Agreement or would result
in any such mortgage servicing agreement being terminable by any party thereto.
There is no pending or, to the knowledge of the Company, threatened cancellation
of any Loan Servicing Agreement and the obligations of the Company and its
subsidiaries under each Loan Servicing Agreement are being performed by the
Company or the relevant subsidiary materially in accordance with the terms of
such Loan Servicing Agreement and applicable rules or regulations.
(f) None of the Company's or any of its subsidiaries' servicing
rights are subject to recourse against the Company or any of its subsidiaries
acting as a servicer, and neither the Company nor any of its subsidiaries is
subject to recourse in connection with
28
<PAGE>
any Loans sold by it, in each case for losses on liquidation of a loan, borrower
defaults or repurchase obligations upon the occurrence of non-payment or other
events.
(g) Unless otherwise prohibited by law or an executed escrow waiver,
the Company or one of its subsidiaries collects all escrows related to the
Loans, and all escrow accounts have been maintained by the Company or one of its
subsidiaries and, to the Company's knowledge, all prior servicers materially in
accordance with the related loan documents, all applicable laws, rules,
regulations, and requirements of Investors, Insurers and governmental
authorities, and in accordance with the applicable Loan Servicing Agreements.
Schedule 4.14(g) to the Company Disclosure Letter sets forth the current balance
of all escrow accounts, which balances are at least equal to the amount required
under the relevant Loan documents and the respective Loan Servicing Agreements.
The Company or one of its subsidiaries has credited to the account of borrowers
all interest required to be paid on any escrow account in accordance with
applicable law and the terms of such agreements and loan documents. All escrow,
custodial, and suspense accounts related to the Loans are held in the name of
the Company or one of its subsidiaries or in the Investor's name.
(h) There are no servicing or other contracts to which the Company or
any of its subsidiaries is a party which obligates it to make servicing advances
for principal and interest payments with respect to defaulted or delinquent
Loans other than in a manner as provided in standard and customary agreements
with Fannie Mae or GNMA. To the extent made, any such advances are valid and
subsisting amounts owing to the Company or one of its subsidiaries, subject to
the terms of the applicable Loan Servicing Agreement.
(i) All of the Loans are secured by multifamily (i.e., more than four
family) residential real property or commercial real property.
(j) With respect to each Loan, the Company has, since the date it
commenced servicing such loan and, to the Company's knowledge, all prior
servicers have (i) properly and accurately entered into its system all data
-
required to service the loan materially in accordance with the related loan
documents and all regulations, (ii) properly and accurately adjusted the monthly
--
payment on each payment adjustment date (for those Loans for which the interest
rate is not fixed for the entire term of the loan), (iii) properly and
---
accurately calculated the amortization of principal and interest on each payment
adjustment date (for those Loans for which the interest rate is not fixed for
the entire term of the loan), in each case materially in compliance with all
applicable laws, rules and regulations and the related loan documents, and (iv)
--
executed and delivered any and all necessary notices required under, and in a
form that complies materially with, all applicable laws, rules and regulations
and the terms of the related loan documents.
29
<PAGE>
(k) There are no agreements or understandings of any nature with any
third party that obligate the Company or any of its subsidiaries to offer
conduit originations or any other Loan origination opportunity to such third
party.
(l) (i) The Company and its relevant subsidiary, as servicer under the
-
applicable Loan Servicing Agreement (the "Securitization Servicer") of each
outstanding transaction under which the Company or any of its subsidiaries has
sold or pledged Loans in a securitization, whether sold under the Securities Act
or otherwise (a "Securitization Transaction"), have complied in all material
respects with all contracts, including the Loan Servicing Agreements, and all
material conditions to be performed or satisfied by them with respect to all
agreements and arrangements pursuant to which such person is bound under such
Securitization Transaction (collectively, "Securitization Instruments"). (ii) No
--
Securitization Servicer or, to the Company's knowledge, no trustee or issuer
with respect to any securitization, has taken any action which would reasonably
be expected to adversely affect the characterization or tax treatment for
federal, state or local income or franchise tax purposes of the issuer or any
securities issued in a Securitization Transaction, and all required federal,
state and local tax and information returns, if any, relating to any
Securitization Transaction required to be filed by the Securitization Servicer
have been properly filed by it. (iii) Each material representation and warranty
---
made by the Company or its subsidiaries in each "Purchase Agreement," "Pooling
and Servicing Agreement,""Placement Agency Agreement," "Servicer's
Indemnification Agreement" and any other Securitization Instrument to which any
of them was a party in any Securitization Transaction was true and correct in
all material respects whenever made or reaffirmed by any of them and the Company
and its subsidiaries have each fully performed and carried out each material
covenant and agreement made by any of them in any such Securitization
Instrument. (iv) No rating agency has downgraded, or given the Company or its
--
subsidiaries any written indication that it is considering a downgrading of any
securities issued in any Securitization Transaction, or of its rating of any
Securitization Servicer.
(m) Each Loan which is indicated in the related loan documents to
have FHA insurance is insured under the National Housing Act or qualifies for
such insurance. As to each FHA insured loan and each Loan which is indicated in
the related loan file to be insured by private mortgage insurance, the Company
or one of its subsidiaries has complied in all material respects with applicable
provisions of the insurance or guaranty contract and applicable laws and
regulations, the insurance or guaranty is in full force and effect with respect
to each such Loan, and to the knowledge of the Company, there does not exist any
event or condition which, but for the passage of time or the giving of notice or
both, can result in a revocation of any such insurance or guaranty or constitute
adequate grounds for the applicable Insurer to refuse to provide insurance or
guaranty payments thereunder.
30
<PAGE>
(n) Security for each Loan has been covered by a policy of hazard
insurance and flood insurance, to the extent required by the Loan Servicing
Agreements relating thereto or any laws, rules, regulations or Investor or
Insurer requirements applicable to such Loan, all in a form usual and customary
in the industry and each of which is in full force and effect and all amounts
due and payable under each policy have been paid prior to the date such payments
were due; and all taxes, assessments, ground rents or other applicable charges
or fees due and payable as to each Loan have been paid prior to the date such
payments were due. Any and all claims under such insurance policies have been
submitted and processed in accordance with the applicable Investor's and
Insurer's requirements, and all outstanding claims in excess of $100,000 are set
forth in Schedule 4.14(n) to the Company Disclosure Letter. Such insurance
policies name the Company and its successors and assigns as mortgagee under
standard BFU 438 mortgage protection endorsements or their equivalent.
(o) Each Loan is covered by an ALTA lender's title insurance policy
or other generally acceptable form of policy of insurance or opinion of title
acceptable to the relevant Investor, and each such title insurance policy is
issued by an Insurer acceptable to the applicable Investor and qualified to do
business in the jurisdiction where the collateral securing such Loan is located,
and insures the originator and its successors and assigns as to the first
priority lien of the mortgage in the original principal amount of the Loan (or,
in the case of a second mortgage, the second priority lien). All outstanding
claims are set forth in Schedule 4.14(o) to the Company Disclosure Letter. The
applicable Investor, as assignee of the originator's rights, is an insured of
such lender's title insurance policy, and such lender's policy is in full force
and effect. Neither the Company nor any of its subsidiaries has, nor, to the
Company's knowledge, has any prior servicer, performed any act or omission which
would impair the coverage of such lender's policy.
(p) Neither the Company nor any of its subsidiaries has received
written notice of or has knowledge of any damage or destruction for which
insurance has been denied or is insufficient in respect of, or any proceeding
pending or threatened for the partial or total condemnation of, any of the
collateral securing any of the Loans, and neither the Company nor any of its
subsidiaries has received written notice or has knowledge that all or any part
of such collateral has been or will be condemned.
(q) The Company has previously delivered to the Parent a tape
(magnetic media) ("Servicing Tape") on which certain information regarding the
servicing portfolio of the Company and its subsidiaries as of December 31, 1999
is recorded. Such tape accurately contains the list of Serviced Loans as of such
date. The information contained on such tape is true, correct, accurate and
complete in all material respects.
(r) To the knowledge of the Company, (i) there have been no actions
-
taken by the Company or any of its subsidiaries as originator or servicer of any
Loans, (ii) there
--
31
<PAGE>
are no circumstances or conditions involving any of the Loans, and (iii) there
---
are no inquiries, investigations or abatement activities that could reasonably
be expected to result in any claims, liability, investigations, costs or
restrictions on the ownership, use, or transfer of any property of the Company
pursuant to any Environmental Law.
(s) (i) There are no Loans in the DUS portfolio with a greater risk
level than Fannie Mae Risk Level I other than as set forth in Schedule 4.14(s)
to the Company Disclosure Letter, and (ii) the credit quality of the Loan
portfolio has not suffered any material adverse change since December 31, 1999.
(t) Except as set forth in Schedule 4.14 (t) to the Company
Disclosure Letter, (i) the Company has not incurred any obligation or
commitment, whether conditional, contingent or otherwise, to fund, invest, loan
or disburse any funds to or on behalf of WMF Carbon Mesa Advisors, Inc. ("WMF-
CMA"), Commercial Mortgage Investment Trust, Inc. ("COMIT"), Carbon Capital
Mortgage Partners I, L.P. ("CCMP"), or Commercial Asset Purchase Fund LLC ("CAP
I"); (ii) WMF-CMA has not incurred any obligation or commitment, whether
conditional, contingent or otherwise, to fund, invest, loan or disburse any
funds to or on behalf of COMIT, CCMP, CAP I or any other party; (iii) none of
the Company nor any of its subsidiaries has guaranteed or otherwise agreed to
pay, whether conditional, contingent or otherwise, any obligation or commitment
of COMIT, CCMP or CAP I; and (iv) neither COMIT, CCMP nor CAP I has incurred any
obligation or commitment, whether conditional, contingent or otherwise, to fund,
invest, loan or disburse any funds to or on behalf of any party.
(u) To the extent any of the Schedules to the Company Disclosure
Letter relating to this Section 4.14 contains information that is as of the
month-end prior to the date of this Agreement, the Company (i) represents that
there has been no material adverse change in the information set forth on such
Schedules and (ii) undertakes to update such Schedules as promptly as
practicable after the end of each calendar month occurring between the date of
this Agreement and the Effective Time.
4.15 Absence of Certain Changes. Since December 31, 1999, except for
--------------------------
the negotiation and execution of this Agreement, the Company and its
subsidiaries have conducted their respective businesses and operations
consistent with past practice only in the ordinary and usual course and there
have not occurred (i) any events, changes, or effects (including the incurrence
-
of any liabilities or obligations of any nature, whether accrued, contingent or
otherwise) having, or which would reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect; (ii) any material adverse change
--
in the availability of capital for the commercial or multi-family mortgage
markets; (iii) any declaration, setting aside or payment of any dividend or
---
other distribution (whether in cash, stock or property) with respect to the
equity interests of the Company or of any of its subsidiaries (except for cash
dividends paid to the Company by its wholly
32
<PAGE>
owned subsidiaries); (iv) any change by the Company or any of its subsidiaries
--
in accounting principles, practices or methods, except insofar as may be
required by a change in GAAP; (v) any grant of Options or stock appreciation
-
rights under any Company Benefit Plan; (vi) any increase in the compensation of
--
any officer or grant of any general salary or benefits increase to the employees
of the Company other than in the ordinary course of business consistent with
past practice; (vii) any adoption, amendment or execution (or any
---
representation regarding the adoption, amendment or execution) of any
employment, consulting, retention, change of control, collective bargaining,
bonus or other incentive compensation, profit sharing, health or other welfare,
stock option or other equity, pension, retirement, vacation, severance, deferred
compensation plan or arrangement for the benefit of any employee, consultant or
director of the Company; (viii) any entry by the Company into any agreement,
----
commitment or transaction or any incurrence of any liability (direct, contingent
or otherwise) that is material to the Company and its subsidiaries, taken as a
whole, other than in the ordinary course of business; or (ix) any other action
--
or failure to act by the Company which, if occurring after the date of this
Agreement, would constitute a breach of Section 6.1 hereof.
4.16 Litigation. There is no suit, action, proceeding or
----------
investigation (whether at law or equity, before or by any federal, state or
foreign court, tribunal, commission, board, agency or instrumentality, or before
any arbitrator) pending or, to the knowledge of the Company, threatened against
or affecting the Company or any of its subsidiaries, the outcome of which would
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect, nor is there any judgment, decree, injunction, rule or order of
any court, governmental department, commission, agency, instrumentality or
arbitrator outstanding against the Company or any of its subsidiaries having, or
which would reasonably be expected to have, a Material Adverse Effect.
4.17 Taxes. (a) The Company, its subsidiaries and all affiliated,
-----
combined or consolidated tax groups of which the Company or any of its
subsidiaries is or has been a member (each an "Affiliated Group") (i) have duly
-
filed all Tax Returns (as hereinafter defined) required to be filed by them on
or prior to the date hereof, and will duly file all material Tax Returns
required to be filed by them on or before the Effective Time, and (ii) have duly
--
paid in full, or made provision for the payment of, all Taxes (as hereinafter
defined) for all periods through the Closing Date. Such Tax Returns are and
will be true, complete and correct in all material respects.
(b) No audits or other proceedings are presently pending with regard
to any Taxes or Tax Returns of the Company, any of its subsidiaries or any
Affiliated Group in which the Company or any of its subsidiaries is or has been
a member, (i) for periods including only days after May 9, 1997 or, (ii) to the
- --
knowledge of the Company, for periods including days on or before May 9, 1997,
in all cases which proceedings would individually or in the aggregate result in
a Material Adverse Effect.
33
<PAGE>
(c) No material deficiencies for Taxes were asserted against the
Company, any of its subsidiaries or any Affiliated Group in which the Company or
any of its subsidiaries is or has been a member (i) for periods including only
-
days after May 9, 1997 or (ii) to the knowledge of the Company, for periods
--
including days on or before May 9, 1997, in all cases which have not been
resolved and fully paid or which are not adequately reserved for.
(d) Schedule 4.17 to the Company Disclosure Letter sets forth the net
operating loss and net capital loss carryovers of the Company and its
subsidiaries for United States federal, state and local Tax purposes (identified
by jurisdiction) to the Tax year beginning January 1, 2000, or such other Tax
year identified therein. All net operating loss and net capital loss carryovers
of the Company and its subsidiaries have arisen with respect to periods
beginning on or after May 9, 1997. Since May 9, 1997, there has been no
"ownership change," as defined in Section 382 of the Internal Revenue Code of
1986, with respect to the Company or any of its subsidiaries prior to the
Closing Date.
(e) "Taxes" shall mean all federal, state, local and foreign taxes,
and other assessments of a similar nature (including, without limitation, any
payroll or employment taxes), whether imposed directly or through withholding
and including any interest and penalties thereon and additions thereto. "Tax
Returns" shall mean all federal, state, local and foreign tax returns,
declarations, statements, reports, schedules, forms and information returns.
4.18 Environmental Matters. Except for such matters as would not,
---------------------
individually or in the aggregate, have a Material Adverse Effect: (i) the
-
Company and each of its subsidiaries are, and at all times have been, in
compliance with all applicable Environmental Laws; (ii) the Company and each of
--
its subsidiaries have at all times been in possession of, and compliance with,
all permits, authorizations and approvals required under applicable
Environmental Laws; (iii) the Company has no knowledge of or reason to know that
---
the properties currently owned or operated by the Company (including soils,
groundwater, surface water, buildings or other structures) are contaminated with
any Hazardous Substances; (iv) the Company has no knowledge of or reason to know
--
that the properties formerly owned or operated by the Company or any of its
subsidiaries were contaminated with Hazardous Substances during the period of
ownership or operation by the Company or any of its subsidiaries; (v) neither
-
the Company nor any of its subsidiaries is subject to liability for any
Hazardous Substance disposal or contamination on any third party property; (vi)
--
neither the Company nor any of its subsidiaries has been associated with any
release or threat of release of any Hazardous Substance; (vii) neither the
---
Company nor any of its subsidiaries has received any notice, demand, letter,
claim or request for information alleging that the Company or any of its
subsidiaries may be in violation of or liable under any Environmental Law;
(viii) neither the Company nor any of
----
34
<PAGE>
its subsidiaries is subject to any orders, decrees, injunctions or other
arrangements with any Governmental Entity or any other person or is subject to
any indemnity or other agreement with any third party relating to liability
under any Environmental Law or relating to Hazardous Substances; and (ix) there
--
are no circumstances or conditions involving the Company or any of its
subsidiaries that could reasonably be expected to result in any claims,
liability, investigations, costs or restrictions on the ownership, use, or
transfer of any property of the Company pursuant to any Environmental Law. The
Company has made available to the Purchaser all site assessments, audits and
studies in its possession, custody and control relating to environmental
conditions at any property or assets currently or formerly owned, leased or
used.
As used herein, the term "Environmental Law" means any federal, state,
local or foreign law, statute, ordinance, regulation, rule, judgment, order,
decree, arbitration award, agency requirement, license, permit, authorization or
opinion or any other requirement of law (including common law), relating to: (A)
-
the protection, investigation or restoration of the environment, health and
safety, or natural resources, (B) the handling, use, presence, disposal, release
-
or threatened release of any Hazardous Substance or (C) noise, odor, wetlands,
-
pollution, contamination or any injury or threat of injury to persons or
property.
As used herein, the term "Hazardous Substance" means any substance or
material that is (A) listed, classified or regulated pursuant to any
-
Environmental Law; (B) any petroleum product or by-product, asbestos-containing
-
material, lead-containing paint, polychlorinated biphenyls, radioactive
materials, radon or urea-formaldehyde insulation; or (C) any other substance or
-
material which may be the subject of regulatory action by any Government Entity
pursuant to any Environmental Law.
4.19 Board Approval; State Takeover Statutes; Stockholder Vote. (a)
---------------------------------------------------------
The Board of Directors of the Company has approved the Offer, the Merger and
this Agreement, and the consummation of all transactions contemplated by this
Agreement, and such approval is sufficient to render inapplicable to the Merger
and the other transactions contemplated by this Agreement the provisions of
Section 203 of the GCL.
(b) Unless the Merger is consummated in accordance with the
provisions of Section 253 of the GCL, the affirmative vote of a number of shares
representing a majority of the total voting power represented by the Company
Common Stock entitled to be cast approving this Agreement is the only vote of
the holders of any class or series of the Company's capital stock necessary to
approve this Agreement and the transactions contemplated by this Agreement.
4.20 Rights Agreement. The Company does not have any continuing
----------------
obligations under the Rights Agreement, dated as of April 21, 1997, by and
between NHP
35
<PAGE>
Incorporated, NHP Financial Services, Ltd. and The First National Bank of Boston
as Rights Agent, and is not a party to any other agreement giving rise to
stockholder rights as a result of the announcement, commencement or consummation
of the Offer, the execution or delivery of this Agreement or any amendment
hereto or the consummation of the other transactions contemplated by this
Agreement.
4.21 Finders and Investment Bankers. No agent, broker, person or firm
------------------------------
acting on behalf of the Company is, or will be, entitled to any fee, commission
or broker's or finder's fees from any of the parties hereto, or from any person
controlling, controlled by, or under common control with any of the parties
hereto, in connection with this Agreement or any of the transactions
contemplated hereby, except for CSFB, whose fees (which are limited to those set
forth in Schedule 4.22 to the Company Disclosure Letter), to the extent payable,
shall be paid by the Company.
4.22 Transaction Costs. Schedule 4.22 to the Company Disclosure
-----------------
Letter sets forth a true and complete list of all transaction-related expenses
and change of control payments for which the Company has become liable, or will
become liable, through the Closing Date (other than premium to be paid for any
Representations and Warranties Insurance Policy) ("Transaction Costs"). The
Company's aggregate pre-tax liability for all such Transaction Costs up to and
including the Closing Date will in no event exceed the limits set forth in
Schedule 4.22. The Company has a written commitment or oral understanding with
each service provider or other creditor whose fees, expenses or charges are
reflected in Schedule 4.22 to the effect that such party will not submit an
invoice to, or otherwise seek payment from, the Company in connection with the
transactions contemplated by this Agreement in an amount that exceeds that set
forth in Schedule 4.22. For purposes of determining whether the Offer Condition
set forth in paragraph (d) of Annex A has been satisfied, the failure of any
representation or warranty contained in this Section 4.22 to be true and correct
shall be deemed "material."
4.23 Opinion of Financial Advisor. The Company has received the
----------------------------
opinion of CSFB to the effect that, as of the date of this Agreement, the
consideration to be received in the Offer and the Merger by the Company's
stockholders is fair to the Company's stockholders from a financial point of
view, and a complete and correct signed copy of such opinion has been, or
promptly upon receipt thereof will be, delivered to the Parent.
36
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND THE PURCHASER
Each of the Parent and the Purchaser jointly and severally represents
and warrants to the Company as follows:
5.1 Organization. Each of the Parent and the Purchaser is a limited
------------
liability company or a corporation, as the case may be, duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite power and authority to conduct its business
as now being conducted. The Purchaser is a wholly-owned subsidiary of the
Parent.
5.2 Authorization of this Agreement. Each of the Parent and the
-------------------------------
Purchaser has all requisite power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized and approved by the
sole member or the Board of Directors, as the case may be, of the Parent and the
Purchaser and by the Parent as the sole stockholder of the Purchaser, and no
other proceedings on the part of the Parent or the Purchaser are necessary to
authorize this Agreement or consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by each of the
Parent and the Purchaser and this Agreement (assuming the due and valid
authorization, execution and delivery of this Agreement by the Company and the
enforceability of this Agreement against it) constitutes a valid and binding
agreement of the Parent and the Purchaser and is enforceable against each of
them in accordance with its terms, except to the extent that enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other similar laws of general applicability relating to or affecting
the enforcement of creditors' rights and by the effect of general principles of
equity (regardless of whether enforceability is considered in a proceeding in
equity or at law).
5.3 Consents and Approvals; No Violations. Except for (i) filings
------------------------------------- -
required under the Exchange Act in connection with this Agreement and the
transactions contemplated hereby, including the Tender Offer Statement on
Schedule TO ("Schedule TO"), (ii) the filing of a Pre-Merger Notification and
--
Report Form by the Parent under the HSR Act, and such filings as may be required
under any other Antitrust Laws, (iii) the filing and recordation of appropriate
---
merger documents as required by the GCL, (iv) filings under the securities or
--
blue sky laws or takeover statutes of the various states, (v) filings in
-
connection with any applicable transfer or other taxes in any applicable
jurisdiction and (vi) such filings as are disclosed in the Company Disclosure
--
Letter, no
37
<PAGE>
filing with, and no permit, authorization, consent or approval of, any
Governmental Entity is necessary for the consummation by the Parent and the
Purchaser of the transactions contemplated by this Agreement, the failure to
make or obtain which would materially impair the ability of the Parent or the
Purchaser to perform their respective obligations hereunder or to consummate the
transactions contemplated hereby. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby nor
compliance by the Parent or the Purchaser with any of the provisions hereof will
(i) conflict with or result in any violation of any provision of the
-
organizational documents of the Parent or the certificate of incorporation or
by-laws of the Purchaser, (ii) result in a violation or breach of, or constitute
--
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration) under, or result in the
creation of any Liens upon any of the properties or assets of the Parent or the
Purchaser or any of their subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which the Parent or the Purchaser or any of their
subsidiaries is a party, or by which any of them or any of their respective
properties or assets is bound, or (iii) violate any statute, rule, regulation,
---
order, injunction, writ or decree of any Governmental Entity applicable to the
Parent or the Purchaser or any of their subsidiaries or by which any of their
respective properties or assets may be bound, excluding from the foregoing
clauses (ii) and (iii) conflicts, violations, breaches or defaults which would
-- ---
not, either individually or in the aggregate, prevent or materially delay
consummation of the transactions contemplated by this Agreement.
5.4 Offer Documents. The Offer Documents will comply in all material
---------------
respects, both as to form and otherwise, with the requirements of the Exchange
Act and the rules and regulations thereunder. The Offer Documents, all written
communications by the Parent or Purchaser relating to the transactions
contemplated by this Agreement as filed with the SEC, and all amendments and
supplements thereto, will, when filed with the SEC and when published, sent or
given to holders of Company common stock, comply as to form in all material
respects with the Exchange Act and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by the Parent or Purchaser with respect to information
supplied by or on behalf of the Company for inclusion therein.
5.5 Proxy/Information Statement; Other Information. None of the
----------------------------------------------
information supplied or to be supplied in writing by the Parent or the Purchaser
specifically for inclusion in the Schedule 14D-9 or in the Proxy/Information
Statement will, (i) at the time the Schedule 14D-9 or the Proxy/Information
-
Statement is filed with the SEC, at any time it is amended or supplemented or at
the time it is first published, given or mailed to the Company's stockholders,
as the case may be, contain any untrue statement of a material
38
<PAGE>
fact, or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading or, (ii) in the case of the
--
Proxy/Information Statement, at the time of the meeting of stockholders to which
such Proxy/Information Statement, as then amended or supplemented, relates, or
at the Effective Time, omit to state any material fact necessary to correct any
statement which has become false or misleading in any earlier communication with
respect to the solicitation of any proxy for such meeting. Notwithstanding the
foregoing, no representation or warranty is made with respect to any information
with respect to the Company or its officers, directors and affiliates provided
to the Parent or the Purchaser by the Company in writing for inclusion in the
Offer Documents or amendments or supplements thereto.
5.6 Financial Ability to Perform. The Parent and the Purchaser, at
----------------------------
the expiration of the Offer and the Effective Time, will have cash funds
sufficient to pay all cash payments for Shares in the Offer and the Merger and,
to pay all related fees and expenses.
5.7 Finders and Investment Bankers No agent, broker, person or firm
------------------------------
acting on behalf of the Parent or the Purchaser is, or will be, entitled to any
fee, commission or broker's or finder's fees from any of the parties hereto, or
from any person controlling, controlled by, or under common control with any of
the parties hereto, in connection with this Agreement or any of the transactions
contemplated hereby, except for Prudential Securities Incorporated whose fees,
to the extent payable, shall be paid by the Parent.
ARTICLE VI
COVENANTS
6.1 Conduct of the Business of the Company. Except as contemplated
--------------------------------------
by this Agreement, agreed to in writing by the Parent or as set forth in the
Company Disclosure Letter, during the period from the date of this Agreement and
prior to its termination or the time the directors designated by the Purchaser
have been elected to, and shall constitute a majority of, the Board of Directors
of the Company, the Company and its subsidiaries will each conduct its
operations (i) according to its ordinary course of business consistent with past
practice or (ii) within the scope of the authority given management by the Board
of Directors of the Company in the corporate policies as set forth in and
modified pursuant to a facsimile transmission, dated May 8, 2000, Re: Corporate
Policies from Michael B. Jameson, Senior Vice President of Parent to the
Chairman and Chief Executive Officer of the Company (the "Corporate Policies").
Without limiting the generality of the foregoing, and except as otherwise
expressly permitted by the Corporate Policies, contemplated by this Agreement or
set forth in the
39
<PAGE>
Company Disclosure Letter, prior to the Effective Time, neither the Company nor
any of its subsidiaries will, without the prior written consent of the Parent
(which consent shall be solicited from Parent by notice given pursuant to
Section 10.4, upon receipt of which Parent shall respond within 10 days):
(a) amend its certificate of incorporation or by-laws (or equivalent
instruments);
(b) authorize for issuance, issue, sell, deliver or agree or commit
to issue, sell or deliver (whether through the issuance or granting of
additional options, warrants, commitments, subscriptions, rights to
purchase or otherwise) any shares of capital stock of any class or any
securities convertible into shares of capital stock of any class, except as
required by any stock option plan or agreement existing as of the date
hereof;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock, redeem or otherwise acquire any shares of its capital stock,
or alter in any respect the ownership structure of the Company and its
subsidiaries;
(d) (i) pledge or otherwise encumber shares of capital stock of the
-
Company or any of its subsidiaries; (ii) create, incur, assume, maintain,
--
prepay, or permit to exist any long-term debt (including obligations in
respect of capital leases) or obligations with respect to letters of credit
or any material short-term debt, other than indebtedness that is
mandatorily prepayable in accordance with its terms and short-term
borrowings incurred in the ordinary course of business consistent with past
practice; (iii) assume, guarantee, endorse or otherwise become liable or
---
responsible (whether directly, contingently or otherwise) for the
obligations of any person other than any subsidiary of the Company; or (iv)
--
make any loans, advances or capital contributions to, or investments in,
any person other than any of the subsidiaries of the Company (other than de
--
minimis amounts advanced to employees for travel, meal and other similar
-------
business-related expenses or the advances it has committed to make on co-
investments in COMIT);
(e) (i) sell, transfer, mortgage or otherwise dispose of or encumber,
any business, subsidiary, assets of the Company and its subsidiaries, or,
other than in the ordinary course of business consistent with past
practice, fixed assets, (ii) sell, assign or otherwise transfer any rights
to service loans, (iii) except in the ordinary course of business and in a
manner consistent with past practice and, in the case of encumbrances,
pursuant only to existing conduit agreements that have been
40
<PAGE>
previously disclosed to the Parent, sell, transfer or encumber any loan or
(iv) cancel any correspondent relationships;
(f) amend, default under or terminate any Company Contracts, waive,
release or assign any material right or claim, or modify, or enter into any
new, intra-company agreements or arrangements;
(g) originate any DUS Loans with a greater risk level than Fannie Mae
Risk Level I or originate or underwrite any Loans under origination and
underwriting standards other than those in place on the date of this
Agreement;
(h) permit any material insurance policy naming it as a beneficiary
or a loss payable payee to be cancelled or terminated;
(i) grant any increase in the compensation payable or to become
payable to any of its officers or employees except in the ordinary course
of business consistent with past practice to employees who are not officers
and except to the extent required under employment or consulting contracts
in effect on the date of this Agreement, copies of which have been
delivered to the Purchaser or increase the total number of employees
employed by the Company or any subsidiary or take any other action that has
the effect of increasing the aggregate payroll obligations of the Company
or any subsidiary in any material fashion, or establish, adopt, enter into,
make any new grants or awards under, be obligated to grant any awards
under, terminate, amend, or make any representations regarding, any Company
Benefit Plan or any collective bargaining (except as required by law),
bonus, profit sharing, thrift, compensation, stock option or other equity,
pension, retirement, incentive or deferred compensation, employment,
retention, termination, severance, health, life or other welfare, fringe or
other plan, agreement, trust, fund, policy or arrangement for the benefit
of any current or former directors, officers or employees of the Company or
any of its subsidiaries, or grant or pay any benefit not required by any
existing plan or arrangement (including, without limitation, the granting
of stock options, stock appreciation rights, shares of restricted stock or
performance units) or amend any annual return or other filing required with
respect to any Company Benefit Plan by the Service, the Pension Benefit
Guaranty Corporation, the Department of Labor or any other governmental
agency or body having jurisdiction over any Company Benefits Plan;
(j) change in any material respect any of the accounting principles
used by it, unless required by GAAP or deplete the reserves or cash
balances of the Company or any of the subsidiaries, other than in the
ordinary course of business consistent with past practices;
41
<PAGE>
(k) (i) enter into any material commitment or transaction with respect
-
to the Company or its subsidiaries outside the ordinary course of business,
(ii) transfer any business or material portion thereof, (iii) make any
-- ---
further investment in WMF Carbon Mesa Advisors, Inc. or (iv) enter into any
--
new line of business;
(l) (i) acquire or agree to acquire, by merging or consolidating with,
-
by purchasing an equity interest in or a portion of the assets of, or by
any other manner, any business or any corporation, partnership, association
or other business organization or division thereof, or otherwise acquire or
agree to acquire any assets of any other person (other than the purchase of
assets in the ordinary course of business and consistent with past
practice), or (ii) acquire any servicing right in a "bulk" transaction;
--
(m) (i) take any action, engage in any transaction or enter into any
-
agreement which would cause any of the representations or warranties set
forth in Article IV hereof to be untrue as of the Closing Date or (ii)
--
purchase or acquire, or offer to purchase or acquire, any shares of capital
stock of the Company;
(n) take any action, including without limitation, any amendments to
the Company Certificate of Incorporation, which would, directly or
indirectly, restrict or impair the ability of the Parent to vote, or
otherwise to exercise the rights and receive the benefits of a stockholder
with respect to, securities of the Company that may be acquired or
controlled by the Parent or the Purchaser or permit any stockholder to
acquire securities of the Company on a basis not available to the Parent in
the event that the Parent were to acquire securities of the Company;
(o) terminate the employment of any production or management personnel
identified by the Parent to the Company in a facsimile communication from
Michael B. Jameson, Senior Vice President of Parent to the Chairman and
Chief Executive Officer of the Company dated May 8, 2000;
(p) amend any Tax Return previously filed or agree to settle or
compromise any government audit, assessment, dispute or other proceedings with
respect to Taxes;
and
(q) agree to do any of the foregoing actions.
6.2 Access to Information. From the date hereof to the Effective
---------------------
Time, the Company shall, and shall cause its subsidiaries, officers, directors,
employees, auditors and other agents to, afford the officers, employees,
auditors and other agents of the Parent reasonable access to its officers,
employees, agents, properties, offices, plants and other
42
<PAGE>
facilities and to all books, records and contracts, and shall furnish the Parent
with all financial, operating and other data and information as the Parent,
through its officers, employees or agents, may from time to time reasonably
request. The Company will promptly furnish to the Parent a copy of each material
document filed or received by it pursuant to the Federal securities laws or
Federal, state, local or foreign tax laws or any Environmental Laws, and of such
other documents as the Parent may reasonably request. The Confidentiality
Agreement shall apply with respect to information furnished hereunder.
6.3 Stockholder Approval. (a) If required by applicable law in
--------------------
order to consummate the Merger, as soon as practicable following the purchase of
the Shares pursuant to the Offer, the Company, acting through its Board of
Directors, shall in accordance with applicable law, take all steps necessary
duly to call, set a record date for, give notice of, convene and hold a meeting
of its stockholders for the purpose of voting on the adoption and approval of
this Agreement and the transactions contemplated hereby. At such meeting, the
Parent and the Purchaser will each vote, or cause to be voted, all Shares
acquired in the Offer or otherwise beneficially owned by it or any of its
subsidiaries on the record date for such meeting, in favor of the approval and
adoption of this Agreement and the transactions contemplated hereby. Subject to
the rights of the Board of Directors as set forth in Section 6.8(d), the Company
shall use its reasonable best efforts to solicit from its stockholders written
consents and proxies, and shall take all other action necessary and advisable,
to secure the vote of stockholders required by applicable law to obtain the
approval for this Agreement.
(b) The Company will, as promptly as practicable, if required by law
for the consummation of the Merger and upon the request of the Parent or the
Purchaser, prepare and file a Proxy/Information Statement with the SEC, and
shall use best efforts to obtain and furnish the information required to be
included by it in the Proxy/Information Statement and, after consultation with
the Parent, to respond promptly to any comments made by the SEC with respect to
the Proxy/Information Statement and any preliminary version thereof, to furnish
all information required to prepare the definitive Proxy/Information Statement
(including, without limitation, financial statements and supporting schedules
and certificates and reports of independent public accountants) and cause the
Proxy/Information Statement to be mailed to its stockholders at the earliest
practicable time following the purchase of the Shares pursuant to the Offer. If
necessary, after the definitive Proxy/Information Statement shall have been so
mailed, the Company will promptly circulate amended, supplemental or
supplemented proxy material and, if required in connection therewith, resolicit
proxies. The Company will not use any proxy material in connection with the
meeting of its stockholders without the Parent's prior approval, such consent
not to be unreasonably delayed or withheld, and subject to the rights of the
Board of Directors as set forth in Section 6.8(d). The Board of Directors of the
Company, the sole member of the Parent and the Board of Directors of the
Purchaser have each deter-
43
<PAGE>
mined that the Merger is advisable, fair to and in the best interests of the
stockholders or the members, as the case may be, of their respective companies
and, except to the extent that the conditions set forth in Section 6.8(d) have
been satisfied, the Board of Directors of the Company will (i) recommend to the
-
stockholders of the Company the adoption and approval of this Agreement and the
transactions contemplated hereby and the other matters to be submitted to such
stockholders in connection therewith and (ii) use its best efforts to obtain
--
the necessary approval by the stockholders of the Company of this Agreement and
the transactions contemplated hereby. The Parent shall provide the Company with
the information concerning the Parent and the Purchaser required to be included
in the Proxy/Information Statement. The Company agrees that it will include in
the Proxy/Information Statement the recommendation of its Board of Directors
that holders of Company Common Stock approve and adopt this Agreement and
approve the Merger, unless the Board of Directors of the Company has exercised
its rights pursuant to, and in accordance with, Section 6.8(d) of this
Agreement.
(c) Notwithstanding the foregoing, in the event that after the
closing of the Offer the Purchaser or its affiliates shall be the owner of at
least 90 percent of the outstanding Shares, the parties hereto shall take all
necessary and appropriate action to cause the Merger to become effective as soon
as practicable after the expiration of the Offer and in compliance with any
applicable rules of the SEC, without a meeting of stockholders of the Company,
in accordance with Section 253 of the GCL.
6.4 Reasonable Best Efforts. Subject to the terms and conditions
-----------------------
herein provided, and except to the extent expressly permitted in Section 6.3(b),
each of the parties hereto agrees to cooperate and use their respective
reasonable best efforts consistent with applicable legal requirements to take,
or cause to be taken, all action, and to do, or cause to be done, all things
necessary or proper and advisable under applicable laws and regulations to
ensure that the conditions set forth in Annex A hereto and Article VII hereof
are satisfied and to consummate and make effective, in the most expeditious
manner practicable, the transactions contemplated by this Agreement. The Company
agrees to pay the non-refundable deposit and the premium payable under, and in
accordance with the terms of, that certain Representations and Warranties
Insurance Policy, effective on the date of this Agreement, between The Reliance
Insurance Company of Illinois, as Insurer, and the insured named therein.
6.5 Consents. The Parent and the Company each shall use its
--------
commercially reasonable efforts to obtain all material consents of third parties
and governmental authorities, and to make all filings (including, without
limitation, under any applicable Antitrust Laws) with all Governmental Entities
and with Fannie Mae, FHA and GNMA, necessary to the consummation of the
transactions contemplated by this Agreement. The Company, the Parent and the
Purchaser shall as soon as practicable file Pre-Merger Notification and Report
Forms under the HSR Act with the FTC and the
44
<PAGE>
Antitrust Division, and shall use their commercially reasonable efforts to
respond as promptly as practicable to all inquiries received from the FTC or the
Antitrust Division for additional information or documentation. Each of the
parties shall use reasonable efforts (but neither the Parent, the Purchaser nor
the Company nor any of its respective subsidiaries shall have any obligation to
pay any material fees or incur any material expenses) to secure required written
consents or waivers. In addition, the Parent shall provide publicly available
financial information, and such other information, about itself as may be
reasonably requested by the person from whom a consent or waiver is sought in
connection with obtaining any such consents or waivers.
6.6 Public Announcements. The Parent and the Company will consult
--------------------
with each other before issuing any press release or otherwise making any public
statements with respect to the Offer, the Merger or the transactions
contemplated by this Agreement and neither the Parent nor the Company shall
issue any such press release or make any such public statement without the prior
approval of the other party, which approval will not be unreasonably delayed or
withheld, except as may be required by applicable laws or court process.
6.7 Consent of the Parent. The Parent, as the sole stockholder of
---------------------
the Purchaser, by executing this Agreement consents to the execution and
delivery of this Agreement by the Purchaser and the consummation of the Merger
and the other transactions contemplated hereby and such consent shall be treated
for all purposes as a vote duly cast at a meeting of the stockholders of the
Purchaser held for such purpose.
6.8 No Solicitation. (a) Neither the Company nor any of its
---------------
subsidiaries nor any of their respective officers, directors, employees, agents
or representatives (including, without limitation, investment bankers, attorneys
and accountants) shall, directly or indirectly, (i) solicit, initiate or
-
encourage or (ii) enter into any discussions or negotiations with, in any way
--
continue any discussions or negotiations commenced before the date of this
Merger Agreement with, or disclose directly or indirectly any information not
customarily disclosed concerning its business and properties to, or afford any
access to its properties, books and records to, any corporation, partnership or
other person or group in connection with any inquiry or proposal (an
"Acquisition Proposal") regarding a sale of any shares of the capital stock of
the Company or any of its subsidiaries or a merger, consolidation or sale or
spin-off of all or a substantial portion of the assets of the Company or any
subsidiary of the Company, or a liquidation or a recapitalization of the Company
or any of its subsidiaries, or any similar transaction. The Company will notify
the Parent immediately, orally and in writing, if any discussions or
negotiations are sought to be initiated, any inquiry or proposal is made, or any
such information is requested, with respect to an Acquisition Proposal or
potential Acquisition Proposal or if any Acquisition Proposal is received or if
the Company has been informed that an Acquisition Proposal is forthcoming, and
will include in such notification the identity of the other party or parties
45
<PAGE>
and the material terms and conditions of any such request, inquiry or
Acquisition Proposal. Except as expressly provided below, the Board of Directors
of the Company shall not take any action to withdraw or modify in a manner
adverse to the Parent or the Purchaser, or take a public position inconsistent
with, its approvals or recommendation of the Offer, the Merger, this Agreement
or the Stockholders Agreement or to recommend another Acquisition Proposal and
shall not resolve to do any of the foregoing. The Company will keep the Parent
informed in reasonable detail of the status (including amendments or proposed
amendments) of any such request, inquiry or Acquisition Proposal. Immediately
following the execution of this Agreement, the Company will cease any existing
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal and request each person which has heretofore
executed a confidentiality agreement in connection with its consideration of
acquiring the Company or any of its subsidiaries or any portion thereof to
return all confidential information heretofore furnished to such person by or on
behalf of the Company.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the Company and its Board of Directors (i) may participate in
-
discussions or negotiations with or furnish information to any third party that
has made an unsolicited Acquisition Proposal in writing after the date hereof (a
"Potential Acquiror") if the Board reasonably determines in good faith (A) that
-
such Acquisition Proposal is reasonably likely to result in a Superior Proposal
and (B) after receiving advice of its independent legal counsel, that
-
participation in such discussions or negotiations or furnishing such information
is consistent with its fiduciary duties to the Company's stockholders under
applicable law, and (ii) shall be permitted to take and disclose to the
--
Company's stockholders a position with respect to any tender or exchange offer
by a third party, or amend or withdraw such position, pursuant to Rules 14d-9
and 14e-2 of the Exchange Act or make any other disclosure to the Company's
shareholders as the Board determines in good faith, after receiving advice of
its independent legal counsel, is consistent with its fiduciary duties to the
Company's stockholders under applicable law.
(c) Any non-public information furnished to a Potential Acquiror
shall be pursuant to a confidentiality agreement containing standard terms for
confidentiality agreements entered into in such circumstances, which terms shall
be no more favorable to the Potential Acquiror than the terms of the
Confidentiality Agreement are to the Parent.
(d) Except as provided in the following sentence, the Board of
Directors of the Company shall not (i) withdraw or modify or propose to withdraw
-
or modify, in any manner adverse to Parent, the approval or recommendation of
such Board of Directors of this Agreement, the Offer or the Merger or (ii)
--
approve or recommend, or propose to approve or recommend, any Acquisition
Proposal. In the event that, after the Company has received a bona fide
Superior Proposal not solicited in violation of this Agreement, the Board
determines (after receiving the advice of its independent counsel) prior to the
46
<PAGE>
consummation of the Offer (or, if the Offer is consummated and extended, the
initial consummation of the Offer) that to do so is consistent with its
fiduciary duties, the Board may (x) withdraw or modify its approval or
-
recommendation of this Agreement, the Offer and the Merger, and (y) approve or
-
recommend such a Superior Proposal.
(e) The term "Superior Proposal" means any proposal to acquire,
directly or indirectly, for consideration consisting of cash and/or securities,
more than a majority of the Shares then outstanding or all or substantially all
the assets of the Company, and otherwise on terms which the Board of Directors
of the Company in good faith concludes (after receiving the advice of its
financial advisors and independent counsel), taking into account, among other
things, all legal, financial, regulatory and other aspects of the proposal and
the person making the proposal, (i) would, if consummated, result in a
-
transaction that is more favorable to its stockholders (in their capacity as
stockholders), from a financial point of view, than the Offer and the Merger and
the other transactions contemplated by this Agreement (taking into account, at
the time of determination, any changes to the terms of this Agreement which as
of that time had been proposed in writing, in good faith, by the Parent) and
(ii) that the person making the Acquisition Proposal is capable of consummating
--
such Acquisition Proposal.
6.9 Indemnification; Insurance. (a) For a period of six years after
--------------------------
the Effective Time, the Parent shall, and shall cause the Surviving Corporation
to, indemnify, defend and hold harmless the present and former officers,
directors, employees and agents of the Company and its subsidiaries
(collectively, the "Indemnified Parties") from and against, and pay or reimburse
the Indemnified Parties for, all losses, obligations, expenses, claims, damages
or liabilities (whether or not resulting from third-party claims and including
interest, penalties, out-of-pocket expenses and attorneys' fees incurred in the
investigation or defense of any of the same or in asserting any of their rights
hereunder) with respect to actions or omissions arising out of such individuals'
services as officers, directors, employees or agents of the Company or any of
its subsidiaries or as trustees or fiduciaries of any plan for the benefit of
employees of the Company or any of its subsidiaries occurring on or prior to the
Effective Time (including, without limitation, the transactions contemplated by
this Agreement) to the full extent permitted or required under applicable law
and, in the case of indemnification by the Surviving Corporation, to the extent
permitted under the provisions of the Company Certificate of Incorporation and
the Company By-Laws, each as in effect at the date hereof (which provisions
shall not be amended in any manner which adversely affects any Indemnified
Party, for a period of six years), including provisions relating to advances of
expenses incurred in the defense of any action or suit; provided that in the
--------
event any claim or claims are asserted or made within such six-year period, all
rights to indemnification in respect of each such claim shall continue until
final disposition of such claim. Without limiting the foregoing, in any case in
which approval by the Surviving Corporation is required to effectuate any
indemnification, the Parent shall cause the Surviving Corporation to direct, at
the election
47
<PAGE>
of the Indemnified Party, that the determination of any such approval shall be
made by independent counsel selected by the Indemnified Party.
(b) Any Indemnified Party wishing to claim indemnification under
Section 6.9(a) shall provide notice to the Parent promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and the Indemnified Party shall permit the Parent (at the Parent's
expense) to assume the defense of any claim or any litigation resulting
therefrom; provided that (i) counsel for the Parent who shall conduct the
-------- -
defense of such claim or litigation shall be reasonably satisfactory to the
Indemnified Party, and the Indemnified Party may participate in such defense at
such Indemnified Party's expense, and (ii) the omission by any Indemnified Party
--
to give notice as provided herein shall not relieve the Parent of its
indemnification obligation under this Agreement except to the extent that such
omission results in a failure of actual notice to the Parent and the Parent is
materially damaged as a result of such failure to give notice. The Parent shall
not, in the defense of any such claim or litigation, except with the consent of
the Indemnified Party, consent to entry of any judgment or enter into any
settlement that provides for injunctive or other nonmonetary relief affecting
the Indemnified Party or that 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 with respect to such claim or litigation. In the event that
the Parent does not accept the defense of any matter as above provided, or
counsel for the Parent advises that there are issues which raise conflicts of
interest between the Parent or the Surviving Corporation and the Indemnified
Parties, the Indemnified Parties may retain counsel satisfactory to them, and
the Parent or the Surviving Corporation shall pay all reasonable fees and
expenses of such counsel for the Indemnified Parties promptly as statements
therefor are received; provided that the Parent shall not be liable for any
--------
settlement effected without its prior written consent. In any event, the Parent
and the Indemnified Parties shall cooperate in the defense of any action or
claim subject to this Section 6.9 and, subject to the Confidentiality Agreement,
the records of each shall be available to the other with respect to such
defense.
(c) The Parent will cause to be maintained for a period of not less
than six (6) years from the Effective Time the Company's current directors' and
officers' insurance and indemnification policy to the extent that it provides
coverage for events occurring prior to the Effective Time ("D&O Insurance") for
all persons who are directors and officers of the Company on the date of this
Agreement, so long as the annual premium therefor would not be in excess of 150%
of the last annual premium paid prior to the date of this Agreement (the
"Maximum Premium"); provided, however, that if the annual premium therefor would
-------- -------
exceed the Maximum Premium, the Parent shall purchase as much coverage as is
available for the Maximum Premium; provided, further, that the Parent may, in
-------- -------
lieu of maintaining such existing D&O Insurance as provided above, cause
coverage to be provided under any policy maintained for the benefit of the
Parent or any of its subsidiaries or any policy specifically obtained for this
purpose, so long as the terms
48
<PAGE>
thereof are no less advantageous to the intended beneficiaries thereof than the
existing D&O Insurance for a period of not less than six (6) years from the
Effective Time. If the existing D&O Insurance expires, is terminated or canceled
during such six (6) year period, the Parent will obtain as much D&O Insurance as
can be obtained for the remainder of such period for an annualized premium equal
to the Maximum Premium, on terms and conditions no less advantageous to the
covered persons than the existing D&O Insurance.
6.10 Employment and Benefit Plans. (a) Following the Effective Time,
----------------------------
the Parent shall cause the Company and/or The Prudential Insurance Company of
America ("PICA") to provide each then current employee of the Company who was an
employee of the Company as of the Effective Time ("Company Employee") with
benefits under employee benefit plans (as such term is defined in Section 3(3)
of ERISA ("Benefit Plans")), that are similar to the benefits received by (i)
similarly situated Company Employees under Benefit Plans sponsored by the
Company immediately prior to the Effective Time subject to the terms and
conditions of such Company Benefit Plans, as in effect from time to time, or
(ii) similarly situated employees of the Parent under Benefit Plans sponsored by
PICA on or after the Effective Time, subject to the terms and conditions of such
PICA Benefit Plans, as in effect from time to time. Active service with the
Company prior to the Effective Time shall be recognized for purposes of
determining eligibility to participate in and vesting of benefits under (but not
for purposes of determining benefit accrual under or eligibility to receive
post-retirement welfare benefits under) the Benefit Plans of the Company or PICA
on or after the Effective Time; provided, that active service with the Company
--------
prior to the Effective Time shall not be recognized if such recognition of
service would result in a duplication of benefits under the Benefit Plans of the
Company or PICA. Nothing in this Agreement shall be construed as limiting in
any way (i) the right of the Parent or the Company (as the case may be) to
-
terminate the employment of any Company Employee after the Effective Time or
(ii) the right of PICA or the Company (as the case may be) to amend or terminate
--
any Benefit Plan of PICA or the Company (including, without limitation, to
change the level of benefits provided thereunder or the requirements for
eligibility to participate thereunder) in accordance with the terms thereunder.
(b) Following the acquisition of Shares pursuant to the Offer, and
prior to the Effective Time, the Company shall take, by action of the Company's
Board of Directors (or an appropriate committee thereof), all actions reasonably
necessary and appropriate, in the opinion of the Purchaser, to ensure that any
Company Employee who commences participation, on or after the Effective Time, in
any Benefit Plan of PICA does not receive duplicate benefits under any Benefit
Plan of the Company.
6.11 Stock Options; Stock Plans. Following the acquisition of Shares
--------------------------
pursuant to the Offer and prior to the Effective Time, the Company shall take,
by action of the Company's Board of Directors (or an appropriate committee
thereof), all necessary
49
<PAGE>
and appropriate actions, in the reasonable opinion of the Purchaser, to cancel,
and shall use all reasonable efforts to obtain all necessary consents with
respect to such cancellation of, all of the Company's Options (and all ancillary
rights attached thereto, including but not limited to the obligation to pay
severance amounts) and to terminate each of the Stock Plans, all as of the
Effective Time, as provided in Section 3.5 hereof. Notwithstanding the
cancellation and settlement of the rights of such former KEIP participants as
provided in Section 3.5, solely for a period of 180 days after the Effective
Time, the Company shall make available to former participants in the KEIP who
are employed by the Company as of the time of cancellation and settlement of
such rights under Section 3.5 severance benefits that are no less favorable than
those to which such former KEIP participants would have been entitled (under
their respective KEIP award agreements) if the Company had terminated the
employment of such KEIP participants within 180 days following a "transfer of
control" as defined in such award agreements.
6.12 Transfer Taxes. Except as otherwise provided in Article III, the
--------------
Purchaser shall pay any stock transfer, real estate transfer, documentary,
stamp, recording and similar Taxes payable in connection with the Offer and the
Merger and shall be responsible for the preparation and filing of any required
Tax Returns with respect to such Taxes.
6.13 Anti-takeover Statutes. If any "fair price," "moratorium,"
----------------------
"control share acquisition" or other form of anti-takeover statute is or shall
become applicable to the Offer, Merger or other transactions contemplated
hereby, the Company and the members of the Board of Directors of the Company
shall grant such approvals and take such actions as are necessary so that the
Offer, Merger and other transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act to
eliminate or minimize the effects of any such anti-takeover statute on the
transactions contemplated hereby.
6.14 Notification of Certain Matters. Each of the Company, the Parent
-------------------------------
and the Purchaser shall give prompt notice to each other party of any notice of,
or other communication relating to, a material default or event that, with
notice or lapse of time or both, would become a material default, received by
such party subsequent to the date of this Agreement and prior to the Effective
Time, under any material contract to which such party is a party or is subject.
Each of the Company and the Parent shall give prompt notice to the other party
of (a) any notice or other communication from any third party alleging that the
-
consent of such third party is or may be required in connection with the
transactions contemplated by this Agreement and (b) the occurrence, or non-
-
occurrence, of any events the occurrence, or non-occurrence, of which would
cause either (i) a representation or warranty contained in this Agreement to be
-
untrue or inaccurate in any material respect at any time from the date hereof to
the date Shares are accepted for payment pursuant to the Offer or (ii) any of
--
the conditions set forth in Annex A or any
50
<PAGE>
covenant, condition or agreement to be complied with or satisfied under this
Agreement to be unsatisfied in any material respect at any time from the date
hereof to the date Shares are purchased pursuant to the Offer; provided,
--------
however, that the delivery of any notice pursuant to this Section 6.14 will not
- -------
limit or otherwise affect the remedies available under this Agreement to the
party receiving such notice.
6.15 Amendment to Schedule TO, Proxy/Information Statement and
---------------------------------------------------------
Schedule 14D-9. (a) If at any time prior to the expiration or termination of
- --------------
the Offer any event occurs which is required by the Exchange Act to be described
in an amendment or supplement to the Schedule TO or any amendment or supplement
thereto, the Purchaser will file and disseminate, as required, an amendment or
supplement which complies in all material respects with the Exchange Act and the
rules and regulations thereunder and any other applicable laws. Prior to or
contemporaneously with its filing with the SEC, the amendment or supplement
shall be delivered to the Company and its counsel.
(b) If at any time prior to the expiration or termination of the
Offer any event occurs which is required by the Exchange Act to be described in
an amendment or supplement to the Schedule 14D-9 or any amendment or supplement
thereto, the Company will file and disseminate, as required, an amendment or
supplement which complies in all material respects with the Exchange Act and the
rules and regulations thereunder and any other applicable laws. Prior to its
filing with the SEC, the amendment or supplement shall be delivered to the
Parent and the Purchaser and their counsel, and any such amendment or supplement
shall be subject to the approval of the Parent and the Purchaser, which approval
(i) shall not be unreasonably withheld or delayed, and (ii) shall be consistent
- --
with the terms and conditions of this Agreement, including, but not limited to,
the rights of the Board of Directors of the Company as set forth in Section
6.8(d).
(c) If at any time prior to the Effective Time any event with respect
to the Company or any it its subsidiaries, or with respect to information
supplied by the Company for inclusion in the Proxy/Information Statement, occurs
which is required by the Exchange Act to be described in an amendment or
supplement to the Proxy/Information Statement, the Company will file and
disseminate, as required, an amendment or supplement which complies in all
material respects with the Exchange Act and the rules and regulations thereunder
and any other applicable laws. Prior to its filing with the SEC, the amendment
or supplement shall be delivered to the Parent and the Purchaser and their
counsel, and any such amendment or supplement shall be subject to the approval
of the Parent and the Purchaser, which approval (i) shall not be unreasonably
-
withheld or delayed, and (ii) shall be consistent with the terms and conditions
--
of this Agreement, including, but not limited to, the rights of the Board of
Directors of the Company as set forth in Section 6.8(d).
51
<PAGE>
6.16 Continuing Services with Respect to Tax Matters. The Company
-----------------------------------------------
will not terminate its existing arrangements with KPMG with respect to the
preparation of Tax Returns and the performance of related Tax services for the
Company and its subsidiaries prior to the Closing Date and will, upon the
request and subject to the consent of the Parent, enter into reasonable
arrangements with KPMG to continue to provide such services to the Company and
its subsidiaries, at prevailing markets rates, for an interim period following
the Closing Date. The Company is not required to make any payment to KPMG in
order to comply with the foregoing covenant unless the Parent agrees to
reimburse the Company for such payment.
6.17 Supplemental Schedules. The Company may, from time to time prior
----------------------
to the consummation of the Offer, by notice given in accordance with this
Agreement, supplement or amend the Company Disclosure Letter to reflect any
development (other than a development intentionally caused by the Company, a
Stockholder or any of their respective affiliates), but only to the extent such
development arises after the date of this Agreement, the non-disclosure of which
may otherwise give rise to a breach of any representation or warranty of the
Company contained in Article IV of this Agreement. The representations and
warranties of the Company contained in Article IV of this Agreement shall not be
deemed to be modified by any such supplement or amendment for purposes of
determining whether the condition set forth in clause (d) of Annex A to this
Agreement is satisfied.
ARTICLE VII
CLOSING CONDITIONS
7.1 Conditions to the Obligations of the Parent, the Purchaser and
--------------------------------------------------------------
the Company. The respective obligations of each party to effect the Merger
- -----------
shall be subject to the fulfillment at or prior to the Effective Time of the
following conditions:
(a) The Purchaser shall have purchased all Shares duly tendered and
not withdrawn pursuant to the terms of the Offer and subject to the terms
thereof; provided that the obligation of the Parent and the Purchaser to
--------
effect the Merger shall not be conditioned on the fulfillment of the
condition set forth in this subsection (a) if the failure of the Purchaser
to purchase the Shares pursuant to the Offer shall have constituted a
breach of the Offer or of this Agreement;
(b) There shall not be in effect any statute, rule or regulation
enacted, promulgated or deemed applicable by any Governmental Entity of
competent jurisdiction that makes consummation of the Merger illegal and no
temporary restraining order, preliminary or permanent injunction or other
order issued by any
52
<PAGE>
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect; provided,
--------
however, that each of the parties shall use its best efforts to prevent the
-------
entry of any such injunction or other order and to appeal as promptly as
possible any injunction or other order that may be entered;
(c) If required by applicable law, this Agreement shall have been
approved and adopted by the affirmative vote of the holders of the
requisite number of shares of Company Common Stock in accordance with
applicable law; and
(d) Any waiting period (and any extension thereof) under the HSR Act
applicable to the Merger shall have expired or been terminated.
ARTICLE VIII
CLOSING
8.1 Time and Place. The closing of the Merger (the "Closing") shall
--------------
take place at the offices of Debevoise & Plimpton, 875 Third Avenue, New York,
New York, as soon as practicable following satisfaction or waiver, if
permissible, of the conditions set forth in Article VII. The date on which the
Closing actually occurs is herein referred to as the "Closing Date."
8.2 Filings at the Closing. At the Closing, the Parent, the
----------------------
Purchaser and the Company shall cause the Delaware Certificate of Merger,
together with any other documents required by law to effectuate the Merger, to
be filed with the Secretary of State of the State of Delaware in accordance with
the provisions of the GCL, and shall take any and all other lawful actions and
do any and all other lawful things necessary to cause the Merger to become
effective.
ARTICLE IX
TERMINATION AND ABANDONMENT
9.1 Termination. This Agreement may be terminated at any time prior
-----------
to the Effective Time, whether before or after approval by the stockholders of
the Company:
(a) by mutual consent of the sole member of the Parent and the Board
of Directors of the Company;
(b) by either the Parent or the Company if (i) the Offer shall have
-
not been consummated by 12:00 p.m. midnight on July 31, 2000 (the "Offer
53
<PAGE>
Termination Date"), or (ii) the Effective Time shall not have occurred by
--
October 31, 2000 (the earlier of such date and the Offer Termination Date,
the "Termination Date"); provided, however, that (A) the passage of such
-------- -------
period shall be tolled for any part thereof during which any party shall be
subject to a nonfinal order, decree, ruling or action restraining,
enjoining or otherwise prohibiting the consummation of the Merger or Offer
and (B) such July 31 date may be extended to a date not later than August
31, 2000, by Parent or the Company prior to termination of this Agreement,
by notice in writing to the other, if on July 31, 2000, the Offer has not
been consummated because of the failure of the condition in clause (i) of
the lead-in paragraph in Annex A or the condition in paragraph (a) in Annex
A or the absence of third party consents which can reasonably be expected
to be obtained within 30 days, provided, further, that a party may not
-------- -------
terminate this Agreement pursuant to this Section 9.1(b) if such party has
committed a breach of any representation, warranty, covenant or agreement
set forth in this Agreement, which has been the cause of or resulted in the
failure of the Offer to be consummated or the Effective Time to occur;
(c) by the Parent or the Company, if the Offer shall expire or
terminate in accordance with its terms without any Shares having been
purchased thereunder due to a failure of any of the conditions set forth in
Annex A to be satisfied, provided that neither the Parent nor the Company
may terminate this Agreement pursuant to this Section 9.1(c) if such
termination or expiration has been caused or resulted from the failure by
the Parent or the Company, respectively, to perform in any material respect
any of its covenants or agreements contained in this Agreement;
(d) by the Company, if the Parent or the Purchaser shall have failed
to commence the Offer within the period set forth in Section 1.1 of this
Agreement; provided, that the Company may not terminate this Agreement
--------
pursuant to this Section 9.1(d) if the Company has failed to perform in any
material respect any of its covenants or agreements contained in this
Agreement which has been the cause or resulted in the failure of the Parent
or the Purchaser to commence the Offer;
(e) by the Company, if Parent or the Purchaser breaches or fails to
perform in any material respect any of its representations, warranties or
covenants contained in this Agreement, which breach or failure to perform
cannot be or has not been cured within 10 business days after the giving of
notice to the Parent of such breach, except such failures which are not
reasonably likely to materially and adversely affect the Parent, or the
Purchaser's ability to complete the Offer or the Merger;
54
<PAGE>
(f) by either the Parent, the Purchaser or the Company, if any court
of competent jurisdiction in the United States or other governmental agency
of competent jurisdiction shall have issued an order, decree or ruling or
taken any other action (which order, decree, ruling or other action the
parties hereto shall use their respective reasonable best efforts to lift)
restraining, permanently enjoining or otherwise prohibiting the
consummation of the Offer or the Merger, and such order, decree, ruling or
other action has become final and non-appealable;
(g) by the Parent or the Purchaser if, prior to the purchase of
shares of Company Common Stock pursuant to the Offer, the Board of
Directors of the Company shall have withdrawn, or modified or changed in a
manner adverse to the Parent or the Purchaser, its approval or
recommendation of the Offer, this Agreement or the Merger or shall have
publicly recommended a Superior Proposal or shall have resolved to do
either of the foregoing;
(h) by the Company, if, prior to the purchase of Shares pursuant to
the Offer, (i) the Board of Directors of the Company shall have determined
-
in good faith, after receiving advice of its independent legal counsel,
that it is consistent with its fiduciary duties to the Company's
stockholders under applicable law, to terminate this Agreement in order to
enter into an agreement with respect to or to consummate a transaction
constituting a Superior Proposal, (ii) the Company shall have given notice
--
to the Purchaser advising the Purchaser that the Company has received a
Superior Proposal from a third party, specifying the material terms and
conditions (including the identity of the third party), and that the
Company intends to terminate this Agreement in accordance with this Section
9.1(h), (iii) either (A) the Purchaser shall not have revised its proposal
--- -
for the Offer and the Merger within five (5) business days from the time on
which such notice is deemed to have been given to Parent or (B) if the
-
Purchaser within such period shall have revised its proposal for the Offer
and the Merger, the Board of Directors of the Company, after receiving
advice from CSFB, shall have determined that the third party's Acquisition
Proposal remains a Superior Proposal, and (iv) the Company, at the time of
--
such termination, has complied in all respects with the provisions of
Section 6.8 and pays the Expenses and the Termination Fee in accordance
with Section 9.3(b); or
(i) if approval by the Company stockholders is required by law, by
either the Purchaser or the Company if, upon a vote at a duly held Company
stockholders meeting or any adjournment thereof at which such Company
stockholder approval shall have been voted upon, such approval shall not
have been obtained.
9.2 Procedure and Effect of Termination. In the event of termination
-----------------------------------
and abandonment of the Merger by the Parent, the Purchaser or the Company
pursuant to Sec-
55
<PAGE>
tion 9.1, written notice thereof shall forthwith be given to the other party or
parties specifying the provision hereof pursuant to which such termination is
made and this Agreement shall terminate and the Merger shall be abandoned,
without further action by any of the parties hereto. The Purchaser agrees that
any termination by the Parent shall be conclusively binding upon it, whether
given expressly on its behalf or not, and the Company shall have no further
obligation with respect to it. If this Agreement is terminated as provided
herein, no party hereto shall have any liability or further obligation to any
other party to this Agreement, provided that any termination shall be without
--------
prejudice to the rights of any party hereto arising out of breach by any other
party of any covenant or agreement contained in this Agreement, and provided,
--------
further, that the obligations set forth in the second sentence of Section
- -------
1.2(a) and Sections 4.21, 5.7, 9.3, 10.7 and 10.11 and in the Confidentiality
Agreement shall in any event survive any termination.
9.3 Fees and Expenses. (a) Except as otherwise provided for in this
-----------------
Agreement, all costs and expenses incurred in connection with this Agreement and
the Offer, the Merger and any transactions contemplated thereby shall be paid by
the party incurring such expenses, whether or not any transaction is
consummated.
(b) The Company shall pay, or cause to be paid, in same day funds to
Parent the sum of (i) Parent's Expenses (as defined below) and (ii) $3,075,000
- --
(the "Termination Fee") upon demand if (A) the Company terminates this Agreement
-
pursuant to Section 9.1(h), (B) the Parent or the Purchaser terminates this
-
Agreement pursuant to Section 9.1(g), or (C) the Parent or the Company
-
terminates this Agreement pursuant to Section 9.1(c) (other than as a result of
a failure of any of the conditions set forth in clause (i) of the introductory
paragraph of Annex A or in any of clauses (a), (b), (c)(i), (f) or (g) of Annex
A, or clause (d) of Annex A if the breach of representation or warranty giving
rise to the failure of the condition set forth in clause (d) of Annex A would
also give rise to a failure of the condition set forth in clause (f) of Annex A
or in the ability of the Parent or the Purchaser to terminate this Agreement
under Section 9.1(f)), and, within nine (9) months after any termination
referred to in the immediately preceding clause (C), any person publicly
announces (x) a merger, consolidation or other business combination with the
-
Company or a subsidiary of the Company, or (y) the purchase of 50% or more (in
-
voting power) of the voting securities of the Company or of 50% or more (in
market value) of the assets of the Company and its subsidiaries, on a
consolidated basis, and such transaction shall within twelve months following
such announcement be consummated on substantially the terms theretofore
announced. "Expenses" shall mean all out-of-pocket fees and expenses incurred
or paid by or on behalf of the Parent or any of its affiliates in connection
with the Offer and Merger or the consummation of any of the transactions
contemplated by this Agreement (including, without limitation, fees and expenses
of counsel, commercial banks, investment banking firms, accountants, experts and
consultants to Parent and any of its affiliates) in an amount not to exceed
$1,000,000.
56
<PAGE>
(c) The Company shall pay, or cause to be paid, in same day funds to
Parent Parent's Expenses upon demand if (i) the Parent or the Purchaser or the
-
Company terminates this Agreement pursuant to Section 9.1(f) at any time after
any third-party Acquisition Proposal has been made, (ii) the Parent or the
--
Company terminates this Agreement pursuant to Section 9.1(c) as a result of a
failure of any of the conditions set forth in clause (i) of the introductory
paragraph of Annex A or in any of clauses (a), (b), (c)(i), (f) or (g) of Annex
A, or clause (d) of Annex A if the breach of representation or warranty giving
rise to the failure of the condition set forth in clause (d) of Annex A would
also give rise to a failure of the condition set forth in clause (f) of Annex A
or in the ability of the Parent or the Purchaser to terminate this Agreement
under Section 9.1(f) or (iii) the Parent or the Company terminates this
---
Agreement pursuant to Section 9.1(b), and, within nine (9) months after any
termination referred to in the immediately preceding clauses (i), (ii) or (iii),
any person publicly announces (x) a merger, consolidation or other business
-
combination with the Company or a subsidiary of the Company, or (y) the purchase
-
of 50% or more (in voting power) of the voting securities of the Company or of
50% or more (in market value) of the assets of the Company and its subsidiaries,
on a consolidated basis, and such transaction shall within twelve months
following such announcement be consummated on substantially the terms
theretofore announced.
ARTICLE X
MISCELLANEOUS
10.1 Amendment and Modification. This Agreement may be amended,
--------------------------
modified or supplemented only by written agreement of the Parent, the Purchaser
and the Company at any time prior to the Effective Time with respect to any of
the terms contained herein, provided, that after this Agreement is adopted by
--------
the Company's stockholders pursuant to Section 6.3, no such amendment or
modification shall be made that reduces the amount or changes the form of the
Merger Consideration or otherwise materially and adversely affects the rights of
the Company's stockholders hereunder, without the further approval of such
stockholders.
10.2 Waiver of Compliance; Consents. Any failure of the Parent or the
------------------------------
Purchaser, on the one hand, or the Company, on the other hand, to comply with
any obligation, covenant, agreement or condition herein may be waived by the
Company or the Parent, respectively, only by a written instrument signed by the
party granting such waiver (and, in the case of the Company, approved in
accordance with the provisions of Section 1.3(c) if applicable), but such waiver
or failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Whenever this Agreement requires
or permits consent by or on behalf of any party hereto, such consent shall be
given in writing in a manner consistent with the requirements for a waiver of
compliance as set forth in
57
<PAGE>
this Section 10.2. The Purchaser hereby agrees that any consent or waiver of
compliance given by the Parent hereunder shall be conclusively binding upon it,
whether given expressly on its behalf or not.
10.3 Survival of Warranties. Each and every representation and
----------------------
warranty made in Article IV, other than Section 4.21 (if this Agreement is
terminated before consummation of the Offer), and Article V, other than Section
5.7 (if this Agreement is terminated before consummation of the Offer), of this
Agreement shall expire with, and be terminated and extinguished by, the Merger,
or the termination of this Agreement pursuant to Section 9.1. This Section 10.3
shall have no effect upon any other obligation of the parties hereto, whether to
be performed before or after the Closing.
10.4 Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed given if (a) delivered personally or by overnight
-
courier, (b) mailed by registered or certified mail, return receipt requested,
-
postage prepaid, or (c) transmitted by telecopier, and in each case, addressed
-
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice; provided that notices of a change of
--------
address shall be effective only upon receipt thereof):
(a) if to the Parent or the Purchaser, to
Prudential Mortgage Capital Company, LLC
Four Embarcadero Center, Suite 2700
San Francisco, California 94111-4106
Telephone: 415-291-5080
Telecopy: 415-296-7237
Attention: Michael B. Jameson
---------
with copies to:
The Prudential Insurance Company of America
751 Broad Street, 4/th/ Floor
Newark, New Jersey 07102-3777
Telephone: 973-367-3473
Telecopy: 973-367-8105
Attention: Douglas A. Gregory
---------
58
<PAGE>
Prudential Mortgage Capital Company, LLC
Four Embarcadero Center, Suite 2700
San Francisco, California 94111-4106
Telephone: 415-291-5040
Telecopy: 415-956-2197
Attention: Harry N. Mixon
---------
and:
Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Telephone: 212-909-6000
Telecopy: 212-909-6836
Attention: Stephen J. Friedman
---------
(b) if to the Company, to
The WMF Group, Ltd.
1593 Spring Hill Road
Suite 400
Vienna, VA 22182-2245
Telephone: 703-610-1400
Telecopy: 703-610-1404
Attention: Shekar Narasimhan
---------
with copies to:
Hunton & Williams
951 East Byrd Street
Richmond, VA 23219-4074
Telephone: 804-788-7275
Telecopy: 804-788-8218
Attention: Randall S. Parks
---------
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
Telephone: 617-951-7000
Telecopy: 617-951-7050
Attention: Jane D. Goldstein
---------
59
<PAGE>
Any notice so addressed shall be deemed to be given upon delivery, if
transmitted by hand delivery, overnight courier or telecopier.
10.5 Assignment; Parties in Interest. This Agreement and all of the
-------------------------------
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto without the prior written consent of the
other parties (except that the Purchaser may assign to the Parent or any other
direct or indirect wholly-owned subsidiary of The Prudential Insurance Company
of America any and all rights and obligations of the Purchaser under this
Agreement and/or the Purchaser's right to purchase Shares transferred pursuant
to the Offer, provided that any such assignment will not relieve the Parent or
the Purchaser from any of its obligations under this Agreement). Except for
Section 6.9, which is intended for the benefit of the Company's directors,
officers, employees and agents, this Agreement is not intended to confer upon
any other person except the parties any rights or remedies under or by reason of
this Agreement.
10.6 Specific Performance. The parties hereto agree that irreparable
--------------------
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
10.7 Governing Law. This Agreement shall be governed by the laws of
-------------
the State of Delaware (regardless of the laws that might otherwise govern under
applicable principles of conflicts of law) as to all matters, including but not
limited to matters of validity, construction, effect, performance and remedies.
10.8 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.
10.9 Interpretation. The article and section headings contained in
--------------
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement. As used in this Agreement, (i) the term
-
"person" shall mean and include an individual, a partnership, a joint venture, a
corporation, a trust, a limited liability company, an unincorporated
organization and a government or any department or agency thereof; (ii) the
--
terms "affiliate" and "associate" shall have the meanings set forth in Rule l2b-
2 of the General Rules and Regulations promulgated under the Exchange Act; and
(iii) the
- ----
60
<PAGE>
term "subsidiary" shall mean as to any person, (x) any corporation 50% or more
-
of whose stock of any class or classes having by the terms thereof ordinary
voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such person and/or one or
more subsidiaries of such person and (y) any partnership, association, joint
-
venture, limited liability company or other entity in which such person and/or
one or more subsidiaries of such person has a 50% or more equity interest at the
time; and (iv) the phrase "to the knowledge" of any specified corporation shall
--
refer only to the actual knowledge of the directors, officers or management of
such corporation.
10.10 Entire Agreement. This Agreement, including the Confidentiality
----------------
Agreement, the Company Disclosure Letter and Annex A hereto, embody the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and supersedes all prior agreements and the
understandings between the parties with respect to such subject matter.
10.11 Jurisdiction. Each party hereby irrevocably submits to the
------------
exclusive jurisdiction of the United States District Court for the Southern
District of New York or any court of the State of New York located in the City
of New York in any action, suit or proceeding arising in connection with this
Agreement, and agrees that any such action, suit or proceeding shall be brought
only in such court (and waives any objection based on forum non conveniens or
any other objection to venue therein); provided, however, that such consent to
--------
jurisdiction is solely for the purpose referred to in this Section 10.11 and
shall not be deemed to be a general submission to the jurisdiction of said
courts or in the State of New York other than for such purposes. Each party
hereto hereby waives any right to a trial by jury in connection with any such
action, suit or proceeding.
61
<PAGE>
IN WITNESS WHEREOF, the Parent, the Purchaser and the Company have
caused this Agreement to be signed by their respective duly authorized officers
as of the date first above written.
PRUDENTIAL MORTGAGE CAPITAL COMPANY, LLC
By /s/ Michael B. Jameson
-----------------------------
Name: Michael B. Jameson
Title: Senior Vice President
PRUDENTIAL MORTGAGE CAPITAL
ACQUISITION CORP.
By /s/ Michael B. Jameson
-----------------------------
Name: Michael B. Jameson
Title: Vice President
THE WMF GROUP, LTD.
By /s/ Shekar Narasimhan
-----------------------------
Name: Shekar Narasimhan
Title: Chairman and Chief Executive Officer
<PAGE>
ANNEX A
-------
Conditions to the Offer. Notwithstanding any other provision of the
-----------------------
Offer, the Purchaser shall not be required to accept for payment, or, subject to
any applicable rules and regulations of the SEC, including Rule 14e-1(c) under
the Exchange Act (relating to the Purchaser's obligation to pay for or return
tendered shares after the termination or withdrawal of the Offer), to pay for
any Shares not theretofore accepted for payment or paid for, and the Purchaser
may (subject to the terms of the Merger Agreement) amend or terminate the Offer
as to, and may postpone the acceptance of, and payment for, such Shares not
theretofore accepted for payment or paid for (subject to any such applicable
rules and regulations of the SEC) unless (i) any applicable waiting period under
-
the Antitrust Laws shall have expired or been terminated, (ii) each of Capricorn
--
Investors II, L.P., Capricorn Holdings, Inc., Demeter Holdings Corporation,
Phemus Corporation, Commonwealth Overseas Trading, Mohammed A. Al-Tuwaijri, J.
Roderick Heller, III, John D. Reilly and Shekar Narasimhan shall have validly
tendered and not withdrawn prior to the expiration date of the Offer their
respective shares of Company Common Stock (the "Minimum Condition") and (iii) at
---
any time on or after the date of the Merger Agreement and at or before the time
that the particular Shares are accepted for payment (whether or not any other
Shares shall theretofore have been accepted for payment or paid for pursuant to
the Offer) none of the following conditions shall occur and be continuing:
(a) there shall have been any action or proceeding brought by any
governmental authority before any federal, state or foreign court, or any
order or preliminary or permanent injunction entered in any action or
proceeding before any federal, state or foreign court or governmental,
administrative or regulatory authority or agency having jurisdiction over
the Company or the Parent, or any statute, rule, regulation, legislation,
interpretation, judgment or order enacted, entered, enforced, promulgated,
amended, issued by any legislative body, court, government or governmental,
administrative or regulatory authority or agency located or having
jurisdiction within the United States or any country or economic region in
which either the Company or the Parent, directly or indirectly, has
material assets or operations, which would reasonably be expected to have
the effect of: (i) making illegal or prohibiting the making of the Offer,
-
the acceptance for payment of, payment for, or ownership, directly or
indirectly, of all or a material portion of the Shares by the Parent or the
Purchaser, or the consummation of any of the transactions contemplated by
the Merger Agreement or the Stockholders Agreement; (ii) (A) prohibiting or
--
materially limiting the ownership or operation by the Parent, the Purchaser
or any of the Parent's subsidiaries, of all or any material portion of the
business or assets of the Company and its subsidiaries taken as a whole, or
of the Parent and its subsidiaries taken as a whole, or (B) compelling the
Purchaser, the Parent or any of the Parent's subsidiaries to
A-1
<PAGE>
dispose of or hold separate all or any material portion of the business or
assets of the Company and its subsidiaries taken as a whole or of the
Parent and its subsidiaries taken as a whole, in each case as a result of
the transactions contemplated by the Offer or the Merger Agreement or the
Stockholders Agreement; (iii) imposing limitations on the ability of the
---
Purchaser, the Parent or any of the Parent's subsidiaries effectively to
acquire or hold or to exercise full rights of ownership of the Shares
including, without limitation, the right to vote any Shares acquired or
owned by the Parent or the Purchaser or any of the Parent's subsidiaries on
all matters properly presented to the stockholders of the Company,
including, without limitation, the adoption and approval of the Merger
Agreement and the Merger or the right to vote any shares of capital stock
of any subsidiary directly or indirectly owned by the Company; or (iv)
--
requiring divestiture by the Parent or the Purchaser, directly or
indirectly, of any Shares;
(b) there shall have occurred (i) a declaration of a banking
-
moratorium or any suspension of payments in respect of banks in the United
States which would reasonably be expected to have a Material Adverse Effect
on the Company or materially adversely affect (or materially delay) the
consummation of the Offer, (ii) any limitation (whether or not mandatory)
--
by any government or governmental, administrative or regulatory authority
or agency, domestic or foreign, on, or any other event that materially
adversely affects, the extension of credit by banks or other lending
institutions which would reasonably be expected to have a Material Adverse
Effect on the Company or materially adversely affect (or materially delay)
the consummation of the Offer, (iii) a commencement of a war or armed
---
hostilities or other national or international calamity directly or
indirectly involving the United States which would reasonably be expected
to have a Material Adverse Effect on the Company or materially adversely
affect (or materially delay) the consummation of the Offer or (iv) in the
--
case of any of the foregoing existing at the time of the execution of the
Agreement, a material acceleration or worsening thereof which acceleration
or worsening is reasonably expected to have a Material Adverse Effect or to
materially adversely affect the consummation of the Offer;
(c) (i) it shall have been publicly disclosed or the Purchaser shall
-
have otherwise learned that beneficial ownership (determined for the
purposes of this paragraph as set forth in Rule 13d-3 promulgated under the
Exchange Act) of 15% or more of the outstanding Shares has been acquired by
any corporation (including the Company or any of its subsidiaries or
affiliates), partnership, person or other entity or group (as defined in
Section 13(d)(3) of the Exchange Act), other than the Parent or any of its
affiliates or the Stockholders, and such Shares have not been tendered in
the Offer, or (ii) (A) the Board of Directors of the Company or any
-- -
committee thereof shall have withdrawn or modified in a manner adverse to
the
A-2
<PAGE>
Parent or the Purchaser the approval or recommendation of the Offer, the
Merger or the Merger Agreement, or approved or recommended any takeover
proposal or any other acquisition of Shares other than the Offer and the
Merger, (B) any such corporation, partnership, person or other entity or
-
group shall have entered into a definitive agreement or an agreement in
principle with the Company with respect to a tender offer or exchange offer
for any Shares or a merger, consolidation or other business combination
with or involving the Company or any of its subsidiaries or (C) the Board
-
of Directors of the Company or any committee thereof shall have resolved to
do any of the foregoing;
(d) any of the representations and warranties of the Company set
forth in the Merger Agreement that are qualified as to materiality shall
not be true and correct or any such representations and warranties that are
not so qualified shall not be true and correct in any material respect, in
each case as if such representations and warranties (other than
representations and warranties made as of a specified date) were made at
the time of such determination except, in each case, for changes
specifically permitted by the Merger Agreement;
(e) the Company shall have failed to perform in any respect any
material obligation or to comply in any respect with any material agreement
or material covenant of the Company to be performed or complied with by it
under the Merger Agreement prior to the time of such determination;
(f) the Company and its subsidiaries shall not have obtained and
delivered to the Parent written evidence that (i) all required notices
-
relating to the transactions contemplated by the Merger Agreement have been
provided to each of GNMA and the FHA and (as certified by the Chairman and
Chief Executive Officer of the Company) that no objections have been
received from GNMA or the FHA which would cause the Company and its
subsidiaries not to be eligible to issue mortgage-backed securities
guaranteed by GNMA or to originate, purchase, hold and service FHA-insured
mortgage loans in the same manner as on the date of the Merger Agreement
and (ii) all required approvals, consents, licenses, accreditations,
--
registrations and qualifications relating to the transactions contemplated
by the Merger Agreement have been received from Fannie Mae for the Company
and its subsidiaries to be able to originate, purchase, hold and service
mortgage loans to be sold to Fannie Mae in the same manner as on the date
of the Merger Agreement;
(g) the Merger Agreement shall have been terminated in accordance
with its terms or the Offer shall have been terminated with the written
consent of the Company.
A-3
<PAGE>
The foregoing conditions are for the sole benefit of the Purchaser and
may be asserted by the Purchaser regardless of the circumstances giving rise to
any such condition or may be waived by the Purchaser in whole or in part at any
time and from time to time in its sole discretion (subject to the terms of the
Merger Agreement). The failure by the Purchaser at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right, the waiver
of any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances, and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
A-4
<PAGE>
EXHIBIT (d)(1)(B)
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT dated as of May 10, 2000, among Prudential
Mortgage Capital Company, LLC, a Delaware limited liability company ("Parent")
------
and the holders listed on Schedule A attached hereto (each, a "Stockholder" and,
-----------
collectively, the "Stockholders") of shares of common stock, par value $0.01 per
------------
share (the "Shares") of The WMF Group, Ltd., a Delaware corporation (the
------
"Company").
R E C I T A L S:
WHEREAS Parent, Prudential Mortgage Capital Acquisition Corp., a
Delaware corporation that is a wholly-owned subsidiary of Parent (the
"Purchaser") and the Company propose to enter into an Agreement and Plan of
Merger, dated as of the date hereof (as the same may be amended or supplemented,
the "Merger Agreement"), providing for the merger of the Purchaser with and into
----------------
the Company (the "Merger"), upon the terms and subject to the conditions set
------
forth in the Merger Agreement;
WHEREAS the execution and delivery of this Agreement by the parties
hereto is a condition precedent to Parent's willingness to enter into the Merger
Agreement;
WHEREAS each Stockholder owns the number of Shares set forth opposite
such Stockholder's name on Schedule A attached hereto (such Shares, together
with any other shares of capital stock of the Company acquired by such
Stockholders after the date hereof and during the term of this Agreement
(including, without limitation, through the exercise of any stock options,
warrants or similar instruments), being collectively referred to herein as the
"Subject Shares");
--------------
WHEREAS, Parent has undertaken and will continue to undertake
substantial expenses in connection with the negotiation and execution of the
Merger Agreement and the subsequent actions necessary to consummate the
transactions contemplated therein; and
WHEREAS, capitalized terms used herein without definition shall have
the respective meanings specified therefor in the Merger Agreement;
NOW, THEREFORE, to induce Parent to enter into, and in consideration
of its entering into, the Merger Agreement, and in consideration of the premises
and the representations, warranties and agreements contained herein, the parties
hereto agree as follows:
<PAGE>
A G R E E M E N T:
1. Representations and Warranties of Each Stockholder. Each
--------------------------------------------------
Stockholder hereby, severally and not jointly, represents and warrants to Parent
as of the date hereof in respect of himself, herself or itself as follows:
(a) Authority. Such Stockholder has all requisite power and
---------
authority to enter into this Agreement and to perform its obligations
hereunder. This Agreement has been duly and validly authorized, executed
and delivered by such Stockholder and constitutes the valid and binding
obligation of such Stockholder enforceable against such Stockholder in
accordance with its terms, except to the extent that enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other similar laws of general applicability relating to or
affecting the enforcement of creditors' rights and by the effect of general
principles of equity. Neither the execution and delivery by such
Stockholder of this Agreement nor the performance by such Stockholder of
its obligations hereunder will violate or conflict in any material respect
with, result in a breach of any material provision of or constitute a
default under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust or any material license,
franchise, permit, lease, contract, agreement or other instrument,
commitment or obligation to which such Stockholder is a party or by which
such Stockholder is bound.
(b) The Subject Shares. Such Stockholder is the record and
------------------
beneficial owner of and has valid title to, the Subject Shares set forth
opposite such Stockholder's name on Schedule A attached hereto, free and
clear of any claims, liens, encumbrances and security interests whatsoever.
Except to the extent set forth in footnotes 1, 2, 3 and 4 to Schedule A
attached hereto, such Stockholder does not own, of record or beneficially,
any shares of capital stock of the Company other than the Subject Shares
set forth opposite such Stockholder's name on Schedule A attached hereto.
Such Stockholder has the sole right to vote such Subject Shares, and none
of such Subject Shares is subject to any voting trust or other agreement,
arrangement or restriction with respect to the voting of such Subject
Shares, except as contemplated by this Agreement.
2. Representation and Warranty of Parent. Parent hereby represents
-------------------------------------
and warrants to each Stockholder that it has all requisite power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly and validly authorized, executed and
delivered by Parent and constitutes the valid and binding obligation of Parent
enforceable against it in accordance with its terms, except to the extent that
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws of general
2
<PAGE>
applicability relating to or affecting the enforcement of creditors' rights and
by the effect of general principles of equity. Neither the execution and
delivery by Parent of this Agreement nor the consummation by Parent of the
transactions contemplated hereby will: (a) violate or conflict in any material
-
respect with, result in a breach of any material provision of, constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, result in the termination or in a right of
termination of, accelerate the performance required by or benefit obtainable
under, result in the vesting, triggering or acceleration of any payment or other
obligations pursuant to, or result in there being declared void, voidable,
subject to withdrawal, or without further binding effect, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust
or any material license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which Parent is a party, by which it or
any of its properties are bound, or under which it or any of its properties are
entitled to a benefit; (b) other than the filings required under the HSR Act or
-
any Exchange Act filings, require any consent, approval or authorization of, or
declaration, filing or registration with, any Governmental Entity; or (c)
-
violate in any material respect any laws applicable to Parent.
3. Covenants of Each Stockholder. Until the termination of this
-----------------------------
Agreement in accordance with Section 7, each Stockholder severally and not
jointly agrees as follows:
(a) At any meeting of the stockholders of the Company called to vote
upon the Merger Agreement or at any adjournment thereof or in any other
circumstances upon which a vote, consent or other approval with respect to
the Merger and the Merger Agreement is sought, such Stockholder shall vote
(or cause to be voted) its Subject Shares in favor of the adoption by the
Company of the Merger Agreement (as it may be amended from time to time,
provided that such amendment is not adverse to such Stockholder) and the
approval of the terms thereof and each of the transactions contemplated
thereby. Any vote cast in accordance with this Section 3(a) or in
accordance with Section 3(b) shall be cast in such manner as will ensure
that such vote is duly counted for purposes of determining whether a quorum
is present and for purposes of determining the result of such vote.
(b) At any meeting of the stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which such
Stockholder's vote, consent or other approval is sought, such Stockholder
shall vote (or cause to be voted) its Subject Shares against any (i)
-
Acquisition Proposal or (ii) any amendment of the Company's certificate of
--
incorporation or by-laws or other proposal, which transaction or amendment
or other proposal would be reasonably likely to impede, frustrate, prevent
or nullify the Merger or the Merger Agreement (as it may be amended from
time to time, provided such amendment is not
3
<PAGE>
adverse to such Stockholder), or any of the other transactions contemplated
by the Merger Agreement or change in any manner the voting rights of the
Shares. Such Stockholder further agrees not to enter into any agreement
inconsistent with the foregoing.
(c) Such Stockholder shall not, prior to the earliest of (i) the
-
Effective Time and (ii) the termination of the Merger Agreement in
--
accordance with its terms, (x) sell, transfer, give, pledge, assign or
-
otherwise dispose of (including by gift) (collectively, "Transfer"),
--------
consent to any Transfer of, or enter into any contract, option or other
arrangement with respect to the Transfer of any or all of such
Stockholder's Subject Shares or any interest therein or (y) enter into any
-
voting arrangement, whether by proxy, voting agreement or otherwise, in
connection with any Acquisition Proposal and agrees not to commit or agree
to take any of the foregoing actions other than Transfers to its Affiliates
provided that such transferee agrees to be bound by the terms hereof, and
Transfers pursuant to the terms of Section 3(d).
(d) In the event that Parent, Purchaser, or any affiliate thereof
conducts a tender offer in accordance with the Merger Agreement, such
Stockholder shall validly tender such Stockholder's Subject Shares and
shall not withdraw Subject Shares so tendered.
(e) Until after the earlier to occur of the Merger being consummated
or the Merger Agreement being terminated, such Stockholder, solely in its
capacity as stockholder, shall use all reasonable efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by the
Merger Agreement (as it may be amended from time to time, provided such
amendment is not adverse to such Stockholder).
(f) Such Stockholder, solely in its capacity as stockholder, shall
not take any action which would restrict, limit or frustrate in any way the
transactions contemplated by this Agreement.
4. Further Assurances. (a) From time to time, at any party's
------------------
request and without further consideration, each other party shall execute and
deliver such additional documents and take all such further action as may be
reasonably necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement.
4
<PAGE>
(b) By its execution of this Agreement, (i) each Stockholder
-
acknowledges that it has been afforded the opportunity to consult with its legal
counsel and financial advisors with respect to its investment decision to
execute this Agreement and (ii) each Stockholder acknowledges that it has been
--
afforded the opportunity to discuss the Merger Agreement with representatives of
Parent. Each Stockholder further acknowledges that it has otherwise investigated
this matter to its full satisfaction and will not seek rescission or revocation
of this Agreement or seek to withdraw or revoke any vote, irrevocable proxy or
irrevocable instruction delivered by it or on its behalf in connection
therewith.
5. Certain Events. Each Stockholder agrees that this Agreement and
--------------
the obligations hereunder shall attach to such Stockholder's Subject Shares and
shall be binding upon any person or entity to which legal or beneficial
ownership of such Subject Shares shall pass, whether by operation of law or
otherwise, including without limitation such Stockholder's heirs, guardians,
administrators or successors. In the event of any stock split, stock dividend,
merger, reorganization, recapitalization or other change in the capital
structure of the Company affecting the Shares, or the acquisition of additional
Shares or other voting securities of the Company by any Stockholder, the number
of Subject Shares listed in Schedule A beside the name of such Stockholder shall
be adjusted appropriately and this Agreement and the obligations hereunder shall
attach to any additional Shares or other voting securities of the Company issued
to or acquired by such Stockholder.
6. Assignment. Neither this Agreement nor any of the rights,
----------
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties, except that Purchaser
may assign, as contemplated by Section 10.5 of the Merger Agreement, in its sole
discretion, any and all of its rights, interests and obligations hereunder to
Parent or any other affiliate of The Prudential Insurance Company of America.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their respective successors
and assigns.
7. Termination. This Agreement, and all rights and obligations of
-----------
the parties hereunder shall terminate upon the earlier of (a) the Effective Time
-
and (b) the date upon which the Merger Agreement is terminated in accordance
-
with its terms provided that if the Merger Agreement has been terminated for any
--------
reason, Sections 6, 7, 8, 9 and 10 shall survive for one year following such
termination.
8. General Provisions.
------------------
(a) Amendments. This Agreement may not be amended except by an
- ----------
instrument in writing signed by each of the parties hereto.
5
<PAGE>
(b) Notice. All notices and other communications hereunder shall be
- ------
in writing and shall be deemed given if hand delivered or sent by overnight
courier (providing proof of delivery) to Parent in accordance with Section
10.4 of the Merger Agreement and to the Stockholders at their respective
addresses set forth on Schedule A attached hereto (or at such other address
for a party as shall be specified by like notice).
(c) Interpretation. When a reference is made in this Agreement to
- --------------
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Wherever the words "include," "includes"
or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation".
(d) Counterparts. This Agreement may be executed in one or more
- ------------
counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more of the counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that each party need not sign the same counterpart.
(e) Entire Agreement; No Third-Party Beneficiaries. This Agreement
- ----------------------------------------------
(including the documents and instruments referred to herein) (i)
-
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to
the subject matter hereof and (ii) is not intended to confer upon any
--
person other than the parties hereto any rights or remedies hereunder.
(f) Governing Law. This Agreement shall be governed by, and
- -------------
construed in accordance with, the laws of the State of Delaware regardless
of the laws that might otherwise govern under applicable principles of
conflicts of law thereof.
9. Enforcement. Each Stockholder agrees that irreparable damage
-----------
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
Each Stockholder accordingly agrees that Parent shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the Southern District of New York or in a New York
state court, this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, Parent and each Stockholder (a)
-
consent to submit such party to the personal jurisdiction of any Federal court
located in the Southern District of New York or any New York state court in the
event any dispute arises out of
6
<PAGE>
this Agreement or any of the transactions contemplated hereby, (b) agree that
-
such party will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court, (c) agree that such party
-
will not bring any action relating to this Agreement or the transactions
contemplated hereby in any court other than a Federal court sitting in the state
of New York or a New York state court and (d) waive any right to trial by jury
-
with respect to any claim or proceeding related to or arising out of this
Agreement or any of the transactions contemplated hereby.
10. Public Announcements. Each party to this Agreement will consult
--------------------
with the other party before issuing, and provide the other party with the
opportunity to review and comment upon, any press release or other public
statements with respect to the transactions contemplated by this Agreement that
expressly identifies any of the Stockholders, and shall not issue any such press
release or make any such public statement without the prior approval of the
other party, which approval shall not be unreasonably withheld.
11. Stop Transfer. Each Stockholder agrees with and covenants to
-------------
Parent that such Stockholder shall not request that the Company register the
transfer of any certificate or uncertificated interest representing any of such
Stockholder's Subject Shares, unless such transfer is made in compliance with
this Agreement. Each Stockholder agrees, with respect to any Subject Shares in
certificated form, that such Stockholder will submit to the Company, within ten
business days after the date hereof, the certificates representing such Subject
Shares in order for the Company to inscribe upon such certificates the following
legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
STOCKHOLDERS AGREEMENT DATED AS OF MAY 10, 2000, AND, PURSUANT TO THE TERMS
THEREOF, MAY NOT BE SOLD, TRANSFERRED, GIVEN, PLEDGED, ASSIGNED OR OTHERWISE
DISPOSED OF, AND ARE SUBJECT TO FURTHER RESTRICTIONS REGARDING, AMONG OTHER
THINGS, VOTING RIGHTS AND CERTAIN INDIRECT TRANSFERS AS SET FORTH IN SUCH
STOCKHOLDERS AGREEMENT." Each Stockholder agrees that within ten business days
after the date hereof, such Stockholder will no longer hold any Subject Shares,
whether certificated or uncertificated, in "street name" or in the name of any
nominee.
7
<PAGE>
IN WITNESS WHEREOF, Parent and the Stockholders have caused this
Agreement to be duly executed and delivered as of the date first written above.
Prudential Mortgage Capital Company, LLC
By: /s/ Michael. B. Jameson
-------------------------------
Name: Michael B. Jameson
Title: Senior Vice President
Stockholders:
Phemus Corporation
By: /s/ Mark A. Rosen
-------------------------------
Name: Mark A. Rosen
Title: Authorized Signatory
Demeter Holdings Corporation
By: /s/ Mark A. Rosen
-------------------------------
Name: Mark A. Rosen
Title: Authorized Signatory
Capricorn Investors II, L.P.
By Capricorn Holdings, LLC,
its General Partner
By: /s/ Herbert S. Winokur, Jr.
-------------------------------
Name: Herbert S. Winokur, Jr.
Title: Manager
Capricorn Holdings, Inc.
By: /s/ Herbert S. Winokur, Jr.
-------------------------------
Name: Herbert S. Winokur, Jr.
Title: President
<PAGE>
Commonwealth Overseas Trading
By: /s/ Shekar Narasimhan
------------------------------
Name: Shekar Narasimhan
Title: Managing Director
Shekar Narasimhan
/s/ Shekar Narasimhan
----------------------------------
John D. Reilly
/s/ John D. Reilly
----------------------------------
Mohammed A. Al-Tuwaijri
/s/ Mohammed A. Al-Tuwaijri
----------------------------------
J. Roderick Heller, III
/s/ J. Roderick Heller, III
----------------------------------
9
<PAGE>
SCHEDULE A
-----------
Share Ownership
---------------
<TABLE>
<CAPTION>
Shares Underlying
-----------------
Stock Options
-----------------
Name and Address
of Stockholder Existing Shares Vested Unvested Total
------------- --------------- ------ -------- -----
<S> <C> <C> <C> <C>
Demeter Holdings Corporation 5,134,483 20,000 10,000 5,164,483
c/o Charlesbank Capital Partners,
LLC
600 Atlantic Ave., 26/th/ Floor
Boston, MA 02110
Phemus Corporation 281,419 --- --- 281,419
c/o Charlesbank Capital Partners,
LLC
600 Atlantic Ave., 26/th/ Floor
Boston, MA 02110
Capricorn Investors II, L.P. /(1)/ 1,730,532 10,000 5,000 1,745,532
30 East Elm St.
Greenwich, CT 06830
Capricorn Holdings, Inc. /(1)/ 163,533 --- --- 163,533
30 East Elm St.
Greenwich, CT 06830
Shekar Narasimhan /(2)/ 55,415 118,867 41,800 216,082
c/o WMF Group Ltd.
1593 Spring Hill Rd
Suite 400
Vienna, VA 22192
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Shares Underlying
-----------------
Stock Options
-------------
Name and Address
of Stockholder Existing Shares Vested Unvested Total
------------- --------------- ------- -------- -----
<S> <C> <C> <C> <C>
Commonwealth Overseas Trading 145,040 --- --- 145,040
Company Limited
c/o Ms. Donna Simmons
The Bank of N.T. Butterfield &
Son, Limited
65 Front Street
Hamilton, HMAX
Bermuda
Mohammed A. /(3)/ --- 10,000 5,000 15,000
Al-Tuwaijri
P.O. Box 60212
Tamaneen Street
Riyadh 11545
Saudi Arabia
J. Roderick Heller III /(4)/ 169,464 130,290 5,000 304,754
2445 M Street, N.W. Suite 460
Washington, DC 20037
John D. Reilly /(5)/ 210,033 10,000 5,000 225,033
5335 Wisconsin Avenue, N.W.
#440
Washington, DC 20015
</TABLE>
(1) Does not include 10,000 shares owned by two revocable trusts benefiting
members of Herbert S. Winokur, Jr.'s family.
(2) Excludes 20,000 shares of restricted stock subject to forfeiture unless
certain events occur and 145,040 shares of common stock owned by
Commonwealth Overseas Trading Company Limited, over which Mr. Narasimhan
and Mr. Al-Tuwaijri share voting power.
(3) Excludes 145,040 shares of common stock owned by Commonwealth Overseas
Trading Company Limited, over which Mr. Narasimhan and Mr. Al-Tuwaijri
share voting power.
11
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(4) Notwithstanding Section 1(b) of the Agreement, the number of Subject Shares
includes 35,000 shares owned by the Heller Family Foundation, a charitable
foundation of which Mr. Heller is an officer, and 6,000 shares held of
record by Mr. Heller as custodian for his minor granddaughter.
(5) Excludes 23,108 shares owned by a trust benefiting members of Mr. Reilly's
family of which Mr. Reilly has no voting or investment control.
12
<PAGE>
EXHIBIT (d)(1)(C)
EMPLOYMENT AGREEMENT
This Agreement is entered into as of this 10th day of May, 2000 by and
among you, SHEKAR NARASIMHAN, WMF GROUP Inc. (the "Employer" or the "Company")
and PRUDENTIAL MORTGAGE CAPITAL CORPORATION ("PMCC").
WHEREAS, simultaneously with the execution hereof PMCC is entering into an
Agreement and Plan of Merger, whereby the Employer will merge with a subsidiary
of PMCC and thereby become a wholly owned subsidiary of PMCC;
WHEREAS, PMCC and Employer wish to secure your agreement to provide
services to them following the closing of such merger, and you are willing to
agree to provide such services to induce PMCC to enter into the Merger
Agreement; and
WHEREAS, each of the parties agrees that this Agreement will not take
effect until the closing of such merger, and will not become effective unless
and until such merger is consummated.
NOW, THEREFORE, PMCC, Employer and you agree as follows:
1. Effective Date. This Agreement shall be and become effective on
--------------
the date on which the Agreement and Plan of Merger (the "Merger Agreement"), by
and between PMCC and Employer, of ever date herewith, closes (the "Closing
Date"). If the Merger Agreement is terminated in accordance with its terms, or
if the Closing Date does not occur on or before October 31, 2000, this Agreement
shall be rendered void and without effect, and neither Employer nor PMCC will
have any obligations or liability to you, and you will have no obligations or
liability to Employer or PMCC, hereunder.
2. Background/Compliance Checks. This Agreement is subject to the
----------------------------
successful completion of a consent and disclosure form, background, character
and reference check, a conflict of interest questionnaire, crime bill notice to
applicants, information security policy agreement and your ability to
demonstrate legal authorization to work in the United States, provided, however,
if completion of any of these documents or activities is not successful,
Employer will still be required to make the payment called for under Section
6(d) of this Agreement.
3. Employment and Duties. As of the Closing Date, your title with
---------------------
Employer shall be Managing Director. You shall perform such duties as are
required of a Managing Director and any additional duties consistent with those
for a Managing Director that PMCC may assign from time to time. Without
limiting the generality of the foregoing, subject to the ability of PMCC to make
changes therein, you shall have the following duties and responsibilities: (i)
Fannie Mae Portfolio Management, (ii) FHA
1
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Portfolio Management, (iii) Redbricks.com loan origination and other internet
origination efforts, and (iv) institutional portfolio management (including the
activities of the company currently known as WMF Carbon Mesa Advisors, Inc.).
You agree to obtain, if necessary, and maintain any regulatory licenses required
for the performance of your duties hereunder or otherwise reasonably requested
by PMCC. Except for periods of travel required by the Employer or PMCC in
connection with the performance of your duties hereunder, you shall perform your
services at the Employer's offices in Virginia, which location for your services
shall not be changed without your consent.
4. Performance/Conflicts of Interest. You agree to devote all of
---------------------------------
your time and efforts to the performance of your duties as an employee of
Employer and during your employment by Employer you shall not, directly or
indirectly, act for the benefit of or be employed by any person, firm or
corporation other than Employer and PMCC. You also agree that you will not be
concerned or connected with any other business pursuit whatsoever without the
prior written consent of PMCC in accordance with its policies, provided,
however, that consent is hereby given to you to continue as of the Closing Date
(i) your current level of participation in the organizations, and (ii) your
ownership of stock and other assets, all as are listed on Appendix A to this
Agreement.
5. Term. The term of this Agreement shall begin on the Closing Date
----
and shall continue through the second anniversary thereof, except for those
clauses contained in this Agreement regarding your post-employment obligations
which shall survive your employment. Notwithstanding the foregoing, this
Agreement shall (i) automatically terminate upon your death, your permanent
-
disability resulting in your inability to perform the essential functions of
your position, or your adjudication of incompetency and (ii) terminate after the
--
Closing Date upon 60 days' written notice of termination from you or the
Employer and/or PMCC, which may be given for any reason whatsoever. During the
period of employment following receipt of any notice of termination as provided
in the immediately preceding sentence, the Company or PMCC shall have the right,
notwithstanding any other provision of this Agreement, to assign to you such
duties and responsibilities consistent with your position as Managing Director,
or no such duties and responsibilities, as it shall determine in its sole
discretion.
6. Compensation. From and after the Closing Date and provided you
------------
remain in full-time employment with Employer, Employer agrees to compensate you
in accordance with the following terms:
(a) Base Salary. You will receive an annual base salary of $240,000,
-----------
payable in accordance with PMCC's usual payroll practices.
(b) Annual Incentive Compensation. Subject to your continued
-----------------------------
employment with Employer or PMCC through the date payment is due
2
<PAGE>
thereunder, you will be eligible to participate in PMCC's Annual Incentive
Plan for Investment Professionals ("AIPIP") or any successor plan thereto
in accordance with its terms, as such plan may be in effect from time to
time. If you are actually employed by PMCC or Employer when the payment
for 2000 services is made under the AIPIP, which is anticipated to be the
end of February 2001, you will receive a minimum annual incentive for 2000
of $135,000.
(c) Long-Term Incentive Compensation. You shall receive an award of
--------------------------------
$150,000 for the 2000-2002 performance period under, and in accordance
with, the terms of the Prudential Global Asset Management Long Term
Incentive Plan, as it may be in effect from time to time ("PGAM LTIP"). An
award under the PGAM LTIP for the 2000-2002 period is payable in the
ordinary course in 2003, subject to your continued employment with Employer
or PMCC through the date payment is due thereunder. Whether and the extent
to which such award is payable to you will be determined under the terms of
the PGAM LTIP.
(d) Payments with Respect to Covenant Not to Compete/Solicit. In
--------------------------------------------------------
consideration of your agreeing to be bound by the restrictive covenants not
to compete/solicit contained in Sections 14 and 15(a) hereunder, and your
compliance with such restrictive covenants, you will receive $525,000 as
soon as practicable, but in no event later than 14 days after the Closing
Date. In the event that you breach any of the restrictive covenants
contained in Sections 14 or 15(a) hereunder, within one year of the Closing
Date, you agree that you will be required to repay the Employer any and all
amounts received by you under this Section 6(d).
7. Benefits. You will be eligible to participate in pension,
--------
medical, dental, legal, long-term care, short and long-term disability, employee
savings, and life insurance plans on the same terms and conditions as other PMCC
employees at your rank and compensation level in accordance with the terms of
these plans which may be in effect from time to time.
8. Vacation. You will be granted 20 days of paid vacation annually
--------
to be administered in accordance with PMCC's policies and practices which may be
in effect from time to time.
9. Severance. The extent to which you shall be eligible for, and the
---------
amount of, any separation benefits that may be payable upon your termination of
employment by Employer or PMCC following the Closing Date shall be determined
in accordance with PMCC's severance policy, if any, then in effect for an
employee at your level. Any such separation payment shall be the greater of (i)
the amount payable pursuant to PMCC's severance policy and (ii) your one-year
base salary of $240,000.
3
<PAGE>
Moreover, if you are terminated by the Employer during the 180-day period
following the Closing Date and you would have been entitled to severance under
your award agreement pursuant to the Key Employee Incentive Plan of the WMF
Group, Ltd. (the "KEIP Plan"), your severance amount shall be no less than that
to which you would otherwise have been entitled. Your right to receive this in-
lieu of KEIP severance amount is contingent upon your execution of the
cancellation, settlement and special severance agreement prior to the Closing
Date.
10. Taxes and Withholding. All payments set forth in this Agreement
---------------------
are subject to applicable taxes and withholding.
11. Benefitability of Compensation. For purposes of this Agreement,
------------------------------
you understand and acknowledge that compensation payable under this Agreement
may be taken into account for employee benefits plans and arrangements only to
the extent such plans and arrangements so provide.
12. Non-Disclosure of Confidential Information.
------------------------------------------
(a) You acknowledge that it is the policy of the Company Group (as
defined below) to maintain as confidential (i) all information relating to
-
the products, services, operations, plans, strategies, formulas, models,
prototypes, finances and business concepts of the Company Group, (ii) all
--
information relating to the customers, clients, accounts, customer or
client leads or prospects, and employees of the Company Group, and (iii)
---
attorney work product and attorney-client communications, and documents and
data prepared in anticipation of or in the course of complaints, charges,
investigations, examinations or litigation in which a Group Member is
involved. All such information, to the extent it is maintained by the
Company Group as confidential and is not otherwise in the public domain, is
hereinafter referred to as "Confidential Information".
(b) The parties recognize that the services to be performed by you
hereunder are special and unique, and that by reason of your retention by
PMCC and Employer you have and will acquire Confidential Information. You
further acknowledge that Confidential Information is of great value to the
Company Group and is developed and acquired by great expenditures of time,
effort and cost. The parties confirm that it is reasonably necessary for
the protection of the good will of the Company Group that you agree, and
accordingly you do agree, that you will not, directly or indirectly, at any
time during your employment or after the termination of your employment for
any reason, disclose to any persons, firms or corporations, other than
entities within the Company Group (such other persons, firms and
corporations not within the Company Group being hereinafter referred to
collectively as "third parties"), or use or cause or authorize any third
4
<PAGE>
parties to use, any Confidential Information except (1) as required by your
-
employment with Employer and PMCC, (2) as required in a legal proceeding,
-
provided you notify counsel for PMCC sufficiently in advance of disclosure
to obtain an appropriate protective order and PMCC has not obtained such an
order, or (3) as authorized by PMCC in writing.
(c) You agree that you will not, at any time, move from the premises
of the Company Group, any correspondence, records, notebooks, computer
software or printouts, data or other documents or materials relating to the
business and procedures heretofore or hereafter acquired, developed or used
by the Company Group, except as reasonably necessary to the discharge of
your duties hereunder.
(d) You agree that, upon the termination of your employment, you will
forthwith deliver to PMCC any and all order-books, customer lists,
notebooks and other documents and materials, together with all copies
thereof, in your possession or under your control relating to the
Confidential Information or which is otherwise the property of the Company
Group. PMCC agrees that you may take copies of any and all publicly
available research documents accumulated by you for your own professional
benefit, provided that you shall leave PMCC the original.
(e) Your obligations under this Section 12 will continue
notwithstanding the termination of your employment for any reason under
this Agreement.
(f) For purposes of this Agreement, Company Group means PMCC, The
Prudential Insurance Company of America, and any other corporation,
partnership, limited liability company or other business entity under
common control with, controlled by or controlling any of the foregoing. A
Group Member shall mean each and any corporation, partnership, limited
liability company or other business entity which is included in the Company
Group.
13. Disclosure and Assignment of Intellectual Property.
--------------------------------------------------
(a) During the term of your employment, you will (without additional
compensation) promptly make available to PMCC and Employer all ideas,
working papers, descriptions, reports, notes, forms, data, products,
diagrams, computer programs (source code and object code), databases,
systems, processes, methodologies, mathematical and/or computer implemented
models, discoveries and inventions (hereinafter referred to collectively as
"Intellectual Property"), whether or not patentable or copyrightable, which
you, while employed by Employer or PMCC, conceive, make, develop, acquire,
reduce to practice and/or memorialize in any tangible form in any and all
media, whether alone or with others and whether during or after usual work
hours, which are unique to any
5
<PAGE>
Group Member's business or are used by any Group Member, or arise out of or
in connection with the duties performed by you hereunder.
(b) You hereby transfer and assign to Employer or, if directed by
PMCC, PMCC all rights, titles and interests in and to the Intellectual
Property, including any and all domestic and foreign trade secret, patent
and copyright rights therein with PMCC having the right to obtain and to
hold in its own name, copyright registrations, patents and such other
intellectual property protection as may be appropriate to the subject
matter, and any extensions and renewals thereof. In addition, you hereby
agree (without any additional compensation to you), from time to time
during or after the term of your employment, to give PMCC or Employer and
any person designated by PMCC, reasonable assistance, at PMCC's expense,
required to perfect, protect and enforce the rights defined in this Section
13, including, but not limited to, executing and delivering all documents
requested by PMCC in connection therewith (including, without limitation,
applications for letters, patents and assignments thereof).
14. Covenant Not To Compete. You acknowledge that you have unique
-----------------------
knowledge of Employer's business, and have been engaged in managing and
overseeing all aspects of Employer's management, marketing, business
development, pricing, branding, advertising, competitive analysis, revenue
generation and customer acquisition and customer retention strategies
(collectively referred to as the "Activities"). You also acknowledge that your
responsibilities with respect to the Activities have extended through the entire
geographic scope of Employer's business and that any restrictions on competitive
employment that do not encompass this entire geographic scope would not protect
Employer and PMCC's legitimate business interests. You also agree and
acknowledge that you are providing the covenants set forth in this Agreement to
encourage and induce PMCC to effect the transactions contemplated in the Merger
Agreement. Accordingly, you agree that, during the term of your employment
hereunder, and for a period of (i) two years thereafter, if your termination of
-
employment for any reason, including, but not limited to, your resignation,
shall occur prior to the first anniversary of the Closing Date or (ii) one year
--
thereafter, if your termination of employment for any reason, including, but not
limited to, your resignation, shall occur on or after the first anniversary of
the Closing Date, you will not, directly or indirectly:
(a) own, manage, operate, join, control or participate in the
ownership, management, operation or control of, or, except as otherwise
provided in subclause (b) below, engage in or be connected in any manner
with, any business which is or may reasonably be found to be engaged in the
same business as Employer or PMCC (a "Competitor"), except that you may own
not more than 2% of any class of securities of a Competitor the securities
of which are publicly traded; or
6
<PAGE>
(b) serve as a director, officer or consultant of, or be employed in
any executive, professional, managerial or supervisory capacity
(collectively referred to as an "Employment Opportunity") by, any
Competitor, performing any of the Activities you performed for Employer or
PMCC prior to your termination or any related activities.
You also agree that, during the term of your employment hereunder, and for
a period of one year thereafter, if your termination of employment for any
reason, including, but not limited to, your resignation, shall occur prior to
the first anniversary of the Closing Date, you will not, directly or indirectly
accept an Employment Opportunity with any commercial or multi-family lending
agency (including, but not limited to, FHA, Fannie Mae, Freddie Mac and Ginnie
Mae).
15. Covenant Not To Solicit.
-----------------------
(a) You agree that, except on behalf of the Company or PMCC, during
the term of your employment, and for a period of (i) two years
thereafter, if your termination of employment for any reason,
including, but not limited to, your resignation, shall occur
prior to the first anniversary of the Closing Date or (ii) one
year thereafter, if your termination of employment for any
reason, including, but not limited to, your resignation, shall
occur on or after the first anniversary of the Closing Date, you
shall not contact, call on, provide advice to, solicit, take
away, or divert, and/or influence or attempt to influence any
customers, clients, and/or patrons of the Company or PMCC;
(b) You also agree that, during the term of your employment, and for
a period of two years after the termination of employment for any reason,
including, but not limited to, your resignation, you shall not:
(i) solicit or induce, either directly or indirectly, any employee
of the Company or PMCC (a "Covered Employee") to leave the
employ of the Company;
(ii) take any action to assist any successor employer or any other
entity, either directly or indirectly, in soliciting or inducing
any Covered Employee to leave the employ of the Company or PMCC;
or
(iii) hire or employ, assist in the hire or employment, either
directly or indirectly, of any individual who was employed by
the Company or PMCC within sixty (60) days preceding the date on
which that individual is hired by you or any successor employer.
7
<PAGE>
(c) You and Employer and PMCC acknowledge and agree that the time
limitations contained in this Section 15 are the essence of this Agreement.
16. Restrictions Separable and Divisible. You hereby acknowledge
------------------------------------
that you are fully cognizant of the restrictions imposed upon you by Section 12,
13, 14 and 15 of this Agreement. The parties understand and intend that each
such restriction agreed to by you will be construed as separable and divisible
from every other restriction, and that the unenforceability, in whole or in
part, of any restriction will not affect the enforceability of the remaining
restrictions and that one or more or all of such restrictions may be enforced in
whole or in part as the circumstances warrant. No waiver of any one breach of
the restrictions contained herein will be deemed a waiver of any future breach.
17. Certain Remedies. You agree that the covenants in Section 12,
----------------
13, 14 and 15 are fair, reasonable and necessary and are reasonably required
for the protection of Employer and PMCC and any other Group Member. You also
acknowledge that any breach by you of any provision of Section 12, 13, 14 or 15
will cause irreparable harm. You also acknowledge that if you breach any of the
restrictive covenants under Sections 14 or 15(a), in addition to any other
remedies that may be available to PMCC or any other Company Group Member at law
or in equity, you will be required to repay the amount paid to you pursuant to
Section 6(d) hereunder, if the breach occurs within one year from the Closing
Date. Further, in addition to monetary damages and/or reasonable attorney's
fees, PMCC or any other Company Group Member shall have the right to seek
injunctive and/or other equitable relief in any court of competent jurisdiction
to enforce the restrictive covenants hereunder and enjoin the breach or
threatened breach (without posting any bond or other security) of the such
restrictive covenants. You also consent to the issuance of a temporary
restraining order to maintain the status quo pending the outcome of any
proceeding.
18. Prior Review and Approval. You agree that you will not publish
-------------------------
any documents or other materials related to your functions and duties (whether
"Confidential Information" or not) without the prior review and written approval
by PMCC.
19. Remedies. Except as stated in Section 17 of this Agreement, any
--------
claim or controversy arising out of or relating to this Agreement, or the
interpretation thereof, or your employment or termination of your employment
shall be settled by arbitration in Newark, New Jersey (or such other location as
the parties shall mutually agree) under the then prevailing National Rules for
the Resolution of Employment Disputes of the American Arbitration Association.
Judgment based upon the decision of the arbitrators may be entered in any court
having jurisdiction thereof. Any controversy relating to your duty to arbitrate
hereunder, or to the validity or enforceability of this arbitration clause, or
to any defense to arbitration, shall also be arbitrated.
8
<PAGE>
20. Representations and Warranties. You warrant and represent that,
------------------------------
except as disclosed in writing to Employer or PMCC, there are no prior, pending
or existing customer complaints, or regulatory, self-regulatory, administrative,
civil or criminal matters, or any other impediments that would affect your
employment, licensing or registration. Should you become a subject of any such
complaints, actions or matters, you agree to immediately report such fact, in
writing, to Employer or PMCC. You warrant and represent that there are no
circumstances which will interfere with, or prevent, your using your best
efforts in the course of your employment with Employer or PMCC. You represent
and warrant that, except as set forth herein, you have no other agreements or
understandings, written or oral, with Employer or PMCC regarding compensation.
21. Other Agreements. You warrant that the performance of the terms
----------------
of this Agreement will not conflict with or result in the breach of any other
agreement to which you are a party or by which you are bound.
22. Waiver. The waiver by either party of a breach of any provision
------
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach thereof.
23. Reservation of Rights. All rights reserved to Employer or PMCC
---------------------
in this Agreement, including but not limited to those in Sections 12-15 and 17,
shall survive your termination of employment and the termination of this
Agreement.
24. Assignment. The rights and benefits of Employer or PMCC under
----------
this Agreement shall be transferable, and all covenants and agreements hereunder
shall inure to the benefit of, and be enforceable by, its successors and
assigns. This Agreement is a personal contract and, except as specifically set
forth herein, your rights and interest may not be sold, transferred, assigned,
pledged or hypothecrated. In the event of any attempted assignment or transfer
of rights hereunder by you contrary to the provisions hereof, Employer or PMCC
shall have no further liability for payments hereunder.
25. Merger or Reorganization. This Agreement shall not be terminated
------------------------
by the voluntary or involuntary dissolution of Employer or PMCC or by any merger
or consolidation whether or not Employer or PMCC is the surviving or resulting
corporation, or upon any transfer of all or substantially all of the assets of
Employer or PMCC. In the event of any such merger or consolidation or transfer
of assets, the provisions of this Agreement shall be binding on and shall inure
to the benefit of the surviving or resulting corporation or the corporation to
which such assets shall be transferred.
26. Entire Agreement/Amendments. This Agreement supersedes any prior
---------------------------
written or oral agreements between the parties and embodies the entire
9
<PAGE>
understanding with respect to the subject matter hereof and cannot be changed or
extended except by a writing signed by you and a duly authorized officer of
Employer and PMCC.
27. Indebtedness. To the extent permitted by applicable law, you
------------
authorize Employer or PMCC to offset as a first lien any of your indebtedness to
Employer or PMCC against any amounts owed to you from Employer or PMCC, until
the amount of such indebtedness is fully paid. Debt not fully satisfied by such
offset is your personal debt and is recoverable by Employer or PMCC at any time
with interest. Employer or PMCC reserves the right to demand full and immediate
repayment of such indebtedness. If Employer or PMCC files legal action to
recover your personal debt, you agree to pay for all costs, including attorneys
fees, incurred by Employer or PMCC in such action.
28. Accounting Procedures. Any calculation, computation, or
---------------------
accounting as may be required under this Agreement shall be made by Employer or
PMCC, as the case may be, in accordance and conformity with its customary
procedures and as may be required by various regulatory agencies.
29. Compliance. You agree to abide by all existing and future
----------
Federal and State laws, all rules and regulations set forth by all regulatory
agencies, exchanges, and self-regulatory bodies, and Employer's or PMCC's own
internal rules and regulations and policies and practices. You further agree to
submit to such supervision as may be necessary to ensure compliance therewith.
30. Duration of Employment. This Agreement does not guarantee you
----------------------
any particular term of employment. You are employed at will and may be
terminated at any time, for any reason, with or without cause or notice. In the
event that this Section 30 conflicts with any other provision(s) of this
Agreement, this Section shall be construed to permit PMCC and Employer to
terminate your employment at will, but not to alter the other contractual
obligations of the parties under this Agreement.
31. Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the substantive and procedural laws of the State of
New Jersey.
32. Severability. If any provision of this Agreement shall be held
------------
to be invalid or unenforceable for any reason, the remaining provisions shall
continue to be valid and enforceable. If a court or agency finds that any
provision of this Agreement is invalid or unenforceable, but that by limiting
such provision it would become valid or enforceable, then such provision shall
be deemed to be written, construed, and enforced as so limited.
10
<PAGE>
33. Captions. Section headings are for convenience of reference only
--------
and will not be considered a part of this Agreement.
11
<PAGE>
34. Further Assurances. Each of the parties agrees to do all further
------------------
acts and things and to execute and deliver all further documents and instruments
as may be necessary or desirable to effectuate the purposes and intent of this
Agreement.
35. Acknowledgment. You acknowledge that you have read, understand
--------------
and are in agreement with the terms and conditions of this Agreement regarding
the rights and obligations of Employer or PMCC and you, and that you have
consulted with and received advice from an attorney of your choice. As such, no
provision of this Agreement shall be construed against the drafter.
IN WITNESS WHEREOF, the parties have read and executed this Agreement as
of the day and year first above written.
EMPLOYER
/s/ Charles H. Cremens
-----------------------------
NAME: Charles H. Cremens
TITLE: President
PRUDENTIAL MORTGAGE CAPITAL CORPORATION
/s/ Robert L. Fitts
-----------------------------
NAME: Robert L. Fitts
TITLE: Vice President
/s/ Shekar Narasimhan
-----------------------------
EMPLOYEE: SHEKAR NARASIMHAN
12
<PAGE>
Exhibit (d)(1)(D)
EMPLOYMENT AGREEMENT
This Agreement is entered into as of this 10th day of May, 2000 by and
among you, CHARLES H. CREMENS, WMF GROUP, Inc. (the "Employer" or the "Company")
and PRUDENTIAL MORTGAGE CAPITAL CORPORATION ("PMCC").
WHEREAS, simultaneously with the execution hereof PMCC is entering into an
Agreement and Plan of Merger, whereby the Employer will merge with a subsidiary
of PMCC and thereby become a wholly owned subsidiary of PMCC;
WHEREAS, PMCC and Employer wish to secure your agreement to provide
services to them following the closing of such merger, and you are willing to
agree to provide such services to induce PMCC to enter into the Merger
Agreement; and
WHEREAS, each of the parties agrees that this Agreement will not take
effect until the closing of such merger, and will not become effective unless
and until such merger is consummated.
NOW, THEREFORE, PMCC, Employer and you agree as follows:
1. Effective Date. This Agreement shall be and become effective on
--------------
the date on which the Agreement and Plan of Merger (the "Merger Agreement"), by
and between PMCC and Employer, of even date herewith, closes (the "Closing
Date"). If the Merger Agreement is terminated in accordance with its terms, or
if the Closing Date does not occur on or before October 31, 2000, this Agreement
shall be rendered void and without effect, and neither Employer nor PMCC will
have any obligations or liability to you, and you will have no obligations or
liability to Employer or PMCC, hereunder.
2. Background/Compliance Checks. You shall complete a consent and
----------------------------
disclosure form, a conflict of interest questionnaire, crime bill notice to
applicants, information security policy agreement and demonstrate your ability
to demonstrate legal authorization to work in the United States.
3. Employment and Duties. You shall have primary responsibility for
---------------------
the possible sale of the commercial mortgage brokerage business (the "Commercial
Brokerage Sale"), assist Employer with any post-closing issues arising in
connection with the Commercial Brokerage Sale, assist Employer with the
integration of the business of Employer with that of PMCC and perform such
additional duties consistent with your training and experience and the other
terms and conditions of this Agreement that PMCC may assign from time to time.
You shall report to Dave Twardock or such other person designated by Employer
from time to time. You agree to obtain, if necessary, and maintain any
regulatory licenses required for the performance of your duties hereunder or
otherwise reasonably requested by PMCC. Except for periods of travel required by
the
<PAGE>
Employer or PMCC in connection with the performance of your duties
hereunder, you shall perform your services in Boston, Massachusetts.
4. Performance/Conflicts of Interest. Prior to the consummation, if
---------------------------------
any, of the Commercial Brokerage Sale, you agree to devote all of your time and
efforts to the performance of your duties as an employee of Employer and you
shall not, directly or indirectly, act for the benefit of or be employed by any
person, firm or corporation other than Employer and PMCC. During such period,
you also agree that you will not be concerned or connected with any other
business pursuit whatsoever without the prior written consent of PMCC in
accordance with its policies. Following the consummation, if any, of the
Commercial Brokerage Sale, you shall be entitled to perform services for third
parties, subject in all events to your compliance with the covenants contained
in Sections 12, 13, 14 and 15.
5. Term. The term of this Agreement shall begin on the Closing Date
----
and shall continue through the six-month anniversary of the Closing Date (the
"End Date"), except for those clauses contained in this Agreement regarding your
post-employment obligations, which shall survive your employment.
Notwithstanding the foregoing, this Agreement shall (i) automatically terminate
-
upon your death, your permanent disability resulting in your inability to
perform the essential functions of your position, or your adjudication of
incompetency and (ii) terminate after the Closing Date upon 60 days' written
--
notice of termination from you or the Employer and/or PMCC, which may be given
for any reason whatsoever. During the period of employment following receipt of
any notice of termination as provided in the immediately preceding sentence, the
Company shall have the right, notwithstanding any other provision of this
Agreement, to assign to you such duties and responsibilities consistent with the
duties described in Section 3 hereof (including no such duties and
responsibilities) as it shall determine in its sole discretion.
6. Compensation. From and after the Closing Date and provided you
------------
remain in employment with Employer, Employer agrees to compensate you in
accordance with the following terms:
(a) Base Salary. You will receive a monthly base salary of $20,000,
-----------
through the End Date, payable in accordance with PMCC's usual payroll
practices. If your employment with Employer terminates prior to the End
Date other than due to your resignation or death, Employer shall pay you a
lump sum amount equal to the remainder of the base salary that would have
been payable through the End Date.
(b) Retention Bonus. Unless your employment with Employer shall end
---------------
prior to the End Date due to your resignation or death, you will receive a
bonus in the amount of $375,000 within 14 days of the End Date.
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(c) Commercial Brokerage Sale Bonus. Unless you shall have previously
-------------------------------
resigned from employment or terminated your employment due to death, you
shall receive an additional bonus of $150,000 upon (and subject to) the
successful consummation of the Commercial Brokerage Sale during the term
hereof. Such a sale will not be considered successful for purposes of the
immediately preceding sentence unless, in the reasonable judgment of
Employer, the terms thereof provide for the continued distribution of
existing products of Employer and PMCC, if desired by PMCC and retention by
Employer or PMCC for a period of at least two years of the servicing of
loans thereafter generated by the Commercial Mortgage Business, if desired
by PMCC. The amount due and payable hereunder shall be paid within ten
business days of the closing of the Commercial Brokerage Sale, subject to
confirmation by Employer that the conditions outlined in the immediately
preceding sentence have been satisfied.
(d) Payments with Respect to Restrictive Covenants. In consideration
----------------------------------------------
of your agreeing to be bound during the Restricted Period as defined in
Section 14, by the restrictive covenants contained in Sections 14 and 15(a)
hereunder, and your compliance with such restrictive covenants, you will
receive $500,000 as soon as practicable, but in no event later than 14 days
after the Closing Date. In the event that you breach any of the
restrictive covenants contained in Sections 14 or 15(a) hereunder, during
the Restricted Period as defined in Section 14, you agree that you will be
required to repay the Employer any and all amounts received by you under
this Section 6(d).
7. Benefits. During your period of full time employment, you will be
--------
eligible to participate in pension, medical, dental, legal, long-term care,
short and long-term disability, employee savings, and life insurance plans on
the same terms and conditions as similarly situated PMCC employees at your rank
and status and compensation level in accordance with the terms of these plans
which may be in effect from time to time. In addition, subject to your being
insurable at standard rates, Employer shall provide you with term life insurance
coverage from the Closing Date to the End Date in the face amount of $650,000,
and you shall have the right to designate the beneficiary of such policy. You
agree to undergo any reasonable physical examination, to complete any form and
to provide any information reasonably necessary to obtain such policy.
8. Vacation. You will be granted 20 days of paid vacation annually
--------
(prorated for your actual period of employment) to be administered in accordance
with PMCC's policies and practices which may be in effect from time to time.
9. Severance. The extent to which you shall be eligible for, and the
---------
amount of, any severance benefits that may be payable upon your termination of
employment by Employer or PMCC following the Closing Date and prior to the End
3
<PAGE>
Date, shall be determined in accordance with PMCC's severance policy, if any,
then in effect for an employee at your level; provided, however, that you agree
that such severance benefits will be offset by any amounts paid to you hereunder
under Section 6 (a), (b) and (c). You further agree that, notwithstanding the
terms of the Merger Agreement pertaining to the provision of severance benefits
comparable to those which would have been payable during the first 180 days
after the Closing Date under the Key Employee Incentive Plan of the WMF Group,
Ltd. (the "KEIP Plan"), you shall have no right or claim to severance benefits
from PMCC, Employer or any of their affiliates other than as expressly provided
in this Section 9. You also agree and acknowledge that if your employment with
Employer terminates at or after the End Date such termination shall not be
treated as entitling you to any severance payments.
10. Taxes and Withholding. All payments set forth in this Agreement
---------------------
are subject to applicable taxes and withholding.
11. Benefitability of Compensation. For purposes of this Agreement,
------------------------------
you understand and acknowledge that compensation payable under this Agreement
may be taken into account for employee benefits plans and arrangements only to
the extent such plans and arrangements so provide.
12. Non-Disclosure of Confidential Information.
------------------------------------------
(a) You acknowledge that it is the policy of the Company Group (as
defined below) to maintain as confidential (i) all information relating to
-
the products, services, operations, plans, strategies, formulas, models,
prototypes, finances and business concepts of the Company Group, (ii) all
--
information relating to the customers, clients, accounts, customer or
client leads or prospects, and employees of the Company Group, and (iii)
---
attorney work product and attorney-client communications, and documents and
data prepared in anticipation of or in the course of complaints, charges,
investigations, examinations or litigation in which a Group Member is
involved. All such information, to the extent it is maintained by the
Company Group as confidential and is not otherwise in the public domain, is
hereinafter referred to as "Confidential Information".
(b) The parties recognize that the services to be performed by you
hereunder are special and unique, and that by reason of your retention by
PMCC and Employer you have and will acquire Confidential Information. You
further acknowledge that Confidential Information is of great value to the
Company Group and is developed and acquired by great expenditures of time,
effort and cost. The parties confirm that it is reasonably necessary for
the protection of the good will of the Company Group that you agree, and
accordingly you do agree, that you will not, directly or indirectly, at any
time during your employment or after the termination of your employment for
any reason, disclose to any persons,
4
<PAGE>
firms or corporations, other than entities within the Company Group (such
other persons, firms and corporations not within the Company Group being
hereinafter referred to collectively as "third parties"), or use or cause
or authorize any third parties to use, any Confidential Information except
(1) as required by your employment with Employer and PMCC, (2) as required
- -
in a legal proceeding, provided you notify counsel for PMCC sufficiently in
advance of disclosure to obtain an appropriate protective order and PMCC
has not obtained such an order, or (3) as authorized by PMCC in writing.
(c) You agree that you will not, at any time, move from the premises
of the Company Group, any correspondence, records, notebooks, computer
software or printouts, data or other documents or materials relating to the
business and procedures heretofore or hereafter acquired, developed or used
by the Company Group, except as reasonably necessary to the discharge of
your duties hereunder.
(d) You agree that, upon the termination of your employment, you will
forthwith deliver to PMCC any and all order-books, customer lists,
notebooks and other documents and materials, together with all copies
thereof, in your possession or under your control relating to the
Confidential Information or which is otherwise the property of the Company
Group. PMCC agrees that you may take copies of any and all publicly
available research documents accumulated by you for your own professional
benefit, provided that you shall leave PMCC the original.
(e) Your obligations under this Section 12 will continue
notwithstanding the termination of your employment for any reason under
this Agreement.
(f) For purposes of this Agreement, Company Group means PMCC, The
Prudential Insurance Company of America, and any other corporation,
partnership, limited liability company or other business entity under
common control with, controlled by or controlling any of the foregoing. A
Group Member shall mean each and any corporation, partnership, limited
liability company or other business entity which is included in the Company
Group.
13. Disclosure and Assignment of Intellectual Property.
--------------------------------------------------
(a) During the term of your employment, you will (without additional
compensation) promptly make available to PMCC and Employer all ideas,
working papers, descriptions, reports, notes, forms, data, products,
diagrams, computer programs (source code and object code), databases,
systems, processes, methodologies, mathematical and/or computer implemented
models, discoveries and inventions (hereinafter referred to collectively as
"Intellectual Property"), whether or not patentable or copyrightable, which
you, while employed by
5
<PAGE>
Employer or PMCC, conceive, make, develop, acquire, reduce to practice
and/or memorialize in any tangible form in any and all media, whether alone
or with others and whether during or after usual work hours, which are
unique to any Group Member's business or are used by any Group Member, or
arise out of or in connection with the duties performed by you hereunder.
(b) You hereby transfer and assign to Employer or, if directed by
PMCC, PMCC all rights, titles and interests in and to the Intellectual
Property, including any and all domestic and foreign trade secret, patent
and copyright rights therein with PMCC having the right to obtain and to
hold in its own name, copyright registrations, patents and such other
intellectual property protection as may be appropriate to the subject
matter, and any extensions and renewals thereof. In addition, you hereby
agree (without any additional compensation to you), from time to time
during or after the term of your employment, to give PMCC or Employer and
any person designated by PMCC, reasonable assistance, at PMCC's expense,
required to perfect, protect and enforce the rights defined in this Section
13, including, but not limited to, executing and delivering all documents
requested by PMCC in connection therewith (including, without limitation,
applications for letters, patents and assignments thereof).
14. Covenant Not To Compete. You acknowledge that you have unique
-----------------------
knowledge of Employer's business, and have been engaged in managing and
overseeing all aspects of Employer's management, marketing, business
development, pricing, branding, advertising, competitive analysis, revenue
generation and customer acquisition and customer retention strategies
(collectively referred to as the "Activities"). You also acknowledge that your
responsibilities with respect to the Activities have extended through the entire
geographic scope of Employer's business and that any restrictions on competitive
employment that do not encompass this entire geographic scope would not protect
Employer and PMCC's legitimate business interests. You also agree and
acknowledge that you are providing the covenants set forth in this Agreement to
encourage and induce PMCC to effect the transactions contemplated in the Merger
Agreement. Accordingly, you agree that, from the Closing Date until (i) the End
Date, if your employment is terminated by the Company prior to the End Date or
(ii) the six month anniversary of your termination of employment for any other
reason (the "Restricted Period"), you will not, directly or indirectly:
(a) own, manage, operate, join, control or participate in the
ownership, management, operation or control of, or, except as otherwise
provided in subclause (b) below, engage in or be connected in any manner
with, any business which is or may reasonably be found to be engaged in the
same business as Employer or PMCC (a "Competitor"), except that you may own
not more than 2% of any class of securities of a Competitor the securities
of which are publicly traded; or
6
<PAGE>
(b) serve as a director, officer or consultant of, or be employed in
any executive, professional, managerial or supervisory capacity
(collectively referred to as an "Employment Opportunity") by, any
Competitor, performing any of the Activities you performed for Employer or
PMCC prior to your termination or any related activities.
(c) accept an Employment Opportunity with any commercial or multi-
family lending agency (including, but not limited to, FHA, Fannie Mae,
Freddie Mac and Ginnie Mae).
15. Covenant Not To Solicit.
-----------------------
(a) You agree that, except on behalf of the Company or PMCC, during
the term of your employment, and during the Restricted Period, you shall not
contact, call on, provide advice to, solicit, take away, or divert, and/or
influence or attempt to influence any customers, clients, and/or patrons of the
Company or PMCC;
(b) You also agree that, during the term of your employment hereunder,
and for a period of six months' thereafter, you shall not:
(i) solicit or induce, either directly or indirectly, any employee
of the Company or PMCC (a "Covered Employee") to leave the
employ of the Company;
(ii) take any action to assist any successor employer or any other
entity, either directly or indirectly, in soliciting or
inducing any Covered Employee to leave the employ of the
Company or PMCC; or
(iii) hire or employ, assist in the hire or employment, either
directly or indirectly, of any individual who was employed by
the Company or PMCC within sixty (60) days preceding the date
on which that individual is hired by you or any successor
employer.
(c) You and Employer and PMCC acknowledge and agree that the time
limitations contained in this Section 15 are the essence of this Agreement.
16. Restrictions Separable and Divisible. You hereby acknowledge
------------------------------------
that you are fully cognizant of the restrictions imposed upon you by Section 12,
13, 14 and 15 of this Agreement. The parties understand and intend that each
such restriction agreed to by you will be construed as separable and divisible
from every other restriction, and that the unenforceability, in whole or in
part, of any restriction will not affect the enforceability of the remaining
restrictions and that one or more or all of such restrictions may be enforced in
whole or in part as the circumstances warrant. No waiver of any one breach of
the restrictions contained herein will be deemed a waiver of any future breach.
7
<PAGE>
17. Certain Remedies. You agree that the covenants in Section 12,
----------------
13, 14 and 15 are fair, reasonable and necessary and are reasonably required for
the protection of Employer and PMCC and any other Group Member. You also
acknowledge that any breach by you of any provision of Section 12, 13, 14 or 15
will cause irreparable harm. You also acknowledge that if you breach any of the
restrictive covenants under Sections 14 or 15(a) during the Restricted Period,
then, in addition to any other remedies that may be available to PMCC or any
other Company Group Member at law or in equity, you will be required to repay
the amount paid to you pursuant to Section 6(d) hereunder. Further, in addition
to monetary damages and/or reasonable attorney's fees, PMCC or any other Company
Group Member shall have the right to seek injunctive and/or other equitable
relief in any court of competent jurisdiction to enforce the restrictive
covenants hereunder and enjoin the breach or threatened breach (without posting
any bond or other security) of the such restrictive covenants. You also consent
to the issuance of a temporary restraining order to maintain the status quo
pending the outcome of any proceeding.
18. Prior Review and Approval. You agree that you will not publish
-------------------------
any documents or other materials related to your functions and duties (whether
"Confidential Information" or not) without the prior review and written approval
by PMCC.
19. Remedies. Except as stated in Section 17 of this Agreement, any
--------
claim or controversy arising out of or relating to this Agreement, or the
interpretation thereof, or your employment or termination of your employment
shall be settled by arbitration in Newark, New Jersey (or such other location as
the parties shall mutually agree) under the then prevailing National Rules for
the Resolution of Employment Disputes of the American Arbitration Association.
Judgment based upon the decision of the arbitrators may be entered in any court
having jurisdiction thereof. Any controversy relating to your duty to arbitrate
hereunder, or to the validity or enforceability of this arbitration clause, or
to any defense to arbitration, shall also be arbitrated.
20. Representations and Warranties. You warrant and represent that,
------------------------------
except as disclosed in writing to Employer or PMCC, there are no prior, pending
or existing customer complaints, or regulatory, self-regulatory, administrative,
civil or criminal matters, or any other impediments that would affect your
employment, licensing or registration. Should you become a subject of any such
complaints, actions or matters, you agree to immediately report such fact, in
writing, to Employer or PMCC. You warrant and represent that there are no
circumstances which will interfere with, or prevent, your using your best
efforts in the course of your employment with Employer or PMCC. You represent
and warrant that, except as set forth herein, you have no other agreements or
understandings, written or oral, with Employer or PMCC regarding compensation.
8
<PAGE>
21. Other Agreements. You warrant that the performance of the terms
----------------
of this Agreement will not conflict with or result in the breach of any other
agreement to which you are a party or by which you are bound.
22. Waiver. The waiver by either party of a breach of any provision
------
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach thereof.
23. Reservation of Rights. All rights reserved to Employer or PMCC
---------------------
in this Agreement, including but not limited to those in Sections 12-15 and 17,
shall survive your termination of employment and the termination of this
Agreement.
24. Assignment. The rights and benefits of Employer or PMCC under
----------
this Agreement shall be transferable, and all covenants and agreements hereunder
shall inure to the benefit of, and be enforceable by, its successors and
assigns. This Agreement is a personal contract and, except as specifically set
forth herein, your rights and interest may not be sold, transferred, assigned,
pledged or hypothecated. In the event of any attempted assignment or transfer
of rights hereunder by you contrary to the provisions hereof, Employer or PMCC
shall have no further liability for payments hereunder.
25. Merger or Reorganization. This Agreement shall not be terminated
------------------------
by the voluntary or involuntary dissolution of Employer or PMCC or by any merger
or consolidation whether or not Employer or PMCC is the surviving or resulting
corporation, or upon any transfer of all or substantially all of the assets of
Employer or PMCC. In the event of any such merger or consolidation or transfer
of assets, the provisions of this Agreement shall be binding on and shall inure
to the benefit of the surviving or resulting corporation or the corporation to
which such assets shall be transferred.
26. Entire Agreement/Amendments. This Agreement supersedes any prior
---------------------------
written or oral agreements between the parties and embodies the entire
understanding with respect to the subject matter hereof and cannot be changed or
extended except by a writing signed by you and a duly authorized officer of
Employer and PMCC.
27. Accounting Procedures. Any calculation, computation, or
---------------------
accounting as may be required under this Agreement shall be made by Employer or
PMCC, as the case may be, in accordance and conformity with its customary
procedures and as may be required by various regulatory agencies.
28. Compliance. You agree to abide by all existing and future
----------
Federal and State laws, all rules and regulations set forth by all regulatory
agencies, exchanges, and self-regulatory bodies, and Employer's or PMCC's own
internal rules and regulations
9
<PAGE>
and policies and practices. You further agree to
submit to such supervision as may be necessary to ensure compliance therewith.
29. Duration of Employment. This Agreement does not guarantee you
----------------------
any particular term of employment. You are employed at will and may be
terminated at any time, for any reason, with or without cause or notice. In the
event that this Section 29 conflicts with any other provision(s) of this
Agreement, this Section shall be construed to permit PMCC and Employer to
terminate your employment at will, but not to alter the other contractual
obligations of the parties under this Agreement.
30. Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the substantive and procedural laws of the State of
New Jersey.
31. Severability. If any provision of this Agreement shall be held
------------
to be invalid or unenforceable for any reason, the remaining provisions shall
continue to be valid and enforceable. If a court or agency finds that any
provision of this Agreement is invalid or unenforceable, but that by limiting
such provision it would become valid or enforceable, then such provision shall
be deemed to be written, construed, and enforced as so limited.
32. Captions. Section headings are for convenience of reference only
--------
and will not be considered a part of this Agreement.
33. Further Assurances. Each of the parties agrees to do all further
------------------
acts and things and to execute and deliver all further documents and instruments
as may be necessary or desirable to effectuate the purposes and intent of this
Agreement.
34. Acknowledgment. You acknowledge that you have read, understand
--------------
and are in agreement with the terms and conditions of this Agreement regarding
the rights and obligations of Employer or PMCC and you, and that you have
consulted with and received advice from an attorney of your choice. As such, no
provision of this Agreement shall be construed against the drafter.
IN WITNESS WHEREOF, the parties have read and executed this Agreement as
of the day and year first above written.
EMPLOYER
/s/ Shekar Narasimhan
------------------------------
NAME: Shekar Narasimhan
TITLE: Chairman & CEO
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<PAGE>
PRUDENTIAL MORTGAGE CAPITAL CORPORATION
/s/ Robert L. Fitts
-----------------------------------
NAME: Robert L. Fitts
TITLE: Vice President
/s/ Charles H. Cremens
-----------------------------------
EMPLOYEE: CHARLES H. CREMENS
11
