STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made and entered
into as of October 16, 1998, by and among THE WMF GROUP, LTD., a Delaware
corporation (the "COMPANY"), DEMETER HOLDINGS CORPORATION, a Massachusetts
corporation ("DEMETER"), PHEMUS CORPORATION, a Massachusetts corporation
("PHEMUS"), CAPRICORN INVESTORS II, L.P., a Delaware limited partnership
("CAPRICORN"), and HARVARD PRIVATE CAPITAL HOLDINGS, INC., a Massachusetts
corporation ("HARVARD"). Demeter, Phemus and Capricorn are referred to herein
individually as an "INVESTOR" and collectively as the "INVESTORS."
RECITALS
A. On October 16, 1998, the Investors agreed (subject to the fulfillment
of certain conditions, including the execution of this Agreement) to
purchase from the Company, and the Company agreed to sell to the
Investors, an aggregate of up to 6,000,000 shares of the Company's
Common Stock, par value $0.01 per share (the "COMMON STOCK") at a price
of $5.00 per share, with up to 5,000,000 shares to be purchased in a
private placement and up to 1,000,000 shares to be purchased pursuant
to a stand-by purchase commitment in connection with a rights offering
to be made to the Company's shareholders and announced on October 21,
1998, as described in SECTION 5.1 of this Agreement (the "RIGHTS
OFFERING").
B. The Company and the Investors now desire to enter into this agreement
to provide for the purchase by the Investors of a total of 3,635,972
shares of non-voting, convertible preferred stock, par value $.01 per
share (the "CLASS A PREFERRED Stock"), in a private placement by the
Company (the "PRIVATE PLACEMENT") and to enter into a Stand-By Purchase
Agreement providing for a stand-by commitment by the Investors to
purchase up to an additional 664,028 shares of Common Stock not
subscribed for by other shareholders of the Company pursuant to the
Rights Offering.
C. The Company shall apply the proceeds from the sale of the Common Stock
in the Private Placement to partially repay the COMIT Notes and
Commercial Mortgage Investment Trust, Inc., a Virginia corporation
("COMIT"), shall apply the proceeds of such repayment to retire shares
of COMIT's Class C Non-Voting Preferred Stock (the "COMIT SERIES C
PREFERRED") held by the Investors, as provided in COMIT's Second
Amended and Restated Articles of Incorporation creating the COMIT
Series C Preferred.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE AND SELL STOCK.
1.1. DEMETER AGREEMENT TO PURCHASE.
The Company agrees to sell to Demeter at the Closing (as
defined below), and Demeter agrees to purchase from the Company at the Closing,
an aggregate of 2,757,633 shares of Class A Preferred Stock (the "DEMETER
SHARES") for an aggregate cash purchase price of $12,649,262.57 (the "DEMETER
PURCHASE PRICE").
1.2. PHEMUS AGREEMENT TO PURCHASE.
The Company agrees to sell to Phemus at the Closing (as
defined below), and Phemus agrees to purchase from the Company at the Closing,
an aggregate of 151,145 shares of Class A Preferred Stock (the "PHEMUS SHARES")
for an aggregate cash purchase price of $693,302.11 (the "PHEMUS PURCHASE
PRICE").
1.3. CAPRICORN AGREEMENT TO PURCHASE.
The Company agrees to sell to Capricorn at the Closing, and
Capricorn agrees to purchase from the Company at the Closing, an aggregate of
727,194 shares of Class A Preferred Stock (the "CAPRICORN SHARES," and together
with the Demeter Shares and Phemus Shares, the "PURCHASED SHARES") for an
aggregate cash purchase price of $3,335,638.88 (the "CAPRICORN PURCHASE PRICE").
1.4. INVESTORS STAND-BY PURCHASE COMMITMENT.
The Company agrees to sell to the Investors, and the Investors
agree to purchase from the Company, at the closing of the Rights Offering
described in SECTION 5.1, up to an aggregate of 664,028 additional shares of
Common Stock (the "STAND-BY SHARES") on the terms and conditions set forth in
the Standby Purchase Agreement in the form attached hereto as EXHIBIT A and
executed by the Company and the Investors simultaneously with the execution of
this Agreement (the "STANDBY PURCHASE AGREEMENT").
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2. CLOSING.
2.1. THE CLOSING.
The sale and purchase of the Purchased Shares (the "CLOSING")
will take place at the offices of the Company at 10:00 a.m., Vienna, Virginia
time, on December 30, 1998, or at such time and place as the Company and the
Investors mutually agree upon (the "CLOSING DATE"), but not later than December
31, 1998. At the Closing, the Company will deliver to each Investor a
certificate representing the Investor's Purchased Shares against delivery to the
Company by the Investor of the applicable Purchase Price.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the Investors that at the
Closing, the following statements will be true and correct:
3.1. ORGANIZATION, GOOD STANDING AND QUALIFICATION.
The Company is a corporation duly organized, validly existing
and in good standing under the laws of the state of Delaware and has all
requisite corporate power and authority to own its properties and assets and to
carry on its business as now conducted and as presently proposed to be
conducted. The Company is duly qualified and in good standing to do business as
a foreign corporation in each jurisdiction where failure to be so qualified
would have a material adverse effect on the business, financial condition,
assets or prospects of the Company (a "MATERIAL ADVERSE EFFECT").
3.2. CAPITALIZATION.
Immediately prior to the Closing, the capitalization of the
Company consists of the following:
(a) PREFERRED STOCK. A total of 12,500,000 authorized shares
of Preferred Stock, $.01 par value per share (the "PREFERRED Stock"),
of which 3,635,972 shares have been designated Class A Preferred Stock,
none of which are issued and outstanding. The rights, privileges and
preferences of the Class A Preferred Stock are as set forth in the
Company's Restated Certificate of Incorporation, as amended (the
"CERTIFICATE OF INCORPORATION").
(b) COMMON STOCK. A total of 25,000,000 authorized shares of
Common Stock, of which 5,299,383 shares of Common Stock are issued and
outstanding. All issued shares of Common Stock have been duly and
validly authorized and issued in material compliance with all federal
and state securities laws and are fully paid and nonassessable.
(c) OPTIONS, WARRANTS, RESERVED SHARES. Except for the Class
A Preferred Stock and as set forth on SCHEDULE 3.2((C)), there are no
outstanding options, warrants, rights (including conversion or
preemptive rights) or agreements for the purchase or acquisition from
the Company of any shares of its capital stock or any securities
convertible into or ultimately exchangeable or exercisable for any
shares of the Company's capital stock. Except as set forth on SCHEDULE
3.2((C)), no shares of the Company's outstanding capital
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stock, or stock issuable upon exercise or exchange of any outstanding
options, warrants or rights, or other stock issuable by the Company,
are subject to any rights of first refusal or other rights to purchase
such stock (whether in favor of the Company or any other person),
pursuant to any agreement or commitment of the Company.
(d) NO AGREEMENTS. To the Company's knowledge, no
shareholders agreement, voting trust agreement or similar agreement
exists relating to the Company's securities.
3.3. COMPANY SUBSIDIARIES.
SCHEDULE 3.3 is a true and complete list of all business
entities that the Company operates, owns or otherwise controls directly or
indirectly through one or more subsidiaries, partnerships, joint ventures or
other business associations, a majority of the outstanding voting securities
(the "SUBSIDIARIES"). Each Subsidiary is duly incorporated and validly existing
under the laws of its jurisdiction of incorporation and has the requisite power
and authority to own its properties and assets and to carry on its business as
now being conducted and as presently proposed to be conducted. Each Subsidiary
is duly qualified and in good standing to do business as a foreign corporation
in each jurisdiction where failure to be so qualified would have a material
adverse effect on the business, financial condition, assets or prospects of such
Subsidiary.
All of such outstanding shares of capital stock of each
Subsidiary are validly issued, fully paid and nonassessable. Except as set forth
on SCHEDULE 3.3, the Company owns all of the shares of the issued and
outstanding capital stock of the Subsidiaries free and clear of any liens,
claims, encumbrances, charges or rights of third parties of any kind whatsoever.
3.4. DUE AUTHORIZATION; ENFORCEABILITY.
All corporate action on the part of the Company, its officers,
directors and shareholders necessary for the authorization, execution, delivery
and performance of all obligations of the Company under this Agreement, and the
authorization, issuance, reservation for issuance and delivery of the Purchased
Shares and the Common Stock issuable upon conversion of the Class A Preferred
Stock has been taken. The shares of Common Stock issuable upon conversion of the
Class A Preferred Stock are referred to herein as the "CONVERSION SHARES." This
Agreement constitutes a valid and legally binding obligation of the Company,
enforceable in accordance with its terms, except as may be limited by (i)
applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) the effect of rules of law governing the availability of
equitable remedies.
3.5. VALID ISSUANCE OF STOCK; COMPLIANCE WITH SECURITIES LAWS.
(a) The Purchased Shares, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration
provided for herein, and the Conversion Shares, when issued in
accordance with the Company's Certificate of Incorporation, will be
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duly and validly issued, fully paid and nonassessable. The Company has
authorized and reserved for issuance upon conversion of the Class A
Preferred Stock a sufficient number of shares of its Common Stock.
(b) Based in part on the representations made by the
Investors in SECTION 4 hereof, the Purchased Shares will be exempt from
the registration and prospectus delivery requirements of the U.S.
Securities Act of 1933, as amended (the "1933 ACT") and the
registration and qualification requirements of the securities laws of
Massachusetts, Delaware, Virginia and Connecticut.
3.6. CONSENTS.
No further consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority or any third-party on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement and the issuance of the Conversion Shares in
accordance with the Company's Certificate of Incorporation (the "CONVERSION
SHARE ISSUANCE"), EXCEPT FOR such qualifications or filings under the 1933 Act
and the regulations thereunder and all other applicable state securities laws as
may be required in connection with the transactions contemplated by this
Agreement. All such qualifications and filings will, in the case of
qualifications, be effective on the Closing Date and will, in the case of
filings, be made within the time prescribed by law.
3.7. LEGAL AND GOVERNMENTAL PROCEEDINGS.
Except as set forth on SCHEDULE 3.7, no legal or governmental
action, proceeding or investigation is pending, or to the best of the Company's
knowledge, threatened (or any basis therefor known to the Company) that
questions the validity of this Agreement, the Class A Preferred Stock, the
Conversion Shares, the Common Stock or the Conversion Share Issuance or that, if
determined adversely to the Company or any Subsidiary, is reasonably likely,
currently or prospectively, individually or in the aggregate, to have a Material
Adverse Effect.
3.8. COMPLIANCE WITH CHARTER DOCUMENTS, CONTRACTS AND LAW.
Except as set forth on SCHEDULE 3.8, the Company and each
Subsidiary is not in violation of its respective articles of incorporation or
bylaws, both as amended, nor in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, lease or other agreement or
instrument to which it is a party or by which it or any of its properties may be
bound. To the best of the Company's knowledge, except for any violations that
individually and in the aggregate would not have a Material Adverse Effect, the
Company and the Subsidiaries are in compliance with all applicable statutes,
laws, regulations and executive orders of the United States of America and all
states, foreign countries or other governmental bodies and agencies having
jurisdiction over the Company's and the Subsidiaries' business or properties.
Neither the
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Company nor any Subsidiary has received any notice of any such violation of such
statutes, laws, regulations or orders that has not been remedied prior to the
date hereof. The execution, delivery and performance by the Company of this
Agreement and the consummation of the transactions contemplated hereby and the
Conversion Share Issuance will not result in any such violation or default, or
be in conflict with or constitute, with or without the passage of time or the
giving of notice or both, either a default under the Company's Certificate of
Incorporation or Bylaws, or, to the best of the Company's knowledge, any such
violation of any statutes, laws, regulations or orders.
3.9. NO CONFLICTS.
The execution, delivery and performance by the Company of this
Agreement, the consummation of the transactions contemplated hereby and the
Conversion Share Issuance will not violate or conflict with or result in a
breach of any provision of, or constitute a default (or any event that, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination or in a right of termination or cancellation of, or accelerate
the performance required by, or result in the creation of any lien upon any of
the properties of the Company or any Subsidiary under, or result in being
declared void, voidable or without further binding effect, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust
or any license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which the Company or any Subsidiary is a
party, or by which the Company, the Subsidiaries or any of their properties is
bound or affected, except for any of the foregoing matters that would not
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect.
3.10. SECURITIES FILINGS.
As of their respective dates, all reports, schedules, forms, statements
and other documents required to be filed by the Company under the Securities
Exchange Act of 1934, as amended (the "1934 ACT"), since December 1, 1997, in
each case as amended (the "COMPANY REPORTS"): (a) complied as to form in all
material respects with the applicable requirements of the 1934 Act and (b) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. Each of the consolidated balance sheets of the Company included in
or incorporated by reference into the Company Reports (as amended and including
the related notes and schedules) (i) complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the U.S. Securities Exchange Commission ("SEC") with respect
thereto, (ii) were prepared in all material respects in accordance with
generally accepted accounting principles ("GAAP"), and (iii) fairly presented in
all material respects the consolidated financial position of the Company and its
wholly-owned subsidiaries as of its date in conformity with GAAP. Each of the
consolidated statements of income, retained earnings and cash flows of the
Company included in or incorporated by reference into the Company Reports (as
amended and including any related notes and schedules) (A) complied as to form
in all material respects with applicable accounting
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requirements and the published rules and regulations of the SEC with respect
thereto, (B) were prepared in accordance with GAAP, and (C) fairly presented the
results of operations, retained earnings or cash flows, as the case may be, of
the Company and its subsidiaries for the periods set forth therein (subject, in
the case of unaudited statements, to normal year-end audit adjustments that
would not be material in amount or effect) in conformity with GAAP.
The Company's registration statement relating to the Rights Offering
referred to in SECTION 5.1, as of its filing date, (a) complied as to form in
all material respects with the applicable requirements of the 1933 Act and (b)
did not contain any untrue statement of a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Except as and to the extent set forth in the Company Reports and as set
forth on SCHEDULE 3.10, neither the Company nor any of its subsidiaries has any
material liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that would be required to be reflected on, or reserved
against in, a balance sheet of the Company or in the notes thereto, prepared in
accordance with GAAP consistently applied, or any other material liabilities
(such liabilities being deemed material if the value of such liabilities,
individually or in the aggregate, is greater than $1 million), except
liabilities arising in the ordinary course of business since such date which
would not have a Material Adverse Effect.
3.11. NO CHANGES.
Since September 30, 1998, except as set forth on SCHEDULE
3.11, there has been no material adverse change in the business, financial
condition, assets or prospects of the Company.
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
Each Investor hereby represents and warrants to the Company that at
Closing, the following statements will be true and correct:
4.1. ORGANIZATION, GOOD STANDING AND QUALIFICATION.
Such Investor is a partnership or corporation, as applicable,
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its formation and has all requisite power and authority to own
its properties and assets and to enter into the transactions contemplated by
this Agreement.
4.2. DUE AUTHORIZATION.
All corporate or partnership action on the part of such
Investor, as applicable, necessary for the authorization, execution, delivery
and performance of all obligations of such Investor under this Agreement has
been taken. This Agreement constitutes such Investor's valid and legally binding
obligation, enforceable in accordance with its terms except as may be limited by
(i) applicable bankruptcy, insolvency, reorganization or other laws of general
application
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relating to or affecting the enforcement of creditors' rights generally and (ii)
the effect of rules of law governing the availability of equitable remedies.
4.3. PURCHASE FOR OWN ACCOUNT.
The Purchased Shares and the Conversion Shares are being
acquired for investment for such Investor's own account, not as a nominee or
agent, and not with a view to the public resale or distribution thereof within
the meaning of the 1933 Act, and such Investor has no present intention of
selling, granting any participation in, or otherwise distributing the same. Such
Investor also represents that it has not been formed for the specific purpose of
acquiring the Purchased Shares or the Conversion Shares.
4.4. INVESTMENT EXPERIENCE.
Such Investor understands that the purchase of the Purchased
Shares and the Conversion Shares involves substantial risk. Such Investor: (i)
has experience as an investor in securities and acknowledges that such Investor
is able to fend for itself, can bear the economic risk of its investment in the
Purchased Shares and the Conversion Shares and has such knowledge and experience
in financial or business matters that such Investor is capable of evaluating the
merits and risks of this investment in the Purchased Shares and the Conversion
Shares and protecting its own interests in connection with this investment
and/or (ii) has a preexisting personal or business relationship with the Company
and certain of its officers, directors or controlling persons of a nature and
duration that enables such Investor to be aware of the character, business
acumen and financial circumstances of such persons.
4.5. ACCREDITED INVESTOR STATUS.
Such Investor is an "accredited investor" within the meaning
of Regulation D promulgated under the 1933 Act, and such Investor has received a
copy of the Company's Restated Articles, Bylaws, this Agreement and such other
documents and agreements that it has requested and has read and understands the
respective contents thereof. Such Investor has had the opportunity to ask
questions of the Company and has received answers to such questions from the
Company. Such Investor has carefully reviewed and evaluated these documents and
understands the risks and other considerations relating to the investment.
4.6. RESTRICTED SECURITIES.
Such Investor understands that the Purchased Shares and the
Conversion Shares are characterized as "restricted securities" under the 1933
Act inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under the 1933 Act and applicable rules and
regulations thereunder such securities may be resold without registration under
the 1933 Act only in certain limited circumstances. In this connection, such
Investor represents that it is familiar with Rule 144 of the SEC, as presently
in effect, and understands the resale limitations imposed thereby and by the
1933 Act.
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5. COVENANTS OF THE PARTIES.
5.1. RIGHTS OFFERING.
As soon as practicable after the date of this Agreement, in
compliance with applicable law, the Company shall distribute on a pro rata basis
transferable rights (each a "RIGHT") to all holders-of-record of Common Stock on
a record date determined by the Board of Directors of the Company. Such holders
shall receive 1.072 Rights for each share of Common Stock held by them on such
record date, and each Right shall entitle the holder thereof to purchase one
share of Common Stock for $5.00 per share (the "RIGHTS OFFERING"). No adjustment
shall be made in the price or number of shares for which each Right may be
exercised to reflect any change in the market price of the Common Stock. The
Company shall file with the SEC a registration statement relating to the shares
of Common Stock issuable upon exercise of the Rights, shall use its reasonable
best efforts to have such registration statement declared effective as soon as
practicable and shall take all other actions as may be necessary to complete the
Rights Offering as soon as practicable. The Investors agree that (i) after the
date of this Agreement and until the day following the first to occur of (A) the
record date for the Rights Offering and (B) June 30, 1999, they will not
transfer in any manner any of the shares of Common Stock "beneficially owned" by
them (as determined pursuant to Rule 12d-3 under the 0000 Xxx) or owned by them
as of record, (ii) they will not exercise or transfer in any manner any of the
Rights received by them with respect to any of such shares (and the certificates
representing Rights distributed to them shall bear a legend to such effect), and
(iii) neither they nor any of their affiliates (which term, in the case of
Capricorn, shall not include any of its limited partners or the limited partners
or general partners of Capricorn Investors, L.P. or any of Capricorn's
affiliates) will purchase or otherwise acquire from any person other than the
Company any other Rights.
5.2. CANCELLATION OF WARRANTS.
At and upon Closing, the Warrants shall no longer be
outstanding and shall automatically be canceled and retired, and all rights with
respect thereto shall cease to exist, and each holder of a certificate
representing any such Warrant shall cease to have any rights with respect
thereto. Harvard and Capricorn shall deliver (or instruct any holder for its
benefit to deliver) the certificates representing the Warrants to the Company
for cancellation at the Closing. The Company has determined that the value of
the Warrants is $150,000.
5.3. TAKING OF NECESSARY ACTION.
Each party hereto agrees to use promptly its commercially
reasonable best efforts to take or cause to be taken all action and to do or
cause to be done promptly all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including all actions necessary to
cause all conditions precedent set forth in SECTION 6 to be satisfied.
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5.4. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS.
(a) Each Investor agrees not to make any disposition of all
or any portion of the Purchased Shares or the Conversion Shares unless
and until:
(i) there is then in effect a registration statement
under the 1933 Act and all applicable state securities laws
covering such proposed disposition and such disposition is
made in accordance with such registration statement; or
(ii) (A) the Investor shall have notified the Company
of the proposed disposition and shall have furnished the
Company with a statement of the circumstances surrounding the
proposed disposition, and (B) the Investor shall have
furnished the Company, at the expense of such Investor or its
transferee, with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not
require registration of such securities under the 1933 Act or
under any applicable state securities laws.
(b) The Conversion Shares and, if Common Stock, the COMIT
Conversion Shares (as defined below) shall be Registrable Shares for
purposes of the Registration Rights Agreement, dated June 12, 1998,
between the Company, Harvard and Capricorn (the "REGISTRATION RIGHTS
AGREEMENT"). By signing and entering into this Agreement, the Company,
the Investors and Harvard each agree that the Registration Rights
Agreement shall be binding upon and inure to the benefit of Demeter and
Phemus. The Company, the Investors and Harvard will execute an
amendment to the Registration Rights Agreement to confirm the rights
and responsibilities of Demeter and Phemus under the Registration
Rights Agreement.
Notwithstanding the provisions of paragraphs (i) and (ii)
above, no such registration statement or opinion of counsel shall be required:
(A) for any transfer of any of the Purchased Shares in compliance with SEC Rule
144; or (B) for any transfer of any of the Purchased Shares by the Investor to
an affiliate of the Investor; PROVIDED that in the foregoing case the transferee
agrees in writing to be subject to the terms of this SECTION 5.4 to the same
extent as if the transferee were the Investor hereunder.
5.5. LEGENDS.
(a) Each Investor acknowledges that the certificates
evidencing the Purchased Shares and the Conversion Shares will bear the
legends set forth below, in addition to any legend required by any
state securities laws:
(i) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED
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OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED
TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
(ii) THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO
RESTRICTIONS ON TRANSFER PURSUANT TO A STOCK PURCHASE
AGREEMENT BETWEEN THE INITIAL HOLDER HEREOF AND THE WMF GROUP,
LTD.
(b) The legend set forth in SUBSECTION (A)(I) above shall be
removed by the Company from any certificate evidencing any of the
Purchased Shares or Conversion Shares upon effectiveness of a
registration statement under the 1933 Act with respect to the legended
security or upon delivery to the Company of an opinion of counsel,
reasonably satisfactory to the Company, that such security can be
freely transferred in a public sale without such a registration
statement being in effect and that such transfer will not jeopardize
the exemption or exemptions from registration pursuant to which the
Company issued the Purchased Shares or Conversion Shares.
5.6. USE OF PROCEEDS; CONVERSION OF SUBORDINATED DEBT.
(a) Simultaneously with the Closing, the Company shall use
the proceeds from the sale of the Purchased Shares to partially repay
the COMIT Notes.
(b) In addition, simultaneously with the closing of the
Rights Offering, the Company shall use the proceeds of the Rights
Offering and of the sale of any Stand-By Shares (i) to pay all
remaining amounts outstanding with respect to the COMIT Notes and (ii)
to the extent that any such proceeds remain, as working capital.
If the COMIT Notes are not fully repaid simultaneously with
Closing of the Rights Offering (whether out of proceeds from the Rights
Offering, the Stand-By Shares or otherwise), at the option of Harvard and
Capricorn, COMIT shall tender to the Company any remaining COMIT Notes and the
Company shall issue shares of Common Stock or, in the event the Class A
Preferred Stock has not been converted into Common Stock, shares of Class A
Preferred Stock at a price of $5.00 per share (whether such shares be Common
Stock or Class A Preferred Stock) in exchange therefor, the number of shares of
Common Stock or Class A Preferred Stock, as the case may be, to be issued upon
such conversion to be calculated by dividing the outstanding principal balance,
and any accrued but unpaid interest thereon, of the COMIT Notes to be converted
by $5.00 (the "COMIT CONVERSION SHARES"). Harvard and Capricorn may exercise the
foregoing conversion option by giving written notice of the principal amount
(and such accrued interest) of COMIT Notes to be so converted to COMIT and the
Company within 10 business days following the payment of amounts outstanding
with respect to the COMIT Notes following the closing of the Rights Offering.
The closing of any conversion of COMIT Notes shall take place at the Company's
offices on the 10th business day following
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receipt by COMIT and the Company of a notice of conversion, or within five
business days after the date upon which all applicable waiting periods under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), shall have expired or been terminated. At such closing, the Company will
deliver to COMIT one or more certificates representing the COMIT Conversion
Shares, registered in such names and denominations as COMIT shall reasonably
request, against delivery of the COMIT Notes to be converted, endorsed in blank.
Upon issuance, the COMIT Conversion Shares shall be duly and validly issued,
fully paid and non-assessable. If the COMIT Conversion Shares include Common
Stock, such shares of Common Stock shall have been approved for listing on any
stock exchange or inclusion in any automated quotation system on which the
Common Stock is then listed or included and shall be Registrable Shares for
purposes of the Registration Rights Agreement. COMIT shall apply all of the
proceeds of the repayment of the COMIT Notes to immediately redeem shares of the
COMIT Series C Preferred held by the Investors and Harvard as provided in the
COMIT Amended and Restates Articles of Incorporation. In the event any portion
of the COMIT Notes are converted into COMIT Conversion Shares as described
above, each share of the COMIT Series C Preferred then held by the Investors and
Harvard shall be immediately exchanged for a number of COMIT Conversion Shares
equal to (1) the aggregate number of COMIT Conversion Shares divided by (2) the
number of shares of COMIT Series C Preferred then held by the Investors and
Harvard, with the Investors and Harvard receiving only shares of Class A
Preferred Stock to the extent the COMIT Conversion Shares include any shares of
Class A Preferred Stock.
6. CONDITIONS TO CLOSING.
6.1. CONDITIONS TO INVESTORS' OBLIGATIONS AT CLOSING.
The obligations of the Investors under SECTION 2 of this
Agreement are subject to the fulfillment or waiver, on or before the Closing, of
each of the following conditions, the waiver of which may be given by written,
oral or telephone communication to the Company, its counsel or to counsel to the
Investors:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company set forth in SECTION 3 shall be true and
correct in all respects on and as of the Closing Date (except for
representations and warranties that speak as of a specific date and
time, which need be true and correct as of such date and time), and the
Company shall have taken all actions required by this Agreement to be
taken by the Company prior to Closing.
(b) SECURITIES EXEMPTIONS. The offer and sale of the
Purchased Shares and the Conversion Shares pursuant to this Agreement
shall be exempt from the registration requirements of the 1933 Act and
the registration and/or qualification requirements of all applicable
state securities laws.
(c) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the
Closing and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Investors and to the
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Investors' counsel, and the Investors shall have received counterpart
originals and certified or other copies of the following documents:
(i) CHARTER DOCUMENTS. A copy of the Certificate of
Incorporation and the Bylaws of the Company (as amended
through the date of the Closing and including a copy of a
Certificate of Designation setting forth the rights,
privileges and preferences of the Class A Preferred Stock in
the form filed with the Secretary of State of Delaware),
certified by the Secretary of the Company as true and correct
copies thereof as of the Closing.
(ii) SECRETARY'S INCUMBENCY CERTIFICATE. A certificate
of the Secretary or an Assistant Secretary or other officer of
the Company certifying the names of the officers of the
Company authorized to sign this Agreement, the certificates
for the Purchased Shares and the other documents, instruments
or certificates to be delivered pursuant to this Agreement by
the Company or any of its officers, together with the true
signatures of such officers.
(iii) CORPORATE ACTIONS. A copy of the resolutions of
the Board of Directors evidencing its approval, including the
approval of a majority of the Company's disinterested
directors, of this Agreement, the issuance of Purchased Shares
and the other matters contemplated hereby, certified by the
Secretary of the Company to be true, complete and correct.
(iv) LEGAL OPINION. An opinion or opinions of Hunton &
Xxxxxxxx or Xxxxxx & Xxxxxx, counsel to the Company, dated as
of the Closing Date, in substantially the form attached hereto
as EXHIBIT B.
(v) GOOD STANDING CERTIFICATE. A good standing
certificate of the Company issued by the Secretary of State of
the State of Delaware dated within ten (10) days before the
Closing.
(d) APPROVAL BY DISINTERESTED DIRECTORS. The transactions
contemplated by this Agreement and the Stand-By Purchase Agreement
shall have been approved by a majority of the members of the Company's
Board of Directors who are neither employees of the Company nor
affiliated with the Investors.
(e) LISTING. The Conversion Shares shall have been approved
for listing on the Nasdaq Stock Market or any other stock exchange or
automated quotation system on which the Common Stock is then listed or
included.
(f) XXXXXXX XXXXX TRANSACTION. The transactions contemplated
by the Mortgage Loan Purchase Agreement, dated December 18, 1998, by
and between Xxxxxxx Xxxxx Mortgage Capital Inc., a Delaware
corporation, and WMF Capital Corp., a Delaware corporation, shall have
been consummated.
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(g) SETTLEMENT AGREEMENT. The transactions contemplated by
the Settlement Agreement and the Termination of Loan Commitment and
Mutual Release Agreement in the forms attached hereto as EXHIBIT C
shall have been consummated.
(h) FORM S-3. The Company shall have filed with the SEC a
registration statement relating to the Rights Offering.
(i) CONSENTS. All government and third-party consents
necessary for the execution, delivery and performance by the Company,
each Investor and COMIT of this Agreement and the related agreements
shall have been received.
(j) REGISTRATION RIGHTS AGREEMENT AMENDMENT. The amendment
to the Registration Rights Agreement contemplated by SECTION 5.4(B)
hereof shall have been executed by the Company, the Investors and
Harvard.
(k) CERTIFICATE. The Investors shall have received a
certificate of the President or an Executive Vice President of the
Company to the effect that the conditions set forth in subparagraphs
(a) and (d) through (j) hereof have been satisfied and that lenders
under the Company's lines of credit have agreed to forebear until April
1, 1999 from terminating any such lines of credit, accelerating the
Company's obligations to any such lenders and otherwise exercising any
remedies available to such lenders as the result of any default on the
part of the Company.
(l) HSR ACT. Any waiting period applicable to the
transactions contemplated by this Agreement under the HSR Act, shall
have terminated or expired.
6.2. CONDITIONS TO COMPANY'S OBLIGATIONS AT CLOSING.
The obligations of the Company to the Investor under SECTION 2
of this Agreement are subject to the fulfillment or waiver on or before the
Closing of the following conditions, the waiver of which may be given by
written, oral or telephone communication to the Investors, their counsel or to
counsel to the Company:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each Investor set forth in SECTION 4 shall be true and
correct in all respects on and as of the Closing Date, and the Company
shall have received a certificate of an appropriate officer or partner,
as applicable, of each Investor to such effect.
(b) PAYMENT OF PURCHASE PRICE. The Investors shall have
delivered to the Company the Demeter Purchase Price, the Phemus
Purchase Price and the Capricorn Purchase Price in accordance with the
provisions of SECTION 2.
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(c) SECURITIES EXEMPTIONS. The offer and sale of the
Purchased Shares pursuant to this Agreement shall be exempt from the
registration requirements of the 1933 Act and the registration and/or
qualification requirements of all other applicable state securities
laws.
(d) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the
Closing and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Company and to the Company's
legal counsel, and the Company shall have received all such counterpart
originals and certified or other copies of such documents as it may
reasonably request.
(e) LISTING. The issuance of the Purchased Shares shall not
violate or conflict with the Company's listing agreement with the
Nasdaq National Market with regard to the Common Stock or the listing
standards or other applicable rules of the Nasdaq National Market.
(f) APPROVAL BY DISINTERESTED DIRECTORS. The transactions
contemplated by this Agreement and the Stand-By Purchase Agreement
shall have been approved by a majority of the members of the Company's
Board of Directors who are neither employees of the Company nor
affiliated with the Investors.
(g) DELIVERY AND CANCELLATION OF WARRANTS. The Company shall
have received the certificates representing the Warrants for
cancellation.
(h) CONSENTS. All government and third-party consents
necessary for the execution, delivery and performance by the Company
and COMIT of this Agreement and the related agreements shall have been
received.
(i) HSR ACT. Any waiting period applicable to the
transactions contemplated by this Agreement under the HSR Act shall
have terminated or expired.
7. MISCELLANEOUS.
7.1. SURVIVAL OF WARRANTIES.
The representations, warranties and covenants of the Company
and the Investors contained in or made pursuant to this Agreement shall survive
the execution and delivery of this Agreement and the Closing and shall in no way
be affected by any investigation of the subject matter thereof made by or on
behalf of each Investor, its counsel or the Company or its counsel, as the case
may be.
7.2. SUCCESSORS AND ASSIGNS.
The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties. Except for assignments by the
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Investors to affiliates, this Agreement may not be assigned by any Investor
without the prior written consent of the Company or by the Company without the
prior written consent of the Investors.
7.3. GOVERNING LAW.
This Agreement shall be governed by and construed under the
internal laws of the Commonwealth of Virginia as applied to agreements among
Virginia residents entered into and to be performed entirely within Virginia,
without reference to principles of conflict of laws or choice of laws.
7.4. COUNTERPARTS.
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
7.5. HEADINGS.
The headings and captions used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement. All references in this Agreement to sections, paragraphs, exhibits
and schedules shall, unless otherwise provided, refer to sections and paragraphs
hereof and exhibits and schedules attached hereto, all of which exhibits and
schedules are incorporated herein by this reference.
7.6. NOTICES.
Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively
given upon personal delivery to the party to be notified or one day after
deposit with a national overnight delivery service or three days after deposit
with the United States Post Office, by registered or certified mail, postage
prepaid and addressed as follows:
To the Company:
The WMF Group, Ltd.
0000 Xxxxxx Xxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxxxxxx
with copies to:
Krooth and Xxxxxx
0000 X Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esquire
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and
Hunton & Xxxxxxxx
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esquire
To Demeter:
c/o Charlesbank Capital Partners, LLC
000 Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxx X. Xxxxxx
Xxxx X. Xxxxx
with copies to:
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx Xxxx, Esquire
To Phemus:
c/o Charlesbank Capital Partners, LLC
000 Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxx X. Xxxxxx
Xxxx X. Xxxxx
with copies to:
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx Xxxx, Esquire
To Capricorn:
Capricorn Investors II, L.P.
00 Xxxx Xxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Xx.
Xxxxx X. Better
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with copies to:
O'Melveny & Xxxxx LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxx X. Xxxxxxxxxxx, Esquire
To Harvard:
c/o Charlesbank Capital Partners, LLC
000 Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxx X. Xxxxxx
Xxxx X. Xxxxx
with copies to:
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx Xxxx, Esquire
or at such other address as an Investor or the Company may designate by giving
ten days advance written notice to the other parties.
7.7. NO FINDER'S FEES.
Each party represents that it neither is nor will be obligated
for any finder's or broker's fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' or broker's fee (and any asserted liability) for which such Investor or
any of its officers, partners, employees, or representatives is responsible. The
Company agrees to indemnify and hold harmless the Investors from any liability
for any commission or compensation in the nature of a finder's or broker's fee
(and any asserted liability) for which the Company or any of its officers,
employees or representatives is responsible.
7.8. EXPENSES.
The Company shall pay all reasonable fees and expenses of the
Investors in connection with the preparation, execution and delivery of this
Agreement and the issuance of the Purchased Shares and the Conversion Shares and
any filings necessary under the HSR Act.
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7.9. AMENDMENTS AND WAIVERS.
Any term of this Agreement may be amended and the observance
of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the Investors. Any amendment or waiver effected in
accordance with this SECTION 7.9 shall be binding upon the Investors and the
Company.
7.10. SEVERABILITY.
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision(s) shall be excluded from
this Agreement, and the balance of the Agreement shall be interpreted as if such
provision(s) were so excluded and shall be enforceable in accordance with its
terms.
7.11. ENTIRE AGREEMENT.
This Agreement, together with all exhibits and schedules
hereto, constitutes the entire agreement and understanding of the parties with
respect to the subject matter hereof and supersedes any and all prior
negotiations, correspondence, agreements, understandings, duties or obligations
between the parties with respect to the subject matter hereof. The Schedules
hereto shall be deemed a part of this Agreement for all purposes.
7.12. FURTHER ASSURANCES.
From and after the date of this Agreement, upon the request of
the Investors or the Company, the Company and the Investors shall execute and
deliver such instruments, documents or other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
THE COMPANY: THE WMF GROUP, LTD.,
a Delaware corporation
By:________________________________________________
Name: Xxxxxx Xxxxxxxxxx
Title: President
THE INVESTORS: DEMETER HOLDINGS CORPORATION, a
Massachusetts corporation
By:________________________________________________
Name:
Title:
By:________________________________________________
Name:
Title:
PHEMUS CORPORATION, a Massachusetts
corporation
By:________________________________________________
Name:
Title:
By:________________________________________________
Name:
Title:
HARVARD PRIVATE CAPITAL HOLDINGS,
INC., a Massachusetts corporation
By:________________________________________________
Name:
Title:
By:________________________________________________
Name:
Title:
STOCK PURCHASE AGREEMENT
CAPRICORN INVESTORS II, L.P.,
a Delaware limited partnership
By: Capricorn Holdings, LLC, a Delaware limited
liability company, its General Partner
By:________________________________________________
Name: Xxxxxxx X. Xxxxxxx, Xx.
Title: Manager
STOCK PURCHASE AGREEMENT
COMIT joins in this Agreement only with respect to
the provisions of the last paragraph of SECTION 5.6
hereof.
COMMERCIAL MORTGAGE INVESTMENT
TRUST, INC., a Virginia corporation
By:________________________________________________
Name:
Title:
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
Schedule 3.2 (c) Options, Warrants, Reserved Shares
Schedule 3.3 Subsidiaries
Schedule 3.7 Legal and Governmental Proceedings
Schedule 3.8 Defaults
Schedule 3.10 Liabilities and Obligations
Schedule 3.11 Changes in Business of the Company
EXHIBITS
Exhibit A Standby Purchase Agreement
Exhibit B Opinions of Hunton & Xxxxxxxx and Xxxxxx &
Xxxxxx
Exhibit C Settlement Agreement and Termination of Loan
Commitment and Mutual Release Agreement
