EXHIBIT 10.6
STOCK PURCHASE AGREEMENT
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THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
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as of October 16, 1998, by and among THE WMF GROUP, LTD., a Delaware corporation
(the "Company"), DEMETER HOLDINGS CORPORATION, a Massachusetts corporation
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("Demeter"), PHEMUS CORPORATION, a Massachusetts corporation ("Phemus"),
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CAPRICORN INVESTORS II, L.P., a Delaware limited partnership ("Capricorn"), and
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HARVARD PRIVATE CAPITAL HOLDINGS, INC., a Massachusetts corporation ("Harvard").
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Demeter, Phemus and Capricorn are referred to herein individually as an
"Investor" and collectively as the "Investors."
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RECITALS
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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,
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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
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of this Agreement (the "Rights Offering").
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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
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"Private Placement") and to enter into a Stand-By Purchase Agreement
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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
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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
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Investors, as provided in COMIT's Second Amended and Restated Articles of
Incorporation creating the COMIT Series C Preferred.
AGREEMENT
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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.
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1.1. Demeter Agreement to Purchase.
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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")
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for an aggregate cash purchase price of $12,649,262.57 (the "Demeter Purchase
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Price").
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1.2. Phemus Agreement to Purchase.
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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
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an aggregate cash purchase price of $693,302.11 (the "Phemus Purchase Price").
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1.3. Capricorn Agreement to Purchase.
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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
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with the Demeter Shares and Phemus Shares, the "Purchased Shares") for an
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aggregate cash purchase price of $3,335,638.88 (the "Capricorn Purchase Price").
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1.4. Investors Stand-By Purchase Commitment.
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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
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(the "Stand-By Shares") on the terms and conditions set forth in the Standby
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Purchase Agreement in the form attached hereto as Exhibit A and executed by the
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Company and the Investors simultaneously with the execution of this Agreement
(the "Standby Purchase Agreement").
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2. CLOSING.
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2.1. The Closing.
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The sale and purchase of the Purchased Shares (the "Closing") will
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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.
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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.
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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.
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The Company is a corporation duly organized, validly existing and in
good standing under the laws of the state of Delaware and has all requisite
corporate power and authority to own its properties and assets and to carry on
its business as now conducted and as presently proposed to be conducted. The
Company is duly qualified and in good standing to do business as a foreign
corporation in each jurisdiction where failure to be so qualified would have a
material adverse effect on the business, financial condition, assets or
prospects of the Company (a "Material Adverse Effect").
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3.2. Capitalization.
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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
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Preferred Stock, $.01 par value per share (the "Preferred Stock"), of which
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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
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Incorporation").
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(b) Common Stock. A total of 25,000,000 authorized shares of Common
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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
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Preferred Stock and as set forth on Schedule 3.2(c), there are no
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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
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Company's outstanding capital stock, or stock issuable upon exercise or
exchange of any outstanding options, warrants or
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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
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agreement, voting trust agreement or similar agreement exists relating to
the Company's securities.
3.3. Company Subsidiaries.
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Schedule 3.3 is a true and complete list of all business entities
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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
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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
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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.
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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."
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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.
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(a) The Purchased Shares, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration provided
for herein, and the Conversion Shares, when issued in accordance with the
Company's Certificate of Incorporation, will be duly and validly issued,
fully paid and nonassessable. The Company has authorized and
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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
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and prospectus delivery requirements of the U.S. Securities Act of 1933, as
amended (the "1933 Act") and the registration and qualification
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requirements of the securities laws of Massachusetts, Delaware, Virginia
and Connecticut.
3.6. Consents.
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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
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Share Issuance"), except for such qualifications or filings under the 1933 Act
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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.
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Except as set forth on Schedule 3.7, no legal or governmental action,
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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.
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Except as set forth on Schedule 3.8, the Company and each Subsidiary
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is not in violation of its respective articles of incorporation or bylaws, both
as amended, nor in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement or instrument
to which it is a party or by which it or any of its properties may be bound. To
the best of the Company's knowledge, except for any violations that individually
and in the aggregate would not have a Material Adverse Effect, the Company and
the Subsidiaries are in compliance with all applicable statutes, laws,
regulations and executive orders of the United States of America and all states,
foreign countries or other governmental bodies and agencies having jurisdiction
over the Company's and the Subsidiaries' business or properties. Neither the
Company nor any Subsidiary has received any notice of any such violation of such
statutes, laws, regulations or orders that has not been remedied prior to the
date hereof. The execution, delivery
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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.
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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.
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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
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each case as amended (the "Company Reports"): (a) complied as to form in all
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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
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thereto, (ii) were prepared in all material respects in accordance with
generally accepted accounting principles ("GAAP"), and (iii) fairly presented in
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all material respects the consolidated financial position of the Company and its
wholly-owned subsidiaries as of its date in conformity with GAAP. Each of the
consolidated statements of income, retained earnings and cash flows of the
Company included in or incorporated by reference into the Company Reports (as
amended and including any related notes and schedules) (A) complied as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, (B) were
prepared in accordance with GAAP, and (C) fairly presented the results of
operations, retained earnings or cash flows, as the case may be, of the Company
and its subsidiaries for the periods
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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
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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
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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.
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Since September 30, 1998, except as set forth on Schedule 3.11, there
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has been no material adverse change in the business, financial condition, assets
or prospects of the Company.
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
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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.
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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.
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All corporate or partnership action on the part of such Investor, as
applicable, necessary for the authorization, execution, delivery and performance
of all obligations of such Investor under this Agreement has been taken. This
Agreement constitutes such Investor's valid and legally binding obligation,
enforceable in accordance with its terms except as may be limited by (i)
applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) the effect of rules of law governing the availability of
equitable remedies.
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4.3. Purchase for Own Account.
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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.
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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.
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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.
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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.
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5.1. Rights Offering.
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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
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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
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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.
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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.
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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.
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(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
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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
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agrees in writing to be subject to the terms of this Section 5.4 to the same
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extent as if the transferee were the Investor hereunder.
5.5. Legends.
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(a) Each Investor acknowledges that the certificates evidencing the
Purchased Shares and the Conversion Shares will bear the legends set forth
below, in addition to any legend required by any state securities laws:
(i) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER
THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND
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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
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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.
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(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
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conversion option by giving written notice of the principal amount (and such
accrued interest) of COMIT Notes to be so converted to COMIT and the Company
within 10 business days following the payment of amounts outstanding with
respect to the COMIT Notes following the closing of the Rights Offering. The
closing of any conversion of COMIT Notes shall take place at the Company's
offices on the 10th business day following receipt by COMIT and the Company of a
notice of conversion, or within five business days after the date upon which all
applicable waiting periods under the Xxxx-Xxxxx-Xxxxxx Antitrust
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Improvements Act of 1976, as amended (the "HSR Act"), shall have expired or been
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terminated. At such closing, the Company will deliver to COMIT one or more
certificates representing the COMIT Conversion Shares, registered in such names
and denominations as COMIT shall reasonably request, against delivery of the
COMIT Notes to be converted, endorsed in blank. Upon issuance, the COMIT
Conversion Shares shall be duly and validly issued, fully paid and non-
assessable. If the COMIT Conversion Shares include Common Stock, such shares of
Common Stock shall have been approved for listing on any stock exchange or
inclusion in any automated quotation system on which the Common Stock is then
listed or included and shall be Registrable Shares for purposes of the
Registration Rights Agreement. COMIT shall apply all of the proceeds of the
repayment of the COMIT Notes to immediately redeem shares of the COMIT Series C
Preferred held by the Investors and Harvard as provided in the COMIT Amended and
Restates Articles of Incorporation. In the event any portion of the COMIT Notes
are converted into COMIT Conversion Shares as described above, each share of the
COMIT Series C Preferred then held by the Investors and Harvard shall be
immediately exchanged for a number of COMIT Conversion Shares equal to (1) the
aggregate number of COMIT Conversion Shares divided by (2) the number of shares
of COMIT Series C Preferred then held by the Investors and Harvard, with the
Investors and Harvard receiving only shares of Class A Preferred Stock to the
extent the COMIT Conversion Shares include any shares of Class A Preferred
Stock.
6. CONDITIONS TO CLOSING.
---------------------
6.1. Conditions to Investors' Obligations at Closing.
-----------------------------------------------
The obligations of the Investors under Section 2 of this Agreement are
---------
subject to the fulfillment or waiver, on or before the Closing, of each of the
following conditions, the waiver of which may be given by written, oral or
telephone communication to the Company, its counsel or to counsel to the
Investors:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Company set forth in Section 3 shall be true and correct
---------
in all respects on and as of the Closing Date (except for representations
and warranties that speak as of a specific date and time, which need be
true and correct as of such date and time), and the Company shall have
taken all actions required by this Agreement to be taken by the Company
prior to Closing.
(b) Securities Exemptions. The offer and sale of the Purchased Shares
---------------------
and the Conversion Shares pursuant to this Agreement shall be exempt from
the registration requirements of the 1933 Act and the registration and/or
qualification requirements of all applicable state securities laws.
(c) Proceedings and Documents. All corporate and other proceedings in
-------------------------
connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Investors and to the Investors' counsel, and the Investors
shall have received counterpart originals and certified or other copies of
the following documents:
-12-
(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 Krooth & 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.
(g) Settlement Agreement. The transactions contemplated by the
--------------------
Settlement Agreement and the Termination of Loan Commitment and Mutual
Release Agreement in the forms attached hereto as Exhibit C shall have been
---------
consummated.
-13-
(h) Form S-3. The Company shall have filed with the SEC a
--------
registration statement relating to the Rights Offering.
(i) Consents. All government and third-party consents necessary for
--------
the execution, delivery and performance by the Company, each Investor and
COMIT of this Agreement and the related agreements shall have been
received.
(j) Registration Rights Agreement Amendment. The amendment to the
---------------------------------------
Registration Rights Agreement contemplated by Section 5.4(b) hereof shall
--------------
have been executed by the Company, the Investors and Harvard.
(k) Certificate. The Investors shall have received a certificate of
-----------
the President or an Executive Vice President of the Company to the effect
that the conditions set forth in subparagraphs (a) and (d) through (j)
hereof have been satisfied and that lenders under the Company's lines of
credit have agreed to forebear until April 1, 1999 from terminating any
such lines of credit, accelerating the Company's obligations to any such
lenders and otherwise exercising any remedies available to such lenders as
the result of any default on the part of the Company.
(l) HSR Act. Any waiting period applicable to the transactions
-------
contemplated by this Agreement under the HSR Act, shall have terminated or
expired.
6.2. Conditions to Company's Obligations at Closing.
----------------------------------------------
The obligations of the Company to the Investor under Section 2 of this
---------
Agreement are subject to the fulfillment or waiver on or before the Closing of
the following conditions, the waiver of which may be given by written, oral or
telephone communication to the Investors, their counsel or to counsel to the
Company:
(a) Representations and Warranties. The representations and
------------------------------
warranties of each Investor set forth in Section 4 shall be true and
---------
correct in all respects on and as of the Closing Date, and the Company
shall have received a certificate of an appropriate officer or partner, as
applicable, of each Investor to such effect.
(b) Payment of Purchase Price. The Investors shall have delivered to
-------------------------
the Company the Demeter Purchase Price, the Phemus Purchase Price and the
Capricorn Purchase Price in accordance with the provisions of Section 2.
---------
(c) Securities Exemptions. The offer and sale of the Purchased Shares
---------------------
pursuant to this Agreement shall be exempt from the registration
requirements of the 1933 Act and the registration and/or qualification
requirements of all other applicable state securities laws.
(d) Proceedings and Documents. All corporate and other proceedings in
-------------------------
connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Company and to the
-14-
Company's legal counsel, and the Company shall have received all such
counterpart originals and certified or other copies of such documents as it
may reasonably request.
(e) Listing. The issuance of the Purchased Shares shall not violate
-------
or conflict with the Company's listing agreement with the Nasdaq National
Market with regard to the Common Stock or the listing standards or other
applicable rules of the Nasdaq National Market.
(f) Approval by Disinterested Directors. The transactions
-----------------------------------
contemplated by this Agreement and the Stand-By Purchase Agreement shall
have been approved by a majority of the members of the Company's Board of
Directors who are neither employees of the Company nor affiliated with the
Investors.
(g) Delivery and Cancellation of Warrants. The Company shall have
-------------------------------------
received the certificates representing the Warrants for cancellation.
(h) Consents. All government and third-party consents necessary for
--------
the execution, delivery and performance by the Company and COMIT of this
Agreement and the related agreements shall have been received.
(i) HSR Act. Any waiting period applicable to the transactions
-------
contemplated by this Agreement under the HSR Act shall have terminated or
expired.
7. MISCELLANEOUS.
7.1. Survival of Warranties.
----------------------
The representations, warranties and covenants of the Company and the
Investors contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement and the Closing and shall in no way be
affected by any investigation of the subject matter thereof made by or on behalf
of each Investor, its counsel or the Company or its counsel, as the case may be.
7.2. Successors and Assigns.
----------------------
The terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective successors and assigns of the parties.
Except for assignments by the Investors to affiliates, this Agreement may not be
assigned by any Investor without the prior written consent of the Company or by
the Company without the prior written consent of the Investors.
7.3. Governing Law.
-------------
This Agreement shall be governed by and construed under the internal
laws of the Commonwealth of Virginia as applied to agreements among Virginia
residents entered into and to
-15-
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
and
Hunton & Xxxxxxxx
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esquire
-16-
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
with copies to:
O'Melveny & Xxxxx LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxx X. Xxxxxxxxxxx, Esquire
-17-
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.
7.9. Amendments and Waivers.
----------------------
Any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the Investors. Any amendment or waiver effected in
accordance with this Section 7.9 shall be binding upon the Investors and the
-----------
Company.
-18-
7.10. Severability.
------------
If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision(s) shall be excluded from
this Agreement, and the balance of the Agreement shall be interpreted as if such
provision(s) were so excluded and shall be enforceable in accordance with its
terms.
7.11. Entire Agreement.
----------------
This Agreement, together with all exhibits and schedules hereto,
constitutes the entire agreement and understanding of the parties with respect
to the subject matter hereof and supersedes any and all prior negotiations,
correspondence, agreements, understandings, duties or obligations between the
parties with respect to the subject matter hereof. The Schedules hereto shall
be deemed a part of this Agreement for all purposes.
7.12. Further Assurances.
------------------
From and after the date of this Agreement, upon the request of the
Investors or the Company, the Company and the Investors shall execute and
deliver such instruments, documents or other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement.
[SIGNATURE PAGE FOLLOWS]
-19-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
THE COMPANY: THE WMF GROUP, LTD.,
------------
a Delaware corporation
By: /s/ Xxxxxx Xxxxxxxxxx
---------------------
Name: Xxxxxx Xxxxxxxxxx
Title: President
THE INVESTORS: DEMETER HOLDINGS CORPORATION, a
--------------
Massachusetts corporation
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Authorized Signatory
By: /s/ Xxx X. Xxxxxx
-----------------
Name: Xxx X. Xxxxxx
Title: Authorized Signatory
PHEMUS CORPORATION, a Massachusetts
corporation
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Authorized Signatory
By: /s/ Xxx X. Xxxxxx
-----------------
Name: Xxx X. Xxxxxx
Title: Authorized Signatory
HARVARD PRIVATE CAPITAL HOLDINGS,
INC., a Massachusetts corporation
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Authorized Signatory
By: /s/ Xxx X. Xxxxxx
-----------------
Name: Xxx X. Xxxxxx
Title: Authorized Signatory
CAPRICORN INVESTORS II, L.P.,
a Delaware limited partnership
By: Capricorn Holdings, LLC, a Delaware
limited liability company, its General
Partner
By: /s/ Xxxxxxx X. Xxxxxxx, Xx.
--------------------------
Name: Xxxxxxx X. Xxxxxxx, Xx.
Title: Manager
COMIT joins in this Agreement only
with respect to the provisions of the
last paragraph of Section 5.6 hereof.
-----------
COMMERCIAL MORTGAGE INVESTMENT TRUST,
INC., a Virginia corporation
By: /s/ Xxxxxx Xxxxxxxxxx
---------------------
Name: Xxxxxx Xxxxxxxxxx
Title: Chairman
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
