SHARE PURCHASE AGREEMENT
dated as of
November 17, 1997
between
CAPRICORN INVESTORS II, L.P.
and
THE WMF GROUP, LTD.
TABLE OF CONTENTS
PAGE
ARTICLE I
TRANSACTIONS................................ 1
Section 1.1 Share Purchase............................................. 1
ARTICLE II
CLOSINGS.................................. 1
Section 2.1 The Closing................................................ 1
Section 2.2 Location of Closing........................................ 2
ARTICLE III
CONDITIONS OF CLOSING........................... 2
Section 3.1 Conditions Precedent to the Closing........................ 2
Section 3.2 Legends.................................................... 4
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY............................... 5
Section 4.1 Corporate Existence and Power.............................. 5
Section 4.2 Authorization; Contravention; Modifications................ 5
Section 4.3 Approvals.................................................. 6
Section 4.4 Binding Effect............................................. 6
Section 4.5 Financial Information...................................... 6
Section 4.6 Absence of Certain Changes or Events....................... 7
Section 4.7 Taxes...................................................... 7
Section 4.8 Litigation................................................. 7
Section 4.9 Compliance with Regulations................................ 8
Section 4.10 Subsidiaries.............................................. 8
Section 4.11 Insurance................................................. 8
Section 4.12 Debt...................................................... 9
Section 4.13 No Default................................................ 9
Section 4.14 Capitalization............................................ 9
Section 4.15 Material Contracts........................................10
Section 4.16 Books and Records.........................................12
Section 4.17 Fees for Brokers and Finders..............................12
Section 4.18 Misstatements.............................................12
Section 4.20 No Merger Agreements......................................13
Section 4.21 Board Actions.............................................13
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PAGE
Section 4.22 Stockholder Approval.......................................13
Section 4.23 Continuing Representations and Warranties..................14
ARTICLE V
REPRESENTATIONS AND WARRANTIES
CONCERNING LOANS AND SERVICING RIGHTS...................14
Section 5.1 Approved Issuer............................................14
Section 5.2 Past Securitizations; No Recourse..........................14
Section 5.3 Loan Documents; Mortgage Servicing Agreements..............15
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER..............15
Section 6.2 Authorization; Contravention...............................15
Section 6.3 Approvals..................................................15
Section 6.4 Binding Effect.............................................16
Section 6.5 Litigation.................................................16
Section 6.6 Compliance with Laws.......................................16
Section 6.7 Investment Intent..........................................16
Section 6.8 Fees for Brokers and Finders...............................16
Section 6.9 Financial Ability..........................................17
Section 6.10 Continuing Representations and Warranties..................17
ARTICLE VII
COVENANTS.................................17
Section 7.1 Mutual Covenants...........................................17
Section 7.2 Affirmative Covenants of the Company.......................19
Section 7.3 Negative Covenants of the Company..........................20
ARTICLE VIII
TERMINATION................................21
Section 8.1 Termination................................................21
Section 8.2 Expenses and Fees..........................................21
ARTICLE IX
INDEMNIFICATION..............................22
Section 9.1 Indemnification by the Company.............................22
Section 9.2 No Limitation on Other Rights of Recovery..................25
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PAGE
ARTICLE X
MISCELLANEOUS...............................25
Section 10.1 Notices...................................................25
Section 10.2 No Waivers; Remedies......................................26
Section 10.3 Amendments, Etc...........................................26
Section 10.4 Successors and Assigns....................................26
Section 10.5 Accounting Terms and Determinations.......................26
Section 10.6 Governing Law.............................................26
Section 10.7 Counterparts; Effectiveness...............................27
Section 10.8 Severability of Provisions................................27
Section 10.9 Headings and References...................................27
Section 10.10 Entire Agreement..........................................27
Section 10.11 Survival..................................................27
Section 10.12 Non-Exclusive Jurisdiction................................27
Section 10.13 Waiver of Jury Trial......................................28
Section 10.14 Affiliate.................................................28
Section 10.15 Non-Recourse..............................................28
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ANNEX
Annex A - Definitions
EXHIBITS
Exhibit A - Form of Registration Rights Agreement
Exhibit 3.1(f)(1) - Certificate of Secretary of the Company
Exhibit 3.1(f)(2) - Certificate of Officer of the Company
Exhibit 3.1(f)(5) - Opinion of Counsel for the Company
Exhibit 3.1(g)(1) - Certificate of Secretary of the Purchaser
Exhibit 3.1(g)(2) - Certificate of Officer of the Purchaser
Exhibit 3.1(g)(4) - Opinion of Counsel for the Purchaser
SCHEDULES
Schedule 4.5(a) - Certain Financial Statements
Schedule 4.6(a) - Certain Changes
Schedule 4.6(b) - Certain Actions
Schedule 4.8 - Litigation
Schedule 4.10 - Subsidiaries
Schedule 4.12 - Certain Debt
Schedule 4.13 - Certain Defaults
Schedule 4.14(h) - Certain Obligations
Schedule 4.15(a) - Material Contracts
Schedule 5.3 - Certain Loan Documents
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SHARE PURCHASE AGREEMENT
SHARE PURCHASE AGREEMENT dated as of November 17, 1997 between
THE WMF GROUP, LTD., a Delaware corporation (the "COMPANY"), and CAPRICORN
INVESTORS II, L.P., a Delaware limited partnership (the "PURCHASER").
Terms not otherwise defined in this Agreement have the
meanings stated in Annex A.
The parties agree as follows:
ARTICLE I
TRANSACTIONS
SECTION 1.1 SHARE PURCHASE. Subject to the terms and
conditions set forth in this Agreement, at the Closing:
(a) the Company shall issue, sell and deliver to the Purchaser
and the Purchaser shall purchase, accept and acquire from the Company,
546,448 shares of Common Stock, (the "SHARES"), which number of shares
is intended by the parties to be equal to 11% of the number of shares
of Common Stock issued and outstanding after giving effect to the
issuance, sale and delivery of the Shares pursuant to this Section
1.1(a) (the "SHARE PURCHASE"); and
(b) the Purchaser shall deliver to the Company in
consideration of the issuance, sale and delivery to the Purchaser of
the Shares, $5,000,000 (the "PURCHASE PRICE"), in immediately available
funds, to such account or accounts as the Company shall specify at
least three Business days prior to the Closing; and
(c) the Company and the Purchaser shall execute and deliver
the Registration Rights Agreement substantially in the form of EXHIBIT
A attached hereto (the "THE REGISTRATION RIGHTS AGREEMENT").
ARTICLE II
CLOSINGS
SECTION 2.1 THE CLOSING. The closing of the Share Purchase
shall take place (the "CLOSING") (i) subsequent to (a) the declaration by the
SEC of the effectiveness of the Registration Statements and (b) the distribution
by NHP Incorporated, a Delaware corporation ("NHP"), of one-third of a share of
Common Stock of the Company to each holder of a Right
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and (ii) prior to Capricorn Investors, L.P.'s distribution of such Common Stock
to certain of its limited partners (the "CLOSING DATE").
SECTION 2.2 LOCATION OF CLOSING. The Closing shall take place
at the offices of The WMF Group, Ltd., ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ or at such other location as agreed to by the parties.
ARTICLE III
CONDITIONS OF CLOSING
SECTION 3.1 CONDITIONS PRECEDENT TO THE CLOSING. The
obligations of each party under this Agreement with respect to the Transactions
are subject to the satisfaction of each of the following conditions, unless such
conditions either are required to be satisfied by such party (for the benefit of
the other party) or are waived by such party at or before the Closing:
(a) each party shall have obtained from each
Governmental Body or other person each Approval or taken all actions required to
be taken in connection with each Approval, and all waiting, review or appeal
periods prescribed with respect to each Approval shall have terminated or
expired, as the case may be, in each case with respect to an Approval that is
required or advisable on the part of such party for (1) the due execution and
delivery by such party of each Transaction Document to which it is or may become
a party, (2) the conclusion of the Transactions, (3) the performance by such
party of its obligations under each Transaction Document to which it is or may
become a party and (4) the exercise by such party of its rights and remedies
under each Transaction Document to which the party is or may become a party;
(b) no Action shall be pending or, to the knowledge
of either party, threatened against such party or any other person that
restricts in any material respect or prohibits (or, if successful, would
restrict or prohibit) the conclusion of the Transactions;
(c) neither party (1) is in violation of or default,
in any material respect, with respect to any Regulation of any Governmental Body
or any decision, ruling, order or award of any arbitrator applicable to it or
its business, properties or operations, (2) would be in violation of or default,
in any material respect, with respect to the same in connection with or as a
result of the conclusion of the Transactions, or (3) has received notice that,
in connection with or as a result of the conclusion of the Transactions it is or
would be in violation of or default, in any material respect, with respect to
the same;
(d) the representations and warranties of the other
party contained in each Transaction Document to which such other party is a
party shall be true and correct in all material respects on and as of the date
hereof and the Closing Date, with the same force and effect as though made on
and as of the date hereof and the Closing Date;
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(e) the other party shall have performed, in all
material respects, all of the covenants and other obligations that are required
by the Transaction Documents to which it is a party to be performed by such
other party at or before the Closing Date; and
(f) the Purchaser shall have received from the
Company the following, each dated the Closing Date, in form and substance
reasonably satisfactory to the Purchaser:
(1) a certificate of the Secretary or an Assistant
Secretary of the Company substantially in the form of EXHIBIT
3.1(F)(1), with respect to (i) the charter documents of the Company,
(ii) the bylaws of the Company, (iii) the resolutions of the Company
approving each Transaction Document and the other documents to be
delivered by it under the Transaction Documents and (iv) the names and
true signatures of the officers of the Company authorized to sign each
Transaction Document to which the Company is a party as of the Closing
Date and the other documents to be delivered by the Company under such
Transaction Documents;
(2) a certificate of the President or a Vice
President of the Company, substantially in the form of EXHIBIT
3.1(F)(2) to the effect that (i) the representations and warranties of
the Company contained in the Transaction Documents to which it is a
party are true and correct in all material respects on and as of the
Closing Date, and (ii) the Company has performed, in all material
respects, all covenants and other obligations required by the
Transaction Documents to which it is a party to be performed by it at
or before the Closing;
(3) certified copies, or other evidence satisfactory
to the Purchaser, of all Approvals of all Governmental Bodies and other
persons with respect to the Company referred to in Sections 4.3;
(4) a certificate of the Secretary of State of the
State of Delaware, dated as of a recent date, as to the good standing
of and payment of taxes by the Company and as to the charter documents
of the Company, as the case may be, on file in the office of the
Secretary of State;
(5) a favorable opinion of one or more counsel for
the Company, which together are substantially in the form of EXHIBIT
3.1(F)(5), and as to other matters reasonably requested by the
Purchaser;
(g) the Company shall have received from the
Purchaser the following, each dated the Closing Date, in form and substance
reasonably satisfactory to the Company:
(1) a certificate of the Secretary or an Assistant
Secretary of the Purchaser's general partner, substantially in the form
of EXHIBIT 3.1(G)(1), with respect to the names and true signatures of
the officers of the Purchaser authorized to sign each Transaction
Document to which the Purchaser is a party as of the Closing Date and
the other documents to be delivered by the Purchaser under such
Transaction Documents;
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(2) a certificate of the President or Vice President
of the Purchaser's general partner, substantially in the form of
EXHIBIT 3.1(G)(2) to the effect that (i) the representations and
warranties of the Purchaser contained in the Transaction Documents to
which it is a party are true and correct in all material respects on
and as of the Closing Date, and (ii) the Purchaser has performed, in
all material respects, all covenants and other obligations required by
the Transaction Documents to which it is a party to be performed by it
at or before the Closing;
(3) certified copies, or other evidence satisfactory
to the Company, of all Approvals of all Government Bodies and other
persons with respect to the Purchaser referred to in Section 6.3; and
(4) a favorable opinion of one or more counsel for
the Purchaser, which together are substantially in the form of EXHIBIT
3.1(G)(4), and as to other matters reasonably requested by the Company.
(h) the Company shall have duly executed and
delivered to the Purchaser one or more certificates representing the Shares;
(i) the Purchaser shall have delivered to the
Company an amount in immediately available funds equal to the Purchase Price for
the Shares;
(j) the Company and the Purchaser shall have
executed and delivered the Registration Rights Agreement substantially in the
form of EXHIBIT A attached hereto, with such changes therein as shall have been
approved by the Company and the Purchaser; and
(k) NHP shall have distributed one-third of a share
of Common Stock of the Company to each holder of a Right; and
(l) each of the Registration Statements shall have
been declared effective by the SEC.
SECTION 3.2 LEGENDS.
(a) Each certificate for Shares and any certificate
issued in exchange therefor or on conversion or upon transfer, except
certificates issued in connection with a sale registered under the Securities
Act and except as provided below, shall bear legends to the following effect:
(1) "The shares represented by this certificate have not been
registered under the Securities Act of 1933 and may not be offered,
sold, transferred or otherwise disposed of except in compliance with
said Act."
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(2) "The shares represented by this certificate are subject to
the restrictions contained in the Registration Rights Agreement dated
as of __________ __, 1997, a copy of which is on file at the office of
the Secretary of the Company."
(b) The legend stated in Section 3.2(a)(1) shall be
removed by delivery of one or more substitute certificates without such legend
if the holder thereof shall have delivered to the Company a copy of a letter
from the staff of the Securities and Exchange Commission or an opinion of
counsel, in form and substance reasonably satisfactory to the Company, to the
effect that the legend is not required for purposes of the Securities Act.
(c) The legend stated in Section 3.2(a)(2) shall be
removed at such time as the related securities are no longer subject to the
Registration Rights Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to the Purchaser as
follows:
SECTION 4.1 CORPORATE EXISTENCE AND POWER. Each of the Company
and its Consolidated Subsidiaries (1) is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, (2) has all necessary corporate power and authority and all
material licenses, authorizations, consents and approvals required to own,
lease, license or use its properties now owned, leased, licensed or used and
proposed to be owned, leased, licensed or used and to carry on its business as
now conducted and proposed to be conducted, (3) is duly qualified as a foreign
corporation under the laws of each jurisdiction in which both (A) qualification
is required either (i) to own, lease, license or use its properties now owned,
leased, licensed and used or (ii) to carry on its business as now conducted and
(B) the failure to be so qualified could materially and adversely affect either
or both of (i) the business, properties, operations, prospects or condition
(financial or otherwise) of the Company and its Consolidated Subsidiaries taken
as a whole, and (ii) the ability of the Company or the Consolidated Subsidiary,
as the case may be, to perform its obligations under any Transaction Document to
which it is or may become a party and (4) has all necessary corporate power and
authority to execute and deliver each Transaction Document to which it is or may
become a party.
SECTION 4.2 AUTHORIZATION; CONTRAVENTION; MODIFICATIONS. The
execution and delivery by the Company of each Transaction Document to which it
is or may become a party and the performance by it of its obligations under each
such Transaction Document have been duly authorized by all necessary corporate
action and do not and will not (1) contravene, violate, result in a breach of or
constitute a default under, (A) its articles of incorporation or bylaws, (B) any
Regulation of any Governmental Body or any decision, ruling, order or award of
any
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arbitrator by which the representing party or any of its properties may be bound
or affected or (C) any agreement, indenture or other instrument to which any of
the Company and its Consolidated Subsidiaries is a party or by which the
representing party or their properties may be bound or affected or (2) result in
or require the creation or imposition of any Lien on any of the properties now
owned or hereafter acquired by any of the Company and its Consolidated
Subsidiaries.
SECTION 4.3 APPROVALS. No Approval of any Governmental Body or
other person is required or advisable on the part any of the Company and its
Consolidated Subsidiaries for (1) the due execution and delivery by the Company
or the Consolidated Subsidiary, as the case may be, of any Transaction Document
to which it is or may become a party, (2) the conclusion of the Transactions or
(3) the performance by the Company or the Consolidated Subsidiary, as the case
may be, of its obligations under each Transaction Document to which it is or may
become a party.
SECTION 4.4 BINDING EFFECT. Each Transaction Document to which
any of the Company and its Consolidated Subsidiaries is or may become a party
is, or when executed and delivered in accordance with this Agreement will be,
the legally valid and binding obligation of the Company or the Consolidated
Subsidiary, as the case may be, enforceable against it in accordance with its
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally and general principles of equity, including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing and the
possible unavailability of specific performance or injunctive relief, regardless
of whether considered in a proceeding in equity or at law.
SECTION 4.5 FINANCIAL INFORMATION.
(a) The consolidated balance sheet of the Company
and its Consolidated Subsidiaries as of the last day of its latest complete
fiscal year (the "BALANCE SHEET DATE") and the related consolidated statements
of operations, shareholders' equity and cash flows for the fiscal year then
ended, reported on by the independent public accountants of the Company and
filed with each of the Registration Statements and attached hereto as Schedule
4.5(a), a true and complete copy of which has been delivered to the Purchaser,
fairly present the consolidated financial position of the Company and its
Consolidated Subsidiaries as of that date and their consolidated results of
operations and cash flows for the year then ended, in accordance with GAAP
applied on a consistent basis except as described in the footnotes to such
financial statements or as set forth on Schedule 4.5(a).
(b) At the Balance Sheet Date, none of the Company
and its Consolidated Subsidiaries had any material liability or obligation of
any nature, whether accrued, absolute, fixed or contingent, and whether due or
to become due, that, in accordance with GAAP applied on a consistent basis,
should have been shown or reflected in the balance sheets but were not.
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(c) The Company has made available to the Purchaser
copies of each management letter delivered to the Company and its Consolidated
Subsidiaries by the independent public accountants of the Company in connection
with the financial statements referred to in this Section 4.5 or relating to any
review by them of the internal controls of the Company and its Consolidated
Subsidiaries during the three years ended on its Balance Sheet Date or
thereafter.
SECTION 4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as set forth on Schedule 4.6(a), since the Balance
Sheet Date there has been no material adverse change in the business,
properties, operations, prospects or condition (financial or otherwise) of the
Company and its Consolidated Subsidiaries, taken as a whole.
(b) Except as set forth on Schedule 4.6(b), since the Balance
Sheet Date, none of the Company and its Consolidated Subsidiaries has done the
following or entered into any agreement or other arrangement with respect to the
following, except in each case with respect or pursuant to each Transaction
Document to which it is or may become a party:
(1) transferred any of its assets except in each
case for fair consideration and in the ordinary course of business; or
(2) waived, released, cancelled, settled or
compromised any debt, claim or right of any material value except in
each case in the ordinary course of business; or
(3) entered into any material agreement, arrangement,
commitment, contract or transaction, amended or terminated any of the
same or otherwise conducted any of its affairs, in any case not in the
ordinary course of business and consistent with past practices; or
(4) except as disclosed in the footnotes to the
financial statements referred to in Section 4.5, changed any accounting
methods or principles used in recording transactions on the books of
the Company or a Consolidated Subsidiary or in preparing the financial
statements of the Company or a Consolidated Subsidiary.
SECTION 4.7 TAXES. Each of the Company and its Subsidiaries
has filed all Tax Returns that are required to be filed with any Governmental
Body and has paid all Taxes due pursuant to the Tax Returns or any assessment
received by it or otherwise required to be paid, except Taxes being contested in
good faith by appropriate proceedings and for which adequate reserves or other
provisions are maintained, and except for the filing of Tax Returns as to which
the failure to file could not, individually or in the aggregate, have a Material
Adverse Effect.
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SECTION 4.8 LITIGATION. Except as set forth on Schedule 4.8,
there is no Action pending or, to the knowledge of the Company, threatened
against the Company, any of its Subsidiaries or any other person that (1)
involves any of the Transactions, (2) any property owned, leased, licensed or
used by the Company or such Subsidiary that, individually or in the aggregate,
if determined adversely to any of them, could have a Material Adverse Effect or
(3) individually or in the aggregate, if determined adversely to any of them,
could result in a liability to any of them in an amount that could have a
Material Adverse Effect.
SECTION 4.9 COMPLIANCE WITH REGULATIONS. None of the Company
and its Subsidiaries is in, and none of them has received notice of, a violation
of or default with respect to, any Regulation of any Governmental Body or any
decision, ruling, order or award of any arbitrator applicable to it or its
business, properties or operations, including individual products or services
sold or provided by it, except for violations or defaults that, individually or
in the aggregate, could not have a Material Adverse Effect.
SECTION 4.10 SUBSIDIARIES.
(a) Set forth on Schedule 4.10 is a correct and
complete list of the Subsidiaries of the Company, showing the following as of
the date of this Agreement with respect to each such Subsidiary: (1) the
jurisdiction of its incorporation; (2) the title of each authorized class or
series of capital stock; (3) the number of shares of each authorized class or
series of capital stock; (4) the number of such shares outstanding; (5) the
number of outstanding shares owned directly or indirectly by the representing
party; and (6) the directors and officers of the Subsidiary as of the date of
this Agreement.
(b) All outstanding shares of capital stock of each
Subsidiary are duly authorized, validly issued, fully paid and nonassessable and
are owned as set forth on Schedule 4.10, directly or indirectly, beneficially
and of record by the representing party, free and clear of all Liens.
SECTION 4.11 INSURANCE. The Company and its Subsidiaries are
insured with reputable insurers against all risks normally insured against in
accordance with generally prevailing practices in the multifamily and commercial
mortgage origination and servicing industry and all of such insurance policies
and bonds maintained by or for the benefit of the Company and such Subsidiary,
as the case may be, are in full force and effect. The Company and its
Subsidiaries maintain insurance with reputable insurance companies in such
amounts and covering such risks as are usually carried by companies engaged in
the same or similar business and similarly situated. There are no currently
outstanding material losses for which the Company or such Subsidiary has failed
to give or present notice or claim under any policy. There are no requirements
by any insurance company or by any board of fire underwriters or other body
exercising similar functions or by any Governmental Body of which the
representing party has knowledge requiring any repairs or other work to be done
to any of the properties owned, leased, licensed or used by the Company or such
Subsidiary or requiring any equipment or facilities to be installed on or in
connection with any of the properties, the failure to complete which could
result in the cancellation of the policy of insurance. Policies for all the
insurance
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are in full force and effect and none of the Company and its Subsidiaries is in
default in any material respect under any of the policies. The representing
party has no knowledge of the cancellation or proposed cancellation of any of
the insurance or of any proposed increase in the contributions for workers'
compensation or unemployment insurance or of any conditions or circumstances
applicable to the business of the Company or such Subsidiary, as the case may
be, which might result in a material increase in those contributions.
SECTION 4.12 DEBT. Set forth on Schedule 4.12 is a correct and
complete list (containing a brief description of each item on such list) of the
following: (1) all credit agreements, indentures, purchase agreements,
Guarantees, Capitalized Leases and other Investments, agreements and other
arrangements presently in effect providing for or relating to Debt in any amount
greater than $250,000 in respect of which any of the Company and its
Subsidiaries is in any manner directly or contingently obligated; (2) the
maximum principal or face amounts of such Debt outstanding or which may be
outstanding under each of those agreements and other arrangements; and (3) the
maturity date or dates of such Debt.
SECTION 4.13 NO DEFAULT. Except as set forth on Schedule 4.13,
none of the Company and its Subsidiaries is in default in respect of any
obligation under any credit agreement, indenture, purchase agreement, Guarantee,
Capitalized Lease and other Investment, agreement or arrangement referred to in
Section 4.12, which default either alone or together with any other default,
entitles another party thereto, with the giving of notice or the passage of time
or both, to terminate or modify the rights and obligations of the parties
thereunder or with respect thereto or to accelerate, increase or otherwise
modify any obligation of the Company or any of its Subsidiaries thereunder.
SECTION 4.14 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
(A) 25,000,000 shares of Common Stock and (B) 12,500,000 shares of
Preferred Stock, $.01 par value, none of which Shares of Preferred
Stock are outstanding.
(b) As of November 17, 1997, there were (A) 4,217,478 shares
of Common Stock issued and outstanding, (B) 0 shares of Common Stock
held in the treasury of the Company and (C) a maximum of 1,133,042
shares of Common Stock reserved for issuance upon the exercise of stock
options, which amount consists of (i) 337,398 shares in respect of
options to be granted by the Company pursuant to its Key Employee
Incentive Plan (i.e., 8% of outstanding common stock), (ii) a maximum
of 395,644 shares in respect of options in NHP Incorporated, originally
granted by NHP Incorporated, which options and other rights will either
be exercised for shares of common stock of NHP Incorporated prior to
the initial public distribution of the Common Stock (requiring
distribution of shares of Common Stock at the time of the initial
public distribution of the Common Stock) or will be converted at the
time of the initial public distribution of the Common Stock into
options to acquire shares of Common Stock in the Company, and (iii) a
maximum of 400,000 shares by means of options granted to each employee
of the Company to purchase up to 1000 shares of Common Stock, which
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option is exercisable for up to ten (10) business days commencing upon
the initial public distribution of the Common Stock (collectively, the
"OUTSTANDING OPTIONS").
(c) Except as set forth above and except as provided herein,
no Equity Securities of the Company are issued, reserved for issuance
or outstanding.
(d) All outstanding shares of capital stock of the Company
are, and all shares that may be issued pursuant to the exercise of the
Outstanding Options, will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and are not subject to preemptive
rights.
(e) Except with respect to the Outstanding Options and the
Transaction Documents, there are no outstanding bonds, debentures,
notes or other indebtedness or other securities of the Company having
the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which shareholders of the
Company may vote.
(f) Except with respect to the Outstanding Options and the
Transaction Documents, there is no agreement or arrangement restricting
the voting or transfer of the Equity Securities of the Company.
(g) Except with respect to the Outstanding Options and the
Transaction Documents, there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which any of the Company and its
Subsidiaries is a party or by which any of them is bound obligating the
Company or such Subsidiary to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other
Equity Securities of the Company or such Subsidiary or obligating the
Company or such Subsidiary to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking.
(h) Except as set forth on Schedule 4.14(h), there are no
outstanding contractual obligations, commitments, understandings or
arrangements of any of the Company and its Subsidiaries to repurchase,
redeem or otherwise acquire, require or make any payment in respect of
any shares of Equity Securities of the Company or such Subsidiary.
(i) Except with respect to statutory restrictions of general
application, there are no legal, contractual or other restrictions on
the payment of dividends or other distributions or amounts on or in
respect of any of the Equity Securities of the Company.
(j) Except as contemplated by the Registration Rights
Agreement, there are no agreements or arrangements to which any of the
Company and its Subsidiaries is a party pursuant to which the Company
is or could be required to register shares of common stock or other
securities under the Securities Act.
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(k) Equity Securities of the Company that were issued and
reacquired by the Company were so reacquired (and, if reissued, so
reissued) in compliance with all applicable Regulations, and the
Company has no liability with respect to the reacquisition or
reissuance of the Equity Securities.
SECTION 4.15 MATERIAL CONTRACTS.
(a) Set forth on Schedule 4.15(a) is a correct and complete
list (containing a brief description of each item on such list) of the following
(collectively, the "MATERIAL CONTRACTS") with respect to any of the Company and
its Subsidiaries:
(1) agreements with investment bankers, brokers,
finders, consultants and advisers engaged by or on behalf of the
Company or such Subsidiary with respect to the Transactions or other
transactions contemplating the recapitalization of the Company or such
Subsidiary, the purchase or sale by the Company or such Subsidiary of
assets not in the ordinary course of business or the issuance and sale
by the Company or such Subsidiary of any Equity Securities or Debt of
the Company or such Subsidiary, as the case may be;
(2) agreements with any shareholder having beneficial
ownership of 5.0% or more of the shares of common stock of the Company
then issued and outstanding, director or officer of the Company or such
Subsidiary and all shareholders' agreements and voting trusts;
(3) agreements that may be cancelled, terminated,
amended or modified, or pursuant to which payments might be required or
acceleration of benefits may be required, in connection with or as the
result of the execution and delivery of the Transaction Documents or
the conclusion of any of the Transactions;
(4) Mortgage Servicing Agreements;
(5) agreements (other than Mortgage Loans) that may
require the payment or provision by or to any of the Company and its
Subsidiaries of money in an aggregate amount, or good or services have
an aggregate value, in each case in the excess of $250,000; and
(6) agreements not made in the ordinary course of
business and which are materially adverse to the business of the
Company or such Subsidiary.
(b) Each agreement referred to in clause (4), (5) and (6) of
Section 4.15 has, to the knowledge of the Company with respect to parties other
than the Company or its Subsidiaries, as the case may be, been duly authorized,
executed and delivered by the parties to such agreement, is in full force and
effect and constitutes the legal, valid and binding obligation of the parties to
such agreement or their respective successors or assigns, enforceable against
them in accordance with the terms of such agreement. There is no liability or
obligation
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of the Company or a Subsidiary with respect to any such agreement that, under
the terms of such agreement, is required to be paid or otherwise performed or is
required to have been paid or otherwise performed, that has not been paid or
otherwise performed in accordance with the applicable agreement. The right,
title and interest of the Company or a Subsidiary in, to and under each such
agreement is free and clear of all Liens. There exists no default under any such
agreement by any party, which default, individually or together with other
defaults under the same agreement or other agreements, could have a Material
Adverse Effect. The conclusion of any of the Transactions will not (and will not
give any person a right to) terminate or modify any rights of, or accelerate or
increase any obligation of, the Company or any Subsidiary under any such
agreement.
(c) Each Mortgage Servicing Agreement is valid, binding and
enforceable in accordance with its terms. The Company has serviced all Mortgage
Loans in accordance with all applicable Investor requirements, except to the
extent that the failure to do so could not reasonably be expected to have a
Material Adverse Effect. There are no pending or threatened claims by any
Investor against the Company relating directly or indirectly to any Mortgage
Loan or any Mortgage Servicing Agreement. The Company has no notice of any
default by other parties under any Mortgage Servicing Agreement or Flow
Servicing Agreement. No material default of the Company exists under any
Mortgage Servicing Agreement or Flow Servicing Agreement, including any default
arising with notice or lapse of time, or both, except to the extent that such
defaults could not reasonably be expected to have a Material Adverse Effect.
SECTION 4.16 BOOKS AND RECORDS.
(a) The records and books of account of each of the Company
and its Consolidated Subsidiaries are correct and complete in all
material respects, have been maintained in accordance with good
business practices and are reflected accurately in the financial
statements referred to in Section 4.5. Each of the Company and its
Consolidated Subsidiaries has accounting controls sufficient to insure
that its transactions are (1) executed in accordance with management's
general or specific authorization and (2) recorded in conformity with
GAAP so as to maintain accountability for assets.
(b) In all material respects, the minute books of each of the
Company and its Consolidated Subsidiaries contain accurate records of
all meetings and accurately reflect all corporate action of the
stockholders and the board of directors (including committees) of the
Company or the Consolidated Subsidiary, as the case may be.
(c) The stock books and ledgers of each of the Company and its
Consolidated Subsidiaries correctly record all transfer and issuances
of all capital stock of the Company or the Consolidated Subsidiary, as
the case may be.
SECTION 4.17 FEES FOR BROKERS AND FINDERS. With respect to the
Transactions, the Company and its Subsidiaries and other Affiliates have not
authorized any person to act as financial advisor, broker, finder or other
intermediary that might be entitled to any fee,
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commission, expense reimbursement or other payment of any kind from any of the
Company, such Subsidiaries and such other Affiliates.
SECTION 4.18 MISSTATEMENTS. Except to the extent revised or
superseded by a subsequent certificate, schedule or written report furnished to
the other party, no written information, certificate, schedule or written report
furnished by Company or any of its Subsidiaries to Purchaser with respect to any
of the Company and its Subsidiaries in connection with the negotiation of any
Transaction Document or the satisfaction of any condition under any Transaction
Document contained as of the date thereof any untrue statement of a material
fact or omitted to state a material fact necessary to make the statement
contained therein, in the light of the circumstances under which it was made,
not misleading.
SECTION 4.19 REGISTRATION STATEMENTS. The Company has filed
each of the Registration Statements with the Securities and Exchange Commission.
The Company has delivered or made available to the Purchaser each of the
Registration Statements. As of its respective date, except to the extent revised
or superseded by a subsequent filing with the SEC, each of the Registration
Statements complied in all material respects with the requirements of the
Securities Act and did not as of such date contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The consolidated financial
statements of the Company and the Subsidiaries included in each of the
Registration Statements including any amendments thereto, comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto.
SECTION 4.20 NO MERGER AGREEMENTS. None of the Company and its
Subsidiaries has entered into any agreement with any person which has not been
terminated as of the date of this Agreement and under which there remains any
liability or obligation of any of the Company and its Subsidiaries with respect
to a merger or consolidation with any of the Company and its Subsidiaries, an
acquisition of any Equity Securities of any of the Company and its Subsidiaries
or any other acquisition of a substantial amount of the assets of any of the
Company and its Subsidiaries.
SECTION 4.21 BOARD ACTIONS. The Board of Directors of the
Company, at a meeting duly called and held, unanimously (1) determined that the
Transactions, taken as a whole, are in the best interest of the Company and its
stockholders and (2) approved the Transaction Documents and the Transactions,
which actions constitute approval of each of the Transaction Documents and the
Transactions for purposes of Section 203 of the Delaware General Corporation Law
and which approval shall make such Section 203 inapplicable to the Transactions
and to any future transactions between the Company and the Purchaser.
SECTION 4.22 STOCKHOLDER APPROVAL. None of the Transactions is
required by the certificate of incorporation or bylaws of the Company, or by any
other agreement, indenture or instrument to which the Company is a party or by
which the Company or its properties may
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be bound or affected, to be approved by the holders of shares of any class of
Equity Securities of the Company.
SECTION 4.23 CONTINUING REPRESENTATIONS AND WARRANTIES. Each
of the representations and warranties made by the Company in this Agreement or
in any other Transaction Document as of any date other than a Closing Date will
be true and correct in all material respects on and as of the Closing Date
except as otherwise contemplated by such Transaction Document.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
CONCERNING LOANS AND SERVICING RIGHTS
The Company hereby represents and warrants to the Purchaser as
follows:
SECTION 5.1 APPROVED ISSUER. Washington Mortgage Financial
Group, Ltd. ("WMF") is a ▇▇▇▇▇▇ ▇▇▇ approved DUS lender in good standing.
WMF/▇▇▇▇▇▇▇ is a GNMA approved issuer in good standing. Each of WMF and
WMF/▇▇▇▇▇▇▇ is (i) a FHA-approved mortgagee, (ii) a ▇▇▇▇▇▇ Mae and a ▇▇▇▇▇▇▇ Mac
approved seller/servicer in good standing, and (iii) in full compliance with all
of the material provisions contained in the applicable FHA, ▇▇▇▇▇▇ Mae and
▇▇▇▇▇▇▇ Mac guides and, with respect to WMF/▇▇▇▇▇▇▇, GNMA guides, any subsequent
amendments in or to any of them, and all other applicable regulations and
Investor requirements. Except as previously disclosed to Purchaser in writing,
which writing makes reference to this Agreement, the Company has not at any time
in the past received notice from any governmental, quasi-governmental or private
agency of pending or threatened actions or investigations which would question
the status of WMF or WMF/▇▇▇▇▇▇▇ as an approved lender or issuer as provided in
this Section 5.1. No outstanding claims exist against the Company (directly or
indirectly) from or through the FHA, GNMA or any Investors (including, without
limitation, claims under FHA multifamily co-insurance program). To the knowledge
of Company, no event has occurred which, with the passage of time or the giving
of notice, or both, would result in the loss by either WMF or WMF/▇▇▇▇▇▇▇ of its
qualification as an approved lender or issuer as set forth in this Section 5.1
or of the Company or any officer, director or employee of the Company as a
contractor or as a person otherwise permitted to transact business with any such
governmental, quasi-governmental or private agency.
SECTION 5.2 PAST SECURITIZATIONS; NO RECOURSE.
(a) PAST SECURITIZATIONS. The description of past
securitization transactions effected by the Company, as contained in
the Registration Statements, is true and complete in all material
respects and to the Company's best knowledge, no event or series of
events has occurred that would result in any of the securities issued
in connection with any of such transactions being downgraded or placed
on a watch list with
- 14 -
negative implications by any rating agency or similar organization, or
that would impair the Company's or its Subsidiaries' ability to
consummate future securitization transactions upon economic terms
consistent with past securitization transactions or otherwise cause the
Company or any of its Subsidiaries to suffer any Material Adverse
Effect with respect to any past or future securitization transaction
(other than any such event or series of events described in the
Registration Statements.
(b) NO RECOURSE. Except with respect to DUS Mortgage Loans,
none of the Servicing Rights is subject to recourse against the Company
for losses on liquidation of a Mortgage Loan, borrower defaults or
repurchase obligations upon the occurrence of non-payment or other
events, and the Company has no obligation or recourse to any person to
which it may have sold or transferred any Mortgage Loans or Servicing
Rights. For the purposes of this Section 5.2(b), "recourse" shall not
include industry standard representations and warranties (such as those
concerning title, zoning, etc.), except to the extent that such
representations and/or warranties relate generally to economic
performance (such as those included in the DUS program).
SECTION 5.3 LOAN DOCUMENTS; MORTGAGE SERVICING AGREEMENTS.
Except as set forth on Schedule 5.3, there are no defaults under any of the Loan
Documents nor any events which, with the giving of notice or the passage of
time, or both, would constitute a default.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants as follows:
SECTION 6.1 CORPORATE EXISTENCE AND POWER. The Purchaser (1)
is a limited partnership duly organized, validly existing and in good standing
under the laws of the State of Delaware, (2) has all necessary partnership and
all material licenses, authorizations, consents and approvals required to own,
lease, license or use its properties now owned, leased, licensed or used and
proposed to be owned, leased, licensed or used and to carry on its business as
now conducted and proposed to be conducted, (3) is duly qualified as a foreign
limited partnership under the laws of each jurisdiction in which both (A)
qualification is required either (i) to own, lease, license or use its
properties now owned, leased, licensed or used or (ii) to carry on its business
as now conducted and (B) the failure to be so qualified could materially and
adversely affect either or both of (i) the business, properties, operations,
prospects or condition (financial or otherwise) of the Purchaser and (ii) the
ability of the Purchaser to perform its obligations under any Transaction
Document to which it is or may become a party and (4) has all necessary
partnership power and authority to execute and deliver each Transaction Document
to which it is or may become a party.
SECTION 6.2 AUTHORIZATION; CONTRAVENTION. The execution and
delivery by the Purchaser of each Transaction Document to which it is or may
become a party and the performance by it of its obligations under each of those
Transaction Documents have been duly
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authorized by all necessary partnership action and do not and will not (1)
contravene, violate, result in a breach of or constitute a default under, (A)
its limited partnership agreement, (B) any Regulation or any decision, ruling,
order or award of any arbitrator by which the Purchaser or any of its properties
may be bound or affected, or (C) any agreement, indenture or other instrument to
which it is a party or by which it or its properties may be bound or affected or
(2) result in or require the creation or imposition of any Lien on any property
now owned or hereafter acquired by it.
SECTION 6.3 APPROVALS. No Approval of any Governmental Body or
other person is required or advisable on the part of the Purchaser, for (1) the
due execution and delivery by the Purchaser of any Transaction Document, (2) the
conclusion of the Transactions and (3) the performance by the Purchaser of its
obligations under each Transaction Document to which it is or may become a
party.
SECTION 6.4 BINDING EFFECT. Each Transaction Document to which
the Purchaser is or may become a party is, or when executed and delivered in
accordance with this Agreement will be, the legally valid and binding obligation
of the Purchaser, enforceable against it in accordance with its terms, except as
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally and general
principles of equity, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing and the possible unavailability of
specific performance or injunctive relief, regardless of whether considered in a
proceeding in equity or at law.
SECTION 6.5 LITIGATION. There is no Action pending or, to the
Purchaser's knowledge, threatened against the Purchaser or, to its knowledge,
any other person or that involves any of the Transactions or any property owned,
leased, licensed or used by the Purchaser that, individually or in the
aggregate, if determined adversely to the Purchaser or the other person, could
materially and adversely affect the ability of the Purchaser to perform its
obligations under any Transaction Document to which it is or may become a party.
SECTION 6.6 COMPLIANCE WITH LAWS. The Purchaser is neither in,
nor has received notice of a, violation of or default with respect to any
Regulation of any Governmental Body or any decision, ruling, order or award of
any arbitrator applicable to it or its business, properties or operations, which
violation or default, individually or in the aggregate, could materially and
adversely affect the ability of the Purchaser to perform its obligations under
any Transaction Document to which it is or may become a party.
SECTION 6.7 INVESTMENT INTENT. The Purchaser acknowledges that
the Company is issuing and selling the Shares pursuant to the terms of the
Transaction Documents in reliance upon the exemption afforded by Section 4(2) of
the Securities Act for transactions by an issuer not involving any public
offering. The Purchaser represents that (1) it is acquiring such securities for
investment and without any view toward distribution of any of the securities to
any other person, (2) it will not sell or otherwise dispose of the securities
except in compliance with the registration requirements or exemption provisions
under the Securities Act and (3) before any sale or other disposition of any of
such securities other than in a sale registered under the
- 16 -
Securities Act, or pursuant to Rule 144 under the Securities Act unless the
Company shall have been advised by counsel that the sale does not meet the
requirements of Rule 144 for the sale, it will deliver to the Company an opinion
of counsel, which counsel shall be reasonably satisfactory to the Company
(including, without limitation, O'Melveny & ▇▇▇▇▇ LLP which shall be
satisfactory to the Company for this purpose), to the effect that such
registration is unnecessary.
SECTION 6.8 FEES FOR BROKERS AND FINDERS. The Purchaser has
not authorized any person to act as financial advisor, broker, finder or other
intermediary that might be entitled to any fee, commission, expense
reimbursement or other payment of any kind from the Purchaser upon the
conclusion of or in connection with any of the Transactions.
SECTION 6.9 FINANCIAL ABILITY. The Purchaser has sufficient
financial resources to perform its obligations on the Closing Date.
SECTION 6.10 CONTINUING REPRESENTATIONS AND WARRANTIES. Each
of the representations and warranties made by the Purchaser in this Agreement or
in any other Transaction Document as of a date other than a Closing Date shall
be true on and as of the Closing Date except as otherwise contemplated by the
Transaction Documents.
ARTICLE VII
COVENANTS
SECTION 7.1 MUTUAL COVENANTS. Each party covenants and agrees
to do the following until the conclusion of the Closing:
(a) MAINTENANCE OF EXISTENCE. The covenanting party shall, and
shall cause its Subsidiaries to, preserve and maintain its corporate or
limited partnership, as the case may be, existence and good standing in
the jurisdiction of its organization and qualify and remain qualified
as a foreign corporation or limited partnership, as the case may be, in
each jurisdiction in which both (1) qualification is required either
(A) to own, lease, license or use its properties now owned, leased,
licensed or used and proposed to be owned, leased, licensed or used or
(B) to carry on its business as now conducted or proposed to be
conducted and (2) the failure to be so qualified could materially and
adversely affect either or both of (A) the business, properties,
operations, prospects or condition (financial or otherwise) of the
party and (B) the ability of the party to perform its obligations under
any Transaction Document to which it is or may become a party.
(b) COMPLIANCE WITH LAWS. The covenanting party shall, and
shall cause its Subsidiaries to, comply in all respects with all
Regulations of each Governmental Body and all decisions, rulings,
orders and awards of each arbitrator applicable to it or its business,
properties or operations in connection with the Transactions.
- 17 -
(c) BEST EFFORTS. Upon the terms and subject to the conditions
provided in the Transaction Documents, the covenanting party shall, and
shall cause its Subsidiaries to, use its best efforts to take, or cause
to be taken, all action, and to do, or cause to be done, and to assist
and cooperate with the other party hereto in doing all things
necessary, proper or advisable under applicable Regulations to ensure
that the conditions set forth in Article III and to the conclusion of
the Transactions are satisfied and to conclude and make effective, in
the most expeditious manner practicable, the Transactions including,
without limitation, using its best efforts to obtain all necessary
Approvals.
(d) NOTIFICATION. The covenanting party shall, and shall cause
its Subsidiaries to, give prompt notice to the other parties to this
Agreement or any other Transaction Document, as the case may be, of (1)
the occurrence, or failure to occur, of any event that would be likely
to cause any representation or warranty of the covenanting party
contained in the Transaction Document to be untrue or inaccurate in any
material respect at any time from the date of this Agreement to the
Closing Date and (2) any failure of the covenanting party to perform or
otherwise comply with, in any material respect, any covenant, condition
or agreement to be performed or complied with by it under the
Transaction Documents; which covenant of notification shall not limit
the right of the other party under Article III to require as a
condition precedent to the performance of its obligations under this
Agreement the continuing accuracy and performance of the
representations and warranties and covenants of the notifying party
made in the Transaction Documents and to receive an unqualified
certificate with respect to the same.
(e) PUBLICITY AND REPORTS. Except as may be required by
applicable laws or court process, the covenanting party shall, and
shall cause its Subsidiaries to, consult with the other party before
issuing any press release or making any public statement with respect
to the Transactions.
(f) CONFIDENTIALITY. The covenanting party shall, and shall
cause its Subsidiaries to, keep confidential information disclosed by
any of the other party, its Subsidiaries or their respective
representatives to any of the covenanting party, its Subsidiaries or
their respective representatives, whether before or after the date of
this Agreement, in connection with the Transactions or the discussions
and negotiations preceding the execution of the Transaction Documents,
and use such information only as contemplated by the Transaction
Documents, except in each case to the extent that (1) the information
was known by the recipient when received or the information is or
hereafter becomes lawfully obtainable from other sources, (2)
disclosure to a Governmental Body having jurisdiction over the parties
is necessary or appropriate, (3) disclosure may otherwise be required
by applicable Regulations or (4) the duty as to confidentiality is
waived in writing by the other party. If this Agreement is terminated,
each party shall use reasonable efforts to return upon written request
from the other party all documents (and reproductions of those
documents) received by it or its representatives from the other party
(and, in the case of reproductions, all reproductions made by the
receiving party) that include information not within the exceptions
contained in the
- 18 -
preceding sentence, unless the recipients provide assurances reasonably
satisfactory to the requesting party that the documents have been
destroyed.
SECTION 7.2 AFFIRMATIVE COVENANTS OF THE COMPANY. The Company
agrees, that prior to the Closing Date, the Company shall do the following:
(a) REPORTING REQUIREMENTS. The Company shall, and shall
cause its Subsidiaries to, furnish to the Purchaser:
(1) ADVERSE EVENTS. Promptly after the occurrence, or
failure to occur, of any such event, information with respect to any
event (A) which could have a Material Adverse Effect, (B) which, if
known as of the date of this Agreement, would have been required to be
disclosed to the Purchaser or (C) which would be likely to cause any
representation or warranty contained in any Transaction Document with
respect to the Company or such Subsidiary to be untrue or inaccurate in
any material respect at any time from the date of this Agreement to the
Closing Date;
(2) ACCESS TO INFORMATION. Afford to the Purchaser
and to the officers, employees, financial advisors, attorneys,
accountants and other representatives of the Purchaser, reasonable
access during normal business hours to all its properties, books,
contracts commitments, personnel and records; furnish as promptly as
practicable to the Purchaser and its representatives such information
with respect to the business, properties, operations, prospects or
conditions (financial or otherwise) of the Company and its Subsidiaries
as they may from time to time reasonably request; and
(3) GENERAL INFORMATION. Such other information
respecting the condition or operations, financial or otherwise, of any
of the Company and its Subsidiaries as the Purchaser may from time to
time reasonably request.
(b) MAINTENANCE OF RECORDS. The Company shall, and shall cause
its Subsidiaries to, keep adequate records and books of account
reflecting all its financial transactions, keep minute books containing
accurate records of all meetings and accurately reflecting all
corporate action of its shareholders and its board of directors
(including committees) and keep stock books and ledgers correctly
recording all transfers and issuances of all capital stock.
(c) MAINTENANCE OF PROPERTIES. The Company shall, and shall
cause its Subsidiaries to, maintain, keep and preserve all its real
property and personal property used or useful in the proper conduct of
its business in good working order and condition, ordinary wear and
tear excepted.
(d) CONDUCT OF BUSINESS. Except as otherwise contemplated by
the Transaction Documents, the Company shall, and shall cause its
Subsidiaries to, continue to engage in an efficient and economical
manner solely in a business of the same general type as conducted by it
on the date of this Agreement in the ordinary course, consistent
- 19 -
with past practices; and use its best efforts to preserve the business
of the Company and its Subsidiaries and to preserve the goodwill of
customers, suppliers and others having business relations with the
Company and its Subsidiaries.
(e) MAINTENANCE OF INSURANCE. The Company shall, and shall
cause its Subsidiaries to, maintain insurance such that the
representations and warranties stated in Section 4.11 shall at all
times remain true.
(f) PAYMENT OF TAXES. The Company shall, and shall cause its
Subsidiaries to, timely file all Tax Returns that are required to be
filed by it and pay before they become delinquent all Taxes due
pursuant to those Tax Returns or any assessment received by it or
otherwise required to be paid, except Taxes being contested in good
faith by appropriate proceedings and for which adequate reserves or
other provisions are maintained, and except for the filing of such Tax
Returns as to which the failure to file could not, individually or in
the aggregate, have a Materially Adverse Effect.
(g) DESIGNATION OF DIRECTORS. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. shall be
elected a director of the Company simultaneously with, or, at the
election of ▇▇. ▇▇▇▇▇▇▇, promptly after, the Closing of the
transactions contemplated by this Agreement.
SECTION 7.3 NEGATIVE COVENANTS OF THE COMPANY. The Company
agrees as follows, and shall not enter into any agreement or take any other
action inconsistent with the following, in each case until the conclusion of the
Closing:
(a) CHARTER DOCUMENTS. The Company shall not, and shall not
permit any of its Subsidiaries to, amend its articles of incorporation
or its bylaws.
(b) CAPITALIZATION. The Company shall not, and shall not
permit any of its Subsidiaries to, issue any shares of capital stock or
other Equity Securities.
(c) MERGERS, ETC. Except as shall have been previously agreed
in writing by the parties, which writing makes reference to this
Agreement, the Company shall not, and shall not permit any of its
Subsidiaries to, merge or consolidate with any person, sell, lease,
license or otherwise dispose of all or substantially all of its assets
(whether now owned or hereafter acquired) to any person or acquire all
or substantially all of the assets or the business of any person, in
each case whether in one transaction or in a series of transactions,
except that a Consolidated Subsidiary may merge into or transfer assets
to the Company or a Wholly-Owned Consolidated Subsidiary.
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ARTICLE VIII
TERMINATION
SECTION 8.1 TERMINATION.
(a) The obligations of the parties under this Agreement with
respect to the Closing may be terminated at any time prior to the
conclusion of the Closing, in each case by:
(1) the mutual consent of the Company and the
Purchaser:
(2) the Company, if (A) the conditions to be
satisfied by the Purchaser set forth in Sections 3.1 shall not have
been met with respect to the Closing by March 31, 1998 and (B) the
Company shall have paid in full to the Purchaser all amounts then owed
to the Purchaser pursuant to Section 8.2, if any;
(3) the Company, if a representation, warranty or
covenant of the Purchaser set forth in a Transaction Document is
breached or violated by the Purchaser in any material respect;
(4) the Purchaser, if the conditions to be satisfied
by the Company set forth in Sections 3.1 shall not have been met with
respect to the Closing by December 31, 1997; and
(5) the Purchaser, if a representation, warranty or
covenant of the Company set forth in a Transaction Document is breached
or violated by the Company in any material respect.
(b) Any termination of the obligations of the parties shall be
made by written agreement or by written notice from the terminating
party to the other parties.
(c) The termination of the obligations of the parties under
this Section 8.1 shall not relieve any party of any liability for a
breach of any warranty, covenant or agreement, or for any
misrepresentation, under this Agreement, or be deemed to constitute a
waiver of any available remedy (including specific performance if
available) for any breach or misrepresentation.
SECTION 8.2 EXPENSES AND FEES.
(a) PURCHASER COLLECTION EXPENSES. In addition to the other
provisions of this Section 8.2, the Company shall promptly, but in no
event later than two business days following written notice thereof,
together with related bills or receipts, reimburse the Purchaser for
all reasonable out-of-pocket costs, fees and expenses, including,
without
- 21 -
limitation, the reasonable fees and disbursements of counsel and the
expenses of litigation incurred in connection with collecting such
costs, fees and expenses and any other fees due under this Agreement or
any of the other Transaction Documents as a result of any willful
breach by the Company of its obligations under this Section 8.2.
(b) COMPANY COLLECTION EXPENSES. In addition to the other
provisions of this Section 8.2, the Purchaser shall promptly, but in no
event later than two business days following written notice thereof,
together with related bills or receipts, reimburse the Company for all
reasonable out-of-pocket costs, fees and expenses, including, without
limitation, the reasonable fees and disbursements of counsel and the
expenses of litigation incurred in connection with collecting such
costs, fees and expenses and any other fees due under this Agreement or
any of the other Transaction Documents as a result of any willful
breach by the Purchaser of its obligations under this Section 8.2.
(c) OTHER EXPENSES. Except as otherwise provided in this
Section 8.2, whether or not the Transactions are concluded, all costs
and expenses incurred in connection with the Transaction Documents and
the Transactions shall be paid by the party incurring such expenses.
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 INDEMNIFICATION BY THE COMPANY.
(a) Subject to, and without limiting the effect of, any term
or provision of any Transaction Document that limits the Purchaser's
recourse against the Company in the event of a failure by the Company
to perform a certain covenant or agreement specified therein, and
whether or not the Closing shall occur, the Purchaser may make a claim
for indemnification pursuant to this Article IX at any time during the
period from the date of termination of this Agreement pursuant to
Section 8.1 or the Closing Date, as the case may be, through and
including the first anniversary of the date of termination of this
Agreement pursuant to Section 8.1 or the Closing Date, as the case may
be, and the Company shall thereafter indemnify the Purchaser against,
and hold it harmless from, any and all Losses in any way relating to or
allegedly arising out of any of the following:
(1) any breach of the representations, warranties,
covenants or agreements of the Company contained in any Transaction
Document, whether or not the Transactions are concluded or the
obligations of the parties under the Transaction Documents are
terminated pursuant to Article VII or otherwise;
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(2) any untrue statement of a material fact contained
in any notification or any materials filed by the Company with the
Securities and Exchange Commission or distributed or otherwise
disseminated to the public (or any amendment or supplement thereto)
relating to the Transaction Documents and the Transactions or any
failure to state a material fact required to make any statement
contained therein not misleading unless the statement or omission is
based primarily upon information furnished in writing to the Company by
the Purchaser or any other indemnified person expressly for inclusion
in the material in question; or
(3) any other matter as to which the Company in other
provisions of this Agreement or any other Transaction Document has
agreed to indemnify any of those persons.
The Company shall have no obligation under this Section 9.1 to (x) the Purchaser
with respect to any of the foregoing arising primarily out of the gross
negligence or willful misconduct of the Purchaser as determined by a final
judgment of a court of competent jurisdiction or (y) any of the limited partners
of the Purchaser.
(b) If any Action indemnifiable under this Section 9.1 shall
be brought, asserted or threatened against Purchaser, Purchaser shall
promptly notify the indemnifying person. A failure to notify the
indemnifying person timely or at all shall reduce the liabilities and
obligations of the indemnifying person under this Section 9.1 only to
the extent the indemnifying person actually shall be prejudiced by such
failure. The indemnifying person shall assume the defense of the
Action, including the employment of counsel satisfactory to the
indemnified person and the payment of all related fees and expenses,
but the indemnified person may employ separate counsel in the Action
and participate in the defense of the Action at its own expense.
However, the indemnified person may by written notice to the
indemnifying person assume the defense of the Action, including the
employment of counsel, at the expense of the indemnifying person
(except that the indemnifying person shall not be liable for the fees
and expenses of more than one such separate counsel with respect to the
Action) if:
(1) without a delay that shall be prejudicial to the
interests of the indemnified person, the indemnifying person fails to
take one or more of the following actions: (A) acknowledge in writing
to the indemnified person the liability of the indemnifying person to
the indemnified person under this Section 9.1 with respect to the
Action, (B) assume the defense, (C) post an indemnity or similar bond
(in form and substance satisfactory to the indemnified person) in an
amount equal to the full amount for which the indemnified person may be
liable as a result of the Action (including penalties and interest) or
provide other evidence satisfactory to the indemnified person of the
ability of the indemnifying person to pay that amount in full or (D)
employ counsel reasonably satisfactory to the indemnified person; or
(2) the persons against whom the Action shall have
been brought, asserted or threatened (including any impleaded parties)
include both the indemnified
- 23 -
person and the indemnifying person and the indemnified person is
advised by counsel that there may be one or more legal defenses
available to the indemnified person that are different from or
additional to those available to the indemnifying person; or
(3) the indemnified person reasonably believes that
the Action or an unfavorable resolution of the Action may materially
and adversely affect the business, properties, operations, prospects or
condition (financial or otherwise) of the indemnified person and its
Affiliates other than as a result of the payment of money damages.
If the indemnified person has assumed the defense of the Action pursuant to any
of the three conditions stated above, then the indemnifying person shall not
have the right to assume the defense of the Action on behalf of the indemnified
person and the indemnified person shall have the right to control the defense,
compromise or settlement of any indemnifiable Action on behalf of and for the
account and risk of the indemnifying person. The indemnifying person shall be
bound by the result of the defense of any Action, whether the defense shall have
been assumed by the indemnifying person or by the indemnified person, and shall
indemnify the indemnified person against, and hold the indemnified person
harmless from, all Losses in any way relating to or allegedly arising in
connection with the matter or matters that shall be the basis of the Action or
otherwise connected to the Action, except that the indemnifying person shall not
be liable for the payment of the amount of money damages provided in a
settlement of an indemnifiable Action defended by the indemnified person
pursuant to the second or third conditions stated above that shall have been
effected without the written consent of the indemnifying person, which consent
shall not be unreasonably withheld.
(c) Notwithstanding anything in this Section 9.1 to the
contrary, if, in connection with an Action indemnifiable under this
Section 9.1, a Governmental Body or other person having authority or
jurisdiction over a matter or matters related to the Action shall have
rendered, entered or granted a binding judgment, decision, ruling,
order or award with respect to the matter or matters providing for the
payment of money damages or the claimant and the indemnifying party
shall have agreed to settle the Action for an amount of money damages
without reservation of any rights or defenses against the indemnified
person, and if the indemnified person elects to appeal the judgment,
decision, ruling, order or award or declines to agree to the proposed
settlement, as the case may be, then the indemnified person may
continue to defend the Action, free of any participation by the
indemnifying person, but the amount of any ultimate liability of the
indemnifying party under this Section 9.1 with respect to Losses
related to or allegedly arising in connection with the matter or
matters that shall have been comprehended by the judgment, decision,
ruling, order or award or by the proposed settlement, as the case may
be, shall then be limited to the amount of the judgment, decision,
ruling, order or award or the amount of the proposed settlement, as the
case may be, plus the other indemnified Losses of the indemnified
person relating to the matter or matters through the date of its
election to appeal or its rejection of the proposed settlement, as the
case may be.
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(d) If the indemnification provided for in this Section 9.1 is
unavailable to an indemnified person (other than by reason of
exceptions provided in this Section 9.1), or is insufficient to hold
harmless an indemnified person in respect of any Loss then the
indemnifying person, in lieu of indemnifying the indemnified person,
shall contribute to the amount paid or payable by the indemnified
person as a result of the Loss in the proportion that is appropriate to
reflect the relative fault of the indemnifying person on the one part
and of the indemnified person on the other part in connection with the
events or circumstances which resulted in the Loss as well as any other
relevant equitable considerations. The relative fault of the
indemnifying person on the one part and of the indemnified person on
the other part shall be determined by reference to, among other things,
those persons' relative intent, knowledge, access to information and
opportunity to correct or prevent the events or circumstances resulting
in the Loss. The amount of any Loss suffered, incurred or paid any
person shall be deemed to include all expenses incurred or paid by the
person in connection with investigating or defending any Action,
including, but not limited to, the fees and expenses of counsel.
SECTION 9.2 NO LIMITATION ON OTHER RIGHTS OF RECOVERY. The
indemnification set forth in this Article IX shall be in addition to any other
obligations or liabilities of an indemnifying person to an indemnified person at
common law or otherwise. The provisions of this Article VIII shall not eliminate
or otherwise limit the right of any indemnified person or any other person to
seek to recover contribution, damages or otherwise enforce its rights against
the indemnifying person or any other person without regard to the provisions of
this Article IX. If at any time all or any part of any indemnification payment
hereunder is or must be rescinded or returned to the person making such
indemnity payment for any reason whatsoever (including, without limitation, the
insolvency, bankruptcy or reorganization of any person) the indemnification
obligations of the person making such payment shall be reinstated with respect
to such payment so rescinded or returned as though such payment had never been
made or received.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 NOTICES. All notices, requests and other
communications to any party or under any Transaction Document shall be in
writing. Communications may be made by telecopy or similar writing. Each
communication shall be given to the party at its address stated on the signature
pages of this Agreement or at any other address as the party may specify for
this purpose by notice to the other party. Each communication shall be effective
(1) if given by telecopy, when the telecopy is transmitted to the proper address
and the receipt of the transmission is confirmed, (2) if given by mail, 72 hours
after the communication is deposited in the mails properly addressed with first
class postage prepaid or (3) if given by any other means, when delivered to the
proper address and a written acknowledgement of delivery is received.
- 25 -
SECTION 10.2 NO WAIVERS; REMEDIES. No failure or delay by any
party in exercising any right, power or privilege under any Transaction Document
shall operate as a waiver of the right, power or privilege. A single or partial
exercise of any right, power or privilege shall not preclude any other or
further exercise of the right, power or privilege or the exercise of any other
right, power or privilege. The rights and remedies provided in the Transaction
Documents shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 10.3 AMENDMENTS, ETC. No amendment, modification,
termination, or waiver of any provision of any Transaction Document, and no
consent to any departure by a party to a Transaction Document from any provision
of the Transaction Document, shall be effective unless it shall be in writing
and signed and delivered by the other parties to the Transaction Document, and
then it shall be effective only in the specific instance and for the specific
purpose for which it is given.
SECTION 10.4 SUCCESSORS AND ASSIGNS.
(a) Purchaser may assign to an Affiliate thereof its rights
and delegate its obligations under this Agreement before the Closing;
such assignee shall accept those rights and assume those obligations
for the benefit of the other party in writing in form reasonably
satisfactory to the Company. Thereafter, without any further action by
any person, all references in this Agreement to the "Purchaser" and all
comparable references, shall be deemed to be references to the
transferee, but such assignor shall not be released from any obligation
or liability under this Agreement.
(b) Except as provided in Section 10.4(a) or in any
Transaction Document, no party to this Agreement may assign its rights
under the Transaction Document. Any delegation in contravention of this
Section shall be void AB INITIO and shall not relieve the delegating
party of any obligation under this Agreement.
(c) The provisions of each Transaction Document shall be
binding upon and inure to the benefit of the parties to the Transaction
Document and their respective successors and permitted assigns.
SECTION 10.5 ACCOUNTING TERMS AND DETERMINATIONS. Unless
otherwise specified, all accounting terms shall be interpreted, all accounting
determinations shall be made, all records and books of account shall be kept and
all financial statements required to be prepared or delivered shall be prepared
in accordance GAAP, applied on a basis consistent (except for changes approved
by the Company's independent public accountants) with the latest audited
financial statements referred to in Section 4.5.
SECTION 10.6 GOVERNING LAW. Each Transaction Document shall be
governed by and construed in accordance with the internal laws of the State of
New York. All rights and obligations of the Company and Purchaser shall be in
addition to and not in limitation of those provided by applicable law.
- 26 -
SECTION 10.7 COUNTERPARTS; EFFECTIVENESS. Each Transaction
Document may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if all signatures were on the same instrument.
SECTION 10.8 SEVERABILITY OF PROVISIONS. Any provision of any
Transaction Document that is prohibited or unenforceable in any jurisdiction
shall, as to that jurisdiction, be ineffective to the extent of the prohibition
or unenforceability without invalidating the remaining provisions of the
Transaction Document or affecting the validity or enforceability of the
provision in any other jurisdiction.
SECTION 10.9 HEADINGS AND REFERENCES. Article and section
headings in any Transaction Document are included in the Transaction Document
for the convenience of reference only and do not constitute a part of the
Transaction Document for any other purpose. References to parties and articles
and sections in any Transaction Document are references to the parties to or the
articles and sections of the Transaction Document, as the case may be, unless
the context shall require otherwise.
SECTION 10.10 ENTIRE AGREEMENT. The Transaction Documents
embody the entire agreement and understanding of the respective parties and
supersede all prior agreements or understandings with respect to the subject
matters of those documents; provided that the agreement of the parties contained
in the sixth paragraph of that certain letter agreement dated as of April 21,
1997 between Purchaser and Seller is expressly incorporated herein by this
reference.
SECTION 10.11 SURVIVAL. Except as otherwise specifically
provided in any Transaction Document, and notwithstanding any investigation or
notice to the contrary or any waiver by any other party of a related condition
precedent to the performance by the other party of an obligation under the
Transaction Document, (1) each representation and warranty of each party to the
Transaction Document contained in or made pursuant to the Transaction Document
shall survive each Closing and remain in full force and effect until the date
that is the first anniversary of the Closing Date (2) the other party may assert
or commence an Action against the party with respect to the breach of any such
representation or warranty of the party on or before such date and may maintain
any such Action thereafter. Each covenant or agreement of a party to a
Transaction Document required to be performed on or after a Closing shall remain
in full force and effect thereafter in accordance with its terms.
SECTION 10.12 NON-EXCLUSIVE JURISDICTION. Each party (1)
agrees that any Action with respect to any Transaction Document may be brought
in the courts of the State of New York or of the United States of America for
the Southern District of New York, (2) accepts for itself and in respect of its
property, generally and unconditionally, the jurisdiction of those courts and
(3) irrevocably waives any objection, including, without limitation, any
objection to the laying of venue or based on the grounds of FORUM NON
CONVENIENS, which it may now or hereafter have to the bringing of any Action in
those jurisdictions; PROVIDED, HOWEVER, that any party may assert in an Action
in any other jurisdiction or venue each mandatory defense, third-
- 27 -
party claim or similar claim that, if not so asserted in such Action, may
thereafter not be asserted by such party in an original Action in the courts
referred to in clause (1) above.
SECTION 10.13 WAIVER OF JURY TRIAL. Each party waives any
right to a trial by jury in any Action to enforce or defend any right under any
Transaction Document or any amendment, instrument, document or agreement
delivered, or which in the future may be delivered, in connection with any
Transaction Document and agrees that any Action shall be tried before a court
and not before a jury.
SECTION 10.14 AFFILIATE. Nothing contained in the Transaction
Documents shall constitute Purchaser an "affiliate" of any of the Company and
its Subsidiaries within the meaning of Rule 13e-3 under the Exchange Act.
SECTION 10.15 NON-RECOURSE. No recourse under any of the
Transaction Documents shall be had against any "controlling person" (within the
meaning of Section 20 of the Exchange Act) of any party or the shareholders,
directors, officers, employees, agents and Affiliates of the party or such
controlling persons, whether by the enforcement of any assessment or by any
legal or equitable proceeding, or by virtue of any Regulation, it being
expressly agreed and acknowledged that no personal liability whatsoever shall
attach to, be imposed on or otherwise be incurred by such controlling person,
shareholder, director, officer, employee, agent or Affiliate, as such, for any
obligations of the party under this Agreement or any other Transaction Document
or for any claim based on, in respect of or by reason of such obligations or
their creation.
---------------------------
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IN WITNESS WHEREOF, the parties have executed and delivered
this Purchase Agreement as of the date first written above.
THE WMF GROUP, LTD.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: President
Address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
CAPRICORN INVESTORS II, L.P.
By: CAPRICORN HOLDINGS, LLC,
its General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.,
------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.,
Title: Manager
Address: ▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
S-1
DEFINITION ANNEX
"ACTION" against a person means an action, suit,
investigation, complaint or other proceeding pending against or affecting the
person or its property, whether civil or criminal, in law or equity or before
any arbitrator or Governmental Body.
"AFFILIATE" of a person means any other person (1) that
directly or indirectly controls, is controlled by or is under common control
with, the person or any of its Subsidiaries, (2) that directly or indirectly
beneficially owns or holds 5.0% or more of any class of voting stock of the
person or any of its Subsidiaries or (3) 5.0% or more of the voting stock of
which is directly or indirectly beneficially owned or held by the person or any
of its Subsidiaries. The term "CONTROL" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, by
contract or otherwise.
"APPROVAL" means an authorization, consent, approval or waiver
of, clearance by, notice to or registration or filing with, or any other similar
action by or with respect to a Governmental Body or any other person and the
expiration or termination of all prescribed waiting, review or appeal periods
with respect to any of the foregoing.
"BENEFICIAL OWNERSHIP" has the meaning assigned to that term
in Section 13(d) of the Exchange Act.
"BEST EFFORTS" means the use of all reasonable efforts,
including, without limitation, the expenditure of amounts reasonably related to
the objective sought to be achieved, with respect to matters and actions over
which the person has or could reasonably be expected to exert any control or
influence.
"CAPITALIZED LEASE" means any lease that is or should be
capitalized and appear on the balance sheet of the lessee.
"CLOSING DATE" has the meaning stated in Section 2.1 of this
Agreement.
"COMMON STOCK" means the common stock, par value $.01 per
share, of the Company.
"COMPANY" means The WMF Group, Ltd., a Delaware corporation,
and its successors.
"CONSOLIDATED" means, as applied to any financial or
accounting term, the term determined on a consolidated basis for a person and
its Subsidiaries, excluding intercompany items and minority interests.
A-1
"CONSOLIDATED SUBSIDIARY" of a person at any date means any
Subsidiary of the person or other entity the accounts of which would be
consolidated with those of the person in its consolidated financial statements
as of that date.
"DEBT" of a person at any date means, without duplication, the
sum of (1) all obligations of the person (A) for borrowed money, (B) evidenced
by bonds, debentures, notes or other similar instruments, (C) to pay the
deferred purchase price of property or services, except trade accounts payable
arising in the ordinary course of business, (D) as lessee under Capitalized
Leases, (E) under letters of credit issued for the account of the person and (F)
arising under acceptance facilities, plus (2) all Debt of others Guaranteed by
the person, plus (3) all Debt of others secured by a Lien on any asset of the
person and whether or not such Debt is assumed by the person.
"DOLLARS" AND "$" refer to United States dollars and other
lawful currency of the United States of America from time to time in effect.
"DUS" shall mean the ▇▇▇▇▇▇ ▇▇▇ Delegated Underwriting and
Servicing program.
"DUS MORTGAGE LOANS" shall mean Mortgage Loans originated
under DUS.
"EQUITY SECURITIES" of a person means the capital stock of the
person and all other securities convertible into or exchangeable or exercisable
for any shares of its capital stock, all rights to subscribe for or to purchase,
all options for the purchase of, and all calls, commitments or claims of any
character relating to, any shares of its capital stock and any securities
convertible into or exchangeable or exercisable for any of the foregoing.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the related rules and regulations thereunder.
"EXCHANGE ACT REGISTRATION STATEMENT" means the Registration
Statement on Form 10 filed by the Company with the SEC on August 4, 1997 which
became effective October 3, 1997 with respect to the registration of the Common
Stock under the Exchange Act.
"FHA" shall mean the Federal Housing Administration, an agency
within HUD, or any successor thereto and including the Federal Housing
Commissioner and the Secretary of HUD where appropriate under the FHA
regulations.
"▇▇▇▇▇▇ MAE" shall mean ▇▇▇▇▇▇ ▇▇▇ or any successor
organization.
"FLOW SERVICING AGREEMENT" shall mean an agreement between the
Company and a Mortgage originator setting forth the terms and conditions under
which the Company agrees to buy loan servicing rights from the Mortgage
originator.
A-2
"▇▇▇▇▇▇▇ MAC" shall mean the Federal Home Loan Mortgage
Corporation or any successor or organization.
"GAAP" means generally accepted accounting principles as in
effect in the United States of America from time to time.
"GNMA" shall mean the Government National Mortgage Association
or any successor organization.
"GOVERNMENTAL BODY" means any agency, bureau, commission,
court, department, official, political subdivision, tribunal or other
instrumentality of any government, whether federal, state, county or local,
domestic or foreign including, without limitation, HUD, GNMA, ▇▇▇▇▇▇▇ Mac,
▇▇▇▇▇▇ ▇▇▇ and the FHA.
"GUARANTEE" by any person means any obligation, contingent or
otherwise, of the person directly or indirectly guaranteeing any Debt of any
other person or in any manner providing for the payment of any Debt of any other
person or the investment of funds in any other person or otherwise protecting
the holder of the Debt against loss (whether by agreement to indemnify, to lease
assets as lessor or lessee, to purchase assets, goods, securities or services,
or to take-or-pay or otherwise), but the term "GUARANTEE" does not include
endorsements for collection or deposit in the ordinary course of business. The
term "GUARANTEE" used as a verb has a correlative meaning.
"HUD" shall mean the United States Department of Housing and
Urban Development or any successor organization.
"INVESTOR" shall mean FHA, GNMA, ▇▇▇▇▇▇ Mae and ▇▇▇▇▇▇▇ Mac or
any private or public investor or credit enhancer for which the Company or any
of its Subsidiaries is originating and/or servicing (or to the extent or any
continuing obligation, has in the past originated or serviced) Mortgage Loans
pursuant to a Mortgage Servicing Agreement.
"KNOWLEDGE" with respect to a representation or warranty of a
party contained in any Transaction Document means, after due inquiry by the
representing party of each of the following persons, the actual knowledge of any
of the officers or other employees of the representing party having managerial
responsibility for the portion of the operations, assets or liabilities of the
representing party and its Subsidiaries with respect to which such knowledge of
the person is being represented.
"LIEN" means any mortgage, deed of trust, lien (statutory or
otherwise), pledge, hypothecation, charge, deposit arrangement, preference,
priority, security interest or encumbrance of any kind (including, but not
limited to, any conditional sale agreement or other title retention agreement,
any Capitalized Lease or financing lease having substantially the same economic
effect as the foregoing and the filing of or agreement to give any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction to evidence any of the foregoing).
A-3
"LOAN DOCUMENTS" shall mean any Mortgage Note or Mortgage or
similar instrument, and all amendments thereto, evidencing or securing a
Mortgage Loan, including hard copies where available, and all machine-readable
copies on any media.
"LOSS" means, with respect to any person, any cost, damage,
disbursement, expense, liability, judgment, loss, deficiency, obligation, Taxes,
penalty or settlement of any kind or nature, whether foreseeable or
unforeseeable (including, without limitation, interest or other carrying costs,
penalties, legal, accounting, expert witness, consultant and other professional
fees and expenses incurred by such person in the investigation, collection,
prosecution and defense of Actions (including, without limitation claims in
connection with the enforcement of any rights under any of the Transaction
Documents) and amounts paid in settlement), that may be imposed on or otherwise
incurred or suffered by such person.
"MATERIAL ADVERSE EFFECT" means, with respect to a
circumstance or event subject to a representation, warranty, covenant or other
agreement of a person or any of its Subsidiaries in any Transaction Document
that includes a reference therein to the possible occurrence of a Material
Adverse Effect, whether considered individually or together in the aggregate
with all other circumstances or events that are the subject of the same
representation, warranty, covenant or other agreement, a material adverse effect
on the business, properties, operations, prospects, condition (financial or
otherwise) or capitalization of the person and its Subsidiaries, taken as a
whole, or the ability of the person to perform its obligations under any
Transaction Document to which it is or may become a party.
"MATERIAL CONTRACT" means an agreement referred to in Section
4.15.
"MORTGAGE" shall mean a mortgage, deed of trust, security deed
or other security instrument on real property securing a Mortgage Note.
"MORTGAGE LOAN" shall mean a mortgage loan evidenced by a
Mortgage Note and secured by a Mortgage which is either an Owned Mortgage Loan
or a Mortgage Loan comprising the Mortgage Servicing Portfolio.
"MORTGAGE NOTE" shall mean a written promise to pay a sum of
money at a fixed or variable interest rate during a specified term evidencing a
Mortgage Loan.
"MORTGAGE SERVICING AGREEMENT" shall mean an agreement between
the Company and an Investor or a servicer or other party setting forth the terms
and conditions under which Mortgage Loans or other obligations relating to
Mortgage Loans have been and are to be serviced or subserviced and which may be
incorporated in general guidelines and issuances of an Investor (such as the
applicable ▇▇▇▇▇▇ Mae and ▇▇▇▇▇▇▇ Mac Seller/Servicer Guides) or PMI.
"MORTGAGE SERVICING PORTFOLIO" shall mean, as of the date of
this Agreement, all the Mortgage Loans which have been, are and, subject to
existing Mortgage Servicing
A-4
Agreements, are to be serviced or subserviced by the Company, other than the
Owned Mortgage Loans, and, from time to time after the date of this Agreement,
as and when Owned Mortgage Loans are delivered to Investors, such previously
Owned Mortgage Loans as well.
"OUTSTANDING OPTIONS" has the meaning stated in Section
4.14(b) of this Agreement.
"OWNED MORTGAGE LOANS" shall mean all the Mortgage Loans the
legal and/or beneficial ownership interests in which are vested in the Company
(or any of its Subsidiaries) as of the date of this Agreement. For the purpose
of this Agreement, Owned Mortgage Loans shall not include Mortgage Loans backed
by mortgage pass-through certificates guaranteed by GNMA (since such Mortgage
Loans are transferred in trust to the owner of the related GNMA guaranteed
mortgage-backed securities).
"PMI" shall mean private mortgage insurance, credit
enhancement or a private mortgage insurer or credit enhancer, as the context may
require.
"PERSON" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
Governmental Body.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement between the Company and Purchaser to be dated as of the Closing Date,
substantially in the form attached hereto as EXHIBIT A.
"REGISTRATION STATEMENTS" means the Securities Act
Registration Statement and the Exchange Act Registration Statement,
collectively.
"REGULATION" means (1) any applicable law, rule, regulation,
judgment, decree, ruling, order, award, injunction, recommendation or other
official action of any Governmental Body and (2) any official change in the
interpretation or administration of any of the foregoing by the Governmental
Body or by any other Governmental Body or other person responsible for the
interpretation or administration of any of the foregoing.
"SEC" means the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the related rules and regulations thereunder.
"SECURITIES ACT REGISTRATION STATEMENT" means the Registration
Statement on Form S-1 filed by the Company with the SEC on October 8, 1997 which
became effective November 4, 1997 with respect to the registration under the
Securities Act of the distribution of shares of Common Stock by Capricorn
Investors, L.P.
A-5
"SERVICING RIGHTS" shall mean the right to receive the
servicing fee income and any other income arising from or connected to the
Mortgage Servicing Agreements or the servicing of the Mortgage Loans in the
Mortgage Servicing Portfolio.
"SHARES" has the meaning stated in Section 1.1(a).
"SUBSIDIARY" of a person means (i) any corporation or other
entity of which securities or other ownership interests having ordinary voting
power to elect not less than 50% of the board of directors or other persons
performing similar functions are at the time directly or indirectly owned by the
person or (ii) a partnership in which the person or a Subsidiary of the person
is, at the date of determination, a general or limited partner of such
partnership, but only if the person or its Subsidiary is entitled to receive
more than fifty percent of the assets of such partnership upon its dissolution.
"TAXES" means all taxes, charges, fees, levies, duties,
imposts, withholdings, restrictions, fines, interest, penalties, additions to
tax or other assessments or charges, including, but not limited to, income,
excise, property, withholding, sales, use, gross receipts, value added and
franchise taxes, license recording, documentation and registration fees and
custom duties imposed by any Governmental Body.
"TAX RETURN" means a report, return or other information
required to be filed by a person with or submitted to a Governmental Body with
respect to Taxes, including, where permitted or required, combined or
consolidated returns for any group of entities that includes the person.
"TRANSACTION DOCUMENTS" means, collectively, means this
Agreement and the Registration Rights Agreement, and all other instruments and
documents executed and delivered by any person in connection with the conclusion
of one or more of the transactions contemplated thereby.
"TRANSACTIONS" means, collectively, the transactions
undertaken pursuant to or otherwise contemplated by, the Transaction Documents.
"TRANSFER" means a sale, an assignment, a lease, a license, a
grant, a transfer or other disposition of an asset or any interest of any nature
in an asset. The term "TRANSFER" used as a verb has a correlative meaning.
"WMF GROUP" shall mean Washington Mortgage Financial Group,
Ltd., a Delaware corporation.
"WMF/▇▇▇▇▇▇▇" shall mean WMF/▇▇▇▇▇▇▇, ▇▇▇▇▇ Associates
Limited, a Delaware corporation.
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