Washington Homes, Inc.
Second Amendment Agreement
Dated as of January 30, 1998
Re: Note Agreements Dated as of April 15, 1994
and
$30,000,000 aggregate principal amount of
8.61% Senior Notes, Series A
Due October 15, 2000
and
$13,000,000 aggregate principal amount of
Adjustable Rate Senior Notes, Series B
Due October 15, 2000
Table of Contents
(Not a part of the Agreement)
Section Heading
Page
Section 1. Amendments to Existing Note Agreements
2
Section 2. Amendments to Outstanding Notes
4
Section 3. Conditions Precedent
4
Section 4. Representations and Warranties.
5
Section 5. Miscellaneous
6
Signature Page 8
Washington Homes, Inc.
Second Amendment Agreement
Re: Note Agreements Dated as of April 15, 1994
and
$30,000,000 original principal amount of
8.61% Senior Notes, Series A
Due October 15, 2000
and
$13,000,000 original principal amount of
Adjustable Rate Senior Notes, Series B
Due October 15, 2000
Dated as of
January 30, 1998
To Each of the Holders
of Notes listed in Schedule I
to this Second Amendment Agreement
Gentlemen:
Reference is made to (i) the separate Note Agreements each dated as of
April 15, 1994 (the "1994 Note Agreements") between Washington Homes, Inc., a
Maryland corporation (the "Company"), and the Purchasers named on Schedule I
attached thereto, respectively (the Purchasers and any subsequent holders of the
Notes are hereinafter referred to as the "Noteholders"), as amended by the First
Amendment Agreement dated as of April 28, 1995 between the Company and the
holders of Notes (the "First Amendment", the 1994 Note Agreements, as amended by
the First Amendment, are hereinafter referred to as the "Existing Note
Agreements"), (ii) the $30,000,000 aggregate principal amount of 8.61% Senior
Notes, Series A due October 15, 2000 originally issued pursuant to the Existing
Note Agreements and currently outstanding (the "Series A Notes"), and
(iii) $13,000,000 aggregate principal amount of the Adjustable Rate Senior
Notes, Series B due October 15, 2000 originally issued pursuant to the Existing
Note Agreements and currently outstanding (the "Series B Notes", the Series A
Notes and the Series B Notes being hereinafter collectively referred to as, the
"Notes"). The Notes are sometimes hereinafter referred to as the "Outstanding
Notes".
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company requests the amendment of certain
provisions of the Existing Note Agreements as hereinafter provided.
Upon your acceptance hereof in the manner hereinafter provided and upon
satisfaction of all conditions to the effectiveness hereof and receipt by the
Company of similar acceptances from the holders of the requisite percentage of
the Outstanding Notes, this Second Amendment Agreement shall constitute a
contract between us amending the Existing Note Agreements as of January 30,
1998, but only in the respects hereinafter set forth:
.c1.Section 1. Amendments to Existing Note Agreements;.
Section 1.1. Section 1 of each of the Existing Note Agreements shall be
and is hereby amended by amending subsection 1.1(a)(i) by deleting the word
"semi-annually" and replacing it with the word "quarterly" and by deleting the
phrase "April and October in each year (commencing October 15, 1994)" and by
inserting "January, April, July and October in each year (commencing on
April 15, 1998, it being acknowledged that the payment on April 15, 1998 shall
include all accrued and unpaid interest from and after October 15, 1997)".
Section 1 shall also be amended by adding the following Section 1.4 to the
end thereof:
"Section 1.4. Adjustment Fee. (a) In addition to, and not in
limitation of, any other amounts due hereunder and under the Notes, the
Company shall pay an adjustment fee (referred to as "Adjustment Fees") in
the respective amounts and on the respective dates and to the respective
Holders set forth below (it being agreed that any amounts described below
in dollars as opposed to percentages shall be allocated on a pro rata basis
to the Holders of the respective series receiving such amounts based on the
unpaid principal amount of Notes of such series held by such Holders):
Date of Payment Amount of Recipients of
of Adjustment Fee Adjustment Fee Adjustment Fee
Second Amendment $200,000.00 Series A Noteholders
Closing Date
Second Amendment $16,250.00 Series B Noteholders
Closing Date
Second Amendment .25% of all Notes All Noteholders
Closing Date
April 30, 1998 .25% of all Notes All Noteholders
May 30, 1998 .125% of all Notes All Noteholders
June 30, 1998 .125% of all Notes All Noteholders
(b) Each Adjustment Fee referred to hereinabove shall be non-
refundable and shall be earned in full as of the date payment thereof as
required hereunder.
(c) In the event the entire issue of Series A Notes is prepaid
pursuant to and in accordance with 2.2(a), the Make-Whole Amount payable
in connection with such prepayment will be reduced by $200,000 provided,
that in no event, shall the Make-Whole Amount be reduced below zero. In
the event the entire issue of Series B Notes is prepaid pursuant to and in
accordance with 2.2(b), the Make-Whole Amount payable in connection with
such prepayment will be reduced by $16,250 but, in no event, shall the
Make-Whole Amount be reduced below zero."
Section 1.2. 2.2(b) of each of the Existing Note Agreements shall be and is
hereby amended (i) by deleting the reference to "April 14, 1998" from the top of
the left hand column of said Section 2.2(b) and, in substitution therefor,
"July 31, 1998" shall be inserted, (ii) by deleting the reference to "3.75" from
the top of the right hand column of said Section 2.2(b) and, in substitution
therefor, the number ".25%" shall be inserted and (iii) by deleting the
reference to "April 15, 1998" from the second line of the left hand column of
said Section 2.2(b) and, in substitution therefor, "August 1, 1998" shall be
inserted.
Section 1.3. 5.8 of each of the Existing Note Agreements shall be and is
hereby amended and restated in its entirety as follows:
"Section 5.8. Interest Charges Coverage Ratio. The Company will keep
and maintain the ratio of Net Income Available for Interest Charges to
Interest Charges (determined as of the end of each fiscal quarter) for any
four fiscal quarters selected by the Company (taken together as a single
accounting period) out of the immediately preceding five consecutive fiscal
quarters at not less than (i) 1.7 to 1 for the fiscal quarters ending
January 31, 1998 and April 30, 1998, and (ii) 2 to 1 for each fiscal
quarter ending July 31, 1998 and thereafter."
Section 1.4. 5.11 of each of the Existing Note Agreements shall be and is
hereby amended by adding as the last paragraph thereof the following:
"Notwithstanding anything contained in this 5.11 to the contrary, the
Company will not make a Restricted Payment at any time prior to July 31,
1998."
Section 1.5. 6.1(c) of each of the Existing Note Agreements shall be and is
hereby amended in its entirety as follows:
"(c) Default shall occur in the making of any payment of the
principal of any Note or premium, if any, thereon, at the expressed or any
accelerated maturity date or at any date fixed for prepayment or in the
making of any payment of an Adjustment Fee on the date such payment is
required to be made pursuant to 1.4; or"
Section 1.6. The definition of the term "Interest Charges" set forth in 8.1
of each of the Existing Note Agreements shall be and is hereby amended and
restated in its entirety as follows:
"`Interest Charges' for any period shall mean on a consolidated basis
all interest and all amortization of debt discount and expense on any
particular Indebtedness (including the interest component of Rentals on
Capitalized Leases) for which such calculations are being made.
Computations of Interest Charges on a pro forma basis for Indebtedness
having a variable interest rate shall be calculated at the rate in effect
on the date of any determination. For purposes of Section 5, computations
of Interest Charges shall exclude Adjustment Fees."
Section 1.7. The first sentence of the definition of the term "Reinvestment
Rate" set forth in Section 8.1 shall be and is hereby amended and restated as
follows:
"`Reinvestment Rate' shall mean (i) in the event of a prepayment of
the Series A Notes pursuant to 2.2(a) at any time from and after
January 30, 1998 to and including April 30, 1998, 2.25%, or (ii) in the
event of a prepayment of the Series A Notes pursuant to 2.2(a) at any time
from and after May 1, 1998 to and including July 31, 1998, 1.75% or
(iii) in the event of a prepayment of the Series A Notes pursuant to
2.2(a) after July 31, 1998 or in the event of any acceleration of the
Series A Notes, 0.50%, plus, in the case of each of clause (i), (ii) and
(iii) above, the arithmetic mean of the yields under the respective
headings "This Week" and "Last Week" published in the Statistical Release
under the caption "Treasury Constant Maturities" for the maturity (rounded
to the nearest month) corresponding to the Weighted Average Life to
Maturity of the principal being prepaid (taking into account the
application of such prepayment required by 2.1)."
.c1.Section 2. Amendments to Outstanding Notes;.
Section 2.1. Each of the Series A Notes shall be and is hereby amended by
deleting therefrom the phrase "semiannually on the fifteenth day of each April
and October in each year (commencing on the first of such dates after the date
hereof) and at maturity" and inserting therefor the phrase "quarterly on the
fifteenth day of each January, April, July and October in each year (commencing
on April 15, 1998, it being acknowledged that the payment on April 15, 1998
shall include all accrued and unpaid interest from and after October 15, 1997)
and at maturity."
.c1.Section 3. Conditions Precedent;.
Section 3.1. This Second Amendment Agreement shall not become effective
until, and shall become effective on the Business Day when each of the following
conditions shall have been satisfied (such Business Day being referred to as the
"Second Amendment Closing Date"):
(a) Each Noteholder shall have received this Second Amendment Agreement,
duly executed by the Company.
(b) The Holders holding 100% of the outstanding principal amount of the
Notes shall have consented to this Second Amendment Agreement as evidenced
by their execution thereof.
(c) The representations and warranties of the Company set forth in
Section 4 hereof are true and correct in all material respects as of the
date of the execution and delivery of this Second Amendment Agreement.
(d) The payment of all Adjustment Fees required to be paid on the Second
Amendment Closing Date as contemplated hereinabove, shall be paid by the
Company in full in immediately available funds.
(e) Counsel for the Company shall have delivered its opinion to each of
the Holders dated the Second Amendment Closing Date, covering each of the
matters set forth in 4.1(a) through (g) hereof (excluding, however
4.1(e)), and such other matters as the Holders may reasonably request, in
form and substance satisfactory to such holders.
(f) Any consents or approvals from any holder or holders of any
outstanding Security of the Company or any Subsidiary and any amendments of
agreements pursuant to which any Securities may have been issued which
shall be necessary to permit the consummation of the transactions
contemplated hereby shall have been obtained and all such consents or
amendments shall be reasonably satisfactory in form and substance to the
Noteholders and their special counsel.
(g) The Company shall have paid the fees and disbursements of the
Noteholders' special counsel, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇, incurred in connection
with the negotiation, preparation, execution and delivery of this Second
Amendment Agreement and the transactions contemplated hereby which fees and
disbursements are reflected in the statement of such special counsel
delivered to the Company at the time of the execution and delivery of this
Second Amendment Agreement. Upon receipt of any supplemental statement
after the execution of this Second Amendment Agreement, the Company will
pay such additional fees and disbursements of the Noteholders' special
counsel which were not reflected in its accounting records as of the time
of the delivery of the initial statement of fees and disbursements.
.c1.Section 4. Representations and Warranties.
Section 4.1. The Company hereby represents and warrants that as of the date
hereof and as of the date of execution and delivery of this Second Amendment
Agreement:
(a) The Company is duly incorporated, validly existing and in good
standing under the laws of the State of Maryland.
(b) The Company has the corporate power to own its property and to carry
on its business as now being conducted.
(c) The Company is duly qualified and in good standing as a foreign
corporation authorized to do business in each jurisdiction in which the
failure to do so would, individually or in the aggregate, have a material
adverse effect on the business, condition (financial or other), assets,
operations, properties or prospects of the Company.
(d) This Second Amendment Agreement and the Existing Note Agreements (as
amended hereby) are within the corporate powers of the Company, have been
duly authorized by all necessary corporate action on the part of the
Company, have been duly executed and delivered by the Company and
constitute legal, valid and binding obligations of the Company enforceable
in accordance with their respective terms.
(e) After giving effect to the amendments set forth in Sections 1 and 2
hereof, no Default or Event of Default has occurred and is continuing.
(f) The execution, delivery and performance of this Second Amendment
Agreement by the Company does not and will not result in a violation of or
default under (A) the certificate of incorporation or bylaws of the
Company, (B) any material agreement to which the Company is a party or by
which it is bound or to which the Company or any of its properties is
subject, (C) any material order, writ, injunction or decree binding on the
Company, or (D) any material statute, regulation, rule or other law
applicable to the Company.
(g) No authorization, consent, approval, exemption or action by or
notice to or filing with any court or administrative or governmental body
(other than periodic filings with regulatory authorities, none of which are
required to be filed as of the effective date of this Second Amendment
Agreement) is required in connection with the execution and delivery of
this Second Amendment Agreement or the consummation of the transactions
contemplated thereby.
.c1.Section 5. Miscellaneous;.
Section 5.1. Except as amended herein, all terms and provisions of the
Existing Note Agreements are hereby ratified, confirmed and approved in all
respects.
Section 5.2. Any and all notices, requests, certificates and other
instruments, including the Notes, may refer to the "Note Agreements" or the
"Note Agreements each dated as of April 15, 1994" without making specific
reference to this Second Amendment Agreement, but nevertheless all such
references shall be deemed to include this Second Amendment Agreement unless the
context shall otherwise require. Your acceptance hereof will also constitute
your agreement that prior to any sale, assignment, transfer, pledge or other
disposition by you of any Notes, you shall either (i) impose on the Notes so to
be disposed of an appropriate endorsement referring to this Second Amendment
Agreement as binding on the parties hereto and upon any and all future holders
of such Notes or (ii) at your option, surrender such Notes for new Notes of the
same form and tenor as the Notes so surrendered but revised to contain express
textual reference to this Second Amendment Agreement. All expenses for the
preparation of such new Notes and the exchange for such new Notes are to be
borne by the Company.
Section 5.3. This Second Amendment Agreement and all covenants herein
contained shall be binding upon and inure to the benefit of the respective
successors and assigns of the parties hereunder. All covenants made by the
Company herein shall survive the closing and the delivery of this Second
Amendment Agreement.
Section 5.4. This Second Amendment Agreement shall be governed by and
construed in accordance with Maryland law.
Section 5.5. The capitalized terms used in this Second Amendment Agreement
shall have the respective meanings specified in the Existing Note Agreements
unless otherwise herein defined or the context hereof shall otherwise require.
The execution hereof by the Noteholders shall constitute a contract among
the Company and the Noteholders for the uses and purposes hereinabove set forth.
This Second Amendment Agreement may be executed in any number of counterparts,
each executed counterpart constituting an original but all together only one
agreement.
.c4.Signature Page;
Washington Homes, Inc.
By
Its
This foregoing Second Amendment Agreement is hereby accepted and agreed to
as of the date aforesaid.
Life Investors Insurance Company of America
By
Its
PFL Life Insurance Company
By
Its
AUSA Life Insurance Company, Inc.
By
Its
Monumental Life Insurance Company
By
Its
The Life Insurance Company of Virginia
By
Its
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Life Insurance Company
of America
By
Its
Washington National Insurance Company
By: Conseco Capital Management, Inc., its
investment advisors
By
Its
Sun Life Insurance Company of America
By
Its
ACACIA Life Insurance Company
By
Its
ACACIA National Life Insurance Company
By
Its
Outstanding
Principal
Amount and Series
of Notes
Name of Holder Held as of January 30,
1998
of Notes
Life Investors Insurance Company
of America $6,500,000 Series A
PFL Life Insurance Company $4,000,000 Series A
AUSA Life Insurance Company, Inc. $3,500,000 Series A
Monumental Life Insurance Company $1,000,000 Series A
The Life Insurance Company of
Virginia $7,000,000 Series A
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Life Insurance
Company of America $5,000,000 Series A
Washington National Insurance $3,000,000 Series A
Company
ACACIA Life Insurance Company $2,000,000 Series B
ACACIA National Life Insurance $2,000,000 Series B
Company
Sun Life Insurance Company of
America $9,000,000 Series B
