As filed with the Securities and Exchange Commission on June 6, 2002
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
K. HOVNANIAN HOVNANIAN
ENTERPRISES, INC. ENTERPRISES, INC.
(Exact Name of Registrant as Specified in Its Charter)
NEW JERSEY DELAWARE
(State or Other Jurisdiction of Incorporation or Organization)
22-2423583 22-1851059
(I.R.S. Employer Identification Number)
10 HIGHWAY 35 10 HIGHWAY 35
P.O. BOX 500 P.O. BOX 500
RED BANK, NEW JERSEY 07701 RED BANK, NEW JERSEY 07701
(732) 747-7800 (732) 747-7800
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
SEE TABLE OF ADDITIONAL REGISTRANTS
---------------------
J. LARRY SORSBY
HOVNANIAN ENTERPRISES, INC.
10 HIGHWAY 35
P.O. BOX 500
RED BANK, NEW JERSEY 07701
(732) 747-7800
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
---------------------
COPIES TO:
VINCENT PAGANO, JR., ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017-3954
(212) 455-2000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|____________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|_______________
---------------------
CALCULATION OF REGISTRATION FEE
===================================================================================================================
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE AGGREGATE REGISTRATION
PER UNIT OFFERING PRICE FEE
- -------------------------------------------------------------------------------------------------------------------
8.000% Senior Notes due 2012....................... $100,000,000 99.161%(1) $ 99,161,000(1) $9,123(2)
- -------------------------------------------------------------------------------------------------------------------
Guarantees of 8.000% Senior Notes due 2012......... (3) (3) (3) None(3)
- -------------------------------------------------------------------------------------------------------------------
8.875% Senior Subordinated Notes due 2012.......... $150,000,000 100%(1) $150,000,000(1) $13,800(2)
- -------------------------------------------------------------------------------------------------------------------
Guarantees of 8.875% Senior Subordinated Notes
due 2012......................................... (3) (3) (3) None(3)
- -------------------------------------------------------------------------------------------------------------------
Total.............................................. $250,000,000 $249,161,000(1) $22,923(2)
===================================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee under
Rule 457 of the Securities Act of 1933.
(2) The registration fee for the securities offered hereby has been calculated
under Rule 457(f)(2) of the Securities Act of 1933 and reflects the book
value of the securities as of May 31, 2002. The Proposed Maximum Aggregate
Offering Price is estimated solely for the purpose of calculating the
registration fee.
(3) No consideration will be received for the Guarantees.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
TABLE OF ADDITIONAL REGISTRANTS
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ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
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All Seasons, Inc. MD 52-0855385 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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Arrow Properties, Inc. NJ 22-1945442 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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Ballantrae Development Corp. FL 22-3366681 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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Ballantrae Home Sales, Inc. FL 22-3312524 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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Condominium Community (Bowie MD 52-2002262 10 Highway 35
New Town), Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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Condominium Community (Largo MD 52-2002261 10 Highway 35
Town), Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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Condominium Community (Park MD 52-2002264 10 Highway 35
Place), Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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Condominium Community (Quail MD 52-2002265 10 Highway 35
Run), Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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Condominium Community (Truman MD 52-2002263 10 Highway 35
Drive), Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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Consultants Corporation MD 52-0856601 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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Designed Contracts, Inc. MD 52-0854124 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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1
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
EXC, Inc. DE 22-3178077 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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Fortis Homes, Inc. NC 56-1477716 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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Housing-Home Sales, Inc. MD 52-0846210 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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Hovnanian at Tarpon Lakes I, Inc. FL 22-2436504 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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Hovnanian Developments of FL 22-2416624 10 Highway 35
Florida, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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Hovnanian Pennsylvania, Inc. PA 22-1097670 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hov A, Inc. NJ 22-2627859 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hov International, Inc. NJ 22-3188610 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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K. Hovnanian Acquisitions, Inc. NJ 22-3406671 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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K. Hovnanian at Ashburn Village, VA 22-3178078 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Atlantic City, NJ 22-1945458 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Ballantrae FL 22-3409425 10 Highway 35
Estates, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
2
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Barrington, Inc. VA 22-3583846 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Bedminster II, NJ 22-3331038 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Bedminster, Inc. NJ 22-1945452 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Belmont, Inc. VA 22-3253529 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Bernards IV, Inc. NJ 22-3292171 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Branchburg III, NJ 22-2961099 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Bridgeport, Inc. CA 22-3547807 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Bridgewater IV, NJ 22-4049666 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Bridgewater V, NJ 22-2713924 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Bridgewater VI, NJ 22-3243298 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Bull Run, Inc. VA 22-3192910 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Burlington III, NJ 22-3412130 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
3
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Burlington, Inc. NJ 22-2949611 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Calabria, Inc. CA 22-3324654 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Cameron Chase, VA 22-3459993 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Carmel Del Mar, CA 22-3320550 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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K. Hovnanian at Carolina Country FL 22-3188607 10 Highway 35
Club I, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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K. Hovnanian at Carolina Country FL 22-3247085 10 Highway 35
Club II, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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K. Hovnanian at Carolina Country FL 22-3273706 10 Highway 35
Club III, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Castile, Inc. CA 22-3356308 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Cedar Grove I, NJ 22-2892342 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Cedar Grove II, NJ 22-2892341 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Chaparral, Inc. CA 22-3565730 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Clarkstown, Inc. NY 22-2618176 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
4
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Coconut Creek, FL 22-3275859 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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K. Hovnanian at Crestline, Inc. CA 22-3493450 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Crystal Springs, NJ 22-3406656 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Dominguez, Inc. CA 22-3602177 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Dominion Ridge, VA 22-3433318 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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K. Hovnanian at East Brunswick VI, NJ 22-2892496 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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K. Hovnanian at East Brunswick NJ 22-2776654 10 Highway 35
VIII, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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K. Hovnanian at East Whiteland I, PA 22-3483220 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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K. Hovnanian at Exeter Hills, VA 22-3331043 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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K. Hovnanian at Fair Lakes Glen, VA 22-3261224 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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K. Hovnanian at Fair Lakes, VA 22-3249049 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Freehold NJ 22-2348977 10 Highway 35
Township, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
5
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Freehold Township NJ 22-2459186 10 Highway 35
I, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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K. Hovnanian at Ft. Myers I, Inc. FL 22-2652958 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Ft. Myers II, Inc. FL 22-2636393 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Great Notch, Inc. NJ 22-3330582 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Hackettstown, Inc. NJ 22-2765936 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Half Moon Bay, FL 22-2915380 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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K. Hovnanian at Hampton Oaks, VA 22-3583845 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Hanover, Inc. NJ 22-3133218 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Hershey's Mill, PA 22-3445102 10 Highway 35
Inc. (a PA Corp) P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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K. Hovnanian at Highland CA 22-3309241 10 Highway 35
Vineyards, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Holly Crest, Inc. VA 22-3214275 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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K. Hovnanian at Hopewell IV, Inc. NJ 22-3345622 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
6
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Hopewell V, Inc. NJ 22-3464499 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Hopewell VI, Inc. NJ 22-3465709 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Howell Township, NJ 22-2859308 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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K. Hovnanian at Hunter Estates, VA 22-3321100 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Jacksonville II, FL 22-2914590 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Jefferson, Inc. NJ 22-3427233 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Jersey City III, NJ 22-3016528 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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K. Hovnanian at Kings Grant I, NJ 22-2601064 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Klockner Farms, NJ 22-2572443 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at La Terraza, Inc. CA 22-3303807 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at La Trovata, Inc. CA 22-3369099 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Lakewood, Inc. NJ 22-2618178 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
7
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Lawrence V, Inc. NJ 22-3638073 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Lower Saucon II, PA 22-3602924 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Lower Saucon, PA 22-2961090 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Mahwah II, Inc. NJ 22-2859315 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Mahwah IV, Inc. NJ 22-3015286 10 Highway 35
(Whalepond) P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Mahwah IX, Inc. NJ 22-3337896 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Mahwah V, Inc. NJ 22-2868663 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Mahwah VI, Inc. NJ 22-3188612 10 Highway 35
(Norfolk) P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Mahwah VII, Inc. NJ 22-2592139 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Mahwah VIII, Inc. NJ 22-2246316 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Manalapan, Inc. NJ 22-2442998 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Manalapan III, NJ 22-3337896 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
8
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Marlboro II, Inc. NJ 22-2748659 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Marlboro NJ 22-3467252 10 Highway 35
Township IV, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Marlboro NJ 22-3791976 10 Highway 35
Township VI, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Marlboro NJ 22-3791977 10 Highway 35
Township VII, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Marlboro NJ 22-2847845 10 Highway 35
Township, III P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Medford I, Inc. NJ 22-3188613 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Merrimack, Inc. NH 22-2821914 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian of Metro DC South, VA 22-3583847 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Montclair NJ, NJ 22-2759221 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Montclair, Inc. VA 22-3188614 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Montgomery I, Inc. PA 22-3165601 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Newark Urban NJ 22-2885748 10 Highway 35
Renewal Corporation I, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
9
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Newark Urban NJ 22-3027957 10 Highway 35
Renewal Corporation IV, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Newark Urban NJ 22-3027960 10 Highway 35
Renewal Corporation V, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at North Bergen, NJ 22-2935352 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at North Brunswick NJ 22-3036037 10 Highway 35
IV, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Northern NY 22-2814372 10 Highway 35
Westchester, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Northlake, Inc. CA 22-3336696 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Ocean Walk, Inc. CA 22-3565732 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at P.C. Properties, VA 22-3583840 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Park Ridge, Inc. VA 22-3253530 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Pasco I, Inc. FL 22-2636392 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Pasco II, Inc. FL 22-2790300 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Peekskill, Inc. NY 22-2718071 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
10
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Pembroke Shores, FL 22-3273708 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Perkiomen I, Inc. PA 22-3094743 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Perkiomen II, Inc. PA 22-3301197 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Plainsboro III, NJ 22-3027955 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Polo Trace, Inc. FL 22-3284165 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Port Imperial NJ 22-3450185 10 Highway 35
North, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Princeton, Inc. NJ 22-3322125 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Rancho CA 22-3369102 10 Highway 35
Christianitos, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Raritan I, Inc. NJ 22-3326386 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Readington II, NJ 22-3085521 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Reservoir Ridge, NJ 22-2510587 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at River Oaks, Inc. VA 22-3199603 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
11
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at San Sevaine, Inc. CA 22-3493454 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Saratoga, Inc. CA 22-3547806 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Scotch Plains II, NJ 22-3464496 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Scotch Plains, NJ 22-2380821 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Seneca Crossing, MD 22-3331047 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Smithville, Inc. NJ 22-3418731 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Smithville III, NJ 22-2776387 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Somers Point, NJ 22-2765935 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at South Brunswick NJ 22-2458485 10 Highway 35
II, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at South Brunswick NJ 22-2652530 10 Highway 35
III, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at South Brunswick NJ 22-2859309 10 Highway 35
IV, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at South Brunswick NJ 22-2937570 10 Highway 35
V, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
12
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Spring Ridge, NJ 22-3192909 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Stone Canyon, CA 22-3512641 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Stonegate, Inc. CA 22-3582033 10 Highway 35
(a CA Corporation) P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Stonegate, Inc. VA 22-3481223 10 Highway 35
(a VA Corporation) P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Stony Point, Inc. NJ 22-2758195 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Stuart Road, Inc. VA 22-3312918 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Sully Station, VA 22-3188746 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Summerwood, Inc. VA 22-3583842 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Sycamore, Inc. CA 22-3493456 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Tannery Hill, NJ 22-3396608 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at The Bluff, Inc. NJ 22-1841019 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at The Cedars, Inc. NJ 22-3406664 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
13
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at The Glen, Inc. VA 22-3618411 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at the Reserve at NJ 22-2934223 10 Highway 35
Medford, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Thornbury, Inc. PA 22-3462983 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Tierrasanta, Inc. CA 22-3351875 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Tuxedo, Inc. NY 22-3516266 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Union Township I, NJ 22-3027952 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Upper Freehold NJ 22-3415873 10 Highway 35
Township I, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Upper Makefield PA 22-3302321 10 Highway 35
I, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Upper Merion, PA 22-3188608 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Vail Ranch, Inc. CA 22-3320537 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Valleybrook II, NJ 22-3252533 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Valleybrook, Inc. NJ 22-3057022 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
14
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Wall Township VI, NJ 22-2859303 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Wall Township NJ 22-3434643 10 Highway 35
VIII, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Washingtonville, NY 22-2717887 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Wayne III, Inc. NJ 22-2607669 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Wayne V, Inc. NJ 22-2790299 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Wayne VI, Inc. NJ 22-3367624 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Wayne VII, Inc. NJ 22-3464498 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Wildrose, Inc. CA 22-3312525 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Winston Trails, FL 22-3219184 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Woodmont, Inc. VA 52-1785667 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Companies Northeast, NJ 22-2445216 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Companies of CA 22-3301757 10 Highway 35
California, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
15
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Companies of FL 22-2349530 10 Highway 35
Florida, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Companies of MD 22-3331050 10 Highway 35
Maryland, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Companies of Metro VA 22-3169584 10 Highway 35
Washington, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Companies of New NY 22-2618171 10 Highway 35
York, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Companies of North NC 22-2765939 10 Highway 35
Carolina, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Companies of PA 22-2390174 10 Highway 35
Pennsylvania, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Companies of CA 22-3493449 10 Highway 35
Southern California, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Construction NJ 22-3406668 10 Highway 35
Management, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian's Design Gallery, CA 22-3301757 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Developments of CA 22-3303806 10 Highway 35
California, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Developments of MD 22-3331045 10 Highway 35
Maryland, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Developments of VA 22-3188615 10 Highway 35
Metro Washington, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
16
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Developments of NJ 22-2664563 10 Highway 35
New Jersey, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Developments of NY 22-2626492 10 Highway 35
New York, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Developments of SC 58-2659968 10 Highway 35
South Carolina, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Developments of TX 22-3685786 10 Highway 35
Texas, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Equities, Inc. NJ 21-0735206 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Florida Division, FL 22-318616 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Forecast CA 95-4892009 10 Highway 35
Acquisition, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Forecast Homes, Inc. CA 95-4892007 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Investment NJ 22-2541361 10 Highway 35
Properties of New Jersey, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Marine, Inc. NJ 22-3196910 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Port Imperial NJ 22-3027956 10 Highway 35
Urban Renewal, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Properties of East NJ 22-2593811 10 Highway 35
Brunswick II, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
17
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Properties of NB NJ 22-3406661 10 Highway 35
Theatre, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Properties of NJ 22-3017267 10 Highway 35
Newark Urban Renewal P.O. Box 500
Corporation, Inc. Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Properties of NJ 22-3002434 10 Highway 35
North Brunswick II, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Properties of NJ 22-2057907 10 Highway 35
North Brunswick V, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Properties of NJ 22-2859305 10 Highway 35
Piscataway, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Properties of Red NJ 22-3092532 10 Highway 35
Bank, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Properties of NJ 22-3244134 10 Highway 35
Wall, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Real Estate NJ 22-1945444 10 Highway 35
Investment, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Real Estate of FL 65-0215569 10 Highway 35
Florida, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Southeast Florida, FL 22-3331675 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Southeast Region, FL 22-3331674 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian's Four Seasons of FL 22-3618584 10 Highway 35
the Palm Beaches, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
18
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
KHC Acquisition, Inc. CA 22-3303802 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Kings Grant Evesham Corp. NJ 22-2445215 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Landarama, Inc. NJ 22-1978612 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Matzel & Mumford of Delaware, DE 22-3386728 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M & M at Long Branch, Inc. NJ 22-3359254 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
New K. Hovnanian Developments FL 58-2003324 10 Highway 35
of Florida, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Parthenon Group, Inc. NJ 22-2748658 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Pine Brook Co., Inc. NJ 22-1762833 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Que Corporation MD 52-1723878 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Reflections of You Interiors, TX 75-1967894 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Stonebrook Homes, Inc. CA 33-0553884 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
The Matzel & Mumford NJ 22-3670677 10 Highway 35
Organization, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
19
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
The New Fortis Corporation NC 56-1458833 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
The Southampton Corporation MD 52-0881406 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Tropical Service Builders, Inc. FL 59-1426699 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Washington Homes of Delaware, DE Inactive 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Washington Homes of West WV 54-1860514 10 Highway 35
Virginia, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Washington Homes, Inc. DE 22-3774737 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Washington Homes, Inc. of VA 52-0898765 10 Highway 35
Virginia P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Westminster Homes (Charlotte), NC 52-1970973 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Westminster Homes of Tennessee, TN 52-1973363 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Westminster Homes, Inc. NC 52-1874680 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
WH Land I, Inc. MD 52-2073468 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
WH Land II, Inc. MD 52-1887626 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
20
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
WH Properties, Inc. MD 52-1955560 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Arbor West, L.L.C. MD 52-19555560 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at St. Margarets, MD 22-3688864 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Arbor Heights, CA 33-0890775 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Ashburn Village, MD 22-3681031 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Barnegat I, NJ 22-3804316 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Berkeley, NJ 22-3644632 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Bernards V, NJ 22-3618587 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Blooms Crossing, MD 22-3688865 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Blue Heron NJ 22-3630449 10 Highway 35
Pines, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Brenbrooke, L.L.C. VA 22-3683842 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Camden I, L.L.C. NJ 22-3845575 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
21
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Carmel Village, CA 52-2147831 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Cedar Grove III, NJ 22-3818491 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Chester I, L.L.C. NJ 22-3618347 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Clifton, L.L.C. NJ 22-3655976 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Columbia Town MD 22-3757772 10 Highway 35
Center, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Cranbury, L.L.C. NJ 22-3814347 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Curries Woods, NJ 22-3776466 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Denville, L.L.C. NJ Applied For 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Encinitas Ranch, CA 33-0890770 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Forecast, L.L.C. CA Applied For 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at 4S Ranch, L.L.C. CA 73-1638455 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Guttenberg, L.L.C. NJ 22-3653007 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
22
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Hamburg, L.L.C. NJ 22-3795544 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Hamburg NJ 22-3814175 10 Highway 35
Contractors, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Jackson, L.L.C. NJ 22-3630450 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Jersey City IV, NJ 22-3655974 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Kent Island, MD 22-3668315 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Kincaid, L.L.C. MD 22-3664456 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at King Farm, MD 22-3647924 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at LaFayette NJ 22-3658926 10 Highway 35
Estates, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Lake Ridge VA 22-3778537 10 Highway 35
Crossing, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Lake Terrapin, VA 22-3647920 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Lawrence V, NJ 22-3638073 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Linwood, L.L.C. NJ 22-3663731 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
23
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Little Egg NJ 22-3795535 10 Highway 35
Harbor, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Little Egg NJ 22-3832077 10 Highway 35
Harbor Contractors, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Lower Moreland I, PA 22-3785544 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Lower Moreland PA 22-3785539 10 Highway 35
II, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Lower Saucon II, PA 22-3602924 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Manalapan II, NJ Applied For 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Mansfield I, LLC NJ 22-3556345 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Mansfield II, NJ 22-3556346 10 Highway 35
LLC P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Mansfield III, NJ 22-3683839 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Marlboro NJ 22-3802594 10 Highway 35
Township VIII, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Marlboro VI, NJ 22-3791976 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Marlboro VII, NJ 22-3791977 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
24
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Menifee, L.L.C. CA 52-2147832 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Middletown, NJ 22-3630452 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Mt. Olive NJ 22-3813043 10 Highway 35
Township, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at North NJ 22-3627814 10 Highway 35
Brunswick VI, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at North Haledon, NJ 22-3770598 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Northampton, NJ 22-3785527 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Northfield, NJ 22-3665826 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Pacific Bluffs, TX 33-0890774 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Paramus, L.L.C. NJ 22-3687884 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Park Lane, L.L.C. CA 33-0896285 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Rancho Santa CA 33-0890773 10 Highway 35
Margarita, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Riverbend, CA 33-0890777 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
25
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Roderuck, L.L.C. MD 22-3756336 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Rowland Heights, CA 22-2147833 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Sayreville, NJ 22-3663105 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at South Amboy, NJ 22-3655682 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at South Bank, MD 22-3688868 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at South NJ 01-0618098 10 Highway 35
Brunswick, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Spring Hill MD 22-3688864 10 Highway 35
Road, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at St. Margarets, MD 33-0890768 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Sunsets, L.L.C. CA 33-0890769 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at the Gables, NC 22-3655975 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Upper Freehold NJ 22-3655975 10 Highway 35
Township II, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Upper Freehold NJ 22-3666680 10 Highway 35
Township III, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
26
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Wanaque, L.L.C. NJ 22-3743403 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Washington, NJ 22-3618348 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Wayne VIII, NJ 22-3618242 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Wayne IX, L.L.C. NJ 22-3828775 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at West Milford, NJ 22-3709105 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at West Windsor, NJ 52-2147836 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Willow Brook, MD 22-3556343 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Winchester, CA 52-2147836 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Woodhill NJ 01-0550781 10 Highway 35
Estates, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Woolwich, L.L.C. NJ 22-3828777 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Central DE 22-3556343 10 Highway 35
Acquisitions, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Companies of MD 22-3683159 10 Highway 35
Metro D.C. North, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
27
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Eastern PA 04-3630089 10 Highway 35
Pennsylvania, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Forecast, L.L.C. CA Applied For 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Four Seasons VA 22-3647925 10 Highway 35
@ Historic Virginia, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian North Central DE 22-3554986 10 Highway 35
Acquisitions, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian North Jersey DE 22-3556344 10 Highway 35
Acquisitions, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Shore DE 22-3556342 10 Highway 35
Acquisitions, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian South Jersey DE 22-3556341 10 Highway 35
Acquisition, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Southern New NJ 01-0648280 10 Highway 35
Jersey, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian's Four Seasons, CA 52-2147837 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian's Private Home NJ 22-3766856 10 Highway 35
Portfolio, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Kings Court at Montgomery, NJ 22-3825046 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M&M at Apple Ridge, L.L.C. NJ 22-3824654 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
28
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
M&M at Brookhill, L.L.C. NJ 22-3824652 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M&M at Heritage Woods, L.L.C. NJ 22-3824650 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M&M at the Highlands, L.L.C. NJ 22-3824649 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M&M at East Mill, L.L.C. NJ 80-0036068 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M&M at Morristown, L.L.C. NJ 22-3834775 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M&M at Roosevelt, L.L.C. NJ Applied For 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M&M at Sheridan, L.L.C. NJ 22-3825357 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M&M at Sparta, L.L.C. NJ 22-3825057 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M&M at Spinnaker Pointe, L.L.C. NJ 22-3825041 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M&M at Spruce Hollow, L.L.C. NJ 22-3825064 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M&M at Spruce Meadows, L.L.C. NJ 22-3825036 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M&M at Spruce Run, L.L.C. NJ 22-3825037 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
29
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
Matzel & Mumford at Cranbury NJ 22-3569945 10 Highway 35
Knoll, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Matzel & Mumford at Freehold, NJ 22-3468991 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Matzel & Mumford at Heritage NJ 22-3575932 10 Highway 35
Landing, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Matzel & Mumford at Montgomery, NJ 22-3500542 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Matzel & Mumford at NJ 22-3619267 10 Highway 35
Phillipsburg, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Matzel & Mumford at South NJ 22-345834 10 Highway 35
Brunswick, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Matzel & Mumford at Woodland NJ 22-3575934 10 Highway 35
Crest, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Section 14 of the Hills, L.L.C. NJ 22-3330375 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
The Landings at Spinnaker NJ 22-3825041 10 Highway 35
Pointe, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Westminster Homes of Alabama, MD 63-1222540 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Westminster Homes of MD 64-0907820 10 Highway 35
Mississippi, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Westminster Homes of South SC 58-2690293 10 Highway 35
Carolina, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
30
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ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
Goodman Family Builders, L.P. TX 75-2653675 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M&M Investments, L.P. NJ 22-3685183 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Washabama, L.P. AL 63-1231207 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
31
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such state.
SUBJECT TO COMPLETION, DATED JUNE 6, 2002
PROSPECTUS
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$250,000,000
K. HOVNANIAN ENTERPRISES, INC.
OFFER TO EXCHANGE ALL OUTSTANDING
8.000% SENIOR NOTES DUE 2012
($100,000,000 AGGREGATE PRINCIPAL AMOUNT OUTSTANDING)
FOR 8.000% SENIOR NOTES DUE 2012
8.875% SENIOR SUBORDINATED NOTES DUE 2012
($150,000,000 AGGREGATE PRINCIPAL AMOUNT OUTSTANDING)
FOR 8.875% SENIOR SUBORDINATED NOTES DUE 2012
EACH REGISTERED UNDER THE SECURITIES ACT OF 1933
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON,
__________________ , 2002, UNLESS EXTENDED
----------------
The Exchange Offer The Exchange Notes
- - We will exchange all outstanding - The exchange notes are being
notes that are validly tendered offered in order to satisfy some
and not validly withdrawn for an of our obligations under
equal principal amount of registration rights agreements
exchange notes that are freely entered into in connection
tradeable. withthe placement of the
outstanding notes.
- - You may withdraw tenders of
outstanding notes at any time - The terms of the exchange
prior to the expiration date of notes to be issued in the
the exchange offer. exchange offer are
substantially identical to the
- - The exchange offer expires at outstanding notes, except that
5:00 p.m., New York City time, on the exchange notes will be
______, 2002, unless extended. freely tradeable.
We do not currently intend to
extend the expiration date. Resales of Exchange Notes
- - The exchange of outstanding - The exchange notes may be sold
notes for exchange notes in the in the over-the counter market,
exchange offer will not be a in negotiated transactions or
taxable event for U.S. federal through a combination of such
income tax purposes. methods. The exchange notes
will be eligible for trading in
- - We will not receive any proceeds The Portal (SM) Market.
from the exchange offer.
YOU SHOULD CONSIDER CAREFULLY THE "RISK FACTORS" BEGINNING ON PAGE 9 OF
THIS PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER.
Each broker-dealer that receives exchange notes for its own account in the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of those exchange notes. The letter of transmittal states that,
by so acknowledging and delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
This prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of exchange notes
received in exchange for outstanding notes where the outstanding notes were
acquired by the broker-dealer as a result of market-making activities or other
trading activities.
We have agreed that, for a period of one year after the consummation of
this exchange offer, we will make this prospectus available to any broker-dealer
for use in connection with the resale of exchange notes. See "Plan of
Distribution".
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE EXCHANGE NOTES TO BE DISTRIBUTED
IN THE EXCHANGE OFFER OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This prospectus is dated , 2002.
TABLE OF CONTENTS
PAGE
PROSPECTUS SUMMARY.............................................................1
THE COMPANY....................................................................8
USE OF PROCEEDS................................................................8
RISK FACTORS...................................................................9
RATIO OF EARNINGS TO FIXED CHARGES............................................14
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION........................15
THE EXCHANGE OFFER............................................................18
DESCRIPTION OF THE EXCHANGE NOTES.............................................29
BOOK ENTRY; DELIVERY AND FORM.................................................88
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS......................92
PLAN OF DISTRIBUTION..........................................................92
FORWARD-LOOKING STATEMENTS....................................................92
LEGAL MATTERS.................................................................93
EXPERTS.......................................................................93
WHERE YOU CAN FIND MORE INFORMATION...........................................93
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...............................93
------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
ANY INFORMATION THAT IS DIFFERENT. THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS
DOCUMENT IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION OF AN OFFER IN SUCH JURISDICTION.
THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE AS OF THE DATE OF THIS
DOCUMENT.
------------------------
i
PROSPECTUS SUMMARY
THIS BRIEF SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THE PROSPECTUS. IT
MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. YOU SHOULD
CAREFULLY READ AND REVIEW THIS ENTIRE PROSPECTUS AND THE OTHER DOCUMENTS TO
WHICH WE REFER YOU. IN THIS PROSPECTUS, EXCEPT AS THE CONTEXT OTHERWISE
REQUIRES, REFERENCES TO "HOVNANIAN", "US", "WE", "OUR" OR THE "COMPANY" MEAN
HOVNANIAN ENTERPRISES, INC., A DELAWARE CORPORATION, TOGETHER WITH ITS
CONSOLIDATED SUBSIDIARIES, INCLUDING K. HOVNANIAN ENTERPRISES, INC., WHICH WE
REFER TO AS THE "ISSUER" OR "K. HOVNANIAN", A NEW JERSEY CORPORATION.
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
General....................... On March 26, 2002, K. Hovnanian completed a
private offering of the outstanding notes,
comprised of $100,000,000 aggregate principal
amount of its 8.000% Senior Notes due 2012 and
$150,000,000 aggregate principal amount of its
8.875% Senior Subordinated Notes due 2012. In
connection with the private offering, we
entered into registration rights agreements
with the initial purchasers in the private
offerings in which we agreed, among other
things, to deliver this prospectus to you and
to complete an exchange offer for the
outstanding notes.
Outstanding Notes............. $100,000,000 aggregate principal amount of
8.000% Senior Notes due 2012 and $150,000,000
aggregate principal amount of 8.875% Senior
Subordinated Notes due 2012, each of which
were issued on March 26, 2002.
Exchange Notes................ $100,000,000 aggregate principal amount of
8.000% Senior Notes due 2012 and $150,000,000
aggregate principal amount of 8.875% Senior
Subordinated Notes due 2012, each of which we
are offering in this exchange offer.
The Exchange Offer............ We are offering to exchange up to $100,000,000
aggregate principal amount of our 8.000%
Senior Notes due 2012, which have been
registered under the Securities Act, and up to
$150,000,000 aggregate principal amount of our
8.875% Senior Subordinated Notes due 2012,
which have been registered under the
Securities Act, in each case for a like
aggregate principal amount of the outstanding
notes. You may only exchange outstanding
notes in integral multiples of $1,000.
The terms of the exchange notes are identical
in all material respects to the terms of the
outstanding notes, except that the
registration rights, related liquidated
damages provisions and the transfer
restrictions, applicable to the outstanding
notes are not applicable to the exchange notes.
Subject to the satisfaction or waiver of
specified conditions, we will exchange the
applicable exchange notes for all outstanding
notes that are validly tendered and not
validly withdrawn prior to the expiration of
the exchange offer. We will cause the
exchange to be effected promptly after the
expiration of the exchange offer.
Upon completion of the exchange offer, there
may be no market for the outstanding notes and
you may have difficulty selling them.
Resales....................... Based on interpretations by the Securities and
Exchange Commission set forth in no-action
letters issued to third parties, we believe
that you may resell or otherwise transfer
exchange notes issued in the exchange offer
without complying with the registration and
prospectus delivery requirements of the
Securities Act, if:
1
(1) you are not an affiliate of K. Hovnanian
within the meaning of Rule 405 under the
Securities Act;
(2) you are not engaged in, and do not intend
to engage in, a distribution of the exchange
notes;
(3) you do not have an arrangement or
understanding with any person to participate in
a distribution of the exchange notes; and
(4) you are acquiring the exchange notes in the
ordinary course of your business.
If you are an affiliate of K. Hovnanian, or are
engaging in, or intend to engage in, or have
any arrangement or understanding with any
person to participate in a distribution of the
exchange notes, or are not acquiring the
exchange notes in the ordinary course of your
business:
(1) you cannot rely on the position of the
Securities and Exchange Commission enunciated
in BROWN & WOOD LLP (available February 7,
1997), MORGAN STANLEY & CO. INCORPORATED
(available June 5, 1991), EXXON CAPITAL
HOLDINGS CORPORATION (available May 13, 1988),
as interpreted in the Securities and Exchange
Commission's letter to SHEARMAN & STERLING
dated July 2, 1993, or similar no-action
letters; and
(2) in the absence of an exception from the
position of the Securities and Exchange
Commission stated in (1) above, you must comply
with the registration and prospectus delivery
requirements of the Securities Act in
connection with any resale of the exchange
notes.
If you are a broker-dealer and receive exchange
notes for your own account in exchange for
outstanding notes that you acquired as a result
of market-making or other trading activities,
you must acknowledge that you will deliver this
prospectus in connection with any resale or
other transfer of the exchange notes that you
receive in the exchange offer.
Expiration Date............... The exchange offer will expire at 5:00 p.m.,
New York City time, on , 2002
unless extended by us. We do not currently
intend to extend the expiration date.
Withdrawal.................... You may withdraw the tender of your
outstanding notes at any time prior to the
expiration of the exchange offer. We will
return to you any of your outstanding notes
that are not accepted for any reason for
exchange, without expense to you, promptly
after the expiration or termination of the
exchange offer.
Interest on the Exchange Notes
and the Outstanding Notes..... Each exchange note will bear interest at the
applicable rate per annum set forth on the
cover page of this prospectus from the most
recent date to which interest has been paid on
the outstanding notes or, if no interest has
been paid on the outstanding notes, from
March 26, 2002. The applicable interest will
be payable semi-annually on each April 1 and
October 1, beginning October 1, 2002. No
interest will be paid on outstanding notes
following their acceptance for exchange.
Conditions to the Exchange
Offer........................... The exchange offer is subject to customary
conditions, which we may assert or waive. See
"The Exchange Offer--Conditions to the Exchange
Offer".
2
Procedures for Tendering
Outstanding Notes............. If you wish to accept the exchange offer, you
must complete, sign and date the accompanying
letter of transmittal, or a facsimile of the
letter of transmittal, according to the
instructions contained in this prospectus and
the letter of transmittal. You must then mail
or otherwise deliver the letter of
transmittal, or a facsimile of the letter of
transmittal, together with the outstanding
notes and any other required documents, to the
exchange agent at the address set forth on the
cover page of the letter of transmittal. If
you hold outstanding notes through The
Depository Trust Company and wish to
participate in the exchange offer, you must
comply with the Automated Tender Offer Program
procedures of DTC, by which you will agree to
be bound by the letter of transmittal. By
signing, or agreeing to be bound by, the
letter of transmittal, you will represent to
us that, among other things:
(1) you are not an affiliate of K. Hovnanian
within the meaning of Rule 405 under the
Securities Act;
(2) you are not engaged in, and do not intend
to engage in, a distribution of the exchange
notes;
(3) you do not have an arrangement or
understanding with any person to participate in
a distribution of the exchange notes; and
(4) you are not acquiring the exchange notes in
the ordinary course of your business.
If you are an affiliate of K. Hovnanian, or are
engaging in, or intend to engage in, or have
any arrangement or understanding with any
person to participate in a distribution of the
exchange notes, or are not acquiring the
exchange notes in the ordinary course of your
business, you cannot rely on the applicable
interpretations of the Securities and Exchange
Commission and you must comply with the
registration and prospectus delivery
requirements of the Securities Act in
connection with any resale of the exchange
notes.
Special Procedures for If you are a beneficial owner of outstanding
Beneficial Owners............. notes that are registered in the name of a
broker, dealer, commercial bank, trust company
or other nominee, and you wish to tender those
outstanding notes in the exchange offer, you
should contact the registered holder promptly
and instruct the registered holder to tender
those outstanding notes on your behalf. If you
wish to tender on your own behalf, you must,
prior to completing and executing the letter of
transmittal and delivering your outstanding
notes, either make appropriate arrangements to
register ownership of the outstanding notes in
your name or obtain a properly completed bond
power from the registered holder. The transfer
of registered ownership may take considerable
time and may not be able to be completed prior
to the expiration date.
Guaranteed Delivery Procedures If you wish to tender your outstanding notes
and your outstanding notes are not immediately
available or you cannot deliver your
outstanding notes, the letter of transmittal
and any other required documents or you cannot
comply with the DTC procedures for book-entry
transfer prior to the expiration date, you
must tender your outstanding notes according
to the guaranteed delivery procedures set
forth in this prospectus under "The Exchange
Offer--Guaranteed Delivery Procedures".
3
Effect on Holders of In connection with the sale of the outstanding
Outstanding Notes............. notes, we entered into registration rights
agreements with the initial purchasers of the
outstanding notes that grant the Holders of
outstanding notes registration rights. By
making this exchange offer, we will have
fulfilled most of our obligations under each of
the registration rights agreements.
Accordingly, we will not be obligated to pay
liquidated damages as described in each of the
registration rights agreements. If you do not
tender your outstanding notes in the exchange
offer, you will continue to be entitled to all
the rights and limitations applicable to the
outstanding notes as set forth in the
applicable indenture, except we will not have
any further obligation to you to provide for
the registration of the outstanding notes under
the applicable registration rights agreement.
To the extent that outstanding notes are
tendered and accepted in the exchange offer,
the trading market for outstanding securities
could be adversely affected.
Consequences of Failure to All untendered outstanding notes will continue
Exchange...................... to be subject to the restrictions on transfer
set forth in the outstanding notes and in the
indenture. In general, the outstanding notes
may not be offered or sold, unless registered
under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject
to, the Securities Act and applicable state
securities laws. Other than in connection with
this exchange offer, we do not currently
anticipate that we will register the
outstanding notes under the Securities Act.
Use of Proceeds............... We will not receive any cash proceeds from the
issuance of exchange notes in the exchange
offer.
Exchange Agent................ Wachovia Bank, N.A. (formerly known as First
Union National Bank) whose address and
telephone number is set forth in the section
captioned "The Exchange Offer--Exchange Agent"
of this prospectus, is the exchange agent for
the exchange offer.
4
SUMMARY OF THE TERMS OF THE EXCHANGE NOTES
The terms of the exchange notes are identical in all material respects to
the terms of the outstanding notes, except that the registration rights, related
liquidated damages provisions and the transfer restrictions applicable to the
outstanding notes are not applicable to the exchange notes. The exchange notes
will evidence the same debt as the outstanding notes. The exchange 8.000% Senior
Notes due 2012 will be governed by the indenture under which the outstanding
8.000% Senior Notes due 2012 were issued. The exchange 8.875% Senior
Subordinated Notes due 2012 will be governed by the indenture under which the
outstanding 8.875% Senior Subordinated Notes due 2012 were issued. Except where
the context requires otherwise, references in this prospectus to "notes" or
"securities" are references to both outstanding notes and exchange notes.
THE EXCHANGE NOTES
8.000% SENIOR NOTES DUE 2012
Issuer........................ K. Hovnanian Enterprises, Inc.
Notes Offered................. We are offering $100,000,000 aggregate
principal amount of 8.000% Senior Notes due
2012.
Maturity Date................. April 1, 2012.
Interest Payment Dates........ Each April 1 and October 1, beginning October
1, 2002.
Optional Redemption........... We may redeem any or all of the notes at any
time on or after April 1, 2007 at the
redemption prices described in this
prospectus, plus accrued and unpaid interest.
See "Description of the Exchange Notes -
8.000% Senior Notes due 2012" under the
heading "--Redemption".
Change of Control............. Upon a change of control as described in the
section "Description of the Exchange Notes -
8.000% Senior Notes due 2012", you will have
the right to require us to purchase some or
all of your notes at 101% of the principal
amount, plus accrued and unpaid interest to
the date of purchase. We can give no assurance
that, upon such an event, we will have
sufficient funds to purchase any of your notes.
Guarantees ................... The guarantors are Hovnanian Enterprises,
Inc., the parent corporation of the Issuer,
and most of the parent's existing and future
restricted subsidiaries. If the Issuer cannot
make payments on the notes when they are due,
the guarantors must make them instead.
Ranking ...................... These notes are our general obligations and
will not be secured by any collateral. Your
right to payment under these notes will be:
o junior to the rights of our secured
creditors to the extent of their security
in our assets;
o equal with the rights of creditors under our
other unsecured senior debt, including our
Revolving Credit Facility and Term Loan
Facility; and
o senior to the rights of creditors under debt
that is expressly subordinated to these
notes.
The guarantee of the notes of each of the
guarantors will also not be secured by any
collateral. Your right to payment under any
guarantee will be:
5
o junior to the rights of secured creditors
to the extent of their security in the
guarantors' assets;
o equal with the rights of creditors under
the guarantors' other unsecured senior
debt; and
o senior to the rights of creditors under the
guarantors' debt that is expressly
subordinated to the guarantee.
8.875% Senior Subordinated Notes due 2012
Issuer........................ K. Hovnanian Enterprises, Inc.
Notes Offered ................ We are offering $150,000,000 aggregate
principal amount of 8.875% Senior Subordinated
Notes due 2012.
Maturity Date................. April 1, 2012.
Interest Payment Dates........ Each April 1 and October 1, beginning October
1, 2002.
Optional Redemption........... We may redeem any or all of the notes at any
time on or after April 1, 2007 at the
redemption prices described in this
prospectus, plus accrued and unpaid interest.
See "Description of the Exchange Notes -
8.875% Senior Subordinated Notes due 2012"
under the heading "Redemption".
Change of Control............. Upon a change of control as described in the
section "Description of the Exchange Notes -
8.875% Senior Subordinated Notes due 2012",
you will have the right to require us to
purchase some or all of your notes at 101% of
the principal amount, plus accrued and unpaid
interest to the date of purchase. We can give
no assurance that, upon such an event, we will
have sufficient funds to purchase any of your
notes.
Guarantees.................... The guarantors are Hovnanian Enterprises,
Inc., the parent corporation of the Issuer,
and most of the parent's existing and future
restricted subsidiaries. If the Issuer can not
make payments on the notes when they are due,
the guarantors must make the payments instead.
Ranking....................... These notes are our general obligations and
will not be secured by any collateral. Your
right to payment under these notes will be:
o junior to the rights of our secured
creditors to the extent of their security
in our assets;
o junior in right of payment to all our
existing and future senior debt, including
the 8.000% Senior Notes due 2012;
o equal with the rights of creditors under
our other unsecured senior subordinated
debt; and
o senior to the rights of creditors under the
debt expressly subordinated to these notes.
The guarantee of the notes of each of the
guarantors will also not be secured by any
collateral. Your right to payment under any
guarantee will be:
o junior to the rights of secured creditors
to the extent of their security in the
guarantors' assets;
o junior to the rights of creditors under the
guarantors' unsecured senior debt;
o equal with the rights of creditors under
the guarantors' other unsecured senior
subordinated debt; and
6
o senior to the rights of creditors under the
guarantors' debt that is expressly
subordinated to the guarantee.
See the section "Description of the Exchange
Notes - 8.875% Senior Subordinated Notes due
2012" under the headings "--Ranking" and
"--Subordination."
THE NOTES GENERALLY
Certain Covenants............. The indentures governing the notes will, among
other things, restrict our ability and the
ability of the guarantors to:
o borrow money;
o pay dividends on our common stock;
o repurchase our common stock;
o make investments in subsidiaries that
are not restricted;
o sell certain assets;
o incur certain liens;
o merge with or into other companies; and
o enter into certain transactions with our
affiliates.
For more details, see the section "Description
of the Exchange Notes - 8.000% Senior Notes due
2012" and "Description of the Exchange Notes -
8.875% Senior Subordinated Notes due 2012",
each under the heading "--Certain Covenants".
Use of Proceeds............... K. Hovnanian will not receive any proCeeds
from the exchange offer. For a description of
the use of proceeds from the private offering
of outstanding securities, see "Use of
Proceeds".
7
THE COMPANY
Hovnanian was originally incorporated in New Jersey in 1967 as successor
to a business founded in 1959 by Kevork S. Hovnanian and became a Delaware
corporation in August 1983. K. Hovnanian was incorporated under the laws of the
State of New Jersey on November 1, 1982, as an indirect wholly-owned
consolidated subsidiary of Hovnanian. K. Hovnanian functions as a management
company for the operating subsidiaries of Hovnanian and borrows funds which it
lends to such subsidiaries. K. Hovnanian has essentially no independent
operations and generates no operating revenues. Both Hovnanian's executive
offices and K. Hovnanian's principal executive offices are located at 10 Highway
35, P.O. Box 500, Red Bank, New Jersey 07701, and their telephone number is
(732) 747-7800.
We design, construct and market high quality single-family detached homes
and attached condominium apartments and townhouses in planned residential
developments in the Northeast, primarily in New Jersey, southern New York state
and eastern Pennsylvania, North Carolina, Metro D.C., which includes northern
Virginia and Maryland, California, Texas, Tennessee, Alabama and Mississippi and
provide mortgage banking and title insurance activities to our homebuilding
customers. We market our homes to first-time buyers, first-time and second-time
move-up buyers, luxury buyers, active adult buyers and empty nesters. We offer a
variety of homestyles in the United States at prices ranging from $43,000 to
$950,000 with an average sales price in fiscal 2001 of $255,000. We are
currently offering homes for sale in 172 communities. Since the incorporation of
our predecessor company in 1959, we have delivered in excess of 106,000 homes,
including 6,791 homes in fiscal 2001.
Over the past few years, our strategies have included several initiatives
to fundamentally transform our traditional practices used to design, build and
sell homes and focus on "building better." We believe that the adoption and
implementation of processes and systems successfully used in other manufacturing
industries, such as rapid cycle times, vendor consolidation, vendor partnering
and just-in-time material procurement, will dramatically improve our business
and give us a clear advantage over our competitors. Our concentration in
selected markets is a key factor that enables us to achieve powers and economies
of scale and differentiate ourselves from most of our competitors. These
performance enhancing strategies are designed to achieve operational excellence
through the implementation of standardized and streamlined "best practice
processes."
USE OF PROCEEDS
The exchange offer is intended to satisfy our obligations under the
registration rights agreements that we entered into in connection with the
private offering of the outstanding notes. We will not receive any cash proceeds
from the issuance of the exchange notes in the exchange offer. As consideration
for issuing the exchange notes as contemplated in this prospectus, we will
receive in exchange a like principal amount of outstanding notes, the terms of
which are identical in all material respects to the exchange notes. The
outstanding notes that are surrendered in exchange for the exchange notes will
be retired and cancelled and cannot be reissued. As a result, the issuance of
the exchange notes will not result in any increase or decrease in our
capitalization.
We used the net proceeds from the private offering of the outstanding
notes to refund all of our outstanding debt under our 9 3/4% Subordinated Notes
due 2005, repay a portion of our Term Loan Facility and repay the currently
outstanding indebtedness under our Revolving Credit Facility, and the remainder
for general corporate purposes.
8
RISK FACTORS
In addition to the other matters described in this prospectus, you should
carefully consider the following risk factors.
IF YOU DO NOT PARTICIPATE IN THE EXCHANGE OFFER, YOU WILL CONTINUE TO BE SUBJECT
TO TRANSFER RESTRICTIONS.
If you do not exchange your outstanding notes in the exchange offer, you
will continue to be subject to restrictions on transfer of your outstanding
notes. We did not register the outstanding notes under the federal or any state
securities laws and we do not intend to register them following the exchange
offer. As a result, you generally may not offer or sell the outstanding notes
except under an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. In addition, to the extent
outstanding notes are tendered and accepted in the exchange offer, the trading
market, if any, for the outstanding notes would be adversely affected. As a
result, after the exchange offer, you may have difficulty selling your
outstanding notes.
YOU MUST FOLLOW THE EXCHANGE OFFER PROCEDURES CAREFULLY IN ORDER TO RECEIVE THE
EXCHANGE NOTES.
If you do not follow the procedures described herein, you will not receive
exchange notes. The exchange notes will be issued to you in exchange for your
outstanding notes only after timely receipt by the exchange agent of:
o your outstanding notes and either:
o a properly completed and executed letter of transmittal and
all other required documents; or
o a book-entry delivery by electronic transmittal of an agent's
message through DTC.
If you want to tender your outstanding notes in exchange for exchange
notes, you should allow sufficient time to ensure timely delivery. No one is
under any obligation to give you notification of defects or irregularities with
respect to tenders of outstanding notes for exchange. For additional
information, please refer to the sections captioned "The Exchange Offer" and
"Plan of Distribution" in this prospectus.
LEVERAGE PLACES BURDENS ON OUR ABILITY TO COMPLY WITH THE TERMS OF OUR
INDEBTEDNESS, MAY RESTRICT OUR ABILITY TO OPERATE AND MAY PREVENT US FROM
FULFILLING OUR OBLIGATIONS UNDER THESE NOTES.
We have a significant amount of debt. As of January 31, 2002, our
consolidated debt was $676.3 million. The private offerings did not reduce, and
in the short-term increased, our debt. The amount of our debt could have
important consequences to you. For example, it could:
o limit our ability to obtain future financing for working capital,
capital expenditures, acquisitions, debt service requirements or
other requirements;
o require us to dedicate a substantial portion of our cash flow from
operations to the payment on our debt and reduce our ability to use
our cash flow for other purposes;
o limit our flexibility in planning for, or reacting to, changes in
our business;
o place us at a competitive disadvantage because we have more debt
than some of our competitors; and
o make us more vulnerable in the event of a downturn in our business
or in general economic conditions.
Our ability to meet our debt service and other obligations will depend
upon our future performance. We are engaged in businesses that are substantially
affected by changes in economic cycles. Our revenues and earnings vary with the
level of general economic activity in the markets we serve. Our businesses are
also affected by financial, political, business and other factors, many of which
are beyond our control. The factors that affect our ability to generate cash can
also affect our ability to raise additional funds for these purposes through the
sale of equity securities, the refinancing of debt, or the sale of assets.
Changes in prevailing interest rates may affect our ability to meet our debt
service obligations, because borrowings under our revolving credit facilities
bear interest at floating rates. A higher interest rate on our debt service
obligations could result in lower earnings.
Our business may not generate sufficient cash flow from operations and
borrowings may not be available to us under our revolving credit facilities in
an amount sufficient to enable us to pay our indebtedness, including these
9
notes, or to fund our other liquidity needs. We may need to refinance all or a
portion of our debt, including these notes, on or before maturity, which we may
not be able to do on favorable terms or at all.
The indentures governing these notes and our other outstanding debt, our
Term Loan and our revolving credit facilities impose restrictions on our
operations and activities. The most significant restrictions relate to debt
incurrence, sales of assets and cash distributions by us and require us to
comply with certain financial covenants listed in those debt, Term Loan and
revolving credit facilities. If we fail to comply with any of these restrictions
or covenants, the trustees or the banks, as appropriate, could cause our debt to
become due and payable prior to maturity.
THE HOMEBUILDING INDUSTRY IS SIGNIFICANTLY AFFECTED BY CHANGES IN GENERAL AND
LOCAL ECONOMIC CONDITIONS, REAL ESTATE MARKETS AND WEATHER CONDITIONS, WHICH
COULD AFFECT OUR ABILITY TO BUILD HOMES AT PRICES OUR CUSTOMERS ARE WILLING OR
ABLE TO PAY, COULD REDUCE PROFITS THAT MAY NOT BE RECAPTURED AND COULD RESULT IN
CANCELLATION OF SALES CONTRACTS.
The homebuilding industry is cyclical, has from time to time experienced
significant difficulties and is significantly affected by changes in general and
local economic conditions, such as:
o employment levels and job growth;
o availability of financing for home buyers;
o interest rates;
o consumer confidence; and
o housing demand.
An oversupply of alternatives to new homes, such as rental properties and
used homes, could depress prices and reduce margins for the sale of new homes.
Weather conditions and natural disasters such as hurricanes, tornadoes,
earthquakes, floods and fires, can harm the local homebuilding business.
The difficulties described above could cause us to take longer and incur
more costs to build our homes. We may not be able to recapture increased costs
by raising prices in many cases because we fix our prices up to twelve months in
advance of delivery by signing home sales contracts. In addition, some home
buyers may cancel or not honor their home sales contracts altogether.
OUR SUCCESS DEPENDS ON THE AVAILABILITY OF SUITABLE UNDEVELOPED LAND AND
IMPROVED LOTS AT ACCEPTABLE PRICES.
Our success in developing land and in building and selling homes depends
in part upon the continued availability of suitable undeveloped land and
improved lots at acceptable prices. The availability of undeveloped land and
improved lots for purchase at favorable prices depends on a number of factors
outside of our control, including the risk of competitive over-bidding on land
on lots and restrictive governmental regulation. Should suitable land
opportunities become less available, the number of homes we may be able to build
and sell would be reduced, which would reduce revenue and profits.
CHANGES IN ECONOMIC AND MARKET CONDITIONS COULD RESULT IN THE SALE OF HOMES AT A
LOSS OR HOLDING LAND IN INVENTORY LONGER THAN PLANNED, THE COST OF WHICH CAN BE
SIGNIFICANT.
Land inventory risk can be substantial for homebuilders. We must
continuously seek and make acquisitions of land for expansion into new markets
and for replacement and expansion of land inventory within our current markets.
The market value of undeveloped land, buildable lots and housing inventories can
fluctuate significantly as a result of changing economic and market conditions.
In the event of significant changes in economic or market conditions, we may
have to sell homes at a loss or hold land in inventory longer than planned.
Inventory carrying costs can be significant and can result in losses in a poorly
performing project or market.
HOME PRICES AND SALES ACTIVITY IN THE NORTHEAST AND MID-ATLANTIC MARKETS HAVE A
LARGE IMPACT ON OUR PROFITABILITY BECAUSE WE CONDUCT A SIGNIFICANT PORTION OF
OUR BUSINESS IN THESE MARKETS.
We presently conduct a significant portion of our business in the
Northeast and mid-Atlantic markets. Home prices and sales activity in the
Northeast and mid-Atlantic, including in some of the markets in which we
operate, have declined from time to time, particularly as a result of slow
economic growth. If home prices and sales
10
activity decline in one or more of the markets in which we operate, our costs
may not decline at all or at the same rate and profits may be reduced.
BECAUSE ALMOST ALL OF OUR CUSTOMERS REQUIRE MORTGAGE FINANCING, INCREASES IN
INTEREST RATES COULD IMPAIR THE AFFORDABILITY OF OUR HOMES, LOWER DEMAND FOR OUR
PRODUCTS, LIMIT OUR MARKETING EFFECTIVENESS, AND LIMIT OUR ABILITY TO FULLY
REALIZE OUR BACKLOG.
Virtually all our customers finance their acquisitions through lenders
providing mortgage financing. Increases in interest rates or decreases in
availability of mortgage financing could lower demand for new homes because of
the increased monthly mortgage costs to potential home buyers. Even if potential
customers do not need financing, changes in interest rates and mortgage
availability could make it harder for them to sell their existing homes to
potential buyers who need financing. This could prevent or limit our ability to
attract new customers as well as our ability to fully realize our backlog
because our sales contracts generally include a financing contingency. Financing
contingencies permit the customer to cancel his obligation in the event mortgage
financing at prevailing interest rates, including financing arranged or provided
by us, is unobtainable within the period specified in the contract. This
contingency period is typically four to eight weeks following the date of
execution.
In addition, we believe that the availability of FNMA, FHLMC, FHA and VA
mortgage financing is an important factor in marketing many of our homes. Any
limitations or restrictions on the availability of those types of financing
could reduce our sales.
HOMEBUILDERS ARE SUBJECT TO A NUMBER OF FEDERAL, LOCAL, STATE AND FOREIGN LAWS
AND REGULATIONS CONCERNING THE DEVELOPMENT OF LAND, THE HOMEBUILDING PROCESS AND
PROTECTION OF THE ENVIRONMENT, WHICH CAN CAUSE US TO INCUR DELAYS, COSTS
ASSOCIATED WITH COMPLIANCE AND PROHIBIT OR RESTRICT ACTIVITY IN SOME REGIONS OR
AREAS.
We are subject to extensive and complex regulations that affect the
development and homebuilding process, including zoning, density and building
standards. These regulations often provide broad discretion to the administering
governmental authorities. This can delay or increase the cost of development or
homebuilding.
We also are subject to a variety of local, state, federal and foreign laws
and regulations concerning protection of health and the environment. The
particular environmental laws which apply to any given community vary greatly
according to the community site, the site's environmental conditions and the
present and former uses of the site. These environmental laws may result in
delays, may cause us to incur substantial compliance, remediation, and/or other
costs, and can prohibit or severely restrict development and homebuilding
activity in certain environmentally sensitive regions or areas.
It can be anticipated that increasingly stringent requirements will be
imposed on developers and homebuilders in the future. Although we cannot predict
the effect of these requirements, they could result in time-consuming and
expensive compliance programs and in substantial expenditures, which could cause
delays and increase our cost of operations. In addition, the continued
effectiveness of permits already granted or approvals already obtained is
dependent upon many factors, some of which are beyond our control, such as
changes in policies, rules and regulations and their interpretation and
application.
WE COMPETE ON SEVERAL LEVELS WITH HOMEBUILDERS THAT MAY HAVE GREATER SALES AND
FINANCIAL RESOURCES, WHICH COULD HURT FUTURE EARNINGS.
We compete not only for home buyers, but also for desirable properties,
financing, raw materials and skilled labor often within larger subdivisions
designed, planned and developed by other homebuilders. Our competitors include
other local regional and national homebuilders, some of which have greater sales
and financial resources.
The competitive conditions in the homebuilding industry could result in:
o difficulty in acquiring suitable land at acceptable prices;
o increased selling incentives;
o lower sales; or
o delays in construction.
Any of these problems could increase costs and/or lower profit margins.
11
WE MAY HAVE DIFFICULTY IN OBTAINING THE ADDITIONAL FINANCING REQUIRED TO OPERATE
AND DEVELOP OUR BUSINESS.
Our operations require significant amounts of cash, and we will be
required to seek additional capital, whether from sales of equity or borrowing
more money, for the future growth and development of our business. The terms or
availability of additional capital is uncertain. Moreover, the indentures for
our outstanding debt, including these notes, contain provisions that may
restrict the debt we may incur in the future. If we are not successful in
obtaining sufficient capital, it could reduce our sales and may hinder our
future growth and results of operations.
OUR FUTURE GROWTH MAY INCLUDE ADDITIONAL ACQUISITIONS THAT MAY NOT BE
SUCCESSFULLY INTEGRATED AND MAY NOT ACHIEVE EXPECTED BENEFITS.
Although we have not recently announced any acquisitions or mergers, other
than the Forecast acquisition, which closed on January 10, 2002, in the future
we may acquire other businesses. As a result of these acquisitions, we may need
to integrate product lines, dispersed operations and distinct corporate
cultures. These integration efforts may not succeed or may distract our
management from operating our existing business. Additionally, we may not be
able to enhance our earnings as a result of acquisitions. Our failure to
successfully manage future acquisitions could harm our operating results.
EXERCISE OF CHANGE OF CONTROL RIGHTS--WE MAY NOT HAVE THE ABILITY TO RAISE FUNDS
NECESSARY TO FINANCE ANY CHANGE OF CONTROL OFFER REQUIRED BY THE INDENTURES.
If a change of control occurs as described in the sections "Description of
the Exchange Notes - 8.000% Senior Notes due 2012" and "Description of the
Exchange Notes - 8.875% Senior Subordinated Notes 2012", each under the heading
"Certain Covenants", we would be required to offer to purchase your Senior Notes
or Senior Subordinated Notes at 101% of their principal amount together with all
accrued and unpaid interest and liquidated damages, if any. If a purchase offer
obligation arises under the indenture governing your series of notes, a change
of control will have also occurred under one or more of the other indentures
governing our debt. If a purchase offer were required under the indentures for
our debt, we may not have sufficient funds to pay the purchase price for all
debt that we are required to repurchase or repay. After giving effect to these
offerings, we would not have sufficient funds available to purchase all of such
outstanding debt.
AN ACTIVE TRADING MARKET MAY NOT DEVELOP FOR THE EXCHANGE NOTES.
The exchange notes are a new issue of securities. There is no active
public trading market for the exchange notes. We do not intend to apply for
listing of the exchange notes on a security exchange. The liquidity of the
trading market in the exchange notes, and the market prices quoted for the
exchange notes, may be adversely affected by changes in the overall market for
these types of securities and by changes in our financial performance or
prospects or in the prospects for companies in our industry generally. As a
consequence, an active trading market may not develop for your exchange notes,
you may not be able to sell your exchange notes, or, even if you can sell your
exchange notes, you may not be able to sell them at an acceptable price.
FEDERAL AND STATE LAWS ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID
GUARANTEES AND TO REQUIRE YOU TO RETURN PAYMENTS RECEIVED FROM GUARANTORS.
Although you will be direct creditors of the guarantors by virtue of the
guarantees, existing or future creditors of any guarantor could avoid or
subordinate such guarantor's guarantee under the fraudulent conveyance laws if
they were successful in establishing that:
o the guarantee was incurred with fraudulent intent; or
o the guarantor did not receive fair consideration or reasonably
equivalent value for issuing its guarantee and
1) was insolvent at the time of the guarantee;
2) was rendered insolvent by reason of the guarantee;
3) was engaged in a business or transaction for which its assets
constituted unreasonably small capital to carry on its
business; or
4) intended to incur, or believed that it would incur, debt
beyond its ability to pay such debt as it matured.
12
The measures of insolvency for purposes of determining whether a
fraudulent conveyance occurred vary depending upon the laws of the relevant
jurisdiction and upon the valuation assumptions and methodology applied by the
court. Generally, however, a company would be considered insolvent for purposes
of the foregoing if:
o the sum of the company's debts, including contingent, unliquidated
and unmatured liabilities, is greater than all of such company's
property at a fair valuation; or
o if the present fair saleable value of the company's assets is less
than the amount that will be required to pay the probable liability
on its existing debts as they become absolute and matured.
13
RATIO OF EARNINGS TO FIXED CHARGES
For purposes of computing the ratio of earnings to fixed charges, earnings
consist of earnings (loss) from continuing operations before income taxes,
minority interest, extraordinary items and cumulative effect of accounting
changes, plus fixed charges less interest capitalized. Fixed charges consist
of all interests incurred plus the amortization of debt issuance costs and bond
discount.
The following table sets forth the ratio of earnings to fixed charges for
Hovnanian for each of the periods indicated.
THREE MONTHS
ENDED JANUARY 31, YEAR ENDED OCTOBER 31,
2002 --------------------------------
----------------- 2001 2000 1999 1998 1997
Ratio of earnings to fixed charges.... 3.5 3.1 2.2 3.0 2.5 (a)
(a) No ratio is presented for the year ended October 31, 1997 as the earnings
for such period were insufficient to cover fixed charges by $9,197,000.
14
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following selected historical consolidated financial information for
the years ended October 31, 2001, 2000, 1999, 1998 and 1997 have been derived
from the audited consolidated financial statements of Hovnanian Enterprises,
Inc. The financial data for the three month periods ended January 31, 2002 and
2001 have been derived from unaudited financial statements. The unaudited
financial statements include all adjustments, consisting of normal recurring
accruals, which Hovnanian Enterprises, Inc. considers necessary for a fair
presentation of the financial position and the results of operations for these
periods. Operating results for the three months ended January 31, 2002 are not
necessarily indicative of the results that may be expected for the entire year
ending October 31, 2002. The data should be read in conjunction with the
consolidated financial statements, related notes, and other financial
information incorporated by reference herein.
THREE MONTHS YEAR ENDED OCTOBER 31,
ENDED JANUARY 31, ----------------------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
---------- ---------- ---------- ----------- ----------- ----------- ---------
(unaudited)
($ in thousands, except average selling prices)
Income Statement Data
------------------------------------------------------------------------------------------
Total revenues $ 454,252 $ 293,188 $ 1,741,9 $ 1,135,5 $ 948,287 $ 941,947 $ 784,136
==========================================================================================
Home and land sale revenues (1) $ 443,519 $ 286,571 $ 1,705,0 $ 1,112,0 $ 920,324 $ 904,280 $ 754,662
Cost of Sales 351,673 225,735 1,355,354 880,463 729,719 748,941 634,317
Inventory impairment loss (2) 905 174 4,368 1,791 2,091 3,994 14,019
------------------------------------------------------------------------------------------
Homebuilding gross margin 90,941 60,662 345,351 229,761 188,514 151,345 106,326
Selling, general and
administrative expenses 37,649 28,225 140,126 104,771 81,396 67,519 62,475
Corporate general and
administrative expenses 10,876 9,878 44,278 33,309 28,652 21,048 15,088
Home and land interest expense 13,702 9,505 51,446 34,956 29,175 32,151 30,467
Income (loss) from financial
services 3,628 1,758 9,985 (426) 1,059 2,099 (69)
Income (loss) from investment
properties -- -- -- -- (1,373) 4,406 (11,906)
Other (loss) income (net of other
operations) (2,545) (3,252) (13,132) (4,481) 1,640 4,160 1,555
------------------------------------------------------------------------------------------
Income (loss) before income taxes and
extraordinary loss 29,797 11,560 106,354 51,818 50,617 41,292 (12,124)
State and federal income taxes
(benefit) 11,636 4,637 42,668 18,655 19,674 15,141 (5,154)
------------------------------------------------------------------------------------------
Income (loss) before extraordinary
loss 18,161 6,923 63,686 33,163 30,943 26,151 (6,970)
Extraordinary loss from
extinguishment of debt net of taxes -- -- -- -- (868) (748) --
------------------------------------------------------------------------------------------
Net Income (loss) $ 18,161 $ 6,923 $ 63,686 $ 33,163 $ 30,075 $ 25,403 $ (6,970)
==========================================================================================
Selected Operating Data
New homes delivered:
Northeast Region 421 427 1,860 1,939 2,063 2,530 2,128
Metro D.C 263 162 1,294 263 198 152 70
Texas 237 177 1,003 914 66 -- --
North Carolina 298 180 1,449 653 756 687 695
California 440 106 760 480 514 457 365
15
THREE MONTHS YEAR ENDED OCTOBER 31,
ENDED JANUARY 31, ----------------------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
---------- ---------- ---------- ----------- ----------- ----------- ---------
(unaudited)
($ in thousands, except average selling prices)
Mid South 85 22 290 -- -- -- --
Florida 1 17 44 74 159 241 418
Other 5 31 91 44 12 71 41
------------------------------------------------------------------------------------------
Total 1,750 1,122 6,791 4,367 3,768 4,138 3,717
==========================================================================================
Net sales contracts:
New homes delivered:
Northeast Region 393 479 1,871 1,963 1,885 2,375 2,438
Metro D.C 263 130 1,253 329 232 170 73
Texas 193 175 984 935 25 -- --
North Carolina 286 233 1,466 661 728 690 694
California 301 182 781 502 524 439 456
Mid South 71 29 313 -- -- -- --
Florida 1 -- -- 82 123 164 351
Other 2 22 54 70 18 39 61
------------------------------------------------------------------------------------------
Total 1,510 1,250 6,722 4,542 3,535 3,877 4,073
==========================================================================================
Backlog at period end:
Number of homes 3,328 3,230 3,033 2,096 1,921 1,681 1,872
Dollar value using base prices $ 853,036 $ 795,229 $ 773,074 $ 538,546 $ 460,660 $ 381,816 $ 374,314
Average selling price for delivered
homes $ 253,199 $ 252,589 $ 249,406 $ 253,141 $ 241,123 $ 216,444 $ 196,881
Other data:
Gross Margin percentage (3) 20.7% 21.4% 20.6% 20.7% 21.0% 17.3% 15.6%
EBITDA (4) $ 46,698 $ 24,103 $ 175,072 $ 98,172 $ 91,277 $ 90,268 $ 59,312
Ratio of EBITDA to interest
incurred (5) 4.1x 2.1x 3.7x 2.5x 3.7x 3.1x 1.7x
Ratio of total debt to EBITDA N/A N/A 2.3x 4.3x 3.6x 2.5x 5.5x
Balance sheet data:
Housing inventories $ 939,830 $ 765,112 $ 740,114 $ 614,983 $ 527,121 $ 375,733 $ 410,393
Total assets 1,330,316 1,040,565 1,064,258 873,541 712,861 589,102 637,082
Total debt (6) 612,464 536,224 410,034 418,150 330,194 229,065 328,696
Stockholders equity 439,741 318,991 375,646 263,359 236,426 201,392 178,762
(1) Land sales for the periods presented were $421,000 for the three months
ended January 31, 2002, $3,166,000 for the three months ended January 31, 2001,
$11,356,000, $6,549,000, $12,077,000, $8,636,000 and $22,855,000 for the years
ended October 31, 2001, 2000, 1999, 1998 and 1997.
(2) In accordance with the provisions of Financial Accounting Standards No. 144
("FAS 144"), we record impairment losses on inventories related to communities
under development or inventories and long-lived assets held for sale. Under FAS
144, communities under development are impaired if the undiscounted cash flows
estimated to be generated from
16
sales is less than the community's carrying amounts. Inventories and long-lived
assets held for sale are impaired if the carrying amount exceeds its fair value
less selling costs. Along with write-offs of options not exercised (including
related approval engineering and capitalized interest costs), such impairment
losses for housing operations are reported as "Inventory impairment loss."
(3) Before inventory impairment loss and land sales.
(4) EBITDA means earnings (loss) before (a) income taxes, (b) interest expense,
(c) amortization of capitalized interest, (d) depreciation and amortization, (e)
a nonrecurring noncash charge relating to real estate inventory of $905,000 for
the three months ended January 31, 2002, $174,000 for the three months ended
January 31, 2001, $4,368,000, $1,791,000, $2,091,000, $5,032,000 and $28,465,000
for the years ended October 31, 2001, 2000, 1999, 1998 and 1997, respectively,
and (f) extraordinary loss from early extinguishment of debt. EBITDA is a widely
accepted financial indicator of a company's availability to service debt.
However, EBITDA should not be considered as an alternative to operating income
or to cash flows from operating activities (as determined in accordance with
generally accepted accounting principles) and should not be construed as an
indication of our operating performance or as a measure of liquidity. In
addition, our method of computation may not be comparable to other similarly
titled measures of other companies.
(5) Interest incurred consists of all cash interest and accrued interest costs,
whether expensed or capitalized, excluding interest under our mortgage warehouse
line and bonds collateralized by mortgages receivable.
(6) Total debt excludes debt under our mortgage warehouse line and bonds
collateralized by mortgages receivable.
17
THE EXCHANGE OFFER
INTRODUCTION
K. Hovnanian hereby offers to exchange a like principal amount of exchange
notes for any or all outstanding notes in each case on the terms and subject to
the conditions set forth in this prospectus and accompanying letter of
transmittal. We refer to this offer as the "exchange offer." You may tender some
or all of your outstanding notes pursuant to the exchange offer.
As of the date of this prospectus, $100,000,000 aggregate principal amount
of the 8.000% Senior Notes due 2012 and $150,000,000 aggregate principal amount
of the 8.875% Senior Subordinated Notes due 2012 are outstanding. This
prospectus, together with the letter of transmittal, is first being sent to
Holders of outstanding notes on or about , 2002.
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
We have entered into registration rights agreements with the initial
purchasers of the outstanding notes in which we agreed, under certain
circumstances, to file a registration statement relating to an offer to exchange
the outstanding notes for exchange notes. We also agreed to use our best efforts
to cause such offer to be consummated on the earliest practicable date after the
exchange offer registration statement has become effective but in no event no
later than 40 days thereafter. The exchange notes will have terms identical in
all material respects to the outstanding notes except that the exchange notes
will not contain terms with respect to transfer restrictions, registration
rights and liquidated damages for failure to observe certain obligations in the
applicable registration rights agreement. The outstanding notes were issued on
March 26, 2002.
Under the circumstances set forth below, we will use our reasonable best
efforts to cause the Securities and Exchange Commission to declare effective a
shelf registration statement with respect to the resale of the outstanding notes
and keep the statement effective for up to two years after the effective date of
the shelf registration statement. These circumstances include:
o if applicable law does not permit the exchange offer after we have
sought a no-action letter or other favorable decision from the
Securities and Exchange Commission and we have taken all such other
actions as may be requested by the Securities and Exchange
Commission or otherwise required in connection with such decision;
and
o if any holder of the outstanding notes notifies us within 20
business days following the consummation deadline of the exchange
offer that:
o the holder was prohibited by law or Securities and Exchange
Commission policy from participating in the exchange offer;
o the holder may not resell the exchange notes acquired by it in
the exchange offer to the public without delivering a
prospectus and this prospectus is not appropriate or available
for any resale by that holder; or
o the holder is a broker-dealer and holds outstanding notes
acquired directly from us or our affiliates.
If we fail to comply with certain obligations under each of the
registration rights agreements, we will be required to pay liquidated damages to
Holders of the outstanding notes. Please read the sections "Description of the
Exchange Notes - 8.000% Senior Notes due 2012" and "Description of the Exchange
Notes - 8.875% Senior Subordinated Notes due 2012", each under the heading
"--Registered Exchange Offer; Registration Rights; Liquidated Damages" for more
details regarding each registration rights agreement.
Each holder of outstanding notes that wishes to exchange their outstanding
notes for exchange notes in the exchange offer will be required to make the
following written representations:
o such holder is not an affiliate of K. Hovnanian within the meaning
of Rule 405 of the Securities Act;
18
o such holder is not engaged in, and does not intend to engage in, and
has no arrangement or understanding with any person to participate
in, a distribution of the exchange notes; and
o such holder is acquiring the exchange notes in the ordinary course
of its business.
Each broker-dealer that receives exchange notes for its own account in
exchange for outstanding notes, where the broker-dealer acquired the outstanding
notes as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such exchange notes. Please see "Plan of Distribution".
RESALE OF EXCHANGE NOTES
Based on interpretations by the Securities and Exchange Commission set
forth in no-action letters issued to third parties, we believe that you may
resell or otherwise transfer exchange notes issued in the exchange offer without
complying with the registration and prospectus delivery provisions of the
Securities Act, if:
o you are not an affiliate of K. Hovnanian within the meaning of Rule
405 under the Securities Act;
o you are not engaged in, and do not intend to engage in, a
distribution of the exchange notes;
o you do not have an arrangement or understanding with any person to
participate in a distribution of the exchange notes; and
o you are acquiring the exchange notes in your ordinary course of
business.
If you are an affiliate of K. Hovnanian, or are engaging in, or intend to
engage in, or have any arrangement or understanding with any person to
participate in a distribution of the exchange notes, or are not acquiring the
exchange notes in the ordinary course of your business:
o you cannot rely on the position of the Securities and Exchange
Commission set forth in BROWN & WOOD LLP (available February 7,
1997), MORGAN STANLEY & CO. INCORPORATED (available June 5, 1991),
EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), as
interpreted in the Securities and Exchange Commission's letter to
SHEARMAN & STERLING dated July 2, 1993, or similar no-action
letters; and
o in the absence of an exception from the position stated immediately
above, you must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale of
the exchange notes.
This prospectus may be used for an offer to resell, resale or other
transfer of exchange notes only as specifically set forth in this prospectus.
With regard to broker-dealers, only broker-dealers that acquired the outstanding
notes as a result of market-making activities or other trading activities may
participate in the exchange offer. Each broker-dealer that receives exchange
notes for its own account in exchange for outstanding notes, where such
outstanding notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of the exchange notes.
Please read "Plan of Distribution" for more details regarding the transfer of
exchange notes.
TERMS OF THE EXCHANGE OFFER
On the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal, we will accept for exchange in
the exchange offer outstanding notes that are validly tendered and not validly
withdrawn prior to the expiration date. Outstanding notes may only be tendered
in multiples of $1,000. We will issue $1,000 principal amount of exchange notes
in exchange for each $1,000 principal amount of outstanding notes surrendered in
the exchange offer.
The form and terms of the exchange notes will be substantially identical
to the form and terms of the outstanding notes except the exchange notes will be
registered under the Securities Act, will not bear legends restricting their
transfer and will not provide for any liquidated damages upon our failure to
fulfill our obligations
19
under the registration rights agreements to file, and cause to be effective, a
registration statement. The exchange notes will evidence the same debt as the
outstanding notes. The exchange 8.000% Senior Notes due 2012 will be issued
under and entitled to the benefits of the same indenture that authorized the
issuance of the outstanding 8.000% Senior Notes due 2012. The exchange 8.875%
Senior Subordinated Notes due 2012 will be issued under and entitled to the
benefits of the same indenture that authorized the issuance of the outstanding
8.875% Senior Subordinated Notes due 2012. Consequently, both series of Senior
Notes will be treated as a single class of debt securities and both series of
Senior Subordinated Notes will be treated as a single class of debt securities
each under the applicable indenture. For a description of each indenture, see
"Description of the Exchange Notes - 8.000% Senior Notes due 2012" and
"Description of Exchange Notes - 8.875% Senior Subordinated Notes due 2012".
The exchange offer is not conditioned upon any minimum aggregate principal
amount of outstanding notes being tendered for exchange.
As of the date of this prospectus, $100,000,000 aggregate principal amount
of the outstanding 8.000% Senior Notes due 2012 and $150,000,000 aggregate
principal amount of the outstanding 8.875% Senior Subordinated Notes due 2012
are outstanding. This prospectus and the letter of transmittal are being sent to
all registered holders of outstanding notes. There will be no fixed record date
for determining registered holders of outstanding notes entitled to participate
in the exchange offer.
We intend to conduct the exchange offer in accordance with the provisions
of both registration rights agreements, the applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations of the SEC.
Outstanding notes that are not tendered for exchange in the exchange offer will
remain outstanding and continue to accrue interest and will be entitled to the
rights and benefits such holders have under the indentures relating to such
holders' series of outstanding notes and the applicable registration rights
agreement except we will not have any further obligation to you to provide for
the registration of the outstanding notes under the applicable registration
rights agreement.
We will be deemed to have accepted for exchange properly tendered
outstanding notes when we have given oral or written notice of the acceptance to
the exchange agent. The exchange agent will act as agent for the tendering
holders for the purposes of receiving the exchange notes from us and delivering
exchange notes to holders. Subject to the terms of the applicable registration
rights agreement, we expressly reserve the right to amend or terminate the
exchange offer and to refuse to accept the occurrence of any of the conditions
specified below under "--Conditions to the Exchange Offer".
Holders who tender outstanding notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
outstanding notes. We will pay all charges and expenses, other than certain
applicable taxes described below in connection with the exchange offer. It is
important that you read "--Fees and Expenses" below for more details regarding
fees and expenses incurred in the exchange offer.
EXPIRATION DATE; EXTENSIONS, AMENDMENTS
As used in this prospectus, the term "expiration date" means 5:00 p.m.,
New York City time, on , 2002. However, if we, in our sole discretion,
extend the period of time for which the exchange offer is open, the term
"expiration date" will mean the latest time and date to which we shall have
extended the expiration of the exchange offer.
To extend the period of time during which the exchange offer is open, we
will notify the exchange agent of any extension by oral or written notice,
followed by notification to the registered holders of the outstanding notes no
later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date.
We reserve the right, in our sole discretion:
o to delay accepting for exchange any outstanding notes;
o to extend the exchange offer or to terminate the exchange offer and
to refuse to accept outstanding notes not previously accepted if any
of the conditions set forth below under "--Conditions to the
Exchange Offer" have not been satisfied, by giving oral or written
notice of such delay, extension or termination to the exchange
agent; and
20
o subject to the terms of the applicable registration rights
agreement, to amend the terms of the exchange offer in any manner.
Any delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice to the registered
holders of the outstanding notes. If we amend the exchange offer in a manner
that we determine to constitute a material change, we will promptly disclose the
amendment in a manner reasonable calculated to inform the holders of outstanding
notes of that amendment.
CONDITIONS TO THE EXCHANGE OFFER
Despite any other term of the exchange offer, we will not be required to
accept for exchange, or to issue exchange notes in exchange for, any outstanding
notes and we may terminate or amend the exchange offer as provided in this
prospectus before accepting any outstanding notes for exchange if in our
reasonable judgment:
o the exchange notes to be received will not be tradeable by the
holder, without restriction under the Securities Act or the Exchange
Act and without material restrictions under the blue sky or
securities laws of substantially all of the states of the United
States;
o the exchange offer or the making of any exchange by a holder
violates any applicable law or interpretation of the Securities and
Exchange Commission; or
o any action or proceeding has been instituted or threatened in any
court or by or before any governmental agency with respect to the
exchange offer that, in our judgment, would reasonably be expected
to impair our ability to proceed with the exchange offer.
In addition, we will not be obligated to accept for exchange the
outstanding notes of any holder that has not made to us
o the representations described under "--Procedures for Tendering" and
"Plan of Distribution" or
o any other representations as may be reasonably necessary under
applicable Securities and Exchange Commission rules, regulations, or
interpretations to make available to us an appropriate form for
registration of the exchange notes under the Securities Act.
We expressly reserve the right at any time or at various times to extend
the period of time during which the exchange offer is open. Consequently, we may
delay acceptance of any outstanding notes by giving oral or written notice of
such extension to their holders. During any such extensions, all outstanding
notes previously tendered will remain subject to the exchange offer and we may
accept them for exchange. We will return any outstanding notes that we do not
accept for exchange for any reason without expense to their tendering holder as
promptly as practicable after the expiration or termination of the exchange
offer.
We expressly reserve the right to amend or terminate the exchange offer
and to reject for exchange any outstanding notes not previously accepted for
exchange, upon the occurrence of any of the conditions of the exchange offer
specified above. We will give oral or written notice of any extension,
amendment, non-acceptance or termination to the holders of the outstanding notes
as promptly as practicable. In the case of any extension, such notice will be
issued no later than 9:00 a.m. New York City time, on the next business day
after the previously scheduled expiration date.
These conditions are for our sole benefit and we may assert them
regardless of the circumstances that may give rise to them or waive them in
whole or in part at any or at various times in our sole discretion. If we fail
at any time to exercise any of the foregoing rights, this failure will not
constitute a waiver of such right. Each such right will be deemed an ongoing
right that we may assert at any time or at various times.
In addition, we will not accept for exchange any outstanding notes
tendered, and will not issue exchange notes in exchange for any such outstanding
notes, if at such time any stop order is threatened or in effect with respect to
the registration statement of which this prospectus constitutes a part or the
qualification of the indentures under the Trust Indenture Act of 1939.
21
PROCEDURES FOR TENDERING
Only a holder of outstanding notes may tender their outstanding notes in
the exchange offer. To tender in the exchange offer, a holder must comply with
either of the following:
o complete, sign and date the letter of transmittal, or a facsimile of
the letter of transmittal, have the signature on the letter of
transmittal guaranteed if required by the letter of transmittal and
mail or deliver such letter of transmittal or facsimile to the
exchange agent prior to the expiration date; or
o comply with DTC's Automated Tender Offer Program procedures
described below.
In addition, either:
o the exchange agent must receive outstanding notes along with the
letter of transmittal; or
o prior to the expiration date, the exchange agent must receive a
timely confirmation of book-entry transfer of outstanding notes into
the exchange agent's account at DTC according to the procedure for
book-entry transfer described below or a properly transmitted
agent's message; or
o the holder must comply with the guaranteed delivery procedures
described below.
To be tendered effectively, the exchange agent must receive any physical
delivery of the letter of transmittal and other required documents at the
address set forth below under "--Exchange Agent" prior to the expiration date.
A tender to us that is not withdrawn prior to the expiration date
constitutes an agreement between us and you upon the terms and subject to the
conditions described in this prospectus and in the letter of transmittal.
The method of delivery of outstanding notes, letters of transmittal, and
all other required documents to the exchange agent is at your election and risk.
Rather than mail these items, we recommend that you use an overnight or hand
delivery service. In all cases, you should allow sufficient time to assure
timely delivery to the exchange agent before the expiration date. You should not
send letters of transmittal or certificates representing outstanding notes to
us. You may request that your broker, dealer, commercial bank, trust company or
nominee effect the above transactions for you.
If you are a beneficial owner whose outstanding notes are registered in
the name of a broker, dealer, commercial bank, trust company, or other nominee
who wishes to participate in the exchange offer, you should promptly contact the
registered holder and instruct the registered holder to tender outstanding notes
on your behalf. If you are a beneficial owner and you wish to tender the
outstanding notes yourself, you must, prior to completing and executing the
letter of transmittal and delivering your outstanding notes either:
o make appropriate arrangements to register ownership of the
outstanding notes in your name; or
o obtain a properly completed bond power from the registered holder of
outstanding notes.
Your must make these arrangements or follow these procedures before
completing and executing the letter of transmittal and delivering the
outstanding notes. The transfer of record ownership may take considerable time
and may not be able to be completed prior to the expiration date.
Signatures on the letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or another "eligible institution" within the meaning of Rule
17A(d)-15 under the Exchange Act unless the outstanding notes surrendered for
exchange are tendered:
o by a registered holder of the outstanding notes who has not
completed the box entitled "Special Registration Instructions" or
"Special Delivery Instructions" on the letter of transmittal; or
o for the account of an eligible institution.
22
If the letter of transmittal is signed by a person other than the
registered holder of any outstanding notes listed on the outstanding notes, such
outstanding notes must be endorsed or accompanied by a properly completed bond
power. The bond power must be signed by the registered holder as the registered
holder's name appears on the outstanding notes and an eligible institution must
guarantee the signature on the bond power.
If the letter of transmittal or any certificates representing outstanding
notes, or bond powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations, or others acting in a
fiduciary or representative capacity, those persons should also indicate when
signing and, unless waived by us, they should also submit evidence satisfactory
to us of their authority to so act.
BOOK-ENTRY DELIVERY PROCEDURES
Promptly after the date of this prospectus, the exchange agent will
establish accounts with respect to the outstanding notes at DTC for purposes of
the exchange offer. Any financial institution that is a participant in DTC's
systems may make book-entry delivery of the outstanding notes by causing DTC to
transfer those outstanding notes into the exchange agent's account at DTC in
accordance with DTC's procedures for such transfer. To be timely, book-entry
delivery of outstanding notes requires receipt of a confirmation of a book-entry
transfer, a "book-entry confirmation", prior to the expiration date. In
addition, although delivery of outstanding notes may be effected through
book-entry transfer into the exchange agent's account at DTC, the letter of
transmittal or a manually signed facsimile thereof, together with any required
signature guarantees and any other required documents, or an "agent's message",
as defined below, in connection with a book-entry transfer, must, in any case,
be delivered or transmitted to and received by the exchange agent at its address
set forth on the cover page of the letter of transmittal prior to the expiration
date to receive exchange notes for tendered outstanding notes, or the guaranteed
delivery procedure described below must be complied with. Tender will not be
deemed made until such documents are received by the exchange agent. Delivery of
documents to DTC does not constitute delivery to the exchange agent.
TENDER OF OUTSTANDING NOTES HELD THROUGH THE DEPOSITORY TRUST COMPANY
The exchange agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may use DTC's Automated Tender Offer
Program to tender. Participants in the program may, instead of physically
completing and signing the letter of transmittal and delivering it to the
exchange, electronically transmit their acceptance of the exchange by causing
DTC to transfer the outstanding notes to the exchange agent in accordance with
DTC's Automated Tender Offer Program procedures for transfer. DTC will then send
an agent's message to the exchange agent. The term "agent's message" means a
message transmitted by DTC, received by the exchange agent and forming part of
the book-entry confirmation, which states that:
o DTC has received an express acknowledgment from a participant in its
Automated Tender Offer Program that is tendering outstanding notes
that are the subject of the book-entry confirmation;
o the participant has received and agrees to be bound by the terms of
the letter of transmittal, or in the case of an agent's message
relating to guaranteed delivery, that such participant has received
and agrees to be bound by the applicable notice of guaranteed
delivery; and
o we may enforce that agreement against such participant.
In all cases, we will issue exchange notes for outstanding notes that we
have accepted for exchange under the exchange offer only after the exchange
agent timely receives:
o outstanding notes or a timely book-entry confirmation of such
outstanding notes into the exchange agent's account at DTC; and
o a properly completed and duly executed letter of transmittal and all
other required documents or a properly transmitted agent's message.
By tendering outstanding notes pursuant to the exchange offer, each holder
will represent to us that, among other things:
23
(1) the holder is not an affiliate of K. Hovnanian within the meaning of
Rule 405 under the Securities Act;
(2) the holder is not engaged in, and does not intend to engage in, a
distribution of the exchange notes;
(3) the holder does not have an arrangement or understanding with any
person to participate in a distribution of the exchange notes; and
(4) the holder is not acquiring the exchange notes in the ordinary
course of its business.
If the holder is an affiliate of K. Hovnanian, or is engaging in, or
intends to engage in, or has any arrangement or understanding with any person to
participate in a distribution of the exchange notes, or is not acquiring the
exchange notes in the ordinary course of its business:
(1) the holder cannot rely on the position of the Securities and
Exchange Commission enunciated in BROWN & WOOD LLP (available
February 7, 1997), MORGAN STANLEY & CO. INCORPORATED (available
June 5, 1991), EXXON CAPITAL HOLDINGS CORPORATION (available May 13,
1988), as interpreted in the SEC's letter to SHEARMAN & STERLING
dated July 2, 1993, or similar no-action letters; and
(2) in the absence of an exception from the position stated in (1) above
the holder must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale of
the exchange notes.
In addition, each broker-dealer that is to receive exchange notes for its
own account in exchange for outstanding notes must represent that such
outstanding notes were acquired by that broker-dealer as a result of
market-making activities or other trading activities and must acknowledge that
it will deliver a prospectus that meets the requirements of the Securities Act
in connection with any resale of the exchange notes. The letter of transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. See "Plan of Distribution."
We will interpret the terms and conditions of the exchange offer,
including the letter of transmittal and the instructions to the letter of
transmittal, and will resolve all questions as to the validity, form,
eligibility, including time of receipt, and acceptance of outstanding notes
tendered for exchange. Our determinations in this regard will be final and
binding on all parties. We reserve the absolute right to reject any and all
tenders of any particular outstanding notes not properly tendered or to not
accept any particular outstanding notes if the acceptance might, in our or our
counsel's judgment, be unlawful. We also reserve the absolute right to waive any
defects or irregularities or conditions of the exchange offer as to any
particular outstanding notes either before or after the expiration date,
including the right to waive the ineligibility of any holder who seeks to tender
outstanding notes in the exchange offer.
Unless waived, any defects or irregularities in connection with tenders of
outstanding notes for exchange must be cured within such reasonable period of
time as we determine. Neither we, the exchange agent, nor any other person will
be under any duty to give notification of any defect or irregularity with
respect to any tender of outstanding notes for exchange, nor will any of them
incur any liability for any failure to give notification. Any outstanding notes
received by the exchange agent that are not properly tendered and as to which
the irregularities have not been cured or waived will be returned by the
exchange agent to the tendering holder, unless otherwise provided in the letter
of transmittal, promptly after the expiration date.
GUARANTEED DELIVERY PROCEDURES
Holders wishing to tender their outstanding notes but whose outstanding
notes are not immediately available or who cannot deliver their outstanding
notes, the letter of transmittal or any other required documents to the exchange
agent or comply with the applicable procedures under DTC's Automatic Tender
Offer Program prior to the expiration date may still tender if:
o the tender is made through an eligible institution;
o prior to the expiration date, the exchange agent receives from such
eligible institution either a properly completed and duly executed
notice of guaranteed delivery, by facsimile transmission, mail, or
hand delivery or a properly transmitted agent's message and notice
of guaranteed delivery:
24
o setting forth the name and address of the holder, the registered
number(s) of such outstanding notes and the principal amount of
outstanding notes tendered;
o stating that the tender is being made thereby;
o guaranteeing that, within three New York Stock Exchange trading days
after the expiration date, the letter of transmittal, or facsimile
thereof, together with the outstanding notes or a book-entry
confirmation, and any other documents required by the letter of
transmittal, will be deposited by the eligible institution with the
exchange agent; and
o the exchange agent receives the properly completed and executed
letter of transmittal or facsimile thereof, as well as
certificate(s) representing all tendered outstanding notes in proper
form for transfer or a book-entry confirmation of transfer of the
outstanding notes into the exchange agent's account at DTC, and all
other documents required by the letter of transmittal within three
New York Stock Exchange trading days after the expiration date.
WITHDRAWAL RIGHTS
Except as otherwise provided in this prospectus, you may withdraw your
tender of outstanding notes at any time prior to 5:00 p.m., New York City time,
on the expiration date.
For a withdrawal to be effective:
o the exchange agent must receive a written notice, which may be by
telegram, telex, facsimile or letter, of withdrawal at one of the
addresses set forth below under "--Exchange Agent"; or
o holders must comply with the appropriate procedures of DTC's
Automated Tender Offer Program system.
Any notice of withdrawal must:
o specify the name of the person who tendered the outstanding notes to
be withdrawn;
o identify the outstanding notes to be withdrawn, including the
principal amount of the outstanding notes; and
o where certificates for outstanding notes have been transmitted,
specify the name in which such outstanding notes were registered, if
different from that of the withdrawing holder.
If certificates for outstanding notes have been delivered or otherwise
identified to the exchange agent, then, prior to the release of such
certificates, the withdrawing holder must also submit:
o the serial numbers of the particular certificates to be withdrawn;
and
o a signed notice of withdrawal with signatures guaranteed by an
eligible institution unless such holder is an eligible institution.
If outstanding notes have been tendered pursuant to the procedures for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawn
outstanding notes and otherwise comply with the procedures of the facility. We
will determine all questions as to the validity, form, and eligibility,
including time of receipt of notices of withdrawal and our determination will be
final and binding on all parties. Any outstanding notes so withdrawn will be
deemed not to have been validly tendered for exchange for purposes of the
exchange offer. Any outstanding notes that have been tendered for exchange but
that are not exchanged for any reason will be returned to their holder without
cost to the holder, or, in account at DTC according to the procedures described
above, such outstanding notes will be credited to an account maintained with DTC
for outstanding notes, as soon as practicable after withdrawal, rejection of
25
tender or termination of the exchange offer. Properly withdrawn outstanding
notes may be retendered by following the procedures described under
"--Procedures for Tendering" above at any time on or prior to the expiration
date.
EXCHANGE AGENT
Wachovia Bank, National Association, formerly known as First Union
National Bank, has been appointed as the exchange agent for the exchange offer.
Wachovia Bank, National Association also acts as trustee under each of the
indentures governing the notes. You should direct all executed letters of
transmittal and all questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal, and
requests for notices of guaranteed delivery to the exchange agent addressed as
follows:
Delivery to: Wachovia Bank, National Association, Exchange Agent
By Mail: By Overnight Courier Delivery: By Hand:
Wachovia Bank, N.A. Wachovia Bank, N.A. Wachovia Bank, N.A.
Attn: Marcia Rice Attn: Marcia Rice Attn: Marcia Rice
Corporate Trust Operations Corporate Trust Corporate Trust
Reorg. Operations Reorg Operations Reorg
1525 West W.T. Harris Blvd. 1525 West W.T. Harris Blvd. 1525 West W.T. Harris Blvd.
Charlotte NC 28288-1153 Charlotte NC 28262 Charlotte NC 28288-1153
By Facsimile Transmissions:
(704) 590-7628
Confirm By Telephone:
(704) 590-7413
For Information:
(704) 590-7413
If you deliver the letter of transmittal to an address other than as set
forth above or transmit instructions via facsimile other than as set forth
above, that delivery or those instructions will not be effective.
FEES AND EXPENSES
We will bear the expenses of soliciting tenders. The principal
solicitation is being made by mail by the exchange agent. We may make additional
solicitation by facsimile, telephone or in person by our officers and regular
employees and our affiliates.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payment to broker-dealers or others for soliciting
acceptances of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and reimburse it for its related,
reasonable out-of-pocket expenses.
We will pay the estimated cash expenses to be incurred in connection with
the exchange offer. The expenses are estimated in the aggregate to be
approximately $115,000. They include:
o Securities and Exchange Commission registration fees;
o fees and expenses of the exchange agent and trustee;
o accounting and legal fees and printing costs; and
o related fees and expenses.
ACCOUNTING TREATMENT
We will record the exchange notes in our accounting records at the same
carrying value as the outstanding notes, which is the aggregate principal amount
as reflected in our accounting records on the date of exchange. Accordingly, we
will not recognize any gain or loss for accounting purposes upon the
consummation of the exchange offer. We will record the expenses of the exchange
offer as incurred.
26
TRANSFER TAXES
We will pay all transfer taxes, if any, applicable to the exchange of
outstanding notes under the exchange offer. The tendering holder, however, will
be required to pay any transfer taxes, whether imposed on the registered holder
or any other person, if:
o certificates representing outstanding notes for principal amounts
not tendered or accepted for exchange are to be delivered to, or are
to be issued in the name of, any person other than the registered
holder of outstanding notes tendered; or
o tendered outstanding notes are registered in the name of any person
other than the person signing the letter of transmittal; or
o a transfer tax is imposed for any reason other than the exchange of
outstanding notes under the exchange offer.
If satisfactory evidence of payment of such taxes is not submitted with
the letter of transmittal, the amount of such transfer taxes will be billed to
that tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of outstanding notes who do not exchange their outstanding notes
for exchange notes under the exchange offer will remain subject to the
restrictions on transfer of such outstanding notes:
o as set forth in the legend printed on the notes as a consequence of
the issuance of the outstanding notes pursuant to the exemptions
from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities
laws; and
o otherwise set forth in the offering memorandum distributed in
connection with the private offering of the outstanding notes.
In general, you may not offer or sell the outstanding notes unless they
are registered under the Securities Act or if the offer or sale is exempt from
registration under the Securities Act and applicable state securities laws.
Except as required by the applicable registration rights agreement, we do not
intend to register resales of the outstanding notes under the Securities Act.
Based on interpretations of the Securities and Exchange Commission, exchange
notes issued pursuant to the exchange offer may be offered for resale, resold or
otherwise transferred by their holders, other than any holder that is our
"affiliate" within the meaning of Rule 405 under the Securities Act, without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that:
o the holder is not an affiliate of K. Hovnanian within the meaning of
Rule 405 under the Securities Act;
o the holder is not engaged in, and does not intend to engage in, a
distribution of the exchange notes;
o the holder does not have an arrangement or understanding with any
person to participate in a distribution of the exchange notes; and
o the holder is not acquiring the exchange notes in the ordinary
course of its business.
Any holder who tenders in the exchange offer for the purpose of
participating in a distribution of the exchange notes:
o cannot rely on the position of the Securities and Exchange
Commission enunciated in BROWN & WOOD LLP (available February 7,
1997), MORGAN STANLEY & CO. INCORPORATED (available June 5, 1991),
EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), as
interpreted in the SEC's letter to SHEARMAN & STERLING dated July 2,
1993, or similar no-action letters; and
27
o in the absence of an exception from the position stated immediately
above, must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale of
exchange notes.
OTHER
Participating in the exchange offer is voluntary and you should carefully
consider whether to accept. You are urged to consult your financial and tax
advisors in making your own decision on what action to take.
We may in the future seek to acquire untendered outstanding notes in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. We have no present plans to acquire any outstanding notes that are
not tendered in the exchange offer or to file a registration statement to permit
resales of any untendered outstanding notes.
28
DESCRIPTION OF THE EXCHANGE NOTES
IN THIS SECTION, REFERENCES TO THE "COMPANY" MEANS HOVNANIAN
ENTERPRISES, INC., A DELAWARE CORPORATION, AND DOES NOT INCLUDE ANY OF ITS
SUBSIDIARIES OR K. HOVNANIAN ENTERPRISES, INC., AND REFERENCES TO THE
"ISSUER", "US," "WE" OR "OUR" MEANS K. HOVNANIAN ENTERPRISES, INC., A NEW
JERSEY CORPORATION. REFERENCES TO "SENIOR NOTES" IN THIS SECTION ARE
REFERENCES TO THE 8.000% SENIOR NOTES DUE 2012, REFERENCES TO THE "SENIOR
SUBORDINATED NOTES" IN THIS SECTION ARE REFERENCES TO THE 8.875% SENIOR
SUBORDINATED NOTES DUE 2012 AND REFERENCES TO "SENIOR NOTES" OR SENIOR
SUBORDINATED NOTES" IN THIS SECTION ARE REFERENCES TO BOTH OUTSTANDING NOTES
AND EXCHANGE NOTES OF THE SENIOR NOTES OR SENIOR SUBORDINATED NOTES, AS
APPLICABLE, UNLESS OTHERWISE SPECIFIED.
We are offering to exchange the outstanding Senior Notes for $100,000,000
aggregate principal amount of 8.000% Senior Notes due 2012 and the outstanding
Senior Subordinated Notes for $150,000,000 aggregate principal amount of 8.875%
Senior Subordinated Notes due 2012.
The form and terms of the exchange notes and the outstanding notes are
identical in all material respects except that the registration rights, related
liquidated damages provisions and the transfer restrictions applicable to the
outstanding notes do no apply to the exchange notes.
8.000% SENIOR NOTES DUE 2012
GENERAL
The outstanding Senior Notes were issued under an indenture, which we
refer to as the "Senior Indenture", dated as of March 26, 2002, among us, the
Guarantors and Wachovia Bank, National Association, formerly known as First
Union National Bank, as trustee, which we refer to as the "Senior Trustee". The
terms of the Senior Notes include those stated in the Senior Indenture and those
made part of the Senior Indenture by reference to the Trust Indenture Act of
1939, as amended. The exchange Senior Notes will be issued under the same Senior
Indenture.
This description of the exchange Senior Notes contains definitions of
terms, including those defined under the caption "--Definitions of Certain Terms
Used in the Senior Indenture". The following discussion includes a summary
description of certain material terms of the Senior Indenture, the Senior
Registration Rights Agreement, and the exchange Senior Notes. Because this is a
summary, it does not include all of the information that is included in the
Senior Indenture, the Senior Registration Rights Agreement, or the exchange
Senior Notes.
You should read the Senior Indenture and the Senior Registration Rights
Agreement carefully and in their entirety because they, and not this
description, define your rights as Holders of the notes. You may request copies
of these documents at our address set forth under "Where You Can Find More
Information".
The outstanding Senior Notes and the exchange Senior Notes constitute a
single series of debt securities under the Senior Indenture. If the exchange
offer is consummated, Holders of Senior Notes who do not exchange their Senior
Notes in the exchange offer will vote together with the Holders of the
registered Senior Notes for all relevant purposes under the Senior Indenture.
Accordingly, when determining whether the required Holders have given notice,
consent or waiver or taken any other action permitted under the Senior
Indenture, any outstanding Senior Notes that remain outstanding after the
exchange offer will be aggregated with the registered Senior Notes. All
references herein to specified percentages in aggregate principal amount of
Senior Notes outstanding shall be deemed to mean, at any time after the exchange
offer is consummated, percentages in aggregate principal amount of Senior Notes
and registered Senior Notes outstanding. Capitalized terms used in this Section
but not otherwise defined have the meanings given to them in the Senior
Indenture.
The exchange Senior Notes will bear interest at the rate PER ANNUM shown
on the cover page of this prospectus from the most recent date to which interest
has been paid on the outstanding Senior Notes or, if no interest has been paid
on the outstanding Senior Notes, from March 26, 2002. The applicable interest
will be payable semi-annually on each April 1 and October 1 beginning October 1,
2002, to Holders of record at the close of business on March 15 or September 15,
as the case may be, immediately preceding each such interest payment date. No
interest will be paid on outstanding Senior Notes following their acceptance for
exchange. The exchange Senior Notes will mature on April 1, 2012, and will be
issued in denominations of $1,000 and integral multiples thereof.
The exchange Senior Notes are limited to an aggregate principal amount of
$200.0 million. The exchange Senior Notes are guaranteed by the Company and each
of the other Guarantors pursuant to the guarantees, which we refer to
collectively as the "--Senior Guarantees", described below.
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The exchange Senior Notes will be our general unsecured obligations and
will rank senior in right of payment to all our future Indebtedness that is, by
its terms, expressly subordinated in right of payment to the exchange Senior
Notes and PARI PASSU in right of payment with all our existing and future
unsecured Indebtedness that is not so subordinated. The Senior Guarantees are
general unsecured obligations of the Guarantors and will rank senior in right of
payment to all future Indebtedness of the Guarantors that is, by its terms,
expressly subordinated in right of payment to the Senior Guarantees and rank
PARI PASSU in right of payment with all existing and future unsecured
Indebtedness of the Guarantors that is not so subordinated.
Secured creditors of the Company, the Issuer and the other Guarantors have
a claim on the assets which secure the obligations of the Company and the
Guarantors to such creditors prior to claims of Holders of the exchange Senior
Notes against those assets. At January 31, 2002, as adjusted to give effect to
the transactions described under "Use of Proceeds" and the acquisition of The
Forecast Group(R), L.P. on January 10, 2002, the Company, the Issuer and the
other Guarantors would have had approximately $676.3 million, including the
Senior Notes, of Indebtedness outstanding, of which $15.2 million would have
been secured by assets of the Company and the other Guarantors $150.0 million of
which would have been subordinated to the Senior Notes.
EXECUTION, AUTHENTICATION AND DELIVERY
The Senior Notes will be executed by facsimile or manual signature in the
name and on behalf of the Issuer, by an Officer. If an Officer whose signature
is on a Senior Note no longer holds that office at the time the Senior Note is
authenticated, the Senior Note will still be valid.
A Senior Note will not be valid until the Senior Trustee manually signs
the certificate of authentication on the Senior Note. The signature will be
conclusive evidence that the Senior Note has been authenticated under the Senior
Indenture. Unless limited by the terms of its appointment, an authenticating
agent may authenticate the Senior Notes whenever the Senior Trustee may do so.
The Senior Notes will be issuable in denominations of $1,000 and multiples
thereof.
REDEMPTION
Except as set forth below, the Senior Notes will not be redeemable prior
to April 1, 2007. Thereafter, the Issuer may redeem the Senior Notes, at its
option, in whole at any time or in part from time to time. Redemption will be at
the following redemption prices plus accrued and unpaid interest and liquidated
damages, if any, to the redemption date, subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date, if redeemed during the 12-month period commencing on
April 1 of the years set forth below:
REDEMPTION
YEAR PRICE
---- ----------
2007...................................... 104.000%
2008...................................... 102.667%
2009...................................... 101.333%
2010 and thereafter....................... 100.000%
Selection of the Senior Notes or portions thereof for redemption pursuant
to the foregoing shall be made by the Senior Trustee only on a PRO RATA basis or
on as nearly a PRO RATA basis as is practicable, subject to the procedures of
The Depository Trust Company, unless such method is otherwise prohibited. Notice
of redemption will be mailed at least 30 days but not more than 60 days before
the redemption date to each Holder whose Senior Notes are to be redeemed at the
registered address of such Holder. On and after the redemption date, interest
ceases to accrue on the Senior Notes or portions thereof called for redemption.
There is no sinking fund for the Senior Notes.
THE SENIOR GUARANTEES
Each of the Guarantors will, so long, in the case of a Restricted
Subsidiary, as it remains a Restricted Subsidiary, unconditionally guarantee on
a joint and several basis all of our obligations under the Senior Notes,
including our obligations to pay principal, premium, if any, and interest with
respect to the Senior Notes. The obligations of each Guarantor other than the
Company are limited to the maximum amount which, after giving effect
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to all other contingent and fixed liabilities of such Guarantor and after giving
effect to any collections from or payments made by or on behalf of any other
Guarantor in respect of the obligations of such other Guarantor under its Senior
Guarantee or pursuant to its contribution obligations under the Senior
Indenture, will result in the obligations of such Guarantor under its Senior
Guarantee not constituting a fraudulent conveyance or fraudulent transfer under
federal or state law. Each Guarantor other than the Company that makes a payment
or distribution under a Senior Guarantee shall be entitled to a contribution
from each other Guarantor in an amount PRO RATA, based on the net assets of each
Guarantor, determined in accordance with GAAP. Except as provided in "--Certain
Covenants" below, the Company is not restricted from selling or otherwise
disposing of any of the Guarantors.
The Senior Indenture requires that each existing and future Restricted
Subsidiary, other than KHL, Inc. and K. Hovnanian Poland, sp z.o.o., be a
Guarantor. The Company is permitted to cause any Unrestricted Subsidiary to
be a Guarantor.
The Senior Indenture provides that if all or substantially all of the
assets of any Guarantor other than the Company or all of the Capital Stock of
any Guarantor other than the Company is sold, including by consolidation,
merger, issuance or otherwise, or disposed of, including by liquidation,
dissolution or otherwise, by the Company or any of its Subsidiaries, or, unless
the Company elects otherwise, if any Guarantor other than the Company is
designated an Unrestricted Subsidiary in accordance with the terms of the Senior
Indenture, then such Guarantor, in the event of a sale or other disposition of
all of the Capital Stock of such Guarantor or a designation as an Unrestricted
Subsidiary, or the Person acquiring such assets, in the event of a sale or other
disposition of all or substantially all of the assets of such Guarantor, shall
be deemed automatically and unconditionally released and discharged from any of
its obligations under the Subordinated Indenture without any further action on
the part of the Subordinated Trustee or any Holder of the Senior Notes.
An Unrestricted Subsidiary that is a Guarantor shall be deemed
automatically and unconditionally released and discharged from all obligations
under its Senior Guarantee upon notice from the Company to the Senior Trustee to
such effect, without any further action required on the part of the Senior
Trustee or any Holder.
A sale of assets or Capital Stock of a Guarantor may constitute an Asset
Disposition subject to the "Limitations on Dispositions of Assets" covenant.
CERTAIN COVENANTS
The following is a summary of certain covenants that are contained in the
Senior Indenture. Such covenants are applicable, unless waived or amended as
permitted by the Senior Indenture, so long as any of the Senior Notes are
outstanding or until the Senior Notes are defeased or discharged pursuant to
provisions described under "--Defeasance of Senior Indenture" or "--Discharge of
Senior Indenture".
REPURCHASE OF SENIOR NOTES UPON CHANGE OF CONTROL. In the event that there
shall occur a Change of Control, each Holder of Senior Notes shall have the
right, at such Holder's option, to require the Issuer to purchase all or any
part of such Holder's Senior Notes on a date (the "Repurchase Date") that is no
later than 90 days after notice of the Change of Control, at 101% of the
principal amount thereof plus accrued and unpaid interest and liquidated
damages, if any, to the Repurchase Date.
On or before the thirtieth day after any Change of Control, the Issuer is
obligated to mail or cause to be mailed, to all Holders of record of Senior
Notes a notice regarding the Change of Control and the repurchase right. The
notice shall state the Repurchase Date, the date by which the repurchase right
must be exercised, the price for the Senior Notes and the procedure which the
Holder must follow to exercise such right. Substantially simultaneously with
mailing of the notice, the Issuer shall cause a copy of such notice to be
published in a newspaper of general circulation in the Borough of Manhattan, The
City of New York. To exercise such right, the Holder of such Senior Note must
deliver, at least ten days prior to the Repurchase Date, written notice to the
Issuer (or an agent designated by the Issuer for such purpose) of the Holder's
exercise of such right, together with the Senior Note with respect to which the
right is being exercised, duly endorsed for transfer; PROVIDED, HOWEVER, that if
mandated by applicable law, a Holder may be permitted to deliver such written
notice nearer to the Repurchase Date than may be specified by the Issuer.
The Issuer will comply with applicable law, including Section 14(e) of the
Securities Exchange Act of 1934 (the "Exchange Act") and Rule 14e-1 thereunder,
if applicable, if the Issuer is required to give a notice of a right of
repurchase as a result of a Change of Control.
With respect to any disposition of assets, the phrase "all or
substantially all" as used in the Senior Indenture (including as set forth under
"Limitations on Mergers, Consolidations and Sales of Assets" below) varies
according
31
to the facts and circumstances of the subject transaction, has no clearly
established meaning under New York law (which governs the Senior Indenture) and
is subject to judicial interpretation. Accordingly, in certain circumstances
there may be a degree of uncertainty in ascertaining whether a particular
transaction would involve a disposition of "all or substantially all" of the
assets of the Company, and therefore it may be unclear as to whether a Change of
Control has occurred and whether the Holders have the right to require the
Issuer to repurchase Senior Notes.
None of the provisions relating to a repurchase upon a Change of Control
is waivable by the Board of Directors of the Issuer or the Company. The Company
could, in the future, enter into certain transactions, including certain
recapitalizations of the Company, that would not result in a Change of Control,
but would increase the amount of Indebtedness outstanding at such time.
The Senior Indenture requires the payment of money for Senior Notes or
portions thereof validly tendered to and accepted for payment by the Issuer
pursuant to a Change of Control offer. In the event that a Change of Control has
occurred under the Senior Indenture, a change of control will also have occurred
under the Subordinated Indenture (as defined under "Description of The Exchange
Notes -- 8.875% Senior Subordinated Notes due 2012" below) and under indentures
governing the Issuer's 10 1/2% Senior Notes due 2007, 9?% Senior Notes due 2009
and under the Revolving Credit Facility and the Term Loan Facility. If a Change
of Control were to occur, there can be no assurance that the Issuer would have
sufficient funds to pay the purchase price for all Senior Notes and amounts due
under other Indebtedness that the Company may be required to repurchase or repay
or that the Company or the other Guarantors would be able to make such payments.
In the event that the Issuer were required to purchase outstanding Senior Notes
pursuant to a Change of Control offer, the Company expects that it would need to
seek third-party financing to the extent it does not have available funds to
enable the Issuer to meet its purchase obligations. However, there can be no
assurance that the Company would be able to obtain such financing.
Failure by the Issuer to purchase the Senior Notes when required upon a
Change of Control will result in an Event of Default with respect to the Senior
Notes.
These provisions could have the effect of deterring hostile or friendly
acquisitions of the Company where the Person attempting the acquisition views
itself as unable to finance the purchase of the principal amount of Senior Notes
which may be tendered to the Company upon the occurrence of a Change of Control.
LIMITATIONS ON INDEBTEDNESS. The Senior Indenture provides that the
Company and the Issuer will not, and will not cause or permit any Restricted
Subsidiary, directly or indirectly, to create, incur, assume, become liable for
or guarantee the payment of (which we refer to collectively as an "INCURRENCE")
any Indebtedness, including Acquired Indebtedness, unless, after giving effect
thereto and the application of the proceeds therefrom, the Consolidated Fixed
Charge Coverage Ratio on the date thereof would be at least 2.0 to 1.0.
Notwithstanding the foregoing, the provisions of the Senior Indenture will
not prevent the incurrence of:
(1) Permitted Indebtedness,
(2) Refinancing Indebtedness,
(3) Non-Recourse Indebtedness,
(4) any Senior Guarantee of Indebtedness represented by the Senior
Notes, and
(5) any guarantee of Indebtedness incurred under Credit Facilities in
compliance with the Senior Indenture.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness may be incurred through the first paragraph of this
covenant or by meeting the criteria of one or more of the types of Indebtedness
described in the second paragraph of this covenant (or the definitions of the
terms used therein) the Company, in its sole discretion,
(1) may classify such item of Indebtedness under and comply with either
of such paragraphs, or any of such definitions, as applicable,
(2) may classify and divide such item of Indebtedness into more than one
of such paragraphs, or definitions, as applicable, and
(3) may elect to comply with such paragraphs, or definitions, as
applicable, in any order.
32
The Company and the Issuer will not, and will not cause or permit any
Guarantor to, directly or indirectly, in any event incur any Indebtedness that
purports to be by its terms (or by the terms of any agreement governing such
Indebtedness) subordinated to any other Indebtedness of the Company or of such
Guarantor, as the case may be, unless such Indebtedness is also by its terms (or
by the terms of any agreement governing such Indebtedness) made expressly
subordinated to the Senior Notes or the Senior Guarantee of such Guarantor, as
the case may be, to the same extent and in the same manner as such Indebtedness
is subordinated to such other Indebtedness of the Company or such Guarantor, as
the case may be.
LIMITATIONS ON RESTRICTED PAYMENTS. The Senior Indenture provides that the
Company and the Issuer will not, and will not cause or permit any Restricted
Subsidiary to, directly or indirectly, make any Restricted Payment unless:
(1) no Default or Event of Default shall have occurred and be continuing
at the time of or immediately after giving effect to such Restricted
Payment;
(2) immediately after giving effect to such Restricted Payment, the
Company could incur at least $1.00 of Indebtedness pursuant to the
first paragraph of the "Limitations on Indebtedness" covenant; and
(3) immediately after giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments (including the Fair
Market Value of any non-cash Restricted Payment) declared or made
after May 4, 1999 does not exceed the sum of:
(a) 50% of the Consolidated Net Income of the Company on a
cumulative basis during the period (taken as one accounting
period) from and including February 1, 1999 and ending on the
last day of the Company's fiscal quarter immediately preceding
the date of such Restricted Payment (or in the event such
Consolidated Net Income shall be a deficit, MINUS 100% of such
deficit), PLUS
(b) 100% of the aggregate net cash proceeds of and the Fair Market
Value of Property received by the Company from (1) any capital
contribution to the Company after February 1, 1999 or any
issue or sale after February 1, 1999 of Qualified Stock (other
than to any Subsidiary of the Company) and (2) the issue or
sale after February 1, 1999 of any Indebtedness or other
securities of the Company convertible into or exercisable for
Qualified Stock of the Company that have been so converted or
exercised, as the case may be, PLUS
(c) in the case of the disposition or repayment of any Investment
constituting a Restricted Payment made after May 4, 1999, an
amount (to the extent not included in the calculation of
Consolidated Net Income referred to in (a)) equal to the
lesser of (x) the return of capital with respect to such
Investment (including by dividend, distribution or sale of
Capital Stock) and (y) the amount of such Investment that was
treated as a Restricted Payment, in either case, less the cost
of the disposition or repayment of such Investment (to the
extent not included in the calculation of Consolidated Net
Income referred to in (a)), PLUS
(d) with respect to any Unrestricted Subsidiary that is
redesignated as a Restricted Subsidiary after May 4, 1999, in
accordance with the definition of Unrestricted Subsidiary (so
long as the designation of such Subsidiary as an Unrestricted
Subsidiary was treated as a Restricted Payment made after the
Issue Date, and only to the extent not included in the
calculation of Consolidated Net Income referred to in (a)), an
amount equal to the lesser of (x) the proportionate interest
of the Company or a Restricted Subsidiary in an amount equal
to the excess of (I) the total assets of such Subsidiary,
valued on an aggregate basis at the lesser of book value and
Fair Market Value thereof, over (II) the total liabilities of
such Subsidiary, determined in accordance with GAAP, and (y)
the Designation Amount at the time of such Subsidiary's
designation as an Unrestricted Subsidiary, PLUS
(e) $17 million, MINUS
(f) the aggregate amount of all Restricted Payments (other than
Restricted Payments referred to in clause (C) of the
immediately succeeding paragraph) made after February 1, 1999
through May 4, 1999.
33
The foregoing clauses (2) and (3) will not prohibit:
(A) the payment of any dividend within 60 days of its declaration
if such dividend could have been made on the date of its
declaration without violation of the provisions of the Senior
Indenture;
(B) the repurchase, redemption or retirement of any shares of
Capital Stock of the Company in exchange for, or out of the
net proceeds of the substantially concurrent sale (other than
to a Subsidiary of the Company) of, other shares of Qualified
Stock; and
(C) the purchase, redemption or other acquisition, cancellation or
retirement for value of Capital Stock, or options, warrants,
equity appreciation rights or other rights to purchase or
acquire Capital Stock, of the Company or any Subsidiary held
by officers or employees or former officers or employees of
the Company or any Subsidiary (or their estates or
beneficiaries under their estates) not to exceed $10 million
in the aggregate since May 4, 1999;
PROVIDED, HOWEVER that each Restricted Payment described in clauses (A) and (B)
of this sentence shall be taken into account for purposes of computing the
aggregate amount of all Restricted Payments pursuant to clause (3) of the
immediately preceding paragraph.
For purposes of determining the aggregate and permitted amounts of
Restricted Payments made, the amount of any guarantee of any Investment in any
Person that was initially treated as a Restricted Payment and which was
subsequently terminated or expired, net of any amounts paid by the Company or
any Restricted Subsidiary in respect of such guarantee, shall be deducted.
In determining the "Fair Market Value of Property" for purposes of clause
(3) of the first paragraph of this covenant, Property other than cash, Cash
Equivalents and Marketable Securities shall be deemed to be equal in value to
the "equity value" of the Capital Stock or other securities issued in exchange
therefor. The equity value of such Capital Stock or other securities shall be
equal to (i) the number of shares of Common Equity issued in the transaction (or
issuable upon conversion or exercise of the Capital Stock or other securities
issued in the transaction) multiplied by the closing sale price of the Common
Equity on its principal market on the date of the transaction (less, in the case
of Capital Stock or other securities which require the payment of consideration
at the time of conversion or exercise, the aggregate consideration payable
thereupon) or (ii) if the Common Equity is not then traded on the New York Stock
Exchange, American Stock Exchange or Nasdaq National Market, or if the Capital
Stock or other securities issued in the transaction do not consist of Common
Equity (or Capital Stock or other securities convertible into or exercisable for
Common Equity), the value (if more than $10 million) of such Capital Stock or
other securities as determined by a nationally recognized investment banking
firm retained by the Board of Directors of the Company.
LIMITATIONS ON TRANSACTIONS WITH AFFILIATES. The Senior Indenture provides
that the Company and the Issuer will not, and will not cause or permit any
Restricted Subsidiary to, make any loan, advance, guarantee or capital
contribution to, or for the benefit of, or sell, lease, transfer or otherwise
dispose of any property or assets to or for the benefit of, or purchase or lease
any property or assets from, or enter into or amend any contract, agreement or
understanding with, or for the benefit of, any Affiliate of the Company or any
Affiliate of any of the Company's Subsidiaries or any holder of 10% or more of
the Common Equity of the Company (including any Affiliates of such holders), in
a single transaction or series of related transactions (each, an "Affiliate
Transaction"), except for any Affiliate Transaction the terms of which are at
least as favorable as the terms which could be obtained by the Company, the
Issuer or such Restricted Subsidiary, as the case may be, in a comparable
transaction made on an arm's length basis with Persons who are not such a
holder, an Affiliate of such a holder or an Affiliate of the Company or any of
the Company's Subsidiaries.
In addition, the Company and the Issuer will not, and will not cause or
permit any Restricted Subsidiary to, enter into an Affiliate Transaction unless:
(1) with respect to any such Affiliate Transaction involving or having a
value of more than $1 million, the Company shall have (x) obtained
the approval of a majority of the Board of Directors of the Company
and (y) either obtained the approval of a majority of the Company's
disinterested directors or obtained an opinion of a qualified
independent financial advisor to the effect that such Affiliate
Transaction is fair to the Company, the Issuer or such Restricted
Subsidiary, as the case may be, from a financial point of view, and
34
(2) with respect to any such Affiliate Transaction involving or having a
value of more than $10 million, the Company shall have (x) obtained
the approval of a majority of the Board of Directors of the Company
and (y) delivered to the Trustee an opinion of a qualified
independent financial advisor to the effect that such Affiliate
Transaction is fair to the Company, the Issuer or such Restricted
Subsidiary, as the case may be, from a financial point of view.
The Senior Indenture also provides that notwithstanding the foregoing, an
Affiliate Transaction will not include:
(1) any contract, agreement or understanding with, or for the benefit
of, or plan for the benefit of, employees of the Company or its
Subsidiaries generally (in their capacities as such) that has been
approved by the Board of Directors of the Company,
(2) Capital Stock issuances to directors, officers and employees of the
Company or its Subsidiaries pursuant to plans approved by the
stockholders of the Company,
(3) any Restricted Payment otherwise permitted under the "Limitations on
Restricted Payments" covenant,
(4) any transaction between or among the Company and one or more
Restricted Subsidiaries or between or among Restricted Subsidiaries
(provided, HOWEVER, no such transaction shall involve any other
Affiliate of the Company (other than an Unrestricted Subsidiary to
the extent the applicable amount constitutes a Restricted Payment
permitted by the Senior Indenture)),
(5) any transaction between one or more Restricted Subsidiaries and one
or more Unrestricted Subsidiaries where all of the payments to, or
other benefits conferred upon, such Unrestricted Subsidiaries are
substantially contemporaneously dividended, or otherwise distributed
or transferred without charge, to the Company or a Restricted
Subsidiary,
(6) issuances, sales or other transfers or dispositions of mortgages and
collateralized mortgage obligations in the ordinary course of
business between Restricted Subsidiaries and Unrestricted
Subsidiaries of the Company, and
(7) the payment of reasonable and customary fees to, and indemnity
provided on behalf of, officers, directors, employees or consultants
of the Company, the Issuer or any Restricted Subsidiary.
LIMITATIONS ON DISPOSITIONS OF ASSETS. The Senior Indenture provides that
the Company and the Issuer will not, and will not cause or permit any Restricted
Subsidiary to, make any Asset Disposition unless:
(A) the Company (or such Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Disposition at
least equal to the Fair Market Value thereof, and
(B) not less than 70% of the consideration received by the Company (or
such Restricted Subsidiary, as the case may be) is in the form of
cash, Cash Equivalents and Marketable Securities.
The amount of (1) any Indebtedness (other than any Indebtedness
subordinated to the Senior Notes) of the Company or any Restricted Subsidiary
that is actually assumed by the transferee in such Asset Disposition and (2) the
fair market value (as determined in good faith by the Board of Directors of the
Company) of any property or assets received that are used or useful in a Real
Estate Business, shall be deemed to be consideration required by clause (B)
above for purposes of determining the percentage of such consideration received
by the Company or the Restricted Subsidiaries.
The Net Cash Proceeds of an Asset Disposition shall, within one year, at
the Company's election, (a) be used by the Company or a Restricted Subsidiary in
the business of the construction and sale of homes conducted by the Company and
the Restricted Subsidiaries or any other business of the Company or a Restricted
Subsidiary existing at the time of such Asset Disposition or (b) to the extent
not so used, be applied to make a Net Cash Proceeds offer for the Senior Notes
and, if the Company or a Restricted Subsidiary elects or is required to do so
repay, purchase or redeem any other unsubordinated Indebtedness (on a PRO RATA
basis if the amount available for such repayment, purchase or redemption is less
than the aggregate amount of (1) the principal amount of the Senior Notes
tendered in such Net Cash Proceeds Offer and (2) the lesser of the principal
amount, or accreted value, of such other unsubordinated Indebtedness, plus, in
each case accrued interest to the date of repayment, purchase or
35
redemption) at 100% of the principal amount or accreted value thereof, as the
case may be, plus accrued and unpaid interest and liquidated damages, if any, to
the date of repurchase or repayment.
Notwithstanding the foregoing, (A) the Company will not be required to
apply such Net Cash Proceeds to the repurchase of Senior Notes in accordance
with clause (b) of the preceding sentence except to the extent that such Net
Cash Proceeds, together with the aggregate Net Cash Proceeds of prior Asset
Dispositions (other than those so used) which have not been applied in
accordance with this provision and as to which no prior Net Cash Proceeds offer
shall have been made, exceed 5% of Consolidated Tangible Assets and (B) in
connection with an Asset Disposition, the Company and the Restricted
Subsidiaries will not be required to comply with the requirements of clause (B)
of the first sentence of the first paragraph of this covenant to the extent that
the non-cash consideration received in connection with such Asset Disposition,
together with the sum of all non-cash consideration received in connection with
all prior Asset Dispositions that has not yet been converted into cash, does not
exceed 5% of Consolidated Tangible Assets; PROVIDED, HOWEVER, that when any
non-cash consideration is converted into cash, such cash shall constitute Net
Cash Proceeds and be subject to the preceding sentence.
LIMITATIONS ON LIENS. The Senior Indenture provides that the Company and
the Issuer will not, and will not cause or permit any Restricted Subsidiary to,
create, incur, assume or suffer to exist any Liens, other than Permitted Liens,
on any of its Property, or on any shares of Capital Stock or Indebtedness of any
Restricted Subsidiary, unless contemporaneously therewith or prior thereto all
payments due under the Senior Indenture and the Senior Notes are secured on an
equal and ratable basis with the obligation or liability so secured until such
time as such obligation or liability is no longer secured by a Lien.
LIMITATIONS ON RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES. The Senior
Indenture provides that the Company and the Issuer will not, and will not cause
or permit any Restricted Subsidiary to, create, assume or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction
(other than encumbrances or restrictions imposed by law or by judicial or
regulatory action or by provisions of agreements that restrict the assignability
thereof) on the ability of any Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock
or any other interest or participation in, or measured by, its
profits, owned by the Company or any other Restricted Subsidiary, or
pay interest on or principal of any Indebtedness owed to the Company
or any other Restricted Subsidiary,
(2) make loans or advances to the Company or any other Restricted
Subsidiary, or
(3) transfer any of its property or assets to the Company or any other
Restricted Subsidiary,
except for
(a) encumbrances or restrictions existing under or by reason of
applicable law,
(b) contractual encumbrances or restrictions in effect on the
Issue Date and any amendments, modifications, restatements,
renewals, supplements, refundings, replacements or
refinancings thereof, provided that such amendments,
modifications, restatements, renewals, supplements,
refundings, replacements or refinancings are no more
restrictive, taken as a whole, with respect to such dividend
and other payment restrictions than those contained in such
contractual encumbrances or restrictions, as in effect on May
4, 1999,
(c) any restrictions or encumbrances arising under Acquired
Indebtedness; provided, that such encumbrance or restriction
applies only to either the assets that were subject to the
restriction or encumbrance at the time of the acquisition or
the obligor on such Indebtedness and its Subsidiaries prior to
such acquisition,
(d) any restrictions or encumbrances arising in connection with
Refinancing Indebtedness; PROVIDED, HOWEVER, that any
restrictions and encumbrances of the type described in this
clause (d) that arise under such Refinancing Indebtedness
shall not be materially more restrictive or apply to
additional assets than those under the agreement creating or
evidencing the Indebtedness being refunded, refinanced,
replaced or extended,
(e) any Permitted Lien, or any other agreement restricting the
sale or other disposition of property, securing Indebtedness
permitted by the Senior Indenture if such Permitted Lien or
36
agreement does not expressly restrict the ability of a
Subsidiary of the Company to pay dividends or make or repay
loans or advances prior to default thereunder,
(f) reasonable and customary borrowing base covenants set forth in
agreements evidencing Indebtedness otherwise permitted by the
Senior Indenture,
(g) customary non-assignment provisions in leases, licenses,
encumbrances, contracts or similar assets entered into or
acquired in the ordinary course of business,
(h) any restriction with respect to a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all of the Capital Stock
or assets of such Restricted Subsidiary pending the closing of
such sale or disposition,
(i) encumbrances or restrictions existing under or by reason of
the Senior Indenture or the Senior Notes,
(j) purchase money obligations that impose restrictions on the
property so acquired of the nature described in clause (3) of
the preceding paragraph,
(k) Liens permitted under the Senior Indenture securing
Indebtedness that limit the right of the debtor to dispose of
the assets subject to such Lien,
(l) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements, assets sale
agreements, stock sale agreements and other similar
agreements,
(m) customary provisions of any franchise, distribution or similar
agreements,
(n) restrictions on cash or other deposits or net worth imposed by
contracts entered into in the ordinary course of business, and
(o) any encumbrance or restrictions of the type referred to in
clauses (1), (2) or (3) of the first paragraph of this section
imposed by any amendments, modifications, restatements,
renewals, supplements, refinancings, replacements or
refinancings of the contracts, instruments or obligations
referred to in clauses (a) through (n) of this paragraph,
provided that such amendments, modifications, restatements,
renewals, supplements, refundings, replacements or
refinancings are, in the good faith judgment of the Company's
Board of Directors, no more restrictive with respect to such
dividend and other payment restrictions than those contained
in the dividend or other payment restrictions prior to such
amendment, modification, restatement, renewal, supplement,
refunding, replacement or refinancing.
LIMITATIONS ON MERGERS, CONSOLIDATIONS AND SALES OF ASSETS. The Senior
Indenture provides that neither the Issuer nor any Guarantor will consolidate or
merge with or into, or sell, lease, convey or otherwise dispose of all or
substantially all of its assets (including, without limitation, by way of
liquidation or dissolution), or assign any of its obligations under the Senior
Notes, the Senior Guarantees or the Senior Indenture (as an entirety or
substantially as an entirety in one transaction or in a series of related
transactions), to any Person (in each case other than in a transaction in which
the Company, the Issuer or a Restricted Subsidiary is the survivor of a
consolidation or merger, or the transferee in a sale, lease, conveyance or other
disposition) unless:
(1) the Person formed by or surviving such consolidation or merger (if
other than the Company, the Issuer or the Guarantor, as the case may
be), or to which such sale, lease, conveyance or other disposition
or assignment will be made (collectively, the "Successor"), is a
corporation or other legal entity organized and existing under the
laws of the United States or any state thereof or the District of
Columbia, and the Successor assumes by supplemental indenture in a
form reasonably satisfactory to the Trustee all of the obligations
of the Company, the Issuer or the Guarantor, as the case may be,
under the Senior Notes or a Senior Guarantee, as the case may be,
and the Senior Indenture,
(2) immediately after giving effect to such transaction, no Default or
Event of Default has occurred and is continuing, and
(3) immediately after giving effect to such transaction, the Company (or
its Successor) could incur at least $1.00 of Indebtedness pursuant
to the first paragraph of the "Limitation on Indebtedness" covenant.
37
The foregoing provisions shall not apply to:
o a transaction involving the sale or disposition of Capital
Stock of a Guarantor, or the consolidation or merger of a
Guarantor, or the sale, lease, conveyance or other disposition
of all or substantially all of the assets of a Guarantor, that
in any such case results in such Guarantor being released from
its Senior Guarantee as provided under "--The Senior
Guarantees" above, or
o a transaction the purpose of which is to change the state of
incorporation of the Company, the Issuer or any Guarantor.
REPORTS TO HOLDERS OF SENIOR NOTES. The Company shall file with the
Commission the annual reports and the information, documents and other reports
required to be filed pursuant to Section 13 or 15(d) of the Exchange Act. The
Company shall file with the Trustee and mail to each Holder of record of Senior
Notes such reports, information and documents within 15 days after it files them
with the Commission. In the event that the Company is no longer subject to these
periodic requirements of the Exchange Act, it will nonetheless continue to file
reports with the Commission and the Trustee and mail such reports to each Holder
of Senior Notes as if it were subject to such reporting requirements. Regardless
of whether the Company is required to furnish such reports to its stockholders
pursuant to the Exchange Act, the Company will cause its consolidated financial
statements and a "Management's Discussion and Analysis of Results of Operations
and Financial Condition" written report, similar to those that would have been
required to appear in annual or quarterly reports, to be delivered to Holders of
Senior Notes.
EVENTS OF DEFAULT
The following are Events of Default under the Senior Indenture:
(1) the failure by the Company, the Issuer and the Guarantors to pay
interest on, or liquidated damages with respect to, any Senior Note
when the same becomes due and payable and the continuance of any
such failure for a period of 30 days;
(2) the failure by the Company, the Issuer and the Guarantors to pay the
principal or premium of any Senior Note when the same becomes due
and payable at maturity, upon acceleration or otherwise;
(3) the failure by the Company, the Issuer or any Restricted Subsidiary
to comply with any of its agreements or covenants in, or provisions
of, the Senior Notes, the Senior Guarantees or the Senior Indenture
and such failure continues for the period and after the notice
specified below (except in the case of a default under covenants
described under "Certain Covenants--Repurchase of Senior Notes upon
Change of Control" and "Limitations on Mergers, Consolidations and
Sales of Assets," which will constitute Events of Default with
notice but without passage of time);
(4) the acceleration of any Indebtedness (other than Non-Recourse
Indebtedness) of the Company, the Issuer or any Restricted
Subsidiary that has an outstanding principal amount of $10 million
or more, individually or in the aggregate, and such acceleration
does not cease to exist, or such Indebtedness is not satisfied, in
either case within 30 days after such acceleration;
(5) the failure by the Company, the Issuer or any Restricted Subsidiary
to make any principal or interest payment in an amount of $10
million or more, individually or in the aggregate, in respect of
Indebtedness (other than Non-Recourse Indebtedness) of the Company
or any Restricted Subsidiary within 30 days of such principal or
interest becoming due and payable (after giving effect to any
applicable grace period set forth in the documents governing such
Indebtedness);
(6) a final judgment or judgments that exceed $10 million or more,
individually or in the aggregate, for the payment of money having
been entered by a court or courts of competent jurisdiction against
the Company, the Issuer or any of its Restricted Subsidiaries and
such judgment or judgments is not satisfied, stayed, annulled or
rescinded within 60 days of being entered;
(7) the Company or any Restricted Subsidiary that is a Significant
Subsidiary pursuant to or within the meaning of any Bankruptcy Law:
(a) commences a voluntary case,
38
(b) consents to the entry of an order for relief against it in an
involuntary case,
(c) consents to the appointment of a Custodian of it or for all or
substantially all of its property, or
(d) makes a general assignment for the benefit of its creditors;
(8) the company or any Restricted Subsidiary that is a Significant
Subsidiary pursuant to or within the meaning of any Bankruptcy Law:
(a) is for relief against the Company or any Restricted Subsidiary
that is a Significant Subsidiary as debtor in an involuntary
case,
(b) appoints a Custodian of the Company or any Restricted
Subsidiary that is a Significant Subsidiary or a Custodian for
all or substantially all of the property of the Company or any
Restricted Subsidiary that is a Significant Subsidiary, or
(c) orders the liquidation of the Company or any Restricted
Subsidiary that is a Significant Subsidiary,
and the order or decree remains unstayed and in effect for 60 days,
or
(9) any Senior Guarantee of a Guarantor which is a Significant
Subsidiary ceases to be in full force and effect (other than in
accordance with the terms of such Senior Guarantee and the Senior
Indenture) or is declared null and void and unenforceable or found
to be invalid or any Guarantor denies its liability under its Senior
Guarantee (other than by reason of release of a Guarantor from its
Senior Guarantee in accordance with the terms of the Senior
Indenture and the Senior Guarantee).
A Default as described in subclause (3) above will not be deemed an Event
of Default until the Senior Trustee notifies the Company, or the Holders of at
least 25 percent in principal amount of the then outstanding Senior Notes notify
the Company and the Senior Trustee, of the Default and (except in the case of a
default with respect to covenants described under "Certain Covenants--Repurchase
of Senior Notes upon Change of Control" and "Limitations on Mergers,
Consolidations and Sales of Assets") the Company does not cure the Default
within 60 days after receipt of the notice. The notice must specify the Default,
demand that it be remedied and state that the notice is a "Notice of Default."
If such a Default is cured within such time period, it ceases.
If an Event of Default (other than an Event of Default with respect to the
Company resulting from subclauses (7) or (8) above), shall have occurred and be
continuing under the Senior Indenture, the Senior Trustee by notice to the
Company, or the Holders of at least 25 percent in principal amount of the Senior
Notes then outstanding by notice to the Company and the Senior Trustee, may
declare all Senior Notes to be due and payable immediately. Upon such
declaration of acceleration, the amounts due and payable on the Senior Notes
will be due and payable immediately. If an Event of Default with respect to the
Company specified in subclauses (7) or (8) above occurs, such an amount will
IPSO FACTO become and be immediately due and payable without any declaration,
notice or other act on the part of the Trustee and the Company or any Holder.
The Holders of a majority in principal amount of the Senior Notes then
outstanding by written notice to the Senior Trustee and the Company may waive
any Default or Event of Default (other than any Default or Event of Default in
payment of principal or interest) on the Senior Notes under the Senior
Indenture. Holders of a majority in principal amount of the then outstanding
Senior Notes may rescind an acceleration and its consequence (except an
acceleration due to nonpayment of principal or interest on the Senior Notes) if
the rescission would not conflict with any judgment or decree and if all
existing Events of Default (other than the non-payment of accelerated principal)
have been cured or waived.
The Holders may not enforce the provisions of the Senior Indenture, the
Senior Notes or the Senior Guarantees except as provided in the Senior
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the Senior Notes then outstanding may direct the Senior Trustee in its
exercise of any trust or power, PROVIDED, HOWEVER, that such direction does not
conflict with the terms of the Senior Indenture. The Trustee may withhold from
the Holders notice of any continuing Default or Event of Default (except any
Default or Event of Default in payment of principal or interest on the Senior
Notes or that resulted from the failure to comply with the covenant entitled
"Repurchase of Notes upon Change of Control") if the Senior Trustee determines
that withholding such notice is in the Holders' interest.
39
The Company is required to deliver to the Senior Trustee an annual
statement regarding compliance with the Senior Indenture, and include in such
statement, if any officer of the Company is aware of any Default or Event of
Default, a statement specifying such Default or Event of Default and what action
the Company is taking or proposes to take with respect thereto. In addition, the
Company is required to deliver to the Senior Trustee prompt written notice of
the occurrence of any Default or Event of Default.
DEFEASANCE OF SENIOR INDENTURE
The Senior Indenture permits the Issuer, the Company and the other
Guarantors to terminate all of their respective obligations under the Senior
Indenture with respect to the Senior Notes and the Senior Guarantees, other than
the obligation to pay interest on and the principal of the Senior Notes and
certain other obligations, at any time by
o depositing in trust with the Senior Trustee, under an irrevocable
trust agreement, money or U.S. government obligations in an amount
sufficient to pay principal of and interest and liquidated damages,
if any, on the Senior Notes to their maturity, and
o complying with certain other conditions, including delivery to the
Senior Trustee of an opinion of counsel or a ruling received from
the Internal Revenue Service to the effect that Holders will not
recognize income, gain or loss for federal income tax purposes as a
result of the Company's exercise of such right and will be subject
to federal income tax on the same amount and in the same manner and
at the same times as would have been the case otherwise.
In addition, the Senior Indenture permits the Company, the Issuer and the
Guarantors to terminate all of their obligations under the Senior Indenture with
respect to the Senior Notes and the Senior Guarantees (including the obligations
to pay interest on and the principal of the Senior Notes and certain other
obligations), at any time by
o depositing in trust with the Senior Trustee, under an irrevocable
trust agreement, money or U.S. government obligations in an amount
sufficient to pay principal of and interest and liquidated damages,
if any, on the Senior Notes to their maturity, and
o complying with certain other conditions, including delivery to the
Senior Trustee of an opinion of counsel or a ruling, received from
the Internal Revenue Service, to the effect that Holders will not
recognize income, gain or loss for federal income tax purposes as a
result of the Company's exercise of such right and will be subject
to federal income tax on the same amount and in the same manner and
at the same times as would have been the case otherwise, which
opinion of counsel is based upon a change in the applicable federal
tax law since the date of the Senior Indenture.
DISCHARGE OF SENIOR INDENTURE
The Issuer, the Company and the other Guarantors may terminate all of
their respective obligations under the Senior Indenture with respect to the
Senior Notes, the Senior Indenture and the Senior Guarantees, other than the
obligation to pay interest on and the principal of the Senior Notes and certain
other obligations to the Senior Trustee, if:
o all Senior Notes previously authenticated and delivered, other than
those destroyed, lost, replaced or stolen, those previously paid in
accordance with the Senior Indenture or those for whose payment
money or U.S. Government Obligations have been held in trust, have
been delivered to the Senior Trustee for cancellation and the Issuer
had paid all sums payable by it under the Senior Indenture; or
o the Senior Notes mature within one year, or all of them are called
for redemption within one year under arrangements satisfactory to
the Senior Trustee for giving notice of redemption; the Issuer
deposits in trust with the Senior Trustee, under an irrevocable
trust agreement, money or U.S. government obligations in an amount
sufficient to pay principal of and interest and liquidated damages,
if any, on the Senior Notes to their maturity or redemption, as the
case may be; no Default has occurred and is continuing on the date
of the deposit and the deposit will not result in a breach or
violation of, or constitute a default under the Senior Indenture or
any other agreement binding the Issuer; and the Issuer delivers to
the Senior Trustee an Officer's Certificate and an Opinion of
Counsel,
40
in each case, stating that all the conditions precedent provided in
the Senior Indenture for satisfaction and discharge of the Senior
Indenture have been complied with.
In either case, the Senior Trustee, upon request, and at the expense of
the Issuer, will provide written acknowledgement of the discharge of the
Issuer's obligations under the Senior Notes and the Senior Indenture, except for
certain surviving obligations.
TRANSFER AND EXCHANGE
A Holder may transfer or Senior Notes only in accordance with the
provisions of the Senior Indenture. The Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents, and to
pay any taxes and fees required by law or permitted by the Senior Indenture.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Senior Indenture, the Senior Notes or
the Senior Guarantees may be amended or supplemented with the consent (which may
include consents obtained in connection with a tender offer or exchange offer
for Senior Notes) of the Holders of at least a majority in principal amount of
the Senior Notes then outstanding, and any existing Default under, or compliance
with any provision of the Senior Indenture may be waived (other than any
continuing Default or Event of Default in the payment of interest on or the
principal of the Senior Notes) with the consent (which may include consents
obtained in connection with a tender offer or exchange offer for Senior Notes)
of the Holders of a majority in principal amount of the Senior Notes then
outstanding. Without the consent of any Holder, the Company, the Issuer, the
Guarantors and the Senior Trustee may amend or supplement the Senior Indenture,
the Senior Notes or the Senior Guarantees to cure any ambiguity, defect or
inconsistency; to comply with the "Limitations on Mergers, Consolidations and
Sales of Assets" covenant set forth in the Senior Indenture; to provide for
uncertificated Senior Notes in addition to or in place of Certificated Senior
Notes; to make any change that does not adversely affect the legal rights of any
Holder; to add a Guarantor; or to delete a Guarantor which, in accordance with
the terms of the Senior Indenture, ceases to be liable on its Senior Guarantee.
Without the consent of each Holder affected, the Company, the Issuer,
the Guarantors and the Senior Trustee may not
(1) reduce the amount of Senior Notes whose Holders must consent to an
amendment, supplement or waiver,
(2) reduce the rate of or change the time for payment of interest,
including default interest, on any Senior Note,
(3) reduce the principal of or change the fixed maturity of any Senior
Note or alter the provisions (including related definitions) with
respect to redemptions described under "Optional Redemption" or with
respect to mandatory offers to repurchase Senior Notes described
under "Limitations on Dispositions of Assets" or "Repurchase of
Senior Notes upon Change of Control",
(4) make any Senior Note payable in money other than that stated in the
Senior Note,
(5) make any change in the "Waiver of Past Defaults and Compliance with
Indenture Provisions," "Rights of Holders to Receive Payment" or the
"With Consent of Holders" sections set forth in the Senior
Indenture,
(6) modify the ranking or priority of the Senior Notes or any Senior
Guarantee,
(7) release any Guarantor from any of its obligations under its Senior
Guarantee or the Senior Indenture otherwise than in accordance with
the Senior Indenture, or
(8) waive a continuing Default or Event of Default in the payment of
principal of or interest on the Senior Notes.
The right of any Holder to participate in any consent required or sought
pursuant to any provision of the Senior Indenture (and our obligation to obtain
any such consent otherwise required from such Holder) may be subject to the
requirement that such Holder shall have been the Holder of record of any Senior
Notes with respect to which such consent is required or sought as of a date
identified by the Trustee in a notice furnished to Holders in accordance with
the terms of the Senior Indenture.
41
STATEMENT AS TO COMPLIANCE
The Company must deliver to the Senior Trustee, within 120 days after the
end of each fiscal year, a written statement by the Company's independent public
accountants stating (A) that their audit examination has included a review of
the terms of the Senior Indenture and the Senior Notes as they relate to
accounting matters, and (B) whether, in connection with their audit examination,
any Default has come to their attention and, if a Default has come to their
attention, specifying the nature and period of the existence thereof.
The Company must also deliver to the Senior Trustee, on or prior to each
Interest Payment Date, an Officer's Certificate setting forth the amount of
Liquidated Damages, if any, the Issuer is required to pay on that Interest
Payment Date. If no Liquidated Damages are required to be paid on a given
Interest Payment Date, no Officer's Certificate is required to be delivered to
the Senior Trustee for that Interest Payment Date.
GOVERNING LAW
The Senior Indenture, the Senior Notes and the Senior Guarantees are
governed by the laws of the State of New York.
DEFINITIONS OF CERTAIN TERMS USED IN THE SENIOR INDENTURE
Set forth below is a summary of certain of the defined terms used in the
Senior Indenture. Reference is made to the Senior Indenture for the full
definition of all terms used in the Senior Indenture.
"ACQUIRED INDEBTEDNESS" means (1) with respect to any Person that becomes
a Restricted Subsidiary (or is merged into the Company, the Issuer or any
Restricted Subsidiary) after the Issue Date, Indebtedness of such Person or any
of its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary (or is merged into the Company, the Issuer or any Restricted
Subsidiary) that was not incurred in connection with, or in contemplation of,
such Person becoming a Restricted Subsidiary (or being merged into the Company,
the Issuer or any Restricted Subsidiary) and (2) with respect to the Company,
the Issuer or any Restricted Subsidiary, any Indebtedness expressly assumed by
the Company, the Issuer or any Restricted Subsidiary in connection with the
acquisition of any assets from another Person (other than the Company, the
Issuer or any Restricted Subsidiary), which Indebtedness was not incurred by
such other Person in connection with or in contemplation of such acquisition.
Indebtedness incurred in connection with or in contemplation of any transaction
described in clause (1) or (2) of the preceding sentence shall be deemed to have
been incurred by the Company or a Restricted Subsidiary, as the case may be, at
the time such Person becomes a Restricted Subsidiary (or is merged into the
Company, the Issuer or any Restricted Subsidiary) in the case of clause (1) or
at the time of the acquisition of such assets in the case of clause (2), but
shall not be deemed Acquired Indebtedness.
"AFFILIATE" means, when used with reference to a specified Person any
Person direct or indirectly controlling, or controlled by or under direct or
indirect common control with the Person specified.
"ASSET ACQUISITION" means (1) an Investment by the Company, the Issuer or
any Restricted Subsidiary in any other Person if, as a result of such
Investment, such Person shall become a Restricted Subsidiary or shall be
consolidated or merged with or into the Company, the Issuer or any Restricted
Subsidiary or (2) the acquisition by the Company, the Issuer or any Restricted
Subsidiary of the assets of any Person, which constitute all or substantially
all of the assets or of an operating unit or line of business of such Person or
which is otherwise outside the ordinary course of business.
"ASSET DISPOSITION" means any sale, transfer, conveyance, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback or sale of shares of Capital Stock in any Subsidiary) (each,
a "TRANSACTION") by the Company, the Issuer or any Restricted Subsidiary to any
Person of any Property having a Fair Market Value in any transaction or series
of related transactions of at least $5 million. The term "ASSET DISPOSITION"
shall not include:
(1) a transaction between the Company, the Issuer and any Restricted
Subsidiary or a transaction between Restricted Subsidiaries,
(2) a transaction in the ordinary course of business, including, without
limitation, sales (directly or indirectly), dedications and other
donations to governmental authorities, leases and sales and
leasebacks of (A) homes, improved land and unimproved land and (B)
real estate (including related amenities and improvements),
42
(3) a transaction involving the sale of Capital Stock of, or the
disposition of assets in, an Unrestricted Subsidiary,
(4) any exchange or swap of assets of the Company, the Issuer or any
Restricted Subsidiary for assets that (A) are to be used by the
Company, the Issuer or any Restricted Subsidiary in the ordinary
course of its Real Estate Business and (B) have a Fair Market Value
not less than the Fair Market Value of the assets exchanged or
swapped,
(5) any sale, transfer, conveyance, lease or other disposition of assets
and properties that is governed by the provisions relating to
"Limitations on Mergers, Consolidation and Sales of Assets", or
(6) dispositions of mortgage loans and related assets and
mortgage-backed securities in the ordinary course of a mortgage
lending business.
"ATTRIBUTABLE DEBT" means, with respect to any Capitalized Lease
Obligations, the capitalized amount thereof determined in accordance with GAAP.
"BANKRUPTCY LAW" means title 11 of the United States Code, as amended, or
any similar federal or state law for the relief of debtors.
"CAPITAL STOCK" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of or in
such Person's capital stock or other equity interests, and options, rights or
warrants to purchase such capital stock or other equity interests, whether now
outstanding or issued after the Issue Date, including, without limitation, all
Disqualified Stock and Preferred Stock.
"CAPITALIZED LEASE OBLIGATIONS" of any Person means the obligations of
such Person to pay rent or other amounts under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such obligations will be the capitalized amount thereof determined in
accordance with GAAP.
"CASH EQUIVALENTS" means
(1) U.S. dollars;
(2) securities issued or directly and fully guaranteed or insured by the
U.S. government or any agency or instrumentality thereof having
maturities of one year or less from the date of acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities
of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight
bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500 million;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3)
entered into with any financial institution meeting the
qualifications specified in clause (3) above;
(5) commercial paper rated P-1, A-1 or the equivalent thereof by Moody's
or S&P, respectively, and in each case maturing within six months
after the date of acquisition; and
(6) investments in money market funds substantially all of the assets of
which consist of securities described in the foregoing clauses (1)
through (5).
"CHANGE OF CONTROL" means
(1) any sale, lease or other transfer (in one transaction or a series of
transactions) of all or substantially all of the consolidated assets
of the Company and its Restricted Subsidiaries to any Person (other
than a Restricted Subsidiary); PROVIDED, HOWEVER, that a transaction
where the Holders of all classes of Common Equity of the Company
immediately prior to such transaction own, directly or indirectly,
more than 50% of all classes of Common Equity of such Person
immediately after such transaction shall not be a Change of Control;
(2) a "person" or "group" (within the meaning of Section 13(d) of the
Exchange Act (other than (x) the Company or (y) the Permitted
Hovnanian Holders) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act) of Common Equity of the Company
representing more than 50% of the voting power of the Common Equity
of the Company;
43
(3) Continuing Directors cease to constitute at least a majority of the
Board of Directors of the Company;
(4) the stockholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company; PROVIDED, HOWEVER, that a
liquidation or dissolution of the Company which is part of a
transaction that does not constitute a Change of Control under the
proviso contained in clause (1) above shall not constitute a Change
of Control; or
(5) a change of control shall occur as defined in the instrument
governing any publicly traded debt securities of the Company or the
Issuer which requires the Company or the Issuer to repay or
repurchase such debt securities.
"COMMON EQUITY" of any Person means Capital Stock of such Person that is
generally entitled to (1) vote in the election of directors of such Person or
(2) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control
the management or policies of such Person.
"CONSOLIDATED ADJUSTED TANGIBLE ASSETS" of the Company as of any date
means the Consolidated Tangible Assets of the Company, the Issuer and the
Restricted Subsidiaries at the end of the fiscal quarter immediately preceding
the date less any assets securing any Non-Recourse Indebtedness, as determined
in accordance with GAAP.
"CONSOLIDATED CASH FLOW AVAILABLE FOR FIXED CHARGES" means, for any period
Consolidated Net Income for such period plus (each to the extent deducted in
calculating such Consolidated Net Income and determined in accordance with GAAP)
the sum for such period, without duplication, of:
(1) income taxes,
(2) Consolidated Interest Expense,
(3) depreciation and amortization expenses and other non-cash charges to
earnings, and
(4) interest and financing fees and expenses which were previously
capitalized and which are amortized to cost of sales, MINUS
all other non-cash items (other than the receipt of notes receivable) increasing
such Consolidated Net Income.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to any
determination date, the ratio of (x) Consolidated Cash Flow Available for Fixed
Charges for the prior four full fiscal quarters (the "FOUR QUARTER PERIOD") for
which financial results have been reported immediately preceding the
determination date (the "TRANSACTION DATE"), to (y) the aggregate Consolidated
Interest Incurred for the Four Quarter Period. For purposes of this definition,
"CONSOLIDATED CASH FLOW AVAILABLE FOR FIXED CHARGES" and "CONSOLIDATED INTEREST
INCURRED" shall be calculated after giving effect on a PRO FORMA basis for the
period of such calculation to
(1) the incurrence or the repayment, repurchase, defeasance or other
discharge or the assumption by another Person that is not an
Affiliate (collectively, "REPAYMENT") of any Indebtedness of the
Company, the Issuer or any Restricted Subsidiary (and the
application of the proceeds thereof) giving rise to the need to make
such calculation, and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), at any
time on or after the first day of the Four Quarter Period and on or
prior to the Transaction Date, as if such incurrence or repayment,
as the case may be (and the application of the proceeds thereof),
occurred on the first day of the Four Quarter Period, except that
Indebtedness under revolving credit facilities shall be deemed to be
the average daily balance of such Indebtedness during the Four
Quarter Period (as reduced on such PRO FORMA basis by the
application of any proceeds of the incurrence of Indebtedness giving
rise to the need to make such calculation);
(2) any Asset Disposition or Asset Acquisition (including, without
limitation, any Asset Acquisition giving rise to the need to make
such calculation as a result of the Company, the Issuer or any
Restricted Subsidiary (including any Person that becomes a
Restricted Subsidiary as a result of any such Asset Acquisition)
incurring Acquired Indebtedness at any time on or after the first
day of the Four Quarter Period and on or prior to the Transaction
Date), as if such Asset Disposition or Asset Acquisition (including
the incurrence or repayment of any such Indebtedness) and the
44
inclusion, notwithstanding clause (2) of the definition of
"Consolidated Net Income," of any Consolidated Cash Flow Available
for Fixed Charges associated with such Asset Acquisition as if it
occurred on the first day of the Four Quarter Period; PROVIDED,
HOWEVER, that the Consolidated Cash Flow Available for Fixed Charges
associated with any Asset Acquisition shall not be included to the
extent the net income so associated would be excluded pursuant to
the definition of "Consolidated Net Income," other than clause (2)
thereof, as if it applied to the Person or assets involved before
they were acquired, and
(3) the Consolidated Cash Flow Available for Fixed Charges and the
Consolidated Interest Incurred attributable to discontinued
operations, as determined in accordance with GAAP, shall be
excluded.
Furthermore, in calculating "Consolidated Cash Flow Available for Fixed
Charges" for purposes of determining the denominator (but not the numerator) of
this "Consolidated Fixed Charge Coverage Ratio,"
(a) interest on Indebtedness in respect of which a PRO FORMA
calculation is required that is determined on a fluctuating
basis as of the Transaction Date (including Indebtedness
actually incurred on the Transaction Date) and which will
continue to be so determined thereafter shall be deemed to
have accrued at a fixed rate PER ANNUM equal to the rate of
interest on such Indebtedness in effect on the Transaction
Date, and
(b) notwithstanding clause (a) above, interest on such
Indebtedness determined on a fluctuating basis, to the extent
such interest is covered by agreements relating to Interest
Protection Agreements, shall be deemed to accrue at the rate
PER ANNUM resulting after giving effect to the operation of
such agreements.
"CONSOLIDATED INTEREST EXPENSE" of the Company for any period means the
Interest Expense of the Company, the Issuer and the Restricted Subsidiaries for
such period, determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED INTEREST INCURRED" for any period means the Interest
Incurred of the Company, the Issuer and the Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" for any period means the aggregate net income
(or loss) of the Company and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP; PROVIDED that there will be excluded
from such net income (loss) (to the extent otherwise included therein), without
duplication:
(1) the net income (or loss) of (x) any Unrestricted Subsidiary (other
than a Mortgage Subsidiary) or (y) any Person (other than a
Restricted Subsidiary or a Mortgage Subsidiary) in which any Person
other than the Company, the Issuer or any Restricted Subsidiary has
an ownership interest, except, in each case, to the extent that any
such income has actually been received by the Company, the Issuer or
any Restricted Subsidiary in the form of cash dividends or similar
cash distributions during such period, which dividends or
distributions are not in excess of the Company's, the Issuer's or
such Restricted Subsidiary's (as applicable) PRO RATA share of such
Unrestricted Subsidiary's or such other Person's net income earned
during such period,
(2) except to the extent includable in Consolidated Net Income pursuant
to the foregoing clause (1), the net income (or loss) of any Person
that accrued prior to the date that (a) such Person becomes a
Restricted Subsidiary or is merged with or into or consolidated with
the Company, the Issuer or any of its Restricted Subsidiaries
(except, in the case of an Unrestricted Subsidiary that is
redesignated a Restricted Subsidiary during such period, to the
extent of its retained earnings from the beginning of such period to
the date of such redesignation) or (b) the assets of such Person are
acquired by the Company or any Restricted Subsidiary,
(3) the net income of any Restricted Subsidiary to the extent that (but
only so long as) the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of that income is not
permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary during such
period,
45
(4) the gains or losses, together with any related provision for taxes,
realized during such period by the Company, the Issuer or any
Restricted Subsidiary resulting from (a) the acquisition of
securities, or extinguishment of Indebtedness, of the Company or any
Restricted Subsidiary or (b) any Asset Disposition by the Company or
any Restricted Subsidiary,
(5) any extraordinary gain or loss together with any related provision
for taxes, realized by the Company, the Issuer or any Restricted
Subsidiary, and
(6) any non-recurring expense recorded by the Company, the Issuer or any
Restricted Subsidiary in connection with a merger accounted for as a
"pooling-of-interests" transaction;
PROVIDED, FURTHER, that for purposes of calculating Consolidated Net Income
solely as it relates to clause (3) of the first paragraph of the "Limitations on
Restricted Payments" covenant, clause (4)(b) above shall not be applicable.
"CONSOLIDATED NET WORTH" of any Person as of any date means the
stockholders' equity (including any Preferred Stock that is classified as equity
under GAAP, other than Disqualified Stock) of such Person and its Restricted
Subsidiaries on a consolidated basis at the end of the fiscal quarter
immediately preceding such date, as determined in accordance with GAAP, less any
amount attributable to Unrestricted Subsidiaries.
"CONSOLIDATED TANGIBLE ASSETS" of the Company as of any date means the
total amount of assets of the Company, the Issuer and the Restricted
Subsidiaries (less applicable reserves) on a consolidated basis at the end of
the fiscal quarter immediately preceding such date, as determined in accordance
with GAAP, less (1) Intangible Assets and (2) appropriate adjustments on account
of minority interests of other Persons holding equity investments in Restricted
Subsidiaries.
"CONTINUING DIRECTOR" means a director who either was a member of the
Board of Directors of the Company on the date of the Senior Indenture or who
became a director of the Company subsequent to such date and whose election or
nomination for election by the Company's stockholders, was duly approved by a
majority of the Continuing Directors on the Board of Directors of the Company at
the time of such approval, either by a specific vote or by approval of the proxy
statement issued by the Company on behalf of the entire Board of Directors of
the Company in which such individual is named as nominee for director.
"control" when used with respect to any Person, means the power to direct
the management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing.
"CREDIT FACILITIES" means, collectively, each of the credit facilities and
lines of credit of the Company or one or more Restricted Subsidiaries in
existence on the Issue Date and one or more other facilities and lines of credit
among or between the Company or one or more Restricted Subsidiaries and one or
more lenders pursuant to which the Company or one or more Restricted
Subsidiaries may incur indebtedness for working capital and general corporate
purposes (including acquisitions), as any such facility or line of credit may be
amended, restated, supplemented or otherwise modified from time to time, and
includes any agreement extending the maturity of, increasing the amount of, or
restructuring, all or any portion of the Indebtedness under such facility or
line of credit or any successor facilities or lines of credit and includes any
facility or line of credit with one or more lenders refinancing or replacing all
or any portion of the Indebtedness under such facility or line of credit or any
successor facility or line of credit.
"CURRENCY AGREEMENT" of any Person means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect such Person or any of its Subsidiaries against fluctuations in currency
values.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
"DEFAULT" means any event, act or condition that is, or after notice or
the passage of time or both would be, an Event of Default.
"DESIGNATION AMOUNT" has the meaning provided in the definition of
Unrestricted Subsidiary.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, (1) matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
final maturity date of the Senior Notes or (2) is convertible into or
46
exchangeable or exercisable for (whether at the option of the issuer or the
holder thereof) (a) debt securities or (b) any Capital Stock referred to in (1)
above, in each case, at any time prior to the final maturity date of the Senior
Notes; PROVIDED, HOWEVER, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof (or the
holders of any security into or for which such Capital Stock is convertible,
exchangeable or exercisable) the right to require the Company to repurchase or
redeem such Capital Stock upon the occurrence of a change in control occurring
prior to the final maturity date of the Senior Notes shall not constitute
Disqualified Stock if the change in control provision applicable to such Capital
Stock are no more favorable to such holders than the provisions described under
the caption "Certain Covenants--Repurchase of Senior Notes upon Change of
Control" and such Capital Stock specifically provides that the Company will not
repurchase or redeem any such Capital Stock pursuant to such provisions prior to
the Company's repurchase of the Senior Notes as are required pursuant to the
provisions described under the caption "Certain Covenants--Repurchase of Senior
Notes upon Change of Control".
"EVENT OF DEFAULT" has the meaning set forth in "Events of Default".
"FAIR MARKET VALUE" means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) that would be
negotiated in an arm's-length transaction for cash between a willing seller and
a willing and able buyer, neither of which is under any compulsion to complete
the transaction, as such price is determined in good faith by the Board of
Directors of the Company or a duly authorized committee thereof, as evidenced by
a resolution of such Board or committee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, as in effect on May 4, 1999.
"GUARANTORS" means (i) initially, each of the Company's Subsidiaries,
other than the Issuer, certain subsidiaries formerly engaged in the issuance of
collateralized mortgage obligations, the Company's mortgage lending and title
subsidiaries and a subsidiary holding and licensing the Hovnanian trade name and
(ii) each of the Company's Subsidiaries which becomes a Guarantor of the Senior
Notes pursuant to the provisions of the Senior Indenture.
"HOLDER" means the Person in whose name a Senior Note is registered in the
books of the Registrar for the Senior Notes.
"INDEBTEDNESS" of any Person means, without duplication,
(1) any liability of such Person (a) for borrowed money or under any
reimbursement obligation relating to a letter of credit or other
similar instruments (other than standby letters of credit or similar
instrument issued for the benefit of or surety, performance,
completion or payment bonds, earnest money notes or similar purpose
undertakings or indemnifications issued by, such Person in the
ordinary course of business), (b) evidenced by a bond, note,
debenture or similar instrument (including a purchase money
obligation) given in connection with the acquisition of any
businesses, properties or assets of any kind or with services
incurred in connection with capital expenditures (other than any
obligation to pay a contingent purchase price which, as of the date
of incurrence thereof is not required to be recorded as a liability
in accordance with GAAP), or (c) in respect of Capitalized Lease
Obligations (to the extent of the Attributable Debt in respect
thereof),
(2) any Indebtedness of others that such Person has guaranteed to the
extent of the guarantee; PROVIDED, HOWEVER, that Indebtedness of the
Company and its Restricted Subsidiaries will not include the
obligations of the Company or a Restricted Subsidiary under
warehouse lines of credit of Mortgage Subsidiaries to repurchase
mortgages at prices no greater than 98% of the principal amount
thereof, and upon any such purchase the excess, if any, of the
purchase price thereof over the Fair Market Value of the mortgages
acquired, will constitute Restricted Payments subject to the
"Limitations on Restricted Payments" covenant,
(3) to the extent not otherwise included, the obligations of such Person
under Currency Agreements or Interest Protection Agreements to the
extent recorded as liabilities not constituting Interest
47
Incurred, net of amounts recorded as assets in respect of such
agreements, in accordance with GAAP, and
(4) all Indebtedness of others secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person;
PROVIDED, that Indebtedness shall not include accounts payable, liabilities to
trade creditors of such Person or other accrued expenses arising in the ordinary
course of business. The amount of Indebtedness of any Person at any date shall
be (a) the outstanding balance at such date of all unconditional obligations as
described above, net of any unamortized discount to be accounted for as Interest
Expense, in accordance with GAAP, (b) the maximum liability of such Person for
any contingent obligations under clause (1) above at such date, net of an
unamortized discount to be accounted for as Interest Expense in accordance with
GAAP, and (c) in the case of clause (4) above, the lesser of (x) the fair market
value of any asset subject to a Lien securing the Indebtedness of others on the
date that the Lien attaches and (y) the amount of the Indebtedness secured.
"INTANGIBLE ASSETS" of the Company means all unamortized debt discount and
expense, unamortized deferred charges, goodwill, patents, trademarks, service
marks, trade names, copyrights, write-ups of assets over their prior carrying
value (other than write-ups which occurred prior to the Issue Date and other
than, in connection with the acquisition of an asset, the write-up of the value
of such asset (within one year of its acquisition) to its fair market value in
accordance with GAAP) and all other items which would be treated as intangible
on the consolidated balance sheet of the Company, the Issuer and the Restricted
Subsidiaries prepared in accordance with GAAP.
"INTEREST EXPENSE" of any Person for any period means, without
duplication, the aggregate amount of (i) interest which, in conformity with
GAAP, would be set opposite the caption "interest expense" or any like caption
on an income statement for such Person (including, without limitation, imputed
interest included in Capitalized Lease Obligations, all commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing, the net costs (but reduced by net gains) associated with
Currency Agreements and Interest Protection Agreements, amortization of other
financing fees and expenses, the interest portion of any deferred payment
obligation, amortization of discount or premium, if any, and all other noncash
interest expense (other than interest and other charges amortized to cost of
sales), and (ii) all interest actually paid by the Company or a Restricted
Subsidiary under any guarantee of Indebtedness (including, without limitation, a
guarantee of principal, interest or any combination thereof) of any Person other
than the Company, the Issuer or any Restricted Subsidiary during such period;
PROVIDED, that Interest Expense shall exclude any expense associated with the
complete write-off of financing fees and expenses in connection with the
repayment of any Indebtedness.
"INTEREST INCURRED" of any Person for any period means, without
duplication, the aggregate amount of (1) Interest Expense and (2) all
capitalized interest and amortized debt issuance costs.
"INTEREST PROTECTION AGREEMENT" of any Person means any interest rate swap
agreement, interest rate collar agreement, option or futures contract or other
similar agreement or arrangement designed to protect such Person or any of its
Subsidiaries against fluctuations in interest rates with respect to Debt
permitted to be incurred under the Senior Indenture.
"INVESTMENTS" of any Person means (i) all investments by such Person in
any other Person in the form of loans, advances or capital contributions, (ii)
all Senior Guarantees of Indebtedness or other obligations of any other Person
by such Person, (iii) all purchases (or other acquisitions for consideration) by
such Person of Indebtedness, Capital Stock or other securities of any other
Person and (iv) all other items that would be classified as investments in any
other Person (including, without limitation, purchases of assets outside the
ordinary course of business) on a balance sheet of such Person prepared in
accordance with GAAP.
"ISSUE DATE" means the date on which the Senior Notes are originally
issued under the Senior Indenture.
"LIEN" means, with respect to any Property, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this definition, a Person shall be deemed to own,
subject to a Lien, any Property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such Property.
"MARKETABLE SECURITIES" means (a) equity securities that are listed on the
New York Stock Exchange, the American Stock Exchange or The Nasdaq National
Market and (b) debt securities that are rated by a nationally
48
recognized rating agency, listed on the New York Stock Exchange or the American
Stock Exchange or covered by at least two reputable market makers.
"MOODY'S" means Moody's Investors Service, Inc. or any successor to its
debt rating business.
"MORTGAGE SUBSIDIARY" means any Subsidiary of the Company substantially
all of whose operations consist of the mortgage lending business.
"NET CASH PROCEEDS" means with respect to an Asset Disposition, cash
payments received (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise
(including any cash received upon sale or disposition of such note or
receivable), but only as and when received), excluding any other consideration
received in the form of assumption by the acquiring Person of Indebtedness or
other obligations relating to the Property disposed of in such Asset Disposition
or received in any other non-cash form unless and until such non-cash
consideration is converted into cash therefrom, in each case, net of all legal,
title and recording tax expenses, commissions and other fees and expenses
incurred, and all federal, state and local taxes required to be accrued as a
liability under GAAP as a consequence of such Asset Disposition, and in each
case net of a reasonable reserve for the after-tax cost of any indemnification
or other payments (fixed and contingent) attributable to the seller's
indemnities or other obligations to the purchaser undertaken by the Company, the
Issuer or any of its Restricted Subsidiaries in connection with such Asset
Disposition, and net of all payments made on any Indebtedness which is secured
by or relates to such Property, in accordance with the terms of any Lien or
agreement upon or with respect to such Property or which must by its terms or by
applicable law be repaid out of the proceeds from such Asset Disposition, and
net of all contractually required distributions and payments made to minority
interest holders in Restricted Subsidiaries or joint ventures as a result of
such Asset Disposition.
"NON-RECOURSE INDEBTEDNESS" with respect to any Person means Indebtedness
of such Person for which (1) the sole legal recourse for collection of principal
and interest on such Indebtedness is against the specific property identified in
the instruments evidencing or securing such Indebtedness and such property was
acquired with the proceeds of such Indebtedness or such Indebtedness was
incurred within 90 days after the acquisition of such property and (2) no other
assets of such Person may be realized upon in collection of principal or
interest on such Indebtedness. Indebtedness which is otherwise Non-Recourse
Indebtedness will not lose its character as Non-Recourse Indebtedness because
there is recourse to the borrower, any guarantor or any other Person for (a)
environmental warranties and indemnities, or (b) indemnities for and liabilities
arising from fraud, misrepresentation, misapplication or non-payment of rents,
profits, insurance and condemnation proceeds and other sums actually received by
the borrower from secured assets to be paid to the lender, waste and mechanics'
liens.
"PERMITTED HOVNANIAN HOLDERS" means, collectively, Kevork S. Hovnanian,
Ara K. Hovnanian, the members of their immediate families, the respective
estates, spouses, heirs, ancestors, lineal descendants, legatees and legal
representatives of any of the foregoing and the trustee of any bona fide trust
of which one or more of the foregoing are the sole beneficiaries or the grantors
thereof, or any entity of which any of the foregoing, individually or
collectively, beneficially own more than 50% of the Common Equity.
"PERMITTED INDEBTEDNESS" means
(1) Indebtedness under Credit Facilities which does not exceed $440
million principal amount outstanding at any one time;
(2) Indebtedness in respect of obligations of the Company and its
Subsidiaries to the trustees under indentures for debt securities;
(3) intercompany debt obligations of (i) the Company to the Issuer, (ii)
the Issuer to the Company, (iii) the Company or the Issuer to any
Restricted Subsidiary and (iv) any Restricted Subsidiary to the
Company or the Issuer or any other Restricted Subsidiary; provided,
HOWEVER, that any Indebtedness of any Restricted Subsidiary or the
Issuer or the Company owed to any Restricted Subsidiary or the
Issuer that ceases to be a Restricted Subsidiary shall be deemed to
be incurred and shall be treated as an incurrence for purposes of
the first paragraph of the covenant described under "Limitations on
Indebtedness" at the time the Restricted Subsidiary in question
ceases to be a Restricted Subsidiary;
(4) Indebtedness of the Company or the Issuer or any Restricted
Subsidiary under any Currency Agreements or Interest Protection
Agreements in a notional amount no greater than the payments
49
due (at the time the related Currency Agreement or Interest
Protection Agreement is entered into) with respect to the
Indebtedness or currency being hedged;
(5) Purchase Money Indebtedness,
(6) Capitalized Lease Obligations;
(7) obligations for, pledge of assets in respect of, and guaranties of,
bond financings of political subdivisions or enterprises thereof in
the ordinary course of business;
(8) Indebtedness secured only by office buildings owned or occupied by
the Company or any Restricted Subsidiary, which Indebtedness does
not exceed $10 million aggregate principal amount outstanding at any
one time;
(9) Indebtedness under warehouse lines of credit, repurchase agreements
and Indebtedness secured by mortgage loans and related assets of
mortgage lending Subsidiaries in the ordinary course of a mortgage
lending business; and
(10) Indebtedness of the Company or any Restricted Subsidiary which,
together with all other Indebtedness under this clause (10), does
not exceed $30 million aggregate principal amount outstanding at any
one time.
"PERMITTED INVESTMENT" means
(1) Cash Equivalents;
(2) any Investment in the Company, the Issuer or any Restricted
Subsidiary or any Person that becomes a Restricted Subsidiary as a
result of such Investment or that is consolidated or merged with or
into, or transfers all or substantially all of the assets of it or
an operating unit or line of business to, the Company or a
Restricted Subsidiary;
(3) any receivables, loans or other consideration taken by the Company,
the Issuer or any Restricted Subsidiary in connection with any asset
sale otherwise permitted by the Senior Indenture;
(4) Investments received in connection with any bankruptcy or
reorganization proceeding, or as a result of foreclosure, perfection
or enforcement of any Lien or any judgment or settlement of any
Person in exchange for or satisfaction of Indebtedness or other
obligations or other property received from such Person, or for
other liabilities or obligations of such Person created, in
accordance with the terms of the Senior Indenture;
(5) Investments in Currency Agreements or Interest Protection Agreements
described in the definition of Permitted Indebtedness;
(6) any loan or advance to an executive officer, director or employee of
the Company or any Restricted Subsidiary made in the ordinary course
of business or in accordance with past practice; PROVIDED, HOWEVER,
that any such loan or advance exceeding $1 million shall have been
approved by the Board of Directors of the Company or a committee
thereof consisting of disinterested members;
(7) Investments in joint ventures in a Real Estate Business with
unaffiliated third parties in an aggregate amount at any time
outstanding not to exceed 10% of Consolidated Tangible Assets at
such time;
(8) Investments in interests in issuances of collateralized mortgage
obligations, mortgages, mortgage loan servicing, or other mortgage
related assets;
(9) obligations of the Company or a Restricted Subsidiary under
warehouse lines of credit of Mortgage Subsidiaries to repurchase
mortgages; and
(10) Investments in an aggregate amount outstanding not to exceed $10
million.
"PERMITTED LIENS" means
(1) Liens for taxes, assessments or governmental or quasi-government
charges or claims that (a) are not yet delinquent, (b) are being
contested in good faith by appropriate proceedings and as to
50
which appropriate reserves have been established or other provisions
have been made in accordance with GAAP, if required, or (c) encumber
solely property abandoned or in the process of being abandoned,
(2) statutory Liens of landlords and carriers', warehousemen's,
mechanics', suppliers', materialmen's, repairmen's or other Liens
imposed by law and arising in the ordinary course of business and
with respect to amounts that, to the extent applicable, either (a)
are not yet delinquent or (b) are being contested in good faith by
appropriate proceedings and as to which appropriate reserves have
been established or other provisions have been made in accordance
with GAAP, if required,
(3) Liens (other than any Lien imposed by the Employer Retirement Income
Security Act of 1974, as amended) incurred or deposits made in the
ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social
security,
(4) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal
bonds, development obligations, progress payments, government
contacts, utility services, developer's or other obligations to make
on-site or off-site improvements and other obligations of like
nature (exclusive of obligations for the payment of borrowed money
but including the items referred to in the parenthetical in clause
(1)(a) of the definition of "INDEBTEDNESS"), in each case incurred
in the ordinary course of business of the Company, the Issuer and
the Restricted Subsidiaries,
(5) attachment or judgment Liens not giving rise to a Default or an
Event of Default,
(6) easements, dedications, assessment district or similar Liens in
connection with municipal or special district financing,
rights-of-way, restrictions, reservations and other similar charges,
burdens, and other similar charges or encumbrances not materially
interfering with the ordinary course of business of the Company, the
Issuer and the Restricted Subsidiaries,
(7) zoning restrictions, licenses, restrictions on the use of real
property or minor irregularities in title thereto, which do not
materially impair the use of such real property in the ordinary
course of business of the Company, the Issuer and the Restricted
Subsidiaries,
(8) Liens securing Indebtedness incurred pursuant to clause (8) or (9)
of the definition of Permitted Indebtedness,
(9) Liens securing Indebtedness of the Company, the Issuer or any
Restricted Subsidiary permitted to be incurred under the Senior
Indenture; provided, that the aggregate amount of all consolidated
Indebtedness of the Company, the Issuer and the Restricted
Subsidiaries (including, with respect to Capitalized Lease
Obligations, the Attributable Debt in respect thereof) secured by
Liens (other than Non-Recourse Indebtedness and Indebtedness
incurred pursuant to clause (9) of the definition of Permitted
Indebtedness) shall not exceed 40% of Consolidated Adjusted Tangible
Assets at any one time outstanding (after giving effect to the
incurrence of such Indebtedness and the use of the proceeds
thereof),
(10) Liens securing Non-Recourse Indebtedness of the Company, the Issuer
or any Restricted Subsidiary; provided, that such Liens apply only
to the property financed out of the net proceeds of such
Non-Recourse Indebtedness within 90 days after the incurrence of
such Non-Recourse Indebtedness,
(11) Liens securing Purchase Money Indebtedness; provided that such Liens
apply only to the property acquired, constructed or improved with
the proceeds of such Purchase Money Indebtedness within 90 days
after the incurrence of such Purchase Money Indebtedness,
(12) Liens on property or assets of the Company, the Issuer or any
Restricted Subsidiary securing Indebtedness of the Company, the
Issuer or any Restricted Subsidiary owing to the Company, the Issuer
or one or more Restricted Subsidiaries,
(13) leases or subleases granted to others not materially interfering
with the ordinary course of business of the Company and the
Restricted Subsidiaries,
51
(14) purchase money security interests (including, without limitation,
Capitalized Lease Obligations); provided, that such Liens apply only
to the Property acquired and the related Indebtedness is incurred
within 90 days after the acquisition of such Property,
(15) any right of first refusal, right of first offer, option, contract
or other agreement to sell an asset; provided that such sale is not
otherwise prohibited under the Senior Indenture,
(16) any right of a lender or lenders to which the Company, the Issuer or
a Restricted Subsidiary may be indebted to offset against, or
appropriate and apply to the payment of such, Indebtedness any and
all balances, credits, deposits, accounts or money of the Company,
the Issuer or a Restricted Subsidiary with or held by such lender or
lenders or its Affiliates,
(17) any pledge or deposit of cash or property in conjunction with
obtaining surety, performance, completion or payment bonds and
letters of credit or other similar instruments or providing earnest
money obligations, escrows or similar purpose undertakings or
indemnifications in the ordinary course of business of the Company,
the Issuer and the Restricted Subsidiaries,
(18) Liens for homeowner and property owner association developments and
assessments,
(19) Liens securing Refinancing Indebtedness; provided, that such Liens
extend only to the assets securing the Indebtedness being
refinanced,
(20) Liens incurred in the ordinary course of business as security for
the obligations of the Company, the Issuer and the Restricted
Subsidiaries with respect to indemnification in respect of title
insurance providers,
(21) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any
Subsidiary of the Company or becomes a Subsidiary of the Company;
provided that such Liens were in existence prior to the
contemplation of such merger or consolidation or acquisition and do
not extend to any assets other than those of the Person merged into
or consolidated with the Company or the Subsidiary or acquired by
the Company or its Subsidiaries,
(22) Liens on property existing at the time of acquisition thereof by the
Company or any Subsidiary of the Company, provided that such Liens
were in existence prior to the contemplation of such acquisition,
(23) Liens existing on the Issue Date and any extensions, renewals or
replacements thereof, and
(24) Liens on specific items of inventory or other goods and proceeds of
any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or
other goods.
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, incorporated or unincorporated association, joint stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"PREFERRED STOCK" of any Person means all Capital Stock of such Person
which has a preference in liquidation or with respect to the payment of
dividends.
"PROPERTY" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person, whether or not included in
the most recent consolidated balance sheet of such Person and its Subsidiaries
under GAAP.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness of the Company, the
Issuer or any Restricted Subsidiary incurred for the purpose of financing all or
any part of the purchase price, or the cost of construction or improvement, of
any property to be used in the ordinary course of business by the Company, the
Issuer and the Restricted Subsidiaries; PROVIDED, HOWEVER, that (1) the
aggregate principal amount of such Indebtedness shall not exceed such purchase
price or cost and (2) such Indebtedness shall be incurred no later than 90 days
after the acquisition of such property or completion of such construction or
improvement.
"QUALIFIED STOCK" means Capital Stock of the Company other than
Disqualified Stock.
52
"REAL ESTATE BUSINESS" means homebuilding, housing construction, real
estate development or construction and related real estate activities, including
the provision of mortgage financing or title insurance.
"REFINANCING INDEBTEDNESS" means Indebtedness (to the extent not Permitted
Indebtedness) that refunds, refinances or extends any Indebtedness of the
Company, the Issuer or any Restricted Subsidiary (to the extent not Permitted
Indebtedness) outstanding on the Issue Date or other Indebtedness (to the extent
not Permitted Indebtedness) permitted to be incurred by the Company, the Issuer
or any Restricted Subsidiary pursuant to the terms of the Senior Indenture, but
only to the extent that
(1) the Refinancing Indebtedness is subordinated, if at all, to the
Senior Notes or the Senior Guarantees, as the case may be, to the
same extent as the Indebtedness being refunded, refinanced or
extended,
(2) the Refinancing Indebtedness is scheduled to mature either (a) no
earlier than the Indebtedness being refunded, refinanced or extended
or (b) after the maturity date of the Senior Notes,
(3) the portion, if any, of the Refinancing Indebtedness that is
scheduled to mature on or prior to the maturity date of the Senior
Notes has a Weighted Average Life to Maturity at the time such
Refinancing Indebtedness is incurred that is equal to or greater
than the Weighted Average Life to Maturity of the portion of the
Indebtedness being refunded, refinanced or extended that is
scheduled to mature on or prior to the maturity date of the Senior
Notes, and
(4) such Refinancing Indebtedness is in an aggregate principal amount
that is equal to or less than the aggregate principal amount then
outstanding under the Indebtedness being refunded, refinanced or
extended.
"RESTRICTED PAYMENT" means any of the following:
(1) the declaration or payment of any dividend or any other distribution
on Capital Stock of the Company, the Issuer or any Restricted
Subsidiary or any payment made to the direct or indirect holders (in
their capacities as such) of Capital Stock of the Company, the
Issuer or any Restricted Subsidiary (other than (a) dividends or
distributions payable solely in Qualified Stock and (b) in the case
of the Issuer or Restricted Subsidiaries, dividends or distributions
payable to the Company, the Issuer or a Restricted Subsidiary);
(2) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company, the Issuer or any
Restricted Subsidiary (other than a payment made to the Company, the
Issuer or any Restricted Subsidiary); and
(3) any Investment (other than any Permitted investment), including any
Investment in an Unrestricted Subsidiary (including by the
designation of a Subsidiary of the Company as an Unrestricted
Subsidiary) and any amounts paid in accordance with clause (2) of
the definition of Indebtedness.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company which is not
an Unrestricted Subsidiary.
"S&P" means Standard and Poor's Ratings Group or any successor to its debt
rating business. "Senior Guarantee" means the guarantee of the Senior Notes by
the Company and each other Guarantor under the Senior Indenture.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary of the Company which would
constitute a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X
under the Securities Act and the Exchange Act as in effect on the Issue Date.
"SUBSIDIARY" of any Person means any corporation or other entity of which
a majority of the Capital Stock having ordinary voting power to elect a majority
of the Board of Directors or other persons performing similar functions is at
the time directly or indirectly owned or controlled by such Person.
"TRUSTEE" means the party named as such above until a successor replaces
such party in accordance with the applicable provisions of the Senior Indenture
and thereafter means the successor serving hereunder.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company so
designated by a resolution adopted by the Board of Directors of the Company
or a duly authorized committee thereof as provided below; PROVIDED that (a)
53
the holders of Indebtedness thereof do not have direct or indirect recourse
against the Company, the Issuer or any Restricted Subsidiary, and neither the
Company, the Issuer nor any Restricted Subsidiary otherwise has liability for,
any payment obligations in respect of such Indebtedness (including any
undertaking, agreement or instrument evidencing such Indebtedness), except, in
each case, to the extent that the amount thereof constitutes a Restricted
Payment permitted by the Senior Indenture, in the case of Non-Recourse
Indebtedness, to the extent such recourse or liability is for the matters
discussed in the last sentence of the definition of "Non-Recourse Indebtedness,"
or to the extent such Indebtedness is a guarantee by such Subsidiary of
Indebtedness of the Company, the Issuer or a Restricted Subsidiary and (b) no
holder of any Indebtedness of such Subsidiary shall have a right to declare a
default on such Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity as a result of a default on any
Indebtedness of the Company, the Issuer or any Restricted Subsidiary. The
Unrestricted Subsidiaries will be the following: Eastern National Title
Insurance Agency, Inc., Eastern Title Agency, Inc., Founders Title Agency, Inc.,
Governor's Abstract Co., Inc., Hexter Fair Land Title Company I, Inc.,
Homebuyer's Mortgage, Inc., Hovnanian Financial Services I, Inc., Hovnanian
Financial Services 11, Inc., Hovnanian Financial Services III, Inc., Hovnanian
Financial Services IV, Inc., K. Hovnanian Investment Properties, Inc., K.
Hovnanian Mortgage, Inc., Preston Grande Homes, Inc., Heritage Pines, L.L.C.,
Kings Crossing at Montgomery, L.L.C., Knox Creek, L.L.C., McKinley Court,
L.L.C., Monticello Woods, L.L.C., New Homebuyers Title Co. (Virginia) L.L.C.,
New Homebuyers Title Company, L.L.C., Shadow Creek, L.L.C., Section 13 of the
Hills, L.L.C., Title Group II, L.L.C., Town Homes at Montgomery, L.L.C.,
Westwood Hills, L.L.C., WH/PR Land Co., L.L.C., Athena Portfolio Investors,
L.P., Beacon Manor Associates, L.P., Galleria Mortgage, L.P., Goodman Mortgage
Investors, L.P., Parkway Development, Sovereign Group, L.P., and K. Hovnanian
Venture I, L.L.C.
Subject to the foregoing, the Board of Directors of the Company or a duly
authorized committee thereof may designate any Subsidiary in addition to those
named above to be an Unrestricted Subsidiary; PROVIDED, HOWEVER, that (1) the
net amount (the "DESIGNATION AMOUNT") then outstanding of all previous
Investments by the Company and the Restricted Subsidiaries in such Subsidiary
will be deemed to be a Restricted Payment at the time of such designation and
will reduce the amount available for Restricted Payments under the "Limitations
on Restricted Payments" covenant set forth in the Senior Indenture, to the
extent provided therein, (2) the Company must be permitted under the
"Limitations on Restricted Payments" covenant set forth in the Senior Indenture
to make the Restricted Payment deemed to have been made pursuant to clause (1),
and (3) after giving effect to such designation, no Default or Event of Default
shall have occurred or be continuing. In accordance with the foregoing, and not
in limitation thereof, Investments made by any Person in any Subsidiary of such
Person prior to such Person's merger with the Company or any Restricted
Subsidiary (but not in contemplation or anticipation of such merger) shall not
be counted as an Investment by the Company or such Restricted Subsidiary if such
Subsidiary of such Person is designated as an Unrestricted Subsidiary.
The Board of Directors of the Company or a duly authorized committee
thereof may also redesignate an Unrestricted Subsidiary to be a Restricted
Subsidiary PROVIDED, HOWEVER, that (1) the Indebtedness of such Unrestricted
Subsidiary as of the date of such redesignation could then be incurred under the
"Limitations on Indebtedness" covenant and (2) immediately after giving effect
to such redesignation and the incurrence of any such additional Indebtedness,
the Company and the Restricted Subsidiaries could incur $1.00 of additional
Indebtedness under the first paragraph of the "Limitations on Indebtedness"
covenant. Any such designation or redesignation by the Board of Directors of the
Company or a committee thereof will be evidenced to the Trustee by the filing
with the Trustee of a certified copy of the resolution of the Board of Directors
of the Company or a committee thereof giving effect to such designation or
redesignation and an Officers' Certificate certifying that such designation or
redesignation complied with the foregoing conditions and setting forth the
underlying calculations of such Officers' Certificate. The designation of any
Person as an Unrestricted Subsidiary shall be deemed to include a designation of
all Subsidiaries of such Person as Unrestricted Subsidiaries; PROVIDED, HOWEVER,
that the ownership of the general partnership interest (or a similar member's
interest in a limited liability company) by an Unrestricted Subsidiary shall not
cause a Subsidiary of the Company of which more than 95% of the equity interest
is held by the Company or one or more Restricted Subsidiaries to be deemed an
Unrestricted Subsidiary.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness or portion thereof at any date, the number of years obtained by
dividing (i) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other required
payment of principal, including, without limitation, payment at final maturity,
in respect thereof, by (b) the number of years (calculated
54
to the nearest one-twelfth) that will elapse between such date and the making of
such payment by (ii) the sum of all such payments described in clause (i)(a)
above.
CONCERNING THE SENIOR TRUSTEE
The Senior Indenture contains certain limitations on the rights of the
Senior Trustee, should it become a creditor of the Company, to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim as security or otherwise. The Senior Trustee will be permitted
to engage in other transactions; however, if it acquires any conflicting
interest, as defined in the Senior Indenture, it must eliminate that conflict
within 90 days, apply to the Securities and Exchange Commission for permission
to continue or resign. The Senior Trustee is also trustee with respect to the
Senior Subordinated Notes and the Issuer's 10 1/2% Senior Notes due 2007 and its
9 ?% Senior Notes due 2009.
The Holders of a majority in principal amount of the outstanding Senior
Notes will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Senior Trustee, subject to
certain exceptions. The Senior Indenture provides that in case an Event of
Default shall occur (which shall not be cured), the Senior Trustee will be
required, in the exercise of its power, to use the degree of care of a prudent
man in the conduct of his own affairs. Subject to such provisions, the Senior
Trustee will be under no obligation to exercise any of its rights or powers
under the Senior Indenture at the request of any holder of Senior Notes, unless
that holder shall have offered to the Senior Trustee security and indemnity
satisfactory to it against any loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this prospectus may obtain a copy of the Senior
Indenture and Senior Registration Rights Agreement without charge by writing to
Hovnanian at 10 Highway 35, Red Bank, NJ 07701, Attention: Corporate Controller.
REGISTERED EXCHANGE OFFER; REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company, the Issuer, the other Guarantors and the initial purchasers
of the outstanding Senior Notes entered into a registration rights agreement on
March 26, 2002, which we refer to as the "Senior Registration Rights Agreement".
Pursuant to the Senior Registration Rights Agreement, the Company, the Issuer
and the Guarantors agreed to file with the Securities and Exchange Commission
the Exchange Offer Registration Statement on the appropriate form under the
Securities Act with respect to the Senior Notes. Upon the effectiveness of the
Exchange Offer Registration Statement, the Issuer will offer to the Holders of
Transfer Restricted Securities pursuant to the Exchange Offer who are able to
make certain representations the opportunity to exchange their Transfer
Restricted Securities for exchange Senior Notes. Capitalized terms used in this
section but not otherwise defined have the meanings given to them in the Senior
Registration Rights Agreement.
Under the Senior Registration Rights Agreement:
(1) the Company, the Issuer and the other Guarantors agreed to file an
Exchange Offer Registration Statement with the Securities and
Exchange Commission on or prior to 90 days after the Closing Date;
(2) the Company, the Issuer and the other Guarantors agreed to use their
reasonable best efforts to have the Exchange Offer Registration
Statement declared effective by the Securities and Exchange
Commission on or prior to 150 days after the Closing Date;
(3) unless the exchange offer would not be permitted by applicable law
or Securities and Exchange Commission policy, the Company, the
Issuer and the other Guarantors agreed to commence the exchange
offer, keep the exchange offer open for a period of not less than 20
business days and use their reasonable best efforts to issue, on or
prior to 30 business days after the date on which the exchange offer
Registration Statement was declared effective by the Securities and
Exchange Commission, exchange Senior Notes in exchange for all
outstanding Senior Notes tendered prior thereto in the exchange
offer; and
(4) if obligated to file the Shelf Registration Statement, the Company,
the Issuer and the other Guarantors will file the Shelf Registration
Statement with the Securities and Exchange Commission on or prior to
30 days after that filing obligation arises and use their reasonable
best
55
efforts to cause the Shelf Registration to be declared effective by the
Securities and Exchange Commission on or prior to 90 days after that
obligation arises.
In the event that:
(1) the Issuer is not required to file the Exchange Offer Registration
Statement or permitted to consummate the Exchange Offer because
the Exchange Offer is not permitted by applicable law or
Securities and Exchange Commission policy; or
(2) any holder of Transfer Restricted Securities notifies the Issuer
in writing prior to the 20th business day following consummation
of the exchange offer that:
(a) based on an opinion of counsel, it is prohibited by law or
Securities and Exchange Commission policy from
participating in the exchange offer; or
(b) it is a broker-dealer and owns Senior Notes acquired
directly from the Issuer,
the Company, the Issuer and the other Guarantors have agreed to file with the
Securities and Exchange Commission a Shelf Registration Statement to cover
resales of the Senior Notes by the Holders thereof who satisfy certain
conditions relating to the provisions of information in connection with the
Shelf Registration Statement.
The Company, the Issuer and the other Guarantors have agreed to use their
reasonable best efforts to cause the applicable registration statement to be
declared effective as promptly as possible by the Securities and Exchange
Commission.
For purposes of the preceding, "Transfer Restricted Securities" means
each:
(1) Senior Note, until the earliest to occur of:
(a) the date on which that Senior Note is exchanged in the
exchange offer for a New Senior Note which is entitled to
be resold to the public by the holder thereof without
complying with the prospectus delivery requirements of the
Securities Act;
(b) the date on which that Senior Note has been disposed of in
accordance with a Shelf Registration Statement (and
purchasers thereof have been issued New Senior Notes); or
(c) the date on which that Senior Note is distributed to the
public pursuant to Rule 144 under the Securities Act; and
(2) New Senior Note issued to a broker-dealer until the date on which
that New Senior Note is disposed of by that broker-dealer pursuant
to the "Plan of Distribution" contemplated by the Exchange Offer
Registration Statement (including the delivery of the prospectus
contained therein).
The Company, the Issuer and the other Guarantors have agreed to pay
liquidated damages to each holder of Senior Notes upon the occurrence of any of
the following:
(1) the Company, the Issuer and the other Guarantors fail to file any
of the Registration Statements required by the Senior Registration
Rights Agreement on or before the date specified for that filing;
(2) any of such Registration Statement is not declared effective by
the Securities and Exchange Commission on or prior to the date
specified for that effectiveness, which we refer to as the
"EFFECTIVENESS TARGET DATE";
(3) the Issuer fails to consummate the exchange offer within 40
business days of the Effectiveness Target Date with respect to the
Exchange Offer Registration Statement; or
(4) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but thereafter ceases
to be effective or usable in connection with resales of Transfer
Restricted Securities during the periods specified in the
registration rights agreement.
We refer to each event referred to in clauses (1) through (4) above as a
"REGISTRATION DEFAULT".
Such liquidated damages shall be:
56
(1) with respect to the first 90-day period immediately following the
occurrence of the first Registration Default, an amount equal to
$.05 per week per $1,000 principal amount of Senior Notes held by
that holder; and
(2) an additional $.05 per week per $1,000 principal amount of Senior
Notes with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of
liquidated damages for all Registration Defaults of $.25 per week
per $1,000 principal amount of Senior Notes.
All accrued liquidated damages will be paid on each Damages Payment Date
to the Global Senior Note holder by wire transfer of immediately available funds
or by federal funds check and to Holders of Certificated Securities by wire
transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. Following the cure
of all Registration Defaults, the accrual of liquidated damages will cease.
Holders of Senior Notes will be required to make certain representations
to the Company, the Issuer and the other Guarantors, as described in the Senior
Registration Rights Agreement, in order to participate in the Exchange Offer and
will be required to deliver certain information to be used in connection with
the Shelf Registration Statement and to provide comments on the Shelf
Registration Statement within the time periods set forth in the registration
rights agreement in order to have their Senior Notes included in the Shelf
Registration Statement and benefit from the provisions regarding liquidated
damages set forth above with respect to the Shelf Registration Statement.
8.875% SENIOR SUBORDINATED NOTES DUE 2012
GENERAL
The outstanding Senior Subordinated Notes were issued under an indenture,
which we refer to as the "Subordinated Indenture," dated as of March 26, 2002,
among us, the Guarantors and Wachovia Bank, National Association, formerly known
as First Union National Bank, as trustee, which we refer to as the "Subordinated
Trustee." The terms of the Senior Subordinated Notes include those stated in the
Subordinated Indenture and those made part of the Subordinated Indenture by
reference to the Trust Indenture Act of 1939, as amended. The exchange Senior
Subordinated Notes will be issued under the same Subordinated Indenture.
This description of the exchange Senior Subordinated Notes contains
definitions of terms, including those defined under the caption "--Definitions
of Certain Terms Used in the Subordinated Indenture". The following discussion
includes a summary description of certain material terms of the Subordinated
Indenture, the Subordinated Registration Rights Agreement, and the exchange
Senior Subordinated Notes. Because this is a summary, it does not include all of
the information that is included in the Subordinated Indenture, the Subordinated
Registration Rights Agreement, or the exchange Senior Subordinated Notes.
You should read the Subordinated Indenture and the Subordinated
Registration Rights Agreement carefully and in their entirety because they, and
not this description, define your rights as Holders of the Senior Subordinated
Notes. You may request copies of these documents at our address set forth under
"Where You Can Find More Information".
The outstanding Senior Subordinated Notes and the exchange Senior
Subordinated Notes constitute a single series of debt securities under the
Subordinated Indenture. If the exchange offer is consummated, Holders of Senior
Subordinated Notes who do not exchange their Senior Subordinated Notes in the
exchange offer will vote together with the Holders of the registered Senior
Subordinated Notes for all relevant purposes under the Subordinated Indenture.
Accordingly, when determining whether the required Holders have given notice,
consent or waiver or taken any other action permitted under the Subordinated
Indenture, any outstanding Senior Subordinated Notes that remain outstanding
after the exchange offer will be aggregated with the registered Senior
Subordinated Notes. All references herein to specified percentages in aggregate
principal amount of Senior Subordinated Notes outstanding shall be deemed to
mean, at any time after the Exchange Offer is consummated, percentages in
aggregate principal amount of Senior Subordinated Notes and registered Senior
Subordinated Notes outstanding. Capitalized terms used in this section but not
otherwise defined have the meanings given to them in the Subordinated Indenture.
57
The exchange Senior Subordinated Notes will bear interest at the rate PER
ANNUM shown on the cover page of this prospectus from the most recent date to
which interest has been paid on the outstanding Senior Subordinated Notes or, if
no interest has been paid on the outstanding Senior Subordinated Notes, from
March 26, 2002. The applicable interest will be payable semi-annually on each
April 1 and October 1, beginning October 1, 2002, to Holders of record at the
close of business on March 15 or September 15, as the case may be, immediately
preceding each such interest payment date. No interest will be paid on
outstanding Senior Subordinated Notes following their acceptance for exchange.
The exchange Senior Subordinated Notes will mature on April 1, 2012, and will be
issued in denominations of $1,000 and integral multiples thereof.
The exchange Senior Subordinated Notes are limited to an aggregate
principal amount of $200.0 million. The exchange Senior Subordinated Notes are
guaranteed by the Company and each of the other Guarantors pursuant to the
guarantees, which we refer to collectively as the "--Subordinated Guarantees",
described below.
RANKING
The Senior Subordinated Notes will be our general unsecured senior
subordinated obligations. This means that the payment of principal, premium and
interest on, and all other amounts owing with respect to, the Senior
Subordinated Notes is subordinated as set forth in the Subordinated Indenture to
the prior payment in full in cash or cash equivalents of all existing and future
Senior Indebtedness of the Issuer.
The Subordinated Guarantees will be general unsecured senior subordinated
obligations. The Subordinated Guarantees will be subordinated on the same basis
to Senior Indebtedness of the Guarantors as the Senior Subordinated Notes are
subordinated to Senior Indebtedness of the Issuer.
At January 31, 2002, as adjusted to give effect to the transactions
described under "Use of Proceeds" and the acquisition of The Forecast Group(R),
L.P. on January 10, 2002, the Company, the Issuer and the other Guarantors would
have had approximately $676.3 million, including the Senior Notes, of
Indebtedness outstanding, of which $15.2 million would have been secured by
certain real estate assets of the Company and the other Guarantors and $526.3
million of which would have been Senior Indebtedness.
EXECUTION AUTHENTICATION AND DELIVERY
The Senior Subordinated Notes will be executed by facsimile or manual
signature in the name and on behalf of the Issuer, by an Officer. If an Officer
whose signature is on a Senior Subordinated Note no longer holds that office at
the time the Senior Note is authenticated, the Senior Subordinated Note will
still be valid.
A Senior Subordinated Note will not be valid until the Subordinated
Trustee manually signs the certificate of authentication on the Senior
Subordinated Note. The signature will be conclusive evidence that the Senior
Subordinated Note has been authenticated under the Subordinated Indenture.
Unless limited by the terms of its appointment, an authenticating agent may
authenticate the Senior Subordinated Notes whenever the Subordinated Trustee may
do so. The Senior Subordinated Notes will be issuable in denominations of $1,000
and multiples thereof.
SUBORDINATION
The Indebtedness evidenced by the Senior Subordinated Notes and the
Subordinated Guarantees will be subordinate to the prior payment when due of the
principal of and interest on all Senior Indebtedness of the Issuer and the
Guarantors, respectively. Upon maturity of any Senior Indebtedness of the Issuer
or any Guarantor, including by reason of acceleration, payment in full must be
made on such Senior Indebtedness before any payment is made on or in respect of
the Senior Subordinated Notes or the Subordinated Guarantee of such Guarantor.
During the continuation of payment default with respect to any Senior
Indebtedness of the Issuer or a Guarantor and upon written notice thereof to the
Issuer and the Subordinated Trustee or upon acceleration of such senior
Indebtedness, no direct or indirect payment may be made by the Issuer or such
Guarantor with respect to the principal of or interest on the Senior
Subordinated Notes or such Subordinated Guarantee or to repurchase or redeem any
of the Senior Subordinated Notes. During the continuation of any non-payment
default with respect to any Senior Indebtedness of the Issuer or a Guarantor
pursuant to which the maturity thereof may be accelerated, no payment or
distribution of any kind or character (excluding certain permitted equity or
subordinated securities) may be made by the Issuer or such Guarantor on account
of the principal of or premium, if any, or interest on, the Senior Subordinated
Notes or such Subordinated Guarantee or the purchase, redemption or other
acquisition of, any Senior Subordinated Notes for the period specified below
(the "PAYMENT BLOCKAGE
58
PERIOD"). The Payment Blockage Period will commence upon the receipt of notice
of the default by the Subordinated Trustee from the holders of Senior
Indebtedness of the Issuer or a Guarantor or any representative of a holder of
such Senior Indebtedness and shall end on the earlier of (i) 120 days
thereafter, (ii) the date on which such default is cured, waived or ceases to
exist or on which such Senior Indebtedness is discharged or (iii) the date on
which such Payment Blockage Period shall have been terminated by written notice
to the Issuer or to the Subordinated Trustee from the holders of such Senior
Indebtedness or any representative of the holders of such Senior Indebtedness
initiating such Payment Blockage Period, after which the Issuer or the
Guarantor, as the case may be, shall promptly resume making any and all required
payments in respect of the Senior Subordinated Notes or the applicable
Subordinated Guarantee, including any missed payments. In no event will a
Payment Blockage period extend beyond 120 days from the date of receipt by the
Subordinated Trustee of the notice initiating such Payment Blockage period (the
"INITIAL PERIOD"). Any number of additional Payment Blockage Periods may be
commenced during the Initial Period; PROVIDED that no such additional period
shall extend beyond the Initial Period. After the expiration of the Initial
Period, no Payment Blockage Period with respect to any Subordinated Notes may be
commenced on the basis of a non-payment default on the Senior Indebtedness which
was the basis of a Payment Blockage Period commenced during the Initial Period
until 270 consecutive days have elapsed after the end of the Initial Period. No
non-payment event of default with respect to Senior Indebtedness of the Issuer
or a Guarantor that existed or was continuing on the date of the commencement of
any Payment Blockage Period with respect to the Senior Indebtedness of the
Issuer or a Guarantor initiating such Payment Blockage Period and of which such
Senior Indebtedness holder(s) are aware will be, or can be, made the basis for
the commencement of a second Payment Blockage Period whether or not within the
specified period, unless such event of default has been cured or waived for a
period of not less than 90 consecutive days. If the Issuer fails to make any
payment on any Senior Subordinated Notes when due or within any applicable grace
period, whether or not on account of the payment blockage provisions referred to
above, such failure would constitute an event of default under the Subordinated
Indenture and would enable the Holders of such Senior Subordinated Notes to
accelerate the maturity thereof. If any Guarantor fails to make any payment on
any Subordinated Guarantee when due or within any applicable grace period,
whether or not on account of the payment blockage provisions referred to above,
such failure would constitute an event of default under the Subordinated
Indenture and would enable the Holders of the Senior Subordinated Notes to
accelerate the maturity thereof.
Upon any distribution of assets of the Issuer or any Guarantor in any
dissolution winding up, liquidation or reorganization of the Issuer or such
Guarantor, payment of the principal of and premium, if any, and interest on
Senior Subordinated Notes or the applicable Subordinated Guarantee will be
subordinated to the extent and in the manner set forth in the Subordinated
Indenture to the prior payment in full of all Senior Indebtedness of the Issuer
or such Guarantor. Because of these subordination provisions, unless holders of
Senior Indebtedness of the Issuer or such Guarantor are paid in full, holders of
Senior Indebtedness of the Issuer or such Guarantor, including general creditors
(other than certain trade creditors) of the Issuer will recover more, ratably,
than Holders of the Senior Subordinated Notes.
"SENIOR INDEBTEDNESS" of any Person means (i) all Indebtedness of such
Person, (ii) lease obligations of such Person, (iii) all Indebtedness, secured
or unsecured, in connection with the acquisition of any business by such Person,
(iv) all Indebtedness secured by an mortgage, lien, pledge, charge or
encumbrance upon property owned by such Person and all Indebtedness secured in
the manner specified in this clause (iv) even if such Person has not assumed or
become liable for the payment thereof, (v) all customer deposits held in escrow
accounts by such Person pending closing of the related sales, (vi) all
indebtedness of such Person created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such Person
or otherwise representing the deferred and unpaid balance of the purchase price
of any such property, including all indebtedness created or arising in the
manner specified in this clause (vi) even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to the
rights and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property, (vii) guarantees
by such Person, direct or indirect, of any indebtedness of another Person of the
types referred to in clauses (i) through (vi) and (viii) contingent obligations
of such Person in respect of, or to purchase or otherwise acquire or be
responsible or liable for through the purchase of products or services,
irrespective of whether such products are delivered or such services are
rendered, any such indebtedness referred to in clauses (i) through (vi); which
indebtedness, lease obligation, deposit, guarantee or contingent obligation such
Person has directly or indirectly created, incurred, assumed, guaranteed or
otherwise become liable or responsible for, whether currently outstanding or
hereafter created. All references to indebtedness include any renewals,
extension, refundings, amendments and modifications of such indebtedness issued
in exchange for such indebtedness PROVIDED, HOWEVER, THAT, with respect to the
Issuer and the
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Guarantors, "Senior Indebtedness" does not include, without limitation: (a) the
Senior Subordinated Notes and the Subordinated Guarantees, (b) the 9 3/4%
Subordinated Notes due 2005 of the Issuer and the guarantee thereof by the
Guarantors, (c) accounts payable or any other indebtedness to trade creditors
created or assumed by the Issuer or a Guarantor in the ordinary course of
business in connection with the obtaining of materials or services, (d) any
liability for federal, state, local to other taxes owned or owing by the Issuer
or a Guarantor, and (e) any Indebtedness as to which, in the instrument creating
or evidencing the same or pursuant to which the same is outstanding, it is
provided that such indebtedness is on a parity with or otherwise not superior in
right of payment to the Senior Subordinated Notes or the Subordinated
Guarantees, as applicable.
REDEMPTION
Except as set forth below, the Senior Subordinated Notes will not be
redeemable prior to April 1, 2007. Thereafter, the Issuer may redeem the Senior
Notes, at its option, in whole at any time or in part from time to time.
Redemption will be at the following redemption prices plus accrued and unpaid
interest and liquidated damages, if any, to the redemption date, subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date, if redeemed during the 12-month period
commencing on April 1 of the years set forth below:
REDEMPTION
YEAR PRICE
----
2007............................... 104.000%
2008............................... 102.667%
2009............................... 101.333%
2010 and thereafter................ 100.000%
Selection of the Senior Subordinated Notes or portions thereof for
redemption pursuant to the foregoing shall be made by the Subordinated Trustee
only on a PRO RATA basis or on as nearly a PRO RATA basis as is practicable,
subject to the procedures of The Depository Trust Company, unless such method is
otherwise prohibited. Notice of redemption will be mailed at least 30 days but
not more than 60 days before the redemption date to each Holder whose Senior
Subordinated Notes are to be redeemed at the registered address of such Holder.
On and after the redemption date, interest ceases to accrue on the Senior
Subordinated Notes or portions thereof called for redemption.
There is no sinking fund for the Senior Subordinated Notes.
THE SUBORDINATED GUARANTEES
Each of the Guarantors will, so long, in the case of a Restricted
Subsidiary, as it remains a Restricted Subsidiary, unconditionally guarantee on
a joint and several basis all of our obligations under the Senior Notes,
including our obligations to pay principal, premium, if any, and interest with
respect to the Senior Subordinated Notes. The obligations of each Guarantor
other than the Company are limited to the maximum amount which, after giving
effect to all other contingent and fixed liabilities of such Guarantor and after
giving effect to any collections from or payments made by or on behalf of any
other Guarantor in respect of the obligations of such other Guarantor under its
Subordinated Guarantee or pursuant to its contribution obligations under the
Subordinated Indenture, will result in the obligations of such Guarantor under
its Subordinated Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. Each Guarantor other than the
Company that makes a payment or distribution under a Subordinated Guarantee
shall be entitled to a contribution from each other Guarantor in an amount PRO
RATA, based on the net assets of each Guarantor, determined in accordance with
GAAP. Except as provided in "--Certain Covenants" below, the Company is not
restricted from selling or otherwise disposing of any of the Guarantors.
The Subordinated Indenture requires that each existing and future
Restricted Subsidiary, other than KHL, Inc. and K. Hovnanian Poland, sp z.o.o.,
be a Guarantor. The Company is permitted to cause any Unrestricted Subsidiary to
be a Guarantor.
The Subordinated Indenture provides that if all or substantially all of
the assets of any Guarantor other than the Company or all of the Capital Stock
of any Guarantor other than the Company is sold, including by consolidation,
merger, issuance or otherwise, or disposed of, including by liquidation,
dissolution or otherwise, by
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the Company or any of its Subsidiaries, or, unless the Company elects otherwise,
if any Guarantor other than the Company is designated an Unrestricted Subsidiary
in accordance with the terms of the Subordinated Indenture, then such Guarantor,
in the event of a sale or other disposition of all of the Capital Stock of such
Guarantor or a designation as an Unrestricted Subsidiary, or the Person
acquiring such assets, in the event of a sale or other disposition of all or
substantially all of the assets of such Guarantor, shall be deemed automatically
and unconditionally released and discharged from any of its obligations under
the Subordinated Indenture without any further action on the part of the
Subordinated Trustee or any Holder of the Senior Subordinated Notes.
An Unrestricted Subsidiary that is a Guarantor shall be deemed
automatically and unconditionally released and discharged from all obligations
under its Subordinated Guarantee upon notice from the Company to the
Subordinated Trustee to such effect, without any further action required on the
part of the Subordinated Trustee or any holder.
A sale of assets or Capital Stock of a Guarantor may constitute an Asset
Disposition subject to the "Limitations on Dispositions of Assets" covenant.
CERTAIN COVENANTS
The following is a summary of certain covenants that are contained in the
Subordinated Indenture. Such covenants are applicable, unless waived or amended
as permitted by the Subordinated Indenture, so long as any of the Senior
Subordinated Notes are outstanding or until the Senior Subordinated Notes are
defeased or discharged pursuant to provisions described under "--Defeasance of
Subordinated Indenture" or "--Discharge of Subordinated Indenture".
REPURCHASE OF SENIOR SUBORDINATED NOTES UPON CHANGE OF CONTROL. In the
event that there shall occur a Change of Control, each Holder of Senior
Subordinated Notes shall have the right, at such holder's option, to require the
Issuer to purchase all or any part of such Holder's Senior Subordinated Notes on
a date, (the "REPURCHASE DATE") that is no later than 90 days after notice of
the Change of Control, at 101% of the principal amount thereof plus accrued and
unpaid interest and liquidated damages, if any, to the Repurchase Date.
On or before the thirtieth day after any Change of Control, the Issuer is
obligated to mail or cause to be mailed, to all Holders of record of Senior
Subordinated Notes a notice regarding the Change of Control and the repurchase
right. The notice shall state the Repurchase Date, the date by which the
repurchase right must be exercised, the price for the Senior Subordinated Notes
and the procedure which the Holder must follow to exercise such right.
Substantially simultaneously with mailing of the notice, the Issuer shall cause
a copy of such notice to be published in a newspaper of general circulation in
the Borough of Manhattan, The City of New York. To exercise such right, the
Holder of such Subordinated Note must deliver at least ten days prior to the
Repurchase Date written notice to the Issuer (or an agent designated by the
Issuer for such purpose) of the Holder's exercise of such right, together with
the Subordinated Note with respect to which the right is being exercised, duly
endorsed for transfer; PROVIDED, HOWEVER, that if mandated by applicable law, a
Holder may be permitted to deliver such written notice nearer to the Repurchase
Date than may be specified by the Issuer.
The Issuer will comply with applicable law, including Section 14(e) of
the Securities Exchange Act of 1934 (the "EXCHANGE ACT") and Rule 14e-1
thereunder, if applicable, if the Issuer is required to give a notice of a right
of repurchase as a result of a Change of Control.
With respect to any disposition of assets, the phrase "all or
substantially all" as used in the Subordinated Indenture (including as set forth
under "Limitations on Mergers, Consolidations and Sales of Assets" below) varies
according to the facts and circumstances of the subject transaction, has no
clearly established meaning under New York law (which governs the Subordinated
Indenture) and is subject to judicial interpretation. Accordingly, in certain
circumstances there may be a degree of uncertainty in ascertaining whether a
particular transaction would involve a disposition of "all or substantially all"
of the assets of the Company, and therefore it may be unclear as to whether a
Change of Control has occurred and whether the Holders have the right to require
the Issuer to repurchase Senior Subordinated Notes.
None of the provisions relating to a repurchase upon a Change of Control
is waivable by the Board of Directors of the Issuer or the Company. The Company
could, in the future, enter into certain transactions, including certain
recapitalizations of the Company, that would not result in a Change of Control,
but would increase the amount of Indebtedness outstanding at such time.
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The Subordinated Indenture requires the payment of money for Senior
Subordinated Notes or portions thereof validly tendered to and accepted for
payment by the Issuer pursuant to a Change of Control offer. In the event that a
Change of Control has occurred under the Subordinated Indenture, a change of
control will also have occurred under the Senior Indenture (as defined under
"Description of the Exchange Notes -- 8.000% Senior Notes due 2012" above) and
under the indentures governing the Issuer's 10 1/2% Senior Notes due 2007, 9?%
Senior Notes due 2009 and under the Revolving Credit Facility and the Term Loan
Facility. If a Change of Control were to occur, there can be no assurance that
the Issuer would have sufficient funds to pay the purchase price for all Senior
Subordinated Notes and amounts due under other Indebtedness that the Company may
be required to repurchase or repay or that the Company or the other Guarantors
would be able to make such payments. In the event that the Issuer were required
to purchase outstanding Senior Subordinated Notes pursuant to a Change of
Control offer, the Company expects that it would need to seek third-party
financing to the extent it does not have available funds to enable the Issuer to
meet its purchase obligations. However, there can be no assurance that the
Company would be able to obtain such financing.
Failure by the Issuer to purchase the Senior Subordinated Notes when
required upon a Change of Control will result in an Event of Default with
respect to the Senior Subordinated Notes.
These provisions could have the effect of deterring hostile or friendly
acquisitions of the Company where the Person attempting the acquisition views
itself as unable to finance the purchase of the principal amount of Senior
Subordinated Notes which may be tendered to the Company upon the occurrence of a
Change of Control.
LIMITATIONS ON INDEBTEDNESS. The Subordinated Indenture provides that the
Company and the Issuer will not, and will not cause or permit any Restricted
Subsidiary, directly or indirectly, to create, incur, assume, become liable for
or guarantee the payment of (which we refer to collectively as an "INCURRENCE")
any Indebtedness (including Acquired Indebtedness) unless, after giving effect
thereto and the application of the proceeds therefrom, the Consolidated Fixed
Charge Coverage Ratio on the date thereof would be at least 2.0 to 1.0.
Notwithstanding the foregoing, the provisions of the Subordinated
Indenture will not prevent the incurrence of:
(1) Permitted Indebtedness,
(2) Refinancing Indebtedness,
(3) Non-Recourse Indebtedness,
(4) any Subordinated Guarantee of Indebtedness represented by the
Senior Subordinated Notes, and
(5) any guarantee of Indebtedness incurred under Credit Facilities in
compliance with the Subordinated Indenture.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness may be incurred through the first paragraph of this
covenant or by meeting the criteria of one or more of the types of Indebtedness
described in the second paragraph of this covenant (or the definitions of the
terms used therein) the Company, in its sole discretion,
(1) may classify such item of Indebtedness under and comply with
either of such paragraphs, or any of such definitions, as
applicable,
(2) may classify and divide such item of Indebtedness into more than
one of such paragraphs, or definitions, as applicable, and
(3) may elect to comply with such paragraphs (or definitions), as
applicable, in any order.
The Company and the Issuer will not, and will not cause or permit any
Guarantor to, directly or indirectly, in any event incur any Indebtedness that
purports to be by its terms (or by the terms of any agreement governing such
Indebtedness) subordinated to any other Indebtedness of the Company or of such
Guarantor, as the case may be, unless such Indebtedness is also by its terms (or
by the terms of any agreement governing such Indebtedness) made expressly
subordinated to the Senior Subordinated Notes or the Subordinated Guarantee of
such Guarantor, as the case may be, to the same extent and in the same manner as
such Indebtedness is subordinated to such other Indebtedness of the Company or
such Guarantor, as the case may be.
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LIMITATIONS ON RESTRICTED PAYMENTS. The Subordinated Indenture provides
that the Company and the Issuer will not, and will not cause or permit any
Restricted Subsidiary to, directly or indirectly, make any Restricted Payment
unless:
(1) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to
such Restricted Payment;
(2) immediately after giving effect to such Restricted Payment, the
Company could incur at least $1.00 of Indebtedness pursuant to the
first paragraph of the "Limitations on Indebtedness" covenant; and
(3) immediately after giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments (including the Fair
Market Value of any non-cash Restricted Payment) declared or made
after May 4, 1999 does not exceed the sum of:
(a) 50% of the Consolidated Net Income of the Company on a
cumulative basis during the period taken as one accounting
period) from and including February 1, 1999 and ending on
the last day of the Company's fiscal quarter immediately
preceding the date of such Restricted Payment (or in the
event such Consolidated Net Income shall be a deficit,
MINUS 100% of such deficit), PLUS
(b) 100% of the aggregate net cash proceeds of and the Fair
Market Value of Property received by the Company from (1)
any capital contribution to the Company after February 1,
1999 or any issue or sale after February 1, 1999 of
Qualified Stock (other than to any Subsidiary of the
Company) and (2) the issue or sale after February 1, 1999
of any Indebtedness or other securities of the Company
convertible into or exercisable for Qualified Stock of the
Company that have been so converted or exercised, as the
case may be, PLUS
(c) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made after May
4, 1999, an amount (to the extent not included in the
calculation of Consolidated Net Income referred to in (a))
equal to the lesser of (x) the return of capital with
respect to such Investment (including by dividend,
distribution or sale of Capital Stock) and (y) the amount
of such Investment that was treated as a Restricted
Payment, in either case, less the cost of the disposition
or repayment of such Investment (to the extent not included
in the calculation of Consolidated Net Income referred to
in (a)), PLUS
(d) with respect to any Unrestricted Subsidiary that is
redesignated as a Restricted Subsidiary after May 4, 1999,
in accordance with the definition of Unrestricted
Subsidiary (so long as the designation of such Subsidiary
as an Unrestricted Subsidiary was treated as a Restricted
Payment made after the Issue Date, and only to the extent
not included in the calculation of Consolidated Net Income
referred to in (a)), an amount equal to the lesser of (x)
the proportionate interest of the Company or a Restricted
Subsidiary in an amount equal to the excess of (I) the
total assets of such Subsidiary, valued on an aggregate
basis at the lesser of book value and Fair Market Value
thereof, over (II) the total liabilities of such
Subsidiary, determined in accordance with GAAP, and (y) the
Designation Amount at the time of such Subsidiary's
designation as an Unrestricted Subsidiary, PLUS
(e) $17 million, MINUS
(f) the aggregate amount of all Restricted Payments (other than
Restricted Payments referred to in clause (C) of the
immediately succeeding paragraph) made after February 1,
1999 through May 4, 1999.
The foregoing clauses (2) and (3) will not prohibit:
(A) the payment of any dividend within 60 days of its declaration if
such dividend could have been made on the date of its declaration
without violation of the provisions of the Subordinated Indenture;
(B) the repurchase, redemption or retirement of any shares of Capital
Stock of the Company in exchange for, or out of the net proceeds
of the substantially concurrent sale (other than to a Subsidiary
of the Company) of, other shares of Qualified Stock; and
63
(C) the purchase, redemption or other acquisition, cancellation or
retirement for value of Capital Stock, or options, warrants,
equity appreciation rights or other rights to purchase or acquire
Capital Stock, of the Company or any Subsidiary held by officers
or employees or former officers or employees of the Company or any
Subsidiary (or their estates or beneficiaries under their estates)
not to exceed $10 million in the aggregate since May 4, 1999;
PROVIDED, HOWEVER, that each Restricted Payment described in clauses (A) and (B)
of this sentence shall be taken into account for purposes of computing the
aggregate amount of all Restricted Payments pursuant to clause (3) of the
immediately preceding paragraph.
For purposes of determining the aggregate and permitted amounts of
Restricted Payments made, the amount of any guarantee of any Investment in any
Person that was initially treated as a Restricted Payment and which was
subsequently terminated or expired, net of any amounts paid by the Company or
any Restricted Subsidiary in respect of such guarantee, shall be deducted.
In determining the "Fair Market Value of Property" for purposes of clause
(3) of the first paragraph of this covenant, Property other than cash, Cash
Equivalents and Marketable Securities shall be deemed to be equal in value to
the "equity value" of the Capital Stock or other securities issued in exchange
therefor. The equity value of such Capital Stock or other securities shall be
equal to (i) the number of shares of Common Equity issued in the transaction (or
issuable upon conversion or exercise of the Capital Stock or other securities
issued in the transaction) multiplied by the closing sale price of the Common
Equity on its principal market on the date of the transaction (less, in the case
of Capital Stock or other securities which require the payment of consideration
at the time of conversion or exercise, the aggregate consideration payable
thereupon) or (ii) if the Common Equity is not then traded on the New York Stock
Exchange, American Stock Exchange or Nasdaq National Market, or if the Capital
Stock or other securities issued in the transaction do not consist of Common
Equity (or Capital Stock or other securities convertible into or exercisable for
Common Equity), the value (if more than $10 million) of such Capital Stock or
other securities as determined by a nationally recognized investment banking
firm retained by the Board of Directors of the Company.
LIMITATIONS ON TRANSACTIONS WITH AFFILIATES. The Subordinated Indenture
provides that the Company and the Issuer will not, and will not cause or permit
any Restricted Subsidiary to, make any loan, advance, guarantee or capital
contribution to, or for the benefit of, or sell, lease, transfer or otherwise
dispose of any property or assets to or for the benefit of, or purchase or lease
any property or assets from, or enter into or amend any contract, agreement or
understanding with, or for the benefit of, any Affiliate of the Company or any
Affiliate of any of the Company's Subsidiaries or any holder of 10% or more of
the Common Equity of the Company (including any Affiliates of such holders), in
a single transaction or series of related transactions (each, an "AFFILIATE
TRANSACTION"), except for any Affiliate Transaction the terms of which are at
least as favorable as the terms which could be obtained by the Company, the
Issuer or such Restricted Subsidiary, as the case may be, in a comparable
transaction made on an arm's length basis with Persons who are not such a
holder, an Affiliate of such a holder or an Affiliate of the Company or any of
the Company's Subsidiaries.
In addition, the Company and the Issuer will not, and will not cause or
permit any Restricted Subsidiary to, enter into an Affiliate Transaction unless:
(1) with respect to any such Affiliate Transaction involving or having
a value of more than $1 million, the Company shall have (x)
obtained the approval of a majority of the Board of Directors of
the Company and (y) either obtained the approval of a majority of
the Company's disinterested directors or obtained an opinion of a
qualified independent financial advisor to the effect that such
Affiliate Transaction is fair to the Company, the Issuer or such
Restricted Subsidiary, as the case may be, from a financial point
of view, and
(2) with respect to any such Affiliate Transaction involving or having
a value of more than $10 million, the Company shall have (x)
obtained the approval of a majority of the Board of Directors of
the Company and (y) delivered to the Trustee an opinion of a
qualified independent financial advisor to the effect that such
Affiliate Transaction is fair to the Company, the Issuer or such
Restricted Subsidiary, as the case may be, from a financial point
of view.
The Subordinated Indenture also provides that notwithstanding the
foregoing, an Affiliate Transaction will not include:
64
(1) any contract, agreement or understanding with, or for the benefit
of, or plan for the benefit of, employees of the Company or its
Subsidiaries generally (in their capacities as such) that has been
approved by the Board of Directors of the Company,
(2) Capital Stock issuances to directors, officers and employees of
the Company or its Subsidiaries pursuant to plans approved by the
stockholders of the Company,
(3) any Restricted Payment otherwise permitted under the "Limitations
on Restricted Payments" covenant,
(4) any transaction between or among the Company and one or more
Restricted Subsidiaries or between or among Restricted
Subsidiaries (PROVIDED, HOWEVER, no such transaction shall involve
any other Affiliate of the Company (other than an Unrestricted
Subsidiary to the extent the applicable amount constitutes a
Restricted Payment permitted by the Subordinated Indenture)),
(5) any transaction between one or more Restricted Subsidiaries and
one or more Unrestricted Subsidiaries where all of the payments
to, or other benefits conferred upon, such Unrestricted
Subsidiaries are substantially contemporaneously dividended, or
otherwise distributed or transferred without charge, to the
Company or a Restricted Subsidiary,
(6) issuances, sales or other transfers or dispositions of mortgages
and collateralized mortgage obligations in the ordinary course of
business between Restricted Subsidiaries and Unrestricted
Subsidiaries of the Company, and
(7) the payment of reasonable and customary fees to, and indemnity
provided on behalf of, officers, directors, employees or
consultants of the Company, the Issuer or any Restricted
Subsidiary.
LIMITATIONS ON DISPOSITIONS OF ASSETS. The Subordinated Indenture
provides that the Company and the Issuer will not, and will not cause or permit
any Restricted Subsidiary to, make any Asset Disposition unless:
(A) the Company (or such Restricted Subsidiary, as the case may
be) receives consideration at the time of such Asset
Disposition at least equal to the Fair Market Value
thereof, and
(B) not less than 70% of the consideration received by the
Company (or such Restricted Subsidiary, as the case may be)
is in the form of cash, Cash Equivalents and Marketable
Securities.
The amount of (1) any Indebtedness (other than any Indebtedness
subordinated to the Senior Subordinated Notes) of the Company or any Restricted
Subsidiary that is actually assumed by the transferee in such Asset Disposition
and (2) the fair market value (as determined in good faith by the Board of
Directors of the Company) of any property or assets received that are used or
useful in a Real Estate Business, shall be deemed to be consideration required
by clause (B) above for purposes of determining the percentage of such
consideration received by the Company or the Restricted Subsidiaries.
The Net Cash Proceeds of an Asset Disposition shall, within one year, at
the Company's election, (a) be used by the Company or a Restricted Subsidiary in
the business of the construction and sale of homes conducted by the Company and
the Restricted Subsidiaries or any other business of the Company or a Restricted
Subsidiary existing at the time of such Asset Disposition, (b) be used to repay
Senior Indebtedness of the Issuer or any Guarantor or (c) to the extent not so
used, be applied to make a Net Cash Proceeds offer for the Senior Subordinated
Notes and, if the Company or a Restricted Subsidiary elects or is required to do
so repay, purchase or redeem any other unsubordinated Indebtedness (on a PRO
RATA basis if the amount available for such repayment, purchase or redemption is
less than the aggregate amount of (1) the principal amount of the Senior
Subordinated Notes tendered in such Net Cash Proceeds Offer and (2) the lesser
of the principal amount, or accreted value, of such other unsubordinated
Indebtedness, plus, in each case accrued interest to the date of repayment,
purchase or redemption) at 100% of the principal amount or accreted value
thereof, as the case may be, plus accrued and unpaid interest and liquidated
damages, if any, to the date of repurchase or repayment.
Notwithstanding the foregoing, (A) the Company will not be required to
apply such Net Cash Proceeds to the repurchase of Senior Subordinated Notes in
accordance with clause (c) of the preceding sentence except to the extent that
such Net Cash Proceeds, together with the aggregate Net Cash Proceeds of prior
Asset Dispositions (other than those so used) which have not been applied in
accordance with this provision and as to which no prior
65
Net Cash Proceeds offer shall have been made, exceed 5% of Consolidated Tangible
Assets and (B) in connection with an Asset Disposition, the Company and the
Restricted Subsidiaries will not be required to comply with the requirements of
clause (B) of the first sentence of the first paragraph of this covenant to the
extent that the non-cash consideration received in connection with such Asset
Disposition, together with the sum of all non-cash consideration received in
connection with all prior Asset Dispositions that has not yet been converted
into cash, does not exceed 5% of Consolidated Tangible Assets; PROVIDED,
HOWEVER, that when any non-cash consideration is converted into cash, such cash
shall constitute Net Cash Proceeds and be subject to the preceding sentence.
LIMITATIONS ON LIENS. The Subordinated Indenture provides that the
Company and the Issuer will not, and will not cause or permit any Restricted
Subsidiary to, create, incur, assume or suffer to exist any Liens, other than
Permitted Liens, on any of its Property, or on any shares of Capital Stock or
Indebtedness of any Restricted Subsidiary, which secures indebtedness other than
Senior Indebtedness unless contemporaneously therewith or prior thereto all
payments due under the Subordinated Indenture and the Senior Subordinated Notes
are secured on an equal and ratable basis with the obligation or liability so
secured until such time as such indebtedness is no longer secured by a Lien.
LIMITATION ON SENIOR SUBORDINATED INDEBTEDNESS. The Company and the
Issuer will not, and will not cause or permit any Guarantor to, incur any
Indebtedness that is subordinate in right of payment to any Senior Indebtedness
unless such Indebtedness is PARI PASSU with, or subordinated in right of payment
to, the Subordinated Notes or any Subordinated Note Guarantee; PROVIDED that the
foregoing limitation shall not apply to distinctions between categories of
Senior Indebtedness that exist by reason of any Liens or guarantees arising or
created in respect of some but not all such Senior Indebtedness or priorities of
paydown, from proceeds of collateral or otherwise, among classes or tranches of
any issue of Senior Indebtedness.
LIMITATIONS ON RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES. The
Subordinated Indenture provides that the Company and the Issuer will not, and
will not cause or permit any Restricted Subsidiary to, create, assume or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction (other than encumbrances or restrictions imposed by
law or by judicial or regulatory action or by provisions of agreements that
restrict the assignability thereof) on the ability of any Restricted Subsidiary
to:
(1) pay dividends or make any other distributions on its Capital Stock
or any other interest or participation in, or measured by, its
profits, owned by the Company or any other Restricted Subsidiary,
or pay interest on or principal of any Indebtedness owed to the
Company or any other Restricted Subsidiary,
(2) make loans or advances to the Company or any other Restricted
Subsidiary, or
(3) transfer any of its property or assets to the Company or any other
Restricted Subsidiary, except for:
(a) encumbrances or restrictions existing under or by reason of
applicable law,
(b) contractual encumbrances or restrictions in effect on the
Issue Date and any amendments, modifications, restatements,
renewals, supplements, refundings, replacements or
refinancings thereof, provided that such amendments,
modifications, restatements, renewals, supplements,
refundings, replacements or refinancings are no more
restrictive, taken as a whole, with respect to such
dividend and other payment restrictions than those
contained in such contractual encumbrances or restrictions,
as in effect on May 4, 1999,
(c) any restrictions or encumbrances arising under Acquired
Indebtedness; provided, that such encumbrance or
restriction applies only to either the assets that were
subject to the restriction or encumbrance at the time of
the acquisition or the obligor on such Indebtedness and its
Subsidiaries prior to such acquisition,
(d) any restrictions or encumbrances arising in connection with
Refinancing Indebtedness; PROVIDED, HOWEVER, that any
restrictions and encumbrances of the type described in this
clause (d) that arise under such Refinancing Indebtedness
shall not be materially more restrictive or apply to
additional assets than those under the agreement creating
or evidencing the Indebtedness being refunded, refinanced,
replaced or extended,
66
(e) any Permitted Lien, or any other agreement restricting the
sale or other disposition of property, securing
Indebtedness permitted by the Subordinated Indenture if
such Permitted Lien or agreement does not expressly
restrict the ability of a Subsidiary of the Company to pay
dividends or make or repay loans or advances prior to
default thereunder,
(f) reasonable and customary borrowing base covenants set forth
in agreements evidencing Indebtedness otherwise permitted
by the Subordinated Indenture,
(g) customary non-assignment provisions in leases, licenses,
encumbrances, contracts or similar assets entered into or
acquired in the ordinary course of business,
(h) any restriction with respect to a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale
or disposition of all or substantially all of the Capital
Stock or assets of such Restricted Subsidiary pending the
closing of such sale or disposition,
(i) encumbrances or restrictions existing under or by reason of
the Subordinated Indenture or the Senior Subordinated
Notes,
(j) purchase money obligations that impose restrictions on the
property so acquired of the nature described in clause (3)
of the preceding paragraph,
(k) Liens permitted under the Subordinated Indenture securing
Indebtedness that limit the right of the debtor to dispose
of the assets subject to such Lien,
(l) provisions with respect to the disposition or distribution
of assets or property in joint venture agreements, assets
sale agreements, stock sale agreements and other similar
agreements,
(m) customary provisions of any franchise, distribution or
similar agreements,
(n) restrictions on cash or other deposits or net worth imposed
by contracts entered into in the ordinary course of
business, and
(o) any encumbrance or restrictions of the type referred to in
clauses (1), (2) or (3) of the first paragraph of this
section imposed by any amendments, modifications,
restatements, renewals, supplements, refinancings,
replacements or refinancings of the contracts, instruments
or obligations referred to in clauses (a) through (n) of
this paragraph, provided that such amendments,
modifications, restatements, renewals, supplements,
refundings, replacements or refinancings are, in the good
faith judgment of the Company's Board of Directors, no more
restrictive with respect to such dividend and other payment
restrictions than those contained in the dividend or other
payment restrictions prior to such amendment, modification,
restatement, renewal, supplement, refunding, replacement or
refinancing.
LIMITATIONS ON MERGERS, CONSOLIDATIONS AND SALES OF ASSETS. The
Subordinated Indenture provides that neither the Issuer nor any Guarantor will
consolidate or merge with or into, or sell, lease, convey or otherwise dispose
of all or substantially all of its assets (including, without limitation, by way
of liquidation or dissolution), or assign any of its obligations under the
Senior Subordinated Notes, the Subordinated Guarantees or the Subordinated
Indenture (as an entirety or substantially as an entirety in one transaction or
in a series of related transactions), to any Person (in each case other than in
a transaction in which the Company, the Issuer or a Restricted Subsidiary is the
survivor of a consolidation or merger, or the transferee in a sale, lease,
conveyance or other disposition) unless:
(1) the Person formed by or surviving such consolidation or merger (if
other than the Company, the Issuer or the Guarantor, as the case
may be), or to which such sale, lease, conveyance or other
disposition or assignment will be made (collectively, the
"SUCCESSOR"), is a corporation or other legal entity organized and
existing under the laws of the United States or any state thereof
or the District of Columbia, and the Successor assumes by
supplemental indenture in a form reasonably satisfactory to the
Trustee all of the obligations of the Company, the Issuer or the
Guarantor, as the case may be, under the Senior Subordinated Notes
or a Subordinated Guarantee, as the case may be, and the
Subordinated Indenture,
(2) immediately after giving effect to such transaction, no Default or
Event of Default has occurred and is continuing, and
67
(3) immediately after giving effect to such transaction, the Company
(or its Successor) could incur at least $1.00 of Indebtedness
pursuant to the first paragraph of the "Limitation on
Indebtedness" covenant.
The foregoing provisions shall not apply to:
o a transaction involving the sale or disposition of Capital
Stock of a Guarantor, or the consolidation or merger of a
Guarantor, or the sale, lease, conveyance or other
disposition of all or substantially all of the assets of a
Guarantor, that in any such case results in such Guarantor
being released from its Subordinated Guarantee as provided
under "--The Subordinated Guarantees" above, or
o a transaction the purpose of which is to change the state
of incorporation of the Company, the Issuer or any
Guarantor.
REPORTS TO HOLDERS OF SENIOR SUBORDINATED NOTES. The Company shall file
with the Commission the annual reports and the information, documents and other
reports required to be filed pursuant to Section 13 or 15(d) of the Exchange
Act. The Company shall file with the Trustee and mail to each holder of record
of Senior Subordinated Notes such reports, information and documents within 15
days after it files them with the Commission. In the event that the Company is
no longer subject to these periodic requirements of the Exchange Act, it will
nonetheless continue to file reports with the Commission and the Subordinated
Trustee and mail such reports to each holder of Senior Subordinated Notes as if
it were subject to such reporting requirements. Regardless of whether the
Company is required to furnish such reports to its stockholders pursuant to the
Exchange Act, the Company will cause its consolidated financial statements and a
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" written report, similar to those that would have been required to
appear in annual or quarterly reports, to be delivered to Holders of Senior
Subordinated Notes.
EVENTS OF DEFAULT
The following are Events of Default under the Subordinated Indenture:
(1) the failure by the Company, the Issuer and the Guarantors to pay
interest on, or liquidated damages with respect to, any Note when
the same becomes due and payable and the continuance of any such
failure for a period of 30 days;
(2) the failure by the Company, the Issuer and the Guarantors to pay
the principal or premium of any Subordinated Note when the same
becomes due and payable at maturity, upon acceleration or
otherwise;
(3) the failure by the Company, the Issuer or any Restricted
Subsidiary to comply with any of its agreements or covenants in,
or provisions of, the Senior Subordinated Notes, the Subordinated
Guarantees or the Subordinated Indenture and such failure
continues for the period and after the notice specified below
(except in the case of a default under covenants described under
"Certain Covenants--Repurchase of Senior Subordinated Notes upon
Change of Control" and "Limitations on Mergers, Consolidations and
Sales of Assets," which will constitute Events of Default with
notice but without passage of time);
(4) the acceleration of any Indebtedness (other than Non-Recourse
Indebtedness) of the Company, the Issuer or any Restricted
Subsidiary that has an outstanding principal amount of $10 million
or more, individually or in the aggregate, and such acceleration
does not cease to exist, or such Indebtedness is not satisfied, in
either case within 30 days after such acceleration;
(5) the failure by the Company, the Issuer or any Restricted
Subsidiary to make any principal or interest payment in an amount
of $10 million or more, individually or in the aggregate, in
respect of Indebtedness (other than Non-Recourse Indebtedness) of
the Company or any Restricted Subsidiary within 30 days of such
principal or interest becoming due and payable (after giving
effect to any applicable grace period set forth in the documents
governing such Indebtedness);
(6) a final judgment or judgments that exceed $10 million or more,
individually or in the aggregate, for the payment of money having
been entered by a court or courts of competent jurisdiction
68
against the Company, the Issuer or any of its Restricted
Subsidiaries and such judgment or judgments is not satisfied,
stayed, annulled or rescinded within 60 days of being entered;
(7) the Company or any Restricted Subsidiary that is a Significant
Subsidiary pursuant to or within the meaning of any Bankruptcy
Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in
an involuntary case,
(c) consents to the appointment of a Custodian of it or for all
or substantially all of its property, or
(d) makes a general assignment for the benefit of creditors.
(8) A court of competent jurisdiction enters an order or decree under
any Bankruptcy law that:
(a) is for relief against the Company or any Restricted
Subsidiary that is a Significant Subsidiary as debtor in an
involuntary case,
(b) appoints a Custodian of the Company or any Restricted
Subsidiary that is a Significant Subsidiary or a Custodian
for all or substantially all of the property of the Company
or any Restricted Subsidiary that is a Significant
Subsidiary, or
(c) orders the liquidation of the Company or any Restricted
Subsidiary that is a Significant Subsidiary,
and the order remains unstayed and in effect for 60 days or
(9) any Subordinated Guarantee of a Guarantor which is a Significant
Subsidiary ceases to be in full force and effect (other than in
accordance with the terms of such Subordinated Guarantee and the
Subordinated Indenture) or is declared null and void and
unenforceable or found to be invalid or any Guarantor denies its
liability under its Subordinated Guarantee (other than by reason
of release of a Guarantor from its Subordinated Guarantee in
accordance with the terms of the Subordinated Indenture and the
Subordinated Guarantee).
A Default as described in subclause (3) above will not be deemed an Event
of Default until the Subordinated Trustee notifies the Company, or the Holders
of at least 25 percent in principal amount of the then outstanding Senior
Subordinated Notes notify the Company and the Trustee, of the Default and
(except in the case of a default with respect to covenants described under
"Certain Covenants--Repurchase of Senior Subordinated Notes upon Change of
Control" and "Limitations on Mergers, Consolidations and Sales of Assets") the
Company does not cure the Default within 60 days after receipt of the notice.
The notice must specify the Default, demand that it be remedied and state that
the notice is a "Notice of Default." If such a Default is cured within such time
period, it ceases.
If an Event of Default (other than an Event of Default with respect to
the Company resulting from subclauses (7) or (8) above), shall have occurred and
be continuing under the Subordinated Indenture, the Subordinated Trustee by
notice to the Company, or the Holders of at least 25 percent in principal amount
of the Senior Subordinated Notes then outstanding by notice to the Company and
the Subordinated Trustee, may declare all Senior Subordinated Notes to be due
and payable immediately. Upon such declaration of acceleration, the amounts due
and payable on the Senior Subordinated Notes will be due and payable
immediately. If an Event of Default with respect to the Company specified in
subclauses (7) or (8) above occurs, such an amount will IPSO FACTO become and be
immediately due and payable without any declaration, notice or other act on the
part of the Trustee and the Company or any Holder.
The Holders of a majority in principal amount of the Senior Subordinated
Notes then outstanding by written notice to the Subordinated Trustee and the
Company may waive any Default or Event of Default (other than any Default or
Event of Default in payment of principal or interest) on the Senior Subordinated
Notes under the Subordinated Indenture. Holders of a majority in principal
amount of the then outstanding Senior Subordinated Notes may rescind an
acceleration and its consequence (except an acceleration due to nonpayment of
principal or interest on the Senior Subordinated Notes) if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
(other than the non-payment of accelerated principal) have been cured or waived.
69
The Holders may not enforce the provisions of the Subordinated Indenture,
the Senior Subordinated Notes or the Subordinated Guarantees except as provided
in the Subordinated Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the Senior Subordinated Notes then outstanding
may direct the Subordinated Trustee in its exercise of any trust or power,
PROVIDED, HOWEVER, that such direction does not conflict with the terms of the
Subordinated Indenture. The Subordinated Trustee may withhold from the Holders
notice of any continuing Default or Event of Default (except any Default or
Event of Default in payment of principal or interest on the Subordinated Notes
or that resulted from the failure to comply with the covenant entitled
"Repurchase of Notes upon Change of Control") if the Subordinated Trustee
determines that withholding such notice is in the Holders' interest.
The Company is required to deliver to the Subordinated Trustee an annual
statement regarding compliance with the Subordinated Indenture, and include in
such statement, if any officer of the Company is aware of any Default or Event
of Default, a statement specifying such Default or Event of Default and what
action the Company is taking or proposes to take with respect thereto. In
addition, the Company is required to deliver to the Subordinated Trustee prompt
written notice of the occurrence of any Default or Event of Default.
DEFEASANCE OF SUBORDINATED INDENTURE
The Subordinated Indenture permits the Issuer, the Company and the other
Guarantors to terminate all of their respective obligations under the
Subordinated Indenture with respect to the Senior Subordinated Notes and the
Subordinated Guarantees, other than the obligation to pay interest on and the
principal of the Senior Subordinated Notes and certain other obligations, at any
time by
o depositing in trust with the Subordinated Trustee, under an
irrevocable trust agreement, money or U.S. government obligations
in an amount sufficient to pay principal of and interest and
liquidated damages, if any, on the Senior Subordinated Notes to
their maturity, and
o complying with certain other conditions, including delivery to the
Subordinated Trustee of an opinion of counsel or a ruling received
from the Internal Revenue Service to the effect that Holders will
not recognize income, gain or loss for federal income tax purposes
as a result of the Company's exercise of such right and will be
subject to federal income tax on the same amount and in the same
manner and at the same times as would have been the case
otherwise.
In addition, the Subordinated Indenture permits the Company, the Issuer
and the Guarantors to terminate all of their obligations under the Subordinated
Indenture with respect to the Senior Subordinated Notes and the Subordinated
Guarantees (including the obligations to pay interest on and the principal of
the Subordinated Notes and certain other obligations), at any time by
o depositing in trust with the Subordinated Trustee, under an
irrevocable trust agreement, money or U.S. government obligations
in an amount sufficient to pay principal of and interest and
liquidated damages, if any, on the Senior Subordinated Notes to
their maturity, and
o complying with certain other conditions, including delivery to the
Subordinated Trustee of an opinion of counsel or a ruling,
received from the Internal Revenue Service, to the effect that
Holders will not recognize income, gain or loss for federal income
tax purposes as a result of the Company's exercise of such right
and will be subject to federal income tax on the same amount and
in the same manner and at the same times as would have been the
case otherwise, which opinion of counsel is based upon a change in
the applicable federal tax law since the date of the Subordinated
Indenture.
DISCHARGE OF SUBORDINATED INDENTURE
The Issuer, the Company and the other Guarantors may terminate all of
their respective obligations under the Subordinated Indenture with respect to
the Senior Subordinated Notes, the Subordinated Indenture and the Subordinated
Guarantees, other than the obligation to pay interest on and the principal of
the Senior Subordinated Notes and certain other obligations to the Subordinated
Trustee, if:
o all Senior Subordinated Notes previously authenticated and
delivered, other than those destroyed, lost, replaced or stolen,
those previously paid in accordance with the Subordinated
Indenture or those for whose payment money or U.S. Government
Obligations have been held in trust, have been delivered to
70
the Subordinated Trustee for cancellation and the Issuer had paid
all sums payable by it under the Subordinated Indenture; or
o the Senior Subordinated Notes mature within one year, or all of
them are called for redemption within one year under arrangements
satisfactory to the Subordinated Trustee for giving notice of
redemption; the Issuer deposits in trust with the Subordinated
Trustee, under an irrevocable trust agreement, money or U.S.
government obligations in an amount sufficient to pay principal of
and interest and liquidated damages, if any, on the Senior
Subordinated Notes to their maturity or redemption, as the case
may be; no Default has occurred and is continuing on the date of
the deposit and the deposit will not result in a breach or
violation of, or constitute a default under the Subordinated
Indenture or any other agreement binding the Issuer; and the
Issuer delivers to the Subordinated Trustee an Officer's
Certificate and an Opinion of Counsel, in each case, stating that
all the conditions precedent provided in the Subordinated
Indenture for satisfaction and discharge of the Subordinated
Indenture have been complied with.
In either case, the Subordinated Trustee, upon request, and at the
expense of the Issuer, will provide written acknowledgement of the discharge of
the Issuer's obligations under the Senior Subordinated Notes and the
Subordinated Indenture, except for certain surviving obligations.
TRANSFER AND EXCHANGE
A Holder may transfer or Senior Subordinated Notes only in accordance
with the provisions of the Subordinated Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents, and to pay any taxes and fees required by law or permitted by the
Subordinated Indenture.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Subordinated Indenture, the Senior
Subordinated Notes or the Subordinated Guarantees may be amended or supplemented
with the consent (which may include consents obtained in connection with a
tender offer or exchange offer for Senior Subordinated Notes) of the Holders of
at least a majority in principal amount of the Senior Subordinated Notes then
outstanding, and any existing Default under, or compliance with any provision of
the Subordinated Indenture may be waived (other than any continuing Default or
Event of Default in the payment of interest on or the principal of the
Subordinated Notes) with the consent (which may include consents obtained in
connection with a tender offer or exchange offer for Subordinated Notes) of the
Holders of a majority in principal amount of the Senior Subordinated Notes then
outstanding. Without the consent of any Holder, the Company, the Issuer, the
Guarantors and the Subordinated Trustee may amend or supplement the Subordinated
Indenture, the Senior Subordinated Notes or the Subordinated Guarantees to cure
any ambiguity, defect or inconsistency; to comply with the "Limitations on
Mergers, Consolidations and Sales of Assets" covenant set forth in the
Subordinated Indenture; to provide for uncertificated Senior Subordinated Notes
in addition to or in place of certificated Senior Subordinated Notes; to make
any change that does not adversely affect the legal rights of any Holder; to add
a Guarantor; or to delete a Guarantor which, in accordance with the terms of the
Subordinated Indenture, ceases to be liable on its Subordinated Guarantee.
Without the consent of each Holder affected, the Company, the Issuer, the
Guarantors and the Subordinated Trustee may not:
(1) reduce the amount of Senior Subordinated Notes whose Holders must
consent to an amendment, supplement or waiver,
(2) reduce the rate of or change the time for payment of interest,
including default interest, on any Subordinated Note,
(3) reduce the principal of or change the fixed maturity of any
Subordinated Note or alter the provisions (including related
definitions) with respect to redemptions described under "Optional
Redemption" or with respect to mandatory offers to repurchase
Senior Subordinated Notes described under "Limitations on
Dispositions of Assets" or "Repurchase of Senior Subordinated
Notes upon Change of Control",
(4) make any Subordinated Note payable in money other than that stated
in the Subordinated Note,
71
(5) make any change in the "Waiver of Past Defaults and Compliance
with Indenture Provisions," "Rights of Holders to Receive Payment"
or the "With Consent of Holders" sections set forth in the
Subordinated Indenture,
(6) modify the ranking or priority of the Senior Subordinated Notes or
any Subordinated Guarantee,
(7) release any Guarantor from any of its obligations under its
Subordinated Guarantee or the Subordinated Indenture otherwise
than in accordance with the Subordinated Indenture, or
(8) waive a continuing Default or Event of Default in the payment of
principal of or interest on the Senior Subordinated Notes.
The right of any Holder to participate in any consent required or sought
pursuant to any provision of the Subordinated Indenture (and our obligation to
obtain any such consent otherwise required from such Holder) may be subject to
the requirement that such Holder shall have been the Holder of record of any
Notes with respect to which such consent is required or sought as of a date
identified by the Trustee in a notice furnished to Holders in accordance with
the terms of the Subordinated Indenture.
STATEMENT AS TO COMPLIANCE
The Company must deliver to the Subordinated Trustee, within 120 days
after the end of each fiscal year, a written statement by the Company's
independent public accountants stating (A) that their audit examination has
included a review of the terms of the Subordinated Indenture and the Senior
Subordinated Notes as they relate to accounting matters, and (B) whether, in
connection with their audit examination, any Default has come to their attention
and, if a Default has come to their attention, specifying the nature and period
of the existence thereof.
The Company must also deliver to the Subordinated Trustee, on or prior to
each Interest Payment Date, an Officer's Certificate setting forth the amount of
Liquidated Damages, if any, the Issuer is required to pay on that Interest
Payment Date. If no Liquidated Damages are required to be paid on a given
Interest Payment Date, no Officer's Certificate is required to be delivered to
the Subordinated Trustee for that Interest Payment Date.
GOVERNING LAW
The Subordinated Indenture, the Senior Subordinated Notes and the
Subordinated Guarantees are governed by the laws of the State of New York.
DEFINITIONS OF CERTAIN TERMS USED IN THE SUBORDINATED INDENTURE
Set forth below is a summary of certain of the defined terms used in the
Subordinated Indenture. Reference is made to the Subordinated Indenture for the
full definition of all terms used in the Subordinated Indenture.
"ACQUIRED INDEBTEDNESS" means (1) with respect to any Person that becomes
a Restricted Subsidiary (or is merged into the Company, the Issuer or any
Restricted Subsidiary) after the Issue Date, Indebtedness of such Person or any
of its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary (or is merged into the Company, the Issuer or any Restricted
Subsidiary) that was not incurred in connection with, or in contemplation of,
such Person becoming a Restricted Subsidiary (or being merged into the Company,
the Issuer or any Restricted Subsidiary) and (2) with respect to the Company,
the Issuer or any Restricted Subsidiary, any Indebtedness expressly assumed by
the Company, the Issuer or any Restricted Subsidiary in connection with the
acquisition of any assets from another Person (other than the Company, the
Issuer or any Restricted Subsidiary), which Indebtedness was not incurred by
such other Person in connection with or in contemplation of such acquisition.
Indebtedness incurred in connection with or in contemplation of any transaction
described in clause (1) or (2) of the preceding sentence shall be deemed to have
been incurred by the Company or a Restricted Subsidiary, as the case may be, at
the time such Person becomes a Restricted Subsidiary (or is merged into the
Company, the Issuer or any Restricted Subsidiary) in the case of clause (1) or
at the time of the acquisition of such assets in the case of clause (2), but
shall not be deemed Acquired Indebtedness.
"AFFILIATE" means, when used with reference to a specified Person any
Person direct or indirectly controlling, or controlled by or under direct or
indirect common control with the Person specified.
"ASSET ACQUISITION" means (1) an Investment by the Company, the Issuer or
any Restricted Subsidiary in any other Person if, as a result of such
Investment, such Person shall become a Restricted Subsidiary or shall be
consolidated or merged with or into the Company, the Issuer or any Restricted
Subsidiary or (2) the acquisition by the Company, the Issuer or any Restricted
Subsidiary of the assets of any Person, which constitute all or
72
substantially all of the assets or of an operating unit or line of business of
such Person or which is otherwise outside the ordinary course of business.
"ASSET DISPOSITION" means any sale, transfer, conveyance, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback or sale of shares of Capital Stock in any Subsidiary) (each,
a "TRANSACTION") by the Company, the Issuer or any Restricted Subsidiary to any
Person of any Property having a Fair Market Value in any transaction or series
of related transactions of at least $5 million. The term "ASSET DISPOSITION"
shall not include:
(1) a transaction between the Company, the Issuer and any Restricted
Subsidiary or a transaction between Restricted Subsidiaries,
(2) a transaction in the ordinary course of business, including,
without limitation, sales (directly or indirectly), dedications
and other donations to governmental authorities, leases and sales
and leasebacks of (A) homes, improved land and unimproved land and
(B) real estate (including related amenities and improvements),
(3) a transaction involving the sale of Capital Stock of, or the
disposition of assets in, an Unrestricted Subsidiary,
(4) any exchange or swap of assets of the Company, the Issuer or any
Restricted Subsidiary for assets that (A) are to be used by the
Company, the Issuer or any Restricted Subsidiary in the ordinary
course of its Real Estate Business and (B) have a Fair Market
Value not less than the Fair Market Value of the assets exchanged
or swapped,
(5) any sale, transfer, conveyance, lease or other disposition of
assets and properties that is governed by the provisions relating
to "Limitations on Mergers, Consolidation and Sales of Assets", or
(6) dispositions of mortgage loans and related assets and
mortgage-backed securities in the ordinary course of a mortgage
lending business.
"ATTRIBUTABLE DEBT" means, with respect to any Capitalized Lease
Obligations, the capitalized amount thereof determined in accordance with GAAP.
"BANKRUPTCY LAW" means title 11 of the United States Code, as amended, or
any similar federal or state law for the relief of debtors.
"CAPITAL STOCK" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of or in
such Person's capital stock or other equity interests, and options, rights or
warrants to purchase such capital stock or other equity interests, whether now
outstanding or issued after the Issue Date, including, without limitation, all
Disqualified Stock and Preferred Stock.
"CAPITALIZED LEASE OBLIGATIONS" of any Person means the obligations of
such Person to pay rent or other amounts under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such obligations will be the capitalized amount thereof determined in
accordance with GAAP.
"CASH EQUIVALENTS" means
(1) U.S. dollars;
(2) securities issued or directly and fully guaranteed or insured by
the U.S. government or any agency or instrumentality thereof
having maturities of one year or less from the date of
acquisition;
(3) certificates of deposit and eurodollar time deposits with
maturities of one year or less from the date of acquisition,
bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial
bank having capital and surplus in excess of $500 million;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and
(3) entered into with any financial institution meeting the
qualifications specified in clause (3) above;
(5) commercial paper rated P-1, A-1 or the equivalent thereof by
Moody's or S&P, respectively, and in each case maturing within six
months after the date of acquisition; and
73
(6) investments in money market funds substantially all of the assets
of which consist of securities described in the foregoing clauses
(1) through (5).
"CHANGE OF CONTROL" means
(1) any sale, lease or other transfer (in one transaction or a series
of transactions) of all or substantially all of the consolidated
assets of the Company and its Restricted Subsidiaries to any
Person (other than a Restricted Subsidiary); PROVIDED, HOWEVER,
that a transaction where the holders of all classes of Common
Equity of the Company immediately prior to such transaction own,
directly or indirectly, more than 50% of all classes of Common
Equity of such Person immediately after such transaction shall not
be a Change of Control;
(2) a "person" or "group" (within the meaning of Section 13(d) of the
Exchange Act (other than (x) the Company or (y) the Permitted
Hovnanian Holders) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act) of Common Equity of the Company
representing more than 50% of the voting power of the Common
Equity of the Company;
(3) Continuing Directors cease to constitute at least a majority of
the Board of Directors of the Company;
(4) the stockholders of the Company approve any plan or proposal for
the liquidation or dissolution of the Company; PROVIDED, HOWEVER,
that a liquidation or dissolution of the Company which is part of
a transaction that does not constitute a Change of Control under
the proviso contained in clause (1) above shall not constitute a
Change of Control; or
(5) a change of control shall occur as defined in the instrument
governing any publicly traded debt securities of the Company or
the Issuer which requires the Company or the Issuer to repay or
repurchase such debt securities.
"COMMON EQUITY" of any Person means Capital Stock of such Person that is
generally entitled to (1) vote in the election of directors of such Person or
(2) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control
the management or policies of such Person.
"CONSOLIDATED ADJUSTED TANGIBLE ASSETS" of the Company as of any date
means the Consolidated Tangible Assets of the Company, the Issuer and the
Restricted Subsidiaries at the end of the fiscal quarter immediately preceding
the date less any assets securing any Non-Recourse Indebtedness, as determined
in accordance with GAAP.
"CONSOLIDATED CASH FLOW AVAILABLE FOR FIXED CHARGES" means, for any
period Consolidated Net Income for such period plus (each to the extent deducted
in calculating such Consolidated Net Income and determined in accordance with
GAAP) the sum for such period, without duplication, of:
(1) income taxes,
(2) Consolidated Interest Expense,
(3) depreciation and amortization expenses and other non-cash charges
to earnings and
(4) interest and financing fees and expenses which were previously
capitalized and which are amortized to cost of sales, MINUS
all other non-cash items (other than the receipt of notes receivable) increasing
such Consolidated Net Income.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to any
determination date, the ratio of (x) Consolidated Cash Flow Available for Fixed
Charges for the prior four full fiscal quarters (the "FOUR QUARTER PERIOD") for
which financial results have been reported immediately preceding the
determination date (the "TRANSACTION DATE"), to (y) the aggregate Consolidated
Interest Incurred for the Four Quarter Period. For purposes of this definition,
"CONSOLIDATED CASH FLOW AVAILABLE FOR FIXED CHARGES" and "CONSOLIDATED INTEREST
INCURRED" shall be calculated after giving effect on a PRO FORMA basis for the
period of such calculation to
(1) the incurrence or the repayment, repurchase, defeasance or other
discharge or the assumption by another Person that is not an
Affiliate (collectively, "REPAYMENT") of any Indebtedness of the
Company, the Issuer or any Restricted Subsidiary (and the
application of the proceeds thereof)
74
giving rise to the need to make such calculation, and any
incurrence or repayment of other Indebtedness (and the application
of the proceeds thereof), at any time on or after the first day of
the Four Quarter Period and on or prior to the Transaction Date,
as if such incurrence or repayment, as the case may be (and the
application of the proceeds thereof), occurred on the first day of
the Four Quarter Period, except that Indebtedness under revolving
credit facilities shall be deemed to be the average daily balance
of such Indebtedness during the Four Quarter Period (as reduced on
such PRO FORMA basis by the application of any proceeds of the
incurrence of Indebtedness giving rise to the need to make such
calculation);
(2) any Asset Disposition or Asset Acquisition (including, without
limitation, any Asset Acquisition giving rise to the need to make
such calculation as a result of the Company, the Issuer or any
Restricted Subsidiary (including any Person that becomes a
Restricted Subsidiary as a result of any such Asset Acquisition)
incurring Acquired Indebtedness at any time on or after the first
day of the Four Quarter Period and on or prior to the Transaction
Date), as if such Asset Disposition or Asset Acquisition
(including the incurrence or repayment of any such Indebtedness)
and the inclusion, notwithstanding clause (2) of the definition of
"Consolidated Net Income," of any Consolidated Cash Flow Available
for Fixed Charges associated with such Asset Acquisition as if it
occurred on the first day of the Four Quarter Period; PROVIDED,
HOWEVER, that the Consolidated Cash Flow Available for Fixed
Charges associated with any Asset Acquisition shall not be
included to the extent the net income so associated would be
excluded pursuant to the definition of "Consolidated Net Income,"
other than clause (2) thereof, as if it applied to the Person or
assets involved before they were acquired, and
(3) the Consolidated Cash Flow Available for Fixed Charges and the
Consolidated Interest Incurred attributable to discontinued
operations, as determined in accordance with GAAP, shall be
excluded.
Furthermore, in calculating "Consolidated Cash Flow Available for Fixed
Charges" for purposes of determining the denominator (but not the numerator) of
this "Consolidated Fixed Charge Coverage Ratio",
(a) interest on Indebtedness in respect of which a PRO FORMA
calculation is required that is determined on a fluctuating
basis as of the Transaction Date (including Indebtedness
actually incurred on the Transaction Date) and which will
continue to be so determined thereafter shall be deemed to
have accrued at a fixed rate PER ANNUM equal to the rate of
interest on such Indebtedness in effect on the Transaction
Date, and
(b) notwithstanding clause (a) above, interest on such
Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to
Interest Protection Agreements, shall be deemed to accrue
at the rate PER ANNUM resulting after giving effect to the
operation of such agreements.
"CONSOLIDATED INTEREST EXPENSE" of the Company for any period means the
Interest Expense of the Company, the Issuer and the Restricted Subsidiaries for
such period, determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED INTEREST INCURRED" for any period means the Interest
Incurred of the Company, the Issuer and the Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" for any period means the aggregate net income
(or loss) of the Company and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP; PROVIDED that there will be excluded
from such net income (loss) (to the extent otherwise included therein), without
duplication:
(1) the net income (or loss) of (x) any Unrestricted Subsidiary (other
than a Mortgage Subsidiary) or (y) any Person (other than a
Restricted Subsidiary or a Mortgage Subsidiary) in which any
Person other than the Company, the Issuer or any Restricted
Subsidiary has an ownership interest, except, in each case, to the
extent that any such income has actually been received by the
Company, the Issuer or any Restricted Subsidiary in the form of
cash dividends or similar cash distributions during such period,
which dividends or distributions are not in excess of the
Company's, the Issuer's or such Restricted Subsidiary's (as
applicable) PRO RATA share of such Unrestricted Subsidiary's or
such other Person's net income earned during such period,
75
(2) except to the extent includable in Consolidated Net Income
pursuant to the foregoing clause (1), the net income (or loss) of
any Person that accrued prior to the date that (a) such Person
becomes a Restricted Subsidiary or is merged with or into or
consolidated with the Company, the Issuer or any of its Restricted
Subsidiaries (except, in the case of an Unrestricted Subsidiary
that is redesignated a Restricted Subsidiary during such period,
to the extent of its retained earnings from the beginning of such
period to the date of such redesignation) or (b) the assets of
such Person are acquired by the Company or any Restricted
Subsidiary,
(3) the net income of any Restricted Subsidiary to the extent that
(but only so long as) the declaration or payment of dividends or
similar distributions by such Restricted Subsidiary of that income
is not permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary
during such period,
(4) the gains or losses, together with any related provision for
taxes, realized during such period by the Company, the Issuer or
any Restricted Subsidiary resulting from (a) the acquisition of
securities, or extinguishment of Indebtedness, of the Company or
any Restricted Subsidiary or (b) any Asset Disposition by the
Company or any Restricted Subsidiary,
(5) any extraordinary gain or loss together with any related provision
for taxes, realized by the Company, the Issuer or any Restricted
Subsidiary, and
(6) any non-recurring expense recorded by the Company, the Issuer or
any Restricted Subsidiary in connection with a merger accounted
for as a "pooling-of-interests" transaction;
PROVIDED, FURTHER, that for purposes of calculating Consolidated Net Income
solely as it relates to clause (3) of the first paragraph of the "Limitations on
Restricted Payments" covenant, clause (4)(b) above shall not be applicable.
"CONSOLIDATED NET WORTH" of any Person as of any date means the
stockholders' equity (including any Preferred Stock that is classified as equity
under GAAP, other than Disqualified Stock) of such Person and its Restricted
Subsidiaries on a consolidated basis at the end of the fiscal quarter
immediately preceding such date, as determined in accordance with GAAP, less any
amount attributable to Unrestricted Subsidiaries.
"CONSOLIDATED TANGIBLE ASSETS" of the Company as of any date means the
total amount of assets of the Company, the Issuer and the Restricted
Subsidiaries (less applicable reserves) on a consolidated basis at the end of
the fiscal quarter immediately preceding such date, as determined in accordance
with GAAP, less (1) Intangible Assets and (2) appropriate adjustments on account
of minority interests of other Persons holding equity investments in Restricted
Subsidiaries.
"CONTINUING DIRECTOR" means a director who either was a member of the
Board of Directors of the Company on the date of the Subordinated Indenture or
who became a director of the Company subsequent to such date and whose election
or nomination for election by the Company's stockholders, was duly approved by a
majority of the Continuing Directors on the Board of Directors of the Company at
the time of such approval, either by a specific vote or by approval of the proxy
statement issued by the Company on behalf of the entire Board of Directors of
the Company in which such individual is named as nominee for director.
"control" when used with respect to any Person, means the power to direct
the management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing.
"CREDIT FACILITIES" means, collectively, each of the credit facilities
and lines of credit of the Company or one or more Restricted Subsidiaries in
existence on the Issue Date and one or more other facilities and lines of credit
among or between the Company or one or more Restricted Subsidiaries and one or
more lenders pursuant to which the Company or one or more Restricted
Subsidiaries may incur indebtedness for working capital and general corporate
purposes (including acquisitions), as any such facility or line of credit may be
amended, restated, supplemented or otherwise modified from time to time, and
includes any agreement extending the maturity of, increasing the amount of, or
restructuring, all or any portion of the Indebtedness under such facility or
line of credit or any successor facilities or lines of credit and includes any
facility or line of credit with one or more lenders refinancing or replacing all
or any portion of the Indebtedness under such facility or line of credit or any
successor facility or line of credit.
76
"CURRENCY AGREEMENT" of any Person means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect such Person or any of its Subsidiaries against fluctuations in currency
values.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
"DEFAULT" means any event, act or condition that is, or after notice or
the passage of time or both would be, an Event of Default.
"DESIGNATION AMOUNT" has the meaning provided in the definition of
Unrestricted Subsidiary.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, (1) matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
final maturity date of the Senior Subordinated Notes or (2) is convertible into
or exchangeable or exercisable for (whether at the option of the issuer or the
holder thereof) (a) debt securities or (b) any Capital Stock referred to in (1)
above, in each case, at any time prior to the final maturity date of the Senior
Subordinated Notes; PROVIDED, HOWEVER, that any Capital Stock that would not
constitute Disqualified Stock but for provisions thereof giving holders thereof
(or the holders of any security into or for which such Capital Stock is
convertible, exchangeable or exercisable) the right to require the Company to
repurchase or redeem such Capital Stock upon the occurrence of a change in
control occurring prior to the final maturity date of the Senior Subordinated
Notes shall not constitute Disqualified Stock if the change in control provision
applicable to such Capital Stock are no more favorable to such holders than the
provisions described under the caption "Certain Covenants--Repurchase of Notes
upon Change of Control" and such Capital Stock specifically provides that the
Company will not repurchase or redeem any such Capital Stock pursuant to such
provisions prior to the Company's repurchase of the Senior Subordinated Notes as
are required pursuant to the provisions described under the caption "Certain
Covenants--Repurchase of Senior Subordinated Notes upon Change of Control".
"EVENT OF DEFAULT" has the meaning set forth in "Events of Default".
"FAIR MARKET VALUE" means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) that would be
negotiated in an arm's-length transaction for cash between a willing seller and
a willing and able buyer, neither of which is under any compulsion to complete
the transaction, as such price is determined in good faith by the Board of
Directors of the Company or a duly authorized committee thereof, as evidenced by
a resolution of such Board or committee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, as in effect on May 4, 1999.
"GUARANTORS" means (i) initially, each of the Company's Subsidiaries,
other than the Issuer, certain subsidiaries formerly engaged in the issuance of
collateralized mortgage obligations, the Company's mortgage lending and title
subsidiaries and a subsidiary holding and licensing the Hovnanian trade name and
(ii) each of the Company's Subsidiaries which becomes a Guarantor of the Senior
Subordinated Notes pursuant to the provisions of the Subordinated Indenture.
"HOLDER" means the Person in whose name a Note is registered in the books
of the Registrar for the Subordinated Notes.
"INDEBTEDNESS" of any Person means, without duplication,
(1) any liability of such Person (a) for borrowed money or under any
reimbursement obligation relating to a letter of credit or other
similar instruments (other than standby letters of credit or
similar instrument issued for the benefit of or surety,
performance, completion or payment bonds, earnest money notes or
similar purpose undertakings or indemnifications issued by, such
Person in the ordinary course of business), (b) evidenced by a
bond, note, debenture or similar instrument (including a purchase
money obligation) given in connection with the acquisition of any
businesses, properties or assets of any kind or with services
incurred in connection with capital expenditures (other than any
obligation to pay a contingent purchase price which, as of the
date of
77
incurrence thereof is not required to be recorded as a liability
in accordance with GAAP), or (c) in respect of Capitalized Lease
Obligations (to the extent of the Attributable Debt in respect
thereof),
(2) any Indebtedness of others that such Person has guaranteed to the
extent of the guarantee; PROVIDED, HOWEVER, that Indebtedness of
the Company and its Restricted Subsidiaries will not include the
obligations of the Company or a Restricted Subsidiary under
warehouse lines of credit of Mortgage Subsidiaries to repurchase
mortgages at prices no greater than 98% of the principal amount
thereof, and upon any such purchase the excess, if any, of the
purchase price thereof over the Fair Market Value of the mortgages
acquired, will constitute Restricted Payments subject to the
"Limitations on Restricted Payments" covenant,
(3) to the extent not otherwise included, the obligations of such
Person under Currency Agreements or Interest Protection Agreements
to the extent recorded as liabilities not constituting Interest
Incurred, net of amounts recorded as assets in respect of such
agreements, in accordance with GAAP, and
(4) all Indebtedness of others secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such
Person;
PROVIDED, that Indebtedness shall not include accounts payable, liabilities to
trade creditors of such Person or other accrued expenses arising in the ordinary
course of business. The amount of Indebtedness of any Person at any date shall
be (a) the outstanding balance at such date of all unconditional obligations as
described above, net of any unamortized discount to be accounted for as Interest
Expense, in accordance with GAAP, (b) the maximum liability of such Person for
any contingent obligations under clause (1) above at such date, net of an
unamortized discount to be accounted for as Interest Expense in accordance with
GAAP, and (c) in the case of clause (4) above, the lesser of (x) the fair market
value of any asset subject to a Lien securing the Indebtedness of others on the
date that the Lien attaches and (y) the amount of the Indebtedness secured.
"INTANGIBLE ASSETS" of the Company means all unamortized debt discount
and expense, unamortized deferred charges, goodwill, patents, trademarks,
service marks, trade names, copyrights, write-ups of assets over their prior
carrying value (other than write-ups which occurred prior to the Issue Date and
other than, in connection with the acquisition of an asset, the write-up of the
value of such asset (within one year of its acquisition) to its fair market
value in accordance with GAAP) and all other items which would be treated as
intangible on the consolidated balance sheet of the Company, the Issuer and the
Restricted Subsidiaries prepared in accordance with GAAP.
"INTEREST EXPENSE" of any Person for any period means, without
duplication, the aggregate amount of (i) interest which, in conformity with
GAAP, would be set opposite the caption "interest expense" or any like caption
on an income statement for such Person (including, without limitation, imputed
interest included in Capitalized Lease Obligations, all commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing, the net costs (but reduced by net gains) associated with
Currency Agreements and Interest Protection Agreements, amortization of other
financing fees and expenses, the interest portion of any deferred payment
obligation, amortization of discount or premium, if any, and all other noncash
interest expense (other than interest and other charges amortized to cost of
sales), and (ii) all interest actually paid by the Company or a Restricted
Subsidiary under any guarantee of Indebtedness (including, without limitation, a
guarantee of principal, interest or any combination thereof) of any Person other
than the Company, the Issuer or any Restricted Subsidiary during such period;
PROVIDED, that Interest Expense shall exclude any expense associated with the
complete write-off of financing fees and expenses in connection with the
repayment of any Indebtedness.
"INTEREST INCURRED" of any Person for any period means, without
duplication, the aggregate amount of (1) Interest Expense and (2) all
capitalized interest and amortized debt issuance costs.
"INTEREST PROTECTION AGREEMENT" of any Person means any interest rate
swap agreement, interest rate collar agreement, option or futures contract or
other similar agreement or arrangement designed to protect such Person or any of
its Subsidiaries against fluctuations in interest rates with respect to Debt
permitted to be incurred under the Subordinated Indenture.
"INVESTMENTS" of any Person means (i) all investments by such Person in
any other Person in the form of loans, advances or capital contributions, (ii)
all guarantees of Indebtedness or other obligations of any other Person by such
Person, (iii) all purchases (or other acquisitions for consideration) by such
Person of Indebtedness, Capital
78
Stock or other securities of any other Person and (iv) all other items that
would be classified as investments in any other Person (including, without
limitation, purchases of assets outside the ordinary course of business) on a
balance sheet of such Person prepared in accordance with GAAP.
"ISSUE DATE" means the date on which the Senior Subordinated Notes are
originally issued under the Subordinated Indenture.
"LIEN" means, with respect to any Property, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this definition, a Person shall be deemed to own,
subject to a Lien, any Property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such Property.
"MARKETABLE SECURITIES" means (a) equity securities that are listed on
the New York Stock Exchange, the American Stock Exchange or The Nasdaq National
Market and (b) debt securities that are rated by a nationally recognized rating
agency, listed on the New York Stock Exchange or the American Stock Exchange or
covered by at least two reputable market makers.
"MOODY'S" means Moody's Investors Service, Inc. or any successor to its
debt rating business. "Mortgage Subsidiary" means any Subsidiary of the Company
substantially all of whose operations consist of the mortgage lending business.
"NET CASH PROCEEDS" means with respect to an Asset Disposition, cash
payments received (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise
(including any cash received upon sale or disposition of such note or
receivable), but only as and when received), excluding any other consideration
received in the form of assumption by the acquiring Person of Indebtedness or
other obligations relating to the Property disposed of in such Asset Disposition
or received in any other non-cash form unless and until such non-cash
consideration is converted into cash therefrom, in each case, net of all legal,
title and recording tax expenses, commissions and other fees and expenses
incurred, and all federal, state and local taxes required to be accrued as a
liability under GAAP as a consequence of such Asset Disposition, and in each
case net of a reasonable reserve for the after-tax cost of any indemnification
or other payments (fixed and contingent) attributable to the seller's
indemnities or other obligations to the purchaser undertaken by the Company, the
Issuer or any of its Restricted Subsidiaries in connection with such Asset
Disposition, and net of all payments made on any Indebtedness which is secured
by or relates to such Property, in accordance with the terms of any Lien or
agreement upon or with respect to such Property or which must by its terms or by
applicable law be repaid out of the proceeds from such Asset Disposition, and
net of all contractually required distributions and payments made to minority
interest holders in Restricted Subsidiaries or joint ventures as a result of
such Asset Disposition.
"NON-RECOURSE INDEBTEDNESS" with respect to any Person means Indebtedness
of such Person for which (1) the sole legal recourse for collection of principal
and interest on such Indebtedness is against the specific property identified in
the instruments evidencing or securing such Indebtedness and such property was
acquired with the proceeds of such Indebtedness or such Indebtedness was
incurred within 90 days after the acquisition of such property and (2) no other
assets of such Person may be realized upon in collection of principal or
interest on such Indebtedness. Indebtedness which is otherwise Non-Recourse
Indebtedness will not lose its character as Non-Recourse Indebtedness because
there is recourse to the borrower, any guarantor or any other Person for (a)
environmental warranties and indemnities, or (b) indemnities for and liabilities
arising from fraud, misrepresentation, misapplication or non-payment of rents,
profits, insurance and condemnation proceeds and other sums actually received by
the borrower from secured assets to be paid to the lender, waste and mechanics'
liens.
"PERMITTED HOVNANIAN HOLDERS" means, collectively, Kevork S. Hovnanian,
Ara K. Hovnanian, the members of their immediate families, the respective
estates, spouses, heirs, ancestors, lineal descendants, legatees and legal
representatives of any of the foregoing and the trustee of any BONA FIDE trust
of which one or more of the foregoing are the sole beneficiaries or the grantors
thereof, or any entity of which any of the foregoing, individually or
collectively, beneficially own more than 50% of the Common Equity.
"PERMITTED INDEBTEDNESS" means
(1) Indebtedness under Credit Facilities which does not exceed $440
million principal amount outstanding at any one time;
(2) Indebtedness in respect of obligations of the Company and its
Subsidiaries to the trustees under indentures for debt securities;
79
(3) intercompany debt obligations of (i) the Company to the Issuer,
(ii) the Issuer to the Company, (iii) the Company or the Issuer to
any Restricted Subsidiary and (iv) any Restricted Subsidiary to
the Company or the Issuer or any other Restricted Subsidiary;
PROVIDED, HOWEVER, that any Indebtedness of any Restricted
Subsidiary or the Issuer or the Company owed to any Restricted
Subsidiary or the Issuer that ceases to be a Restricted Subsidiary
shall be deemed to be incurred and shall be treated as an
incurrence for purposes of the first paragraph of the covenant
described under "Limitations on Indebtedness" at the time the
Restricted Subsidiary in question ceases to be a Restricted
Subsidiary;
(4) Indebtedness of the Company or the Issuer or any Restricted
Subsidiary under any Currency Agreements or Interest Protection
Agreements in a notional amount no greater than the payments due
(at the time the related Currency Agreement or Interest Protection
Agreement is entered into) with respect to the Indebtedness or
currency being hedged;
(5) Purchase Money Indebtedness;
(6) Capitalized Lease Obligations;
(7) obligations for, pledge of assets in respect of, and guaranties
of, bond financings of political subdivisions or enterprises
thereof in the ordinary course of business;
(8) Indebtedness secured only by office buildings owned or occupied by
the Company or any Restricted Subsidiary, which Indebtedness does
not exceed $10 million aggregate principal amount outstanding at
any one time;
(9) Indebtedness under warehouse lines of credit, repurchase
agreements and Indebtedness secured by mortgage loans and related
assets of mortgage lending Subsidiaries in the ordinary course of
a mortgage lending business; and
(10) Indebtedness of the Company or any Restricted Subsidiary which,
together with all other Indebtedness under this clause (10), does
not exceed $30 million aggregate principal amount outstanding at
any one time.
"PERMITTED INVESTMENT" means
(1) Cash Equivalents;
(2) any Investment in the Company, the Issuer or any Restricted
Subsidiary or any Person that becomes a Restricted Subsidiary as a
result of such Investment or that is consolidated or merged with
or into, or transfers all or substantially all of the assets of it
or an operating unit or line of business to, the Company or a
Restricted Subsidiary;
(3) any receivables, loans or other consideration taken by the
Company, the Issuer or any Restricted Subsidiary in connection
with any asset sale otherwise permitted by the Subordinated
Indenture;
(4) Investments received in connection with any bankruptcy or
reorganization proceeding, or as a result of foreclosure,
perfection or enforcement of any Lien or any judgment or
settlement of any Person in exchange for or satisfaction of
Indebtedness or other obligations or other property received from
such Person, or for other liabilities or obligations of such
Person created, in accordance with the terms of the Subordinated
Indenture;
(5) Investments in Currency Agreements or Interest Protection
Agreements described in the definition of Permitted Indebtedness;
(6) any loan or advance to an executive officer, director or employee
of the Company or any Restricted Subsidiary made in the ordinary
course of business or in accordance with past practice; PROVIDED,
HOWEVER, that any such loan or advance exceeding $1 million shall
have been approved by the Board of Directors of the Company or a
committee thereof consisting of disinterested members;
(7) Investments in joint ventures in a Real Estate Business with
unaffiliated third parties in an aggregate amount at any time
outstanding not to exceed 10% of Consolidated Tangible Assets at
such time;
80
(8) Investments in interests in issuances of collateralized mortgage
obligations, mortgages, mortgage loan servicing, or other mortgage
related assets;
(9) obligations of the Company or a Restricted Subsidiary under
warehouse lines of credit of Mortgage Subsidiaries to repurchase
mortgages; and
(10) Investments in an aggregate amount outstanding not to exceed $10
million.
"PERMITTED LIENS" means
(1) Liens for taxes, assessments or governmental or quasi-government
charges or claims that (a) are not yet delinquent, (b) are being
contested in good faith by appropriate proceedings and as to which
appropriate reserves have been established or other provisions
have been made in accordance with GAAP, if required, or (c)
encumber solely property abandoned or in the process of being
abandoned,
(2) statutory Liens of landlords and carriers', warehousemen's,
mechanics', suppliers', materialmen's, repairmen's or other Liens
imposed by law and arising in the ordinary course of business and
with respect to amounts that, to the extent applicable, either (a)
are not yet delinquent or (b) are being contested in good faith by
appropriate proceedings and as to which appropriate reserves have
been established or other provisions have been made in accordance
with GAAP, if required,
(3) Liens (other than any Lien imposed by the Employer Retirement
Income Security Act of 1974, as amended) incurred or deposits made
in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social
security,
(4) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal
bonds, development obligations, progress payments, government
contacts, utility services, developer's or other obligations to
make on-site or off-site improvements and other obligations of
like nature (exclusive of obligations for the payment of borrowed
money but including the items referred to in the parenthetical in
clause (1)(a) of the definition of "INDEBTEDNESS"), in each case
incurred in the ordinary course of business of the Company, the
Issuer and the Restricted Subsidiaries,
(5) attachment or judgment Liens not giving rise to a Default or an
Event of Default,
(6) easements, dedications, assessment district or similar Liens in
connection with municipal or special district financing,
rights-of-way, restrictions, reservations and other similar
charges, burdens, and other similar charges or encumbrances not
materially interfering with the ordinary course of business of the
Company, the Issuer and the Restricted Subsidiaries,
(7) zoning restrictions, licenses, restrictions on the use of real
property or minor irregularities in title thereto, which do not
materially impair the use of such real property in the ordinary
course of business of the Company, the Issuer and the Restricted
Subsidiaries,
(8) Liens securing Indebtedness incurred pursuant to clause (8) or (9)
of the definition of Permitted Indebtedness,
(9) Liens securing Indebtedness of the Company, the Issuer or any
Restricted Subsidiary permitted to be incurred under the
Subordinated Indenture; provided, that the aggregate amount of all
consolidated Indebtedness of the Company, the Issuer and the
Restricted Subsidiaries (including, with respect to Capitalized
Lease Obligations, the Attributable Debt in respect thereof)
secured by Liens (other than Non-Recourse Indebtedness and
Indebtedness incurred pursuant to clause (9) of the definition of
Permitted Indebtedness) shall not exceed 40% of Consolidated
Adjusted Tangible Assets at any one time outstanding (after giving
effect to the incurrence of such Indebtedness and the use of the
proceeds thereof),
(10) Liens securing Non-Recourse Indebtedness of the Company, the
Issuer or any Restricted Subsidiary; provided, that such Liens
apply only to the property financed out of the net proceeds of
such Non-Recourse Indebtedness within 90 days after the incurrence
of such Non-Recourse Indebtedness,
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(11) Liens securing Purchase Money Indebtedness; provided that such
Liens apply only to the property acquired, constructed or improved
with the proceeds of such Purchase Money Indebtedness within 90
days after the incurrence of such Purchase Money Indebtedness,
(12) Liens on property or assets of the Company, the Issuer or any
Restricted Subsidiary securing Indebtedness of the Company, the
Issuer or any Restricted Subsidiary owing to the Company, the
Issuer or one or more Restricted Subsidiaries,
(13) leases or subleases granted to others not materially interfering
with the ordinary course of business of the Company and the
Restricted Subsidiaries,
(14) purchase money security interests (including, without limitation,
Capitalized Lease Obligations); provided, that such Liens apply
only to the Property acquired and the related Indebtedness is
incurred within 90 days after the acquisition of such Property,
(15) any right of first refusal, right of first offer, option, contract
or other agreement to sell an asset; provided that such sale is
not otherwise prohibited under the Subordinated Indenture,
(16) any right of a lender or lenders to which the Company, the Issuer
or a Restricted Subsidiary may be indebted to offset against, or
appropriate and apply to the payment of such, Indebtedness any and
all balances, credits, deposits, accounts or money of the Company,
the Issuer or a Restricted Subsidiary with or held by such lender
or lenders or its Affiliates,
(17) any pledge or deposit of cash or property in conjunction with
obtaining surety, performance, completion or payment bonds and
letters of credit or other similar instruments or providing
earnest money obligations, escrows or similar purpose undertakings
or indemnifications in the ordinary course of business of the
Company, the Issuer and the Restricted Subsidiaries,
(18) Liens for homeowner and property owner association developments
and assessments,
(19) Liens securing Refinancing Indebtedness; provided, that such Liens
extend only to the assets securing the Indebtedness being
refinanced,
(20) Liens incurred in the ordinary course of business as security for
the obligations of the Company, the Issuer and the Restricted
Subsidiaries with respect to indemnification in respect of title
insurance providers,
(21) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any
Subsidiary of the Company or becomes a Subsidiary of the Company;
provided that such Liens were in existence prior to the
contemplation of such merger or consolidation or acquisition and
do not extend to any assets other than those of the Person merged
into or consolidated with the Company or the Subsidiary or
acquired by the Company or its Subsidiaries,
(22) Liens on property existing at the time of acquisition thereof by
the Company or any Subsidiary of the Company, provided that such
Liens were in existence prior to the contemplation of such
acquisition,
(23) Liens existing on the Issue Date and any extensions, renewals or
replacements thereof, and
(24) Liens on specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such
Person to facilitate the purchase, shipment or storage of such
inventory or other goods.
"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, incorporated or unincorporated association,
joint stock company, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"PREFERRED STOCK" of any Person means all Capital Stock of such Person
which has a preference in liquidation or with respect to the payment of
dividends.
"PROPERTY" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person, whether or not included in
the most recent consolidated balance sheet of such Person and its Subsidiaries
under GAAP.
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"PURCHASE MONEY INDEBTEDNESS" means Indebtedness of the Company, the
Issuer or any Restricted Subsidiary incurred for the purpose of financing all or
any part of the purchase price, or the cost of construction or improvement, of
any property to be used in the ordinary course of business by the Company, the
Issuer and the Restricted Subsidiaries; PROVIDED, HOWEVER, that (1) the
aggregate principal amount of such Indebtedness shall not exceed such purchase
price or cost and (2) such Indebtedness shall be incurred no later than 90 days
after the acquisition of such property or completion of such construction or
improvement.
"QUALIFIED STOCK" means Capital Stock of the Company other than
Disqualified Stock.
"REAL ESTATE BUSINESS" means homebuilding, housing construction, real
estate development or construction and related real estate activities, including
the provision of mortgage financing or title insurance.
"REFINANCING INDEBTEDNESS" means Indebtedness (to the extent not
Permitted Indebtedness) that refunds, refinances or extends any Indebtedness of
the Company, the Issuer or any Restricted Subsidiary (to the extent not
Permitted Indebtedness) outstanding on the Issue Date or other Indebtedness (to
the extent not Permitted Indebtedness) permitted to be incurred by the Company,
the Issuer or any Restricted Subsidiary pursuant to the terms of the
Subordinated Indenture, but only to the extent that
(1) the Refinancing Indebtedness is subordinated, if at all, to the
Senior Subordinated Notes or the Subordinated Guarantees, as the
case may be, to the same extent as the Indebtedness being
refunded, refinanced or extended,
(2) the Refinancing Indebtedness is scheduled to mature either (a) no
earlier than the Indebtedness being refunded, refinanced or
extended or (b) after the maturity date of the Senior Subordinated
Notes,
(3) the portion, if any, of the Refinancing Indebtedness that is
scheduled to mature on or prior to the maturity date of the Senior
Subordinated Notes has a Weighted Average Life to Maturity at the
time such Refinancing Indebtedness is incurred that is equal to or
greater than the Weighted Average Life to Maturity of the portion
of the Indebtedness being refunded, refinanced or extended that is
scheduled to mature on or prior to the maturity date of the Senior
Subordinated Notes, and
(4) such Refinancing Indebtedness is in an aggregate principal amount
that is equal to or less than the aggregate principal amount then
outstanding under the Indebtedness being refunded, refinanced or
extended.
"RESTRICTED PAYMENT" means any of the following:
(1) the declaration or payment of any dividend or any other
distribution on Capital Stock of the Company, the Issuer or any
Restricted Subsidiary or any payment made to the direct or
indirect holders (in their capacities as such) of Capital Stock of
the Company, the Issuer or any Restricted Subsidiary (other than
(a) dividends or distributions payable solely in Qualified Stock
and (b) in the case of the Issuer or Restricted Subsidiaries,
dividends or distributions payable to the Company, the Issuer or a
Restricted Subsidiary);
(2) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company, the Issuer or any
Restricted Subsidiary (other than a payment made to the Company,
the Issuer or any Restricted Subsidiary); and
(3) any Investment (other than any Permitted Investment), including
any Investment in an Unrestricted Subsidiary (including by the
designation of a Subsidiary of the Company as an Unrestricted
Subsidiary) and any amounts paid in accordance with clause (2) of
the definition of Indebtedness.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company which is not
an Unrestricted Subsidiary.
"S&P" means Standard and Poor's Ratings Group or any successor to its
debt rating business.
"SUBORDINATED GUARANTEE" means the guarantee of the Senior Subordinated
Notes by the Company and each other Guarantor under the Subordinated Indenture.
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"SIGNIFICANT SUBSIDIARY" means any Subsidiary of the Company which would
constitute a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X
under the Securities Act and the Exchange Act as in effect on the Issue Date.
"SUBSIDIARY" of any Person means any corporation or other entity of which
a majority of the Capital Stock having ordinary voting power to elect a majority
of the Board of Directors or other persons performing similar functions is at
the time directly or indirectly owned or controlled by such Person.
"TRUSTEE" means the party named as such above until a successor replaces
such party in accordance with the applicable provisions of the Subordinated
Indenture and thereafter means the successor serving hereunder.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company so
designated by a resolution adopted by the Board of Directors of the Company or a
duly authorized committee thereof as provided below; PROVIDED that (a) the
holders of Indebtedness thereof do not have direct or indirect recourse against
the Company, the Issuer or any Restricted Subsidiary, and neither the Company,
the Issuer nor any Restricted Subsidiary otherwise has liability for, any
payment obligations in respect of such Indebtedness (including any undertaking,
agreement or instrument evidencing such Indebtedness), except, in each case, to
the extent that the amount thereof constitutes a Restricted Payment permitted by
the Subordinated Indenture, in the case of Non-Recourse Indebtedness, to the
extent such recourse or liability is for the matters discussed in the last
sentence of the definition of "Non-Recourse Indebtedness," or to the extent such
Indebtedness is a guarantee by such Subsidiary of Indebtedness of the Company,
the Issuer or a Restricted Subsidiary and (b) no holder of any Indebtedness of
such Subsidiary shall have a right to declare a default on such Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity as a result of a default on any Indebtedness of the Company, the Issuer
or any Restricted Subsidiary. The Unrestricted Subsidiaries will be the
following: Eastern National Title Insurance Agency, Inc., Eastern Title Agency,
Inc., Founders Title Agency, Inc., Governor's Abstract Co., Inc., Hexter Fair
Land Title Company I, Inc., Homebuyer's Mortgage, Inc., Hovnanian Financial
Services I, Inc., Hovnanian Financial Services 11, Inc., Hovnanian Financial
Services III, Inc., Hovnanian Financial Services IV, Inc., K. Hovnanian
Investment Properties, Inc., K Hovnanian Mortgage, Inc., Preston Grande Homes,
Inc., Heritage Pines, L.L.C., Kings Crossing at Montgomery, L.L.C., Knox Creek,
L.L.C., McKinley Court, L.L.C., Monticello Woods, L.L.C., New Homebuyers Title
Co. (Virginia) L.L.C., New Homebuyers Title Company, L.L.C., Shadow Creek,
L.L.C., Section 13 of the Hills, L.L.C., Title Group II, L.L.C., Town Homes at
Montgomery, L.L.C., Westwood Hills, L.L.C., WH/PR Land Co., L.L.C., Athena
Portfolio Investors, L.P., Beacon Manor Associates, L.P., Galleria Mortgage,
L.P., Goodman Mortgage Investors, L.P., Parkway Development, Sovereign Group,
L.P., K. Hovnanian Venture I, L.L.C.
Subject to the foregoing, the Board of Directors of the Company or a duly
authorized committee thereof may designate any Subsidiary in addition to those
named above to be an Unrestricted Subsidiary; PROVIDED, HOWEVER, that (1) the
net amount (the "DESIGNATION AMOUNT") then outstanding of all previous
Investments by the Company and the Restricted Subsidiaries in such Subsidiary
will be deemed to be a Restricted Payment at the time of such designation and
will reduce the amount available for Restricted Payments under the "Limitations
on Restricted Payments" covenant set forth in the Subordinated Indenture, to the
extent provided therein, (2) the Company must be permitted under the
"Limitations on Restricted Payments" covenant set forth in the Subordinated
Indenture to make the Restricted Payment deemed to have been made pursuant to
clause (1), and (3) after giving effect to such designation, no Default or Event
of Default shall have occurred or be continuing. In accordance with the
foregoing, and not in limitation thereof, Investments made by any Person in any
Subsidiary of such Person prior to such Person's merger with the Company or any
Restricted Subsidiary (but not in contemplation or anticipation of such merger)
shall not be counted as an Investment by the Company or such Restricted
Subsidiary if such Subsidiary of such Person is designated as an Unrestricted
Subsidiary.
The Board of Directors of the Company or a duly authorized committee
thereof may also redesignate an Unrestricted Subsidiary to be a Restricted
Subsidiary PROVIDED, HOWEVER, that (1) the Indebtedness of such Unrestricted
Subsidiary as of the date of such redesignation could then be incurred under the
"Limitations on Indebtedness" covenant and (2) immediately after giving effect
to such redesignation and the incurrence of any such additional Indebtedness,
the Company and the Restricted Subsidiaries could incur $1.00 of additional
Indebtedness under the first paragraph of the "Limitations on Indebtedness"
covenant. Any such designation or redesignation by the Board of Directors of the
Company or a committee thereof will be evidenced to the Trustee by the filing
with the Trustee of a certified copy of the resolution of the Board of Directors
of the Company or a committee thereof giving effect to such designation or
redesignation and an Officers' Certificate certifying that such designation or
redesignation complied with the foregoing conditions and setting forth the
underlying calculations of such Officers'
84
Certificate. The designation of any Person as an Unrestricted Subsidiary shall
be deemed to include a designation of all Subsidiaries of such Person as
Unrestricted Subsidiaries; PROVIDED, HOWEVER, that the ownership of the general
partnership interest (or a similar member's interest in a limited liability
company) by an Unrestricted Subsidiary shall not cause a Subsidiary of the
Company of which more than 95% of the equity interest is held by the Company or
one or more Restricted Subsidiaries to be deemed an Unrestricted Subsidiary.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness or portion thereof at any date, the number of years obtained by
dividing (i) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other required
payment of principal, including, without limitation, payment at final maturity,
in respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such payment
by (ii) the sum of all such payments described in clause (i)(a) above.
CONCERNING THE SUBORDINATED TRUSTEE
The Subordinated Indenture contains certain limitations on the rights of
the Subordinated Trustee, should it become a creditor of the Company, to obtain
payment of claims in certain cases, or to realize on certain property received
in respect of any such claim as security or otherwise. The Subordinated Trustee
will be permitted to engage in other transactions; however, if within 90 days,
apply to the Securities and Exchange Commission for permission to continue
acquires any conflicting interest, as defined in the Subordinated Indenture, it
must eliminate that conflict within 90 days, apply to the Securities and
Exchange Commission for permission to continue or resign. The Subordinated
Trustee is also trustee with respect to the Senior Notes and the Issuer's 10
1/2% Senior Notes due 2007 and its 9 ?% Senior Notes due 2009.
ADDITIONAL INFORMATION
Anyone who receives this prospectus may obtain a copy of the Subordinated
Indenture and Subordinated Registration Rights Agreement without charge by
writing to Hovnanian at 10 Highway 35, Red Bank, NJ 07701, Attention: Corporate
Controller.
REGISTERED EXCHANGE OFFER; REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company, the Issuer, the other Guarantors and the initial purchasers
of the outstanding Senior Subordinated Notes entered into a registration rights
agreement on March 26, 2002, which we refer to as the "Subordinated Registration
Rights Agreement". Pursuant to the Subordinated Registration Rights Agreement,
the Company, the Issuer and the Guarantors agreed to file with the Securities
and Exchange Commission the Exchange Offer Registration Statement on the
appropriate form under the Securities Act with respect to the Senior
Subordinated Notes. Upon the effectiveness of the Exchange Offer Registration
Statement, the Issuer will offer to the holders of Transfer Restricted
Securities pursuant to the exchange offer who are able to make certain
representations the opportunity to exchange their Transfer Restricted Securities
for exchange Senior Subordinated Notes. Capitalized terms used in this section
but not otherwise defined have the meanings given to them in the Subordinated
Registration Rights Agreement.
Under the Subordinated Registration Rights Agreement:
(1) the Company, the Issuer and the other Guarantors agreed to file an
Exchange Offer Registration Statement with the Securities and
Exchange Commission on or prior to 90 days after the Closing Date;
(2) the Company, the Issuer and the Guarantors agreed to use their
reasonable best efforts to have the Exchange Offer Registration
Statement declared effective by the Securities and Exchange
Commission on or prior to 150 days after the Closing Date;
(3) unless the exchange offer would not be permitted by applicable law
or Securities and Exchange Commission policy, the Company, the
Issuer and the other Guarantors agreed to commence the exchange
offer, keep the exchange offer open for a period of not less than
20 business days and use their reasonable best efforts to issue,
on or prior to 30 business days after the date on which the
Exchange Offer Registration Statement was declared effective by
the Securities and Exchange Commission, exchange Senior
Subordinated Notes in exchange for all outstanding Senior
Subordinated Notes tendered prior thereto in the exchange offer;
85
(4) if obligated to file the Shelf Registration Statement, the
Company, the Issuer and the other Guarantors will file the Shelf
Registration Statement with the Securities and Exchange Commission
on or prior to 30 days after that filing obligation arises and use
their reasonable best efforts to cause the Shelf Registration to
be declared effective by the Securities and Exchange Commission on
or prior to 90 days after that obligation arises;
(5) the Issuer is not required to file the Exchange Offer Registration
Statement or permitted to consummate the exchange offer because
the exchange offer is not permitted by applicable law or
Securities and Exchange Commission policy; or
(6) any holder of Transfer Restricted Securities notifies the Issuer
in writing prior to the 20th business day following consummation
of the exchange offer that:
(a) based on an opinion of counsel, it is prohibited by law or
Securities and Exchange Commission policy from
participating in the exchange offer; or
(b) it is a broker-dealer and owns Senior Subordinated Notes
acquired directly from the Issuer,
the Company, the Issuer and the Guarantors have agreed to file with the
Securities and Exchange Commission a Shelf Registration Statement to cover
resales of the Senior Subordinated Notes by the Holders thereof who satisfy
certain conditions relating to the provisions of information in connection with
the Shelf Registration Statement.
The Company, the Issuer and the other Guarantors have agreed to use their
reasonable best efforts to cause the applicable registration statement to be
declared effective as promptly as possible by the Securities and Exchange
Commission.
For purposes of the preceding, "Transfer Restricted Securities" means
each:
(1) Senior Subordinated Note, until the earliest to occur of:
(a) the date on which that Senior Subordinated Note is
exchanged in the Exchange Offer for a New Senior
Subordinated Note which is entitled to be resold to the
public by the holder thereof without complying with the
prospectus delivery requirements of the Securities Act;
(b) the date on which that Senior Subordinated Note has been
disposed of in accordance with a Shelf Registration
Statement (and purchasers thereof have been issued New
Senior Subordinated Notes); or
(c) the date on which that Senior Subordinated Note is
distributed to the public pursuant to Rule 144 under the
Securities Act; and
(2) New Senior Subordinated Note issued to a broker-dealer until the
date on which that New Senior Subordinated Note is disposed of by
that broker-dealer pursuant to the "Plan of Distribution"
contemplated by the Exchange Offer Registration Statement
(including the delivery of the prospectus contained therein).
The Company, the Issuer and the other Guarantors have agreed to pay
liquidated damages to each holder of Senior Subordinated Notes upon the
occurrence of any of the following:
(1) the Company, the Issuer and the other Guarantors fail to file any
of the Registration Statements required by the Subordinated
Registration Rights Agreement on or before the date specified for
that filing;
(2) any of such Registration Statements is not declared effective by
the Securities and Exchange Commission on or prior to the date
specified for that effectiveness, which we refer to as the
"EFFECTIVENESS TARGET DATE";
(3) the Issuer fails to consummate the Exchange Offer within 40
business days of the Effectiveness Target Date with respect to the
Exchange Offer Registration Statement; or
(4) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but thereafter ceases
to be effective or usable in connection with resales of Transfer
Restricted Securities during the periods specified in the
Subordinated Registration Rights Agreement
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We refer to each event referred to in clauses (1) through (4) above as a
"REGISTRATION DEFAULT".
Such liquidated damages shall be:
(1) with respect to the first 90-day period immediately following the
occurrence of the first Registration Default, an amount equal to
$.05 per week per $1,000 principal amount of Senior Subordinated
Notes held by that holder; and
(2) an additional $.05 per week per $1,000 principal amount of Senior
Subordinated Notes with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum
amount of liquidated damages for all Registration Defaults of $.25
per week per $1,000 principal amount of Senior Subordinated Notes.
All accrued liquidated damages will be paid on each Damages Payment Date
to the Global Senior Subordinated Note holder by wire transfer of immediately
available funds or by federal funds check and to holders of Certificated
Securities by wire transfer to the accounts specified by them or by mailing
checks to their registered addresses if no such accounts have been specified.
Following the cure of all Registration Defaults, the accrual of liquidated
damages will cease.
Holders of Senior Subordinated Notes will be required to make certain
representations to the Company, the Issuer and the other Guarantors, as
described in the Subordinated Registration Rights Agreement, in order to
participate in the Exchange Offer and will be required to deliver certain
information to be used in connection with the Shelf Registration Statement and
to provide comments on the Shelf Registration Statement within the time periods
set forth in the registration rights agreement in order to have their Senior
Subordinated Notes included in the Shelf Registration Statement and benefit from
the provisions regarding liquidated damages set forth above with respect to the
Shelf Registration Statement.
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BOOK ENTRY; DELIVERY AND FORM
BOOK-ENTRY PROCEDURES FOR THE GLOBAL NOTES
The exchange notes will initially be represented in the form of one or
more global notes in fully-registered book-entry form, without interest coupons
that will be deposited with or on behalf of The Depository Trust Company, or
DTC, and registered in the name of DTC or its participants.
Except as set forth below, the global notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the global notes may not be exchanged for notes
in certificated form except in the limited circumstances described below.
The descriptions of the operations and procedures of DTC set forth below
are provided solely as a matter of convenience. These operations and procedures
are solely within the control of the settlement system of DTC and are subject to
change by DTC from time to time. We take no responsibility for these operations
or procedures, and investors are urged to contact DTC or its participants
directly to discuss these matters.
DTC has advised us that it is:
o a limited-purpose trust company organized under the laws of the
State of New York;
o a "banking organization" within the meaning of the New York
Banking Law;
o a member of the Federal Reserve System;
o a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended; and
o a "clearing agency" registered under Section 17A of the Securities
Exchange Act of 1934.
DTC was created to hold securities for its participants, organizations,
which we refer to as "participants", and to and facilitate the clearance and
settlement of securities transactions between participants through electronic
book-entry changes to the accounts of participants, which eliminates the need
for physical transfer and delivery of certificates. DTC's participants include
securities brokers and dealers; banks and trust companies; clearing corporations
and specified other organizations. Indirect access to DTC's system is also
available to other entities such as banks, brokers, dealers, and trust
companies; these indirect participants clear through or maintain a custodial
relationship with a participant, either directly or indirectly. Investors who
are not participants may beneficially own securities held by or on behalf of DTC
only through participants or indirect participants.
We expect that under the procedures established by DTC:
o upon deposit of each global note, DTC will credit the accounts of
participants in DTC with an interest in the global note; and
o ownership of the notes will be shown on, and the transfer of
ownership of the notes will be effected only through, records
maintained by DTC, with respect to the interests of participants
in DTC, and the records of participants and indirect participants,
with respect to the interests of persons other than participants
in DTC.
The laws of some jurisdictions may require that some purchasers of
securities take physical delivery of the securities in definitive form.
Accordingly, the ability to transfer interests in the new notes represented by a
global note to these persons may be limited. In addition, because DTC can act
only on behalf of its participants, who in turn act on behalf of persons who
hold interests through participants, the ability of a person having an interest
in the new notes represented by a global note to pledge or transfer that
interest to persons or entities that do not participate in DTC's system, or to
otherwise take actions in respect of that interest, may be affected by the lack
of a physical definitive security in respect of the interest.
So long as DTC or its nominee is the registered owner of a global note,
DTC or the nominee, as the case may be, will be considered the sole owner or
holder of the notes represented by the global note for all purposes
88
under each of the Senior Indenture and the Subordinated Indenture. Except as
provided below, owners of beneficial interests in a global note:
o will not be entitled to have notes represented by the global notes
registered in their names;
o will not receive or be entitled to receive physical delivery of
certificated notes; and
o will not be considered the owners or Holders of the notes under
the Senior Indenture and the Subordinated Indenture, as
applicable, for any purpose, including with respect to the giving
of any direction, instruction or approval to the trustee under the
Senior Indenture and the Subordinated Indenture, respectively.
Accordingly, each holder owning a beneficial interest in a global note
must rely on the procedure of DTC and, if the holder is not a participant or an
indirect participant in DTC, on the procedures of the participant through which
the holder owns its interest, to exercise any rights of a holder of notes under
the Senior Indenture and the Subordinated Indenture, as applicable, or the
global note. We understand that under existing industry practice, if we request
any action of Holders of notes or a holder that is an owner of a beneficial
interest in a global note desires to take any action that DTC, as the holder of
the global note, is entitled to take, then DTC would authorize the participants
to take the action and the participants would authorize Holders owning through
participants to take the action or would otherwise act upon the instruction of
the holders. Neither we nor the Senior Trustee or the Subordinated Trustee will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of notes by DTC, or for maintaining, supervising or
reviewing any records of DTC relating to the notes.
Payment with respect to the principal of premium, if any, liquidated
damages, if any, and interest on any notes represented by a global note
registered in the name of DTC or its nominee on the applicable record date will
be payable by the Senior Trustee or Subordinated Trustee, as applicable, to or
at the direction of DTC or its nominee, in its capacity as the registered holder
of the global note representing the notes under the Senior Indenture and the
Subordinated Indenture, as applicable. Under the terms of the Senior Indenture
and the Subordinated Indenture, as applicable, we and the Senior Trustee or
Subordinated Trustee may treat the persons in whose names the notes, including
the global notes, are registered as the owners of the notes for the purpose of
receiving payment on the notes and for any and all other purposes whatsoever.
Accordingly, neither we nor the Senior Trustee or Subordinated Trustee has or
will have any responsibility or liability for the payment of amounts to owners
of beneficial interests in a global note, including principal, premium, if any,
liquidated damages, if any, and interest. Payments by the participants and the
indirect participants in DTC to the owners of beneficial interests in a global
note will be governed by standing instructions and customary industry practice
and will be the responsibility of the participants or the indirect participants
and DTC.
Transfers between participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear or Clearstream will be effected in the ordinary way
according to their respective rules and operating procedures.
Cross-market transfers between the participants in DTC, on the one hand,
and Euroclear or Clearstream participants, on the other hand, will be effected
through DTC in accordance with DTC's rules on behalf of Euroclear or
Clearstream, as the case may be, by its respective depositary. These
cross-market transactions, however, will require delivery of instructions to
Euroclear or Clearstream, as the case may be, by the counterparty in that system
in accordance with the rules and procedures and within the established
deadlines, Brussels time, of that system. If the transaction meets its
settlement requirements, Euroclear or Clearstream, as the case may be, will
deliver instructions to its respective depositary to take action to effect final
settlement on its behalf by delivering or receiving interests in the relevant
global notes in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Euroclear
participants and Clearstream participants may not deliver instructions directly
to the depositaries for Euroclear or Clearstream.
Because of time zone differences, the securities account of a Euroclear
or Clearstream participant purchasing an interest in a global note from a
participant in DTC will be credited, and any crediting will be reported to the
relevant Euroclear or Clearstream participant, during the securities settlement
processing day, which must be a business day for Euroclear and Clearstream,
immediately following the settlement date of DTC. Cash received in Euroclear or
Clearstream as a result of sales of interest in a global note by or through a
Euroclear or Clearstream
89
participant to a participant in DTC will be received with value on the
settlement date of DTC but will be available in the relevant Euroclear or
Clearstream cash account only as of the business day for Euroclear or
Clearstream following DTC's settlement date.
Although DTC, Euroclear and Clearstream have agreed to the above
procedures to facilitate transfers of interests in the global notes among its
participants in DTC, Euroclear and Clearstream, they are under no obligation to
perform or to continue to perform the procedures, and the procedures may be
discontinued at any time. Neither we nor the Senior Trustee or Subordinated
Trustee will have any responsibility for the performance by DTC, Euroclear or
Clearstream or its respective participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
CERTIFICATED NOTES
A global note is exchangeable for certificated notes if:
o DTC (a) notifies the Issuer that it is unwilling or unable to
continue as depositary for the global note and the Issuer fails to
appoint a successor depositary or (b) has ceased to be a clearing
agency registered under the Exchange Act;
o the Issuer, at its option, notifies the Senior Trustee or
Subordinated Trustee in writing that it elects to cause the
issuance of the notes in certificated form; or
o there shall have occurred and be continuing to occur a Default or
an Event of Default with respect to the notes.
In addition, beneficial interest in a global note may be exchanged for
certificated notes upon request but only upon at least 20 days' prior written
notice given to the Senior Trustee or Subordinated Trustee, as applicable, by or
on behalf of DTC in accordance with customary procedures. In all cases,
certificated notes delivered in exchange for any global note or beneficial
interest therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary, according to its
customary procedures.
Subject to certain conditions, any person having a beneficial interest in
the global notes may, upon request to the Senior Trustee or Subordinated
Trustee, as applicable, exchange their beneficial interest for notes in the form
of certificated notes. Upon any such issuance, the Senior Trustee or
Subordinated Trustee, is required to register the certificated notes in the name
of, and deliver to such person or persons, or the nominee of any thereof. In
addition, if:
o we notify the Senior Trustee or Subordinated Trustee in writing
that DTC is no longer willing or able to act as a depository or
DTC ceases to be registered as a clearing agency under the
Securities Exchange Act of 1934 and a successor depository is not
appointed within 90 days of the notice or cessation; or
o we, at our option, notify the Senior Trustee or Subordinated
Trustee in writing that we elect to cause the issuance of notes in
definitive form under the applicable indenture;
then, upon surrender of the global notes, certificated notes will be issued to
each person that DTC identifies as the beneficial owner of the notes represented
by the global notes. Upon the issuance of certificated notes, the Senior Trustee
or Subordinated Trustee is required to register certificated notes in the name
of that person or persons, or their nominee, and cause the certified notes to be
delivered to those persons.
Neither we nor the trustee will be liable for any delay by DTC or any
participant or indirect participant in identifying the beneficial owners of the
related notes and each of those persons may conclusively rely on, and will be
protected in relying on, instructions from DTC for all purposes, including with
respect to the registration and delivery, and the respective principal amounts,
of the notes to be issued.
SAME DAY SETTLEMENT AND PAYMENT
Each of the Senior Indenture and the Subordinated Indenture requires that
payments in respect of the notes represented by the global note, including
principal, premium, if any, interest and liquidated damages, if any, be
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made by wire transfer of immediately available next day funds to the accounts
specified by the global note holder. With respect to certificated notes, we will
make all payments of principal, premium, if any, interest and liquidated
damages, if any, by wire transfer of immediately available funds to the accounts
specified by the Holders thereof or, if no such account is specified, by mailing
a check to each such holder's registered address. We expect that secondary
trading in the certificated notes will also be settled in immediately available
funds.
91
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
EXCHANGE OF NOTES
The exchange of outstanding notes for exchange notes in the exchange
offer will not constitute a taxable event to holders for United States federal
income tax purposes. Consequently, no gain or loss will be recognized by a
holder upon receipt of an exchange note, the holding period of the exchange note
will include the holding period of the outstanding note and the basis of the
exchange note will be the same as the basis of the outstanding note immediately
before the exchange.
In any event, persons considering the exchange of outstanding notes for
exchange notes should consult their own tax advisors concerning the United
States federal income tax consequences in light of their particular situations
as well as any consequences arising under the laws of any other taxing
jurisdiction.
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account as a
result of market-making activities and other trading activities, other than
outstanding notes acquired directly from us or any of our affiliates, in the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of exchange notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of exchange notes received in exchange for outstanding notes where
outstanding notes were acquired as a result of market-making activities or other
trading activities. We have agreed that, for a period of one year after the
consummation of the exchange offer or such shorter period as will terminate when
all outstanding notes covered by the registration statement have been sold, we
will make this prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any resale.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
in the exchange offer may be sold from time to time in one or more transactions
in the over-the-counter market, in negotiated transactions, through the writing
of options on the exchange notes, or through a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices, or at negotiated prices. Any resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any broker-dealer or
the purchasers of any exchange notes. Any broker-dealer that resells exchange
notes that were received by it for its own account in the exchange offer and any
broker or dealer that participates in a distribution of exchange notes may be
deemed to be an "underwriter" within the meaning of the Securities Act, and any
profit on any resale of exchange notes and any commission or concessions
received by any of those persons may be deemed to be underwriting compensation
under the Securities Act. The letter of transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is in an "underwriter" within
the meaning of the Securities Act.
We have agreed, for a period of one year after the consummation of the
exchange offer or such shorter period as will terminate when all transfer
restricted securities covered by the registration statement have been sold, to
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests those documents
in the letter of transmittal. We have also agreed to pay all expenses incident
to the exchange offer, including the expenses of one counsel for the holders of
the outstanding notes directly from us, and will indemnify the holders of the
notes, including any broker-dealers, against certain liabilities, including
liabilities caused by any omission or alleged omission to state a material fact
required to be stated in the registration statement or prospectus or necessary
to make the statements in the registration statement or prospectus not
misleading. This indemnification obligation does not extend to statements or
omissions in the registration statement or prospectus made in reliance upon and
in conformity with written information pertaining to the holder that is
furnished in writing to us by or on behalf of any holder.
FORWARD-LOOKING STATEMENTS
This prospectus includes "forward-looking statements" including, in
particular, the statements about our plans, strategies and prospects under the
heading "Prospectus Summary," and in the Unaudited Pro Forma Combined Financial
Data and the related notes thereto. Although we believe that our plans,
intentions and
92
expectations reflected in, or suggested by such forward-looking statements are
reasonable, we can give no assurance that such plans, intentions or expectations
will be achieved. The forward-looking statements we make in the prospectus are
subject to risks, uncertainties, and assumptions, including, among other things,
factors discussed under the heading "Risk Factors". All forward-looking
statements attributable to Hovnanian or the Issuer or persons acting on our
behalf are expressly qualified in their entirety by the cautionary statements
and risk factors contained throughout this prospectus.
LEGAL MATTERS
Certain legal matters related to the exchange notes offered hereby will
be passed upon for us by Simpson Thacher & Bartlett, New York, New York.
EXPERTS
The consolidated financial statements of Hovnanian Enterprises, Inc.,
appearing in Hovnanian Enterprises, Inc.'s Annual Report (Form 10-K) for the
year ended October 31, 2001, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report included therein and incorporated herein
by reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, and file reports, proxy statements and other information
with the Commission. You may read and copy any reports, proxy statements and
other information at the Commission's public reference room at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its
regional office located at 500 West Madison Street, 14th Floor, Chicago,
Illinois 60661. Copies of such material also can be obtained by mail from the
Public Reference Section of the Commission, at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, at the prescribed rates. The
Commission also maintains a website that contains reports, proxy and information
statements and other information. The website address is: http://www.sec.gov.
Hovnanian's Class A common stock is listed on the New York Stock Exchange, and
reports, proxy statements and other information also can be inspected at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Hovnanian has filed the following documents with the Commission and these
documents are incorporated herein by reference:
o Annual Report on Form 10-K for the fiscal year ended October 31,
2001, Registration File No. 1-8551;
o Quarterly Report on Form 10-Q for the quarter ended January 31,
2002, Registration File No. 1-8551; and
o Current Reports on Form 8-K filed on January 24, 2002, as amended
by Current Report on Form 8-K/A filed February 19, 2002,
Registration File Nos. 1-8551 and on March 21, 2002, Registration
File No. 1-8551.
This prospectus is part of a registration statement filed with the SEC.
The Securities and Exchange Commission allows us to "incorporate by reference"
selected documents we file with it, which means that we can disclose important
information to you by referring you to those documents. The information in the
documents incorporated by reference is considered to be part of this prospectus,
and information in documents that we file later with the Securities and Exchange
Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below filed under Section 13(a),
13(c), 14 or 15(d) of the Exchange Act.
All documents filed by Hovnanian pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this prospectus and prior to
the termination of the offerings made by this prospectus are to
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be incorporated herein by reference. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is incorporated or deemed to be incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
prospectus.
Hovnanian will provide without charge to each person, including any
beneficial owner, to whom a copy of this prospectus is delivered, upon the
written or oral request of such person, a copy of any or all of the information
incorporated by reference in this prospectus, other than exhibits to such
information (unless such exhibits are specifically incorporated by reference
into the information that this prospectus incorporates). Requests for such
copies should be directed to Paul W. Buchanan, Senior Vice President--Corporate
Controller, Hovnanian Enterprises, Inc., 10 Highway 35, P.O. Box 500, Red Bank,
New Jersey 07701 (telephone: (732) 747-7800).
94
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Hovnanian is a Delaware corporation. Section 145 of the General
Corporation Law of the State of Delaware grants each corporation organized
thereunder the power to indemnify any person who is or was a director, officer,
employee or agent of a corporation or enterprise, against expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, other than an action by or in the right of the corporation, by
reason of being or having been in any such capacity, if he acted in good faith
in a manner reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Section 102(b)(7) of the
General Corporation Law of the State of Delaware enables a corporation in its
certificate of incorporation or an amendment thereto validly approved by
stockholders to limit or eliminate the personal liability of the members of its
board of directors for violations of the directors' fiduciary duty of care.
Article EIGHTH of Hovnanian's Restated Certificate of Incorporation
contains the following provisions with respect to indemnification:
No director of the Company shall be personally liable to the Company or
its stockholders for monetary damages for breach of fiduciary duty as a
director; provided, however, that this Article shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit. This Article shall
not eliminate or limit the liability of a director for any act or omission
occurring prior to the date on which this Article becomes effective. Any repeal
or modification of this Article Eighth shall not adversely affect any right or
protection of a director of the Company existing hereunder with respect to any
act or omission occurring prior to the time of such repeal or modification.
Hovnanian maintains a liability insurance policy providing coverage for
its directors and officers in an amount up to an aggregate limit of $10,000,000
for any single occurrence.
K. Hovnanian is a New Jersey corporation. Subsection 2 of Title 14A,
Section 3-5 of the New Jersey Statutes grants any corporation organized for any
purpose under any general or special law of New Jersey the power to indemnify a
corporate agent against his expenses and liabilities in connection with any
proceeding involving the corporate agent by reason of his being or having been
such a corporate agent, other than a proceeding by or in the right of the
corporation, if (a) such corporate agent acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation; and (b) with respect to any criminal proceeding, such corporate
agent had no reasonable cause to believe his conduct was unlawful. The
termination of any proceeding by judgment, order, settlement, conviction or upon
a plea of nolo contendere or its equivalent does not by itself create a
presumption that the corporate agent did not meet such applicable standards of
conduct. Section 3 of Title 14A, Section 3-5 of the New Jersey Statutes grants
any corporation organized under any general or special law of New Jersey the
power to indemnify a director, officer, employee or agent of a corporation
against his expenses in connection with any proceeding by or in the right of the
corporation, which involves him by reason of his having been a corporate agent,
if he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation. However, no indemnification
shall be provided in respect of any claim, issue or matter in which the
corporate agent shall be adjudged to be liable to the corporation, unless and
only to the extent that the Superior Court or the court in which the proceeding
was brought determines, upon application, that despite the adjudication of
liability, but in view of all circumstances of the case, the corporate agent is
fairly and reasonably entitled to indemnity for expenses deemed proper by the
Superior Court or such other court. Corporations organized for any purpose under
any general or special law of New Jersey shall indemnify a corporate agent
against expenses to the extent that such corporate agent has been successful on
the merits or otherwise in any proceeding referred to in subsections 2 and 3 of
Title 14A, Section 3-5.
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Subsection 4 provides that any indemnification under these subsections,
unless ordered by a court under subsection 3, may be made by the corporation
only as authorized in a specific case upon a determination that indemnification
is proper in the circumstances because the corporate agent met the applicable
standard of (a) good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and (b) with respect to any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful. Subsection 5 provides that unless provided for in the certificate of
incorporation or bylaws, such determination shall be made (a) by the board of
directors or a committee thereof, acting by a majority vote of a quorum
consisting of directors who were not parties to or otherwise involved in the
proceeding; or (b) if such quorum is not obtainable, or even if obtainable and
such quorum directs, by written opinion of independent legal counsel designated
by the board of directors; or (c) by the shareholders if the certificate of
incorporation or bylaws or a resolution of the board of directors or of the
shareholders so directs. Subsection 7 provides that if a corporation on
application by a corporate agent fails or refuses to provide indemnification as
required or permitted by this section, a corporate agent may apply to a court
for an award of indemnification by the corporation. This section does not
exclude any other rights to which a corporate agent may be entitled under a
certificate of incorporation, bylaw, agreement, vote of shareholders, or
otherwise; provided that no indemnification is made if a final adjudication
adverse to the corporate agent establishes that his acts or omissions (a) were
in breach of his duty of loyalty to the corporation or its shareholders, as
defined under New Jersey law, (b) were not in good faith or involved a knowing
violation of law or (c) resulted in receipt by the corporate agent of an
improper personal benefit.
Except as required by subsection 4, no indemnification shall be made or
expenses advanced by a corporation or shall be ordered by a court if such action
would be inconsistent with a provision of the certificate of incorporation, a
bylaw, a resolution of the board of directors or of the shareholders, an
agreement or other proper corporate action in effect at the time of the accrual
of the alleged cause of action asserted in the proceeding, which prohibits,
limits or otherwise conditions the exercise of indemnification powers by the
corporation or the rights to which a corporate agent may be entitled.
Neither K. Hovnanian's Certificate of Incorporation nor its bylaws
contain any provisions relating to indemnity.
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ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
4.1 Indenture, dated as of March 26, 2002 among K. Hovnanian Enterprises,
Inc., the Guarantors party named therein, and Wachovia Bank, National
Association, formerly known as First Union National Bank, as trustee
(filed herewith).
4.2 Indenture, dated as of March 26, 2002 among K. Hovnanian Enterprises,
Inc., the Guarantors party named therein, and Wachovia Bank, National
Association, formerly known as First Union National Bank, as trustee
(filed herewith).
4.3 Registration Rights Agreement, dated as of March 26, 2002 among K.
Hovnanian Enterprises, Inc., Hovnanian Enterprises, Inc., certain of its
Subsidiaries, Salomon Smith Barney, Inc., Banc of America Securities LLC,
Credit Suisse First Boston Corporation and PNC Capital Markets, Inc.
(filed herewith).
4.4 Registration Rights Agreement, dated as of March 26, 2002 among K.
Hovnanian Enterprises, Inc., Hovnanian Enterprises, Inc., certain of its
Subsidiaries, Salomon Smith Barney, Inc., Banc of America Securities LLC
and Credit Suisse First Boston Corporation (filed herewith).
5.1 Opinion of Simpson Thacher & Bartlett (filed herewith).
12.1 Statement re: Computation of Ratio of Earnings to Fixed Charges (filed
herewith).
23.1 Consent of Simpson Thacher & Bartlett (contained in Exhibit 5.1 filed
herewith).
23.2 Consent of Ernst & Young LLP (filed herewith).
24.1 Powers of Attorney of the Board of Directors of Hovnanian Enterprises,
Inc. (included on signature page).
24.2 Powers of Attorney of the Board of Directors of K. Hovnanian Enterprises,
Inc. (included on signature page).
24.3 Powers of Attorney of the Board of Directors of Subsidiary Registrants
(included on signature page).
25.1 Statement of Eligibility of Trustee under both the Indenture filed as
Exhibit 4.1 hereto and under the Indenture filed as Exhibit 4.2 hereto
(filed herewith).
99.1 Form of Letter of Transmittal.*
99.2 Form of Letter to Securities Dealers, Commercial Banks, Trust Companies
and Other Nominees.*
99.3 Form of Letter to Clients.*
99.4 Form of Notice of Guaranteed Delivery.*
* To be filed by amendment.
ITEM 22. UNDERTAKINGS.
1. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial BONA FIDE
offering thereof.
2. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, or controlling
persons of the registrant pursuant to the foregoing provisions, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of it counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
3. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11, or 13 of this form, within one business
day of
II-3
receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
4. The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
5. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1993;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such information
in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial BONA FIDE offering thereof.
(3) To reprove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Hovnanian
Enterprises, Inc. has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Red
Bank, state of New Jersey, on June 6, 2002.
HOVNANIAN ENTERPRISES, INC.
By: /s/ J. Larry Sorsby
----------------------------------
J. Larry Sorsby
Executive Vice-President and
Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
J. Larry Sorsby and Paul W. Buchanan and each of them, the true and lawful
attorneys-in-fact and agents of the undersigned, with full power of substitution
and resubstitution, for and in the name, place and stead of undersigned, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, including any filings pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with all exhibits thereto, and all other documents in connection therewith, with
the Securities and Exchange Commission, and hereby grants to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and anything necessary to be done, as fully to
all intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute, or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on June 6, 2002.
Signature Title
--------- -----
/s/ Kevork S. Hovnanian Chairman of the Board
- ------------------------------------
Kevork S. Hovnanian
/s/ Ara K. Hovnanian President, Chief Executive Officer and
- ------------------------------------ Director
Ara K. Hovnanian
/s/ Paul W. Buchanan Senior Vice-President, Corporate
- ------------------------------------ Controller and Director
Paul W. Buchanan
/s/ Geaton A. Decesaris, Jr. President of Homebuilding Operations
- ------------------------------------ and Chief Operating Officer and Director
Geaton A. DeCesaris, Jr.
/s/ Arthur M. Greenbaum Director
- ------------------------------------
Arthur M. Greenbaum
/s/ Desmond P. McDonald Director
- ------------------------------------
Desmond P. McDonald
/s/ Peter S. Reinhart Senior Vice-President, General
- ------------------------------------ Counsel/Secretary and Director
Peter S. Reinhart
/s/ John J. Robbins Director
- ------------------------------------
John J. Robbins
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/s/ J. Larry Sorsby Executive Vice-President, Chief
- ------------------------------------ Financial Officer and Director
J. Larry Sorsby
/s/ Stephen D. Weinroth Director
- ------------------------------------
Stephen D. Weinroth
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, K. Hovnanian
Enterprises, Inc. has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Red
Bank, state of New Jersey, June 6, 2002.
K. HOVNANIAN ENTERPRISES, INC.
By: /s/ J. Larry Sorsby
-----------------------------
J. Larry Sorsby
Executive Vice-President
Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
J. Larry Sorsby and Paul W. Buchanan and each of them, the true and lawful
attorneys-in-fact and agents of the undersigned, with full power of substitution
and resubstitution, for and in the name, place and stead of undersigned, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, including any filings pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with all exhibits thereto, and all other documents in connection therewith, with
the Securities and Exchange Commission, and hereby grants to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and anything necessary to be done, as fully to
all intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute, or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on June 6, 2002.
SIGNATURE TITLE
--------- -----
/s/ Kevork S. Hovnanian Chairman of the Board
- ------------------------------------
Kevork S. Hovnanian
/s/ Ara K. Hovnanian President, Chief Executive Officer
- ------------------------------------ and Director
Ara K. Hovnanian
/s/ Paul W. Buchanan Senior Vice-President, Corporate
- ------------------------------------ Controller and Director
Paul W. Buchanan
/s/ Geaton A. Decesaris, Jr. President of Homebuilding
- ------------------------------------ Operations and Chief Operating
Geaton A. DeCesaris, Jr. Officer and Director
/s/ Peter S. Reinhart Senior Vice-President, General
- ------------------------------------ Counsel/Secretary and Director
Peter S. Reinhart
/s/ J. Larry Sorsby Executive Vice-President, Chief
- ------------------------------------ Financial Officer and Director
J. Larry Sorsby
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
Registrants, as listed on the attached Schedule of Subsidiary Registrants has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Red Bank, state of New
Jersey, on June 6, 2002.
Registrants (as listed on the attached Schedule
of Subsidiary Registrants)
By: /s/ J. Larry Sorsby
----------------------
J. Larry Sorsby
Executive Vice-President
Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
J. Larry Sorsby and Paul W. Buchanan and each of them, the true and lawful
attorneys-in-fact and agents of the undersigned, with full power of substitution
and resubstitution, for and in the name, place and stead of undersigned, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, including any filings pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with all exhibits thereto, and all other documents in connection therewith, with
the Securities and Exchange Commission, and hereby grants to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and anything necessary to be done, as fully to
all intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute, or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on June 6, 2002.
SIGNATURE TITLE
--------- -----
/s/ Kevork S. Hovnanian Chairman of the Board and Director
- ------------------------------------
Kevork S. Hovnanian
/s/ Ara K. Hovnanian Vice Chairman of the Board
- ------------------------------------
Ara K. Hovnanian
/s/ Paul W. Buchanan Senior Vice-President, Corporate
- ------------------------------------ Controller and Director
Paul W. Buchanan
/s/ Geaton A. Decesaris, Jr. President of Homebuilding Operations
- ------------------------------------ and Chief Operating Officer and
Geaton A. DeCesaris, Jr. Director
/s/ Peter S. Reinhart Senior Vice-President, General
- ------------------------------------ Counsel/Secretary and Director
Peter S. Reinhart
/s/ J. Larry Sorsby Executive Vice-President, Chief
- ------------------------------------ Financial Officer and Director
J. Larry Sorsby
II-8
SCHEDULE OF SUBSIDIARY REGISTRANTS
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
All Seasons, Inc.
Arrow Properties, Inc.
Ballantrae Development Corp.
Ballantrae Home Sales, Inc.
Condominium Community (Bowie New Town), Inc.
Condominium Community (Largo Town), Inc.
Condominium Community (Park Place), Inc.
Condominium Community (Quail Run), Inc.
Condominium Community (Truman Drive), Inc.
Consultants Corporation
Designed Contracts, Inc.
EXC, Inc.
Fortis Homes, Inc.
Housing-Home Sales, Inc.
Hovnanian at Tarpon Lakes I, Inc.
Hovnanian Developments of Florida, Inc.
Hovnanian Pennsylvania, Inc.
K. Hov A, Inc.
K. Hov International, Inc.
K. Hovnanian Acquisitions, Inc.
K. Hovnanian at Ashburn Village, Inc.
K. Hovnanian at Atlantic City, Inc.
K. Hovnanian at Ballantrae Estates, Inc.
K. Hovnanian at Barrington, Inc.
K. Hovnanian at Bedminster II, Inc.
K. Hovnanian at Bedminster, Inc.
K. Hovnanian at Belmont, Inc.
K. Hovnanian at Bernards IV, Inc.
K. Hovnanian at Branchburg III, Inc.
K. Hovnanian at Bridgeport, Inc.
K. Hovnanian at Bridgewater IV, Inc.
K. Hovnanian at Bridgewater V, Inc.
K. Hovnanian at Bridgewater VI, Inc.
K. Hovnanian at Bull Run, Inc.
K. Hovnanian at Burlington III, Inc.
K. Hovnanian at Burlington, Inc.
II-9
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
K. Hovnanian at Calabria, Inc.
K. Hovnanian at Cameron Chase, Inc.
K. Hovnanian at Carmel Del Mar, Inc.
K. Hovnanian at Carolina Country Club I, Inc.
K. Hovnanian at Carolina Country Club II, Inc.
K. Hovnanian at Carolina Country Club III, Inc.
K. Hovnanian at Castile, Inc.
K. Hovnanian at Cedar Grove I, Inc.
K. Hovnanian at Cedar Grove II, Inc.
K. Hovnanian at Chaparral, Inc.
K. Hovnanian at Clarkstown, Inc.
K. Hovnanian at Coconut Creek, Inc.
K. Hovnanian at Crestline, Inc.
K. Hovnanian at Crystal Springs, Inc.
K. Hovnanian at Dominguez, Inc.
K. Hovnanian at Dominion Ridge, Inc.
K. Hovnanian at East Brunswick VI, Inc.
K. Hovnanian at East Brunswick VIII, Inc.
K. Hovnanian at East Whiteland I, Inc.
K. Hovnanian at Exeter Hills, Inc.
K. Hovnanian at Fair Lakes Glen, Inc.
K. Hovnanian at Fair Lakes, Inc.
K. Hovnanian at Freehold Township, Inc.
K. Hovnanian at Freehold Township I, Inc.
K. Hovnanian at Ft. Myers I, Inc.
K. Hovnanian at Ft. Myers II, Inc.
K. Hovnanian at Great Notch, Inc.
K. Hovnanian at Hackettstown, Inc.
K. Hovnanian at Half Moon Bay, Inc.
K. Hovnanian at Hampton Oaks, Inc.
K. Hovnanian at Hanover, Inc.
K. Hovnanian at Hershey's Mill, Inc. (a PA Corp)
K. Hovnanian at Highland Vineyards, Inc.
K. Hovnanian at Holly Crest, Inc.
K. Hovnanian at Hopewell IV, Inc.
K. Hovnanian at Hopewell V, Inc.
K. Hovnanian at Hopewell VI, Inc.
K. Hovnanian at Howell Township, Inc.
K. Hovnanian at Hunter Estates, Inc.
II-10
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
K. Hovnanian at Jacksonville II, Inc.
K. Hovnanian at Jefferson, Inc.
K. Hovnanian at Jersey City III, Inc.
K. Hovnanian at Kings Grant I, Inc.
K. Hovnanian at Klockner Farms, Inc.
K. Hovnanian at La Terraza, Inc.
K. Hovnanian at La Trovata, Inc.
K. Hovnanian at Lakewood, Inc.
K. Hovnanian at Lawrence V, Inc.
K. Hovnanian at Lower Saucon II, Inc.
K. Hovnanian at Lower Saucon, Inc.
K. Hovnanian at Mahwah II, Inc.
K. Hovnanian at Mahwah IV, Inc. (Whalepond)
K. Hovnanian at Mahwah IX, Inc.
K. Hovnanian at Mahwah V, Inc.
K. Hovnanian at Mahwah VI, Inc. (Norfolk)
K. Hovnanian at Mahwah VII, Inc.
K. Hovnanian at Mahwah VIII, Inc.
K. Hovnanian at Manalapan, Inc.
K. Hovnanian at Manalapan III, Inc.
K. Hovnanian at Marlboro II, Inc.
K. Hovnanian at Marlboro Township IV, Inc.
K. Hovnanian at Marlboro Township VI, Inc.
K. Hovnanian at Marlboro Township VII, Inc.
K. Hovnanian at Marlboro Township, III
K. Hovnanian at Medford I, Inc.
K. Hovnanian at Merrimack, Inc.
K. Hovnanian of Metro DC South, Inc.
K. Hovnanian at Montclair NJ, Inc.
K. Hovnanian at Montclair, Inc.
K. Hovnanian at Montgomery I, Inc.
K. Hovnanian at Newark Urban Renewal Corporation I, Inc.
K. Hovnanian at Newark Urban Renewal Corporation IV, Inc.
K. Hovnanian at Newark Urban Renewal Corporation V, Inc.
K. Hovnanian at North Bergen, Inc.
K. Hovnanian at North Brunswick IV, Inc.
K. Hovnanian at Northern Westchester, Inc.
K. Hovnanian at Northlake, Inc.
K. Hovnanian at Ocean Walk, Inc.
II-11
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
K. Hovnanian at P.C. Properties, Inc.
K. Hovnanian at Park Ridge, Inc.
K. Hovnanian at Pasco I, Inc.
K. Hovnanian at Pasco II, Inc.
K. Hovnanian at Peekskill, Inc.
K. Hovnanian at Pembroke Shores, Inc.
K. Hovnanian at Perkiomen I, Inc.
K. Hovnanian at Perkiomen II, Inc.
K. Hovnanian at Plainsboro III, Inc.
K. Hovnanian at Polo Trace, Inc.
K. Hovnanian at Port Imperial North, Inc.
K. Hovnanian at Princeton, Inc.
K. Hovnanian at Rancho Christianitos, Inc.
K. Hovnanian at Raritan I, Inc.
K. Hovnanian at Readington II, Inc.
K. Hovnanian at Reservoir Ridge, Inc.
K. Hovnanian at River Oaks, Inc.
K. Hovnanian at San Sevaine, Inc.
K. Hovnanian at Saratoga, Inc.
K. Hovnanian at Scotch Plains II, Inc.
K. Hovnanian at Scotch Plains, Inc.
K. Hovnanian at Seneca Crossing, Inc.
K. Hovnanian at Smithville, Inc.
K. Hovnanian at Smithville III, Inc.
K. Hovnanian at Somers Point, Inc.
K. Hovnanian at South Brunswick II, Inc.
K. Hovnanian at South Brunswick III, Inc.
K. Hovnanian at South Brunswick IV, Inc.
K. Hovnanian at South Brunswick V, Inc.
K. Hovnanian at Spring Ridge, Inc.
K. Hovnanian at Stone Canyon, Inc.
K. Hovnanian at Stonegate, Inc. (a CA Corporation)
K. Hovnanian at Stonegate, Inc. (a VA Corporation)
K. Hovnanian at Stony Point, Inc.
K. Hovnanian at Stuart Road, Inc.
K. Hovnanian at Sully Station, Inc.
K. Hovnanian at Summerwood, Inc.
K. Hovnanian at Sycamore, Inc.
K. Hovnanian at Tannery Hill, Inc.
II-12
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
K. Hovnanian at The Bluff, Inc.
K. Hovnanian at The Cedars, Inc.
K. Hovnanian at The Glen, Inc.
K. Hovnanian at the Reserve at Medford, Inc.
K. Hovnanian at Thornbury, Inc.
K. Hovnanian at Tierrasanta, Inc.
K. Hovnanian at Tuxedo, Inc.
K. Hovnanian at Union Township I, Inc.
K. Hovnanian at Upper Freehold Township I, Inc.
K. Hovnanian at Upper Makefield I, Inc.
K. Hovnanian at Upper Merion, Inc.
K. Hovnanian at Vail Ranch, Inc.
K. Hovnanian at Valleybrook II, Inc.
K. Hovnanian at Valleybrook, Inc.
K. Hovnanian at Wall Township VI, Inc.
K. Hovnanian at Wall Township VIII, Inc.
K. Hovnanian at Washingtonville, Inc.
K. Hovnanian at Wayne III, Inc.
K. Hovnanian at Wayne V, Inc.
K. Hovnanian at Wayne VI, Inc.
K. Hovnanian at Wayne VII, Inc.
K. Hovnanian at Wildrose, Inc.
K. Hovnanian at Winston Trails, Inc.
K. Hovnanian at Woodmont, Inc.
K. Hovnanian Companies Northeast, Inc.
K. Hovnanian Companies of California, Inc.
K. Hovnanian Companies of Florida, Inc.
K. Hovnanian Companies of Maryland, Inc.
K. Hovnanian Companies of Metro Washington, Inc.
K. Hovnanian Companies of New York, Inc.
K. Hovnanian Companies of North Carolina, Inc.
K. Hovnanian Companies of Pennsylvania, Inc.
K. Hovnanian Companies of Southern California, Inc.
K. Hovnanian Construction Management, Inc.
K. Hovnanian's Design Gallery, Inc.
K. Hovnanian Developments of California, Inc.
K. Hovnanian Developments of Maryland, Inc.
K. Hovnanian Developments of Metro Washington, Inc.
K. Hovnanian Developments of New Jersey, Inc.
II-13
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
K. Hovnanian Developments of New York, Inc.
K. Hovnanian Developments of South Carolina, Inc.
K. Hovnanian Developments of Texas, Inc.
K. Hovnanian Equities, Inc.
K. Hovnanian Florida Division, Inc.
K. Hovnanian Forecast Acquisition, Inc.
K. Hovnanian Forecast Homes, Inc.
K. Hovnanian Investment Properties of New Jersey, Inc.
K. Hovnanian Marine, Inc.
K. Hovnanian Port Imperial Urban Renewal, Inc.
K. Hovnanian Properties of East Brunswick II, Inc.
K. Hovnanian Properties of NB Theatre, Inc.
K. Hovnanian Properties of Newark Urban Renewal Corporation, Inc.
K. Hovnanian Properties of North Brunswick II, Inc.
K. Hovnanian Properties of North Brunswick V, Inc.
K. Hovnanian Properties of Piscataway, Inc.
K. Hovnanian Properties of Red Bank, Inc.
K. Hovnanian Properties of Wall, Inc.
K. Hovnanian Real Estate Investment, Inc.
K. Hovnanian Real Estate of Florida, Inc.
K. Hovnanian Southeast Florida, Inc.
K. Hovnanian Southeast Region, Inc.
K. Hovnanian's Four Seasons of the Palm Beaches, Inc.
KHC Acquisition, Inc.
Kings Grant Evesham Corp.
Landarama, Inc.
Matzel & Mumford of Delaware, Inc.
M & M at Long Branch, Inc.
New K. Hovnanian Developments of Florida, Inc.
Parthenon Group, Inc.
Pine Brook Co., Inc.
Que Corporation
Reflections of You Interiors, Inc.
Stonebrook Homes, Inc.
The Matzel & Mumford Organization, Inc.
The New Fortis Corporation
The Southampton Corporation
Tropical Service Builders, Inc.
Washington Homes of Delaware, Inc.
II-14
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
Washington Homes of West Virginia, Inc.
Washington Homes, Inc.
Washington Homes, Inc. of Virginia
Westminster Homes (Charlotte), Inc.
Westminster Homes of Tennessee, Inc.
Westminster Homes, Inc.
WH Land I, Inc.
WH Land II, Inc.
WH Properties, Inc.
Arbor West, L.L.C.
K. Hovnanian at St. Margarets, L.L.C.
K. Hovnanian at Arbor Heights, L.L.C.
K. Hovnanian at Ashburn Village, L.L.C.
K. Hovnanian at Barnegat I, L.L.C.
K. Hovnanian at Berkeley, L.L.C.
K. Hovnanian at Bernards V, L.L.C.
K. Hovnanian at Blooms Crossing, L.L.C.
K. Hovnanian at Blue Heron Pines, L.L.C.
K. Hovnanian at Brenbrooke, L.L.C.
K. Hovnanian at Camden I, L.L.C.
K. Hovnanian at Carmel Village, L.L.C.
K. Hovnanian at Cedar Grove III, L.L.C.
K. Hovnanian at Chester I, L.L.C.
K. Hovnanian at Clifton, L.L.C.
K. Hovnanian at Columbia Town Center, L.L.C.
K. Hovnanian at Cranbury, L.L.C.
K. Hovnanian at Curries Woods, L.L.C.
K. Hovnanian at Denville, L.L.C.
K. Hovnanian at Encinitas Ranch, L.L.C.
K. Hovnanian at Forecast, L.L.C.
K. Hovnanian at 4S Ranch, L.L.C.
K. Hovnanian at Guttenberg, L.L.C.
K. Hovnanian at Hamburg, L.L.C.
K. Hovnanian at Hamburg Contractors, L.L.C.
K. Hovnanian at Jackson, L.L.C.
K. Hovnanian at Jersey City IV, L.L.C.
K. Hovnanian at Kent Island, L.L.C.
K. Hovnanian at Kincaid, L.L.C.
K. Hovnanian at King Farm, L.L.C.
II-15
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
K. Hovnanian at LaFayette Estates, L.L.C.
K. Hovnanian at Lake Ridge Crossing, L.L.C.
K. Hovnanian at Lake Terrapin, L.L.C.
K. Hovnanian at Lawrence V, L.L.C.
K. Hovnanian at Linwood, L.L.C.
K. Hovnanian at Little Egg Harbor, L.L.C.
K. Hovnanian at Little Egg Harbor Contractors, L.L.C.
K. Hovnanian at Lower Moreland I, L.L.C.
K. Hovnanian at Lower Moreland II, L.L.C.
K. Hovnanian at Lower Saucon II, L.L.C.
K. Hovnanian at Manalapan II, L.L.C.
K. Hovnanian at Mansfield I, LLC
K. Hovnanian at Mansfield II, LLC
K. Hovnanian at Mansfield III, L.L.C.
K. Hovnanian at Marlboro Township VIII, L.L.C.
K. Hovnanian at Marlboro VI, L.L.C.
K. Hovnanian at Marlboro VII, L.L.C.
K. Hovnanian at Menifee, L.L.C.
K. Hovnanian at Middletown, L.L.C.
K. Hovnanian at Mt. Olive Township, L.L.C.
K. Hovnanian at North Brunswick VI, L.L.C.
K. Hovnanian at North Haledon, L.L.C.
K. Hovnanian at Northampton, L.L.C.
K. Hovnanian at Northfield, L.L.C.
K. Hovnanian at Pacific Bluffs, L.L.C.
K. Hovnanian at Paramus, L.L.C.
K. Hovnanian at Park Lane, L.L.C.
K. Hovnanian at Rancho Santa Margarita, L.L.C.
K. Hovnanian at Riverbend, L.L.C.
K. Hovnanian at Roderuck, L.L.C.
K. Hovnanian at Rowland Heights, L.L.C.
K. Hovnanian at Sayreville, L.L.C.
K. Hovnanian at South Amboy, L.L.C.
K. Hovnanian at South Bank, L.L.C.
K. Hovnanian at South Brunswick, L.L.C.
K. Hovnanian at Spring Hill Road, L.L.C.
K. Hovnanian at St. Margarets, L.L.C.
K. Hovnanian at Sunsets, L.L.C.
K. Hovnanian at the Gables, L.L.C.
II-16
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
K. Hovnanian at Upper Freehold Township II, L.L.C.
K. Hovnanian at Upper Freehold Township III, L.L.C.
K. Hovnanian at Wanaque, L.L.C.
K. Hovnanian at Washington, L.L.C.
K. Hovnanian at Wayne VIII, L.L.C.
K. Hovnanian at Wayne IX, L.L.C.
K. Hovnanian at West Milford, L.L.C.
K. Hovnanian at West Windsor, L.L.C.
K. Hovnanian at Willow Brook, L.L.C.
K. Hovnanian at Winchester, L.L.C.
K. Hovnanian at Woodhill Estates, L.L.C.
K. Hovnanian at Woolwich, L.L.C.
K. Hovnanian Central Acquisitions, L.L.C.
K. Hovnanian Companies of Metro D.C. North, L.L.C.
K. Hovnanian Eastern Pennsylvania, L.L.C.
K. Hovnanian Forecast, L.L.C.
K. Hovnanian Four Seasons @ Historic Virginia, L.L.C.
K. Hovnanian North Central Acquisitions, L.L.C.
K. Hovnanian North Jersey Acquisitions, L.L.C.
K. Hovnanian Shore Acquisitions, L.L.C.
K. Hovnanian South Jersey Acquisition, L.L.C.
K. Hovnanian Southern New Jersey, L.L.C.
K. Hovnanian's Four Seasons, L.L.C.
K. Hovnanian's Private Home Portfolio, L.L.C.
Kings Court at Montgomery, L.L.C.
M&M at Apple Ridge, L.L.C.
M&M at Brookhill, L.L.C.
M&M at Heritage Woods, L.L.C.
M&M at the Highlands, L.L.C.
M&M at East Mill, L.L.C.
M&M at Morristown, L.L.C.
M&M at Roosevelt, L.L.C.
M&M at Sheridan, L.L.C.
M&M at Sparta, L.L.C.
M&M at Spinnaker Pointe, L.L.C.
M&M at Spruce Hollow, L.L.C.
M&M at Spruce Meadows, L.L.C.
M&M at Spruce Run, L.L.C.
Matzel & Mumford at Cranbury Knoll, L.L.C.
II-17
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
Matzel & Mumford at Freehold, L.L.C.
Matzel & Mumford at Heritage Landing, L.L.C.
Matzel & Mumford at Montgomery, L.L.C.
Matzel & Mumford at Phillipsburg, L.L.C.
Matzel & Mumford at South Brunswick, L.L.C.
Matzel & Mumford at Woodland Crest, L.L.C.
Section 14 of the Hills, L.L.C.
The Landings at Spinnaker Pointe, L.L.C.
Westminster Homes of Alabama, L.L.C.
Westminster Homes of Mississippi, L.L.C.
Westminster Homes of South Carolina, L.L.C.
Goodman Family Builders, L.P.
M&M Investments, L.P.
Washabama, L.P.
II-18
EXHIBIT 4.1
================================================================================
K. HOVNANIAN ENTERPRISES, INC.,
AS ISSUER
HOVNANIAN ENTERPRISES, INC.
THE GUARANTORS PARTY HERETO
AND
FIRST UNION NATIONAL BANK,
AS TRUSTEE
----------
INDENTURE
DATED AS OF MARCH 26, 2002
----------
8.000% SENIOR NOTES DUE 2012
================================================================================
CROSS-REFERENCE TABLE(1)
TIA Sections Indenture Sections
- ------------ ------------------
Section 310 (a).........................................................................7.10
(b).........................................................................7.08
Section 312 10.02...........................................................................
Section 313 ............................................................................7.06
Section 314 (a)...................................................................4.15, 4.16
(c)........................................................................10.04
(e)........................................................................10.05
Section 315 (a)...................................................................7.01, 7.02
(b)...................................................................7.02, 7.05
(c).........................................................................7.01
(d).........................................................................7.02
(e).........................................................................5.09
Section 316 (a).......................................................2.06, 5.01, 5.03, 5.04
(b).........................................................................5.06
(c)........................................................................10.02
Section 317 (a) (1).....................................................................5.07
(a) (2).....................................................................5.07
(b).........................................................................2.04
Section 318 ...........................................................................10.01
TABLE OF CONTENTS
TABLE OF CONTENTS
PAGE
RECITALS
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS........................................................................................ 1
SECTION 1.02. RULES OF CONSTRUCTION..............................................................................24
ARTICLE 2
THE NOTES
SECTION 2.01. FORM, DATING AND DENOMINATIONS; LEGENDS............................................................24
SECTION 2.02. EXECUTION AND AUTHENTICATION; EXCHANGE NOTES; ADDITIONAL NOTES.....................................25
SECTION 2.03. REGISTRAR, PAYING AGENT AND AUTHENTICATING AGENT; PAYING AGENT TO HOLD MONEY IN TRUST..............26
SECTION 2.04. REPLACEMENT NOTES..................................................................................27
SECTION 2.05. OUTSTANDING NOTES..................................................................................27
SECTION 2.06. TEMPORARY NOTES....................................................................................28
SECTION 2.07. CANCELLATION...................................................................................... 28
SECTION 2.08. CUSIP AND ISIN NUMBERS.............................................................................28
SECTION 2.09. REGISTRATION, TRANSFER AND EXCHANGE................................................................28
SECTION 2.10. RESTRICTIONS ON TRANSFER AND EXCHANGE..............................................................31
SECTION 2.11. REGULATION S TEMPORARY GLOBAL NOTES................................................................32
ARTICLE 3
REDEMPTION; OFFER TO PURCHASE
SECTION 3.01. OPTIONAL REDEMPTION................................................................................33
SECTION 3.02. METHOD AND EFFECT OF REDEMPTION....................................................................33
SECTION 3.03. OFFER TO PURCHASE..................................................................................34
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF NOTES...................................................................................37
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY....................................................................37
SECTION 4.03. EXISTENCE..........................................................................................38
SECTION 4.04. PAYMENT OF TAXES AND OTHER CLAIMS..................................................................38
SECTION 4.05. MAINTENANCE OF PROPERTIES AND INSURANCE............................................................38
SECTION 4.06. LIMITATIONS ON INDEBTEDNESS........................................................................38
SECTION 4.07. LIMITATION ON RESTRICTED PAYMENTS..................................................................39
SECTION 4.08. LIMITATION ON LIENS................................................................................41
SECTION 4.09. LIMITATIONS ON RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES......................................42
SECTION 4.10. LIMITATIONS ON DISPOSITIONS OF ASSETS..............................................................43
SECTION 4.11. GUARANTEES BY RESTRICTED SUBSIDIARIES..............................................................44
SECTION 4.12. REPURCHASE OF NOTES UPON A CHANGE OF CONTROL.......................................................44
SECTION 4.13. LIMITATION ON TRANSACTIONS WITH AFFILIATES.........................................................45
SECTION 4.14. LIMITATIONS ON MERGERS, CONSOLIDATIONS AND SALES OF ASSETS.........................................46
SECTION 4.15. REPORTS TO HOLDERS OF NOTES........................................................................47
SECTION 4.16. REPORTS TO TRUSTEE.................................................................................48
ARTICLE 5
REMEDIES
SECTION 5.01. EVENTS OF DEFAULT..................................................................................48
SECTION 5.02. OTHER REMEDIES.....................................................................................50
SECTION 5.03. WAIVER OF DEFAULTS BY MAJORITY OF HOLDERS..........................................................50
SECTION 5.04. DIRECTION OF PROCEEDINGS...........................................................................50
SECTION 5.05. APPLICATION OF MONEYS COLLECTED BY TRUSTEE.........................................................51
SECTION 5.06. PROCEEDINGS BY HOLDERS.............................................................................51
SECTION 5.07. PROCEEDINGS BY TRUSTEE.............................................................................52
SECTION 5.08. REMEDIES CUMULATIVE AND CONTINUING.................................................................52
SECTION 5.09. UNDERTAKING TO PAY COSTS...........................................................................52
SECTION 5.10. NOTICE OF DEFAULTS.................................................................................53
SECTION 5.11. WAIVER OF STAY, EXTENSION OR USURY LAWS............................................................53
ARTICLE 6
GUARANTEE
SECTION 6.01. GUARANTEE..........................................................................................53
SECTION 6.02. OBLIGATIONS OF EACH GUARANTOR UNCONDITIONAL........................................................54
SECTION 6.03. RELEASE OF A GUARANTOR.............................................................................54
SECTION 6.04. EXECUTION AND DELIVERY OF GUARANTY.................................................................55
SECTION 6.05. LIMITATION ON GUARANTOR LIABILITY..................................................................55
SECTION 6.06. ARTICLE 6 NOT TO PREVENT EVENTS OF DEFAULT.........................................................55
SECTION 6.07. WAIVER BY THE GUARANTORS...........................................................................55
SECTION 6.08. SUBROGATION AND CONTRIBUTION.......................................................................55
SECTION 6.09. STAY OF ACCELERATION...............................................................................56
ARTICLE 7
THE TRUSTEE
SECTION 7.01. GENERAL............................................................................................56
SECTION 7.02. CERTAIN RIGHTS OF TRUSTEE..........................................................................56
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE......................................................................57
SECTION 7.04. TRUSTEE'S DISCLAIMER..............................................................................57
SECTION 7.05. NOTICE OF DEFAULT.................................................................................57
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.....................................................................58
SECTION 7.07. COMPENSATION AND INDEMNITY........................................................................58
SECTION 7.08. REPLACEMENT OF TRUSTEE............................................................................58
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER.......................................................................59
SECTION 7.10. ELIGIBILITY.......................................................................................59
SECTION 7.11. MONEY HELD IN TRUST...............................................................................59
ARTICLE 8
DEFEASANCE AND DISCHARGE
SECTION 8.01. DISCHARGE OF ISSUER'S OBLIGATIONS.................................................................60
SECTION 8.02. LEGAL DEFEASANCE..................................................................................60
SECTION 8.03. COVENANT DEFEASANCE...............................................................................61
SECTION 8.04. APPLICATION OF TRUST MONEY........................................................................61
SECTION 8.05. REPAYMENT TO ISSUER...............................................................................62
SECTION 8.06. REINSTATEMENT.....................................................................................62
SECTION 8.07. INDEMNITY FOR U.S. GOVERNMENT OBLIGATIONS.........................................................62
ARTICLE 9
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. AMENDMENTS WITHOUT CONSENT OF HOLDERS.............................................................62
SECTION 9.02. AMENDMENTS WITH CONSENT OF HOLDERS................................................................63
SECTION 9.03. EFFECT OF CONSENT.................................................................................64
SECTION 9.04. TRUSTEE'S RIGHTS AND OBLIGATIONS..................................................................64
SECTION 9.05. CONFORMITY WITH TRUST INDENTURE ACT...............................................................64
SECTION 9.06. PAYMENTS FOR CONSENTS.............................................................................64
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. TRUST INDENTURE ACT OF 1939.......................................................................65
SECTION 10.02. HOLDER COMMUNICATIONS; HOLDER ACTIONS.............................................................65
SECTION 10.03. NOTICES...........................................................................................65
SECTION 10.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT................................................66
SECTION 10.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.....................................................67
SECTION 10.06. PAYMENT DATE OTHER THAN A BUSINESS DAY............................................................67
SECTION 10.07. GOVERNING LAW.....................................................................................67
SECTION 10.08. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.....................................................67
SECTION 10.09. SUCCESSORS........................................................................................67
SECTION 10.10. DUPLICATE ORIGINALS...............................................................................67
SECTION 10.11. SEPARABILITY......................................................................................67
SECTION 10.12. TABLE OF CONTENTS AND HEADINGS....................................................................68
Section 10.13. NO LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATORS AND STOCKHOLDERS....................68
EXHIBITS
EXHIBIT A FORM OF NOTE
EXHIBIT B FORM OF SUPPLEMENTAL INDENTURE
EXHIBIT C RESTRICTED LEGEND
EXHIBIT D DTC LEGEND
EXHIBIT E REGULATION S CERTIFICATE
EXHIBIT F RULE 144A CERTIFICATE
EXHIBIT G INSTITUTIONAL ACCREDITED INVESTOR CERTIFICATE
EXHIBIT H CERTIFICATE OF BENEFICIAL OWNERSHIP
EXHIBIT I REGULATION S TEMPORARY GLOBAL NOTE LEGEND
INDENTURE, dated as of March 26, 2002, between K. HOVNANIAN ENTERPRISES,
INC., a New Jersey corporation (the "Issuer"), HOVNANIAN ENTERPRISES, INC., a
Delaware corporation (the "Company"), each of the Guarantors (as defined hereto)
and FIRST UNION NATIONAL BANK, as Trustee.
RECITALS
The Issuer has duly authorized the execution and delivery of the Indenture
to provide for the issuance of up to $200,000,000 aggregate principal amount of
the Issuer's 8.000% Senior Notes Due 2012, and, if and when issued, any
Additional Notes, together with any Exchange Notes issued therefor as provided
herein (the "NOTES"). All things necessary to make the Indenture a valid
agreement of the Issuer, in accordance with its terms, have been done, and the
Issuer has done all things necessary to make the Notes (in the case of the
Additional Notes, when duly authorized), when executed by the Issuer and
authenticated and delivered by the Trustee and duly issued by the Issuer, the
valid obligations of the Issuer as hereinafter provided.
In addition, the Guarantors party hereto have duly authorized the execution
and delivery of the Indenture as guarantors of the Notes. All things necessary
to make the Indenture a valid agreement of each Guarantor, in accordance with
its terms, have been done, and each Guarantor has done all things necessary to
make the Note Guarantees, when executed by each Guarantor, and the Notes, when
executed by the Issuer and authenticated and delivered by the Trustee and duly
issued by the Issuer, the valid obligations of such Guarantor as hereinafter
provided.
This Indenture is subject to, and will be governed by, the provisions of
the Trust Indenture Act that are required to be a part of and govern indentures
qualified under the Trust Indenture Act.
THIS INDENTURE WITNESSETH
For and in consideration of the premises and the purchase of the Notes by
the Holders thereof, the parties hereto covenant and agree, for the equal and
proportionate benefit of all Holders, as follows:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ACQUIRED INDEBTEDNESS" means (a) with respect to any Person that becomes a
Restricted Subsidiary (or is merged into the Company, the Issuer or any
Restricted Subsidiary) after the Issue Date, Indebtedness of such Person or any
of its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary (or is merged into the Company, the Issuer or any Restricted
Subsidiary) that was not incurred in connection with, or in contemplation of,
such Person becoming a Restricted Subsidiary (or being merged into the Company,
the Issuer or any Restricted Subsidiary) and (b) with respect to the Company,
the Issuer or any Restricted Subsidiary, any Indebtedness expressly assumed by
the Company, the Issuer or any Restricted Subsidiary in connection with the
acquisition of any assets from another Person (other than the
Company, the Issuer or any Restricted Subsidiary), which Indebtedness was not
incurred by such other Person in connection with or in contemplation of such
acquisition. Indebtedness incurred in connection with or in contemplation of any
transaction described in clause (a) or (b) of the preceding sentence shall be
deemed to have been incurred by the Company or a Restricted Subsidiary, as the
case may be, at the time such Person becomes a Restricted Subsidiary (or is
merged into the Company, the Issuer or any Restricted Subsidiary) in the case of
clause (a) or at the time of the acquisition of such assets in the case of
clause (b), but shall not be deemed Acquired Indebtedness.
"ADDITIONAL NOTES" means any notes issued under the Indenture in addition
to the Original Notes, including any Exchange Notes issued in exchange for such
Additional Notes, having the same terms in all respects as the Original Notes
except that interest will accrue on the Additional Notes from their date of
issuance.
"AFFILIATE" means, when used with reference to a specified Person any
Person direct or indirectly controlling, or controlled by or under direct or
indirect common control with the Person specified.
"AGENT" means any Registrar, Paying Agent or Authenticating Agent.
"AGENT MEMBER" means a member of, or a participant in, the Depositary.
"ASSET ACQUISITION" means (a) an Investment by the Company, the Issuer or
any Restricted Subsidiary in any other Person if, as a result of such
Investment, such Person shall become a Restricted Subsidiary or shall be
consolidated or merged with or into the Company, the Issuer or any Restricted
Subsidiary or (b) the acquisition by the Company, the Issuer or any Restricted
Subsidiary of the assets of any Person, which constitute all or substantially
all of the assets or of an operating unit or line of business of such Person or
which is otherwise outside the ordinary course of business.
"ASSET DISPOSITION" means any sale, transfer, conveyance, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback or sale of shares of Capital Stock in any Subsidiary) (each,
a "TRANSACTION") by the Company, the Issuer or any Restricted Subsidiary to any
Person of any Property having a Fair Market Value in any transaction or series
of related transactions of at least $5 million. The term "Asset Disposition"
shall not include:
(a) a transaction between the Company, the Issuer and any Restricted
Subsidiary or a transaction between Restricted Subsidiaries,
(b) a transaction in the ordinary course of business, including,
without limitation, sales (directly or indirectly), dedications and other
donations to governmental authorities, leases and sales and leasebacks of
(A) homes, improved land and unimproved land and (B) real estate (including
related amenities and improvements),
(c) a transaction involving the sale of Capital Stock of, or the
disposition of assets in, an Unrestricted Subsidiary,
2
(d) any exchange or swap of assets of the Company, the Issuer or any
Restricted Subsidiary for assets that (x) are to be used by the Company,
the Issuer or any Restricted Subsidiary in the ordinary course of its Real
Estate Business and (y) have a Fair Market Value not less than the Fair
Market Value of the assets exchanged or swapped,
(e) any sale, transfer, conveyance, lease or other disposition of
assets and properties that is governed by Section 4.14 hereof, or
(f) dispositions of mortgage loans and related assets and
mortgage-backed securities in the ordinary course of a mortgage lending
business.
"ATTRIBUTABLE DEBT" means, with respect to any Capitalized Lease
Obligations, the capitalized amount thereof determined in accordance with GAAP.
"AUTHENTICATING AGENT" refers to a Person engaged to authenticate the Notes
in the stead of the Trustee.
"BANKRUPTCY LAW" means title 11 of the United States Code, as amended, or
any similar federal or state law for the relief of debtors.
"BOARD OF DIRECTORS" means the board of directors of the Issuer, or any
committee thereof duly authorized to act on its behalf.
"BOARD RESOLUTION" means a resolution duly adopted by the Board of
Directors which, as of the date of any certification thereof, remains in full
force and effect.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City or in the city where the Corporate Trust
Office of the Trustee is located are authorized by law to close.
"CAPITAL STOCK" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of or in
such Person's capital stock or other equity interests, and options, rights or
warrants to purchase such capital stock or other equity interests, whether now
outstanding or issued after the Issue Date, including, without limitation, all
Disqualified Stock and Preferred Stock.
"CAPITALIZED LEASE OBLIGATIONS" of any Person means the obligations of such
Person to pay rent or other amounts under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such obligations will be the capitalized amount thereof determined in
accordance with GAAP.
"CASH EQUIVALENTS" means
(g) U.S. dollars;
3
(h) securities issued or directly and fully guaranteed or insured by
the U.S. government or any agency or instrumentality thereof having
maturities of one year or less from the date of acquisition;
(i) certificates of deposit and eurodollar time deposits with
maturities of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500 million;
(j) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (b) and (c)
entered into with any financial institution meeting the qualifications
specified in clause (c) above;
(k) commercial paper rated P-1, A-1 or the equivalent thereof by
Moody's or S & P, respectively, and in each case maturing within six months
after the date of acquisition; and
(l) investments in money market funds substantially all of the assets
of which consist of securities described in the foregoing clauses (a)
through (e).
"CERTIFICATE OF BENEFICIAL OWNERSHIP" means a certificate substantially in
the form of Exhibit H.
"CERTIFICATED NOTE" means a Note in registered individual form without
interest coupons.
"Change of Control" means
(a) any sale, lease, or other transfer (in one transaction or a
series of transactions) of all or substantially all of the consolidated
assets of the Company and its Restricted Subsidiaries to any Person (other
than a Restricted Subsidiary); PROVIDED, HOWEVER, that a transaction where
the holders of all classes of Common Equity of the Company immediately
prior to such transaction own, directly or indirectly, more than 50% of all
classes of Common Equity of such Person immediately after such transaction
shall not be a Change of Control;
(b) a "person" or "group" (within the meaning of Section 13(d) of the
Exchange Act (other than (x) the Company or (y) the Permitted Hovnanian
Holders) becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of Common Equity of the Company representing more than 50% of
the voting power of the Common Equity of the Company;
(c) Continuing Directors cease to constitute at least a majority of
the Board of Directors of the Company;
(d) the stockholders of the Company approve any plan or proposal for
the liquidation or dissolution of the Company; PROVIDED, HOWEVER, that a
liquidation or dissolution of the Company which is part of a transaction
that does not constitute a
4
Change of Control under the proviso contained in clause (a) above shall not
constitute a Change of Control; or
(e) a change of control shall occur as defined in the instrument
governing any publicly traded debt securities of the Company or the Issuer
which requires the Company or the Issuer to repay or repurchase such debt
securities.
"CLEARSTREAM" means Clearstream Banking, societe anonyme, Luxembourg,
formerly Cedelbank.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON EQUITY" of any Person means Capital Stock of such Person that is
generally entitled to (a) vote in the election of directors of such Person or
(b) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control
the management or policies of such Person.
"COMPANY" means Hovnanian Enterprises, Inc., or any successor obligor under
the Indenture and the Note Guarantees pursuant to Section 4.14.
"CONSOLIDATED ADJUSTED TANGIBLE ASSETS" of the Company as of any date means
the Consolidated Tangible Assets of the Company, the Issuer and the Restricted
Subsidiaries at the end of the fiscal quarter immediately preceding the date
less any assets securing any Non-Recourse Indebtedness, as determined in
accordance with GAAP.
"CONSOLIDATED CASH FLOW AVAILABLE FOR FIXED CHARGES" means, for any period,
Consolidated Net Income for such period plus (each to the extent deducted in
calculating such Consolidated Net Income and determined in accordance with GAAP)
the sum for such period, without duplication, of:
(a) income taxes,
(b) Consolidated Interest Expense,
(c) depreciation and amortization expenses and other non-cash charges
to earnings, and
(d) interest and financing fees and expenses which were previously
capitalized and which are amortized to cost of sales, MINUS
all other non-cash items (other than the receipt of notes receivable) increasing
such Consolidated Net Income.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to any
determination date, the ratio of (x) Consolidated Cash Flow Available for Fixed
Charges for the prior four full fiscal quarters (the "FOUR QUARTER PERIOD") for
which financial results have been reported immediately preceding the
determination date (the "TRANSACTION DATE"), to (y) the aggregate Consolidated
Interest Incurred for the Four Quarter Period. For purposes of this
5
definition, "CONSOLIDATED CASH FLOW AVAILABLE FOR FIXED CHARGES" and
"CONSOLIDATED INTEREST INCURRED" shall be calculated after giving effect on a
PRO FORMA basis for the period of such calculation to:
(a) the incurrence or the repayment, repurchase, defeasance or other
discharge or the assumption by another Person that is not an Affiliate
(collectively, "REPAYMENT") of any Indebtedness of the Company, the Issuer
or any Restricted Subsidiary (and the application of the proceeds thereof)
giving rise to the need to make such calculation, and any incurrence or
repayment of other Indebtedness (and the application of the proceeds
thereof), at any time on or after the first day of the Four Quarter Period
and on or prior to the Transaction Date, as if such incurrence or
repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period, except that
Indebtedness under revolving credit facilities shall be deemed to be the
average daily balance of such Indebtedness during the Four Quarter Period
(as reduced on such pro forma basis by the application of any proceeds of
the incurrence of Indebtedness giving rise to the need to make such
calculation);
(b) any Asset Disposition or Asset Acquisition (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of the Company, the Issuer or any Restricted
Subsidiary (including any Person that becomes a Restricted Subsidiary as a
result of any such Asset Acquisition) incurring Acquired Indebtedness at
any time on or after the first day of the Four Quarter Period and on or
prior to the Transaction Date), as if such Asset Disposition or Asset
Acquisition (including the incurrence or repayment of any such
Indebtedness) and the inclusion, notwithstanding clause (b) of the
definition of "Consolidated Net Income," of any Consolidated Cash Flow
Available for Fixed Charges associated with such Asset Acquisition as if it
occurred on the first day of the Four Quarter Period; PROVIDED, HOWEVER,
that the Consolidated Cash Flow Available for Fixed Charges associated with
any Asset Acquisition shall not be included to the extent the net income so
associated would be excluded pursuant to the definition of "Consolidated
Net Income," other than clause (b) thereof, as if it applied to the Person
or assets involved before they were acquired; and
(c) the Consolidated Cash Flow Available for Fixed Charges and the
Consolidated Interest Incurred attributable to discontinued operations, as
determined in accordance with GAAP, shall be excluded.
Furthermore, in calculating "Consolidated Cash Flow Available for Fixed
Charges" for purposes of determining the denominator (but not the numerator) of
this "Consolidated Fixed Charge Coverage Ratio,"
(a) interest on Indebtedness in respect of which a PRO FORMA
calculation is required that is determined on a fluctuating basis as of the
Transaction Date (including Indebtedness actually incurred on the
Transaction Date) and which will continue to be so determined thereafter
shall be deemed to have accrued at a fixed rate per annum equal to the rate
of interest on such Indebtedness in effect on the Transaction Date, and
6
(b) notwithstanding clause (a) above, interest on such Indebtedness
determined on a fluctuating basis, to the extent such interest is covered
by agreements relating to Interest Protection Agreements, shall be deemed
to accrue at the rate per annum resulting after giving effect to the
operation of such agreements.
"CONSOLIDATED INTEREST EXPENSE" of the Company for any period means the
Interest Expense of the Company, the Issuer and the Restricted Subsidiaries for
such period, determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED INTEREST INCURRED" for any period means the Interest Incurred
of the Company, the Issuer and the Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" for any period means the aggregate net income (or
loss) of the Company and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP; PROVIDED that there will be excluded
from such net income (loss) (to the extent otherwise included therein), without
duplication:
(a) the net income (or loss) of (x) any Unrestricted Subsidiary
(other than a Mortgage Subsidiary) or (y) any Person (other than a
Restricted Subsidiary or a Mortgage Subsidiary) in which any Person other
than the Company, the Issuer or any Restricted Subsidiary has an ownership
interest, except, in each case, to the extent that any such income has
actually been received by the Company, the Issuer or any Restricted
Subsidiary in the form of cash dividends or similar cash distributions
during such period, which dividends or distributions are not in excess of
the Company's, the Issuer's or such Restricted Subsidiary's (as applicable)
pro rata share of such Unrestricted Subsidiary's or such other Person's net
income earned during such period,
(b) except to the extent includable in Consolidated Net Income
pursuant to the foregoing clause (a), the net income (or loss) of any
Person that accrued prior to the date that (i) such Person becomes a
Restricted Subsidiary or is merged with or into or consolidated with the
Company, the Issuer or any of its Restricted Subsidiaries (except, in the
case of an Unrestricted Subsidiary that is redesignated a Restricted
Subsidiary during such period, to the extent of its retained earnings from
the beginning of such period to the date of such redesignation) or (ii) the
assets of such Person are acquired by the Company or any Restricted
Subsidiary,
(c) the net income of any Restricted Subsidiary to the extent that
(but only so long as) the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of that income is not permitted
by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary during such period,
(d) the gains or losses, together with any related provision for
taxes, realized during such period by the Company, the Issuer or any
Restricted Subsidiary resulting from (i) the acquisition of securities, or
extinguishment of Indebtedness, of the Company
7
or any Restricted Subsidiary or (ii) any Asset Disposition by the Company
or any Restricted Subsidiary,
(e) any extraordinary gain or loss together with any related
provision for taxes, realized by the Company, the Issuer or any Restricted
Subsidiary, and
(f) any non-recurring expense recorded by the Company, the Issuer or
any Restricted Subsidiary in connection with a merger accounted for as a
"pooling-of-interests" transaction;
PROVIDED FURTHER, that for purposes of calculating Consolidated Net Income
solely as it relates to clause (iii) of Section 4.07 hereof, clause (d)(ii)
above shall not be applicable.
"CONSOLIDATED NET WORTH" of any Person as of any date means the
stockholders' equity (including any Preferred Stock that is classified as equity
under GAAP, other than Disqualified Stock) of such Person and its Restricted
Subsidiaries on a consolidated basis at the end of the fiscal quarter
immediately preceding such date, as determined in accordance with GAAP, less any
amount attributable to Unrestricted Subsidiaries.
"CONSOLIDATED TANGIBLE ASSETS" of the Company as of any date means the
total amount of assets of the Company, the Issuer and the Restricted
Subsidiaries (less applicable reserves) on a consolidated basis at the end of
the fiscal quarter immediately preceding such date, as determined in accordance
with GAAP, less (a) Intangible Assets and (b) appropriate adjustments on account
of minority interests of other Persons holding equity investments in Restricted
Subsidiaries.
"CONTINUING DIRECTOR" means a director who either was a member of the Board
of Directors of the Company on the date of the Indenture or who became a
director of the Company subsequent to such date and whose election or nomination
for election by the Company's stockholders, was duly approved by a majority of
the Continuing Directors on the Board of Directors of the Company at the time of
such approval, either by a specific vote or by approval of the proxy statement
issued by the Company on behalf of the entire Board of Directors of the Company
in which such individual is named as nominee for director.
"CONTROL" when used with respect to any Person, means the power to direct
the management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"CORPORATE TRUST OFFICE" means the office of the Trustee at which the
corporate trust business of the Trustee is principally administered, which at
the date of the Indenture is located at 21 South Street, Morristown, NJ 07960.
"CREDIT FACILITIES" means, collectively, each of the credit facilities and
lines of credit of the Company or one or more Restricted Subsidiaries in
existence on the Issue Date and one or more other facilities and lines of credit
among or between the Company or one or more Restricted Subsidiaries and one or
more lenders pursuant to which the Company or one or more Restricted
Subsidiaries may incur indebtedness for working capital and general corporate
8
purposes (including acquisitions), as any such facility or line of credit may be
amended, restated, supplemented or otherwise modified from time to time, and
includes any agreement extending the maturity of, increasing the amount of, or
restructuring, all or any portion of the Indebtedness under such facility or
line of credit or any successor facilities or lines of credit and includes any
facility or line of credit with one or more lenders refinancing or replacing all
or any portion of the Indebtedness under such facility or line of credit or any
successor facility or line of credit.
"CURRENCY AGREEMENT" of any Person means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect such Person or any of its Subsidiaries against fluctuations in currency
values.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
"DEFAULT" means any event, act or condition that is, or after notice or the
passage of time or both would be, an Event of Default.
"DEPOSITARY" means the depositary of each Global Note, which will initially
be DTC.
"DESIGNATION AMOUNT" has the meaning provided in the definition of
Unrestricted Subsidiary.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, (a) matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
final maturity date of the Notes or (b) is convertible into or exchangeable or
exercisable for (whether at the option of the issuer or the holder thereof) (i)
debt securities or (ii) any Capital Stock referred to in (a) above, in each
case, at any time prior to the final maturity date of the Notes; PROVIDED,
HOWEVER, that any Capital Stock that would not constitute Disqualified Stock but
for provisions thereof giving holders thereof (or the holders of any security
into or for which such Capital Stock is convertible, exchangeable or
exercisable) the right to require the Company to repurchase or redeem such
Capital Stock upon the occurrence of a change in control occurring prior to the
final maturity date of the Notes shall not constitute Disqualified Stock if the
change in control provision applicable to such Capital Stock are no more
favorable to such holders than Section 4.12 hereof and such Capital Stock
specifically provides that the Company will not repurchase or redeem any such
Capital Stock pursuant to such provisions prior to the Company's repurchase of
the Notes as are required pursuant to Section 4.12 hereof.
"DTC" means The Depository Trust Company, a New York corporation.
"DTC LEGEND" means the legend set forth in Exhibit D.
"EUROCLEAR" means Euroclear Bank S.A./N.V., and its successors or assigns,
as operator of the Euroclear System.
"EVENT OF DEFAULT" has the meaning assigned to such term in Section 5.01.
9
"EXCHANGE ACT" means the Securities Exchange Act of 1934.
"EXCHANGE NOTES" means the Notes of the Issuer issued pursuant to the
Indenture in exchange for, and in an aggregate principal amount equal to, the
Initial Notes or any Initial Additional Notes in compliance with the terms of a
Registration Rights Agreement and containing terms substantially identical to
the Initial Notes or any Initial Additional Notes (except that (i) such Exchange
Notes will be registered under the Securities Act and will not be subject to
transfer restrictions or bear the Restricted Legend, and (ii) the provisions
relating to Liquidated Damages will be eliminated).
"EXCHANGE OFFER" means an offer by the Issuer to the Holders of the Initial
Notes or any Initial Additional Notes to exchange outstanding Notes for Exchange
Notes, as provided for in a Registration Rights Agreement.
"EXCHANGE OFFER REGISTRATION STATEMENT" means the Exchange Offer
Registration Statement as defined in a Registration Rights Agreement.
"FAIR MARKET VALUE" means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) that would be
negotiated in an arm's-length transaction for cash between a willing seller and
a willing and able buyer, neither of which is under any compulsion to complete
the transaction, as such price is determined in good faith by the Board of
Directors of the Company or a duly authorized committee thereof, as evidenced by
a resolution of such Board or committee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, as in effect on May 4, 1999.
"GLOBAL NOTE" means a Note in registered global form without interest
coupons.
"GLOBAL NOTE LEGEND" means the legend set forth in Exhibit I.
"GUARANTEE" means the guarantee of the Notes by each Guarantor under the
Indenture.
"GUARANTORS" means (a) initially, the Company and each of the Company's
Restricted Subsidiaries in existence on the Issue Date, except the Issuer, KHL,
Inc. and K. Hovnanian Poland, sp. z.o.o. and (b) each of the Company's
Subsidiaries that executes a supplemental indenture in the form of Exhibit B to
the Indenture providing for the guaranty of the payment of the Notes, or any
successor obligor under its Note Guaranty pursuant to Section 4.14., in each
case unless an until such Guarantor is released from its Note Guaranty pursuant
to the Indenture.
"HOLDER" means the Person in whose name a Note is registered in the books
of the Registrar for the Notes.
"INDEBTEDNESS" of any Person means, without duplication,
10
(a) any liability of such Person (i) for borrowed money or under any
reimbursement obligation relating to a letter of credit or other similar
instruments (other than standby letters of credit or similar instrument
issued for the benefit of or surety, performance, completion or payment
bonds, earnest money notes or similar purpose undertakings or
indemnifications issued by, such Person in the ordinary course of
business), (ii) evidenced by a bond, note, debenture or similar instrument
(including a purchase money obligation) given in connection with the
acquisition of any businesses, properties or assets of any kind or with
services incurred in connection with capital expenditures (other than any
obligation to pay a contingent purchase price which, as of the date of
incurrence thereof is not required to be recorded as a liability in
accordance with GAAP), or (iii) in respect of Capitalized Lease Obligations
(to the extent of the Attributable Debt in respect thereof),
(b) any Indebtedness of others that such Person has guaranteed to the
extent of the guarantee, PROVIDED HOWEVER, that Indebtedness of the Company
and its Restricted Subsidiaries will not include the obligations of the
Company or a Restricted Subsidiary under warehouse lines of credit of
Mortgage Subsidiaries to repurchase mortgages at prices no greater than 98%
of the principal amount thereof, and upon any such purchase the excess, if
any, of the purchase price thereof over the Fair Market Value of the
mortgages acquired, will constitute Restricted Payments subject to Section
4.07 hereof,
(c) to the extent not otherwise included, the obligations of such
Person under Currency Agreements or Interest Protection Agreements to the
extent recorded as liabilities not constituting Interest Incurred, net of
amounts recorded as assets in respect of such agreements, in accordance
with GAAP, and
(d) all Indebtedness of others secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person;
PROVIDED, that Indebtedness shall not include accounts payable, liabilities to
trade creditors of such Person or other accrued expenses arising in the ordinary
course of business. The amount of Indebtedness of any Person at any date shall
be (i) the outstanding balance at such date of all unconditional obligations as
described above, net of any unamortized discount to be accounted for as Interest
Expense, in accordance with GAAP, (ii) the maximum liability of such Person for
any contingent obligations under clause (a) above at such date, net of an
unamortized discount to be accounted for as Interest Expense in accordance with
GAAP, and (iii) in the case of clause (d) above, the lesser of (x) the fair
market value of any asset subject to a Lien securing the Indebtedness of others
on the date that the Lien attaches and (y) the amount of the Indebtedness
secured.
"INDENTURE" means this indenture, as amended or supplemented from time to
time.
"INITIAL ADDITIONAL NOTES" means Additional Notes issued in an offering not
registered under the Securities Act and any Notes issued in replacement thereof,
but not including any Exchange Notes issued in exchange therefor.
11
"INITIAL NOTES" means the Notes issued on the Issue Date and any Notes
issued in replacement thereof, but not including any Exchange Notes issued in
exchange therefor.
"INITIAL PURCHASERS" means the initial purchasers party to a purchase
agreement with the Issuer relating to the sale of the Initial Notes by the
Issuer.
"INSTITUTIONAL ACCREDITED INVESTOR CERTIFICATE" means a certificate
substantially in the form of Exhibit G hereto.
"INTANGIBLE ASSETS" of the Company means all unamortized debt discount and
expense, unamortized deferred charges, goodwill, patents, trademarks, service
marks, trade names, copyrights, write-ups of assets over their prior carrying
value (other than write-ups which occurred prior to the Issue Date and other
than, in connection with the acquisition of an asset, the write-up of the value
of such asset (within one year of its acquisition) to its fair market value in
accordance with GAAP) and all other items which would be treated as intangible
on the consolidated balance sheet of the Company, the Issuer and the Restricted
Subsidiaries prepared in accordance with GAAP.
"INTEREST EXPENSE" of any Person for any period means, without duplication,
the aggregate amount of (a) interest which, in conformity with GAAP, would be
set opposite the caption "interest expense" or any like caption on an income
statement for such Person (including, without limitation, imputed interest
included in Capitalized Lease Obligations, all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, the net costs (but reduced by net gains) associated with Currency
Agreements and Interest Protection Agreements, amortization of other financing
fees and expenses, the interest portion of any deferred payment obligation,
amortization of discount or premium, if any, and all other noncash interest
expense (other than interest and other charges amortized to cost of sales), and
(b) all interest actually paid by the Company or a Restricted Subsidiary under
any guarantee of Indebtedness (including, without limitation, a guarantee of
principal, interest or any combination thereof) of any Person other than the
Company, the Issuer or any Restricted Subsidiary during such period; PROVIDED
that Interest Expense shall exclude any expense associated with the complete
writeoff of financing fees and expenses in connection with the repayment of any
Indebtedness.
"INTEREST INCURRED" of any Person for any period means, without
duplication, the aggregate amount of (a) Interest Expense and (b) all
capitalized interest and amortized debt issuance costs.
"INTEREST PAYMENT DATE" means each April 1 and October 1 of each year,
commencing October 1, 2002.
"INTEREST PROTECTION AGREEMENT" of any Person means any interest rate swap
agreement, interest rate collar agreement, option or futures contract or other
similar agreement or arrangement designed to protect such Person or any of its
Subsidiaries against fluctuations in interest rates with respect to Debt
permitted to be incurred under the Indenture.
"INVESTMENTS" of any Person means (a) all investments by such Person in any
other Person in the form of loans, advances or capital contributions, (b) all
guarantees of Indebtedness
12
or other obligations of any other Person by such Person, (c) all purchases (or
other acquisitions for consideration) by such Person of Indebtedness, Capital
Stock or other securities of any other Person and (d) all other items that would
be classified as investments in any other Person (including, without limitation,
purchases of assets outside the ordinary course of business) on a balance sheet
of such Person prepared in accordance with GAAP.
"ISSUE DATE" means the date on which the Initial Notes are originally
issued under the Indenture.
"LIEN" means, with respect to any Property, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this definition, a Person shall be deemed to own,
subject to a Lien, any Property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such Property.
"LIQUIDATED DAMAGES" means liquidated damages owed to the Holders pursuant
to a Registration Rights Agreement.
"MARKETABLE SECURITIES" means (a) equity securities that are listed on the
New York Stock Exchange, the American Stock Exchange or The Nasdaq National
Market and (b) debt securities that are rated by a nationally recognized rating
agency, listed on the New York Stock Exchange or the American Stock Exchange or
covered by at least two reputable market makers.
"MOODY'S" means Moody's Investors Service, Inc. or any successor to its
debt rating business.
"MORTGAGE SUBSIDIARY" means any Subsidiary of the Company substantially all
of whose operations consist of the mortgage lending business.
"NET CASH PROCEEDS" means with respect to an Asset Disposition, cash
payments received (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise
(including any cash received upon sale or disposition of such note or
receivable), but only as and when received), excluding any other consideration
received in the form of assumption by the acquiring Person of Indebtedness or
other obligations relating to the Property disposed of in such Asset Disposition
or received in any other noncash form unless and until such non-cash
consideration is converted into cash therefrom, in each case, net of all legal,
title and recording tax expenses, commissions and other fees and expenses
incurred, and all federal, state and local taxes required to be accrued as a
liability under GAAP as a consequence of such Asset Disposition, and in each
case net of a reasonable reserve for the after-tax cost of any indemnification
or other payments (fixed and contingent) attributable to the seller's
indemnities or other obligations to the purchaser undertaken by the Company, the
Issuer or any of its Restricted Subsidiaries in connection with such Asset
Disposition, and net of all payments made on any Indebtedness which is secured
by or relates to such Property, in accordance with the terms of any Lien or
agreement upon or with respect to such Property or which must by its terms or by
applicable law be repaid out of the proceeds from such Asset Disposition, and
net of all contractually required distributions and
13
payments made to minority interest holders in Restricted Subsidiaries or joint
ventures as a result of such Asset Disposition.
"NON-RECOURSE INDEBTEDNESS" with respect to any Person means Indebtedness
of such Person for which (a) the sole legal recourse for collection of principal
and interest on such Indebtedness is against the specific property identified in
the instruments evidencing or securing such Indebtedness and such property was
acquired with the proceeds of such Indebtedness or such Indebtedness was
incurred within 90 days after the acquisition of such property and (b) no other
assets of such Person may be realized upon in collection of principal or
interest on such Indebtedness. Indebtedness which is otherwise Non-Recourse
Indebtedness will not lose its character as Non-Recourse Indebtedness because
there is recourse to the borrower, any guarantor or any other Person for (i)
environmental warranties and indemnities, or (ii) indemnities for and
liabilities arising from fraud, misrepresentation, misapplication or non-payment
of rents, profits, insurance and condemnation proceeds and other sums actually
received by the borrower from secured assets to be paid to the lender, including
waste and mechanics' liens.
"NON-U.S. PERSON" means a Person that is not a U.S. person, as defined in
Regulation S.
"NOTES" has the meaning assigned to such term in the Recitals.
"OFFER TO PURCHASE" has the meaning assigned to such term in Section 3.03.
"OFFICER" means the chairman of the Board of Directors, the president or
chief executive officer, any vice president, the chief financial officer, the
treasurer or any assistant treasurer, or the secretary or any assistant
secretary, of the Company.
"OFFICERS' CERTIFICATE" means a certificate signed in the name of the
Company (i) by the chairman of the Board of Directors, the president or chief
executive officer or a vice president and (ii) by the chief financial officer,
the treasurer or any assistant treasurer or the secretary or any assistant
secretary.
"OPINION OF COUNSEL" means a written opinion signed by legal counsel, who
may be an employee of or counsel to the Issuer, satisfactory to the Trustee.
"ORIGINAL NOTES" means the Initial Notes and any Exchange Notes issued in
exchange therefor.
"PAYING AGENT" refers to a Person engaged to perform the obligations of the
Trustee in respect of payments made or funds held hereunder in respect of the
Notes.
"PERMANENT REGULATION S GLOBAL NOTE" means a Regulation S Global Note that
does not bear the Regulation S Temporary Global Note Legend.
"PERMITTED HOVNANIAN HOLDERS" means, collectively, Kevork S. Hovnanian, Ara
K. Hovnanian, the members of their immediate families, the respective estates,
spouses, heirs, ancestors, lineal descendants, legatees and legal
representatives of any of the foregoing and the trustee of any BONA FIDE trust
of which one or more of the foregoing are the sole beneficiaries or
14
the grantors thereof, or any entity of which any of the foregoing, individually
or collectively, beneficially own more than 50% of the Common Equity.
"PERMITTED INDEBTEDNESS" means
(a) Indebtedness under Credit Facilities which does not exceed $440
million principal amount outstanding at any one time;
(b) Indebtedness in respect of obligations of the Company and its
Subsidiaries to the trustees under indentures for debt securities;
(c) intercompany debt obligations of (i) the Company to the Issuer,
(ii) the Issuer to the Company, (iii) the Company or the Issuer to any
Restricted Subsidiary and (iv) any Restricted Subsidiary to the Company or
the Issuer or any other Restricted Subsidiary; PROVIDED HOWEVER, that any
Indebtedness of any Restricted Subsidiary or the Issuer or the Company owed
to any Restricted Subsidiary or the Issuer that ceases to be a Restricted
Subsidiary shall be deemed to be incurred and shall be treated as an
incurrence for purposes of Section 4.06(a) hereof at the time the
Restricted Subsidiary in question ceases to be a Restricted Subsidiary;
(d) Indebtedness of the Company or the Issuer or any Restricted
Subsidiary under any Currency Agreements or Interest Protection Agreements
in a notional amount no greater than the payments due (at the time the
related Currency Agreement or Interest Protection Agreement is entered
into) with respect to the Indebtedness or currency being hedged;
(e) Purchase Money Indebtedness;
(f) Capitalized Lease Obligations;
(g) obligations for, pledge of assets in respect of, and guaranties
of, bond financings of political subdivisions or enterprises thereof in the
ordinary course of business;
(h) Indebtedness secured only by office buildings owned or occupied
by the Company or any Restricted Subsidiary, which Indebtedness does not
exceed $10 million aggregate principal amount outstanding at any one time;
(i) Indebtedness under warehouse lines of credit, repurchase
agreements and Indebtedness, secured by mortgage loans and related assets
of mortgage lending Subsidiaries in the ordinary course of a mortgage
lending business; and
(j) Indebtedness of the Company or any Restricted Subsidiary which,
together with all other Indebtedness under this clause (j), does not exceed
$30 million aggregate principal amount outstanding at any one time.
"PERMITTED INVESTMENT" means
15
(a) Cash Equivalents;
(b) any Investment in the Company, the Issuer or any Restricted
Subsidiary or any Person that becomes a Restricted Subsidiary as a result
of such Investment or that is consolidated or merged with or into, or
transfers all or substantially all of the assets of it or an operating unit
or line of business to, the Company or a Restricted Subsidiary;
(c) any receivables, loans or other consideration taken by the
Company, the Issuer or any Restricted Subsidiary in connection with any
asset sale otherwise permitted by the Indenture;
(d) Investments received in connection with any bankruptcy or
reorganization proceeding, or as a result of foreclosure, perfection or
enforcement of any Lien or any judgment or settlement of any Person in
exchange for or satisfaction of Indebtedness or other obligations or other
property received from such Person, or for other liabilities or obligations
of such Person created, in accordance with the terms of the Indenture;
(e) Investments in Currency Agreements or Interest Protection
Agreements described in the definition of Permitted Indebtedness;
(f) any loan or advance to an executive officer, director or employee
of the Company or any Restricted Subsidiary made in the ordinary course of
business or in accordance with past practice; PROVIDED, HOWEVER, that any
such loan or advance exceeding $1 million shall have been approved by the
Board of Directors of the Company or a committee thereof consisting of
disinterested members;
(g) Investments in joint ventures in a Real Estate Business with
unaffiliated third parties in an aggregate amount at any time outstanding
not to exceed 10% of Consolidated Tangible Assets at such time;
(h) Investments in interests in issuances of collateralized mortgage
obligations, mortgages, mortgage loan servicing, or other mortgage related
assets;
(i) obligations of the Company or a Restricted Subsidiary under
warehouse lines of credit of Mortgage Subsidiaries to repurchase mortgages;
and
(j) Investments in an aggregate amount outstanding not to exceed $10
million.
"PERMITTED LIENS" means
(a) Liens for taxes, assessments or governmental or quasi-government
charges or claims that (i) are not yet delinquent, (ii) are being contested
in good faith by appropriate proceedings and as to which appropriate
reserves have been established or other provisions have been made in
accordance with GAAP, if required, or (iii) encumber solely property
abandoned or in the process of being abandoned,
16
(b) statutory Liens of landlords and carriers', warehousemen's,
mechanics', suppliers', materialmen's, repairmen's or other Liens imposed
by law and arising in the ordinary course of business and with respect to
amounts that, to the extent applicable, either (i) are not yet delinquent
or (ii) are being contested in good faith by appropriate proceedings and as
to which appropriate reserves have been established or other provisions
have been made in accordance with GAAP, if required,
(c) Liens (other than any Lien imposed by the Employer Retirement
Income Security Act of 1974, as amended) incurred or deposits made in the
ordinary course of business in connection with workers' compensation.
unemployment insurance and other types of social security,
(d) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal bonds,
development obligations, progress payments, government contacts, utility
services, developer's or other obligations to make on-site or off-site
improvements and other obligations of like nature (exclusive of obligations
for the payment of borrowed money but including the items referred to in
the parenthetical in clause (a)(i) of the definition of "Indebtedness"), in
each case incurred in the ordinary course of business of the Company, the
Issuer and the Restricted Subsidiaries,
(e) attachment or judgment Liens not giving rise to a Default or an
Event of Default,
(f) easements, dedications, assessment district or similar Liens in
connection with municipal or special district financing, rights-of-way,
restrictions, reservations and other similar charges, burdens, and other
similar charges or encumbrances not materially interfering with the
ordinary course of business of the Company, the Issuer and the Restricted
Subsidiaries,
(g) zoning restrictions, licenses, restrictions on the use of real
property or minor irregularities in title thereto, which do not materially
impair the use of such real property in the ordinary course of business of
the Company, the Issuer and the Restricted Subsidiaries,
(h) Liens securing Indebtedness incurred pursuant to clause (h) or
(i) of the definition of Permitted Indebtedness,
(i) Liens securing Indebtedness of the Company, the Issuer or any
Restricted Subsidiary permitted to be incurred under the Indenture;
PROVIDED that the aggregate amount of all consolidated Indebtedness of the
Company, the Issuer and the Restricted Subsidiaries (including, with
respect to Capitalized Lease Obligations, the Attributable Debt in respect
thereof) secured by Liens (other than Non-Recourse Indebtedness and
Indebtedness incurred pursuant to clause (i) of the definition of Permitted
Indebtedness) shall not exceed 40% of Consolidated Adjusted Tangible Assets
at any one time outstanding (after giving effect to the incurrence of such
Indebtedness and the use of the proceeds thereof),
17
(j) Liens securing Non-Recourse Indebtedness of the Company, the
Issuer or any Restricted Subsidiary; PROVIDED, that such Liens apply only
to the property financed out of the net proceeds of such Non-Recourse
Indebtedness within 90 days after the incurrence of such Non-Recourse
Indebtedness,
(k) Liens securing Purchase Money Indebtedness; PROVIDED that such
Liens apply only to the property acquired, constructed or improved with the
proceeds of such Purchase Money Indebtedness within 90 days after the
incurrence of such Purchase Money Indebtedness,
(l) Liens on property or assets of the Company, the Issuer or any
Restricted Subsidiary securing Indebtedness of the Company, the Issuer or
any Restricted Subsidiary owing to the Company, the Issuer or one or more
Restricted Subsidiaries,
(m) leases or subleases granted to others not materially interfering
with the ordinary course of business of the Company and the Restricted
Subsidiaries,
(n) purchase money security interests (including, without limitation,
Capitalized Lease Obligations); PROVIDED that such Liens apply only to the
Property acquired and the related Indebtedness is incurred within 90 days
after the acquisition of such Property,
(o) any right of first refusal, right of first offer, option,
contract or other agreement to sell an asset; PROVIDED that such sale is
not otherwise prohibited under the Indenture,
(p) any right of a lender or lenders to which the Company, the Issuer
or a Restricted Subsidiary may be indebted to offset against, or
appropriate and apply to the payment of such, Indebtedness any and all
balances, credits, deposits, accounts or money of the Company, the Issuer
or a Restricted Subsidiary with or held by such lender or lenders or its
Affiliates,
(q) any pledge or deposit of cash or property in conjunction with
obtaining surety, performance, completion or payment bonds and letters of
credit or other similar instruments or providing earnest money obligations,
escrows or similar purpose undertakings or indemnifications in the ordinary
course of business of the Company, the Issuer and the Restricted
Subsidiaries,
(r) Liens for homeowner and property owner association developments
and assessments,
(s) Liens securing Refinancing Indebtedness; PROVIDED, that such
Liens extend only to the assets securing the Indebtedness being refinanced,
(t) Liens incurred in the ordinary course of business as security for
the obligations of the Company, the Issuer and the Restricted Subsidiaries
with respect to indemnification in respect of title insurance providers,
18
(u) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Subsidiary of
the Company or becomes a Subsidiary of the Company; PROVIDED that such
Liens were in existence prior to the contemplation of such merger or
consolidation or acquisition and do not extend to any assets other than
those of the Person merged into or consolidated with the Company or the
Subsidiary or acquired by the Company or its Subsidiaries,
(v) Liens on property existing at the time of acquisition thereof by
the Company or any Subsidiary of the Company, PROVIDED that such Liens were
in existence prior to the contemplation of such acquisition,
(w) Liens existing on the Issue Date and any extensions, renewals or
replacements thereof, and
(x) Liens on specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods.
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, incorporated or unincorporated association, joint stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"PREFERRED STOCK" of any Person means all Capital Stock of such Person
which has a preference in liquidation or with respect to the payment of
dividends.
"PROPERTY" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person, whether or not included in
the most recent consolidated balance sheet of such Person and its Subsidiaries
under GAAP.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness of the Company, the Issuer
or any Restricted Subsidiary incurred for the purpose of financing all or any
part of the purchase price, or the cost of construction or improvement, of any
property to be used in the ordinary course of business by the Company, the
Issuer and the Restricted Subsidiaries; PROVIDED, HOWEVER, that (a) the
aggregate principal amount of such Indebtedness shall not exceed such purchase
price or cost and (b) such Indebtedness shall be incurred no later than 90 days
after the acquisition of such property or completion of such construction or
improvement.
"QUALIFIED STOCK" means Capital Stock of the Company other than
Disqualified Stock.
"REAL ESTATE BUSINESS" means homebuilding, housing construction, real
estate development or construction and related real estate activities, including
the provision of mortgage financing or title insurance.
"REFINANCING INDEBTEDNESS" means Indebtedness (to the extent not Permitted
Indebtedness) that refunds, refinances or extends any Indebtedness of the
Company, the Issuer or any Restricted Subsidiary (to the extent not Permitted
Indebtedness) outstanding on the Issue Date or other Indebtedness (to the extent
not Permitted Indebtedness) permitted to be incurred by
19
the Company, the Issuer or any Restricted Subsidiary pursuant to the terms of
the Indenture, but only to the extent that
(a) the Refinancing Indebtedness is subordinated, if at all, to the
Notes or the Guarantee, as the case may be, to the same extent as the
Indebtedness being refunded, refinanced or extended,
(b) the Refinancing Indebtedness is scheduled to mature either (i) no
earlier than the Indebtedness being refunded, refinanced or extended or
(ii) after the maturity date of the Notes,
(c) the portion, if any, of the Refinancing Indebtedness that is
scheduled to mature on or prior to the maturity date of the Notes has a
Weighted Average Life to Maturity at the time such Refinancing Indebtedness
is incurred that is equal to or greater than the Weighted Average Life to
Maturity of the portion of the Indebtedness being refunded, refinanced or
extended that is scheduled to mature on or prior to the maturity date of
the Notes, and
(d) such Refinancing Indebtedness is in an aggregate principal amount
that is equal to or less than the aggregate principal amount then
outstanding under the Indebtedness being refunded, refinanced or extended.
"REGISTER" has the meaning assigned to such term in Section 2.09.
"REGISTRAR" means a Person engaged to maintain the Register.
"REGISTRATION RIGHTS AGREEMENT" means (i) the Registration Rights Agreement
dated the Issue Date between the Company and the Initial Purchasers party
thereto with respect to the Initial Notes, and (ii) with respect to any
Additional Notes, any registration rights agreements between the Company and the
Initial Purchasers party thereto relating to rights given by the Company to the
purchasers of Additional Notes to register such Additional Notes or exchange
them for Notes registered under the Securities Act.
"REGULAR RECORD DATE" for the interest payable on any Interest Payment Date
means the March 15 or September 15 (whether or not a Business Day) next
preceding such Interest Payment Date.
"REGULATION S" means Regulation S under the Securities Act.
"REGULATION S CERTIFICATE" means a certificate substantially in the form of
Exhibit E hereto.
"REGULATION S GLOBAL NOTE" means a Global Note representing Notes issued
and sold pursuant to Regulation S.
"REGULATION S TEMPORARY GLOBAL NOTE" means an Regulation S Global Note that
bears the Regulation S Temporary Global Note Legend.
20
"REGULATION S TEMPORARY GLOBAL NOTE LEGEND" means the legend set forth in
Exhibit I.
"RESTRICTED LEGEND" means the legend set forth in Exhibit C.
"RESTRICTED PAYMENT" means any of the following:
(a) the declaration or payment of any dividend or any other
distribution on Capital Stock of the Company, the Issuer or any Restricted
Subsidiary or any payment made to the direct or indirect holders (in their
capacities as such) of Capital Stock of the Company, the Issuer or any
Restricted Subsidiary (other than (i) dividends or distributions payable
solely in Qualified Stock and (ii) in the case of the Issuer or Restricted
Subsidiaries, dividends or distributions payable to the Company, the Issuer
or a Restricted Subsidiary);
(b) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company, the Issuer or any Restricted
Subsidiary (other than a payment made to the Company, the Issuer or any
Restricted Subsidiary); and
(c) any Investment (other than any Permitted Investment), including
any Investment in an Unrestricted Subsidiary (including by the designation
of a Subsidiary of the Company as an Unrestricted Subsidiary) and any
amounts paid in accordance with clause (b) of the definition of
Indebtedness.
"RESTRICTED PERIOD" means the relevant 40-day distribution compliance
period as defined in Regulation S, which, for each relevant Note, commences on
the date such Note is Issued.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company which is not an
Unrestricted Subsidiary.
"RULE 144A" means Rule 144A under the Securities Act.
"RULE 144A CERTIFICATE" means (i) a certificate substantially in the form
of Exhibit F hereto or (ii) a written certification addressed to the Issuer and
the Trustee to the effect that the Person making such certification (x) is
acquiring such Note (or beneficial interest) for its own account or one or more
accounts with respect to which it exercises sole investment discretion and that
it and each such account is a qualified institutional buyer within the meaning
of Rule 144A, (y) is aware that the transfer to it or exchange, as applicable,
is being made in reliance upon the exemption from the provisions of Section 5 of
the Securities Act provided by Rule 144A, and (z) acknowledges that it has
received such information regarding the Issuer as it has requested pursuant to
Rule 144A(d)(4) or has determined not to request such information.
"RULE 144A GLOBAL NOTE" means a Global Note that bears the Restricted
Legend representing Notes issued and sold pursuant to Rule 144A.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc. and its successors.
21
"SECURITIES ACT" means the Securities Act of 1933.
"SHELF REGISTRATION STATEMENT" means the Shelf Registration Statement as
defined in a Registration Rights Agreement.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary of the Company that would
constitute a "significant subsidiary" as defined in Article 1, Rule 1-02 (w)(1)
or (2) of Regulation S-X promulgated under the Securities Act, as such
regulation is in effect on the date of the Indenture.
"SUBSIDIARY" of any Person means any corporation or other entity of which a
majority of the Capital Stock having ordinary voting power to elect a majority
of the Board of Directors or other persons performing similar functions is at
the time directly or indirectly owned or controlled by such Person.
"TRUSTEE" means the party named as such in the first paragraph of the
Indenture or any successor trustee under the Indenture pursuant to Article 7.
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939.
"U.S. GOVERNMENT OBLIGATIONS" means obligations issued or directly and
fully guaranteed or insured by the United States of America or by any agent or
instrumentality thereof, provided that the full faith and credit of the United
States of America is pledged in support thereof.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company so designated
by a resolution adopted by the Board of Directors of the Company or a duly
authorized committee thereof as provided below; PROVIDED that (a) the holders of
Indebtedness thereof do not have direct or indirect recourse against the
Company, the Issuer or any Restricted Subsidiary, and neither the Company, the
Issuer nor any Restricted Subsidiary otherwise has liability for, any payment
obligations in respect of such Indebtedness (including any undertaking,
agreement or instrument evidencing such Indebtedness), except, in each case, to
the extent that the amount thereof constitutes a Restricted Payment permitted by
the Indenture, in the case of Non-Recourse Indebtedness, to the extent such
recourse or liability is for the matters discussed in the last sentence of the
definition of "Non-Recourse Indebtedness," or to the extent such Indebtedness is
a guarantee by such Subsidiary of Indebtedness of the Company, the Issuer or a
Restricted Subsidiary and (b) no holder of any Indebtedness of such Subsidiary
shall have a right to declare a default on such Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity as a
result of a default on any Indebtedness of the Company, the Issuer or any
Restricted Subsidiary. As of the Issue Date, the Unrestricted Subsidiaries will
be the following:
Eastern National Title Insurance Agency, Inc., Eastern Title Agency, Inc.,
Founders Title Agency, Inc., Governor's Abstract Co., Inc. Hexter Fair Land
Title Company I, Inc., Homebuyer's Mortgage, Inc., K. Hovnanian Mortgage, Inc.,
Hovnanian Financial Services I, Inc., Hovnanian Financial Services II, Inc.,
Hovnanian Financial Services III, Inc., Hovnanian Financial Services IV. Inc.,
K. Hovnanian Investment Properties, Inc., Preston Grande Homes, Inc., Heritage
Pines, L.L.C., Kings Crossing at Montgomery, L.L.C., Knox Creek, L.L.C.,
McKinley Court, L.L.C., Monticello Woods, L.L.C., New Homebuyers Title Co.
(Virginia) L.L.C., New Homebuyers Title Company, L.L.C., Shadow Creek, L.L.C.,
Section 13 of the
22
Hills, L.L.C., Title Group II, L.L.C., Town Homes at Montgomery, L.L.C.,
Westwood Hills, L.L.C., WH/PR Land Co., L.L.C., Athena Portfolio Investors,
L.P., Beacon Manor Associates, L.P., Galleria Mortgage, L.P., Goodman Mortgage
Investors, L.P., Parkway Development, Sovereign Group, L.P., and K. Hovnanian
Venture I, L.L.C.
Subject to the foregoing, the Board of Directors of the Company or a duly
authorized committee thereof may designate any Subsidiary in addition to those
named above to be an Unrestricted Subsidiary; PROVIDED HOWEVER, that (a) the net
amount (the "DESIGNATION AMOUNT") then outstanding of all previous Investments
by the Company and the Restricted Subsidiaries in such Subsidiary will be deemed
to be a Restricted Payment at the time of such designation and will reduce the
amount available for Restricted Payments under Section 4.07 hereof to the extent
provided therein, (b) the Company must be permitted under Section 4.07 hereof to
make the Restricted Payment deemed to have been made pursuant to clause (a), and
(c) after giving effect to such designation, no Default or Event of Default
shall have occurred or be continuing. In accordance with the foregoing, and not
in limitation thereof, Investments made by any Person in any Subsidiary of such
Person prior to such Person's merger with the Company or any Restricted
Subsidiary (but not in contemplation or anticipation of such merger) shall not
be counted as an Investment by the Company or such Restricted Subsidiary if such
Subsidiary of such Person is designated as an Unrestricted Subsidiary.
The Board of Directors of the Company or a duly authorized committee
thereof may also redesignate an Unrestricted Subsidiary to be a Restricted
Subsidiary PROVIDED, HOWEVER, that (a) the Indebtedness of such Unrestricted
Subsidiary as of the date of such redesignation could then be incurred under
Section 4.06 hereof and (b) immediately after giving effect to such
redesignation and the incurrence of any such additional Indebtedness, the
Company and the Restricted Subsidiaries could incur $1.00 of additional
Indebtedness under Section 4.06(a) hereof. Any such designation or redesignation
by the Board of Directors of the Company or a committee thereof will be
evidenced to the Trustee by the filing with the Trustee of a certified copy of
the resolution of the Board of Directors of the Company or a committee thereof
giving effect to such designation or redesignation and an Officers' Certificate
certifying that such designation or redesignation complied with the foregoing
conditions and setting forth the underlying calculations of such Officers'
Certificate. The designation of any Person as an Unrestricted Subsidiary shall
be deemed to include a designation of all Subsidiaries of such Person as
Unrestricted Subsidiaries; PROVIDED, HOWEVER, that the ownership of the general
partnership interest (or a similar member's interest in a limited liability
company) by an Unrestricted Subsidiary shall not cause a Subsidiary of the
Company of which more than 95% of the equity interest is held by the Company or
one or more Restricted Subsidiaries to be deemed an Unrestricted Subsidiary.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
or portion thereof at any date, the number of years obtained by dividing (a) the
sum of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including, without limitation, payment at final maturity, in
respect thereof, by (ii) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such payment
by (b) the sum of all such payments described in clause (a)(i) above.
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SECTION 1.02. RULES OF CONSTRUCTION. Unless the context otherwise requires
or except as otherwise expressly provided,
(a) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(b) "herein," "hereof" and other words of similar import refer to the
Indenture as a whole and not to any particular Section, Article or other
subdivision;
(c) all references to Sections or Articles or Exhibits refer to Sections
or Articles or Exhibits of or to the Indenture unless otherwise indicated;
(d) references to agreements or instruments, or to statutes or
regulations, are to such agreements or instruments, or statutes or regulations,
as amended from time to time (or to successor statutes and regulations); and
(e) in the event that a transaction meets the criteria of more than one
category of permitted transactions or listed exceptions the Issuer may classify
such transaction as it, in its sole discretion, determines.
ARTICLE 2
THE NOTES
SECTION 2.01. FORM, DATING AND DENOMINATIONS; LEGENDS. The Notes and the
Trustee's certificate of authentication will be substantially in the form
attached as Exhibit A. The terms and provisions contained in the form of the
Notes annexed as Exhibit A constitute, and are hereby expressly made, a part of
the Indenture. The Notes may have notations, legends or endorsements required by
law, rules of or agreements with national securities exchanges to which the
Issuer is subject, or usage. Each Note will be dated the date of its
authentication. The Notes will be issuable in denominations of $1,000 in
principal amount and any multiple of $1,000 in excess thereof.
(a) (i) Except as otherwise provided in paragraph (c), Section
2.10(b)(iii), (b)(v), or (c) or Section 2.09(b)(iv), each Initial Note or
Initial Additional Note (other than a Permanent Regulation S Note) will
bear the Restricted Legend.
(ii) Each Global Note, whether or not an Initial Note or Additional
Note, will bear the DTC Legend.
(iii) Each Regulation S Temporary Global Note will bear the Regulation
S Temporary Global Note Legend.
(iv) Initial Notes and Initial Additional Notes offered and sold in
reliance on Regulation S will be issued as provided in Section 2.11(a).
(v) Initial Notes and Initial Additional Notes offered and sold in
reliance on any exception under the Securities Act other than Regulation S
and Rule 144A will be
24
issued, and upon the request of the Issuer to the Trustee, Initial Notes
offered and sold in reliance on Rule 144A may be issued, in the form of
Certificated Notes.
(vi) Exchange Notes will be issued, subject to Section 2.09(b), in
the form of one or more Global Notes.
(b) (i) If the Issuer determines (upon the advice of counsel and
such other certifications and evidence as the Issuer may reasonably
require) that a Note is eligible for resale pursuant to Rule 144(k) under
the Securities Act (or a successor provision) and that the Restricted
Legend is no longer necessary or appropriate in order to ensure that
subsequent transfers of the Note (or a beneficial interest therein) are
effected in compliance with the Securities Act, or
(ii) after an Initial Note or any Initial Additional Note is
(A) sold pursuant to an effective registration statement under
the Securities Act, pursuant to the Registration Rights Agreement or
otherwise, or
(B) is validly tendered for exchange into an Exchange Note
pursuant to an Exchange Offer
the Issuer may instruct the Trustee to cancel the Note and issue to the
Holder thereof (or to its transferee) a new Note of like tenor and amount,
registered in the name of the Holder thereof (or its transferee), that does
not bear the Restricted Legend, and the Trustee will comply with such
instruction.
(c) By its acceptance of any Note bearing the Restricted Legend (or
any beneficial interest in such a Note), each Holder thereof and each owner
of a beneficial interest therein acknowledges the restrictions on transfer
of such Note (and any such beneficial interest) set forth in this Indenture
and in the Restricted Legend and agrees that it will transfer such Note
(and any such beneficial interest) only in accordance with the Indenture
and such legend.
SECTION 2.02. EXECUTION AND AUTHENTICATION; EXCHANGE NOTES; ADDITIONAL
NOTES. (a) An Officer shall execute the Notes for the Issuer by facsimile or
manual signature in the name and on behalf of the Issuer. If an Officer whose
signature is on a Note no longer holds that office at the time the Note is
authenticated, the Note will still be valid.
(b) A Note will not be valid until the Trustee manually signs the
certificate of authentication on the Note, with the signature conclusive
evidence that the Note has been authenticated under the Indenture.
(c) At any time and from time to time after the execution and delivery of
the Indenture, the Issuer may deliver Notes executed by the Issuer to the
Trustee for authentication. The Trustee will authenticate and deliver
(i) Initial Notes for original issue in the aggregate principal
amount not to exceed $100,000,000,
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(ii) Initial Additional Notes from time to time for original issue in
aggregate principal amounts up to $100,000,000 specified by the Issuer, and
(iii) Exchange Notes from time to time for issue in exchange for a
like principal amount of Initial Notes or Initial Additional Notes
after the following conditions have been met:
(A) Receipt by the Trustee of an Officers' Certificate
specifying
(1) the amount of Notes to be authenticated and the
date on which the Notes are to be authenticated,
(2) whether the Notes are to be Initial Notes or,
Additional Notes or Exchange Notes,
(3) in the case of Initial Additional Notes, that the
issuance of such Notes does not contravene any provision of
Article 4,
(4) whether the Notes are to be issued as one or more
Global Notes or Certificated Notes, and
(5) other information the Issuer may determine to
include or the Trustee may reasonably request.
(B) In the case of Initial Additional Notes, receipt by the
Trustee of an Opinion of Counsel confirming that the Holders of the
outstanding Notes will be subject to federal income tax in the same
amounts, in the same manner and at the same times as would have been
the case if such Additional Notes were not issued.
(C) In the case of Exchange Notes, effectiveness of an Exchange
Offer Registration Statement and Consummation (as defined in the
Registration Rights Agreement) of the exchange offer thereunder (and
receipt by the Trustee of an Officers' Certificate to that effect).
Initial Notes or Initial Additional Notes exchanged for Exchange Notes
will be cancelled by the Trustee.
SECTION 2.03. REGISTRAR, PAYING AGENT AND AUTHENTICATING AGENT; PAYING
AGENT TO HOLD MONEY IN TRUST. (a) The Issuer may appoint one or more Registrars
and one or more Paying Agents, and the Trustee may appoint an Authenticating
Agent, in which case each reference in the Indenture to the Trustee in respect
of the obligations of the Trustee to be performed by that Agent will be deemed
to be references to the Agent. The Issuer may act as Registrar or (except for
purposes of Article 8) Paying Agent. In each case the Issuer and the Trustee
will enter into an appropriate agreement with the Agent implementing the
provisions of the Indenture relating to the obligations of the Trustee to be
performed by the Agent and the related rights.
(b) The Issuer will require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of the
Holders or the Trustee all
26
money held by the Paying Agent for the payment of principal of and interest on
the Notes and will promptly notify the Trustee of any default by the Issuer in
making any such payment. The Issuer at any time may require a Paying Agent to
pay all money held by it to the Trustee and account for any funds disbursed, and
the Trustee may at any time during the continuance of any payment default, upon
written request to a Paying Agent, require the Paying Agent to pay all money
held by it to the Trustee and to account for any funds disbursed. Upon doing so,
the Paying Agent will have no further liability for the money so paid over to
the Trustee.
SECTION 2.04. REPLACEMENT NOTES. If a mutilated Note is surrendered to the
Trustee or if a Holder claims that its Note has been lost, destroyed or
wrongfully taken, the Issuer will issue and the Trustee will authenticate a
replacement Note of like tenor and principal amount and bearing a number not
contemporaneously outstanding. Every replacement Note is an additional
obligation of the Issuer and entitled to the benefits of the Indenture. If
required by the Trustee or the Issuer, an indemnity must be furnished that is
sufficient in the judgment of both the Trustee and the Issuer to protect the
Issuer and the Trustee from any loss they may suffer if a Note is replaced. The
Issuer may charge the Holder for the expenses of the Issuer and the Trustee in
replacing a Note. In case the mutilated, lost, destroyed or wrongfully taken
Note has become or is about to become due and payable, the Issuer in its
discretion may pay the Note instead of issuing a replacement Note.
SECTION 2.05. OUTSTANDING NOTES. (a) Notes outstanding at any time are all
Notes that have been authenticated by the Trustee except for
(i) Notes cancelled by the Trustee or delivered to it for
cancellation;
(ii) any Note which has been replaced pursuant to Section 2.04 unless
and until the Trustee and the Issuer receive proof satisfactory to them
that the replaced Note is held by a BONA FIDE purchaser; and
(iii) on or after the maturity date or any redemption date or date for
purchase of the Notes pursuant to an Offer to Purchase, those Notes payable
or to be redeemed or purchased on that date for which the Trustee (or
Paying Agent, other than the Issuer or an Affiliate of the Issuer) holds
money sufficient to pay all amounts then due.
(b) A Note does not cease to be outstanding because the Issuer or one of
its Affiliates holds the Note, PROVIDED that in determining whether the Holders
of the requisite principal amount of the outstanding Notes have given or taken
any request, demand, authorization, direction, notice, consent, waiver or other
action hereunder, Notes owned by the Issuer or any Affiliate of the Issuer will
be disregarded and deemed not to be outstanding, (it being understood that in
determining whether the Trustee is protected in relying upon any such request,
demand, authorization, direction, notice, consent, waiver or other action, only
Notes which the Trustee knows to be so owned will be so disregarded). Notes so
owned which have been pledged in good faith may be regarded as outstanding if
the pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Notes and that the pledgee is not the Issuer or
any Affiliate of the Issuer.
27
SECTION 2.06. TEMPORARY NOTES. Until definitive Notes are ready for
delivery, the Issuer may prepare and the Trustee will authenticate temporary
Notes. Temporary Notes will be substantially in the form of definitive Notes but
may have insertions, substitutions, omissions and other variations determined to
be appropriate by the Officer executing the temporary Notes, as evidenced by the
execution of the temporary Notes. If temporary Notes are issued, the Issuer will
cause definitive Notes to be prepared without unreasonable delay. After the
preparation of definitive Notes, the temporary Notes will be exchangeable for
definitive Notes upon surrender of the temporary Notes at the office or agency
of the Issuer designated for the purpose pursuant to Section 4.02, without
charge to the Holder. Upon surrender for cancellation of any temporary Notes the
Issuer will execute and the Trustee will authenticate and deliver in exchange
therefor a like principal amount of definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes will be entitled to the
same benefits under the Indenture as definitive Notes.
SECTION 2.07. CANCELLATION. The Issuer at any time may deliver to the
Trustee for cancellation any Notes previously authenticated and delivered
hereunder which the Issuer may have acquired in any manner whatsoever, and may
deliver to the Trustee for cancellation any Notes previously authenticated
hereunder which the Issuer has not issued and sold. Any Registrar or the Paying
Agent will forward to the Trustee any Notes surrendered to it for transfer,
exchange or payment. The Trustee will cancel all Notes surrendered for transfer,
exchange, payment or cancellation and dispose of them in accordance with its
normal procedures or the written instructions of the Issuer. The Issuer may not
issue new Notes to replace Notes it has paid in full or delivered to the Trustee
for cancellation.
SECTION 2.08. CUSIP AND ISIN NUMBERS. The Issuer in issuing the Notes may
use "CUSIP" and "ISIN" numbers, and the Trustee will use CUSIP numbers or ISIN
numbers in notices of redemption or exchange or in Offers to Purchase as a
convenience to Holders, the notice to state that no representation is made as to
the correctness of such numbers either as printed on the Notes or as contained
in any notice of redemption or exchange or Offer to Purchase. The Issuer will
promptly notify the Trustee of any change in the CUSIP or ISIN numbers.
SECTION 2.09. REGISTRATION, TRANSFER AND EXCHANGE. (a) The Notes will be
issued in registered form only, without coupons, and the Issuer shall cause the
Trustee to maintain a register (the "REGISTER") of the Notes, for registering
the record ownership of the Notes by the Holders and transfers and exchanges of
the Notes.
(b) (i) Each Global Note will be registered in the name of the
Depositary or its nominee and, so long as DTC is serving as the Depositary
thereof, will bear the DTC Legend.
(ii) Each Global Note will be delivered to the Trustee as custodian
for the Depositary. Transfers of a Global Note (but not a beneficial
interest therein) will be limited to transfers thereof in whole, but not in
part, to the Depositary, its successors or their respective nominees,
except (A) as set forth in Section 2.09(b)(iv) and (B) transfers of
portions thereof in the form of Certificated Notes may be made upon request
of an Agent Member (for itself or on behalf of a beneficial owner) by
written notice given to
28
the Trustee by or on behalf of the Depositary in accordance with customary
procedures of the Depositary and in compliance with this Section and
Section 2.10.
(iii) Agent Members will have no rights under the Indenture with
respect to any Global Note held on their behalf by the Depositary, and the
Depositary may be treated by the Issuer, the Trustee and any agent of the
Issuer or the Trustee as the absolute owner and Holder of such Global Note
for all purposes whatsoever. Notwithstanding the foregoing, the Depositary
or its nominee may grant proxies and otherwise authorize any Person
(including any Agent Member and any Person that holds a beneficial interest
in a Global Note through an Agent Member) to take any action which a Holder
is entitled to take under the Indenture or the Notes, and nothing herein
will impair, as between the Depositary and its Agent Members, the operation
of customary practices governing the exercise of the rights of a holder of
any security.
(iv) If (x) the Depositary notifies the Issuer that it is unwilling
or unable to continue as Depositary for a Global Note and a successor
depositary is not appointed by the Issuer within 90 days of the notice or
(y) an Event of Default has occurred and is continuing and the Trustee has
received a request from the Depositary, the Trustee will promptly exchange
each beneficial interest in the Global Note for one or more Certificated
Notes in authorized denominations having an equal aggregate principal
amount registered in the name of the owner of such beneficial interest, as
identified to the Trustee by the Depositary, and thereupon the Global Note
will be deemed canceled. If such Note does not bear the Restricted Legend,
then the Certificated Notes issued in exchange therefor will not bear the
Restricted Legend. If such Note bears the Restricted Legend, then the
Certificated Notes issued in exchange therefor will bear the Restricted
Legend, PROVIDED that any Holder of any such Certificated Note issued in
exchange for a beneficial interest in a Regulation S Temporary Global Note
will have the right upon presentation to the Trustee of a duly completed
Certificate of Beneficial Ownership after the Restricted Period to exchange
such Certificated Note for a Certificated Note of like tenor and amount
that does not bear the Restricted Legend, registered in the name of such
Holder.
(c) Each Certificated Note will be registered in the name of the
holder thereof or its nominee.
(d) A Holder may transfer a Note (or a beneficial interest therein)
to another Person or exchange a Note (or a beneficial interest therein) for
another Note or Notes of any authorized denomination by presenting to the
Trustee a written request therefor stating the name of the proposed
transferee or requesting such an exchange, accompanied by any
certification, opinion or other document required by Section 2.10. The
Trustee will promptly register any transfer or exchange that meets the
requirements of this Section by noting the same in the register maintained
by the Trustee for the purpose; PROVIDED that
(i) no transfer or exchange will be effective until it is registered
in such register and
29
(ii) the Trustee will not be required (x) to issue, register the
transfer of or exchange any Note for a period of 15 days before a selection
of Notes to be redeemed or purchased pursuant to an Offer to Purchase, (y)
to register the transfer of or exchange any Note so selected for redemption
or purchase in whole or in part, except, in the case of a partial
redemption or purchase, that portion of any Note not being redeemed or
purchased, or (z) if a redemption or a purchase pursuant to an Offer to
Purchase is to occur after a Regular Record Date but on or before the
corresponding Interest Payment Date, to register the transfer of or
exchange any Note on or after the Regular Record Date and before the date
of redemption or purchase. Prior to the registration of any transfer, the
Issuer, the Trustee and their agents will treat the Person in whose name
the Note is registered as the owner and Holder thereof for all purposes
(whether or not the Note is overdue), and will not be affected by notice to
the contrary.
From time to time the Issuer will execute and the Trustee will authenticate
additional Notes as necessary in order to permit the registration of a transfer
or exchange in accordance with this Section.
No service charge will be imposed in connection with any transfer or
exchange of any Note, but the Issuer may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith (other than a transfer tax or other similar governmental charge
payable upon exchange pursuant to subsection (b)(iv)).
(e) (i) GLOBAL NOTE TO GLOBAL NOTE. If a beneficial interest in a
Global Note is transferred or exchanged for a beneficial interest in
another Global Note, the Trustee will (x) record a decrease in the
principal amount of the Global Note being transferred or exchanged equal to
the principal amount of such transfer or exchange and (y) record a like
increase in the principal amount of the other Global Note. Any beneficial
interest in one Global Note that is transferred to a Person who takes
delivery in the form of an interest in another Global Note, or exchanged
for an interest in another Global Note, will, upon transfer or exchange,
cease to be an interest in such Global Note and become an interest in the
other Global Note and, accordingly, will thereafter be subject to all
transfer and exchange restrictions, if any, and other procedures applicable
to beneficial interests in such other Global Note for as long as it remains
such an interest.
(ii) GLOBAL NOTE TO CERTIFICATED NOTE. If a beneficial interest in a
Global Note is transferred or exchanged for a Certificated Note, the
Trustee will (x) record a decrease in the principal amount of such Global
Note equal to the principal amount of such transfer or exchange and (y)
deliver one or more new Certificated Notes in authorized denominations
having an equal aggregate principal amount to the transferee (in the case
of a transfer) or the owner of such beneficial interest (in the case of an
exchange), registered in the name of such transferee or owner, as
applicable.
(iii) CERTIFICATED NOTE TO GLOBAL NOTE. If a Certificated Note is
transferred or exchanged for a beneficial interest in a Global Note, the
Trustee will (x) cancel such Certificated Note, (y) record an increase in
the principal amount of such Global Note equal to the principal amount of
such transfer or exchange and (z) in the event that such transfer or
exchange involves less than the entire principal amount of the canceled
30
Certificated Note, deliver to the Holder thereof one or more new
Certificated Notes in authorized denominations having an aggregate
principal amount equal to the untransferred or unexchanged portion of the
canceled Certificated Note, registered in the name of the Holder thereof.
(iv) CERTIFICATED NOTE TO CERTIFICATED NOTE. If a Certificated Note
is transferred or exchanged for another Certificated Note, the Trustee will
(x) cancel the Certificated Note being transferred or exchanged, (y)
deliver one or more new Certificated Notes in authorized denominations
having an aggregate principal amount equal to the principal amount of such
transfer or exchange to the transferee (in the case of a transfer) or the
Holder of the canceled Certificated Note (in the case of an exchange),
registered in the name of such transferee or Holder, as applicable, and (z)
if such transfer or exchange involves less than the entire principal amount
of the canceled Certificated Note, deliver to the Holder thereof one or
more Certificated Notes in authorized denominations having an aggregate
principal amount equal to the untransferred or unexchanged portion of the
canceled Certificated Note, registered in the name of the Holder thereof.
SECTION 2.10. RESTRICTIONS ON TRANSFER AND EXCHANGE. (a) The transfer or
exchange of any Note (or a beneficial interest therein) may only be made in
accordance with this Section and Section 2.09 and, in the case of a Global Note
(or a beneficial interest therein), the applicable rules and procedures of the
Depositary. The Trustee shall refuse to register any requested transfer or
exchange that does not comply with the preceding sentence.
(b) Subject to paragraph (c), the transfer or exchange of any Note (or a
beneficial interest therein) of the type set forth in column A below for a Note
(or a beneficial interest therein) of the type set forth opposite in column B
below may only be made in compliance with the certification requirements (if
any) described in the clause of this paragraph set forth opposite in column C
below.
A B C
Rule 144A Global Note Rule 144A Global Note (i)
Rule 144A Global Note Regulation S Global Note (ii)
Rule 144A Global Note Certificated Note (iii)
Regulation S Global Note Rule 144A Global Note (iv)
Regulation S Global Note Regulation S Global Note (i)
Regulation S Global Note Certificated Note (v)
Certificated Note Rule 144A Global Note (iv)
Certificated Note Regulation S Global Note (ii)
Certificated Note Certificated Note (iii)
(i) No certification is required.
(ii) The Person requesting the transfer or exchange must deliver or
cause to be delivered to the Trustee a duly completed Regulation S
Certificate; PROVIDED that if the requested transfer or exchange is made by
the Holder of a Certificated Note that does not bear the Restricted Legend,
then no certification is required.
31
(iii) The Person requesting the transfer or exchange must deliver or
cause to be delivered to the Trustee (x) a duly completed Rule 144A
Certificate, (y) a duly completed Regulation S Certificate or (z) a duly
completed Institutional Accredited Investor Certificate, and/or an opinion
of counsel and such other certifications and evidence as the Issuer may
reasonably require in order to determine that the proposed transfer or
exchange is being made in compliance with the Securities Act and any
applicable securities laws of any state of the United States; PROVIDED that
if the requested transfer or exchange is made by the Holder of a
Certificated Note that does not bear the Restricted Legend, then no
certification is required. In the event that (B) the requested transfer or
exchange takes place after the Restricted Period and a duly completed
Regulation S Certificate is delivered to the Trustee or (C) a Certificated
Note that does not bear the Restricted Legend is surrendered for transfer
or exchange, upon transfer or exchange the Trustee will deliver a
Certificated Note that does not bear the Restricted Legend.
(iv) The Person requesting the transfer or exchange must deliver or
cause to be delivered to the Trustee a duly completed Rule 144A
Certificate.
(v) Notwithstanding anything to the contrary contained herein, no
such exchange is permitted if the requested exchange involves a beneficial
interest in a Regulation S Temporary Global Note. If the requested transfer
or exchange involves a beneficial interest in a Permanent Regulation S
Global Note, no certification is required and the Trustee will deliver a
Certificated Note that does not bear the Restricted Legend.
(c) No certification is required in connection with any transfer or
exchange of any Note (or a beneficial interest therein)
(i) after such Note is eligible for resale pursuant to Rule 144(k)
under the Securities Act (or a successor provision); PROVIDED that the
Issuer has provided the Trustee with a certificate to that effect, and the
Issuer may require from any Person requesting a transfer or exchange in
reliance upon this clause (i) an opinion of counsel and any other
reasonable certifications and evidence in order to support such
certificate; or
(ii) (A) sold pursuant to an effective registration statement,
pursuant to the Registration Rights Agreement or otherwise or (B) which is
validly tendered for exchange into an Exchange Note pursuant to an Exchange
Offer.
Any Certificated Note delivered in reliance upon this paragraph will not
bear the Restricted Legend.
(d) The Trustee will retain copies of all certificates, opinions and other
documents received in connection with the transfer or exchange of a Note (or a
beneficial interest therein), and the Issuer will have the right to inspect and
make copies thereof at any reasonable time upon written notice to the Trustee.
SECTION 2.11. REGULATION S TEMPORARY GLOBAL NOTES. (a) Each Note
originally sold by the Initial Purchasers in reliance upon Regulation S will be
evidenced by one or more Regulation S Global Notes that bear the Regulation S
Temporary Global Note Legend.
32
(b) An owner of a beneficial interest in a Regulation S Temporary Global
Note (or a Person acting on behalf of such an owner) may provide to the Trustee
(and the Trustee will accept) a duly completed Certificate of Beneficial
Ownership at any time after the Restricted Period (it being understood that the
Trustee will not accept any such certificate during the Restricted Period).
Promptly after acceptance of a Certificate of Beneficial Ownership with respect
to such a beneficial interest, the Trustee will cause such beneficial interest
to be exchanged for an equivalent beneficial interest in a Permanent Regulation
S Global Note, and will (x) permanently reduce the principal amount of such
Regulation S Temporary Global Note by the amount of such beneficial interest and
(y) increase the principal amount of such Permanent Regulation S Global Note by
the amount of such beneficial interest.
(c) Notwithstanding anything to the contrary contained herein, beneficial
interests in a Regulation S Temporary Global Note may be held through the
Depositary only through Euroclear and Clearstream and their respective direct
and indirect participants.
(d) Notwithstanding paragraph (b), if after the Restricted Period any
Initial Purchaser owns a beneficial interest in a Regulation S Temporary Global
Note, such Initial Purchaser may, upon written request to the Trustee
accompanied by a certification as to its status as an Initial Purchaser,
exchange such beneficial interest for an equivalent beneficial interest in a
Permanent Regulation S Global Note, and the Trustee will comply with such
request and will (x) permanently reduce the principal amount of such Regulation
S Temporary Global Note by the amount of such beneficial interest and (y)
increase the principal amount of such Permanent Regulation S Global Note by the
amount of such beneficial interest.
ARTICLE 3
REDEMPTION; OFFER TO PURCHASE
Section 3.01. OPTIONAL REDEMPTION. At any time and from time to time on or
after April 1, 2007, the Issuer may redeem the Notes, in whole or in part, at a
redemption price equal to the percentage of principal amount set forth below
plus accrued and unpaid interest, and Liquidated Damages, if any, thereon, to
the redemption date.
12-MONTH PERIOD
COMMENCING
APRIL 1 IN YEAR PERCENTAGE
------------------------- -------------------------
2007 104.000%
2008 102.667%
2009 101.333%
2010 and thereafter 100.000%
SECTION 3.02. METHOD AND EFFECT OF REDEMPTION. (a) If the Issuer elects to
redeem Notes, it must notify the Trustee of the redemption date and the
principal amount of Notes to be redeemed by delivering an Officers' Certificate
at least 60 days before the redemption date (unless a shorter period is
satisfactory to the Trustee). If fewer than all of the Notes are being redeemed,
the Officers' Certificate must also specify a record date not less than 15 days
after the
33
date of the notice of redemption is given to the Trustee, and the Trustee will
select the Notes to be redeemed pro rata, or as nearly a pro rata basis as is
practicable (subject to the procedures of DTC), unless such method is otherwise
prohibited, in which case, by lot or by any other method the Trustee in its sole
discretion deems fair and appropriate, in denominations of $1,000 principal
amount and multiples thereof. The Trustee will notify the Issuer promptly of the
Notes or portions of Notes to be called for redemption. Notice of redemption
must be sent by the Issuer or at the Issuer's request, by the Trustee in the
name and at the expense of the Issuer, to Holders whose Notes are to be redeemed
at least 30 days but not more than 60 days before the redemption date.
(b) The notice of redemption will identify the Notes to be redeemed and
will include or state the following:
(i) the redemption date;
(ii) the redemption price, including the portion thereof representing
any accrued interest or Liquidated Damages;
(iii) the place or places where Notes are to be surrendered for
redemption;
(iv) Notes called for redemption must be so surrendered in order to
collect the redemption price;
(v) on the redemption date the redemption price will become due and
payable on Notes called for redemption, and interest on Notes called for
redemption will cease to accrue on and after the redemption date;
(vi) if any Note is redeemed in part, on and after the redemption
date, upon surrender of such Note, new Notes equal in principal amount to
the unredeemed portion will be issued; and
(vii) if any Note contains a CUSIP or ISIN number, no representation
is being made as to the correctness of the CUSIP or ISIN number either as
printed on the Notes or as contained in the notice of redemption and that
the Holder should rely only on the other identification numbers printed on
the Notes.
(c) Once notice of redemption is sent to the Holders, Notes called for
redemption become due and payable at the redemption price on the redemption
date, and upon surrender of the Notes called for redemption, the Issuer shall
redeem such Notes at the redemption price. Commencing on the redemption date,
Notes redeemed will cease to accrue interest. Upon surrender of any Note
redeemed in part, the Holder will receive a new Note equal in principal amount
to the unredeemed portion of the surrendered Note.
SECTION 3.03. OFFER TO PURCHASE. (a) An "OFFER TO PURCHASE" means an offer
by the Issuer to purchase Notes as required by the Indenture. An Offer to
Purchase must be made by written offer (the "OFFER") sent to the Holders. The
Issuer will notify the Trustee at least 15 days (or such shorter period as is
acceptable to the Trustee) prior to sending the offer to Holders
34
of its obligation to make an Offer to Purchase, and the offer will be sent by
the Issuer or, at the Issuer's request, by the Trustee in the name and at the
expense of the Issuer.
(b) The offer must include or state the following as to the terms of the
Offer to Purchase:
(i) the provision of the Indenture pursuant to which the Offer to
Purchase is being made;
(ii) the aggregate principal amount of the outstanding Notes offered
to be purchased by the Issuer pursuant to the Offer to Purchase (including,
if less than 100%, the manner by which such amount has been determined
pursuant to the Indenture) (the "PURCHASE AMOUNT");
(iii) the purchase price, including the portion thereof representing
accrued interest and Liquidated Damages, if any;
(iv) an expiration date (the "EXPIRATION DATE") not less than 30 days
or more than 60 days after the date of the offer, and a settlement date for
purchase (the "PURCHASE DATE") not more than five Business Days after the
expiration date;
(v) information concerning the business of the Issuer and its
Subsidiaries which the Issuer in good faith believes will enable the
Holders to make an informed decision with respect to the Offer to Purchase,
at a minimum to include
(A) the most recent annual and quarterly financial statements
and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for the Company,
(B) a description of material developments in the Company's
business subsequent to the date of the latest of the financial
statements (including a description of the events requiring the Issuer
to make the Offer to Purchase), and
(C) if applicable, appropriate pro forma financial information
concerning the Offer to Purchase and the events requiring the Issuer
to make the Offer to Purchase;
(vi) a Holder may tender all or any portion of its Notes, subject to
the requirement that any portion of a Note tendered must be in a multiple
of $1,000 principal amount;
(vii) the place or places where Notes are to be surrendered for tender
pursuant to the Offer to Purchase;
(viii)each Holder electing to tender a Note pursuant to the offer
will be required to surrender such Note at the place or places specified in
the offer prior to the close of business on the expiration date (such Note
being, if the Issuer or the Trustee so requires, duly endorsed or
accompanied by a duly executed written instrument of transfer);
35
(ix) interest on any Note not tendered, or tendered but not purchased
by the Issuer pursuant to the Offer to Purchase, will continue to accrue;
(x) on the purchase date the purchase price will become due and
payable on each Note accepted for purchase, and interest on Notes purchased
will cease to accrue on and after the purchase date;
(xi) Holders are entitled to withdraw Notes tendered by giving
notice, which must be received by the Issuer or the Trustee not later than
the close of business on the expiration date, setting forth the name of the
Holder, the principal amount of the tendered Notes, the certificate number
of the tendered Notes and a statement that the Holder is withdrawing all or
a portion of the tender;
(xii) (A) if Notes in an aggregate principal amount less than or equal
to the purchase amount are duly tendered and not withdrawn pursuant to the
Offer to Purchase, the Issuer will purchase all such Notes, and (B) if the
Offer to Purchase is for less than all of the outstanding Notes and Notes
in an aggregate principal amount in excess of the purchase amount are
tendered and not withdrawn pursuant to the offer, the Issuer will purchase
Notes having an aggregate principal amount equal to the purchase amount on
a pro rata basis, with adjustments so that only Notes in multiples of
$1,000 principal amount will be purchased;
(xiii)if any Note is purchased in part, new Notes equal in principal
amount to the unpurchased portion of the Note will be issued; and
(xiv) if any Note contains a CUSIP or ISIN number, no representation
is being made as to the correctness of the CUSIP or ISIN number either as
printed on the Notes or as contained in the offer and that the Holder
should rely only on the other identification numbers printed on the Notes.
(c) Prior to the purchase date, the Issuer will accept tendered Notes for
purchase as required by the Offer to Purchase and deliver to the Trustee all
Notes so accepted together with an Officers' Certificate specifying which Notes
have been accepted for purchase. On the purchase date the purchase price will
become due and payable on each Note accepted for purchase, and interest on Notes
purchased will cease to accrue on and after the purchase date. The Trustee will
promptly return to Holders any Notes not accepted for purchase and send to
Holders new Notes equal in principal amount to any unpurchased portion of any
Notes accepted for purchase in part.
(d) The Issuer will comply with Rule 14e-1 under the Exchange Act and all
other applicable laws in making any Offer to Purchase, and the above procedures
will be deemed modified as necessary to permit such compliance.
36
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF NOTES. (a) The Issuer agrees to pay the
principal of and interest and Liquidated Damages, if any, on the Notes on the
dates and in the manner provided in the Notes and the Indenture. The Issuer
shall pay Liquidated Damages in the amounts set forth in the Registration Rights
Agreement. Not later than 9:00 A.M. (New York City time) on the due date of any
principal of or interest on any Notes, or any redemption or purchase price of
the Notes, the Issuer will deposit with the Trustee (or Paying Agent) money in
immediately available funds sufficient to pay such amounts, PROVIDED that if the
Issuer or any Affiliate of the Issuer is acting as Paying Agent, it will, on or
before each due date, segregate and hold in a separate trust fund for the
benefit of the Holders a sum of money sufficient to pay such amounts until paid
to such Holders or otherwise disposed of as provided in the Indenture. In each
case the Issuer will promptly notify the Trustee of its compliance with this
paragraph.
(b) An installment of principal or interest will be considered paid on the
date due if the Trustee (or Paying Agent, other than the Issuer or any Affiliate
of the Issuer) holds on that date money designated for and sufficient to pay the
installment. If the Issuer or any Affiliate of the Issuer acts as Paying Agent,
an installment of principal or interest will be considered paid on the due date
only if paid to the Holders.
(c) The Issuer agrees to pay interest on overdue principal, and, to the
extent lawful, overdue installments of interest and Liquidated Damages at the
rate per annum specified in the Notes.
(d) Payments in respect of the Notes represented by the Global Notes are
to be made by wire transfer of immediately available funds to the accounts
specified by the Holders of the Global Notes. With respect to Certificated
Notes, the Issuer will make all payments by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no such
account is specified, by mailing a check to each Holder's registered address.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. The Issuer will maintain an
office or agency where Notes may be surrendered for registration of transfer or
exchange or for presentation for payment and where notices and demands to or
upon the Issuer in respect of the Notes and the Indenture may be served. The
Issuer hereby initially designates the Corporate Trust Office of the Trustee as
such office of the Issuer. The Issuer will give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Issuer fails to maintain any such required office or
agency or fails to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served to the
Trustee.
The Issuer may also from time to time designate one or more other offices
or agencies where the Notes may be surrendered or presented for any of such
purposes and may from time to time rescind such designations. The Issuer will
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
37
SECTION 4.03. EXISTENCE. The Company and the Issuer will each do or cause
to be done all things necessary to preserve and keep in full force and effect
its existence and the existence of each of its Restricted Subsidiaries in
accordance with their respective organizational documents, and the material
rights, licenses and franchises of the Company, the Issuer and each Restricted
Subsidiary, PROVIDED that the Company and the Issuer are not required to
preserve any such right, license or franchise, or the existence of any
Restricted Subsidiary, if the maintenance or preservation thereof is no longer
desirable in the conduct of the business of the Company and its Restricted
Subsidiaries taken as a whole; and PROVIDED FURTHER that this Section does not
prohibit any transaction otherwise permitted by Section 4.10 or Section 4.14.
SECTION 4.04. PAYMENT OF TAXES AND OTHER CLAIMS. The Company will pay or
discharge, and cause each of its Subsidiaries to pay or discharge before the
same become delinquent (a) all material taxes, assessments and governmental
charges levied or imposed upon the Company or any Subsidiary or its income or
profits or property, and (b) all material lawful claims for labor, materials and
supplies that, if unpaid, might by law become a Lien upon the property of the
Company or any Subsidiary, other than any such tax, assessment, charge or claim
the amount, applicability or validity of which is being contested in good faith
by appropriate proceedings and for which adequate reserves have been
established.
SECTION 4.05. MAINTENANCE OF PROPERTIES AND INSURANCE. (a) The Company
will cause all properties used or useful in the conduct of its business or the
business of any of its Restricted Subsidiaries to be maintained and kept in good
condition, repair and working order as in the judgment of the Company may be
necessary so that the business of the Company and its Restricted Subsidiaries
may be properly and advantageously conducted at all times; PROVIDED that nothing
in this Section prevents the Company or any Restricted Subsidiary from
discontinuing the use, operation or maintenance of any of such properties or
disposing of any of them, if such discontinuance or disposal is, in the judgment
of the Company, desirable in the conduct of the business of the Company and its
Restricted Subsidiaries taken as a whole.
(b) The Company will provide or cause to be provided, for itself and its
Restricted Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds customarily insured against by corporations
similarly situated and owning like properties, including, but not limited to,
products liability insurance and public liability insurance, with reputable
insurers, in such amounts, with such deductibles and by such methods as are
customary for corporations similarly situated in the industry in which the
Company and its Restricted Subsidiaries are then conducting business.
SECTION 4.06. LIMITATIONS ON INDEBTEDNESS. (a) The Company and the Issuer
will not, and will not cause or permit any Restricted Subsidiary, directly or
indirectly, to create, incur, assume, become liable for or guarantee the payment
of (collectively, an "INCURRENCE") any Indebtedness (including Acquired
Indebtedness) unless, after giving effect thereto and the application of the
proceeds therefrom, the Consolidated Fixed Charge Coverage Ratio on the date
thereof would be at least 2.0 to 1.0.
(b) Notwithstanding the foregoing, the provisions of the Indenture will
not prevent the incurrence of:
38
(i) Permitted Indebtedness,
(ii) Refinancing Indebtedness,
(iii) Non-Recourse Indebtedness,
(iv) any Guarantee of Indebtedness represented by the Notes, and
(v) any guarantee of Indebtedness incurred under Credit Facilities
in compliance with the Indenture.
(c) For purposes of determining compliance with this covenant, in the
event that an item of Indebtedness may be incurred through the first paragraph
of this covenant or by meeting the criteria of one or more of the types of
Indebtedness described in the second paragraph of this covenant (or the
definitions of the terms used therein), the Company, in its sole discretion,
(i) may classify such item of Indebtedness under and comply with
either of such paragraphs (or any of such definitions), as applicable,
(ii) may classify and divide such item of Indebtedness into more than
one of such paragraphs (or definitions), as applicable, and
(iii) may elect to comply with such paragraphs (or definitions), as
applicable, in any order.
(d) The Company and the Issuer will not, and will not cause or permit any
Guarantor to, directly or indirectly, in any event incur any Indebtedness that
purports to be by its terms (or by the terms of any agreement governing such
Indebtedness) subordinated to any other Indebtedness of the Company or of such
Guarantor, as the case may be, unless such Indebtedness is also by its terms (or
by the terms of any agreement governing such Indebtedness) made expressly
subordinated to the Notes or the Guarantee of such Guarantor, as the case may
be, to the same extent and in the same manner as such Indebtedness is
subordinated to such other Indebtedness of the Company or such Guarantor, as the
case may be.
SECTION 4.07. LIMITATION ON RESTRICTED PAYMENTS. (a) The Company and the
Issuer will not, and will not cause or permit any Restricted Subsidiary to,
directly or indirectly, make any Restricted Payment unless:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
(ii) immediately after giving effect to such Restricted Payment, the
Company could incur at least $1.00 of Indebtedness pursuant to Section
4.06(a) hereof; and
(iii) immediately after giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments (including the Fair Market
Value of any non-cash Restricted Payment) declared or made after May 4,
1999 does not exceed the sum of:
39
(A) 50% of the Consolidated Net Income of the Company on a
cumulative basis during the period (taken as one accounting period)
from and including February 1, 1999 and ending on the last day of the
Company's fiscal quarter immediately preceding the date of such
Restricted Payment (or in the event such Consolidated Net Income shall
be a deficit, minus 100% of such deficit), PLUS
(B) 100% of the aggregate net cash proceeds of and the Fair
Market Value of Property received by the Company from (1) any capital
contribution to the Company after February 1, 1999 or any issue or
sale after February 1, 1999 of Qualified Stock (other than to any
Subsidiary of the Company) and (2) the issue or sale after February 1,
1999 of any Indebtedness or other securities of the Company
convertible into or exercisable for Qualified Stock of the Company
that have been so converted or exercised, as the case may be, PLUS
(C) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made after May 4, 1999,
an amount (to the extent not included in the calculation of
Consolidated Net Income referred to in (A)) equal to the lesser of (x)
the return of capital with respect to such Investment (including by
dividend, distribution or sale of Capital Stock) and (y) the amount of
such Investment that was treated as a Restricted Payment, in either
case, less the cost of the disposition or repayment of such Investment
(to the extent not included in the calculation of Consolidated Net
Income referred to in (A)), PLUS
(D) with respect to any Unrestricted Subsidiary that is
redesignated as a Restricted Subsidiary after May 4, 1999, in
accordance with the definition of Unrestricted Subsidiary (so long as
the designation of such Subsidiary as an Unrestricted Subsidiary was
treated as a Restricted Payment made after May 4, 1999, and only to
the extent not included in the calculation of Consolidated Net Income
referred to in (A)), an amount equal to the lesser of (x) the
proportionate interest of the Company or a Restricted Subsidiary in an
amount equal to the excess of (I) the total assets of such Subsidiary,
valued on an aggregate basis at the lesser of book value and Fair
Market Value thereof, over (II) the total liabilities of such
Subsidiary, determined in accordance with GAAP, and (y) the
Designation Amount at the time of such Subsidiary's designation as an
Unrestricted Subsidiary, PLUS
(E) $17 million, MINUS
(F) the aggregate amount of all Restricted Payments (other than
Restricted Payments referred to in clause (iii) of paragraph (b)
below) made after February 1, 1999 through May 4, 1999.
(b) Clauses (ii) and (iii) of paragraph (a) will not prohibit:
40
(i) the payment of any dividend within 60 days of its declaration if
such dividend could have been made on the date of its declaration without
violation of the provisions of the Indenture;
(ii) the repurchase, redemption or retirement of any shares of
Capital Stock of the Company in exchange for, or out of the net proceeds of
the substantially concurrent sale (other than to a Subsidiary of the
Company) of, other shares of Qualified Stock; and
(iii) the purchase, redemption or other acquisition, cancellation or
retirement for value of Capital Stock, or options, warrants, equity
appreciation rights or other rights to purchase or acquire Capital Stock,
of the Company or any Subsidiary held by officers or employees or former
officers or employees of the Company or any Subsidiary (or their estates or
beneficiaries under their estates) not to exceed $10 million in the
aggregate since May 4, 1999; PROVIDED, HOWEVER that each Restricted Payment
described in clauses (i) and (ii) of this sentence shall be taken into
account for purposes of computing the aggregate amount of all Restricted
Payments pursuant to clause (iii) of the immediately preceding paragraph.
(c) For purposes of determining the aggregate and permitted amounts of
Restricted Payments made, the amount of any guarantee of any Investment in any
Person that was initially treated as a Restricted Payment and which was
subsequently terminated or expired, net of any amounts paid by the Company or
any Restricted Subsidiary in respect of such guarantee, shall be deducted.
(d) In determining the "Fair Market Value of Property" for purposes of
clause (iii) of paragraph (a), Property other than cash, Cash Equivalents and
Marketable Securities shall be deemed to be equal in value to the "equity value"
of the Capital Stock or other securities issued in exchange therefor. The equity
value of such Capital Stock or other securities shall be equal to (i) the number
of shares of Common Equity issued in the transaction (or issuable upon
conversion or exercise of the Capital Stock or other securities issued in the
transaction) multiplied by the closing sale price of the Common Equity on its
principal market on the date of the transaction (less, in the case of Capital
Stock or other securities which require the payment of consideration at the time
of conversion or exercise, the aggregate consideration payable thereupon) or
(ii) if the Common Equity is not then traded on the New York Stock Exchange,
American Stock Exchange or Nasdaq National Market, or if the Capital Stock or
other securities issued in the transaction do not consist of Common Equity (or
Capital Stock or other securities convertible into or exercisable for Common
Equity), the value (if more than $10 million) of such Capital Stock or other
securities as determined by a nationally recognized investment banking firm
retained by the Board of Directors of the Company.
SECTION 4.08. LIMITATION ON LIENS. The Company and the Issuer will not,
and will not cause or permit any Restricted Subsidiary to, create, incur, assume
or suffer to exist any Liens, other than Permitted Liens, on any of its
Property, or on any shares of Capital Stock or Indebtedness of any Restricted
Subsidiary, unless contemporaneously therewith or prior thereto all payments due
under the Indenture and the Notes are secured on an equal and ratable basis with
the obligation or liability so secured until such time as such obligation or
liability is no longer secured by a Lien.
41
SECTION 4.09. LIMITATIONS ON RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES. The Company and the Issuer will not, and will not cause or permit
any Restricted Subsidiary to, create, assume or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction (other than
encumbrances or restrictions imposed by law or by judicial or regulatory action
or by provisions of agreements that restrict the assignability thereof) on the
ability of any Restricted Subsidiary to:
(a) pay dividends or make any other distributions on its Capital Stock or
any other interest or participation in, or measured by, its profits, owned by
the Company or any other Restricted Subsidiary, or pay interest on or principal
of any Indebtedness owed to the Company or any other Restricted Subsidiary,
(b) make loans or advances to the Company or any other Restricted
Subsidiary, or
(c) transfer any of its property or assets to the Company or any other
Restricted Subsidiary,
except for
(i) encumbrances or restrictions existing under or by reason of
applicable law,
(ii) contractual encumbrances or restrictions in effect on the Issue
Date and any amendments, modifications, restatements, renewals,
supplements, refundings, replacements or refinancings thereof, PROVIDED
that such amendments, modifications, restatements, renewals, supplements,
refundings, replacements or refinancings are no more restrictive, taken as
a whole, with respect to such dividend and other payment restrictions than
those contained in such contractual encumbrances or restrictions, as in
effect on May 4, 1999,
(iii) any restrictions or encumbrances arising under Acquired
Indebtedness; PROVIDED that such encumbrance or restriction applies only to
either the assets that were subject to the restriction or encumbrance at
the time of the acquisition or the obligor on such Indebtedness and its
Subsidiaries prior to such acquisition,
(iv) any restrictions or encumbrances arising in connection with
Refinancing Indebtedness; PROVIDED, HOWEVER, that any restrictions and
encumbrances of the type described in this clause (iv) that arise under
such Refinancing Indebtedness shall not be materially more restrictive or
apply to additional assets than those under the agreement creating or
evidencing the Indebtedness being refunded, refinanced, replaced or
extended,
(v) any Permitted Lien, or any other agreement restricting the sale
or other disposition of property, securing Indebtedness permitted by the
Indenture if such Permitted Lien or agreement does not expressly restrict
the ability of a Subsidiary of the Company to pay dividends or make or
repay loans or advances prior to default thereunder,
42
(vi) reasonable and customary borrowing base covenants set forth in
agreements evidencing Indebtedness otherwise permitted by the Indenture,
(vii) customary non-assignment provisions in leases, licenses,
encumbrances, contracts or similar assets entered into or acquired in the
ordinary course of business,
(viii)any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of such Restricted
Subsidiary pending the closing of such sale or disposition,
(ix) encumbrances or restrictions existing under or by reason of the
Indenture or the Notes,
(x) purchase money obligations that impose restrictions on the
property so acquired of the nature described in clause (c) of the preceding
paragraph,
(xi) Liens permitted under the Indenture securing Indebtedness that
limit the right of the debtor to dispose of the assets subject to such
Lien,
(xii) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements, assets sale agreements,
stock sale agreements and other similar agreements,
(xiii)customary provisions of any franchise, distribution or similar
agreements,
(xiv) restrictions on cash or other deposits or net worth imposed by
contracts entered into in the ordinary course of business, and
(xv) any encumbrance or restrictions of the type referred to in
clauses (a), (b) or (c) of the first paragraph of this section imposed by
any amendments, modifications, restatements, renewals, supplements,
refinancings, replacements or refinancings of the contracts, instruments or
obligations referred to in clauses (i) through (xiv) of this paragraph,
PROVIDED that such amendments, modifications, restatements, renewals,
supplements, refundings, replacements or refinancings are, in the good
faith judgment of the Company's Board of Directors, no more restrictive
with respect to such dividend and other payment restrictions than those
contained in the dividend or other payment restrictions prior to such
amendment, modification, restatement, renewal, supplement, refunding,
replacement or refinancing.
SECTION 4.10. LIMITATIONS ON DISPOSITIONS OF ASSETS. The Company and the
Issuer will not, and will not cause or permit any Restricted Subsidiary to, make
any Asset Disposition unless (x) the Company (or such Restricted Subsidiary, as
the case may be) receives consideration at the time of such Asset Disposition at
least equal to the Fair Market Value thereof, and (y) not less than 70% of the
consideration received by the Company (or such Restricted Subsidiary, as the
case may be) is in the form of cash, Cash Equivalents and Marketable Securities.
The amount of (i) any Indebtedness (other than any Indebtedness subordinated to
the Notes) of the Company or any Restricted Subsidiary that is actually assumed
by the transferee in such Asset Disposition
43
and (ii) the fair market value (as determined in good faith by the Board of
Directors of the Company) of any property or assets received that are used or
useful in a Real Estate Business, shall be deemed to be consideration required
by clause (y) above for purposes of determining the percentage of such
consideration received by the Company or the Restricted Subsidiaries. The Net
Cash Proceeds of an Asset Disposition shall, within one year, at the Company's
election, (a) be used by the Company or a Restricted Subsidiary in the business
of the construction and sale of homes conducted by the Company and the
Restricted Subsidiaries or any other business of the Company or a Restricted
Subsidiary existing at the time of such Asset Disposition or (b) to the extent
not so used, be applied to make an Offer to Purchase Notes and, if the Company
or a Restricted Subsidiary elects or is required to do so repay, purchase or
redeem any other unsubordinated Indebtedness (on a PRO RATA basis if the amount
available for such repayment, purchase or redemption is less than the aggregate
amount of (i) the principal amount of the Notes tendered in such Offer to
Purchase and (ii) the lesser of the principal amount, or accreted value, of such
other unsubordinated Indebtedness, plus, in each case accrued interest to the
date of repayment, purchase or redemption) at 100% of the principal amount or
accreted value thereof, as the case may be, plus accrued interest and Liquidated
Damages, if any, to the date of repurchase or repayment. Notwithstanding the
foregoing, (A) the Company will not be required to apply such Net Cash Proceeds
to the repurchase of Notes in accordance with clause (b) of the preceding
sentence except to the extent that such Net Cash Proceeds, together with the
aggregate Net Cash Proceeds of prior Asset Dispositions (other than those so
used) which have not been applied in accordance with this provision and as to
which no prior Offer to Purchase shall have been made, exceed 5% of Consolidated
Tangible Assets and (B) in connection with an Asset Disposition, the Company and
the Restricted Subsidiaries will not be required to comply with the requirements
of clause (y) of the first sentence of the first paragraph of this covenant to
the extent that the non-cash consideration received in connection with such
Asset Disposition together with the sum of all non-cash consideration received
in connection with all prior Asset Disposition that has not yet been converted
into cash, does not exceed 5% of Consolidated Tangible Assets; PROVIDED HOWEVER,
that when any non-cash consideration is converted into cash, such cash shall
constitute Net Cash Proceeds and be subject to the preceding sentence.
SECTION 4.11. GUARANTEES BY RESTRICTED SUBSIDIARIES. Each existing
Restricted Subsidiary (other than KHL, Inc. and K. Hovnanian Poland, sp. z.o.o.)
will provide a Note Guaranty. The Company will be permitted to cause any
Unrestricted Subsidiary to provide a Note Guaranty. If the Issuer, the Company
or any of its Restricted Subsidiaries acquires or creates a Restricted
Subsidiary after the date of the Indenture, the new Restricted Subsidiary must
provide a Note Guaranty.
A Restricted Subsidiary required to provide a Note Guaranty shall execute a
supplemental indenture in the form of Exhibit B, and deliver an Opinion of
Counsel to the Trustee to the effect that the supplemental indenture has been
duly authorized, executed and delivered by the Restricted Subsidiary and
constitutes a valid and binding obligation of the Restricted Subsidiary,
enforceable against the Restricted Subsidiary in accordance with its terms
(subject to customary exceptions).
SECTION 4.12. REPURCHASE OF NOTES UPON A CHANGE OF CONTROL. (a) In the
event that there shall occur a Change of Control, each Holder of Notes shall
have the right, at such Holder's option, to require the Issuer to purchase all
or any part of such Holder's Notes on a date
44
(the "REPURCHASE DATE") that is no later than 90 days after notice of the Change
of Control, at 101% of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages, if any, to the Repurchase Date.
(b) On or before the thirtieth day after any Change of Control, the Issuer
is obligated to mail or cause to be mailed, to all Holders of record of Notes a
notice regarding the Change of Control and the repurchase right. The notice
shall state the Repurchase Date, the date by which the repurchase right must be
exercised, the price for the Notes and the procedure which the Holder must
follow to exercise such right. Substantially simultaneously with mailing of the
notice, the Issuer shall cause a copy of such notice to be published in a
newspaper of general circulation in the Borough of Manhattan, The City of New
York. To exercise such right, the Holder of such Note must deliver at least ten
days prior to the Repurchase Date written notice to the Issuer (or an agent
designated by the Issuer for such purpose) of the Holder's exercise of such
right, together with the Note with respect to which the right is being
exercised, duly endorsed for transfer; PROVIDED, HOWEVER, that if mandated by
applicable law, a Holder may be permitted to deliver such written notice nearer
to the Repurchase Date than may be specified by the Issuer.
(c) The Issuer will comply with applicable law, including Section 14(e) of
Exchange Act and Rule 14e-1 thereunder, if applicable, if the Issuer is required
to give a notice of a right of repurchase as a result of a Change of Control.
SECTION 4.13. LIMITATION ON TRANSACTIONS WITH AFFILIATES. (a) The Company
and the Issuer will not, and will not cause or permit any Restricted Subsidiary
to, make any loan, advance, guarantee or capital contribution to, or for the
benefit of, or sell, lease, transfer or otherwise dispose of any property or
assets to or for the benefit of, or purchase or lease any property or assets
from, or enter into or amend any contract, agreement or understanding with, or
for the benefit of, any Affiliate of the Company or any Affiliate of any of the
Company's Subsidiaries or any holder of 10% or more of the Common Equity of the
Company (including any Affiliates of such holders), in a single transaction or
series of related transactions (each, an "AFFILIATE TRANSACTION"), except for
any Affiliate Transaction the terms of which are at least as favorable as the
terms which could be obtained by the Company, the Issuer or such Restricted
Subsidiary, as the case may be, in a comparable transaction made on an arm's
length basis with Persons who are not such a holder, an Affiliate of such a
holder or an Affiliate of the Company or any of the Company's Subsidiaries.
(b) In addition, the Company and the Issuer will not, and will not cause
or permit any Restricted Subsidiary to, enter into an Affiliate Transaction
unless:
(i) with respect to any such Affiliate Transaction involving or
having a value of more than $1 million, the Company shall have (x) obtained
the approval of a majority of the Board of Directors of the Company and (y)
either obtained the approval of a majority of the Company's disinterested
directors or obtained an opinion of a qualified independent financial
advisor to the effect that such Affiliate Transaction is fair to the
Company, the Issuer or such Restricted Subsidiary, as the case may be, from
a financial point of view, and
45
(ii) with respect to any such Affiliate Transaction involving or
having a value of more than $10 million, the Company shall have (x)
obtained the approval of a majority of the Board of Directors of the
Company and (y) delivered to the Trustee an opinion of a qualified
independent financial advisor to the effect that such Affiliate Transaction
is fair to the Company, the Issuer or such Restricted Subsidiary, as the
case may be, from a financial point of view.
(c) Notwithstanding the foregoing, an Affiliate Transaction will not
include:
(i) any contract, agreement or understanding with, or for the
benefit of, or plan for the benefit of, employees of the Company or its
Subsidiaries generally (in their capacities as such) that has been approved
by the Board of Directors of the Company,
(ii) Capital Stock issuances to directors, officers and employees of
the Company or its Subsidiaries pursuant to plans approved by the
stockholders of the Company,
(iii) any Restricted Payment otherwise permitted under Section 4.07
hereof,
(iv) any transaction between or among the Company and one or more
Restricted Subsidiaries or between or among Restricted Subsidiaries
(PROVIDED, HOWEVER, no such transaction shall involve any other Affiliate
of the Company (other than an Unrestricted Subsidiary to the extent the
applicable amount constitutes a Restricted Payment permitted by the
Indenture)),
(v) any transaction between one or more Restricted Subsidiaries and
one or more Unrestricted Subsidiaries where all of the payments to, or
other benefits conferred upon, such Unrestricted Subsidiaries are
substantially contemporaneously dividended, or otherwise distributed or
transferred without charge, to the Company or a Restricted Subsidiary,
(vi) issuances, sales or other transfers or dispositions of mortgages
and collateralized mortgage obligations in the ordinary course of business
between Restricted Subsidiaries and Unrestricted Subsidiaries of the
Company, and
(vii) the payment of reasonable and customary fees to, and indemnity
provided on behalf of, officers, directors, employees or consultants of the
Company, the Issuer or any Restricted Subsidiary.
SECTION 4.14. LIMITATIONS ON MERGERS, CONSOLIDATIONS AND SALES OF ASSETS.
Neither the Company nor the Issuer nor any Guarantor will consolidate or merge
with or into, or sell, lease, convey or otherwise dispose of all or
substantially all of its assets (including, without limitation, by way of
liquidation or dissolution), or assign any of its obligations under the Notes,
the Guarantee or the Indenture (as an entirety or substantially as an entirety
in one transaction or in a series of related transactions), to any Person (in
each case other than in a transaction in which the Company, the Issuer or a
Restricted Subsidiary is the survivor of a consolidation or merger, or the
transferee in a sale, lease, conveyance or other disposition) unless:
46
(i) the Person formed by or surviving such consolidation or merger
(if other than the Company, the Issuer or the Guarantor, as the case may
be), or to which such sale, lease, conveyance or other disposition or
assignment will be made (collectively, the "SUCCESSOR"), is a corporation
or other legal entity organized and existing under the laws of the United
States or any state thereof or the District of Columbia, and the Successor
assumes by supplemental indenture in a form reasonably satisfactory to the
Trustee all of the obligations of the Company, the Issuer or the Guarantor,
as the case may be, under the Notes or a Guarantee, as the case may be, and
the Indenture,
(ii) immediately after giving effect to such transaction, no Default
or Event of Default has occurred and is continuing, and
(iii) immediately after giving effect to such transaction, the Company
(or its Successor) could incur at least $1.00 of Indebtedness pursuant to
Section 4.06(a) hereof.
The foregoing provisions shall not apply to (i) a transaction involving the
sale or disposition of Capital Stock of a Guarantor, or the consolidation or
merger of a Guarantor, or the sale, lease, conveyance or other disposition of
all or substantially all of the assets of a Guarantor, that in any such case
results in such Guarantor being released from its Guarantee pursuant to the
Indenture, or (ii) a transaction the purpose of which is to change the state of
incorporation of the Company, the Issuer or any Guarantor.
SECTION 4.15. REPORTS TO HOLDERS OF NOTES. (a) The Company shall file with
the Commission the annual reports and the information, documents and other
reports required to be filed pursuant to Section 13 or 15(d) of the Exchange
Act. The Company shall file with the Trustee and mail to each Holder of record
of Notes such reports, information and documents within 15 days after it files
them with the Commission. In the event that the Company is no longer subject to
these periodic requirements of the Exchange Act, it will nonetheless continue to
file reports with the Commission and the Trustee and mail such reports to each
Holder of Notes as if it were subject to such reporting requirements. Regardless
of whether the Company is required to furnish such reports to its stockholders
pursuant to the Exchange Act, the Company will cause its consolidated financial
statements and a "Management's Discussion and Analysis of Results of Operations
and Financial Condition" written report, similar to those that would have been
required to appear in annual or quarterly reports, to be delivered to Holders of
Notes.
(b) For so long as any of the Notes remain outstanding and constitute
"restricted securities" under Rule 144, the Company will furnish to the Holders
of the Notes and prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
(c) All obligors on the Notes will comply with Section 314(a) of the Trust
Indenture Act.
(d) Delivery of these reports and information to the Trustee is for
informational purposes only and the Trustee's receipt of them will not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the
47
Company's compliance with any of its covenants hereunder (as to which the
Trustee is entitled to rely exclusively on Officers' Certificates).
SECTION 4.16. REPORTS TO TRUSTEE. (a) The Company will deliver to the
Trustee within 120 days after the end of each fiscal year a written statement by
the Company's independent public accountants stating (i) that their audit
examination has included a review of the terms of this Indenture and the Notes
as they relate to accounting matters, and (ii) whether, in connection with their
audit examination, any Default has come to their attention and, if a Default has
come to their attention, specifying the nature and period of the existence
thereof.
(b) The Company shall deliver to the Trustee, on or prior to each Interest
Payment Date, an Officer's Certificate setting forth the amount of Liquidated
Damages, if any, the Issuer is required to pay on that Interest Payment Date. If
no Liquidated Damages are required to be paid on a given Interest Payment Date,
no such Officer's Certificate is required to be delivered to the Trustee for
that Interest Payment Date.
(c) The Company will notify the Trustee when any Notes are listed on any
national securities exchange and of any delisting.
ARTICLE 5
REMEDIES
SECTION 5.01. EVENTS OF DEFAULT. (a) "EVENT OF DEFAULT" means any one or
more of the following events:
(i) the failure by the Company, the Issuer and the Guarantors to pay
interest on, or Liquidated Damages with respect to, any Note when the same
becomes due and payable and the continuance of any such failure for a
period of 30 days;
(ii) the failure by the Company, the Issuer and the Guarantors to pay
the principal or premium of any Note when the same becomes due and payable
at maturity, upon acceleration or otherwise;
(iii) the failure by the Company, the Issuer or any Restricted
Subsidiary to comply with any of its agreements or covenants in, or
provisions of, the Notes, the Guarantee or the Indenture and such failure
continues for the period and after the notice specified below (except in
the case of a default under Sections 4.12 and 4.14 hereof, which will
constitute Events of Default with notice but without passage of time);
(iv) the acceleration of any Indebtedness (other than Non-Recourse
Indebtedness) of the Company, the Issuer or any Restricted Subsidiary that
has an outstanding principal amount of $10 million or more, individually or
in the aggregate, and such acceleration does not cease to exist, or such
Indebtedness is not satisfied, in either case within 30 days after such
acceleration;
(v) the failure by the Company, the Issuer or any Restricted
Subsidiary to make any principal or interest payment in an amount of $10
million or more, individually
48
or in the aggregate, in respect of Indebtedness (other than Non-Recourse
Indebtedness) of the Company or any Restricted Subsidiary within 30 days of
such principal or interest becoming due and payable (after giving effect to
any applicable grace period set forth in the documents governing such
Indebtedness);
(vi) a final judgment or judgments that exceed $10 million or more,
individually or in the aggregate, for the payment of money having been
entered by a court or courts of competent jurisdiction against the Company,
the Issuer or any of its Restricted Subsidiaries and such judgment or
judgments is not satisfied, stayed, annulled or rescinded within 60 days of
being entered;
(vii) the Company or any Restricted Subsidiary that is a Significant
Subsidiary pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in
an involuntary case,
(C) consents to the appointment of a Custodian of it or for
all or substantially all of its property, or
(D) makes a general assignment for the benefit of its
creditors;
(viii)a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Restricted
Subsidiary that is a Significant Subsidiary as debtor in an
involuntary case,
(B) appoints a Custodian of the Company or any Restricted
Subsidiary that is a Significant Subsidiary or a Custodian for all
or substantially all of the property of the Company or any
Restricted Subsidiary that is a Significant Subsidiary, or
(C) orders the liquidation of the Company or any Restricted
Subsidiary that is a Significant Subsidiary,
and the order or decree remains unstayed and in effect for 60 days, or
(ix) any Guarantee of a Guarantor which is a Significant Subsidiary
ceases to be in full force and effect (other than in accordance with the
terms of such Guarantee and the Indenture) or is declared null and void and
unenforceable or found to be invalid or any Guarantor denies its liability
under its Guarantee (other than by reason of release of a Guarantor from
its Guarantee in accordance with the terms of the Indenture and the
Guarantee).
49
A Default as described in subclause (iii) above will not be deemed an Event
of Default until the Trustee notifies the Company, or the Holders of at least 25
percent in principal amount of the then outstanding Notes notify the Company and
the Trustee, of the Default and (except in the case of a default with respect to
Sections 4.12 and 4.14 hereof) the Company does not cure the Default within 60
days after receipt of the notice. The notice must specify the Default, demand
that it be remedied and state that the notice is a "Notice of Default." If such
a Default is cured within such time period, it ceases.
If an Event of Default (other than an Event of Default with respect to the
Company resulting from subclauses (vii) or (viii) above), shall have occurred
and be continuing under the Indenture, the Trustee by notice to the Company, or
the Holders of at least 25 percent in principal amount of the Notes then
outstanding by notice to the Company and the Trustee, may declare all Notes to
be due and payable immediately. Upon such declaration of acceleration, the
amounts due and payable on the Notes will be due and payable immediately. If an
Event of Default with respect to the Company specified in subclauses (vii) or
(viii) above occurs, such an amount will ipso facto become and be immediately
due and payable without any declaration, notice or other act on the part of the
Trustee and the Company or any Holder.
Except with respect to an Event of Default pursuant to clauses (i) or (ii)
of this Section 5.01, the Trustee shall not be charged with knowledge of any
Event of Default unless written notice thereof shall have been given to the
Trustee by the Issuer or any Holder.
SECTION 5.02. OTHER REMEDIES. If an Event of Default occurs and is
continuing, the Trustee may pursue, in its own name or as trustee of an express
trust, any available remedy by proceeding at law or in equity to collect the
payment of principal of and interest or Liquidated Damages, if any, on the Notes
or to enforce the performance of any provision of the Notes or the Indenture.
The Trustee may maintain a proceeding even if it does not possess any of the
Notes or does not produce any of them in the proceeding.
SECTION 5.03. WAIVER OF DEFAULTS BY MAJORITY OF HOLDERS. The Holders of a
majority in principal amount of the Notes then outstanding by written notice to
the Trustee and the Company may waive any Default or Event of Default (other
than any Default or Event of Default in payment of principal or interest or
Liquidated Damages) on the Notes under the Indenture. Holders of a majority in
principal amount of the then outstanding Notes may rescind an acceleration and
its consequence (except an acceleration due to nonpayment of principal or
interest or Liquidated Damages, if any, on the Notes) if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
(other than the non-payment of accelerated principal) have been cured or waived.
SECTION 5.04. DIRECTION OF PROCEEDINGS. The Holders may not enforce the
provisions of the Indenture, the Notes or the Guarantees except as provided in
the Indenture. Subject to certain limitations, Holders of a majority in
principal amount of the Notes then outstanding may direct the Trustee in its
exercise of any trust or power, PROVIDED, HOWEVER, that such direction does not
conflict with the terms of the Indenture. The Trustee may withhold from the
Holders notice of any continuing Default or Event of Default (except any Default
or Event of Default in payment of principal or interest or Liquidated Damages,
if any, on the Notes or that resulted
50
from the failure to comply with Section 4.12 hereof) if the Trustee determines
that withholding such notice is in the Holders' interest or would involve the
Trustee in personal liability.
SECTION 5.05. APPLICATION OF MONEYS COLLECTED BY TRUSTEE. Any moneys
collected by the Trustee pursuant to this Article with respect to Notes shall be
applied in the order following, at the date or dates fixed by the Trustee for
the distribution of such moneys, upon presentation of the Notes and stamping
thereon the payment, if only partially paid, and upon surrender thereof, if
fully paid:
FIRST: To the payment of costs and expenses of collection and
reasonable compensation to the Trustee, its agents, attorneys and counsel,
and all other expenses and liabilities incurred, and all advances made, by
the Trustee pursuant to Section 7.07 except as a result of its negligence
or bad faith;
SECOND: If the principal of the Notes shall not have become due and be
unpaid, to the payment of interest or Liquidated Damages, if any, on the
Notes with interest (to the extent that such interest has been collected by
the Trustee) upon the overdue installments of interest and Liquidated
Damages, if any, at the rate borne by the Notes, such payment to be made
ratably to the Persons entitled thereto;
THIRD: If the principal of the Notes shall have become due, by
declaration or otherwise, to the payment of the whole amount then owing and
unpaid upon the Notes for principal, interest and Liquidated Damages, if
any, with interest on the overdue principal and (to the extent that such
interest has been collected by the Trustee) upon overdue installments of
interest and Liquidated Damages, if any, at the rate borne by the Notes,
and in case such moneys shall be insufficient to pay in full the whole
amounts so due and unpaid upon the Notes, then to the payment of such
principal and interest and Liquidated Damages, if any, without preference
or priority of principal over interest or Liquidated Damages or of interest
or Liquidated Damages over principal, or of interest over Liquidated
Damages, or of any installment of interest or Liquidated Damages over any
other installment of interest or Liquidated Damages, ratably to the
aggregate of such principal and accrued and unpaid interest and Liquidated
Damages, if any; and
FOURTH: To the payment of any surplus then remaining to the Issuer,
its successors or assigns, or to whomsoever may be lawfully entitled to
receive the same.
No claim for interest which in any manner at or after maturity shall have
been transferred or pledged separate or apart from the Notes to which it
relates, or which in any manner shall have been kept alive after maturity by an
extension (otherwise than pursuant to an extension made pursuant to a plan
proposed by the Issuer to the Holders of all Notes), purchase, funding or
otherwise by or on behalf or with the consent or approval of the Issuer shall be
entitled, in case of a default hereunder, to any benefit of this Indenture,
except after prior payment in full of the principal of all Notes and of all
claims for interest not so transferred, pledged, kept alive, extended, purchased
or funded.
SECTION 5.06. PROCEEDINGS BY HOLDERS. No holder of any Notes shall have
any right by virtue of or by availing of any provision of this Indenture to
institute any suit, action or
51
proceeding in equity or at law upon or under or with respect to this Indenture
for the appointment of a receiver or trustee or similar official, or for any
other remedy hereunder, unless such Holder previously shall have given to the
Trustee written notice of default and of the continuance thereof, as
hereinbefore provided, and unless the Holders of not less than 25% in aggregate
principal amount of the Notes shall have made written request to the Trustee to
institute such action, suit or proceeding in its own name as Trustee hereunder
and shall have offered to the Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be incurred therein or
thereby, and the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity, shall have neglected or refused to institute any such
action, suit or proceeding, it being understood and intended, and being
expressly covenanted by the Holder of every Note with every other Holder and the
Trustee, that no one or more Holders of Notes shall have any right in any manner
whatever by virtue of or by availing of any provision of this Indenture or of
the Notes to affect, disturb or prejudice the rights of any other Holder of
Notes, or to obtain or seek to obtain priority over or preference as to any
other such Holder, or to enforce any right under this Indenture or the Notes,
except in the manner herein provided and for the equal, ratable and common
benefit of all Holders of Notes.
Notwithstanding any other provisions in this Indenture, however, the right
of any Holder of any Note to receive payment of the principal of, premium, if
any, and interest and Liquidated Damages, if any, on such Note, on or after the
maturity thereof, or to institute suit for the enforcement of any such payment
on or after such respective dates shall not be impaired or affected without the
consent of such Holder.
SECTION 5.07. PROCEEDINGS BY TRUSTEE. In case of an Event of Default
hereunder, the Trustee may in its discretion proceed to protect and enforce the
rights vested in it by this Indenture by such appropriate judicial proceedings
as the Trustee shall deem most effectual to protect and enforce any of such
rights, either by suit in equity or by action at law or by proceedings in
bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture, or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law.
SECTION 5.08. REMEDIES CUMULATIVE AND CONTINUING. All powers and remedies
given by this Article Five to the Trustee or to the Holders shall, to the extent
permitted by law, be deemed cumulative and not exclusive of any thereof or of
any other powers and remedies available to the Trustee or the Holders, by
judicial proceedings or otherwise, to enforce the performance or observance of
the covenants and agreements contained in this Indenture, and no delay or
omission of the Trustee or of any Holder to exercise any right or power accruing
upon any default occurring and continuing as aforesaid shall impair any such
right or power, or shall be construed to be a waiver of any such default or an
acquiescence therein; and, subject to the provisions of Section 5.06, every
power and remedy given by this Article 5 or by law to the Trustee or to the
Holders may be exercised from time to time, and as often as shall be deemed
expedient, by the Trustee or by the Holders.
SECTION 5.09. UNDERTAKING TO PAY COSTS. All parties to this Indenture
agree and each Holder of any Note by his acceptance thereof shall be deemed to
have agreed, that any court may in its discretion require, or in any suit for
the enforcement of any right or remedy under this
52
Indenture, or in any suit against the Trustee for any action taken or omitted by
it as Trustee, the filing by any party litigant in such suit of any undertaking
to pay the cost of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees and expenses, against any
party litigant in such suit, having due regard to the merits and good faith of
the claims or defenses made by such party litigant; but the provisions of this
Section 5.09 shall not apply to any suit instituted by the Trustee, to any suit
instituted by any Holder, or group of Holders, holding in the aggregate more
than 10% in principal amount of the Notes, or to any suit instituted by any
Holders for the enforcement of the payment of the principal of or interest or
Liquidated Damages, if any, on any Note against the Issuer on or after the due
date of such Note.
SECTION 5.10. NOTICE OF DEFAULTS. The Company is required to deliver to
the Trustee an annual statement regarding compliance with the Indenture, and
include in such statement, if any officer of the Company is aware of any Default
or Event of Default, a statement specifying such Default or Event of Default and
what action the Company is taking or proposes to take with respect thereto. In
addition, the Company is required to deliver to the Trustee prompt written
notice of the occurrence of any Default or Event of Default.
SECTION 5.11. WAIVER OF STAY, EXTENSION OR USURY LAWS. The Company, the
Issuer and each Guarantor covenants, to the extent that it may lawfully do so,
that it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury law or other law that would prohibit or forgive the Company, the Issuer or
the Guarantor from paying all or any portion of the principal of, or interest or
Liquidated Damages, if any, on the Notes as contemplated herein, wherever
enacted, now or at any time hereafter in force, or that may affect the covenants
or the performance of the Indenture. The Company, the Issuer and each Guarantor
hereby expressly waives, to the extent that it may lawfully do so, all benefit
or advantage of any such law and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
ARTICLE 6
GUARANTEE
SECTION 6.01. GUARANTEE. Each of the Guarantors hereby unconditionally
guarantees, jointly and severally, to each Holder and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of this
Indenture, the Notes or the obligations of the Issuer hereunder or thereunder,
that: (i) the due and punctual payment of the principal of and any premium,
interest or Liquidated Damages on the Notes, whether at maturity or on an
interest payment date, by acceleration, pursuant to an Offer to Purchase or
otherwise, and interest on the overdue principal of and interest and Liquidated
Damages, if any, on the Notes, if lawful, and all other obligations of the
Issuer to the Holders or the Trustee hereunder or thereunder shall be promptly
paid in full when due or performed in accordance with the terms hereof and
thereof; including all amounts payable to the Trustee under Section 7.07 hereof,
and (ii) in case of any extension of time of payment or renewal of any Notes or
any of such other obligations, the same shall be promptly paid in full when due
or to be performed in accordance with the terms of the extension or renewal,
whether at stated maturity, by acceleration or otherwise.
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If the Issuer fails to make any payment when due of any amount so
guaranteed for whatever reason, each Guarantor shall be obligated to pay the
same immediately. Each Guarantor hereby agrees that its obligations hereunder
shall be continuing, absolute and unconditional, irrespective of, and shall be
unaffected by, the validity regularity or enforceability of the Notes, this
Indenture, the absence of any action to enforce the same, any waiver or consent
by any Holder or the Trustee with respect to any provisions hereof or thereof,
the recovery of any judgment against the Issuer, any action to enforce the same
or any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of such Guarantor. If any Holder is required by any court
or otherwise to return to the Issuer or any Guarantor, or any custodian,
trustee, liquidator or other similar official acting in relation to the Issuer
or such Guarantor, any amount paid by the Issuer or any Guarantor to the Trustee
or such Holder, this Article 6, to the extent theretofore discharged, shall be
reinstated in full force and effect. Each Guarantor agrees that is shall not be
entitled to any right of subrogation in relation to the Holders in respect of
any obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby.
The Guarantee set forth in this Section 6.01 shall not be valid or become
obligatory for any purpose with respect to a Note until the certificate of
authentication on such Note shall have been signed by the Trustee or any duly
appointed agent.
SECTION 6.02. OBLIGATIONS OF EACH GUARANTOR UNCONDITIONAL. Nothing
contained in this Article 6 or elsewhere in this Indenture or in any Note is
intended to or shall impair, as between each Guarantor and the Holders, which
are absolute and unconditional, to pay to the Holders the principal of and
interest and Liquidated Damages, if any, on the Notes as and when the same shall
become due and payable in accordance with the provisions of the Guarantee or is
intended to or shall affect the relative rights of the Holders and creditors of
the Issuer, nor shall anything herein or therein prevent the Trustee or any
Holder from exercising all remedies otherwise permitted by applicable law upon
any Default under this Indenture in respect of cash, property or securities of
such Guarantor received upon the exercise of any such remedy.
Upon any distribution of assets of a Guarantor referred to in this Article
6, the Trustee, subject to the provisions of Article 7, and the Holders shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending, or a certificate of the liquidating
trustee or agent or other person making any distribution to the Trustee or to
the Holders, for the purpose of ascertaining the persons entitled to participate
in such distribution, the holders of other indebtedness of such Guarantor, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article 6.
SECTION 6.03. RELEASE OF A GUARANTOR. If all or substantially all of the
assets of any Guarantor other than the Company or all of the Capital Stock of
any Guarantor other than the Company is sold (including by consolidation,
merger, issuance or otherwise) or disposed of (including by liquidation,
dissolution or otherwise) by the Company or any of its Subsidiaries, or, unless
the Company elects otherwise, if any Guarantor other than the Company is
designated an Unrestricted Subsidiary in accordance with the terms of the
Indenture, then such Guarantor (in the event of a sale or other disposition of
all of the Capital Stock of such Guarantor or a designation as an Unrestricted
Subsidiary) or the Person acquiring such assets (in the event of a
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sale or other disposition of all or substantially all of the assets of such
Guarantor) shall be deemed automatically and unconditionally released and
discharged from any of its obligations under the Indenture without any further
action on the part of the Trustee or any Holder of the Notes.
An Unrestricted Subsidiary that is a Guarantor shall be deemed
automatically and unconditionally released and discharged from all obligations
under its Guarantee upon notice from the Company to the Trustee to such effect,
without any further action required on the part of the Trustee or any Holder.
SECTION 6.04. EXECUTION AND DELIVERY OF GUARANTY. The execution by each
Guarantor of the Indenture (or a supplemental indenture in the form of Exhibit
B) evidences the Note Guaranty of such Guarantor, whether or not the person
signing as an officer of the Guarantor still holds that office at the time of
authentication of any Note. The delivery of any Note by the Trustee after
authentication constitutes due delivery of the Note Guaranty set forth in the
Indenture on behalf of each Guarantor.
SECTION 6.05. LIMITATION ON GUARANTOR LIABILITY. Notwithstanding anything
to the contrary in this Article, each Guarantor, and by its acceptance of Notes,
each Holder, hereby confirms that it is the intention of all such parties that
the Note Guaranty of such Guarantor not constitute a fraudulent conveyance under
applicable fraudulent conveyance provisions of the United States Bankruptcy Code
or any comparable provision of state law. To effectuate that intention, the
Trustee, the Holders and the Guarantors hereby irrevocably agree that the
obligations of each Guarantor under its Note Guaranty are limited to the maximum
amount that would not render the Guarantor's obligations subject to avoidance
under applicable fraudulent conveyance provisions of the United States
Bankruptcy Code or any comparable provision of state law.
SECTION 6.06. ARTICLE 6 NOT TO PREVENT EVENTS OF DEFAULT. The failure to
make a payment on account of principal or interest or Liquidated Damages, if
any, on the Notes by reason of any provision in this Article 6 shall not be
construed as preventing the occurrence of any Event of Default under Section
5.01.
SECTION 6.07. WAIVER BY THE GUARANTORS. Each Guarantor hereby irrevocably
waives diligence, presentment, demand of payment, demand of performance, filing
of claims with a court in the event of insolvency of bankruptcy of the Issuer,
any right to require a proceeding first against the Issuer, the benefit of
discussion, protest, notice and all demand whatsoever and covenants that this
Guarantee shall not be discharged except by complete performance of the
obligations contained in the Notes, in this Indenture and in this Article 6.
SECTION 6.08. SUBROGATION AND CONTRIBUTION. Upon making any payment with
respect to any obligation of the Issuer under this Article, the Guarantor making
such payment will be subrogated to the rights of the payee against the Issuer
with respect to such obligation, PROVIDED that the Guarantor may not enforce
either any right of subrogation, or any right to receive payment in the nature
of contribution, or otherwise, from any other Guarantor, with respect to such
payment so long as any amount payable by the Issuer hereunder or under the Notes
remains unpaid.
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SECTION 6.09. STAY OF ACCELERATION. If acceleration of the time for
payment of any amount payable by the Issuer under the Indenture or the Notes is
stayed upon the insolvency, bankruptcy or reorganization of the Issuer, all such
amounts otherwise subject to acceleration under the terms of the Indenture are
nonetheless payable by the Guarantors hereunder forthwith on demand by the
Trustee or the Holders.
ARTICLE 7
THE TRUSTEE
SECTION 7.01. GENERAL. (a) The duties and responsibilities of the Trustee
are as provided by the Trust Indenture Act and as set forth herein. Whether or
not expressly so provided, every provision of the Indenture relating to the
conduct or affecting the liability of or affording protection to the Trustee is
subject to this Article.
(b) Except during the continuance of an Event of Default, the Trustee need
perform only those duties that are specifically set forth in the Indenture and
no others, and no implied covenants or obligations will be read into the
Indenture against the Trustee. In case an Event of Default has occurred and is
continuing, the Trustee shall exercise those rights and powers vested in it by
the Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
SECTION 7.02. CERTAIN RIGHTS OF TRUSTEE. Subject to Trust Indenture Act
Sections 315(a) through (d):
(a) The Trustee may rely, and will be protected in acting or
refraining from acting, upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper Person. The Trustee need not investigate any fact or matter
stated in the document, but the Trustee, in its discretion, may make
further inquiry or investigation into such facts or matters as it sees fit.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel conforming to Section
10.05 and the Trustee will not be liable for any action it takes or omits
to take in good faith in reliance on the certificate or opinion.
(c) The Trustee may act through its attorneys and agents and will
not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee will be under no obligation to exercise any of the
rights or powers vested in it by the Indenture at the request or direction
of any of the Holders, unless such Holders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction.
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(e) The Trustee will not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within its
rights or powers or for any action it takes or omits to take in accordance
with the direction of the Holders in accordance with Section 5.04 relating
to the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred upon
the Trustee, under the Indenture.
(f) The Trustee may consult with counsel, and the written advice of
such counsel or any Opinion of Counsel will be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon.
(g) No provision of the Indenture will require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of its duties hereunder, or in the exercise of its rights or
powers, unless it receives indemnity satisfactory to it against any loss,
liability or expense.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee, in its individual
or any other capacity, may become the owner or pledgee of Notes and may
otherwise deal with the Company or its Affiliates with the same rights it would
have if it were not the Trustee. Any Agent may do the same with like rights.
However, the Trustee is subject to Trust Indenture Act Sections 310(b) and 311.
For purposes of Trust Indenture Act Section 311(b)(4) and (6):
(a) "CASH TRANSACTION" means any transaction in which full payment
for goods or securities sold is made within seven days after delivery of
the goods or securities in currency or in checks or other orders drawn upon
banks or bankers and payable upon demand; and
(b) "SELF-LIQUIDATING PAPER" means any draft, bill of exchange,
acceptance or obligation which is made, drawn, negotiated or incurred for
the purpose of financing the purchase, processing, manufacturing, shipment,
storage or sale of goods, wares or merchandise and which is secured by
documents evidencing title to, possession of, or a lien upon, the goods,
wares or merchandise or the receivables or proceeds arising from the sale
of the goods, wares or merchandise previously constituting the security,
provided the security is received by the Trustee simultaneously with the
creation of the creditor relationship arising from the making, drawing,
negotiating or incurring of the draft, bill of exchange, acceptance or
obligation.
SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee (a) makes no
representation as to the validity or adequacy of the Indenture or the Notes, (b)
is not accountable for the Company's use or application of the proceeds from the
Notes and (c) is not responsible for any statement in the Notes other than its
certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULT. If any Default occurs and is continuing
and is known to the Trustee, the Trustee will send notice of the Default to each
Holder within 90 days after it occurs, unless the Default has been cured;
PROVIDED that, except in the case of a default in the payment of the principal
of or interest or Liquidated Damages, if any, on any Note, the Trustee
57
may withhold the notice if and so long as the board of directors, the executive
committee or a trust committee of directors of the Trustee in good faith
determines that withholding the notice is in the interest of the Holders. Notice
to Holders under this SECTION will be given in the manner and to the extent
provided in Trust Indenture Act Section 313(c).
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. Within 60 days after each May
15, beginning with May 15, 2002, the Trustee will mail to each Holder, as
provided in Trust Indenture Act Section 313(c), a brief report dated as of such
May 15, if required by Trust Indenture Act Section 313(a).
SECTION 7.07. COMPENSATION AND INDEMNITY. (a) The Company will pay the
Trustee compensation as agreed upon in writing for its services. The
compensation of the Trustee is not limited by any law on compensation of a
Trustee of an express trust. The Company will reimburse the Trustee upon request
for all reasonable out-of-pocket expenses, disbursements and advances incurred
or made by the Trustee, including the reasonable compensation and expenses of
the Trustee's agents and counsel.
(b) The Company will indemnify the Trustee for, and hold it harmless
against, any loss or liability or expense incurred by it without negligence or
bad faith on its part arising out of or in connection with the acceptance or
administration of the Indenture and its duties under the Indenture and the
Notes, including the costs and expenses of defending itself against any claim or
liability and of complying with any process served upon it or any of its
officers in connection with the exercise or performance of any of its powers or
duties under the Indenture and the Notes.
(c) To secure the Company's payment obligations in this Section, the
Trustee will have a lien prior to the Notes on all money or property held or
collected by the Trustee, in its capacity as Trustee, except money or property
held in trust to pay principal of, and interest or Liquidated Damages, if any,
on particular Notes.
SECTION 7.08. REPLACEMENT OF TRUSTEE. (a) (i) The Trustee may resign at
any time by written notice to the Company.
(ii) The Holders of a majority in principal amount of the outstanding
Notes may remove the Trustee by written notice to the Trustee.
(iii) If the Trustee is no longer eligible under Section 7.10 or in
the circumstances described in Trust Indenture Act Section 310(b), any
Holder that satisfies the requirements of Trust Indenture Act Section
310(b) may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
(iv) The Company may remove the Trustee if: (A) the Trustee is no
longer eligible under Section 7.10; (B) the Trustee is adjudged a bankrupt
or an insolvent; (C) a receiver or other public officer takes charge of the
Trustee or its property; or (D) the Trustee becomes incapable of acting.
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A resignation or removal of the Trustee and appointment of a successor Trustee
will become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
(b) If the Trustee has been removed by the Holders, Holders of a majority
in principal amount of the Notes may appoint a successor Trustee with the
consent of the Company. Otherwise, if the Trustee resigns or is removed, or if a
vacancy exists in the office of Trustee for any reason, the Company will
promptly appoint a successor Trustee. If the successor Trustee does not deliver
its written acceptance within 30 days after the retiring Trustee resigns or is
removed, the retiring Trustee, the Company or the Holders of a majority in
principal amount of the outstanding Notes may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(c) Upon delivery by the successor Trustee of a written acceptance of its
appointment to the retiring Trustee and to the Company, (i) the retiring Trustee
will transfer all property held by it as Trustee to the successor Trustee,
subject to the lien provided for in Section 7.07, (ii) the resignation or
removal of the retiring Trustee will become effective, and (iii) the successor
Trustee will have all the rights, powers and duties of the Trustee under the
Indenture. Upon request of any successor Trustee, the Company will execute any
and all instruments for fully and vesting in and confirming to the successor
Trustee all such rights, powers and trusts. The Company will give notice of any
resignation and any removal of the Trustee and each appointment of a successor
Trustee to all Holders, and include in the notice the name of the successor
Trustee and the address of its Corporate Trust Office.
(d) Notwithstanding replacement of the Trustee pursuant to this Section,
the Company's obligations under Section 7.07 will continue for the benefit of
the retiring Trustee.
(e) The Trustee agrees to give the notices provided for in, and otherwise
comply with, Trust Indenture Act Section 310(b).
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all of its
corporate trust business to, another corporation or national banking
association, the resulting, surviving or transferee corporation or national
banking association without any further act will be the successor Trustee with
the same effect as if the successor Trustee had been named as the Trustee in the
Indenture.
SECTION 7.10. ELIGIBILITY. The Indenture must always have a Trustee that
satisfies the requirements of Trust Indenture Act Section 310(a) and has a
combined capital and surplus of at least $25,000,000 as set forth in its most
recent published annual report of condition.
SECTION 7.11. MONEY HELD IN TRUST. The Trustee will not be liable for
interest on any money received by it except as it may agree with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law and except for money held in trust under
Article 8.
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ARTICLE 8
DEFEASANCE AND DISCHARGE
SECTION 8.01. DISCHARGE OF ISSUER'S OBLIGATIONS. (a) Subject to paragraph
(b), the Issuer's obligations under the Notes and the Indenture, and each
Guarantor's obligations under its Note Guaranty, will terminate if:
(1) all Notes previously authenticated and delivered (other than (a)
destroyed, lost or stolen Notes that have been replaced or (b) Notes that
are paid pursuant to Section 4.01 or (c) Notes for whose payment money or
U.S. Government Obligations have been held in trust and then repaid to the
Issuer pursuant to Section 8.05) have been delivered to the Trustee for
cancellation and the Issuer has paid all sums payable by it hereunder; or
(2) (A) the Notes mature within one year, or all of them are to be
called for redemption within one year under arrangements satisfactory to
the Trustee for giving the notice of redemption,
(B) the Issuer irrevocably deposits in trust with the Trustee, as
trust funds solely for the benefit of the Holders, money or U.S. Government
Obligations or a combination thereof sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certificate delivered to the Trustee, without consideration of any
reinvestment, to pay principal of and premium, interest and Liquidated
Damages, if any, on the Notes to maturity or redemption, as the case may
be, and to pay all other sums payable by it hereunder,
(C) no Default has occurred and is continuing on the date of the
deposit,
(D) the deposit will not result in a breach or violation of, or
constitute a default under, the Indenture or any other agreement or
instrument to which the Issuer is a party or by which it is bound, and
(E) the Issuer delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, in each case stating that all conditions precedent
provided for herein relating to the satisfaction and discharge of the
Indenture have been complied with.
(b) After satisfying the conditions in clause (a)(1), only the Issuer's
obligations under Section 7.07 will survive. After satisfying the conditions in
clause (a)(2), only the Issuer's obligations in Article 2 and Sections 4.01,
4.02, 7.07, 7.08, 8.05 and 8.06 will survive. In either case, the Trustee, upon
the request and at the cost and expense of the Issuer, will acknowledge in
writing the discharge of the Issuer's obligations under the Notes and the
Indenture other than the surviving obligations.
SECTION 8.02. LEGAL DEFEASANCE. On the 91st day following the deposit
referred to in clause (1), the Issuer will be deemed to have paid and will be
discharged from its obligations in respect of the Notes and the Indenture, other
than its obligations in Article 2 and Sections 4.01, 4.02, 7.07, 7.08, 8.05 and
8.06, and each Guarantor's obligations under its Note Guaranty will terminate,
PROVIDED the following conditions have been satisfied:
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(1) The Issuer has irrevocably deposited in trust with the Trustee,
as trust funds solely for the benefit of the Holders, money or U.S.
Government Obligations or a combination thereof sufficient, in the opinion
of a nationally recognized firm of independent public accountants expressed
in a written certificate thereof delivered to the Trustee, without
consideration of any reinvestment, to pay principal of and premium,
interest and Liquidated Damages, if any, on the Notes to maturity or
redemption, as the case may be, PROVIDED that any redemption before
maturity has been irrevocably provided for under arrangements satisfactory
to the Trustee.
(2) The deposit will not result in a breach or violation of, or
constitute a default under, the Indenture or any other agreement or
instrument to which the Issuer is a party or by which it is bound.
(3) The Issuer has delivered to the Trustee either (x) a ruling
received from the Internal Revenue Service to the effect that the Holders
will not recognize income, gain or loss for federal income tax purposes as
a result of the defeasance and will be subject to federal income tax on the
same amount and in the same manner and at the same times as would otherwise
have been the case or (y) an Opinion of Counsel, based on a change in law
after the date of the Indenture, to the same effect as the ruling described
in clause (x).
(4) The Issuer has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, in each case stating that all conditions
precedent provided for herein relating to the defeasance have been complied
with.
Prior to the end of the 91-day period, none of the Issuer's obligations
under the Indenture will be discharged. Thereafter, the Trustee, upon the
request and at the cost and expense of the Issuer, will acknowledge in writing
the discharge of the Issuer's obligations under the Notes and the Indenture
except for the surviving obligations specified above.
SECTION 8.03. COVENANT DEFEASANCE. After the 91st day following the
deposit referred to in clause (1), the Issuer's obligations set forth in
Sections 4.06 through 4.13, inclusive and clause (iii) of Section 4.14, and each
Guarantor's obligations under its Note Guaranty, will terminate, and clauses
(iii), (iv), (v), (vi) and (ix) of Section 5.01 will no longer constitute Events
of Default, PROVIDED the following conditions have been satisfied:
(1) The Issuer has complied with clauses (1), (2) and (4) of
Section 8.02; and
(2) the Issuer has delivered to the Trustee an Opinion of Counsel to
the effect that the Holders will not recognize income, gain or loss for
federal income tax purposes as a result of the defeasance and will be
subject to federal income tax on the same amount and in the same manner and
at the same times as would otherwise have been the case.
Except as specifically stated above, none of the Issuer's obligations under
the Indenture will be discharged.
SECTION 8.04. APPLICATION OF TRUST MONEY. Subject to Section 8.05, the
Trustee will hold in trust the money or U.S. Government Obligations deposited
with it pursuant to Section 8.01, 8.02 or 8.03, and apply the deposited money
and the proceeds from deposited U.S.
61
Government Obligations to the payment of principal of and premium, interest and
Liquidated Damages, if any, on the Notes in accordance with the Notes and the
Indenture. Such money and U.S. Government Obligations need not be segregated
from other funds except to the extent required by law.
SECTION 8.05. REPAYMENT TO ISSUER. Subject to Sections 7.07, 8.01, 8.02
and 8.03, the Trustee will promptly pay to the Issuer upon request any excess
money held by the Trustee at any time and thereupon be relieved from all
liability with respect to such money. The Trustee will pay to the Issuer upon
written request any money deposited with or paid to the Trustee for the payment
of the principal of, premium, interest or Liquidated Damages, if any, with
respect to the Notes and not applied but remaining unclaimed for two years after
the date upon which such After payment to the Company, Holders entitled to such
principal, premium, interest or Liquidated Damages, shall have become due and
payable, shall, upon the written request of the Issuer and unless otherwise
required by mandatory provisions of applicable escheat or abandoned or unclaimed
property law, be repaid to the Issuer by the Trustee. Thereafter, the Holder of
the Notes must look solely to the Issuer for any payment such Holder may be
entitled to collect, unless otherwise required by mandatory provisions of
applicable escheat or abandoned or unclaimed property laws, and all liability of
the Trustee with respect to such money shall thereupon cease.
SECTION 8.06. REINSTATEMENT. If and for so long as the Trustee is unable
to apply any money or U.S. Government Obligations held in trust pursuant to
Section 8.01, 8.02 or 8.03 by reason of any legal proceeding or by reason of any
order or judgment of any court or governmental authority enjoining, restraining
or otherwise prohibiting such application, the Issuer's obligations under the
Indenture and the Notes will be reinstated as though no such deposit in trust
had been made. If the Issuer makes any payment of principal of or interest or
Liquidated Damages, if any, on any Notes because of the reinstatement of its
obligations, it will be subrogated to the rights of the Holders of such Notes to
receive such payment from the money or U.S. Government Obligations held in
trust.
SECTION 8.07. INDEMNITY FOR U.S. GOVERNMENT OBLIGATIONS. The Issuer shall
pay and indemnify the Trustee against any tax, fee or other charge imposed on or
assessed against the U.S. Government Obligations deposited pursuant to
Sections 8.01, 8.02 or 8.03.
ARTICLE 9
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. AMENDMENTS WITHOUT CONSENT OF HOLDERS. The Company, the
Issuer, the Guarantors and the Trustee may amend or supplement the Indenture or
the Notes without notice to or the consent of any Holder
(a) to cure any ambiguity, defect or inconsistency in the Indenture
or the Notes that does not adversely affect the interests of the Holders;
(b) to comply with Section 4.14;
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(c) to comply with any requirements of the Commission in connection
with the qualification of the Indenture under the Trust Indenture Act;
(d) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee;
(e) to provide for uncertificated Notes in addition to or in place
of certificated Notes;
(f) to provide for any Guarantee of the Notes, to secure the Notes
or to confirm and evidence the release, termination or discharge of any
Guarantee of or Lien securing the Notes when such release, termination or
discharge is permitted by the Indenture;
(g) to provide for or confirm the issuance of Additional Notes; or
(h) to make any other change that does not adversely affect the
legal rights of any Holder.
SECTION 9.02. AMENDMENTS WITH CONSENT OF HOLDERS. (a) Except as otherwise
provided in Sections 5.01, 5.03 and 5.06 or paragraph (b), the Company, the
Issuer, the Guarantors and the Trustee may amend the Indenture and the Notes
with the written consent of the Holders of a majority in principal amount of the
outstanding Notes, and the Holders of a majority in principal amount of the
outstanding Notes by written notice to the Trustee may waive future compliance
by the Company, the Issuer and the Guarantors with any provision of the
Indenture or the Notes.
(b) Notwithstanding the provisions of paragraph (a), without the consent
of each Holder affected, an amendment or waiver may not
(i) reduce the amount of Notes whose Holders must consent to an
amendment, supplement or waiver,
(ii) reduce the rate of or change the time for payment of any
interest, including default interest, on any Note,
(iii) reduce principal of or change the fixed maturity of any Note or
alter the provisions (including related definitions) with respect to
redemptions described under Section 3.01 or with respect to mandatory
offers to repurchase Notes described under Section 4.10 and 4.12,
(iv) make any Note payable in money other than that stated in the
Note,
(v) modify the ranking or priority of the Notes or any Guarantee,
(vi) make any change in Section 5.03 or 5.06,
63
(vii) release any Guarantor from any of its obligations under its
Guarantee or the Indenture otherwise than in accordance with the Indenture,
or
(viii)waive a continuing Default or Event of Default in the payment
of principal of or interest or Liquidated Damages on the Notes.
(c) It is not necessary for Holders to approve the particular form of any
proposed amendment, supplement or waiver, but is sufficient if their consent
approves the substance thereof.
(d) An amendment, supplement or waiver under this Section will become
effective on receipt by the Trustee of written consents from the Holders of the
requisite percentage in principal amount of the outstanding Notes. After an
amendment, supplement or waiver under this Section becomes effective, the Issuer
will send to the Holders affected thereby a notice briefly describing the
amendment, supplement or waiver. The Issuer will send supplemental indentures to
Holders upon request. Any failure of the Issuer to send such notice, or any
defect therein, will not, however, in any way impair or affect the validity of
any such supplemental indenture or waiver.
SECTION 9.03. EFFECT OF CONSENT. (a) After an amendment, supplement or
waiver becomes effective, it will bind every Holder unless it is of the type
requiring the consent of each Holder affected. If the amendment, supplement or
waiver is of the type requiring the consent of each Holder affected, the
amendment, supplement or waiver will bind each Holder that has consented to it
and every subsequent Holder of a Note that evidences the same debt as the Note
of the consenting Holder.
(b) If an amendment, supplement or waiver changes the terms of a Note, the
Trustee may require the Holder to deliver it to the Trustee so that the Trustee
may place an appropriate notation of the changed terms on the Note and return it
to the Holder, or exchange it for a new Note that reflects the changed terms.
The Trustee may also place an appropriate notation on any Note thereafter
authenticated. However, the effectiveness of the amendment, supplement or waiver
is not affected by any failure to annotate or exchange Notes in this fashion.
SECTION 9.04. TRUSTEE'S RIGHTS AND OBLIGATIONS. The Trustee is entitled to
receive, and will be fully protected in relying upon, an Opinion of Counsel
stating that the execution of any amendment, supplement or waiver authorized
pursuant to this Article is authorized or permitted by the Indenture. If the
Trustee has received such an Opinion of Counsel, it shall sign the amendment,
supplement or waiver so long as the same does not adversely affect the rights of
the Trustee. The Trustee may, but is not obligated to, execute any amendment,
supplement or waiver that affects the Trustee's own rights, duties or immunities
under the Indenture.
SECTION 9.05. CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental
indenture executed pursuant to this Article shall conform to the requirements of
the Trust Indenture Act.
SECTION 9.06. PAYMENTS FOR CONSENTS. Neither the Issuer, the Company nor
any of its Subsidiaries or Affiliates may, directly or indirectly, pay or cause
to be paid any consideration, whether by way of interest, fee or otherwise, to
any Holder for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of the Indenture or the Notes
64
unless such consideration is offered to be paid or agreed to be paid to all
Holders of the Notes that consent, waive or agree to amend such term or
provision within the time period set forth in the solicitation documents
relating to the consent, waiver or amendment.
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. TRUST INDENTURE ACT OF 1939. The Indenture shall incorporate
and be governed by the provisions of the Trust Indenture Act that are required
to be part of and to govern indentures qualified under the Trust Indenture Act.
SECTION 10.02. HOLDER COMMUNICATIONS; HOLDER ACTIONS. (a) The rights of
Holders to communicate with other Holders with respect to the Indenture or the
Notes are as provided by the Trust Indenture Act, and the Company and the
Trustee shall comply with the requirements of Trust Indenture Act Section
312(a). Neither the Company, the Issuer nor the Trustee will be held accountable
by reason of any disclosure of information as to names and addresses of Holders
made pursuant to the Trust Indenture Act.
(b) (i) Any request, demand, authorization, direction, notice, consent
to amendment, supplement or waiver or other action provided by this Indenture to
be given or taken by a Holder (an "ACT") may be evidenced by an instrument
signed by the Holder delivered to the Trustee. The fact and date of the
execution of the instrument, or the authority of the person executing it, may be
proved in any manner that the Trustee deems sufficient.
(ii) The Trustee may make reasonable rules for action by or at a
meeting of Holders, which will be binding on all the Holders.
(c) Any act by the Holder of any Note binds that Holder and every
subsequent Holder of a Note that evidences the same debt as the Note of the
acting Holder, even if no notation thereof appears on the Note. Subject to
paragraph (d), a Holder may revoke an act as to its Notes, but only if the
Trustee receives the notice of revocation before the date the amendment or
waiver or other consequence of the act becomes effective.
(d) The Issuer may, but is not obligated to, fix a record date (which need
not be within the time limits otherwise prescribed by Trust Indenture Act
Section 316(c)) for the purpose of determining the Holders entitled to act with
respect to any amendment or waiver or in any other regard, except that during
the continuance of an Event of Default, only the Trustee may set a record date
as to notices of default, any declaration or acceleration or any other remedies
or other consequences of the Event of Default. If a record date is fixed, those
Persons that were Holders at such record date and only those Persons will be
entitled to act, or to revoke any previous act, whether or not those Persons
continue to be Holders after the record date. No act will be valid or effective
for more than 90 days after the record date.
SECTION 10.03. NOTICES. (a) Any notice or communication to the Issuer or
the Company will be deemed given if in writing (i) when delivered in person or
(ii) five days after mailing when mailed by first class mail, or (iii) when sent
by facsimile transmission, with
65
transmission confirmed. Notices or communications to a Guarantor will be deemed
given if given to the Issuer. Any notice to the Trustee will be effective only
upon receipt. In each case the notice or communication should be addressed as
follows:
IF TO THE ISSUER:
K. Hovnanian Enterprises, Inc.
10 Highway 35
P.O. Box 500
Red Bank, NJ 007701
732-747-7159
IF TO THE TRUSTEE:
First Union National Bank
21 South Street
Morristown, NJ 07960
ATTN: Corporate Trust Administration
(K. Hovnanian Enterprises, Inc. Senior Notes due 2012)
973-682-4531
The Issuer or the Trustee by notice to the other may designate additional or
different addresses for subsequent notices or communications.
(b) Except as otherwise expressly provided with respect to published
notices, any notice or communication to a Holder will be deemed given when
mailed to the Holder at its address as it appears on the Register by first class
mail or, as to any Global Note registered in the name of DTC or its nominee, as
agreed by the Issuer, the Trustee and DTC. Copies of any notice or communication
to a Holder, if given by the Issuer or the Company, will be mailed to the
Trustee at the same time. Defect in mailing a notice or communication to any
particular Holder will not affect its sufficiency with respect to other Holders.
(c) Where the Indenture provides for notice, the notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and the waiver will be the equivalent of the notice. Waivers of
notice by Holders must be filed with the Trustee, but such filing is not a
condition precedent to the validity of any action taken in reliance upon such
waivers.
SECTION 10.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any
request or application by the Issuer or the Company to the Trustee to take any
action under the Indenture, the Issuer or the Company will furnish to the
Trustee:
(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in the Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that all such conditions precedent
relating to the proposed action have been complied with.
66
SECTION 10.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in the Indenture must include:
(a) a statement that each person signing the certificate or opinion
has read the covenant or condition and the related definitions;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statement or opinion contained in the
certificate or opinion is based;
(c) a statement that, in the opinion of each such person, that
person has made such examination or investigation as is necessary to enable
the person to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether or not, in the opinion of each such
person, such condition or covenant has been complied with, PROVIDED that an
Opinion of Counsel may rely on an Officers' Certificate or certificates of
public officials with respect to matters of fact.
SECTION 10.06. PAYMENT DATE OTHER THAN A BUSINESS DAY. If any payment with
respect to a payment of any principal of, premium, if any, or interest or
Liquidated Damages, if any, on any Note (including any payment to be made on any
date fixed for redemption or purchase of any Note) is due on a day which is not
a Business Day, then the payment need not be made on such date, but may be made
on the next Business Day with the same force and effect as if made on such date,
and no interest will accrue for the intervening period.
SECTION 10.07. GOVERNING LAW. The Indenture, including any Note Guaranties,
and the Notes shall be governed by, and construed in accordance with, the laws
of the State of New York.
SECTION 10.08. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. The Indenture
may not be used to interpret another indenture or loan or debt agreement of the
Issuer, the Company or any Subsidiary of the Company, and no such indenture or
loan or debt agreement may be used to interpret the Indenture.
SECTION 10.09. SUCCESSORS. All agreements of the Issuer, the Company or any
Guarantor in the Indenture and the Notes will bind its successors. All
agreements of the Trustee in the Indenture will bind its successor.
SECTION 10.10. DUPLICATE ORIGINALS. The parties may sign any number of
copies of the Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
SECTION 10.11. SEPARABILITY. In case any provision in the Indenture or in
the Notes is invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions will not in any way be affected or
impaired thereby.
67
SECTION 10.12. TABLE OF CONTENTS AND HEADINGS. The Table of Contents,
Cross-Reference Table and headings of the Articles and Sections of the Indenture
have been inserted for convenience of reference only, are not to be considered a
part of the Indenture and in no way modify or restrict any of the terms and
provisions of the Indenture.
SECTION 10.13. NO LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES,
INCORPORATORS AND STOCKHOLDERS. No director, officer, employee, incorporator,
member or stockholder of the Issuer, the Company or any Guarantor, as such, will
have any liability for any obligations of the Issuer, the Company or such
Guarantor under the Notes, any Note Guaranty or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations. Each Holder of Notes
by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes.
68
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused the Indenture to be duly
executed as of the date first written above.
K. HOVNANIAN ENTERPRISES, INC.
as Issuer
/s/ J. Larry Sorsby
---------------------------------
By: J. Larry Sorsby
Title: Executive Vice President
Chief Financial Officer
HOVNANIAN ENTERPRISES, INC.
as the Company
/s/ J. Larry Sorsby
---------------------------------
By: J. Larry Sorsby
Title: Executive Vice President
Chief Financial Officer
GUARANTORS:
ALL SEASONS, INC.
ARROW PROPERTIES, INC.
BALLANTRAE DEVELOPMENT CORP.
BALLANTRAE HOME SALES, INC.
CONDOMINIUM COMMUNITY (BOWIE NEW TOWN), INC.
CONDOMINIUM COMMUNITY (LARGO TOWN), INC.
CONDOMINIUM COMMUNITY (PARK PLACE), INC.
CONDOMINIUM COMMUNITY (QUAIL RUN), INC.
CONDOMINIUM COMMUNITY (TRUMAN DRIVE), INC.
CONSULTANTS CORPORATION
DESIGNED CONTRACTS. INC.
EXC, INC.
FORTIS HOMES, INC.
HOUSING-HOME SALES, INC.
HOVNANIAN AT TARPON LAKES I, INC.
HOVNANIAN DEVELOPMENTS OF FLORIDA, INC.
69
HOVNANIAN PENNSYLVANIA, INC.
K. HOV INTERNATIONAL, INC.
K. HOVNANIAN ACQUISITIONS, INC.
K. HOVNANIAN AT ASHBURN VILLAGE, INC.
K. HOVNANIAN AT ATLANTIC CITY, INC.
K. HOVNANIAN AT BALLANTRAE ESTATES, INC.
K. HOVNANIAN AT BARRINGTON, INC.
K. HOVNANIAN AT BEDMINSTER II, INC.
K. HOVNANIAN AT BEDMINSTER, INC.
K. HOVNANIAN AT BELMONT, INC.
K. HOVNANIAN AT BERNARDS IV, INC.
K. HOVNANIAN AT BRANCHBURG III, INC.
K. HOVNANIAN AT BRIDGEPORT, INC.
K. HOVNANIAN AT BRIDGEWATER IV, INC.
K. HOVNANIAN AT BRIDGEWATER V, INC.
K. HOVNANIAN AT BRIDGEWATER VI, INC.
K. HOVNANIAN AT BULL RUN, INC.
K. HOVNANIAN AT BURLINGTON III, INC.
K. HOVNANIAN AT BURLINGTON, INC.
K. HOVNANIAN AT CALABRIA, INC.
K. HOVNANIAN AT CAMERON CHASE, INC.
K. HOVNANIAN AT CARMEL DEL MAR, INC.
K. HOVNANIAN AT CAROLINA COUNTRY CLUB I, INC.
K. HOVNANIAN AT CAROLINA COUNTRY CLUB II, INC.
K. HOVNANIAN AT CAROLINA COUNTRY CLUB III, INC.
K. HOVNANIAN AT CASTILE, INC.
K. HOVNANIAN AT CEDAR GROVE I, INC.
K. HOVNANIAN AT CEDAR GROVE II, INC.
K. HOVNANIAN AT CHAPARRAL, INC.
K. HOVNANIAN AT CLARKSTOWN, INC.
K. HOVNANIAN AT COCONUT CREEK, INC.
K. HOVNANIAN AT CRESTLINE, INC.
K. HOVNANIAN AT CRYSTAL SPRINGS, INC.
K. HOVNANIAN AT DOMINGUEZ, INC.
K. HOVNANIAN AT DOMINION RIDGE, INC.
K. HOVNANIAN AT EAST BRUNSWICK VI, INC.
K. HOVNANIAN AT EAST BRUNSWICK VIII, INC.
K. HOVNANIAN AT EAST WHITELAND I, INC.
K. HOVNANIAN AT EXETER HILLS, INC.
K. HOVNANIAN AT FAIR LAKES GLEN, INC.
K. HOVNANIAN AT FAIR LAKES, INC.
K. HOVNANIAN AT FREEHOLD TOWNSHIP, INC.
K. HOVNANIAN AT FREEHOLD TOWNSHIP I, INC.
70
K. HOVNANIAN AT FT. MYERS I, INC.
K. HOVNANIAN AT FT. MYERS II, INC.
K. HOVNANIAN AT GREAT NOTCH, INC.
K. HOVNANIAN AT HACKETTSTOWN, INC.
K. HOVNANIAN AT HALF MOON BAY, INC.
K. HOVNANIAN AT HAMPTON OAKS, INC.
K. HOVNANIAN AT HANOVER, INC.
K. HOVNANIAN AT HERSHEY'S MILL, INC.(a PA Corp)
K. HOVNANIAN AT HIGHLAND VINEYARDS, INC.
K. HOVNANIAN AT HOLLY CREST, INC.
K. HOVNANIAN AT HOPEWELL IV, INC.
K. HOVNANIAN AT HOPEWELL V, INC.
K. HOVNANIAN AT HOPEWELL VI, INC.
K. HOVNANIAN AT HOWELL TOWNSHIP, INC.
K. HOVNANIAN AT HUNTER ESTATES, INC.
K. HOVNANIAN AT JACKSONVILLE II, INC.
K. HOVNANIAN AT JEFFERSON, INC.
K. HOVNANIAN AT JERSEY CITY III, INC.
K. HOVNANIAN AT KINGS GRANT I, INC.
K. HOVNANIAN AT KLOCKNER FARMS, INC.
K. HOVNANIAN AT LA TERRAZA, INC.
K. HOVNANIAN AT LA TROVATA, INC.
K. HOVNANIAN AT LAKEWOOD, INC.
K. HOVNANIAN AT LAWRENCE V, INC.
K. HOVNANIAN AT LOWER SAUCON II, INC.
K. HOVNANIAN AT LOWER SAUCON, INC.
K. HOVNANIAN AT MAHWAH II, INC.
K. HOVNANIAN AT MAHWAH IV, INC. (Whalepond)
K. HOVNANIAN AT MAHWAH IX, INC.
K. HOVNANIAN AT MAHWAH V, INC.
K. HOVNANIAN AT MAHWAH VI, INC. (Norfolk)
K. HOVNANIAN AT MAHWAH VII, INC.
K. HOVNANIAN AT MAHWAH VIII, INC.
K. HOVNANIAN AT MANALAPAN, INC.
K. HOVNANIAN AT MARLBORO II, INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP IV, INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP VI, INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP VII, INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP III, INC.
K. HOVNANIAN AT MEDFORD I, INC.
K. HOVNANIAN AT MERRIMACK, INC.
K. HOVNANIAN AT METRO DC SOUTH, INC.
71
K. HOVNANIAN AT MONTCLAIR NJ, INC.
K. HOVNANIAN AT MONTCLAIR, INC.
K. HOVNANIAN AT MONTGOMERY I, INC.
K. HOVNANIAN AT NEWARK URBAN RENEWAL
CORPORATION I, INC.
K. HOVNANIAN AT NEWARK URBAN RENEWAL
CORPORATION IV, INC.
K. HOVNANIAN AT NEWARK URBAN RENEWAL
CORPORATION V, INC.
K. HOVNANIAN AT NORTH BERGEN, INC.
K. HOVNANIAN AT NORTH BRUNSWICK IV, INC.
K. HOVNANIAN AT NORTHERN WESTCHESTER, INC.
K. HOVNANIAN AT NORTHLAKE, INC.
K. HOVNANIAN AT OCEAN WALK, INC.
K. HOVNANIAN AT P.C. PROPERTIES, INC.
K. HOVNANIAN AT PARK RIDGE, INC.
K. HOVNANIAN AT PASCO I, INC.
K. HOVNANIAN AT PASCO II, INC.
K. HOVNANIAN AT PEEKSKILL, INC.
K. HOVNANIAN AT PEMBROKE SHORES, INC.
K. HOVNANIAN AT PERKIOMEN I, INC.
K. HOVNANIAN AT PERKIOMEN II, INC.
K. HOVNANIAN AT PLAINSBORO III, INC.
K. HOVNANIAN AT POLO TRACE, INC.
K. HOVNANIAN AT PORT IMPERIAL NORTH, INC.
K. HOVNANIAN AT PRINCETON, INC.
K. HOVNANIAN AT RANCHO CHRISTIANITOS, INC.
K. HOVNANIAN AT RARITAN I, INC.
K. HOVNANIAN AT READINGTON II, INC.
K. HOVNANIAN AT RESERVOIR RIDGE, INC.
K. HOVNANIAN AT RIVER OAKS, INC.
K. HOVNANIAN AT SAN SEVAINE, INC.
K. HOVNANIAN AT SARATOGA, INC.
K. HOVNANIAN AT SCOTCH PLAINS II, INC.
K. HOVNANIAN AT SCOTCH PLAINS, INC.
K. HOVNANIAN AT SENECA CROSSING, INC.
K. HOVNANIAN AT SMITHVILLE, INC.
K. HOVNANIAN AT SMITHVILLE III, INC.
K. HOVNANIAN AT SOMERS POINT, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK II, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK III, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK IV, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK V, INC.
K. HOVNANIAN AT SPRING RIDGE, INC.
K. HOVNANIAN AT STONE CANYON, INC.
72
K. HOVNANIAN AT STONEGATE, INC. (a CA
Corporation)
K. HOVNANIAN AT STONEGATE, INC. (a VA
Corporation)
K. HOVNANIAN AT STONY POINT, INC.
K. HOVNANIAN AT STUART ROAD, INC.
K. HOVNANIAN AT SULLY STATION, INC.
K. HOVNANIAN AT SUMMERWOOD, INC.
K. HOVNANIAN AT SYCAMORE, INC.
K. HOVNANIAN AT TANNERY HILL, INC.
K. HOVNANIAN AT THE BLUFF, INC.
K. HOVNANIAN AT THE CEDARS, INC.
K. HOVNANIAN AT THE GLEN, INC.
K. HOVNANIAN AT THE RESERVE AT MEDFORD, INC.
K. HOVNANIAN AT THORNBURY, INC.
K. HOVNANIAN AT TIERRASANTA, INC.
K. HOVNANIAN AT TUXEDO, INC.
K. HOVNANIAN AT UNION TOWNSHIP I, INC.
K. HOVNANIAN AT UPPER FREEHOLD TOWNSHIP I, INC.
K. HOVNANIAN AT UPPER MAKEFIELD I, INC.
K. HOVNANIAN AT UPPER MERION, INC.
K. HOVNANIAN AT VAIL RANCH, INC.
K. HOVNANIAN AT VALLEYBROOK II, INC.
K. HOVNANIAN AT VALLEYBROOK, INC.
K. HOVNANIAN AT WALL TOWNSHIP VI, INC.
K. HOVNANIAN AT WALL TOWNSHIP VIII, INC.
K. HOVNANIAN AT WASHINGTONVILLE, INC.
K. HOVNANIAN AT WAYNE III, INC.
K. HOVNANIAN AT WAYNE V, INC.
K. HOVNANIAN AT WAYNE VI, INC.
K. HOVNANIAN AT WAYNE VII, INC.
K. HOVNANIAN AT WILDROSE, INC.
K. HOVNANIAN AT WINSTON TRAILS, INC.
K. HOVNANIAN AT WOODMONT, INC.
K. HOVNANIAN AVIATION, INC.
K. HOVNANIAN COMPANIES NORTHEAST, INC.
K. HOVNANIAN COMPANIES OF CALIFORNIA, INC.
K. HOVNANIAN COMPANIES OF FLORIDA, INC.
K. HOVNANIAN COMPANIES OF MARYLAND, INC.
K. HOVNANIAN COMPANIES OF METRO WASHINGTON,
INC.
K. HOVNANIAN COMPANIES OF NEW YORK, INC.
K. HOVNANIAN COMPANIES OF NORTH CAROLINA, INC.
73
K. HOVNANIAN COMPANIES OF PENNSYLVANIA, INC.
K. HOVNANIAN COMPANIES OF SOUTHERN CALIFORNIA,
INC.
K. HOVNANIAN CONSTRUCTION MANAGEMENT, INC.
K. HOVNANIAN'S DESIGN GALLERY, INC.
K. HOVNANIAN DEVELOPMENTS OF CALIFORNIA, INC.
K. HOVNANIAN DEVELOPMENTS OF MARYLAND, INC.
K. HOVNANIAN DEVELOPMENTS OF METRO WASHINGTON,
INC.
K. HOVNANIAN DEVELOPMENTS OF NEW JERSEY, INC.
K. HOVNANIAN DEVELOPMENTS OF NEW YORK, INC.
K. HOVNANIAN DEVELOPMENTS OF SOUTH CAROLINA,
INC.
K. HOVNANIAN DEVELOPMENTS OF TEXAS, INC.
K. HOVNANIAN EQUITIES, INC.
K. HOVNANIAN FLORIDA DIVISION, INC.
K. HOVNANIAN FORECAST ACQUISITION, INC.
K. HOVNANIAN FORECAST HOMES, INC.
K. HOVNANIAN INVESTMENT PROPERTIES OF NEW
JERSEY, INC.
K. HOVNANIAN MARINE, INC.
K. HOVNANIAN PORT IMPERIAL URBAN RENEWAL, INC.
K. HOVNANIAN PROPERTIES OF EAST BRUNSWICK II,
INC.
K. HOVNANIAN PROPERTIES OF NB THEATRE, INC.
K. HOVNANIAN PROPERTIES OF NEWARK URBAN RENEWAL
CORPORATION, INC.
K. HOVNANIAN PROPERTIES OF NORTH BRUNSWICK II,
INC.
K. HOVNANIAN PROPERTIES OF NORTH BRUNSWICK V,
INC.
K. HOVNANIAN PROPERTIES OF PISCATAWAY, INC.
K. HOVNANIAN PROPERTIES OF RED BANK, INC.
K. HOVNANIAN PROPERTIES OF WALL, INC.
K. HOVNANIAN REAL ESTATE INVESTMENT, INC.
K. HOVNANIAN REAL ESTATE OF FLORIDA, INC.
K. HOVNANIAN SOUTHEAST FLORIDA, INC.
K. HOVNANIAN SOUTHEAST REGION, INC.
74
K. HOVNANIAN'S FOUR SEASONS OF THE PALM
BEACHES, INC.
KHC ACQUISITION, INC.
KINGS GRANT EVESHAM CORP.
LANDARAMA, INC.
MATZEL & MUMFORD OF DELAWARE, INC.
M & M AT LONG BRANCH, INC.
NEW K. HOVNANIAN DEVELOPMENTS OF FLORIDA, INC.
PARK VILLAGE REALTY, INC.
PARTHENON GROUP, INC.
PINE BROOK CO., INC.
QUE CORPORATION
REFLECTIONS OF YOU INTERIORS, INC.
STONEBROOK HOMES, INC.
THE MATZEL & MUMFORD ORGANIZATION, INC.
THE NEW FORTIS CORPORATION
THE SOUTHAMPTON CORPORATION
TROPICAL SERVICE BUILDERS, INC.
WASHINGTON HOMES OF DELAWARE, INC.
WASHINGTON HOMES OF WEST VIRGINIA, INC.
WASHINGTON HOMES, INC.
WASHINGTON HOMES, INC. OF VIRGINIA
WESTMINSTER HOMES (CHARLOTTE), INC.
WESTMINSTER HOMES OF TENNESSEE, INC.
WESTMINSTER HOMES, INC.
WH LAND I, INC
WH LAND II, INC.
WH PROPERTIES, INC.
ARBOR WEST, L.L.C.
K. HOVNANIAN AT ST. MARGARETS, L.L.C.
K. HOVNANIAN AT ARBOR HEIGHTS, L.L.C.
K. HOVNANIAN AT ASHBURN VILLAGE, L.L.C.
K. HOVNANIAN AT BARNEGAT I, L.L.C.
K. HOVNANIAN AT BERKELEY, L.L.C.
K. HOVNANIAN AT BERNARDS V, L.L.C.
K. HOVNANIAN AT BLOOMS CROSSING, L.L.C.
K. HOVNANIAN AT BLUE HERON PINES, L.L.C.
K. HOVNANIAN AT BRENBROOKE, L.L.C.
K. HOVNANIAN AT CAMDEN I, L.L.C.
K. HOVNANIAN AT CARMEL VILLAGE, L.L.C.
K. HOVNANIAN AT CEDAR GROVE III, L.L.C.
K. HOVNANIAN AT CHESTER I, L.L.C.
K. HOVNANIAN AT CLIFTON, L.L.C.
K. HOVNANIAN AT COLUMBIA TOWN CENTER, L.L.C.
75
K. HOVNANIAN AT CRANBURY, L.L.C.
K. HOVNANIAN AT CURRIES WOODS, L.L.C.
K. HOVNANIAN AT ENCINITAS RANCH, L.L.C.
K. HOVNANIAN AT FORECAST, L.L.C.
K. HOVNANIAN AT GUTTENBERG, L.L.C.
K. HOVNANIAN AT HAMBURG, L.L.C.
K. HOVNANIAN AT HAMBURG CONTRACTORS, L.L.C.
K. HOVNANIAN AT JACKSON, L.L.C.
K. HOVNANIAN AT JERSEY CITY IV, L.L.C.
K. HOVNANIAN AT KENT ISLAND, L.L.C.
K. HOVNANIAN AT KINCAID, L.L.C.
K. HOVNANIAN AT KING FARM, L.L.C.
K. HOVNANIAN AT LAFAYETTE ESTATES, L.L.C.
K. HOVNANIAN AT LAKE RIDGE CROSSING, L.L.C.
K. HOVNANIAN AT LAKE TERRAPIN, L.L.C.
K. HOVNANIAN AT LAWRENCE V, L.L.C.
K. HOVNANIAN AT LINWOOD, L.L.C.
K. HOVNANIAN AT LITTLE EGG HARBOR, L.L.C.
K. HOVNANIAN AT LITTLE EGG HARBOR CONTRACTORS,
L.L.C.
K. HOVNANIAN AT LOWER MORELAND I, L.L.C.
K. HOVNANIAN AT LOWER MORELAND II, L.L.C.
K. HOVNANIAN AT LOWER SAUCON II, L.L.C.
K. HOVNANIAN AT MANSFIELD I, LLC
K. HOVNANIAN AT MANSFIELD II, LLC
K. HOVNANIAN AT MANSFIELD III, L.L.C.
K. HOVNANIAN AT MARLBORO TOWNSHIP VIII, L.L.C.
K. HOVNANIAN AT MARLBORO VI, L.L.C.
K. HOVNANIAN AT MARLBORO VII, L.L.C.
K. HOVNANIAN AT MENIFEE, L.L.C.
K. HOVNANIAN AT MIDDLETOWN, L.L.C.
K. HOVNANIAN AT MT. OLIVE TOWNSHIP, L.L.C.
K. HOVNANIAN AT NORTH BRUNSWICK VI, L.L.C.
K. HOVNANIAN AT NORTH HALEDON, L.L.C.
K. HOVNANIAN AT NORTHAMPTON, L.L.C.
K. HOVNANIAN AT NORTHFIELD, L.L.C.
K. HOVNANIAN AT PACIFIC BLUFFS, L.L.C.
K. HOVNANIAN AT PARAMUS, L.L.C.
K. HOVNANIAN AT PARK LANE, L.L.C.
K. HOVNANIAN AT PRINCE WILLIAM, L.L.C.
K. HOVNANIAN AT RANCHO SANTA MARGARITA, L.L.C.
K. HOVNANIAN AT RIVERBEND, L.L.C.
K. HOVNANIAN AT RODERUCK. L.L.C.
76
K. HOVNANIAN AT ROWLAND HEIGHTS, L.L.C.
K. HOVNANIAN AT SAYREVILLE, L.L.C.
K. HOVNANIAN AT SOUTH AMBOY, L.L.C.
K. HOVNANIAN AT SOUTH BANK, L.L.C.
K. HOVNANIAN AT SOUTH BRUNSWICK, L.L.C.
K. HOVNANIAN AT SPRING HILL ROAD, L.L.C.
K. HOVNANIAN AT ST. MARGARETS, L.L.C.
K. HOVNANIAN AT SUNSETS, L.L.C.
K. HOVNANIAN AT THE GABLES, L.L.C.
K. HOVNANIAN AT UPPER FREEHOLD TOWNSHIP II,
L.L.C.
K. HOVNANIAN AT UPPER FREEHOLD TOWNSHIP III,
L.L.C.
K. HOVNANIAN AT WANAQUE, L.L.C.
K. HOVNANIAN AT WASHINGTON, L.L.C.
K. HOVNANIAN AT WAYNE VIII, L.L.C.
K. HOVNANIAN AT WAYNE IX, L.L.C.
K. HOVNANIAN AT WEST MILFORD, L.L.C.
K. HOVNANIAN AT WEST WINDSOR, L.L.C.
K. HOVNANIAN AT WILLOW BROOK, L.L.C.
K. HOVNANIAN AT WINCHESTER, L.L.C.
K. HOVNANIAN AT WOODHILL ESTATES, L.L.C.
K. HOVNANIAN AT WOOLWICH, L.L.C.
K. HOVNANIAN CENTRAL ACQUISITIONS, L.L.C.
K. HOVNANIAN COMPANIES OF METRO D.C. NORTH,
L.L.C.
K. HOVNANIAN EASTERN PENNSYLVANIA, L.L.C.
K. HOVNANIAN FORECAST, L.L.C.
K. HOVNANIAN NORTH CENTRAL ACQUISITIONS, L.L.C.
K. HOVNANIAN NORTH JERSEY ACQUISITIONS, L.L.C.
K. HOVNANIAN SHORE ACQUISITIONS, L.L.C.
K. HOVNANIAN SOUTH JERSEY ACQUISITION, L.L.C.
K. HOVNANIAN SOUTHERN NEW JERSEY, L.L.C.
K. HOVNANIAN'S FOUR SEASONS, L.L.C.
K. HOVNANIAN'S PRIVATE HOME PORTFOLIO, L.L.C.
KINGS COURT AT MONTGOMERY, L.L.C.
M&M AT APPLE RIDGE, L.L.C.
M&M AT BROOKHILL, L.L.C.
M&M AT HERITAGE WOODS, L.L.C.
M&M AT THE HIGHLANDS, L.L.C.
M&M AT EAST MILL, L.L.C.
M&M AT MORRISTOWN, L.L.C.
77
M&M AT ROOSEVELT, L.L.C.
M&M AT SHERIDAN, L.L.C.
M&M AT SPARTA, L.L.C.
M&M AT SPINNAKER POINTE, L.L.C.
M&M AT SPRUCE HOLLOW, L.L.C.
M&M AT SPRUCE MEADOWS, L.L.C.
M&M AT SPRUCE RUN, L.L.C.
MATZEL & MUMFORD AT CRANBURY KNOLL, L.L.C.
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
MATZEL & MUMFORD AT HERITAGE LANDING, L.L.C.
MATZEL & MUMFORD AT MONTGOMERY, L.L.C.
MATZEL & MUMFORD AT PHILLIPSBURG, L.L.C.
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
MATZEL & MUMFORD AT WOODLAND CREST, L.L.C.
SECTION 14 OF THE HILLS, L.L.C.
THE LANDINGS AT SPINNAKER POINTE, L.L.C.
WESTMINSTER HOMES OF ALABAMA, L.L.C.
WESTMINSTER HOMES OF MISSISSIPPI, L.L.C.
WESTMINSTER HOMES OF SOUTH CAROLINA, L.L.C.
GOODMAN FAMILY BUILDERS, L.P.
M & M INVESTMENTS, L.P.
WASHABAMA, L.P.
/s/ J. Larry Sorsby
----------------------------------
By: J. Larry Sorsby
Title: Executive Vice President
Chief Financial Officer
FIRST UNION NATIONAL BANK,
as Trustee
By: /s/ S. Roche
-------------------
Name: Stephanie Roche
Title: Vice President
78
EXHIBIT A
[FACE OF NOTE]
K. HOVNANIAN ENTERPRISES, INC.
8.000% Senior Note Due 2012
No. [CUSIP] [ISIN] _______________
No. $_______________
K. Hovnanian Enterprises, Inc., a New Jersey corporation (the "ISSUER",
which term includes any successor under the Indenture hereinafter referred to),
for value received, promises to pay to ____________________, or its registered
assigns, the principal sum of ____________ DOLLARS ($______) on April 1, 2012
Initial Interest Rate: 8.000% per annum.
Interest Payment Dates: April 1 and October 1, commencing October 1, 2002.
Regular Record Dates: March 15 and September 15.
Reference is hereby make to the further provisions of this Note set forth
on the reverse hereof, which will for all purposes have the same effect as if
set forth at this place.
IN WITNESS WHEREOF, the Issuer has caused this Note to be signed manually
or by facsimile by its duly authorized officers.
Date: K. HOVNANIAN ENTERPRISES, INC.
By:
---------------------------
Name:
Title:
A-1
(Form of Trustee's Certificate of Authentication)
This is one of the 8.000% Senior Notes Due 2012 described in the Indenture
referred to in this Note.
FIRST UNION NATIONAL BANK,
as Trustee
By:
------------------------
Authorized Signatory
A-2
[REVERSE SIDE OF NOTE]
K. HOVNANIAN ENTERPRISES, INC.
8.000% Senior Note Due 2012
1. PRINCIPAL AND INTEREST.
The Issuer promises to pay the principal of this Note on April 1, 2012.
The Issuer promises to pay interest on the principal amount of this Note on
each interest payment date, as set forth on the face of this Note, at the rate
of 8.000% per annum.
Interest will be payable semiannually (to the holders of record of the
Notes at the close of business on the March 15 or September 15 immediately
preceding the interest payment date) on each interest payment date, commencing
October 1, 2002.
The Holder of this Note is entitled to the benefits of the Registration
Rights Agreement, dated March 26, 2002, between the Issuer, the Guarantors party
thereto and the Initial Purchasers named therein (the "REGISTRATION RIGHTS
AGREEMENT"). In the event that neither the Exchange Offer Registration Statement
(as defined in the Registration Rights Agreement) nor the Shelf Registration
Statement (as defined in the Registration Rights Agreement) is declared
effective on or prior to the date that is 150 days after the Issue Date (the
"EFFECTIVENESS DEADLINE"), the Holder shall be entitled to Liquidated Damages as
specified in the Registration Rights Agreement until the Exchange Offer
Registration Statement or the Shelf Registration Statement is declared effective
by the Commission. If the Exchange Offer Registration Statement is declared
effective but the Exchange Offer is not consummated on or prior to the earlier
to occur of 40 Business Days after the date of effectiveness of the Exchange
Offer Registration Statement, the Issuer shall be required to pay Liquidated
Damages as specified in the Registration Rights Agreement.
Interest on this Note will accrue from the most recent date to which
interest has been paid on this Note or the Note surrendered in exchange for this
Note (or, if there is no existing default in the payment of interest and if this
Note is authenticated between a regular record date and the next interest
payment date, from such interest payment date) or, if no interest has been paid,
from the Issue Date. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
The Issuer will pay interest on overdue principal, premium, if any, and, to
the extent lawful, interest and Liquidated Damages, if any, at a rate per annum
that is 1% in excess of 8.000%. Interest and Liquidated Damages not paid when
due and any interest on principal, premium or interest not paid when due will be
paid to the Persons that are Holders on a special record date, which will be the
15th day preceding the date fixed by the Issuer for the payment of such
interest, whether or not such day is a Business Day. At least 15 days before a
special record date, the Issuer will send to each Holder and to the Trustee a
notice that sets forth the special record date, the payment date and the amount
of interest to be paid.
A-3
2. INDENTURES; NOTE GUARANTY.
This is one of the Notes issued under an Indenture dated as of March 26,
2002 (as amended from time to time, the "INDENTURE"), among the Issuer, the
Guarantors party thereto and First Union National Bank, as Trustee. Capitalized
terms used herein are used as defined in the Indenture unless otherwise
indicated. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act. The
Notes are subject to all such terms, and Holders are referred to the Indenture
and the Trust Indenture Act for a statement of all such terms. To the extent
permitted by applicable law, in the event of any inconsistency between the terms
of this Note and the terms of the Indenture, the terms of the Indenture will
control.
The Notes are general unsecured obligations of the Issuer. The Indenture
limits the original aggregate principal amount of the Notes to $100,000,000, but
Additional Notes in an aggregate principal amount of up to $100,000,000 may be
issued pursuant to the Indenture, and the originally issued Notes and all such
Additional Notes vote together for all purposes as a single class. This Note is
guaranteed as set forth in the Indenture.
3. REDEMPTION AND REPURCHASE; DISCHARGE PRIOR TO REDEMPTION OR MATURITY.
This Note is subject to optional redemption, and may be the subject of an
Offer to Purchase, as further described in the Indenture. There is no sinking
fund or mandatory redemption applicable to this Note.
If the Issuer deposits with the Trustee money or U.S. Government
Obligations sufficient to pay the then outstanding principal of, premium and
Liquidated Damages, if any, and accrued interest on the Notes to redemption or
maturity, the Company may in certain circumstances be discharged from the
Indenture and the Notes or may be discharged from certain of its obligations
under certain provisions of the Indenture.
4. REGISTERED FORM; DENOMINATIONS; TRANSFER; EXCHANGE.
The Notes are in registered form without coupons in denominations of $1,000
principal amount and any multiple of $1,000 in excess thereof. A Holder may
register the transfer or exchange of Notes in accordance with the Indenture. The
Trustee may require a Holder to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. Pursuant to the Indenture, there are certain periods during which the
Trustee will not be required to issue, register the transfer of or exchange any
Note or certain portions of a Note.
5. DEFAULTS AND REMEDIES.
If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the Notes may declare all the Notes to be due and payable. If a bankruptcy or
insolvency default with respect to the Issuer occurs and is continuing, the
Notes automatically become due and payable. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. The Trustee may
require indemnity
A-4
satisfactory to it before it enforces the Indenture or the Notes. Subject to
certain limitations, Holders of a majority in principal amount of the Notes then
outstanding may direct the Trustee in its exercise of remedies.
6. AMENDMENT AND WAIVER.
Subject to certain exceptions, the Indenture and the Notes may be amended,
or default may be waived, with the consent of the Holders of a majority in
principal amount of the outstanding Notes. Without notice to or the consent of
any Holder, the Issuer and the Trustee may amend or supplement the Indenture or
the Notes to, among other things, cure any ambiguity, defect or inconsistency.
7. AUTHENTICATION.
This Note is not valid until the Trustee (or Authenticating Agent) signs
the certificate of authentication on the other side of this Note.
8. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder or an assignee,
such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties),
JT TEN (= joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian) and U/G/M/A/ (= Uniform Gifts to Minors Act).
The Company will furnish a copy of the Indenture to any Holder upon written
request and without charge.
A-5
[FORM OF NOTATION ON NOTE RELATING TO GUARANTEE]
GUARANTEE
The undersigned (the "GUARANTORS") have unconditionally guaranteed, jointly
and severally (such guarantee by each Guarantor being referred to herein as the
"GUARANTEE") (i) the due and punctual payment of the principal of and interest
on the Notes, whether at maturity, by acceleration or otherwise, the due and
punctual payment of interest on the overdue principal and interest, if any, on
the Notes, to the extent lawful, and the due and punctual performance of all
other obligations of the Issuer to the Holders or the Trustee all in accordance
with the terms set forth in Article 6 of the Indenture and (ii) in case of any
extension of time of payment or renewal of any Notes or any of such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise.
No past, present or future stockholder, officer, director, employee or
incorporator, as such, of any of the Guarantors shall have any liability under
the Guarantee by reason of such person's status as stockholder, officer,
director, employee or incorporator. Each Holder of a Note by accepting a Note
waives and releases all such liability. This waiver and release are part of the
consideration for the issuance of the Guarantee.
Each Holder of a Note by accepting a Note agrees that any Guarantor named
below shall have no further liability with respect to its Guarantee if such
Guarantor otherwise ceases to be liable in respect of its Guarantee in
accordance with the terms of the Indenture.
The Guarantee shall not be valid or obligatory for any purpose until the
certificate of authentication on the Notes upon which the Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
[Guarantors]
By:
-----------------------------
Title:
A-6
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s)
and transfer(s) unto
Insert Taxpayer Identification No.
________________________________________________________________________________
________________________________________________________________________________
Please print or typewrite name and address including zip code of assignee
________________________________________________________________________________
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
________________________________________________________________________________
attorney to transfer said Note on the books of the Issuer with full power of
substitution in the premises.
A-7
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL
CERTIFICATES BEARING A RESTRICTED LEGEND]
In connection with any transfer of this Note occurring prior to
______________, the undersigned confirms that such transfer is made without
utilizing any general solicitation or general advertising and further as
follows:
Check One
/ / (1) This Note is being transferred to a "qualified institutional buyer"
in compliance with Rule 144A under the Securities Act of 1933, as amended and
certification in the form of Exhibit F to the Indenture is being furnished
herewith.
/ / (2) This Note is being transferred to a Non-U.S. Person in compliance
with the exemption from registration under the Securities Act of 1933, as
amended, provided by Regulation S thereunder, and certification in the form of
Exhibit E to the Indenture is being furnished herewith.
OR
/ / (3) This Note is being transferred other than in accordance with (1) or
(2) above and documents are being furnished which comply with the conditions of
transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee is not obligated to
register this Note in the name of any Person other than the Holder hereof unless
and until the conditions to any such transfer of registration set forth herein
and in the Indenture have been satisfied.
Date:
----------------------------
-----------------------------------------
Seller
By
--------------------------------------
NOTICE: The signature to this assignment must
correspond with the name as written upon the
face of the within-mentioned instrument in
every particular, without alteration or any
change whatsoever.
A-8
Signature Guarantee:(1)
-------------------------------------
By
-----------------------------------
To be executed by an executive officer
- ----------
(1) Signatures must be guaranteed by an "ELIGIBLE GUARANTOR INSTITUTION"
meeting the requirements of the Trustee, which requirements include
membership or participation in the Note Transfer Agent Medallion
Program ("STAMP") or such other "SIGNATURE GUARANTEE PROGRAM" as may be
determined by the Trustee in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended.
A-9
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have all of this Note purchased by the Company pursuant to
Section 4.10 or Section 4.12 of the Indenture, check the box: / /
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.10 or Section 4.12 of the Indenture, state the amount (in
original principal amount) below:
$
---------------------------------------
Date:
------------------------
Your Signature:
-------------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:(1)
-------------------------------
- ----------
(1) Signatures must be guaranteed by an "ELIGIBLE GUARANTOR INSTITUTION"
meeting the requirements of the Trustee, which requirements include
membership or participation in the Note Transfer Agent Medallion
Program ("STAMP") or such other "SIGNATURE GUARANTEE PROGRAM" as may be
determined by the Trustee in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended.
A-10
SCHEDULE OF EXCHANGES OF NOTES(1)
The following exchanges of a part of this Global Note for Physical Notes or a
part of another Global Note have been made:
PRINCIPAL AMOUNT OF
THIS GLOBAL NOTE
AMOUNT OF DECREASE AMOUNT OF INCREASE FOLLOWING SUCH SIGNATURE OF
IN PRINCIPAL AMOUNT IN PRINCIPAL AMOUNT DECREASE (OR AUTHORIZED OFFICER
DATE OF EXCHANGE OF THIS GLOBAL NOTE OF THIS GLOBAL NOTE INCREASE) OF TRUSTEE
--------------------- ---------------------- --------------------- ---------------------- --------------------
- ----------
(1) For Global Notes
A-11
EXHIBIT B
SUPPLEMENTAL INDENTURE
dated as of __________, ____
among
K. HOVNANIAN ENTERPRISES, INC.
HOVNANIAN ENTERPRISES, INC.
The Guarantors Party Hereto
and
FIRST UNION NATIONAL BANK
as Trustee
----------
8.000% Senior Notes due 2012
THIS SUPPLEMENTAL INDENTURE (this "SUPPLEMENTAL INDENTURE"), entered into
as of __________, ____, among K. Hovnanian Enterprises, Inc., a New Jersey
corporation (the "ISSUER"), Hovnanian Enterprises, Inc. (the "COMPANY"), [list
each new guarantor and its jurisdiction of incorporation] (each an
"UNDERSIGNED") and First Union National Bank, as trustee (the "TRUSTEE").
RECITALS
WHEREAS, the Issuer, Company, the Guarantors party thereto and the Trustee
entered into the Indenture, dated as of March 26, 2002 (the "INDENTURE"),
relating to the Company's 8.000% Senior Notes due 2012 (the "NOTES");
WHEREAS, as a condition to the Trustee entering into the Indenture and the
purchase of the Notes by the Holders, the Company agreed pursuant to the
Indenture to cause any newly acquired or created Restricted Subsidiaries to
provide Guaranties.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and intending to be legally bound, the parties the Indenture
hereby agree as follows:SECTION 1. Capitalized terms used herein and not
otherwise defined herein are used as defined in the Indenture.
SECTION 2. Each Undersigned, by its execution of this Supplemental
Indenture, agrees to be a Guarantor under the Indenture and to be bound by the
terms of the Indenture applicable to Guarantors, including, but not limited to,
Article 6 thereof.
SECTION 3. This Supplemental Indenture shall be governed by and construed
in accordance with the laws of the State of New York.
SECTION 4. This Supplemental Indenture may be signed in various
counterparts which together will constitute one and the same instrument.
SECTION 5. This Supplemental Indenture is an amendment supplemental to the
Indenture and the Indenture and this Supplemental Indenture will henceforth be
read together.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
K. HOVNANIAN ENTERPRISES, INC.,
as Issuer
By:
-----------------------------------
Name:
Title:
B-1
HOVNANIAN ENTERPRISES, INC.,
By:
-----------------------------------
Name:
Title:
[GUARANTOR]
By:
-----------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK,
as Trustee
By:
-----------------------------------
Name:
Title:
B-2
EXHIBIT C
RESTRICTED LEGEND
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE
HOLDER
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT HAS ACQUIRED
THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(a) (1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "IAI"),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE OR ANY
BENEFICIAL INTEREST HEREIN, EXCEPT (A) TO THE COMPANY OR ANY OF ITS
SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING
THE REQUIREMENTS OF RULE 903 OR 904 OF REGULATION S OF THE SECURITIES ACT, (D)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT,
(E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND,
IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN
$250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH TRANSFER IS
IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER) OR (G) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN
INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTIONS" AND "UNITED STATES" HAVE
THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT.
THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER
ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING.
C-1
EXHIBIT D
DTC LEGEND
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ANY
OF ITS SUBSIDIARIES OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS A BENEFICIAL INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE ARE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN
PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE ARE LIMITED TO TRANSFERS
MADE IN ACCORDANCE WITH THE TRANSFER PROVISIONS OF THE INDENTURE.
D-1
EXHIBIT E
Regulation S Certificate
_________, ____
First Union National Bank
21 South Street
Morristown, NJ 07960
Attention: Corporate Trust Administration
Re: K. Hovnanian Enterprises, Inc.
8.000% Senior Notes due 2012 (the "NOTES")
Issued under the Indenture (the "INDENTURE")
DATED AS OF MARCH 26, 2002 RELATING TO THE NOTES
Dear Sirs:
Terms are used in this Certificate as used in Regulation S ("Regulation S")
under the Securities Act of 1933, as amended (the "Securities Act"), except as
otherwise stated herein.
[CHECK A OR B AS APPLICABLE.]
/ / A. This Certificate relates to our proposed transfer of $________
principal amount of Notes issued under the Indenture. We hereby
certify as follows:
1. The offer and sale of the Notes was not and will not be made
to a person in the United States (unless such person is
excluded from the definition of "U.S. person" pursuant to
Rule 902(k)(2)(vi) or the account held by it for which it is
acting is excluded from the definition of "U.S. person"
pursuant to Rule 902(k)(2)(i) under the circumstances
described in Rule 902(g)(3)) and such offer and sale was not
and will not be specifically targeted at an identifiable
group of U.S. citizens abroad.
2. Unless the circumstances described in the parenthetical in
paragraph 1 above are applicable, either (a) at the time the
buy order was originated, the buyer was outside the United
States or we and any person acting on our behalf reasonably
believed that the buyer was outside the United States or (b)
the transaction was executed in, on or through the facilities
of a designated offshore securities market, and neither we
nor any person acting on our behalf knows that the
transaction was pre-arranged with a buyer in the United
States.
3. Neither we, any of our affiliates, nor any person acting on
our or their behalf has made any directed selling efforts in
the United States with respect to the Notes.
E-1
4. The proposed transfer of Notes is not part of a plan or
scheme to evade the registration requirements of the
Securities Act.
5. If we are a dealer or a person receiving a selling
concession, fee or other remuneration in respect of the
Notes, and the proposed transfer takes place during the
Restricted Period (as defined in the Indenture), or we are an
officer or director of the Company or an Initial Purchaser
(as defined in the Indenture), we certify that the proposed
transfer is being made in accordance with the provisions of
Rule 904(b) of Regulation S.
/ / B This Certificate relates to our proposed exchange of $______
principal amount of Notes issued under the Indenture for an equal
principal amount of Notes to be held by us. We hereby certify as
follows:
1. At the time the offer and sale of the Notes was made to us,
either (i) we were not in the United States or (ii) we were
excluded from the definition of "U.S. person" pursuant to
Rule 902(k)(2)(vi) or the account held by us for which we
were acting was excluded from the definition of "U.S. person"
pursuant to Rule 902(k)(2)(i) under the circumstances
described in Rule 902(g)(3); and we were not a member of an
identifiable group of U.S. citizens abroad.
2. Unless the circumstances described in paragraph 1(ii) above
are applicable, either (a) at the time our buy order was
originated, we were outside the United States or (b) the
transaction was executed in, on or through the facilities of
a designated offshore securities market and we did not
pre-arrange the transaction in the United States.
3. The proposed exchange of Notes is not part of a plan or
scheme to evade the registration requirements of the
Securities Act.
You and the Company are entitled to rely upon this Certificate and are
irrevocably authorized to produce this Certificate or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[NAME OF SELLER (FOR TRANSFERS) OR OWNER
(FOR EXCHANGES)]
By:
----------------------------------
Name:
Title:
Address:
Date:_______________________
E-2
EXHIBIT F
Rule 144A Certificate
_________, ____
First Union National Bank
21 South Street
Morristown, NJ 07960
Attention: Corporate Trust Administration
Re: K. Hovnanian Enterprises, Inc.
8.000% Senior Notes due 2012 (the "NOTES") Issued under
the Indenture (the "INDENTURE") DATED AS OF MARCH 26,
2002 RELATING TO THE NOTES
Ladies and Gentlemen:
TO BE COMPLETED BY PURCHASER IF (1) ABOVE IS CHECKED.
This Certificate relates to:
[CHECK A OR B AS APPLICABLE.]
/ / A. Our proposed purchase of $____ principal amount of Notes issued
under the Indenture.
/ / B. Our proposed exchange of $____ principal amount of Notes issued
under the Indenture for an equal principal amount of Notes to be
held by us.
We and, if applicable, each account for which we are acting, are a
qualified institutional buyer within the meaning of Rule 144A ("Rule 144A")
under the Securities Act of 1933, as amended (the "Securities Act"). If we are
acting on behalf of an account, we exercise sole investment discretion with
respect to such account. We are aware that the transfer of Notes to us, or such
exchange, as applicable, is being made in reliance upon the exemption from the
provisions of Section 5 of the Securities Act provided by Rule 144A. Prior to
the date of this Certificate we have received such information regarding the
Company as we have requested pursuant to Rule 144A(d)(4) or have determined not
to request such information.
You and the Company are entitled to rely upon this Certificate and are
irrevocably authorized to produce this Certificate or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
F-1
Very truly yours,
[NAME OF SELLER (FOR TRANSFERS) OR OWNER
(FOR EXCHANGES)]
By:
----------------------------------
Name:
Title:
Address:
Date:_______________________
F-2
EXHIBIT G
Institutional Accredited Investor Certificate
First Union National Bank
21 South Street
Morristown, NJ 07960
Attention: Corporate Trust Administration
Re: K. Hovnanian Enterprises, Inc.
8.000% Senior Notes due 2012 (the "NOTES")
Issued under the Indenture (the "INDENTURE")
DATED AS OF MARCH 26, 2002 RELATING TO THE NOTES
Ladies and Gentlemen:
This Certificate relates to:
[CHECK A, B OR C AS APPLICABLE.]
/ / A. Our proposed purchase of $____ principal amount of Notes issued
under the Indenture.
/ / B. Our proposed purchase of $____ principal amount of a beneficial
interest in a Global Note.
/ / C. Our proposed exchange of $____ principal amount of Notes issued
under the Indenture for an equal principal amount of Notes to be
held by us.
We hereby confirm that:
1. We are an institutional "accredited investor" within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act of 1933, as amended (the "Securities Act") (an
"Institutional Accredited Investor").
2. Any acquisition of Notes by us will be for our own account or
for the account of one or more other Institutional Accredited
Investors as to which we exercise sole investment discretion.
3. We have such knowledge and experience in financial and
business matters that we are capable of evaluating the merits
and risks of an investment in the Notes and we and any
accounts for which we are acting are able to bear the
economic risks of and an entire loss of our or their
investment in the Notes.
4. We are not acquiring the Notes or beneficial interest therein
with a view to any distribution thereof in a transaction that
would violate the Securities Act or the securities laws of
any State of the United States or any other
G-1
applicable jurisdiction; PROVIDED that the disposition of our
property and the property of any accounts for which we are
acting as fiduciary will remain at all times within our and
their control.
5. We acknowledge that the Notes have not been registered under
the Securities Act and that the Notes may not be offered or
sold within the United States or to or for the benefit of
U.S. persons except as set forth below.
6. The principal amount of Notes to which this Certificate
relates is at least equal to $250,000.
We agree for the benefit of the Company, on our own behalf and on behalf of
each account for which we are acting, that we will not resell or otherwise
transfer this note or any beneficial interest herein, except (A) to the company
or any of its subsidiaries, (B) to a person whom the we reasonably believes is a
QIB purchasing for its own account or for the account of a QIB in a transaction
meeting the requirements of Rule 144A, (C) in an offshore transaction meeting
the requirements of Rule 903 or 904 of Regulation S of the Securities Act, (D)
in a transaction meeting the requirements of Rule 144 under the Securities Act,
(E) to an IAI that, prior to such transfer, furnishes the Trustee a signed
letter containing certain representations and agreements relating to the
transfer of this Note (the form of which can be obtained from the Trustee) and,
if such transfer is in respect of an aggregate principal amount of less than
$250,000, an opinion of counsel acceptable to the company that such transfer is
in compliance with the Securities Act, (F) in accordance with another exemption
form the registration requirements of the Securities Act (and based upon an
opinion of counsel acceptable to the Company) or (G) pursuant to an effective
Registration Statement, and in each case, in accordance with the applicable
securities laws of any state of the United States or any other applicable
jurisdiction.
Prior to the registration of any transfer in accordance with (f) or (g)
above, we acknowledge that the Company reserves the right to require the
delivery of such legal opinions, certifications or other evidence as may
reasonably be required in order to determine that the proposed transfer is being
made in compliance with the Securities Act and applicable state securities laws.
We acknowledge that no representation is made as to the availability of any Rule
144 exemption from the registration requirements of the Securities Act.
We understand that the Trustee will not be required to accept for
registration of transfer any Notes acquired by us, except upon presentation of
evidence satisfactory to the Company and the Trustee that the foregoing
restrictions on transfer have been complied with. We further agree to provide to
any person acquiring any of the Notes or any beneficial interest therein from us
a notice advising such person that resales of the Notes are restricted as stated
herein.
We agree to notify you promptly in writing if any of our acknowledgments,
representations or agreements herein ceases to be accurate and complete.
G-2
We represent to you that we have full power to make the foregoing
acknowledgments, representations and agreements on our own behalf and on behalf
of any account for which we are acting.
You and the Company are entitled to rely upon this Certificate and are
irrevocably authorized to produce this Certificate or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[NAME OF PURCHASER (FOR TRANSFERS) OR OWNER
(FOR EXCHANGES)]
By:
-----------------------------------
Name:
Title:
Address:
Date:______________________
G-3
Upon transfer of certificated Notes, the Notes would be registered in the
name of the new beneficial owner as follows:
By:
------------------------------------------------
Date:
----------------------------------------------
Taxpayer ID number:
---------------------------------
G-4
EXHIBIT H
[COMPLETE FORM I OR FORM II AS APPLICABLE.]
[FORM I]
CERTIFICATE OF BENEFICIAL OWNERSHIP
To: First Union National Bank
21 South Street
Morristown, NJ 07960
Attention: Corporate Trust Administration OR
[Euroclear Bank S.A./N.V., as operator of the Euroclear System] OR
[Clearstream Banking, SOCIETE ANONYME]
Re: K. Hovnanian Enterprises, Inc.
8.000% Senior Notes due 2012 (the "NOTES") Issued
under the Indenture (the "INDENTURE") DATED AS OF MARCH
26, 2002 RELATING TO THE NOTES
Ladies and Gentlemen:
We are the beneficial owner of $____ principal amount of Notes issued under
the Indenture and represented by a Regulation S Temporary Global Note (as
defined in the Indenture).
We hereby certify as follows:
[CHECK A OR B AS APPLICABLE.]
/ / A. We are a non-U.S. person (within the meaning of Regulation S under
the Securities Act of 1933, as amended).
/ / B. We are a U.S. person (within the meaning of Regulation S under the
Securities Act of 1933, as amended) that purchased the Notes in a
transaction that did not require registration under the Securities
Act of 1933, as amended.
You and the Company are entitled to rely upon this Certificate and are
irrevocably authorized to produce this Certificate or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
H-1
Very truly yours,
[NAME OF BENEFICIAL OWNER]
By:
-----------------------------------
Name:
Title:
Address:
Date:______________________
[FORM II]
Certificate of Beneficial Ownership
First Union National Bank
21 South Street
Morristown, NJ 07960
Attention: Corporate Trust Administration
Re: K. Hovnanian Enterprises, Inc.
8.000% Senior Notes due 2012 (the "NOTES") Issued under the
Indenture (the "INDENTURE") DATED AS OF MARCH 26, 2002 RELATING
TO THE NOTES
Ladies and Gentlemen:
This is to certify that based solely on certifications we have received in
writing, by tested telex or by electronic transmission from member organizations
("Member Organizations") appearing in our records as persons being entitled to a
portion of the principal amount of Notes represented by a Regulation S Temporary
Global Note issued under the above-referenced Indenture, that as of the date
hereof, $____ principal amount of Notes represented by the Regulation S
Temporary Global Note being submitted herewith for exchange is beneficially
owned by persons that are either (i) non-U.S. persons (within the meaning of
Regulation S under the Securities Act of 1933, as amended) or (ii) U.S. persons
that purchased the Notes in a transaction that did not require registration
under the Securities Act of 1933, as amended.
We further certify that (i) we are not submitting herewith for exchange any
portion of such Regulation S Temporary Global Note excepted in such Member
Organization certifications and (ii) as of the date hereof we have not received
any notification from any Member Organization to the effect that the statements
made by such Member Organization with respect to
H-2
any portion of such Regulation S Temporary Global Note submitted herewith for
exchange are no longer true and cannot be relied upon as of the date hereof.
You and the Company are entitled to rely upon this Certificate and are
irrevocably authorized to produce this Certificate or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Yours faithfully,
[EUROCLEAR BANK S.A./N.V., as operator of
the Euroclear System]
OR
[CLEARSTREAM BANKING, SOCIETE
ANONYME]
By:
------------------------------------
Name:
Title:
Address:
Date:______________________
H-3
EXHIBIT I
THIS NOTE IS A TEMPORARY GLOBAL NOTE. PRIOR TO THE EXPIRATION OF THE RESTRICTED
PERIOD APPLICABLE HERETO, BENEFICIAL INTERESTS HEREIN MAY NOT BE HELD BY ANY
PERSON OTHER THAN (1) A NON-U.S. PERSON OR (2) A U.S. PERSON THAT PURCHASED SUCH
INTEREST IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"). BENEFICIAL INTERESTS HEREIN ARE NOT
EXCHANGEABLE FOR PHYSICAL NOTES OTHER THAN A PERMANENT GLOBAL NOTE IN ACCORDANCE
WITH THE TERMS OF THE INDENTURE. TERMS IN THIS LEGEND ARE USED AS USED IN
REGULATION S UNDER THE SECURITIES ACT.
EXHIBIT 4.2
=========================================
K. HOVNANIAN ENTERPRISES, INC.,
AS ISSUER
KOVNANIAN ENTERPRISES, INC.
THE GUARANTORS PARTY HERETO
AND
FIRST UNION NATIONAL BANK,
AS TRUSTEE
-----------------------------------------
INDENTURE
DATED AS OF MARCH 26, 2002
-----------------------------------------
8.875% SENIOR SUBORDINATED NOTES DUE 2012
=========================================
CROSS-REFERENCE TABLE(1)
TIA Sections Indenture Sections
- ------------ ------------------
Section 310(a)...............................................................7.10
(b)...............................................................7.08
Section 312.................................................................12.02
Section 313..................................................................7.06
Section 314(a).........................................................4.15, 4.16
(c)..............................................................12.04
(e)..............................................................12.05
Section 315(a).........................................................7.01, 7.02
(b).........................................................7.02, 7.05
(c)...............................................................7.01
(d)...............................................................7.02
(e)...............................................................5.09
Section 316(a).............................................2.06, 5.01, 5.03, 5.04
(b)...............................................................5.06
(c)..............................................................12.02
Section 317(a) (1)...........................................................5.07
(a) (2)...........................................................5.07
(b)...............................................................2.04
Section 318......................................................................
TABLE OF CONTENTS
Page
----
ARTICLE 1
Definitions and Incorporation by Reference
SECTION 1.01. Definitions....................................................................1
SECTION 1.02. Rules of Construction.........................................................23
ARTICLE 2
The Notes
SECTION 2.01. Form, Dating and Denominations; Legends.......................................24
SECTION 2.02. Execution and Authentication; Exchange Notes; Additional Notes................25
SECTION 2.03. Registrar, Paying Agent and Authenticating Agent; Paying Agent to
Hold Money in Trust.........................................................26
SECTION 2.04. Replacement Notes.............................................................26
SECTION 2.05. Outstanding Notes.............................................................26
SECTION 2.06. Temporary Notes...............................................................27
SECTION 2.07. Cancellation..................................................................27
SECTION 2.08. CUSIP and ISIN Numbers........................................................27
SECTION 2.09. Registration, Transfer and Exchange...........................................28
SECTION 2.10. Restrictions on Transfer and Exchange.........................................30
SECTION 2.11. Regulation S Temporary Global Notes...........................................32
ARTICLE 3
Redemption; Offer to Purchase
SECTION 3.01. Optional Redemption...........................................................32
SECTION 3.02. Method and Effect of Redemption...............................................33
SECTION 3.03. Offer to Purchase.............................................................34
ARTICLE 4
Covenants
SECTION 4.01. Payment of Notes..............................................................36
SECTION 4.02. Maintenance of Office or Agency...............................................36
SECTION 4.03. Existence.....................................................................37
SECTION 4.04. Payment of Taxes and Other Claims.............................................37
SECTION 4.05. Maintenance of Properties and Insurance.......................................37
SECTION 4.06. Limitations on Indebtedness...................................................37
SECTION 4.07. Limitation on Restricted Payments.............................................38
SECTION 4.08. Limitation on Liens...........................................................40
i
SECTION 4.09. Limitations on Restrictions Affecting Restricted Subsidiaries.................40
SECTION 4.10. Limitations on Dispositions of Assets.........................................42
SECTION 4.11. Guarantees by Restricted Subsidiaries.........................................43
SECTION 4.12. Repurchase of Notes upon a Change of Control..................................43
SECTION 4.13. Limitation on Transactions with Affiliates....................................44
SECTION 4.14. Limitations on Mergers, Consolidations and Sales of Assets....................45
SECTION 4.15. Reports to Holders of Notes...................................................46
SECTION 4.16. Reports to Trustee............................................................46
SECTION 4.17. Notice of Other Defaults......................................................47
SECTION 4.18. Limitation on Senior Subordinated Indebtedness................................47
ARTICLE 5
remedies
SECTION 5.01. Events of Default.............................................................47
SECTION 5.02. Other Remedies................................................................49
SECTION 5.03. Waiver of Defaults by Majority of Holders.....................................49
SECTION 5.04. Direction of Proceedings......................................................49
SECTION 5.05. Application of Moneys Collected by Trustee....................................50
SECTION 5.06. Proceedings by Holders........................................................50
SECTION 5.07. Proceedings by Trustee........................................................51
SECTION 5.08. Remedies Cumulative and Continuing............................................51
SECTION 5.09. Undertaking to Pay Costs......................................................51
SECTION 5.10. Notice of Defaults............................................................52
SECTION 5.11. Waiver of Stay, Extension or Usury Laws.......................................52
ARTICLE 6
guarantee
SECTION 6.01. Guarantee.....................................................................52
SECTION 6.02. Obligations of each Guarantor Unconditional...................................53
SECTION 6.03. Release of a Guarantor........................................................53
SECTION 6.04. Execution and Delivery of Guaranty............................................54
SECTION 6.05. Limitation on Guarantor Liability.............................................54
SECTION 6.06. Article 6 Not to Prevent Events of Default....................................54
SECTION 6.07. Waiver by the Guarantors......................................................54
SECTION 6.08. Subrogation and Contribution..................................................54
SECTION 6.09. Stay of Acceleration..........................................................54
ARTICLE 7
The Trustee
SECTION 7.01. General.......................................................................55
SECTION 7.02. Certain Rights of Trustee.....................................................55
ii
SECTION 7.03. Individual Rights of Trustee..................................................56
SECTION 7.04. Trustee's Disclaimer..........................................................56
SECTION 7.05. Notice of Default.............................................................56
SECTION 7.06. Reports by Trustee to Holders.................................................56
SECTION 7.07. Compensation and Indemnity....................................................57
SECTION 7.08. Replacement of Trustee........................................................57
SECTION 7.09. Successor Trustee by Merger...................................................58
SECTION 7.10. Eligibility...................................................................58
SECTION 7.11. Money Held in Trust...........................................................58
ARTICLE 8
Defeasance and Discharge
SECTION 8.01. Discharge of Issuer's Obligations.............................................58
SECTION 8.02. Legal Defeasance..............................................................59
SECTION 8.03. Covenant Defeasance...........................................................60
SECTION 8.04. Application of Trust Money....................................................60
SECTION 8.05. Repayment to Issuer...........................................................60
SECTION 8.06. Reinstatement.................................................................61
SECTION 8.07. Indemnity for U.S. Government Obligations.....................................61
ARTICLE 9
Amendments, Supplements and Waivers
SECTION 9.01. Amendments Without Consent of Holders.........................................61
SECTION 9.02. Amendments With Consent of Holders............................................62
SECTION 9.03. Effect of Consent.............................................................63
SECTION 9.04. Trustee's Rights and Obligations..............................................63
SECTION 9.05. Conformity with Trust Indenture Act...........................................63
SECTION 9.06. Payments for Consents.........................................................63
ARTICLE 10
Subordination of Notes
SECTION 10.01. Notes Subordinated to Senior Debt of the Issuer...............................63
SECTION 10.02. Issuer Not to Make Payments with Respect to Notes in Certain
Circumstances...............................................................65
SECTION 10.03. Notes Subordinated to Prior Payment of All Senior Debt of the Issuer
on Dissolution, Winding Up, Liquidation or Reorganization of Issuer.........66
SECTION 10.04. Holders to Be Subrogated to Rights of Holders of Senior Debt of the Issuer....68
SECTION 10.05. Obligations of the Issuer Unconditional.......................................68
iii
SECTION 10.06. Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice.......69
SECTION 10.07. Application by Trustee of Monies Deposited with it............................69
SECTION 10.08. Subordination Rights Not Impaired by Acts or Omissions of Issuer or
Holders of Senior Debt of the Issuer........................................69
SECTION 10.09. Holders Authorize Trustee to Effectuate Subordination of Notes................70
SECTION 10.10. Right of Trustee to Hold Senior Debt of the Issuer............................70
SECTION 10.11. Trustee Not Fiduciary for Holders of Senior Debt of the Issuer................70
SECTION 10.12. Article 10 Not to Prevent Events of Default...................................70
SECTION 10.13. Officers' Certificate.........................................................70
ARTICLE 11
Subordination of Guarantees
SECTION 11.01. Guarantees Subordination to Senior Debt of a Guarantor........................71
SECTION 11.02. Guarantor Not to Make Payments with Respect to Notes in Certain
Circumstances...............................................................72
SECTION 11.03. Guarantee Subordinated to Prior Payment of All Senior Debt of a
Guarantor on Dissolution, Winding Up, Liquidation or
Reorganization of a Guarantor...............................................74
SECTION 11.04. Holders to Be Subrogated to Rights of Holders of Senior Debt of a Guarantor...75
SECTION 11.05. Obligations of the Guarantors Unconditional...................................75
SECTION 11.06. Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice.......76
SECTION 11.07. Application by Trustee of Monies Deposited with it............................76
SECTION 11.08. Subordination Rights Not Impaired by Acts or Omissions of Any Guarantor
or Holders of Senior Debt of a Guarantor....................................77
SECTION 11.09. Holders Authorize Trustee to Effectuate Subordination of Notes................77
SECTION 11.10. Right of Trustee to Hold Senior Debt of a Guarantor...........................77
SECTION 11.11. Trustee Not Fiduciary for Holders of Senior Debt of a Guarantor...............78
SECTION 11.12. Article 11 Not to Prevent Events of Default...................................78
SECTION 11.13. Subordination of Indebtedness Owed by the Issuer to a Guarantor...............78
SECTION 11.14. Officers' Certificate.........................................................78
ARTICLE 12
Miscellaneous
SECTION 12.01. Trust Indenture Act of 1939...................................................78
SECTION 12.02. Holder Communications; Holder Actions.........................................78
SECTION 12.03. Notices.......................................................................79
SECTION 12.04. Certificate and Opinion as to Conditions Precedent............................80
SECTION 12.05. Statements Required in Certificate or Opinion.................................80
SECTION 12.06. Payment Date Other Than a Business Day........................................80
SECTION 12.07. Governing Law.................................................................81
iv
SECTION 12.08. No Adverse Interpretation of Other Agreements.................................81
SECTION 12.09. Successors....................................................................81
SECTION 12.10. Duplicate Originals...........................................................81
SECTION 12.11. Separability..................................................................81
SECTION 12.12. Table of Contents and Headings................................................81
SECTION 12.13. No Liability of Directors, Officers, Employees, Incorporators and
Stockholders.................................................................81
EXHIBITS
EXHIBIT A FORM OF NOTE
EXHIBIT B FORM OF SUPPLEMENTAL INDENTURE
EXHIBIT C RESTRICTED LEGEND
EXHIBIT D DTC LEGEND
EXHIBIT E REGULATION S CERTIFICATE
EXHIBIT F RULE 144A CERTIFICATE
EXHIBIT G INSTITUTIONAL ACCREDITED INVESTOR CERTIFICATE
EXHIBIT H CERTIFICATE OF BENEFICIAL OWNERSHIP
EXHIBIT I REGULATION S TEMPORARY GLOBAL NOTE LEGEND
v
INDENTURE, dated as of March 26, 2002, between K. HOVNANIAN ENTERPRISES,
INC., a New Jersey corporation (the "Issuer"), HOVNANIAN ENTERPRISES, INC., a
Delaware corporation (the "Company"), each of the Guarantors (as defined hereto)
and FIRST UNION NATIONAL BANK, as Trustee.
RECITALS
The Issuer has duly authorized the execution and delivery of the Indenture
to provide for the issuance of up to $300,000,000 aggregate principal amount of
the Issuer's 8.875% Senior Subordinated Notes Due 2012, and, if and when issued,
any Additional Notes, together with any Exchange Notes issued therefor as
provided herein (the "NOTES"). All things necessary to make the Indenture a
valid agreement of the Issuer, in accordance with its terms, have been done, and
the Issuer has done all things necessary to make the Notes (in the case of the
Additional Notes, when duly authorized), when executed by the Issuer and
authenticated and delivered by the Trustee and duly issued by the Issuer, the
valid obligations of the Issuer as hereinafter provided.
In addition, the Guarantors party hereto have duly authorized the execution
and delivery of the Indenture as guarantors of the Notes. All things necessary
to make the Indenture a valid agreement of each Guarantor, in accordance with
its terms, have been done, and each Guarantor has done all things necessary to
make the Note Guarantees, when executed by each Guarantor, and the Notes, when
executed by the Issuer and authenticated and delivered by the Trustee and duly
issued by the Issuer, the valid obligations of such Guarantor as hereinafter
provided.
This Indenture is subject to, and will be governed by, the provisions of
the Trust Indenture Act that are required to be a part of and govern indentures
qualified under the Trust Indenture Act.
THIS INDENTURE WITNESSETH
For and in consideration of the premises and the purchase of the Notes by
the Holders thereof, the parties hereto covenant and agree, for the equal and
proportionate benefit of all Holders, as follows:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"ACQUIRED INDEBTEDNESS" means (a) with respect to any Person that becomes a
Restricted Subsidiary (or is merged into the Company, the Issuer or any
Restricted Subsidiary) after the Issue Date, Indebtedness of such Person or any
of its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary (or is merged into the Company, the Issuer or any Restricted
Subsidiary) that was not incurred in connection with, or in contemplation of,
such Person becoming a Restricted Subsidiary (or being merged into the Company,
the Issuer or any Restricted Subsidiary) and (b) with respect to the Company,
the Issuer or any Restricted Subsidiary, any Indebtedness expressly assumed by
the Company, the Issuer or any Restricted Subsidiary in connection with the
acquisition of any assets from another Person (other than the
Company, the Issuer or any Restricted Subsidiary), which Indebtedness was
not incurred by such other Person in connection with or in contemplation of such
acquisition. Indebtedness incurred in connection with or in contemplation of any
transaction described in clause (a) or (b) of the preceding sentence shall be
deemed to have been incurred by the Company or a Restricted Subsidiary, as the
case may be, at the time such Person becomes a Restricted Subsidiary (or is
merged into the Company, the Issuer or any Restricted Subsidiary) in the case of
clause (a) or at the time of the acquisition of such assets in the case of
clause (b), but shall not be deemed Acquired Indebtedness.
"ADDITIONAL NOTES" means any notes issued under the Indenture in addition
to the Original Notes, including any Exchange Notes issued in exchange for such
Additional Notes, having the same terms in all respects as the Original Notes
except that interest will accrue on the Additional Notes from their date of
issuance.
"AFFILIATE" means, when used with reference to a specified Person any
Person direct or indirectly controlling, or controlled by or under direct or
indirect common control with the Person specified.
"AGENT" means any Registrar, Paying Agent or Authenticating Agent.
"AGENT MEMBER" means a member of, or a participant in, the Depositary.
"ASSET ACQUISITION" means (a) an Investment by the Company, the Issuer or
any Restricted Subsidiary in any other Person if, as a result of such
Investment, such Person shall become a Restricted Subsidiary or shall be
consolidated or merged with or into the Company, the Issuer or any Restricted
Subsidiary or (b) the acquisition by the Company, the Issuer or any Restricted
Subsidiary of the assets of any Person, which constitute all or substantially
all of the assets or of an operating unit or line of business of such Person or
which is otherwise outside the ordinary course of business.
"ASSET DISPOSITION" means any sale, transfer, conveyance, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback or sale of shares of Capital Stock in any Subsidiary) (each,
a "TRANSACTION") by the Company, the Issuer or any Restricted Subsidiary to any
Person of any Property having a Fair Market Value in any transaction or series
of related transactions of at least $5 million. The term "Asset Disposition"
shall not include:
(a) a transaction between the Company, the Issuer and any Restricted
Subsidiary or a transaction between Restricted Subsidiaries,
(b) a transaction in the ordinary course of business, including,
without limitation, sales (directly or indirectly), dedications and other
donations to governmental authorities, leases and sales and leasebacks of
(A) homes, improved land and unimproved land and (B) real estate (including
related amenities and improvements),
(c) a transaction involving the sale of Capital Stock of, or the
disposition of assets in, an Unrestricted Subsidiary,
2
(d) any exchange or swap of assets of the Company, the Issuer or any
Restricted Subsidiary for assets that (x) are to be used by the Company,
the Issuer or any Restricted Subsidiary in the ordinary course of its Real
Estate Business and (y) have a Fair Market Value not less than the Fair
Market Value of the assets exchanged or swapped,
(e) any sale, transfer, conveyance, lease or other disposition of
assets and properties that is governed by Section 4.14 hereof, or
(f) dispositions of mortgage loans and related assets and
mortgage-backed securities in the ordinary course of a mortgage lending
business.
"ATTRIBUTABLE DEBT" means, with respect to any Capitalized Lease
Obligations, the capitalized amount thereof determined in accordance with GAAP.
"AUTHENTICATING AGENT" refers to a Person engaged to authenticate the Notes
in the stead of the Trustee.
"BANKRUPTCY LAW" means title 11 of the United States Code, as amended, or
any similar federal or state law for the relief of debtors.
"BOARD OF DIRECTORS" means the board of directors of the Issuer, or any
committee thereof duly authorized to act on its behalf.
"BOARD RESOLUTION" means a resolution duly adopted by the Board of
Directors which, as of the date of any certification thereof, remains in full
force and effect.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City or in the city where the Corporate Trust
Office of the Trustee is located are authorized by law to close.
"CAPITAL STOCK" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of or in
such Person's capital stock or other equity interests, and options, rights or
warrants to purchase such capital stock or other equity interests, whether now
outstanding or issued after the Issue Date, including, without limitation, all
Disqualified Stock and Preferred Stock.
"CAPITALIZED LEASE OBLIGATIONS" of any Person means the obligations of such
Person to pay rent or other amounts under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such obligations will be the capitalized amount thereof determined in
accordance with GAAP.
"CASH EQUIVALENTS" means
(a) U.S. dollars;
(b) securities issued or directly and fully guaranteed or insured by
the U.S. government or any agency or instrumentality thereof having
maturities of one year or less from the date of acquisition;
3
(c) certificates of deposit and eurodollar time deposits with
maturities of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any domestic commercial bank having capital and
surplus in excess of $500 million;
(d) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (b) and (c)
entered into with any financial institution meeting the qualifications
specified in clause (c) above;
(e) commercial paper rated P-1, A-1 or the equivalent thereof by
Moody's or S & P, respectively, and in each case maturing within six months
after the date of acquisition; and
(f) investments in money market funds substantially all of the assets
of which consist of securities described in the foregoing clauses (a)
through (e).
"CERTIFICATE OF BENEFICIAL OWNERSHIP" means a certificate substantially in
the form of Exhibit H.
"CERTIFICATED NOTE" means a Note in registered individual form without
interest coupons.
"CHANGE OF CONTROL" means
(a) any sale, lease, or other transfer (in one transaction or a
series of transactions) of all or substantially all of the consolidated
assets of the Company and its Restricted Subsidiaries to any Person (other
than a Restricted Subsidiary); PROVIDED, HOWEVER, that a transaction where
the holders of all classes of Common Equity of the Company immediately
prior to such transaction own, directly or indirectly, more than 50% of all
classes of Common Equity of such Person immediately after such transaction
shall not be a Change of Control;
(b) a "person" or "group" (within the meaning of Section 13(d) of the
Exchange Act (other than (x) the Company or (y) the Permitted Hovnanian
Holders) becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act) of Common Equity of the Company representing more than 50% of
the voting power of the Common Equity of the Company;
(c) Continuing Directors cease to constitute at least a majority of
the Board of Directors of the Company;
(d) the stockholders of the Company approve any plan or proposal for
the liquidation or dissolution of the Company; PROVIDED, HOWEVER, that a
liquidation or dissolution of the Company which is part of a transaction
that does not constitute a Change of Control under the proviso contained in
clause (a) above shall not constitute a Change of Control; or
(e) a change of control shall occur as defined in the instrument
governing any publicly traded debt securities of the Company or the Issuer
which requires the Company or the Issuer to repay or repurchase such debt
securities.
4
"CLEARSTREAM" means Clearstream Banking, societe anonyme, Luxembourg,
formerly Cedelbank.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON EQUITY" of any Person means Capital Stock of such Person that is
generally entitled to (a) vote in the election of directors of such Person or
(b) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control
the management or policies of such Person.
"COMPANY" means Hovnanian Enterprises, Inc., or any successor obligor under
the Indenture and the Note Guarantees pursuant to Section 4.14.
"CONSOLIDATED ADJUSTED TANGIBLE ASSETS" of the Company as of any date means
the Consolidated Tangible Assets of the Company, the Issuer and the Restricted
Subsidiaries at the end of the fiscal quarter immediately preceding the date
less any assets securing any Non-Recourse Indebtedness, as determined in
accordance with GAAP.
"CONSOLIDATED CASH FLOW AVAILABLE FOR FIXED CHARGES" means, for any period,
Consolidated Net Income for such period plus (each to the extent deducted in
calculating such Consolidated Net Income and determined in accordance with GAAP)
the sum for such period, without duplication, of:
(a) income taxes,
(b) Consolidated Interest Expense,
(c) depreciation and amortization expenses and other non-cash charges
to earnings, and
(d) interest and financing fees and expenses which were previously
capitalized and which are amortized to cost of sales, MINUS
all other non-cash items (other than the receipt of notes receivable) increasing
such Consolidated Net Income.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to any
determination date, the ratio of (x) Consolidated Cash Flow Available for Fixed
Charges for the prior four full fiscal quarters (the "FOUR QUARTER PERIOD") for
which financial results have been reported immediately preceding the
determination date (the "TRANSACTION DATE"), to (y) the aggregate Consolidated
Interest Incurred for the Four Quarter Period. For purposes of this definition,
"CONSOLIDATED CASH FLOW AVAILABLE FOR FIXED CHARGEs" and "CONSOLIDATED INTEREST
INCURRED" shall be calculated after giving effect on a PRO FORMA basis for the
period of such calculation to:
(a) the incurrence or the repayment, repurchase, defeasance or other
discharge or the assumption by another Person that is not an Affiliate
(collectively, "REPAYMENT") of any Indebtedness of the Company, the Issuer
or any Restricted Subsidiary (and the application of the proceeds thereof)
giving rise to the need to make such calculation, and any incurrence or
repayment of other Indebtedness (and the application of the proceeds
5
thereof), at any time on or after the first day of the Four Quarter Period
and on or prior to the Transaction Date, as if such incurrence or
repayment, as the case may be (and the application of the proceeds
thereof), occurred on the first day of the Four Quarter Period, except that
Indebtedness under revolving credit facilities shall be deemed to be the
average daily balance of such Indebtedness during the Four Quarter Period
(as reduced on such pro forma basis by the application of any proceeds of
the incurrence of Indebtedness giving rise to the need to make such
calculation);
(b) any Asset Disposition or Asset Acquisition (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of the Company, the Issuer or any Restricted
Subsidiary (including any Person that becomes a Restricted Subsidiary as a
result of any such Asset Acquisition) incurring Acquired Indebtedness at
any time on or after the first day of the Four Quarter Period and on or
prior to the Transaction Date), as if such Asset Disposition or Asset
Acquisition (including the incurrence or repayment of any such
Indebtedness) and the inclusion, notwithstanding clause (b) of the
definition of "Consolidated Net Income," of any Consolidated Cash Flow
Available for Fixed Charges associated with such Asset Acquisition as if it
occurred on the first day of the Four Quarter Period; PROVIDED, HOWEVER,
that the Consolidated Cash Flow Available for Fixed Charges associated with
any Asset Acquisition shall not be included to the extent the net income so
associated would be excluded pursuant to the definition of "Consolidated
Net Income," other than clause (b) thereof, as if it applied to the Person
or assets involved before they were acquired; and
(c) the Consolidated Cash Flow Available for Fixed Charges and the
Consolidated Interest Incurred attributable to discontinued operations, as
determined in accordance with GAAP, shall be excluded.
Furthermore, in calculating "Consolidated Cash Flow Available for Fixed
Charges" for purposes of determining the denominator (but not the numerator) of
this "Consolidated Fixed Charge Coverage Ratio,"
(a) interest on Indebtedness in respect of which a PRO FORMA
calculation is required that is determined on a fluctuating basis as of the
Transaction Date (including Indebtedness actually incurred on the
Transaction Date) and which will continue to be so determined thereafter
shall be deemed to have accrued at a fixed rate per annum equal to the rate
of interest on such Indebtedness in effect on the Transaction Date, and
(b) notwithstanding clause (a) above, interest on such Indebtedness
determined on a fluctuating basis, to the extent such interest is covered
by agreements relating to Interest Protection Agreements, shall be deemed
to accrue at the rate per annum resulting after giving effect to the
operation of such agreements.
"CONSOLIDATED INTEREST EXPENSE" of the Company for any period means the
Interest Expense of the Company, the Issuer and the Restricted Subsidiaries for
such period, determined on a consolidated basis in accordance with GAAP.
6
"CONSOLIDATED INTEREST INCURRED" for any period means the Interest Incurred
of the Company, the Issuer and the Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" for any period means the aggregate net income (or
loss) of the Company and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP; PROVIDED that there will be excluded
from such net income (loss) (to the extent otherwise included therein), without
duplication:
(a) the net income (or loss) of (x) any Unrestricted Subsidiary
(other than a Mortgage Subsidiary) or (y) any Person (other than a
Restricted Subsidiary or a Mortgage Subsidiary) in which any Person other
than the Company, the Issuer or any Restricted Subsidiary has an ownership
interest, except, in each case, to the extent that any such income has
actually been received by the Company, the Issuer or any Restricted
Subsidiary in the form of cash dividends or similar cash distributions
during such period, which dividends or distributions are not in excess of
the Company's, the Issuer's or such Restricted Subsidiary's (as applicable)
pro rata share of such Unrestricted Subsidiary's or such other Person's net
income earned during such period,
(b) except to the extent includable in Consolidated Net Income
pursuant to the foregoing clause (a), the net income (or loss) of any
Person that accrued prior to the date that (i) such Person becomes a
Restricted Subsidiary or is merged with or into or consolidated with the
Company, the Issuer or any of its Restricted Subsidiaries (except, in the
case of an Unrestricted Subsidiary that is redesignated a Restricted
Subsidiary during such period, to the extent of its retained earnings from
the beginning of such period to the date of such redesignation) or (ii) the
assets of such Person are acquired by the Company or any Restricted
Subsidiary,
(c) the net income of any Restricted Subsidiary to the extent that
(but only so long as) the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of that income is not permitted
by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary during such period,
(d) the gains or losses, together with any related provision for
taxes, realized during such period by the Company, the Issuer or any
Restricted Subsidiary resulting from (i) the acquisition of securities, or
extinguishment of Indebtedness, of the Company or any Restricted Subsidiary
or (ii) any Asset Disposition by the Company or any Restricted Subsidiary,
(e) any extraordinary gain or loss together with any related
provision for taxes, realized by the Company, the Issuer or any Restricted
Subsidiary, and
(f) any non-recurring expense recorded by the Company, the Issuer or
any Restricted Subsidiary in connection with a merger accounted for as a
"pooling-of-interests" transaction;
PROVIDED FURTHER, that for purposes of calculating Consolidated Net Income
solely as it relates to clause (iii) of Section 4.07 hereof, clause (d)(ii)
above shall not be applicable.
7
"CONSOLIDATED NET WORTH" of any Person as of any date means the
stockholders' equity (including any Preferred Stock that is classified as equity
under GAAP, other than Disqualified Stock) of such Person and its Restricted
Subsidiaries on a consolidated basis at the end of the fiscal quarter
immediately preceding such date, as determined in accordance with GAAP, less any
amount attributable to Unrestricted Subsidiaries.
"CONSOLIDATED TANGIBLE ASSETS" of the Company as of any date means the
total amount of assets of the Company, the Issuer and the Restricted
Subsidiaries (less applicable reserves) on a consolidated basis at the end of
the fiscal quarter immediately preceding such date, as determined in accordance
with GAAP, less (a) Intangible Assets and (b) appropriate adjustments on account
of minority interests of other Persons holding equity investments in Restricted
Subsidiaries.
"CONTINUING DIRECTOR" means a director who either was a member of the Board
of Directors of the Company on the date of the Indenture or who became a
director of the Company subsequent to such date and whose election or nomination
for election by the Company's stockholders, was duly approved by a majority of
the Continuing Directors on the Board of Directors of the Company at the time of
such approval, either by a specific vote or by approval of the proxy statement
issued by the Company on behalf of the entire Board of Directors of the Company
in which such individual is named as nominee for director.
"CONTROL" when used with respect to any Person, means the power to direct
the management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"CORPORATE TRUST OFFICE" means the office of the Trustee at which the
corporate trust business of the Trustee is principally administered, which at
the date of the Indenture is located at 21 South Street, Morristown, NJ 07960.
"CREDIT FACILITIES" means, collectively, each of the credit facilities and
lines of credit of the Company or one or more Restricted Subsidiaries in
existence on the Issue Date and one or more other facilities and lines of credit
among or between the Company or one or more Restricted Subsidiaries and one or
more lenders pursuant to which the Company or one or more Restricted
Subsidiaries may incur indebtedness for working capital and general corporate
purposes (including acquisitions), as any such facility or line of credit may be
amended, restated, supplemented or otherwise modified from time to time, and
includes any agreement extending the maturity of, increasing the amount of, or
restructuring, all or any portion of the Indebtedness under such facility or
line of credit or any successor facilities or lines of credit and includes any
facility or line of credit with one or more lenders refinancing or replacing all
or any portion of the Indebtedness under such facility or line of credit or any
successor facility or line of credit.
"CURRENCY AGREEMENT" of any Person means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect such Person or any of its Subsidiaries against fluctuations in currency
values.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
8
"DEFAULT" means any event, act or condition that is, or after notice or the
passage of time or both would be, an Event of Default.
"DEPOSITARY" means the depositary of each Global Note, which will initially
be DTC.
"DESIGNATION AMOUNT" has the meaning provided in the definition of
Unrestricted Subsidiary.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, (a) matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
final maturity date of the Notes or (b) is convertible into or exchangeable or
exercisable for (whether at the option of the issuer or the holder thereof) (i)
debt securities or (ii) any Capital Stock referred to in (a) above, in each
case, at any time prior to the final maturity date of the Notes; PROVIDED,
HOWEVER, that any Capital Stock that would not constitute Disqualified Stock but
for provisions thereof giving holders thereof (or the holders of any security
into or for which such Capital Stock is convertible, exchangeable or
exercisable) the right to require the Company to repurchase or redeem such
Capital Stock upon the occurrence of a change in control occurring prior to the
final maturity date of the Notes shall not constitute Disqualified Stock if the
change in control provision applicable to such Capital Stock are no more
favorable to such holders than Section 4.12 hereof and such Capital Stock
specifically provides that the Company will not repurchase or redeem any such
Capital Stock pursuant to such provisions prior to the Company's repurchase of
the Notes as are required pursuant to Section 4.12 hereof.
"DTC" means The Depository Trust Company, a New York corporation.
"DTC LEGEND" means the legend set forth in Exhibit D.
"EUROCLEAR" means Euroclear Bank S.A./N.V., and its successors or assigns,
as operator of the Euroclear System.
"EVENT OF DEFAULT" has the meaning assigned to such term in Section 5.01.
"EXCHANGE ACT" means the Securities Exchange Act of 1934.
"EXCHANGE NOTES" means the Notes of the Issuer issued pursuant to the
Indenture in exchange for, and in an aggregate principal amount equal to, the
Initial Notes or any Initial Additional Notes in compliance with the terms of a
Registration Rights Agreement and containing terms substantially identical to
the Initial Notes or any Initial Additional Notes (except that (i) such Exchange
Notes will be registered under the Securities Act and will not be subject to
transfer restrictions or bear the Restricted Legend, and (ii) the provisions
relating to Liquidated Damages will be eliminated).
"EXCHANGE OFFER" means an offer by the Issuer to the Holders of the Initial
Notes or any Initial Additional Notes to exchange outstanding Notes for Exchange
Notes, as provided for in a Registration Rights Agreement.
"EXCHANGE OFFER REGISTRATION STATEMENT" means the Exchange Offer
Registration Statement as defined in a Registration Rights Agreement.
9
"FAIR MARKET VALUE" means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) that would be
negotiated in an arm's-length transaction for cash between a willing seller and
a willing and able buyer, neither of which is under any compulsion to complete
the transaction, as such price is determined in good faith by the Board of
Directors of the Company or a duly authorized committee thereof, as evidenced by
a resolution of such Board or committee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, as in effect on May 4, 1999.
"GLOBAL NOTE" means a Note in registered global form without interest
coupons.
"GLOBAL NOTE LEGEND" means the legend set forth in Exhibit I.
"GUARANTEE" means the guarantee of the Notes by each Guarantor under the
Indenture.
"GUARANTEE INITIAL PERIOD" has the meaning set forth in Section 11.02.
"GUARANTEE PAYMENT BLOCKAGE PERIOD" has the meaning set forth in Section
11.02.
"GUARANTORS" means (a) initially, the Company and each of the Company's
Restricted Subsidiaries in existence on the Issue Date, except the Issuer, KHL,
Inc. and K. Hovnanian Poland, sp. z.o.o. and (b) each of the Company's
Subsidiaries that executes a supplemental indenture in the form of Exhibit B to
the Indenture providing for the guaranty of the payment of the Notes, or any
successor obligor under its Note Guaranty pursuant to Section 4.14., in each
case unless an until such Guarantor is released from its Note Guaranty pursuant
to the Indenture.
"HOLDER" means the Person in whose name a Note is registered in the books
of the Registrar for the Notes.
"INDEBTEDNESS" of any Person means, without duplication,
(a) any liability of such Person (i) for borrowed money or under any
reimbursement obligation relating to a letter of credit or other similar
instruments (other than standby letters of credit or similar instrument
issued for the benefit of or surety, performance, completion or payment
bonds, earnest money notes or similar purpose undertakings or
indemnifications issued by, such Person in the ordinary course of
business), (ii) evidenced by a bond, note, debenture or similar instrument
(including a purchase money obligation) given in connection with the
acquisition of any businesses, properties or assets of any kind or with
services incurred in connection with capital expenditures (other than any
obligation to pay a contingent purchase price which, as of the date of
incurrence thereof is not required to be recorded as a liability in
accordance with GAAP), or (iii) in respect of Capitalized Lease Obligations
(to the extent of the Attributable Debt in respect thereof),
(b) any Indebtedness of others that such Person has guaranteed to the
extent of the guarantee, PROVIDED HOWEVER, that Indebtedness of the Company
and its Restricted
10
Subsidiaries will not include the obligations of the Company or a
Restricted Subsidiary under warehouse lines of credit of Mortgage
Subsidiaries to repurchase mortgages at prices no greater than 98% of the
principal amount thereof, and upon any such purchase the excess, if any, of
the purchase price thereof over the Fair Market Value of the mortgages
acquired, will constitute Restricted Payments subject to Section 4.07
hereof,
(c) to the extent not otherwise included, the obligations of such
Person under Currency Agreements or Interest Protection Agreements to the
extent recorded as liabilities not constituting Interest Incurred, net of
amounts recorded as assets in respect of such agreements, in accordance
with GAAP, and
(d) all Indebtedness of others secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person;
PROVIDED, that Indebtedness shall not include accounts payable, liabilities to
trade creditors of such Person or other accrued expenses arising in the ordinary
course of business. The amount of Indebtedness of any Person at any date shall
be (i) the outstanding balance at such date of all unconditional obligations as
described above, net of any unamortized discount to be accounted for as Interest
Expense, in accordance with GAAP, (ii) the maximum liability of such Person for
any contingent obligations under clause (a) above at such date, net of an
unamortized discount to be accounted for as Interest Expense in accordance with
GAAP, and (iii) in the case of clause (d) above, the lesser of (x) the fair
market value of any asset subject to a Lien securing the Indebtedness of others
on the date that the Lien attaches and (y) the amount of the Indebtedness
secured.
"INDENTURE" means this indenture, as amended or supplemented from time to
time.
"INITIAL ADDITIONAL NOTES" means Additional Notes issued in an offering not
registered under the Securities Act and any Notes issued in replacement thereof,
but not including any Exchange Notes issued in exchange therefor.
"INITIAL NOTES" means the Notes issued on the Issue Date and any Notes
issued in replacement thereof, but not including any Exchange Notes issued in
exchange therefor.
"INITIAL PERIOD" has the meaning set forth in Section 10.02.
"INITIAL PURCHASERS" means the initial purchasers party to a purchase
agreement with the Issuer relating to the sale of the Initial Notes by the
Issuer.
"INSTITUTIONAL ACCREDITED INVESTOR CERTIFICATE" means a certificate
substantially in the form of Exhibit G hereto.
"INTANGIBLE ASSETS" of the Company means all unamortized debt discount and
expense, unamortized deferred charges, goodwill, patents, trademarks, service
marks, trade names, copyrights, write-ups of assets over their prior carrying
value (other than write-ups which occurred prior to the Issue Date and other
than, in connection with the acquisition of an asset, the write-up of the value
of such asset (within one year of its acquisition) to its fair market value in
accordance with GAAP) and all other items which would be treated as intangible
on the
11
consolidated balance sheet of the Company, the Issuer and the Restricted
Subsidiaries prepared in accordance with GAAP.
"INTEREST EXPENSE" of any Person for any period means, without duplication,
the aggregate amount of (a) interest which, in conformity with GAAP, would be
set opposite the caption "interest expense" or any like caption on an income
statement for such Person (including, without limitation, imputed interest
included in Capitalized Lease Obligations, all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, the net costs (but reduced by net gains) associated with Currency
Agreements and Interest Protection Agreements, amortization of other financing
fees and expenses, the interest portion of any deferred payment obligation,
amortization of discount or premium, if any, and all other noncash interest
expense (other than interest and other charges amortized to cost of sales), and
(b) all interest actually paid by the Company or a Restricted Subsidiary under
any guarantee of Indebtedness (including, without limitation, a guarantee of
principal, interest or any combination thereof) of any Person other than the
Company, the Issuer or any Restricted Subsidiary during such period; PROVIDED
that Interest Expense shall exclude any expense associated with the complete
writeoff of financing fees and expenses in connection with the repayment of any
Indebtedness.
"INTEREST INCURRED" of any Person for any period means, without
duplication, the aggregate amount of (a) Interest Expense and (b) all
capitalized interest and amortized debt issuance costs.
"INTEREST PAYMENT DATE" means each April 1 and October 1 of each year,
commencing October 1, 2002.
"INTEREST PROTECTION AGREEMENT" of any Person means any interest rate swap
agreement, interest rate collar agreement, option or futures contract or other
similar agreement or arrangement designed to protect such Person or any of its
Subsidiaries against fluctuations in interest rates with respect to Debt
permitted to be incurred under the Indenture.
"INVESTMENTS" of any Person means (a) all investments by such Person in any
other Person in the form of loans, advances or capital contributions, (b) all
guarantees of Indebtedness or other obligations of any other Person by such
Person, (c) all purchases (or other acquisitions for consideration) by such
Person of Indebtedness, Capital Stock or other securities of any other Person
and (d) all other items that would be classified as investments in any other
Person (including, without limitation, purchases of assets outside the ordinary
course of business) on a balance sheet of such Person prepared in accordance
with GAAP.
"ISSUE DATE" means the date on which the Initial Notes are originally
issued under the Indenture.
"LIEN" means, with respect to any Property, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this definition, a Person shall be deemed to own,
subject to a Lien, any Property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such Property.
12
"LIQUIDATED DAMAGES" means liquidated damages owed to the Holders pursuant
to a Registration Rights Agreement.
"MARKETABLE SECURITIES" means (a) equity securities that are listed on
the New York Stock Exchange, the American Stock Exchange or The Nasdaq National
Market and (b) debt securities that are rated by a nationally recognized rating
agency, listed on the New York Stock Exchange or the American Stock Exchange or
covered by at least two reputable market makers.
"MOODY'S" means Moody's Investors Service, Inc. or any successor to its
debt rating business.
"MORTGAGE SUBSIDIARY" means any Subsidiary of the Company substantially all
of whose operations consist of the mortgage lending business.
"NET CASH PROCEEDS" means with respect to an Asset Disposition, cash
payments received (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise
(including any cash received upon sale or disposition of such note or
receivable), but only as and when received), excluding any other consideration
received in the form of assumption by the acquiring Person of Indebtedness or
other obligations relating to the Property disposed of in such Asset Disposition
or received in any other noncash form unless and until such non-cash
consideration is converted into cash therefrom, in each case, net of all legal,
title and recording tax expenses, commissions and other fees and expenses
incurred, and all federal, state and local taxes required to be accrued as a
liability under GAAP as a consequence of such Asset Disposition, and in each
case net of a reasonable reserve for the after-tax cost of any indemnification
or other payments (fixed and contingent) attributable to the seller's
indemnities or other obligations to the purchaser undertaken by the Company, the
Issuer or any of its Restricted Subsidiaries in connection with such Asset
Disposition, and net of all payments made on any Indebtedness which is secured
by or relates to such Property, in accordance with the terms of any Lien or
agreement upon or with respect to such Property or which must by its terms or by
applicable law be repaid out of the proceeds from such Asset Disposition, and
net of all contractually required distributions and payments made to minority
interest holders in Restricted Subsidiaries or joint ventures as a result of
such Asset Disposition.
"NON-PAYMENT DEFAULT" means any event (other than a Payment Default), the
occurrence of which entitles one or more Persons to accelerate the maturity of
any Senior Debt of the Issuer or any Senior Debt of a Guarantor.
"NON-RECOURSE INDEBTEDNESS" with respect to any Person means Indebtedness
of such Person for which (a) the sole legal recourse for collection of principal
and interest on such Indebtedness is against the specific property identified in
the instruments evidencing or securing such Indebtedness and such property was
acquired with the proceeds of such Indebtedness or such Indebtedness was
incurred within 90 days after the acquisition of such property and (b) no other
assets of such Person may be realized upon in collection of principal or
interest on such Indebtedness. Indebtedness which is otherwise Non-Recourse
Indebtedness will not lose its character as Non-Recourse Indebtedness because
there is recourse to the borrower, any guarantor or any other Person for (i)
environmental warranties and indemnities, or (ii) indemnities for and
liabilities arising from fraud, misrepresentation, misapplication or non-payment
of rents, profits,
13
insurance and condemnation proceeds and other sums actually received by the
borrower from secured assets to be paid to the lender, including waste and
mechanics' liens.
"NON-U.S. PERSON" means a Person that is not a U.S. person, as defined in
Regulation S.
"NOTES" has the meaning assigned to such term in the Recitals.
"OFFER TO PURCHASE" has the meaning assigned to such term in Section 3.03.
"OFFICER" means the chairman of the Board of Directors, the president or
chief executive officer, any vice president, the chief financial officer, the
treasurer or any assistant treasurer, or the secretary or any assistant
secretary, of the Company.
"OFFICERS' CERTIFICATE" means a certificate signed in the name of the
Company (i) by the chairman of the Board of Directors, the president or chief
executive officer or a vice president and (ii) by the chief financial officer,
the treasurer or any assistant treasurer or the secretary or any assistant
secretary.
"OPINION OF COUNSEL" means a written opinion signed by legal counsel, who
may be an employee of or counsel to the Issuer, satisfactory to the Trustee.
"ORIGINAL NOTES" means the Initial Notes and any Exchange Notes issued in
exchange therefor.
"PAYING AGENT" refers to a Person engaged to perform the obligations of the
Trustee in respect of payments made or funds held hereunder in respect of the
Notes.
"PAYMENT BLOCKAGE PERIOD" has the meaning set forth in Section 10.02.
"PAYMENT DEFAULT" means any default in the payment of principal of or
interest on any Senior Debt of the Issuer or any Senior Debt of a Guarantor
beyond any applicable grace period with respect thereto.
"PERMANENT REGULATION S GLOBAL NOTE" means a Regulation S Global Note that
does not bear the Regulation S Temporary Global Note Legend.
"PERMITTED HOVNANIAN HOLDERS" means, collectively, Kevork S. Hovnanian, Ara
K. Hovnanian, the members of their immediate families, the respective estates,
spouses, heirs, ancestors, lineal descendants, legatees and legal
representatives of any of the foregoing and the trustee of any BONA FIDE trust
of which one or more of the foregoing are the sole beneficiaries or the grantors
thereof, or any entity of which any of the foregoing, individually or
collectively, beneficially own more than 50% of the Common Equity.
"PERMITTED INDEBTEDNESS" means
(a) Indebtedness under Credit Facilities which does not exceed $440
million principal amount outstanding at any one time;
(b) Indebtedness in respect of obligations of the Company and its
Subsidiaries to the trustees under indentures for debt securities;
14
(c) intercompany debt obligations of (i) the Company to the Issuer,
(ii) the Issuer to the Company, (iii) the Company or the Issuer to any
Restricted Subsidiary and (iv) any Restricted Subsidiary to the Company or
the Issuer or any other Restricted Subsidiary; PROVIDED HOWEVER, that any
Indebtedness of any Restricted Subsidiary or the Issuer or the Company owed
to any Restricted Subsidiary or the Issuer that ceases to be a Restricted
Subsidiary shall be deemed to be incurred and shall be treated as an
incurrence for purposes of Section 4.06(a) hereof at the time the
Restricted Subsidiary in question ceases to be a Restricted Subsidiary;
(d) Indebtedness of the Company or the Issuer or any Restricted
Subsidiary under any Currency Agreements or Interest Protection Agreements
in a notional amount no greater than the payments due (at the time the
related Currency Agreement or Interest Protection Agreement is entered
into) with respect to the Indebtedness or currency being hedged;
(e) Purchase Money Indebtedness;
(f) Capitalized Lease Obligations;
(g) obligations for, pledge of assets in respect of, and guaranties
of, bond financings of political subdivisions or enterprises thereof in the
ordinary course of business;
(h) Indebtedness secured only by office buildings owned or occupied
by the Company or any Restricted Subsidiary, which Indebtedness does not
exceed $10 million aggregate principal amount outstanding at any one time;
(i) Indebtedness under warehouse lines of credit, repurchase
agreements and Indebtedness, secured by mortgage loans and related assets
of mortgage lending Subsidiaries in the ordinary course of a mortgage
lending business; and
(j) Indebtedness of the Company or any Restricted Subsidiary which,
together with all other Indebtedness under this clause (j), does not exceed
$30 million aggregate principal amount outstanding at any one time.
"PERMITTED INVESTMENT" means
(a) Cash Equivalents;
(b) any Investment in the Company, the Issuer or any Restricted
Subsidiary or any Person that becomes a Restricted Subsidiary as a result
of such Investment or that is consolidated or merged with or into, or
transfers all or substantially all of the assets of it or an operating unit
or line of business to, the Company or a Restricted Subsidiary;
(c) any receivables, loans or other consideration taken by the
Company, the Issuer or any Restricted Subsidiary in connection with any
asset sale otherwise permitted by the Indenture;
(d) Investments received in connection with any bankruptcy or
reorganization proceeding, or as a result of foreclosure, perfection or
enforcement of any Lien or any
15
judgment or settlement of any Person in exchange for or satisfaction of
Indebtedness or other obligations or other property received from such
Person, or for other liabilities or obligations of such Person created, in
accordance with the terms of the Indenture;
(e) Investments in Currency Agreements or Interest Protection
Agreements described in the definition of Permitted Indebtedness;
(f) any loan or advance to an executive officer, director or employee
of the Company or any Restricted Subsidiary made in the ordinary course of
business or in accordance with past practice; PROVIDED, HOWEVER, that any
such loan or advance exceeding $1 million shall have been approved by the
Board of Directors of the Company or a committee thereof consisting of
disinterested members;
(g) Investments in joint ventures in a Real Estate Business with
unaffiliated third parties in an aggregate amount at any time outstanding
not to exceed 10% of Consolidated Tangible Assets at such time;
(h) Investments in interests in issuances of collateralized mortgage
obligations, mortgages, mortgage loan servicing, or other mortgage related
assets;
(i) obligations of the Company or a Restricted Subsidiary under
warehouse lines of credit of Mortgage Subsidiaries to repurchase mortgages;
and
(j) Investments in an aggregate amount outstanding not to exceed $10
million.
"PERMITTED LIENS" means
(a) Liens for taxes, assessments or governmental or quasi-government
charges or claims that (i) are not yet delinquent, (ii) are being contested
in good faith by appropriate proceedings and as to which appropriate
reserves have been established or other provisions have been made in
accordance with GAAP, if required, or (iii) encumber solely property
abandoned or in the process of being abandoned,
(b) statutory Liens of landlords and carriers', warehousemen's,
mechanics', suppliers', materialmen's, repairmen's or other Liens imposed
by law and arising in the ordinary course of business and with respect to
amounts that, to the extent applicable, either (i) are not yet delinquent
or (ii) are being contested in good faith by appropriate proceedings and as
to which appropriate reserves have been established or other provisions
have been made in accordance with GAAP, if required,
(c) Liens (other than any Lien imposed by the Employer Retirement
Income Security Act of 1974, as amended) incurred or deposits made in the
ordinary course of business in connection with workers' compensation.
unemployment insurance and other types of social security,
(d) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal bonds,
development obligations, progress payments, government contacts, utility
services, developer's or other obligations to make on-site or off-site
improvements and other obligations of like nature (exclusive
16
of obligations for the payment of borrowed money but including the items
referred to in the parenthetical in clause (a)(i) of the definition of
"Indebtedness"), in each case incurred in the ordinary course of business
of the Company, the Issuer and the Restricted Subsidiaries,
(e) attachment or judgment Liens not giving rise to a Default or an
Event of Default,
(f) easements, dedications, assessment district or similar Liens in
connection with municipal or special district financing, rights-of-way,
restrictions, reservations and other similar charges, burdens, and other
similar charges or encumbrances not materially interfering with the
ordinary course of business of the Company, the Issuer and the Restricted
Subsidiaries,
(g) zoning restrictions, licenses, restrictions on the use of real
property or minor irregularities in title thereto, which do not materially
impair the use of such real property in the ordinary course of business of
the Company, the Issuer and the Restricted Subsidiaries,
(h) Liens securing Indebtedness incurred pursuant to clause (h) or
(i) of the definition of Permitted Indebtedness,
(i) Liens securing Indebtedness of the Company, the Issuer or any
Restricted Subsidiary permitted to be incurred under the Indenture;
PROVIDED that the aggregate amount of all consolidated Indebtedness of the
Company, the Issuer and the Restricted Subsidiaries (including, with
respect to Capitalized Lease Obligations, the Attributable Debt in respect
thereof) secured by Liens (other than Non-Recourse Indebtedness and
Indebtedness incurred pursuant to clause (i) of the definition of Permitted
Indebtedness) shall not exceed 40% of Consolidated Adjusted Tangible Assets
at any one time outstanding (after giving effect to the incurrence of such
Indebtedness and the use of the proceeds thereof),
(j) Liens securing Non-Recourse Indebtedness of the Company, the
Issuer or any Restricted Subsidiary; PROVIDED, that such Liens apply only
to the property financed out of the net proceeds of such Non-Recourse
Indebtedness within 90 days after the incurrence of such Non-Recourse
Indebtedness,
(k) Liens securing Purchase Money Indebtedness; PROVIDED that such
Liens apply only to the property acquired, constructed or improved with the
proceeds of such Purchase Money Indebtedness within 90 days after the
incurrence of such Purchase Money Indebtedness,
(l) Liens on property or assets of the Company, the Issuer or any
Restricted Subsidiary securing Indebtedness of the Company, the Issuer or
any Restricted Subsidiary owing to the Company, the Issuer or one or more
Restricted Subsidiaries,
(m) leases or subleases granted to others not materially interfering
with the ordinary course of business of the Company and the Restricted
Subsidiaries,
17
(n) purchase money security interests (including, without limitation,
Capitalized Lease Obligations); PROVIDED that such Liens apply only to the
Property acquired and the related Indebtedness is incurred within 90 days
after the acquisition of such Property,
(o) any right of first refusal, right of first offer, option,
contract or other agreement to sell an asset; PROVIDED that such sale is
not otherwise prohibited under the Indenture,
(p) any right of a lender or lenders to which the Company, the Issuer
or a Restricted Subsidiary may be indebted to offset against, or
appropriate and apply to the payment of such, Indebtedness any and all
balances, credits, deposits, accounts or money of the Company, the Issuer
or a Restricted Subsidiary with or held by such lender or lenders or its
Affiliates,
(q) any pledge or deposit of cash or property in conjunction with
obtaining surety, performance, completion or payment bonds and letters of
credit or other similar instruments or providing earnest money obligations,
escrows or similar purpose undertakings or indemnifications in the ordinary
course of business of the Company, the Issuer and the Restricted
Subsidiaries,
(r) Liens for homeowner and property owner association developments
and assessments,
(s) Liens securing Refinancing Indebtedness; PROVIDED, that such
Liens extend only to the assets securing the Indebtedness being refinanced,
(t) Liens incurred in the ordinary course of business as security for
the obligations of the Company, the Issuer and the Restricted Subsidiaries
with respect to indemnification in respect of title insurance providers,
(u) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Subsidiary of
the Company or becomes a Subsidiary of the Company; PROVIDED that such
Liens were in existence prior to the contemplation of such merger or
consolidation or acquisition and do not extend to any assets other than
those of the Person merged into or consolidated with the Company or the
Subsidiary or acquired by the Company or its Subsidiaries,
(v) Liens on property existing at the time of acquisition thereof by
the Company or any Subsidiary of the Company, PROVIDED that such Liens were
in existence prior to the contemplation of such acquisition,
(w) Liens existing on the Issue Date and any extensions, renewals or
replacements thereof, and
(x) Liens on specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods.
18
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, incorporated or unincorporated association, joint stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"PREFERRED STOCK" of any Person means all Capital Stock of such Person
which has a preference in liquidation or with respect to the payment of
dividends.
"PROPERTY" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person, whether or not included in
the most recent consolidated balance sheet of such Person and its Subsidiaries
under GAAP.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness of the Company, the Issuer
or any Restricted Subsidiary incurred for the purpose of financing all or any
part of the purchase price, or the cost of construction or improvement, of any
property to be used in the ordinary course of business by the Company, the
Issuer and the Restricted Subsidiaries; PROVIDED, HOWEVER, that (a) the
aggregate principal amount of such Indebtedness shall not exceed such purchase
price or cost and (b) such Indebtedness shall be incurred no later than 90 days
after the acquisition of such property or completion of such construction or
improvement.
"QUALIFIED STOCK" means Capital Stock of the Company other than
Disqualified Stock.
"REAL ESTATE BUSINESS" means homebuilding, housing construction, real
estate development or construction and related real estate activities, including
the provision of mortgage financing or title insurance.
"REFINANCING INDEBTEDNESS" means Indebtedness (to the extent not Permitted
Indebtedness) that refunds, refinances or extends any Indebtedness of the
Company, the Issuer or any Restricted Subsidiary (to the extent not Permitted
Indebtedness) outstanding on the Issue Date or other Indebtedness (to the extent
not Permitted Indebtedness) permitted to be incurred by the Company, the Issuer
or any Restricted Subsidiary pursuant to the terms of the Indenture, but only to
the extent that
(a) the Refinancing Indebtedness is subordinated, if at all, to the
Notes or the Guarantee, as the case may be, to the same extent as the
Indebtedness being refunded, refinanced or extended,
(b) the Refinancing Indebtedness is scheduled to mature either (i) no
earlier than the Indebtedness being refunded, refinanced or extended or
(ii) after the maturity date of the Notes,
(c) the portion, if any, of the Refinancing Indebtedness that is
scheduled to mature on or prior to the maturity date of the Notes has a
Weighted Average Life to Maturity at the time such Refinancing Indebtedness
is incurred that is equal to or greater than the Weighted Average Life to
Maturity of the portion of the Indebtedness being refunded, refinanced or
extended that is scheduled to mature on or prior to the maturity date of
the Notes, and
19
(d) such Refinancing Indebtedness is in an aggregate principal amount
that is equal to or less than the aggregate principal amount then
outstanding under the Indebtedness being refunded, refinanced or extended.
"REGISTER" has the meaning assigned to such term in Section 2.09.
"REGISTRAR" means a Person engaged to maintain the Register.
"REGISTRATION RIGHTS AGREEMENT" means (i) the Registration Rights Agreement
dated the Issue Date between the Company and the Initial Purchasers party
thereto with respect to the Initial Notes, and (ii) with respect to any
Additional Notes, any registration rights agreements between the Company and the
Initial Purchasers party thereto relating to rights given by the Company to the
purchasers of Additional Notes to register such Additional Notes or exchange
them for Notes registered under the Securities Act.
"REGULAR RECORD DATE" for the interest payable on any Interest Payment Date
means the March 15 or September 15 (whether or not a Business Day) next
preceding such Interest Payment Date.
"REGULATION S" means Regulation S under the Securities Act.
"REGULATION S CERTIFICATE" means a certificate substantially in the form of
Exhibit E hereto.
"REGULATION S GLOBAL NOTE" means a Global Note representing Notes issued
and sold pursuant to Regulation S.
"REGULATION S TEMPORARY GLOBAL NOTE" means a Regulation S Global Note that
bears the Regulation S Temporary Global Note Legend.
"REGULATION S TEMPORARY GLOBAL NOTE LEGEND" means the legend set forth in
Exhibit I.
"RESTRICTED LEGEND" means the legend set forth in Exhibit C.
"RESTRICTED PAYMENT" means any of the following:
(a) the declaration or payment of any dividend or any other
distribution on Capital Stock of the Company, the Issuer or any Restricted
Subsidiary or any payment made to the direct or indirect holders (in their
capacities as such) of Capital Stock of the Company, the Issuer or any
Restricted Subsidiary (other than (i) dividends or distributions payable
solely in Qualified Stock and (ii) in the case of the Issuer or Restricted
Subsidiaries, dividends or distributions payable to the Company, the Issuer
or a Restricted Subsidiary);
(b) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company, the Issuer or any Restricted
Subsidiary (other than a payment made to the Company, the Issuer or any
Restricted Subsidiary); and
20
(c) any Investment (other than any Permitted Investment), including
any Investment in an Unrestricted Subsidiary (including by the designation
of a Subsidiary of the Company as an Unrestricted Subsidiary) and any
amounts paid in accordance with clause (b) of the definition of
Indebtedness.
"RESTRICTED PERIOD" means the relevant 40-day distribution compliance
period as defined in Regulation S, which, for each relevant Note, commences on
the date such Note is Issued.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company which is not an
Unrestricted Subsidiary.
"RULE 144A" means Rule 144A under the Securities Act.
"RULE 144A CERTIFICATE" means (i) a certificate substantially in the form
of Exhibit F hereto or (ii) a written certification addressed to the Issuer and
the Trustee to the effect that the Person making such certification (x) is
acquiring such Note (or beneficial interest) for its own account or one or more
accounts with respect to which it exercises sole investment discretion and that
it and each such account is a qualified institutional buyer within the meaning
of Rule 144A, (y) is aware that the transfer to it or exchange, as applicable,
is being made in reliance upon the exemption from the provisions of Section 5 of
the Securities Act provided by Rule 144A, and (z) acknowledges that it has
received such information regarding the Issuer as it has requested pursuant to
Rule 144A(d)(4) or has determined not to request such information.
"RULE 144A GLOBAL NOTE" means a Global Note that bears the Restricted
Legend representing Notes issued and sold pursuant to Rule 144A.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc. and its successors.
"SECURITIES ACT" means the Securities Act of 1933.
"SENIOR DEBT OF A GUARANTOR" has the meaning set forth in Section 10.01.
"SENIOR DEBT OF THE ISSUER" has the meaning set forth in Section 10.01.
"SHELF REGISTRATION STATEMENT" means the Shelf Registration Statement as
defined in a Registration Rights Agreement.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary of the Company that would
constitute a "significant subsidiary" as defined in Article 1, Rule 1-02 (w)(1)
or (2) of Regulation S-X promulgated under the Securities Act, as such
regulation is in effect on the date of the Indenture.
"SUBSIDIARY" of any Person means any corporation or other entity of which a
majority of the Capital Stock having ordinary voting power to elect a majority
of the Board of Directors or other persons performing similar functions is at
the time directly or indirectly owned or controlled by such Person.
"TRUSTEE" means the party named as such in the first paragraph of the
Indenture or any successor trustee under the Indenture pursuant to Article 7.
21
"TRUST INDENTURE ACT" means the Trust Indenture Act of 1939.
"U.S. GOVERNMENT OBLIGATIONS" means obligations issued or directly and
fully guaranteed or insured by the United States of America or by any agent or
instrumentality thereof, provided that the full faith and credit of the United
States of America is pledged in support thereof.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company so designated
by a resolution adopted by the Board of Directors of the Company or a duly
authorized committee thereof as provided below; PROVIDED that (a) the holders of
Indebtedness thereof do not have direct or indirect recourse against the
Company, the Issuer or any Restricted Subsidiary, and neither the Company, the
Issuer nor any Restricted Subsidiary otherwise has liability for, any payment
obligations in respect of such Indebtedness (including any undertaking,
agreement or instrument evidencing such Indebtedness), except, in each case, to
the extent that the amount thereof constitutes a Restricted Payment permitted by
the Indenture, in the case of Non-Recourse Indebtedness, to the extent such
recourse or liability is for the matters discussed in the last sentence of the
definition of "Non-Recourse Indebtedness," or to the extent such Indebtedness is
a guarantee by such Subsidiary of Indebtedness of the Company, the Issuer or a
Restricted Subsidiary and (b) no holder of any Indebtedness of such Subsidiary
shall have a right to declare a default on such Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity as a
result of a default on any Indebtedness of the Company, the Issuer or any
Restricted Subsidiary. As of the Issue Date, the Unrestricted Subsidiaries will
be the following:
Eastern National Title Insurance Agency, Inc., Eastern Title Agency, Inc.,
Founders Title Agency, Inc., Governor's Abstract Co., Inc. Hexter Fair Land
Title Company I, Inc., Homebuyer's Mortgage, Inc., Hovnanian Financial Services
I, Inc., Hovnanian Financial Services II, Inc., Hovnanian Financial Services
III, Inc., Hovnanian Financial Services IV. Inc., K. Hovnanian Investment
Properties, Inc., K. Hovnanian Mortgage, Inc., Preston Grande Homes, Inc.,
Heritage Pines, L.L.C., Kings Crossing at Montgomery, L.L.C., Knox Creek,
L.L.C., McKinley Court, L.L.C., Monticello Woods, L.L.C., New Homebuyers Title
Co. (Virginia) L.L.C., New Homebuyers Title Company, L.L.C., Shadow Creek,
L.L.C., Section 13 of the Hills, L.L.C., Title Group II, L.L.C., Town Homes at
Montgomery, L.L.C., Westwood Hills, L.L.C., WH/PR Land Co., L.L.C., Athena
Portfolio Investors, L.P., Beacon Manor Associates, L.P., Galleria Mortgage,
L.P., Goodman Mortgage Investors, L.P., Parkway Development, Sovereign Group,
L.P., and K. Hovnanian Venture I, L.L.C.
Subject to the foregoing, the Board of Directors of the Company or a duly
authorized committee thereof may designate any Subsidiary in addition to those
named above to be an Unrestricted Subsidiary; PROVIDED HOWEVER, that (a) the net
amount (the "DESIGNATION AMOUNT") then outstanding of all previous Investments
by the Company and the Restricted Subsidiaries in such Subsidiary will be deemed
to be a Restricted Payment at the time of such designation and will reduce the
amount available for Restricted Payments under Section 4.07 hereof to the extent
provided therein, (b) the Company must be permitted under Section 4.07 hereof to
make the Restricted Payment deemed to have been made pursuant to clause (a), and
(c) after giving effect to such designation, no Default or Event of Default
shall have occurred or be continuing. In accordance with the foregoing, and not
in limitation thereof, Investments made by any Person in any Subsidiary of such
Person prior to such Person's merger with the Company or any Restricted
Subsidiary (but not in contemplation or anticipation of such merger) shall not
be counted as an
22
Investment by the Company or such Restricted Subsidiary if such Subsidiary of
such Person is designated as an Unrestricted Subsidiary.
The Board of Directors of the Company or a duly authorized committee
thereof may also redesignate an Unrestricted Subsidiary to be a Restricted
Subsidiary PROVIDED, HOWEVER, that (a) the Indebtedness of such Unrestricted
Subsidiary as of the date of such redesignation could then be incurred under
Section 4.06 hereof and (b) immediately after giving effect to such
redesignation and the incurrence of any such additional Indebtedness, the
Company and the Restricted Subsidiaries could incur $1.00 of additional
Indebtedness under Section 4.06(a) hereof. Any such designation or redesignation
by the Board of Directors of the Company or a committee thereof will be
evidenced to the Trustee by the filing with the Trustee of a certified copy of
the resolution of the Board of Directors of the Company or a committee thereof
giving effect to such designation or redesignation and an Officers' Certificate
certifying that such designation or redesignation complied with the foregoing
conditions and setting forth the underlying calculations of such Officers'
Certificate. The designation of any Person as an Unrestricted Subsidiary shall
be deemed to include a designation of all Subsidiaries of such Person as
Unrestricted Subsidiaries; PROVIDED, HOWEVER, that the ownership of the general
partnership interest (or a similar member's interest in a limited liability
company) by an Unrestricted Subsidiary shall not cause a Subsidiary of the
Company of which more than 95% of the equity interest is held by the Company or
one or more Restricted Subsidiaries to be deemed an Unrestricted Subsidiary.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
or portion thereof at any date, the number of years obtained by dividing (a) the
sum of the products obtained by multiplying (i) the amount of each then
remaining installment, sinking fund, serial maturity or other required payment
of principal, including, without limitation, payment at final maturity, in
respect thereof, by (ii) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such payment
by (b) the sum of all such payments described in clause (a)(i) above.
SECTION 1.02. RULES OF CONSTRUCTION. Unless the context otherwise requires
or except as otherwise expressly provided,
(a) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(b) "herein," "hereof" and other words of similar import refer to the
Indenture as a whole and not to any particular Section, Article or other
subdivision;
(c) all references to Sections or Articles or Exhibits refer to Sections
or Articles or Exhibits of or to the Indenture unless otherwise indicated;
(d) references to agreements or instruments, or to statutes or
regulations, are to such agreements or instruments, or statutes or regulations,
as amended from time to time (or to successor statutes and regulations); and
(e) in the event that a transaction meets the criteria of more than one
category of permitted transactions or listed exceptions the Issuer may classify
such transaction as it, in its sole discretion, determines.
23
ARTICLE 2
THE NOTES
SECTION 2.01. FORM, DATING AND DENOMINATIONS; LEGENDS. The Notes and the
Trustee's certificate of authentication will be substantially in the form
attached as Exhibit A. The terms and provisions contained in the form of the
Notes annexed as Exhibit A constitute, and are hereby expressly made, a part of
the Indenture. The Notes may have notations, legends or endorsements required by
law, rules of or agreements with national securities exchanges to which the
Issuer is subject, or usage. Each Note will be dated the date of its
authentication. The Notes will be issuable in denominations of $1,000 in
principal amount and any multiple of $1,000 in excess thereof.
(a) (i) Except as otherwise provided in paragraph (c), Section
2.10(b)(iii), (b)(v), or (c) or Section 2.09(b)(iv), each Initial Note or
Initial Additional Note (other than a Permanent Regulation S Note) will
bear the Restricted Legend.
(ii) Each Global Note, whether or not an Initial Note or Additional
Note, will bear the DTC Legend.
(iii) Each Regulation S Temporary Global Note will bear the
Regulation S Temporary Global Note Legend.
(iv) Initial Notes and Initial Additional Notes offered and sold in
reliance on Regulation S will be issued as provided in Section 2.11(a).
(v) Initial Notes and Initial Additional Notes offered and sold in
reliance on any exception under the Securities Act other than Regulation S
and Rule 144A will be issued, and upon the request of the Issuer to the
Trustee, Initial Notes offered and sold in reliance on Rule 144A may be
issued, in the form of Certificated Notes.
(vi) Exchange Notes will be issued, subject to Section 2.09(b), in
the form of one or more Global Notes.
(b)(i) If the Issuer determines (upon the advice of counsel and such
other certifications and evidence as the Issuer may reasonably require)
that a Note is eligible for resale pursuant to Rule 144(k) under the
Securities Act (or a successor provision) and that the Restricted Legend is
no longer necessary or appropriate in order to ensure that subsequent
transfers of the Note (or a beneficial interest therein) are effected in
compliance with the Securities Act, or
(ii) after an Initial Note or any Initial Additional Note is
(A) sold pursuant to an effective registration statement under
the Securities Act, pursuant to the Registration Rights Agreement or
otherwise, or
(B) is validly tendered for exchange into an Exchange Note
pursuant to an Exchange Offer
24
the Issuer may instruct the Trustee to cancel the Note and issue to the Holder
thereof (or to its transferee) a new Note of like tenor and amount, registered
in the name of the Holder thereof (or its transferee), that does not bear the
Restricted Legend, and the Trustee will comply with such instruction.
(c) By its acceptance of any Note bearing the Restricted Legend (or
any beneficial interest in such a Note), each Holder thereof and each owner
of a beneficial interest therein acknowledges the restrictions on transfer
of such Note (and any such beneficial interest) set forth in this Indenture
and in the Restricted Legend and agrees that it will transfer such Note
(and any such beneficial interest) only in accordance with the Indenture
and such legend.
SECTION 2.02. EXECUTION AND AUTHENTICATION; EXCHANGE NOTES; ADDITIONAL
NOTES. (a) An Officer shall execute the Notes for the Issuer by facsimile or
manual signature in the name and on behalf of the Issuer. If an Officer whose
signature is on a Note no longer holds that office at the time the Note is
authenticated, the Note will still be valid.
(b) A Note will not be valid until the Trustee manually signs the
certificate of authentication on the Note, with the signature conclusive
evidence that the Note has been authenticated under the Indenture.
(c) At any time and from time to time after the execution and delivery of
the Indenture, the Issuer may deliver Notes executed by the Issuer to the
Trustee for authentication. The Trustee will authenticate and deliver
(i) Initial Notes for original issue in the aggregate principal
amount not to exceed $150,000,000,
(ii) Initial Additional Notes from time to time for original issue
in aggregate principal amounts up to $150,000,000 specified by the Issuer,
and
(iii) Exchange Notes from time to time for issue in exchange for a
like principal amount of Initial Notes or Initial Additional Notes
after the following conditions have been met:
(A) Receipt by the Trustee of an Officers' Certificate
specifying
(1) the amount of Notes to be authenticated and the date on which the
Notes are to be authenticated,
(2) whether the Notes are to be Initial Notes or, Additional Notes or
Exchange Notes,
(3) in the case of Initial Additional Notes, that the issuance of
such Notes does not contravene any provision of Article 4,
(4) whether the Notes are to be issued as one or more Global Notes or
Certificated Notes, and
25
(5) other information the Issuer may determine to include or the
Trustee may reasonably request.
(B) In the case of Initial Additional Notes, receipt by the
Trustee of an Opinion of Counsel confirming that the Holders of the
outstanding Notes will be subject to federal income tax in the same
amounts, in the same manner and at the same times as would have been
the case if such Additional Notes were not issued.
(C) In the case of Exchange Notes, effectiveness of an Exchange
Offer Registration Statement and Consummation (as defined in the
Registration Rights Agreement) of the exchange offer thereunder (and
receipt by the Trustee of an Officers' Certificate to that effect).
Initial Notes or Initial Additional Notes exchanged for Exchange Notes
will be cancelled by the Trustee.
SECTION 2.03. REGISTRAR, PAYING AGENT AND AUTHENTICATING AGENT; PAYING
AGENT TO HOLD MONEY IN TRUST. (a) The Issuer may appoint one or more Registrars
and one or more Paying Agents, and the Trustee may appoint an Authenticating
Agent, in which case each reference in the Indenture to the Trustee in respect
of the obligations of the Trustee to be performed by that Agent will be deemed
to be references to the Agent. The Issuer may act as Registrar or (except for
purposes of Article 8) Paying Agent. In each case the Issuer and the Trustee
will enter into an appropriate agreement with the Agent implementing the
provisions of the Indenture relating to the obligations of the Trustee to be
performed by the Agent and the related rights.
(b) The Issuer will require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of the
Holders or the Trustee all money held by the Paying Agent for the payment of
principal of and interest on the Notes and will promptly notify the Trustee of
any default by the Issuer in making any such payment. The Issuer at any time may
require a Paying Agent to pay all money held by it to the Trustee and account
for any funds disbursed, and the Trustee may at any time during the continuance
of any payment default, upon written request to a Paying Agent, require the
Paying Agent to pay all money held by it to the Trustee and to account for any
funds disbursed. Upon doing so, the Paying Agent will have no further liability
for the money so paid over to the Trustee.
SECTION 2.04. REPLACEMENT NOTES. If a mutilated Note is surrendered to the
Trustee or if a Holder claims that its Note has been lost, destroyed or
wrongfully taken, the Issuer will issue and the Trustee will authenticate a
replacement Note of like tenor and principal amount and bearing a number not
contemporaneously outstanding. Every replacement Note is an additional
obligation of the Issuer and entitled to the benefits of the Indenture. If
required by the Trustee or the Issuer, an indemnity must be furnished that is
sufficient in the judgment of both the Trustee and the Issuer to protect the
Issuer and the Trustee from any loss they may suffer if a Note is replaced. The
Issuer may charge the Holder for the expenses of the Issuer and the Trustee in
replacing a Note. In case the mutilated, lost, destroyed or wrongfully taken
Note has become or is about to become due and payable, the Issuer in its
discretion may pay the Note instead of issuing a replacement Note.
SECTION 2.05. OUTSTANDING NOTES. (a) Notes outstanding at any time are all
Notes that have been authenticated by the Trustee except for
26
(i) Notes cancelled by the Trustee or delivered to it for
cancellation;
(ii) any Note which has been replaced pursuant to Section 2.04
unless and until the Trustee and the Issuer receive proof satisfactory to
them that the replaced Note is held by a BONA FIDE purchaser; and
(iii) on or after the maturity date or any redemption date or date
for purchase of the Notes pursuant to an Offer to Purchase, those Notes
payable or to be redeemed or purchased on that date for which the Trustee
(or Paying Agent, other than the Issuer or an Affiliate of the Issuer)
holds money sufficient to pay all amounts then due.
(b) A Note does not cease to be outstanding because the Issuer or one of
its Affiliates holds the Note, PROVIDED that in determining whether the Holders
of the requisite principal amount of the outstanding Notes have given or taken
any request, demand, authorization, direction, notice, consent, waiver or other
action hereunder, Notes owned by the Issuer or any Affiliate of the Issuer will
be disregarded and deemed not to be outstanding, (it being understood that in
determining whether the Trustee is protected in relying upon any such request,
demand, authorization, direction, notice, consent, waiver or other action, only
Notes which the Trustee knows to be so owned will be so disregarded). Notes so
owned which have been pledged in good faith may be regarded as outstanding if
the pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Notes and that the pledgee is not the Issuer or
any Affiliate of the Issuer.
SECTION 2.06. TEMPORARY NOTES. Until definitive Notes are ready for
delivery, the Issuer may prepare and the Trustee will authenticate temporary
Notes. Temporary Notes will be substantially in the form of definitive Notes but
may have insertions, substitutions, omissions and other variations determined to
be appropriate by the Officer executing the temporary Notes, as evidenced by the
execution of the temporary Notes. If temporary Notes are issued, the Issuer will
cause definitive Notes to be prepared without unreasonable delay. After the
preparation of definitive Notes, the temporary Notes will be exchangeable for
definitive Notes upon surrender of the temporary Notes at the office or agency
of the Issuer designated for the purpose pursuant to Section 4.02, without
charge to the Holder. Upon surrender for cancellation of any temporary Notes the
Issuer will execute and the Trustee will authenticate and deliver in exchange
therefor a like principal amount of definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes will be entitled to the
same benefits under the Indenture as definitive Notes.
SECTION 2.07. CANCELLATION. The Issuer at any time may deliver to the
Trustee for cancellation any Notes previously authenticated and delivered
hereunder which the Issuer may have acquired in any manner whatsoever, and may
deliver to the Trustee for cancellation any Notes previously authenticated
hereunder which the Issuer has not issued and sold. Any Registrar or the Paying
Agent will forward to the Trustee any Notes surrendered to it for transfer,
exchange or payment. The Trustee will cancel all Notes surrendered for transfer,
exchange, payment or cancellation and dispose of them in accordance with its
normal procedures or the written instructions of the Issuer. The Issuer may not
issue new Notes to replace Notes it has paid in full or delivered to the Trustee
for cancellation.
SECTION 2.08. CUSIP AND ISIN NUMBERS. The Issuer in issuing the Notes may
use "CUSIP" and "ISIN" numbers, and the Trustee will use CUSIP numbers or ISIN
numbers in notices of redemption or exchange or in Offers to Purchase as a
convenience to Holders, the
27
notice to state that no representation is made as to the correctness of such
numbers either as printed on the Notes or as contained in any notice of
redemption or exchange or Offer to Purchase. The Issuer will promptly notify the
Trustee of any change in the CUSIP or ISIN numbers.
SECTION 2.09. REGISTRATION, TRANSFER AND EXCHANGE. (a) The Notes will be
issued in registered form only, without coupons, and the Issuer shall cause the
Trustee to maintain a register (the "REGISTER") of the Notes, for registering
the record ownership of the Notes by the Holders and transfers and exchanges of
the Notes.
(b) (i) Each Global Note will be registered in the name of the Depositary
or its nominee and, so long as DTC is serving as the Depositary thereof, will
bear the DTC Legend.
(ii) Each Global Note will be delivered to the Trustee as custodian
for the Depositary. Transfers of a Global Note (but not a beneficial
interest therein) will be limited to transfers thereof in whole, but not in
part, to the Depositary, its successors or their respective nominees,
except (A) as set forth in Section 2.09(b)(iv) and (B) transfers of
portions thereof in the form of Certificated Notes may be made upon request
of an Agent Member (for itself or on behalf of a beneficial owner) by
written notice given to the Trustee by or on behalf of the Depositary in
accordance with customary procedures of the Depositary and in compliance
with this Section and Section 2.10.
(iii) Agent Members will have no rights under the Indenture with
respect to any Global Note held on their behalf by the Depositary, and the
Depositary may be treated by the Issuer, the Trustee and any agent of the
Issuer or the Trustee as the absolute owner and Holder of such Global Note
for all purposes whatsoever. Notwithstanding the foregoing, the Depositary
or its nominee may grant proxies and otherwise authorize any Person
(including any Agent Member and any Person that holds a beneficial interest
in a Global Note through an Agent Member) to take any action which a Holder
is entitled to take under the Indenture or the Notes, and nothing herein
will impair, as between the Depositary and its Agent Members, the operation
of customary practices governing the exercise of the rights of a holder of
any security.
(iv) If (x) the Depositary notifies the Issuer that it is unwilling
or unable to continue as Depositary for a Global Note and a successor
depositary is not appointed by the Issuer within 90 days of the notice or
(y) an Event of Default has occurred and is continuing and the Trustee has
received a request from the Depositary, the Trustee will promptly exchange
each beneficial interest in the Global Note for one or more Certificated
Notes in authorized denominations having an equal aggregate principal
amount registered in the name of the owner of such beneficial interest, as
identified to the Trustee by the Depositary, and thereupon the Global Note
will be deemed canceled. If such Note does not bear the Restricted Legend,
then the Certificated Notes issued in exchange therefor will not bear the
Restricted Legend. If such Note bears the Restricted Legend, then the
Certificated Notes issued in exchange therefor will bear the Restricted
Legend, PROVIDED that any Holder of any such Certificated Note issued in
exchange for a beneficial interest in a Regulation S Temporary Global Note
will have the right upon presentation to the Trustee of a duly completed
Certificate of Beneficial Ownership after the Restricted Period to exchange
such Certificated Note for a Certificated Note of like
28
tenor and amount that does not bear the Restricted Legend, registered in
the name of such Holder.
(c) Each Certificated Note will be registered in the name of the holder
thereof or its nominee.
(d) A Holder may transfer a Note (or a beneficial interest therein) to
another Person or exchange a Note (or a beneficial interest therein) for another
Note or Notes of any authorized denomination by presenting to the Trustee a
written request therefor stating the name of the proposed transferee or
requesting such an exchange, accompanied by any certification, opinion or other
document required by Section 2.10. The Trustee will promptly register any
transfer or exchange that meets the requirements of this Section by noting the
same in the register maintained by the Trustee for the purpose; PROVIDED that
(i) no transfer or exchange will be effective until it is
registered in such register and
(ii) the Trustee will not be required (x) to issue, register the
transfer of or exchange any Note for a period of 15 days before a selection
of Notes to be redeemed or purchased pursuant to an Offer to Purchase, (y)
to register the transfer of or exchange any Note so selected for redemption
or purchase in whole or in part, except, in the case of a partial
redemption or purchase, that portion of any Note not being redeemed or
purchased, or (z) if a redemption or a purchase pursuant to an Offer to
Purchase is to occur after a Regular Record Date but on or before the
corresponding Interest Payment Date, to register the transfer of or
exchange any Note on or after the Regular Record Date and before the date
of redemption or purchase. Prior to the registration of any transfer, the
Issuer, the Trustee and their agents will treat the Person in whose name
the Note is registered as the owner and Holder thereof for all purposes
(whether or not the Note is overdue), and will not be affected by notice to
the contrary.
From time to time the Issuer will execute and the Trustee will authenticate
additional Notes as necessary in order to permit the registration of a transfer
or exchange in accordance with this Section.
No service charge will be imposed in connection with any transfer or
exchange of any Note, but the Issuer may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith (other than a transfer tax or other similar governmental charge
payable upon exchange pursuant to subsection (b)(iv)).
(e) (i) GLOBAL NOTE TO GLOBAL NOTE. If a beneficial interest in a Global
Note is transferred or exchanged for a beneficial interest in another Global
Note, the Trustee will (x) record a decrease in the principal amount of the
Global Note being transferred or exchanged equal to the principal amount of such
transfer or exchange and (y) record a like increase in the principal amount of
the other Global Note. Any beneficial interest in one Global Note that is
transferred to a Person who takes delivery in the form of an interest in another
Global Note, or exchanged for an interest in another Global Note, will, upon
transfer or exchange, cease to be an interest in such Global Note and become an
interest in the other Global Note and, accordingly, will thereafter be subject
to all transfer and exchange restrictions, if any, and other procedures
29
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.
(ii) GLOBAL NOTE TO CERTIFICATED NOTE. If a beneficial interest in a
Global Note is transferred or exchanged for a Certificated Note, the
Trustee will (x) record a decrease in the principal amount of such Global
Note equal to the principal amount of such transfer or exchange and (y)
deliver one or more new Certificated Notes in authorized denominations
having an equal aggregate principal amount to the transferee (in the case
of a transfer) or the owner of such beneficial interest (in the case of an
exchange), registered in the name of such transferee or owner, as
applicable.
(iii) CERTIFICATED NOTE TO GLOBAL NOTE. If a Certificated Note is
transferred or exchanged for a beneficial interest in a Global Note, the
Trustee will (x) cancel such Certificated Note, (y) record an increase in
the principal amount of such Global Note equal to the principal amount of
such transfer or exchange and (z) in the event that such transfer or
exchange involves less than the entire principal amount of the canceled
Certificated Note, deliver to the Holder thereof one or more new
Certificated Notes in authorized denominations having an aggregate
principal amount equal to the untransferred or unexchanged portion of the
canceled Certificated Note, registered in the name of the Holder thereof.
(iv) CERTIFICATED NOTE TO CERTIFICATED NOTE. If a Certificated Note
is transferred or exchanged for another Certificated Note, the Trustee will
(x) cancel the Certificated Note being transferred or exchanged, (y)
deliver one or more new Certificated Notes in authorized denominations
having an aggregate principal amount equal to the principal amount of such
transfer or exchange to the transferee (in the case of a transfer) or the
Holder of the canceled Certificated Note (in the case of an exchange),
registered in the name of such transferee or Holder, as applicable, and (z)
if such transfer or exchange involves less than the entire principal amount
of the canceled Certificated Note, deliver to the Holder thereof one or
more Certificated Notes in authorized denominations having an aggregate
principal amount equal to the untransferred or unexchanged portion of the
canceled Certificated Note, registered in the name of the Holder thereof.
SECTION 2.10. RESTRICTIONS ON TRANSFER AND EXCHANGE. (a) The transfer or
exchange of any Note (or a beneficial interest therein) may only be made in
accordance with this Section and Section 2.09 and, in the case of a Global Note
(or a beneficial interest therein), the applicable rules and procedures of the
Depositary. The Trustee shall refuse to register any requested transfer or
exchange that does not comply with the preceding sentence.
(b) Subject to paragraph (c), the transfer or exchange of any Note (or a
beneficial interest therein) of the type set forth in column A below for a Note
(or a beneficial interest therein) of the type set forth opposite in column B
below may only be made in compliance with the certification requirements (if
any) described in the clause of this paragraph set forth opposite in column C
below.
A B C
Rule 144A Global Note Rule 144A Global Note (i)
Rule 144A Global Note Regulation S Global Note (ii)
Rule 144A Global Note Certificated Note (iii)
30
Regulation S Global Note Rule 144A Global Note (iv)
Regulation S Global Note Regulation S Global Note (i)
Regulation S Global Note Certificated Note (v)
Certificated Note Rule 144A Global Note (iv)
Certificated Note Regulation S Global Note (ii)
Certificated Note Certificated Note (iii)
(i) No certification is required.
(ii) The Person requesting the transfer or exchange must deliver or
cause to be delivered to the Trustee a duly completed Regulation S
Certificate; PROVIDED that if the requested transfer or exchange is made by
the Holder of a Certificated Note that does not bear the Restricted Legend,
then no certification is required.
(iii) The Person requesting the transfer or exchange must deliver or
cause to be delivered to the Trustee (x) a duly completed Rule 144A
Certificate, (y) a duly completed Regulation S Certificate or (z) a duly
completed Institutional Accredited Investor Certificate, and/or an opinion
of counsel and such other certifications and evidence as the Issuer may
reasonably require in order to determine that the proposed transfer or
exchange is being made in compliance with the Securities Act and any
applicable securities laws of any state of the United States; PROVIDED that
if the requested transfer or exchange is made by the Holder of a
Certificated Note that does not bear the Restricted Legend, then no
certification is required. In the event that (A) the requested transfer or
exchange takes place after the Restricted Period and a duly completed
Regulation S Certificate is delivered to the Trustee or (B) a Certificated
Note that does not bear the Restricted Legend is surrendered for transfer
or exchange, upon transfer or exchange the Trustee will deliver a
Certificated Note that does not bear the Restricted Legend.
(iv) The Person requesting the transfer or exchange must deliver or
cause to be delivered to the Trustee a duly completed Rule 144A
Certificate.
(v) Notwithstanding anything to the contrary contained herein, no
such exchange is permitted if the requested exchange involves a beneficial
interest in a Regulation S Temporary Global Note. If the requested transfer
or exchange involves a beneficial interest in a Permanent Regulation S
Global Note, no certification is required and the Trustee will deliver a
Certificated Note that does not bear the Restricted Legend.
(c) No certification is required in connection with any transfer or
exchange of any Note (or a beneficial interest therein)
(i) after such Note is eligible for resale pursuant to Rule 144(k)
under the Securities Act (or a successor provision); PROVIDED that the
Issuer has provided the Trustee with a certificate to that effect, and the
Issuer may require from any Person requesting a transfer or exchange in
reliance upon this clause (i) an opinion of counsel and any other
reasonable certifications and evidence in order to support such
certificate; or
31
(ii) (A) sold pursuant to an effective registration statement,
pursuant to the Registration Rights Agreement or otherwise or (B) which is
validly tendered for exchange into an Exchange Note pursuant to an Exchange
Offer.
Any Certificated Note delivered in reliance upon this paragraph will not
bear the Restricted Legend.
(d) The Trustee will retain copies of all certificates, opinions and other
documents received in connection with the transfer or exchange of a Note (or a
beneficial interest therein), and the Issuer will have the right to inspect and
make copies thereof at any reasonable time upon written notice to the Trustee.
SECTION 2.11. REGULATION S TEMPORARY GLOBAL NOTES. (a) Each Note
originally sold by the Initial Purchasers in reliance upon Regulation S will be
evidenced by one or more Regulation S Global Notes that bear the Regulation S
Temporary Global Note Legend.
(b) An owner of a beneficial interest in a Regulation S Temporary Global
Note (or a Person acting on behalf of such an owner) may provide to the Trustee
(and the Trustee will accept) a duly completed Certificate of Beneficial
Ownership at any time after the Restricted Period (it being understood that the
Trustee will not accept any such certificate during the Restricted Period).
Promptly after acceptance of a Certificate of Beneficial Ownership with respect
to such a beneficial interest, the Trustee will cause such beneficial interest
to be exchanged for an equivalent beneficial interest in a Permanent Regulation
S Global Note, and will (x) permanently reduce the principal amount of such
Regulation S Temporary Global Note by the amount of such beneficial interest and
(y) increase the principal amount of such Permanent Regulation S Global Note by
the amount of such beneficial interest.
(c) Notwithstanding anything to the contrary contained herein, beneficial
interests in a Regulation S Temporary Global Note may be held through the
Depositary only through Euroclear and Clearstream and their respective direct
and indirect participants.
(d) Notwithstanding paragraph (b), if after the Restricted Period any
Initial Purchaser owns a beneficial interest in a Regulation S Temporary Global
Note, such Initial Purchaser may, upon written request to the Trustee
accompanied by a certification as to its status as an Initial Purchaser,
exchange such beneficial interest for an equivalent beneficial interest in a
Permanent Regulation S Global Note, and the Trustee will comply with such
request and will (x) permanently reduce the principal amount of such Regulation
S Temporary Global Note by the amount of such beneficial interest and (y)
increase the principal amount of such Permanent Regulation S Global Note by the
amount of such beneficial interest.
ARTICLE 3
REDEMPTION; OFFER TO PURCHASE
SECTION 3.01. OPTIONAL REDEMPTION. At any time and from time to time on or
after April 1, 2007, the Issuer may redeem the Notes, in whole or in part, at a
redemption price equal to the percentage of principal amount set forth below
plus accrued and unpaid interest, and Liquidated Damages, if any, thereon to the
redemption date.
32
12-MONTH PERIOD
COMMENCING
APRIL 1
IN YEAR PERCENTAGE
------------------------- ----------------------
2007 104.438%
2008 102.958%
2009 101.479%
2010 and thereafter 100.000%
SECTION 3.02. METHOD AND EFFECT OF REDEMPTION. (a) If the Issuer elects to
redeem Notes, it must notify the Trustee of the redemption date and the
principal amount of Notes to be redeemed by delivering an Officers' Certificate
at least 60 days before the redemption date (unless a shorter period is
satisfactory to the Trustee). If fewer than all of the Notes are being redeemed,
the Officers' Certificate must also specify a record date not less than 15 days
after the date of the notice of redemption is given to the Trustee, and the
Trustee will select the Notes to be redeemed pro rata, or as nearly a pro rata
basis as is practicable (subject to the procedures of DTC), unless such method
is otherwise prohibited, in which case, by lot or by any other method the
Trustee in its sole discretion deems fair and appropriate, in denominations of
$1,000 principal amount and multiples thereof. The Trustee will notify the
Issuer promptly of the Notes or portions of Notes to be called for redemption.
Notice of redemption must be sent by the Issuer or at the Issuer's request, by
the Trustee in the name and at the expense of the Issuer, to Holders whose Notes
are to be redeemed at least 30 days but not more than 60 days before the
redemption date.
(b) The notice of redemption will identify the Notes to be redeemed and
will include or state the following:
(i) the redemption date;
(ii) the redemption price, including the portion thereof
representing any accrued interest or Liquidated Damages;
(iii) the place or places where Notes are to be surrendered for
redemption;
(iv) Notes called for redemption must be so surrendered in order to
collect the redemption price;
(v) on the redemption date the redemption price will become due and
payable on Notes called for redemption, and interest on Notes called for
redemption will cease to accrue on and after the redemption date;
(vi) if any Note is redeemed in part, on and after the redemption
date, upon surrender of such Note, new Notes equal in principal amount to
the unredeemed portion will be issued; and
(vii) if any Note contains a CUSIP or ISIN number, no representation
is being made as to the correctness of the CUSIP or ISIN number either as
printed on the Notes or as contained in the notice of redemption and that
the Holder should rely only on the other identification numbers printed on
the Notes.
33
(c) Once notice of redemption is sent to the Holders, Notes called for
redemption become due and payable at the redemption price on the redemption
date, and upon surrender of the Notes called for redemption, the Issuer shall
redeem such Notes at the redemption price. Commencing on the redemption date,
Notes redeemed will cease to accrue interest. Upon surrender of any Note
redeemed in part, the Holder will receive a new Note equal in principal amount
to the unredeemed portion of the surrendered Note.
SECTION 3.03. OFFER TO PURCHASE. (a) An "OFFER TO PURCHASE" means an offer
by the Issuer to purchase Notes as required by the Indenture. An Offer to
Purchase must be made by written offer (the "OFFER") sent to the Holders. The
Issuer will notify the Trustee at least 15 days (or such shorter period as is
acceptable to the Trustee) prior to sending the offer to Holders of its
obligation to make an Offer to Purchase, and the offer will be sent by the
Issuer or, at the Issuer's request, by the Trustee in the name and at the
expense of the Issuer.
(b) The offer must include or state the following as to the terms of the
Offer to Purchase:
(i) the provision of the Indenture pursuant to which the Offer to
Purchase is being made;
(ii) the aggregate principal amount of the outstanding Notes offered
to be purchased by the Issuer pursuant to the Offer to Purchase (including,
if less than 100%, the manner by which such amount has been determined
pursuant to the Indenture) (the "PURCHASE AMOUNT");
(iii) the purchase price, including the portion thereof representing
accrued interest and Liquidated Damages, if any;
(iv) an expiration date (the "EXPIRATION DATE") not less than 30
days or more than 60 days after the date of the offer, and a settlement
date for purchase (the "PURCHASE DATE") not more than five Business Days
after the expiration date;
(v) information concerning the business of the Issuer and its
Subsidiaries which the Issuer in good faith believes will enable the
Holders to make an informed decision with respect to the Offer to Purchase,
at a minimum to include
(A) the most recent annual and quarterly financial statements
and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for the Company,
(B) a description of material developments in the Company's
business subsequent to the date of the latest of the financial
statements (including a description of the events requiring the Issuer
to make the Offer to Purchase), and
(C) if applicable, appropriate pro forma financial information
concerning the Offer to Purchase and the events requiring the Issuer
to make the Offer to Purchase;
(vi) a Holder may tender all or any portion of its Notes, subject to
the requirement that any portion of a Note tendered must be in a multiple
of $1,000 principal amount;
34
(vii) the place or places where Notes are to be surrendered for
tender pursuant to the Offer to Purchase;
(viii) each Holder electing to tender a Note pursuant to the offer
will be required to surrender such Note at the place or places specified in
the offer prior to the close of business on the expiration date (such Note
being, if the Issuer or the Trustee so requires, duly endorsed or
accompanied by a duly executed written instrument of transfer);
(ix) interest on any Note not tendered, or tendered but not
purchased by the Issuer pursuant to the Offer to Purchase, will continue to
accrue;
(x) on the purchase date the purchase price will become due and
payable on each Note accepted for purchase, and interest on Notes purchased
will cease to accrue on and after the purchase date;
(xi) Holders are entitled to withdraw Notes tendered by giving
notice, which must be received by the Issuer or the Trustee not later than
the close of business on the expiration date, setting forth the name of the
Holder, the principal amount of the tendered Notes, the certificate number
of the tendered Notes and a statement that the Holder is withdrawing all or
a portion of the tender;
(xii) (A) if Notes in an aggregate principal amount less than or
equal to the purchase amount are duly tendered and not withdrawn pursuant
to the Offer to Purchase, the Issuer will purchase all such Notes, and (B)
if the Offer to Purchase is for less than all of the outstanding Notes and
Notes in an aggregate principal amount in excess of the purchase amount are
tendered and not withdrawn pursuant to the offer, the Issuer will purchase
Notes having an aggregate principal amount equal to the purchase amount on
a pro rata basis, with adjustments so that only Notes in multiples of
$1,000 principal amount will be purchased;
(xiii) if any Note is purchased in part, new Notes equal in principal
amount to the unpurchased portion of the Note will be issued; and
(xiv) if any Note contains a CUSIP or ISIN number, no representation
is being made as to the correctness of the CUSIP or ISIN number either as
printed on the Notes or as contained in the offer and that the Holder
should rely only on the other identification numbers printed on the Notes.
(c) Prior to the purchase date, the Issuer will accept tendered Notes for
purchase as required by the Offer to Purchase and deliver to the Trustee all
Notes so accepted together with an Officers' Certificate specifying which Notes
have been accepted for purchase. On the purchase date the purchase price will
become due and payable on each Note accepted for purchase, and interest on Notes
purchased will cease to accrue on and after the purchase date. The Trustee will
promptly return to Holders any Notes not accepted for purchase and send to
Holders new Notes equal in principal amount to any unpurchased portion of any
Notes accepted for purchase in part.
35
(d) The Issuer will comply with Rule 14e-1 under the Exchange Act and all
other applicable laws in making any Offer to Purchase, and the above procedures
will be deemed modified as necessary to permit such compliance.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF NOTES. (a) The Issuer agrees to pay the principal
of and interest and Liquidated Damages, if any, on the Notes on the dates and in
the manner provided in the Notes and the Indenture. The Issuer shall pay
Liquidated Damages in the amounts set forth in the Registration Rights
Agreement. Not later than 9:00 A.M. (New York City time) on the due date of any
principal of or interest on any Notes, or any redemption or purchase price of
the Notes, the Issuer will deposit with the Trustee (or Paying Agent) money in
immediately available funds sufficient to pay such amounts, provided that if the
Issuer or any Affiliate of the Issuer is acting as Paying Agent, it will, on or
before each due date, segregate and hold in a separate trust fund for the
benefit of the Holders a sum of money sufficient to pay such amounts until paid
to such Holders or otherwise disposed of as provided in the Indenture. In each
case the Issuer will promptly notify the Trustee of its compliance with this
paragraph.
(b) An installment of principal or interest will be considered paid on the
date due if the Trustee (or Paying Agent, other than the Issuer or any Affiliate
of the Issuer) holds on that date money designated for and sufficient to pay the
installment. If the Issuer or any Affiliate of the Issuer acts as Paying Agent,
an installment of principal or interest will be considered paid on the due date
only if paid to the Holders.
(c) The Issuer agrees to pay interest on overdue principal, and, to the
extent lawful, overdue installments of interest and Liquidated Damages at the
rate per annum specified in the Notes.
(d) Payments in respect of the Notes represented by the Global Notes are
to be made by wire transfer of immediately available funds to the accounts
specified by the Holders of the Global Notes. With respect to Certificated
Notes, the Issuer will make all payments by wire transfer of immediately
available funds to the accounts specified by the Holders thereof or, if no such
account is specified, by mailing a check to each Holder's registered address.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. The Issuer will maintain an
office or agency where Notes may be surrendered for registration of transfer or
exchange or for presentation for payment and where notices and demands to or
upon the Issuer in respect of the Notes and the Indenture may be served. The
Issuer hereby initially designates the Corporate Trust Office of the Trustee as
such office of the Issuer. The Issuer will give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Issuer fails to maintain any such required office or
agency or fails to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served to the
Trustee.
The Issuer may also from time to time designate one or more other offices
or agencies where the Notes may be surrendered or presented for any of such
purposes and may from time to
36
time rescind such designations. The Issuer will give prompt written notice to
the Trustee of any such designation or rescission and of any change in the
location of any such other office or agency.
SECTION 4.03. EXISTENCE. The Company and the Issuer will each do or cause
to be done all things necessary to preserve and keep in full force and effect
its existence and the existence of each of its Restricted Subsidiaries in
accordance with their respective organizational documents, and the material
rights, licenses and franchises of the Company, the Issuer and each Restricted
Subsidiary, provided that the Company and the Issuer are not required to
preserve any such right, license or franchise, or the existence of any
Restricted Subsidiary, if the maintenance or preservation thereof is no longer
desirable in the conduct of the business of the Company and its Restricted
Subsidiaries taken as a whole; and provided further that this Section does not
prohibit any transaction otherwise permitted by Section 4.10 or Section 4.14.
SECTION 4.04. PAYMENT OF TAXES AND OTHER CLAIMS. The Company will pay or
discharge, and cause each of its Subsidiaries to pay or discharge before the
same become delinquent (a) all material taxes, assessments and governmental
charges levied or imposed upon the Company or any Subsidiary or its income or
profits or property, and (b) all material lawful claims for labor, materials and
supplies that, if unpaid, might by law become a Lien upon the property of the
Company or any Subsidiary, other than any such tax, assessment, charge or claim
the amount, applicability or validity of which is being contested in good faith
by appropriate proceedings and for which adequate reserves have been
established.
SECTION 4.05. MAINTENANCE OF PROPERTIES AND INSURANCE. (a) The Company
will cause all properties used or useful in the conduct of its business or the
business of any of its Restricted Subsidiaries to be maintained and kept in good
condition, repair and working order as in the judgment of the Company may be
necessary so that the business of the Company and its Restricted Subsidiaries
may be properly and advantageously conducted at all times; provided that nothing
in this Section prevents the Company or any Restricted Subsidiary from
discontinuing the use, operation or maintenance of any of such properties or
disposing of any of them, if such discontinuance or disposal is, in the judgment
of the Company, desirable in the conduct of the business of the Company and its
Restricted Subsidiaries taken as a whole.
(b) The Company will provide or cause to be provided, for itself and its
Restricted Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds customarily insured against by corporations
similarly situated and owning like properties, including, but not limited to,
products liability insurance and public liability insurance, with reputable
insurers, in such amounts, with such deductibles and by such methods as are
customary for corporations similarly situated in the industry in which the
Company and its Restricted Subsidiaries are then conducting business.
SECTION 4.06. LIMITATIONS ON INDEBTEDNESS. (a) The Company and the Issuer
will not, and will not cause or permit any Restricted Subsidiary, directly or
indirectly, to create, incur, assume, become liable for or guarantee the payment
of (collectively, an "INCURRENCE") any Indebtedness (including Acquired
Indebtedness) unless, after giving effect thereto and the application of the
proceeds therefrom, the Consolidated Fixed Charge Coverage Ratio on the date
thereof would be at least 2.0 to 1.0.
37
(b) Notwithstanding the foregoing, the provisions of the Indenture will
not prevent the incurrence of:
(i) Permitted Indebtedness,
(ii) Refinancing Indebtedness,
(iii) Non-Recourse Indebtedness,
(iv) any Guarantee of Indebtedness represented by the Notes, and
(v) any guarantee of Indebtedness incurred under Credit Facilities
in compliance with the Indenture.
(c) For purposes of determining compliance with this covenant, in the
event that an item of Indebtedness may be incurred through the first paragraph
of this covenant or by meeting the criteria of one or more of the types of
Indebtedness described in the second paragraph of this covenant (or the
definitions of the terms used therein), the Company, in its sole discretion,
(i) may classify such item of Indebtedness under and comply with
either of such paragraphs (or any of such definitions), as applicable,
(ii) may classify and divide such item of Indebtedness into more
than one of such paragraphs (or definitions), as applicable, and
(iii) may elect to comply with such paragraphs (or definitions), as
applicable, in any order.
(d) The Company and the Issuer will not, and will not cause or permit any
Guarantor to, directly or indirectly, in any event incur any Indebtedness that
purports to be by its terms (or by the terms of any agreement governing such
Indebtedness) subordinated to any other Indebtedness of the Company or of such
Guarantor, as the case may be, unless such Indebtedness is also by its terms (or
by the terms of any agreement governing such Indebtedness) made expressly
subordinated to the Notes or the Guarantee of such Guarantor, as the case may
be, to the same extent and in the same manner as such Indebtedness is
subordinated to such other Indebtedness of the Company or such Guarantor, as the
case may be.
SECTION 4.07. LIMITATION ON RESTRICTED PAYMENTS. (a) The Company and the
Issuer will not, and will not cause or permit any Restricted Subsidiary to,
directly or indirectly, make any Restricted Payment unless:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
(ii) immediately after giving effect to such Restricted Payment, the
Company could incur at least $1.00 of Indebtedness pursuant to Section
4.06(a) hereof; and
(iii) immediately after giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments (including the Fair Market
Value of any non-cash Restricted Payment) declared or made after May 4,
1999 does not exceed the sum of:
38
(A) 50% of the Consolidated Net Income of the Company on a
cumulative basis during the period (taken as one accounting period)
from and including February 1, 1999 and ending on the last day of the
Company's fiscal quarter immediately preceding the date of such
Restricted Payment (or in the event such Consolidated Net Income shall
be a deficit, minus 100% of such deficit), PLUS
(B) 100% of the aggregate net cash proceeds of and the Fair
Market Value of Property received by the Company from (1) any capital
contribution to the Company after February 1, 1999 or any issue or
sale after February 1, 1999 of Qualified Stock (other than to any
Subsidiary of the Company) and (2) the issue or sale after February 1,
1999 of any Indebtedness or other securities of the Company
convertible into or exercisable for Qualified Stock of the Company
that have been so converted or exercised, as the case may be, PLUS
(C) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made after May 4, 1999,
an amount (to the extent not included in the calculation of
Consolidated Net Income referred to in (A)) equal to the lesser of (x)
the return of capital with respect to such Investment (including by
dividend, distribution or sale of Capital Stock) and (y) the amount of
such Investment that was treated as a Restricted Payment, in either
case, less the cost of the disposition or repayment of such Investment
(to the extent not included in the calculation of Consolidated Net
Income referred to in (A)), PLUS
(D) with respect to any Unrestricted Subsidiary that is
redesignated as a Restricted Subsidiary after May 4, 1999, in
accordance with the definition of Unrestricted Subsidiary (so long as
the designation of such Subsidiary as an Unrestricted Subsidiary was
treated as a Restricted Payment made after May 4, 1999, and only to
the extent not included in the calculation of Consolidated Net Income
referred to in (A)), an amount equal to the lesser of (x) the
proportionate interest of the Company or a Restricted Subsidiary in an
amount equal to the excess of (I) the total assets of such Subsidiary,
valued on an aggregate basis at the lesser of book value and Fair
Market Value thereof, over (II) the total liabilities of such
Subsidiary, determined in accordance with GAAP, and (y) the
Designation Amount at the time of such Subsidiary's designation as an
Unrestricted Subsidiary, PLUS
(E) $17 million, MINUS
(F) the aggregate amount of all Restricted Payments (other than
Restricted Payments referred to in clause (iii) of paragraph (b)
below) made after February 1, 1999 through May 4, 1999.
(b) Clauses (ii) and (iii) of paragraph (a) will not prohibit:
(i) the payment of any dividend within 60 days of its declaration
if such dividend could have been made on the date of its declaration
without violation of the provisions of the Indenture;
39
(ii) the repurchase, redemption or retirement of any shares of
Capital Stock of the Company in exchange for, or out of the net
proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Company) of, other shares of Qualified Stock; and
(iii) the purchase, redemption or other acquisition, cancellation or
retirement for value of Capital Stock, or options, warrants, equity
appreciation rights or other rights to purchase or acquire Capital Stock,
of the Company or any Subsidiary held by officers or employees or former
officers or employees of the Company or any Subsidiary (or their estates or
beneficiaries under their estates) not to exceed $10 million in the
aggregate since May 4, 1999; PROVIDED, HOWEVER that each Restricted Payment
described in clauses (i) and (ii) of this sentence shall be taken into
account for purposes of computing the aggregate amount of all Restricted
Payments pursuant to clause (iii) of the immediately preceding paragraph.
(c) For purposes of determining the aggregate and permitted amounts of
Restricted Payments made, the amount of any guarantee of any Investment in any
Person that was initially treated as a Restricted Payment and which was
subsequently terminated or expired, net of any amounts paid by the Company or
any Restricted Subsidiary in respect of such guarantee, shall be deducted.
(d) In determining the "Fair Market Value of Property" for purposes of
clause (iii) of paragraph (a), Property other than cash, Cash Equivalents and
Marketable Securities shall be deemed to be equal in value to the "equity value"
of the Capital Stock or other securities issued in exchange therefor. The equity
value of such Capital Stock or other securities shall be equal to (i) the number
of shares of Common Equity issued in the transaction (or issuable upon
conversion or exercise of the Capital Stock or other securities issued in the
transaction) multiplied by the closing sale price of the Common Equity on its
principal market on the date of the transaction (less, in the case of Capital
Stock or other securities which require the payment of consideration at the time
of conversion or exercise, the aggregate consideration payable thereupon) or
(ii) if the Common Equity is not then traded on the New York Stock Exchange,
American Stock Exchange or Nasdaq National Market, or if the Capital Stock or
other securities issued in the transaction do not consist of Common Equity (or
Capital Stock or other securities convertible into or exercisable for Common
Equity), the value (if more than $10 million) of such Capital Stock or other
securities as determined by a nationally recognized investment banking firm
retained by the Board of Directors of the Company.
SECTION 4.08. LIMITATION ON LIENS. The Company and the Issuer will not,
and will not cause or permit any Restricted Subsidiary to, create, incur, assume
or suffer to exist any Liens which secure Indebtedness other than Senior Debt of
the Issuer or Senior Debt of a Guarantor, as the case may be, other than
Permitted Liens, on any of its Property, or on any shares of Capital Stock or
Indebtedness of any Restricted Subsidiary, unless contemporaneously therewith or
prior thereto all payments due under the Indenture and the Notes are secured on
an equal and ratable basis with the obligation or liability so secured until
such time as such obligation or liability is no longer secured by a Lien.
SECTION 4.09. LIMITATIONS ON RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES. The Company and the Issuer will not, and will not cause or permit
any Restricted Subsidiary to, create, assume or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction (other than
encumbrances or restrictions imposed by law or by
40
judicial or regulatory action or by provisions of agreements that restrict the
assignability thereof) on the ability of any Restricted Subsidiary to:
(a) pay dividends or make any other distributions on its Capital Stock or
any other interest or participation in, or measured by, its profits, owned by
the Company or any other Restricted Subsidiary, or pay interest on or principal
of any Indebtedness owed to the Company or any other Restricted Subsidiary,
(b) make loans or advances to the Company or any other Restricted
Subsidiary, or
(c) transfer any of its property or assets to the Company or any other
Restricted Subsidiary,
except for
(i) encumbrances or restrictions existing under or by reason of
applicable law,
(ii) contractual encumbrances or restrictions in effect on the Issue
Date and any amendments, modifications, restatements, renewals,
supplements, refundings, replacements or refinancings thereof, PROVIDED
that such amendments, modifications, restatements, renewals, supplements,
refundings, replacements or refinancings are no more restrictive, taken as
a whole, with respect to such dividend and other payment restrictions than
those contained in such contractual encumbrances or restrictions, as in
effect on May 4, 1999,
(iii) any restrictions or encumbrances arising under Acquired
Indebtedness; PROVIDED that such encumbrance or restriction applies only to
either the assets that were subject to the restriction or encumbrance at
the time of the acquisition or the obligor on such Indebtedness and its
Subsidiaries prior to such acquisition,
(iv) any restrictions or encumbrances arising in connection with
Refinancing Indebtedness; PROVIDED, HOWEVER, that any restrictions and
encumbrances of the type described in this clause (iv) that arise under
such Refinancing Indebtedness shall not be materially more restrictive or
apply to additional assets than those under the agreement creating or
evidencing the Indebtedness being refunded, refinanced, replaced or
extended,
(v) any Permitted Lien, or any other agreement restricting the sale
or other disposition of property, securing Indebtedness permitted by the
Indenture if such Permitted Lien or agreement does not expressly restrict
the ability of a Subsidiary of the Company to pay dividends or make or
repay loans or advances prior to default thereunder,
(vi) reasonable and customary borrowing base covenants set forth in
agreements evidencing Indebtedness otherwise permitted by the Indenture,
(vii) customary non-assignment provisions in leases, licenses,
encumbrances, contracts or similar assets entered into or acquired in the
ordinary course of business,
41
(viii) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all of the Capital Stock or assets of such Restricted
Subsidiary pending the closing of such sale or disposition,
(ix) encumbrances or restrictions existing under or by reason of the
Indenture or the Notes,
(x) purchase money obligations that impose restrictions on the
property so acquired of the nature described in clause (c) of the preceding
paragraph,
(xi) Liens permitted under the Indenture securing Indebtedness that
limit the right of the debtor to dispose of the assets subject to such
Lien,
(xii) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements, assets sale agreements,
stock sale agreements and other similar agreements,
(xiii) customary provisions of any franchise, distribution or similar
agreements,
(xiv) restrictions on cash or other deposits or net worth imposed by
contracts entered into in the ordinary course of business, and
(xv) any encumbrance or restrictions of the type referred to in
clauses (a), (b) or (c) of the first paragraph of this section imposed by
any amendments, modifications, restatements, renewals, supplements,
refinancings, replacements or refinancings of the contracts, instruments or
obligations referred to in clauses (i) through (xiv) of this paragraph,
PROVIDED that such amendments, modifications, restatements, renewals,
supplements, refundings, replacements or refinancings are, in the good
faith judgment of the Company's Board of Directors, no more restrictive
with respect to such dividend and other payment restrictions than those
contained in the dividend or other payment restrictions prior to such
amendment, modification, restatement, renewal, supplement, refunding,
replacement or refinancing.
SECTION 4.10. LIMITATIONS ON DISPOSITIONS OF ASSETS. The Company and the
Issuer will not, and will not cause or permit any Restricted Subsidiary to, make
any Asset Disposition unless (x) the Company (or such Restricted Subsidiary, as
the case may be) receives consideration at the time of such Asset Disposition at
least equal to the Fair Market Value thereof, and (y) not less than 70% of the
consideration received by the Company (or such Restricted Subsidiary, as the
case may be) is in the form of cash, Cash Equivalents and Marketable Securities.
The amount of (i) any Indebtedness (other than any Indebtedness subordinated to
the Notes) of the Company or any Restricted Subsidiary that is actually assumed
by the transferee in such Asset Disposition and (ii) the fair market value (as
determined in good faith by the Board of Directors of the Company) of any
property or assets received that are used or useful in a Real Estate Business,
shall be deemed to be consideration required by clause (y) above for purposes of
determining the percentage of such consideration received by the Company or the
Restricted Subsidiaries. The Net Cash Proceeds of an Asset Disposition shall,
within one year, at the Company's election, (a) be used by the Company or a
Restricted Subsidiary in the business of the construction and sale of homes
conducted by the Company and the Restricted Subsidiaries or any other business
of the
42
Company or a Restricted Subsidiary existing at the time of such Asset
Disposition, (b) be used to repay Senior Debt of the Issuer or Senior Debt of a
Guarantor or (c) to the extent not so used, be applied to make an Offer to
Purchase Notes and, if the Company or a Restricted Subsidiary elects or is
required to do so repay, purchase or redeem any other unsubordinated
Indebtedness (on a PRO RATA basis if the amount available for such repayment,
purchase or redemption is less than the aggregate amount of (i) the principal
amount of the Notes tendered in such Offer to Purchase and (ii) the lesser of
the principal amount, or accreted value, of such other unsubordinated
Indebtedness, plus, in each case accrued interest to the date of repayment,
purchase or redemption) at 100% of the principal amount or accreted value
thereof, as the case may be, plus accrued interest and Liquidated Damages, if
any, to the date of repurchase or repayment. Notwithstanding the foregoing, (A)
the Company will not be required to apply such Net Cash Proceeds to the
repurchase of Notes in accordance with clause (c) of the preceding sentence
except to the extent that such Net Cash Proceeds, together with the aggregate
Net Cash Proceeds of prior Asset Dispositions (other than those so used) which
have not been applied in accordance with this provision and as to which no prior
Offer to Purchase shall have been made, exceed 5% of Consolidated Tangible
Assets and (B) in connection with an Asset Disposition, the Company and the
Restricted Subsidiaries will not be required to comply with the requirements of
clause (y) of the first sentence of the first paragraph of this covenant to the
extent that the non-cash consideration received in connection with such Asset
Disposition together with the sum of all non-cash consideration received in
connection with all prior Asset Disposition that has not yet been converted into
cash, does not exceed 5% of Consolidated Tangible Assets; PROVIDED HOWEVER, that
when any non-cash consideration is converted into cash, such cash shall
constitute Net Cash Proceeds and be subject to the preceding sentence.
SECTION 4.11. GUARANTEES BY RESTRICTED SUBSIDIARIES. Each existing
Restricted Subsidiary (other than KHL, Inc. and K. Hovnanian Poland, sp. z.o.o.)
will provide a Note Guaranty. The Company will be permitted to cause any
Unrestricted Subsidiary to provide a Note Guaranty. If the Issuer, the Company
or any of its Restricted Subsidiaries acquires or creates a Restricted
Subsidiary after the date of the Indenture, the new Restricted Subsidiary must
provide a Note Guaranty.
A Restricted Subsidiary required to provide a Note Guaranty shall execute a
supplemental indenture in the form of Exhibit B, and deliver an Opinion of
Counsel to the Trustee to the effect that the supplemental indenture has been
duly authorized, executed and delivered by the Restricted Subsidiary and
constitutes a valid and binding obligation of the Restricted Subsidiary,
enforceable against the Restricted Subsidiary in accordance with its terms
(subject to customary exceptions).
SECTION 4.12. REPURCHASE OF NOTES UPON A CHANGE OF CONTROL. (a) In the
event that there shall occur a Change of Control, each Holder of Notes shall
have the right, at such Holder's option, to require the Issuer to purchase all
or any part of such Holder's Notes on a date (the "REPURCHASE DATE") that is no
later than 90 days after notice of the Change of Control, at 101% of the
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages, if any, to the Repurchase Date.
(b) On or before the thirtieth day after any Change of Control, the Issuer
is obligated to mail or cause to be mailed, to all Holders of record of Notes a
notice regarding the Change of Control and the repurchase right. The notice
shall state the Repurchase Date, the date by which the repurchase right must be
exercised, the price for the Notes and the procedure which the
43
Holder must follow to exercise such right. Substantially simultaneously with
mailing of the notice, the Issuer shall cause a copy of such notice to be
published in a newspaper of general circulation in the Borough of Manhattan, The
City of New York. To exercise such right, the Holder of such Note must deliver
at least ten days prior to the Repurchase Date written notice to the Issuer (or
an agent designated by the Issuer for such purpose) of the Holder's exercise of
such right, together with the Note with respect to which the right is being
exercised, duly endorsed for transfer; PROVIDED, HOWEVER, that if mandated by
applicable law, a Holder may be permitted to deliver such written notice nearer
to the Repurchase Date than may be specified by the Issuer.
(c) The Issuer will comply with applicable law, including Section 14(e) of
Exchange Act and Rule 14e-1 thereunder, if applicable, if the Issuer is required
to give a notice of a right of repurchase as a result of a Change of Control.
SECTION 4.13. LIMITATION ON TRANSACTIONS WITH AFFILIATES. (a) The Company
and the Issuer will not, and will not cause or permit any Restricted Subsidiary
to, make any loan, advance, guarantee or capital contribution to, or for the
benefit of, or sell, lease, transfer or otherwise dispose of any property or
assets to or for the benefit of, or purchase or lease any property or assets
from, or enter into or amend any contract, agreement or understanding with, or
for the benefit of, any Affiliate of the Company or any Affiliate of any of the
Company's Subsidiaries or any holder of 10% or more of the Common Equity of the
Company (including any Affiliates of such holders), in a single transaction or
series of related transactions (each, an "AFFILIATE TRANSACTION"), except for
any Affiliate Transaction the terms of which are at least as favorable as the
terms which could be obtained by the Company, the Issuer or such Restricted
Subsidiary, as the case may be, in a comparable transaction made on an arm's
length basis with Persons who are not such a holder, an Affiliate of such a
holder or an Affiliate of the Company or any of the Company's Subsidiaries.
(b) In addition, the Company and the Issuer will not, and will not cause
or permit any Restricted Subsidiary to, enter into an Affiliate Transaction
unless:
(i) with respect to any such Affiliate Transaction involving or
having a value of more than $1 million, the Company shall have (x) obtained
the approval of a majority of the Board of Directors of the Company and (y)
either obtained the approval of a majority of the Company's disinterested
directors or obtained an opinion of a qualified independent financial
advisor to the effect that such Affiliate Transaction is fair to the
Company, the Issuer or such Restricted Subsidiary, as the case may be, from
a financial point of view, and
(ii) with respect to any such Affiliate Transaction involving or
having a value of more than $10 million, the Company shall have (x)
obtained the approval of a majority of the Board of Directors of the
Company and (y) delivered to the Trustee an opinion of a qualified
independent financial advisor to the effect that such Affiliate Transaction
is fair to the Company, the Issuer or such Restricted Subsidiary, as the
case may be, from a financial point of view.
(c) Notwithstanding the foregoing, an Affiliate Transaction will not
include:
44
(i) any contract, agreement or understanding with, or for the
benefit of, or plan for the benefit of, employees of the Company or its
Subsidiaries generally (in their capacities as such) that has been approved
by the Board of Directors of the Company,
(ii) Capital Stock issuances to directors, officers and employees of
the Company or its Subsidiaries pursuant to plans approved by the
stockholders of the Company,
(iii) any Restricted Payment otherwise permitted under Section 4.07
hereof,
(iv) any transaction between or among the Company and one or more
Restricted Subsidiaries or between or among Restricted Subsidiaries
(PROVIDED, HOWEVER, no such transaction shall involve any other Affiliate
of the Company (other than an Unrestricted Subsidiary to the extent the
applicable amount constitutes a Restricted Payment permitted by the
Indenture)),
(v) any transaction between one or more Restricted Subsidiaries and
one or more Unrestricted Subsidiaries where all of the payments to, or
other benefits conferred upon, such Unrestricted Subsidiaries are
substantially contemporaneously dividended, or otherwise distributed or
transferred without charge, to the Company or a Restricted Subsidiary,
(vi) issuances, sales or other transfers or dispositions of
mortgages and collateralized mortgage obligations in the ordinary course of
business between Restricted Subsidiaries and Unrestricted Subsidiaries of
the Company, and
(vii) the payment of reasonable and customary fees to, and indemnity
provided on behalf of, officers, directors, employees or consultants of the
Company, the Issuer or any Restricted Subsidiary.
SECTION 4.14. LIMITATIONS ON MERGERS, CONSOLIDATIONS AND SALES OF ASSETS.
Neither the Company nor the Issuer nor any Guarantor will consolidate or merge
with or into, or sell, lease, convey or otherwise dispose of all or
substantially all of its assets (including, without limitation, by way of
liquidation or dissolution), or assign any of its obligations under the Notes,
the Guarantee or the Indenture (as an entirety or substantially as an entirety
in one transaction or in a series of related transactions), to any Person (in
each case other than in a transaction in which the Company, the Issuer or a
Restricted Subsidiary is the survivor of a consolidation or merger, or the
transferee in a sale, lease, conveyance or other disposition) unless:
(i) the Person formed by or surviving such consolidation or merger
(if other than the Company, the Issuer or the Guarantor, as the case may
be), or to which such sale, lease, conveyance or other disposition or
assignment will be made (collectively, the "SUCCESSOR"), is a corporation
or other legal entity organized and existing under the laws of the United
States or any state thereof or the District of Columbia, and the Successor
assumes by supplemental indenture in a form reasonably satisfactory to the
Trustee all of the obligations of the Company, the Issuer or the Guarantor,
as the case may be, under the Notes or a Guarantee, as the case may be, and
the Indenture,
45
(ii) immediately after giving effect to such transaction, no Default
or Event of Default has occurred and is continuing, and
(iii) immediately after giving effect to such transaction, the
Company (or its Successor) could incur at least $1.00 of Indebtedness
pursuant to Section 4.06(a) hereof.
The foregoing provisions shall not apply to (i) a transaction involving the
sale or disposition of Capital Stock of a Guarantor, or the consolidation or
merger of a Guarantor, or the sale, lease, conveyance or other disposition of
all or substantially all of the assets of a Guarantor, that in any such case
results in such Guarantor being released from its Guarantee pursuant to the
Indenture, or (ii) a transaction the purpose of which is to change the state of
incorporation of the Company, the Issuer or any Guarantor.
SECTION 4.15. REPORTS TO HOLDERS OF NOTES. (a) The Company shall file with
the Commission the annual reports and the information, documents and other
reports required to be filed pursuant to Section 13 or 15(d) of the Exchange
Act. The Company shall file with the Trustee and mail to each Holder of record
of Notes such reports, information and documents within 15 days after it files
them with the Commission. In the event that the Company is no longer subject to
these periodic requirements of the Exchange Act, it will nonetheless continue to
file reports with the Commission and the Trustee and mail such reports to each
Holder of Notes as if it were subject to such reporting requirements. Regardless
of whether the Company is required to furnish such reports to its stockholders
pursuant to the Exchange Act, the Company will cause its consolidated financial
statements and a "Management's Discussion and Analysis of Results of Operations
and Financial Condition" written report, similar to those that would have been
required to appear in annual or quarterly reports, to be delivered to Holders of
Notes.
(b) For so long as any of the Notes remain outstanding and constitute
"restricted securities" under Rule 144, the Company will furnish to the Holders
of the Notes and prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
(c) All obligors on the Notes will comply with Section 314(a) of the Trust
Indenture Act.
(d) Delivery of these reports and information to the Trustee is for
informational purposes only and the Trustee's receipt of them will not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 4.16. REPORTS TO TRUSTEE(a) The Company will deliver to the
Trustee within 120 days after the end of each fiscal year a written statement by
the Company's independent public accountants stating (i) that their audit
examination has included a review of the terms of this Indenture and the Notes
as they relate to accounting matters, and (ii) whether, in connection with their
audit examination, any Default has come to their attention and, if a Default has
come to their attention, specifying the nature and period of the existence
thereof.
(b) The Company shall deliver to the Trustee, on or prior to each Interest
Payment Date, an Officer's Certificate setting forth the amount of Liquidated
Damages, if any, the Issuer is required to pay on that Interest Payment Date. If
no Liquidated Damages are required to be paid
46
on a given Interest Payment Date, no such Officer's Certificate is required to
be delivered to the Trustee for that Interest Payment Date.
(c) The Company will notify the Trustee when any Notes are listed on any
national securities exchange and of any delisting.
SECTION 4.17. NOTICE OF OTHER DEFAULTS. In the event that any Indebtedness
of the Issuer or any Guarantor is declared due and payable before its maturity
because of the occurrence of any default under such Indebtedness, the Issuer or
the relevant Guarantor, as the case may be, shall promptly deliver to the
Trustee and Officers' Certificate stating such declaration; PROVIDED that the
term "Indebtedness" as used in this Section 4.17 shall not include Non-Recourse
Indebtedness.
SECTION 4.18. LIMITATION ON SENIOR SUBORDINATED INDEBTEDNESS. The Company
and the Issuer will not, and will not cause or permit any Guarantor to, incur
any Indebtedness that is subordinate in right of payment to any Senior Debt of
the Issuer or Senior Debt of a Guarantor, as the case may be, unless such
Indebtedness is pari passu with, or subordinated in right of payment to, the
Notes or any Note Guarantee; PROVIDED that the foregoing limitation shall not
apply to distinctions between categories of Senior Debt of the Issuer or Senior
Debt of a Guarantor that exist by reason of any Liens or guarantees arising or
created in respect of some but not all such Senior Debt of the Issuer or Senior
Debt of a Guarantor or priorities of paydown, from proceeds of collateral or
otherwise, among classes or tranches of any issue of Senior Debt of the Issuer
or Senior Debt of a Guarantor.
ARTICLE 5
REMEDIES
SECTION 5.01. EVENTS OF DEFAULT. (a) "EVENT OF DEFAULT" means any one or
more of the following events:
(i) the failure by the Company, the Issuer and the Guarantors to
pay interest on, or Liquidated Damages with respect to, any Note when the
same becomes due and payable and the continuance of any such failure for a
period of 30 days;
(ii) the failure by the Company, the Issuer and the Guarantors to
pay the principal or premium of any Note when the same becomes due and
payable at maturity, upon acceleration or otherwise;
(iii) the failure by the Company, the Issuer or any Restricted
Subsidiary to comply with any of its agreements or covenants in, or
provisions of, the Notes, the Guarantee or the Indenture and such failure
continues for the period and after the notice specified below (except in
the case of a default under Sections 4.12 and 4.14 hereof, which will
constitute Events of Default with notice but without passage of time);
(iv) the acceleration of any Indebtedness (other than Non-Recourse
Indebtedness) of the Company, the Issuer or any Restricted Subsidiary that
has an outstanding principal amount of $10 million or more, individually or
in the aggregate,
47
and such acceleration does not cease to exist, or such Indebtedness is not
satisfied, in either case within 30 days after such acceleration;
(v) the failure by the Company, the Issuer or any Restricted
Subsidiary to make any principal or interest payment in an amount of $10
million or more, individually or in the aggregate, in respect of
Indebtedness (other than Non-Recourse Indebtedness) of the Company or any
Restricted Subsidiary within 30 days of such principal or interest becoming
due and payable (after giving effect to any applicable grace period set
forth in the documents governing such Indebtedness);
(vi) a final judgment or judgments that exceed $10 million or more,
individually or in the aggregate, for the payment of money having been
entered by a court or courts of competent jurisdiction against the Company,
the Issuer or any of its Restricted Subsidiaries and such judgment or
judgments is not satisfied, stayed, annulled or rescinded within 60 days of
being entered;
(vii) the Company or any Restricted Subsidiary that is a Significant
Subsidiary pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in
an involuntary case,
(C) consents to the appointment of a Custodian of it or for all
or substantially all of its property, or
(D) makes a general assignment for the benefit of its
creditors;
(viii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Restricted
Subsidiary that is a Significant Subsidiary as debtor in an
involuntary case,
(B) appoints a Custodian of the Company or any Restricted
Subsidiary that is a Significant Subsidiary or a Custodian for all or
substantially all of the property of the Company or any Restricted
Subsidiary that is a Significant Subsidiary, or
(C) orders the liquidation of the Company or any Restricted
Subsidiary that is a Significant Subsidiary,
and the order or decree remains unstayed and in effect for 60 days, or
(ix) any Guarantee of a Guarantor which is a Significant Subsidiary
ceases to be in full force and effect (other than in accordance with the
terms of such Guarantee and the Indenture) or is declared null and void and
unenforceable or found to be invalid or any Guarantor denies its liability
under its Guarantee (other than by reason of release of a
48
Guarantor from its Guarantee in accordance with the terms of the Indenture
and the Guarantee).
A Default as described in subclause (iii) above will not be deemed an Event
of Default until the Trustee notifies the Company, or the Holders of at least 25
percent in principal amount of the then outstanding Notes notify the Company and
the Trustee, of the Default and (except in the case of a default with respect to
Sections 4.12 and 4.14 hereof) the Company does not cure the Default within 60
days after receipt of the notice. The notice must specify the Default, demand
that it be remedied and state that the notice is a "Notice of Default." If such
a Default is cured within such time period, it ceases.
If an Event of Default (other than an Event of Default with respect to the
Company resulting from subclauses (vii) or (viii) above), shall have occurred
and be continuing under the Indenture, the Trustee by notice to the Company, or
the Holders of at least 25 percent in principal amount of the Notes then
outstanding by notice to the Company and the Trustee, may declare all Notes to
be due and payable immediately. Upon such declaration of acceleration, the
amounts due and payable on the Notes will be due and payable immediately. If an
Event of Default with respect to the Company specified in subclauses (vii) or
(viii) above occurs, such an amount will ipso facto become and be immediately
due and payable without any declaration, notice or other act on the part of the
Trustee and the Company or any Holder.
Except with respect to an Event of Default pursuant to clauses (i) or (ii)
of this Section 5.01, the Trustee shall not be charged with knowledge of any
Event of Default unless written notice thereof shall have been given to the
Trustee by the Issuer or any Holder.
SECTION 5.02. OTHER REMEDIES. If an Event of Default occurs and is
continuing, the Trustee may pursue, in its own name or as trustee of an express
trust, any available remedy by proceeding at law or in equity to collect the
payment of principal of and interest or Liquidated Damages, if any, on the Notes
or to enforce the performance of any provision of the Notes or the Indenture.
The Trustee may maintain a proceeding even if it does not possess any of the
Notes or does not produce any of them in the proceeding.
SECTION 5.03. WAIVER OF DEFAULTS BY MAJORITY OF HOLDERS. The Holders of a
majority in principal amount of the Notes then outstanding by written notice to
the Trustee and the Company may waive any Default or Event of Default (other
than any Default or Event of Default in payment of principal or interest or
Liquidated Damages) on the Notes under the Indenture. Holders of a majority in
principal amount of the then outstanding Notes may rescind an acceleration and
its consequence (except an acceleration due to nonpayment of principal or
interest or Liquidated Damages, if any, on the Notes) if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
(other than the non-payment of accelerated principal) have been cured or waived.
SECTION 5.04. DIRECTION OF PROCEEDINGS. The Holders may not enforce the
provisions of the Indenture, the Notes or the Guarantees except as provided in
the Indenture. Subject to certain limitations, Holders of a majority in
principal amount of the Notes then outstanding may direct the Trustee in its
exercise of any trust or power, PROVIDED, HOWEVER, that such direction does not
conflict with the terms of the Indenture. The Trustee may withhold from the
Holders notice of any continuing Default or Event of Default (except any Default
or Event of Default in payment of principal or interest or Liquidated Damages,
if any, on the Notes or that resulted
49
from the failure to comply with Section 4.12 hereof) if the Trustee determines
that withholding such notice is in the Holders' interest or would involve the
Trustee in personal liability.
SECTION 5.05. APPLICATION OF MONEYS COLLECTED BY TRUSTEE. Any moneys
collected by the Trustee pursuant to this Article with respect to Notes shall be
applied in the order following, at the date or dates fixed by the Trustee for
the distribution of such moneys, upon presentation of the Notes and stamping
thereon the payment, if only partially paid, and upon surrender thereof, if
fully paid:
FIRST: To the payment of costs and expenses of collection and
reasonable compensation to the Trustee, its agents, attorneys and counsel,
and all other expenses and liabilities incurred, and all advances made, by
the Trustee pursuant to Section 7.07 except as a result of its negligence
or bad faith;
SECOND: If the principal of the Notes shall not have become due and be
unpaid, to the payment of interest or Liquidated Damages, if any, on the
Notes with interest (to the extent that such interest has been collected by
the Trustee) upon the overdue installments of interest and Liquidated
Damages, if any, at the rate borne by the Notes, such payment to be made
ratably to the Persons entitled thereto;
THIRD: If the principal of the Notes shall have become due, by
declaration or otherwise, to the payment of the whole amount then owing and
unpaid upon the Notes for principal, interest and Liquidated Damages, if
any, with interest on the overdue principal and (to the extent that such
interest has been collected by the Trustee) upon overdue installments of
interest and Liquidated Damages, if any, at the rate borne by the Notes,
and in case such moneys shall be insufficient to pay in full the whole
amounts so due and unpaid upon the Notes, then to the payment of such
principal and interest and Liquidated Damages, if any, without preference
or priority of principal over interest or Liquidated Damages or of interest
or Liquidated Damages over principal, or of interest over Liquidated
Damages, or of any installment of interest or Liquidated Damages over any
other installment of interest or Liquidated Damages, ratably to the
aggregate of such principal and accrued and unpaid interest and Liquidated
Damages, if any; and
FOURTH: To the payment of any surplus then remaining to the Issuer,
its successors or assigns, or to whomsoever may be lawfully entitled to
receive the same.
No claim for interest which in any manner at or after maturity shall have
been transferred or pledged separate or apart from the Notes to which it
relates, or which in any manner shall have been kept alive after maturity by an
extension (otherwise than pursuant to an extension made pursuant to a plan
proposed by the Issuer to the Holders of all Notes), purchase, funding or
otherwise by or on behalf or with the consent or approval of the Issuer shall be
entitled, in case of a default hereunder, to any benefit of this Indenture,
except after prior payment in full of the principal of all Notes and of all
claims for interest not so transferred, pledged, kept alive, extended, purchased
or funded.
SECTION 5.06. PROCEEDINGS BY HOLDERS. No holder of any Notes shall have
any right by virtue of or by availing of any provision of this Indenture to
institute any suit, action or proceeding in equity or at law upon or under or
with respect to this Indenture for the appointment of a receiver or trustee or
similar official, or for any other remedy hereunder, unless such Holder
50
previously shall have given to the Trustee written notice of default and of the
continuance thereof, as hereinbefore provided, and unless the Holders of not
less than 25% in aggregate principal amount of the Notes shall have made written
request to the Trustee to institute such action, suit or proceeding in its own
name as Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee for 60 days after its receipt of
such notice, request and offer of indemnity, shall have neglected or refused to
institute any such action, suit or proceeding, it being understood and intended,
and being expressly covenanted by the Holder of every Note with every other
Holder and the Trustee, that no one or more Holders of Notes shall have any
right in any manner whatever by virtue of or by availing of any provision of
this Indenture or of the Notes to affect, disturb or prejudice the rights of any
other Holder of Notes, or to obtain or seek to obtain priority over or
preference as to any other such Holder, or to enforce any right under this
Indenture or the Notes, except in the manner herein provided and for the equal,
ratable and common benefit of all Holders of Notes.
Notwithstanding any other provisions in this Indenture, however, the right
of any Holder of any Note to receive payment of the principal of, premium, if
any, and interest and Liquidated Damages, if any, on such Note, on or after the
maturity thereof, or to institute suit for the enforcement of any such payment
on or after such respective dates shall not be impaired or affected without the
consent of such Holder.
SECTION 5.07. PROCEEDINGS BY TRUSTEE. In case of an Event of Default
hereunder, the Trustee may in its discretion proceed to protect and enforce the
rights vested in it by this Indenture by such appropriate judicial proceedings
as the Trustee shall deem most effectual to protect and enforce any of such
rights, either by suit in equity or by action at law or by proceedings in
bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture, or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law.
SECTION 5.08. REMEDIES CUMULATIVE AND CONTINUING. All powers and remedies
given by this Article Five to the Trustee or to the Holders shall, to the extent
permitted by law, be deemed cumulative and not exclusive of any thereof or of
any other powers and remedies available to the Trustee or the Holders, by
judicial proceedings or otherwise, to enforce the performance or observance of
the covenants and agreements contained in this Indenture, and no delay or
omission of the Trustee or of any Holder to exercise any right or power accruing
upon any default occurring and continuing as aforesaid shall impair any such
right or power, or shall be construed to be a waiver of any such default or an
acquiescence therein; and, subject to the provisions of Section 5.06, every
power and remedy given by this Article 5 or by law to the Trustee or to the
Holders may be exercised from time to time, and as often as shall be deemed
expedient, by the Trustee or by the Holders.
SECTION 5.09. UNDERTAKING TO PAY COSTS. All parties to this Indenture
agree and each Holder of any Note by his acceptance thereof shall be deemed to
have agreed, that any court may in its discretion require, or in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken or omitted by it as Trustee, the filing
by any party litigant in such suit of any undertaking to pay the cost of such
suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees and expenses, against any party litigant in
such suit, having due regard to the merits and good faith of
51
the claims or defenses made by such party litigant; but the provisions of this
Section 5.09 shall not apply to any suit instituted by the Trustee, to any suit
instituted by any Holder, or group of Holders, holding in the aggregate more
than 10% in principal amount of the Notes, or to any suit instituted by any
Holders for the enforcement of the payment of the principal of or interest or
Liquidated Damages, if any, on any Note against the Issuer on or after the due
date of such Note.
SECTION 5.10. NOTICE OF DEFAULTS. The Company is required to deliver to
the Trustee an annual statement regarding compliance with the Indenture, and
include in such statement, if any officer of the Company is aware of any Default
or Event of Default, a statement specifying such Default or Event of Default and
what action the Company is taking or proposes to take with respect thereto. In
addition, the Company is required to deliver to the Trustee prompt written
notice of the occurrence of any Default or Event of Default.
SECTION 5.11. WAIVER OF STAY, EXTENSION OR USURY LAWS. The Company, the
Issuer and each Guarantor covenants, to the extent that it may lawfully do so,
that it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury law or other law that would prohibit or forgive the Company, the Issuer or
the Guarantor from paying all or any portion of the principal of, or interest or
Liquidated Damages, if any, on the Notes as contemplated herein, wherever
enacted, now or at any time hereafter in force, or that may affect the covenants
or the performance of the Indenture. The Company, the Issuer and each Guarantor
hereby expressly waives, to the extent that it may lawfully do so, all benefit
or advantage of any such law and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
ARTICLE 6
GUARANTEE
SECTION 6.01. GUARANTEE. Each of the Guarantors hereby unconditionally
guarantees, jointly and severally, to each Holder and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of this
Indenture, the Notes or the obligations of the Issuer hereunder or thereunder,
that: (i) the due and punctual payment of the principal of and any premium,
interest or Liquidated Damages on the Notes, whether at maturity or on an
interest payment date, by acceleration, pursuant to an Offer to Purchase or
otherwise, and interest on the overdue principal of and interest and Liquidated
Damages, if any, on the Notes, if lawful, and all other obligations of the
Issuer to the Holders or the Trustee hereunder or thereunder shall be promptly
paid in full when due or performed in accordance with the terms hereof and
thereof; including all amounts payable to the Trustee under Section 7.07 hereof,
and (ii) in case of any extension of time of payment or renewal of any Notes or
any of such other obligations, the same shall be promptly paid in full when due
or to be performed in accordance with the terms of the extension or renewal,
whether at stated maturity, by acceleration or otherwise.
If the Issuer fails to make any payment when due of any amount so
guaranteed for whatever reason, each Guarantor shall be obligated to pay the
same immediately. Each Guarantor hereby agrees that its obligations hereunder
shall be continuing, absolute and unconditional, irrespective of, and shall be
unaffected by, the validity regularity or enforceability of the Notes, this
Indenture, the absence of any action to enforce the same, any waiver or consent
52
by any Holder or the Trustee with respect to any provisions hereof or thereof,
the recovery of any judgment against the Issuer, any action to enforce the same
or any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of such Guarantor. If any Holder is required by any court
or otherwise to return to the Issuer or any Guarantor, or any custodian,
trustee, liquidator or other similar official acting in relation to the Issuer
or such Guarantor, any amount paid by the Issuer or any Guarantor to the Trustee
or such Holder, this Article 6, to the extent theretofore discharged, shall be
reinstated in full force and effect. Each Guarantor agrees that is shall not be
entitled to any right of subrogation in relation to the Holders in respect of
any obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby.
The Guarantee set forth in this Section 6.01 shall not be valid or become
obligatory for any purpose with respect to a Note until the certificate of
authentication on such Note shall have been signed by the Trustee or any duly
appointed agent.
SECTION 6.02. OBLIGATIONS OF EACH GUARANTOR UNCONDITIONAL. Nothing
contained in this Article 6 or elsewhere in this Indenture or in any Note is
intended to or shall impair, as between each Guarantor and the Holders, which
are absolute and unconditional, to pay to the Holders the principal of and
interest and Liquidated Damages, if any, on the Notes as and when the same shall
become due and payable in accordance with the provisions of the Guarantee or is
intended to or shall affect the relative rights of the Holders and creditors of
the Issuer, nor shall anything herein or therein prevent the Trustee or any
Holder from exercising all remedies otherwise permitted by applicable law upon
any Default under this Indenture in respect of cash, property or securities of
such Guarantor received upon the exercise of any such remedy.
Upon any distribution of assets of a Guarantor referred to in this Article
6, the Trustee, subject to the provisions of Article 7, and the Holders shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending, or a certificate of the liquidating
trustee or agent or other person making any distribution to the Trustee or to
the Holders, for the purpose of ascertaining the persons entitled to participate
in such distribution, the holders of other indebtedness of such Guarantor, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article 6.
SECTION 6.03. RELEASE OF A GUARANTOR. If all or substantially all of the
assets of any Guarantor other than the Company or all of the Capital Stock of
any Guarantor other than the Company is sold (including by consolidation,
merger, issuance or otherwise) or disposed of (including by liquidation,
dissolution or otherwise) by the Company or any of its Subsidiaries, or, unless
the Company elects otherwise, if any Guarantor other than the Company is
designated an Unrestricted Subsidiary in accordance with the terms of the
Indenture, then such Guarantor (in the event of a sale or other disposition of
all of the Capital Stock of such Guarantor or a designation as an Unrestricted
Subsidiary) or the Person acquiring such assets (in the event of a sale or other
disposition of all or substantially all of the assets of such Guarantor) shall
be deemed automatically and unconditionally released and discharged from any of
its obligations under the Indenture without any further action on the part of
the Trustee or any Holder of the Notes.
An Unrestricted Subsidiary that is a Guarantor shall be deemed
automatically and unconditionally released and discharged from all obligations
under its Guarantee upon notice
53
from the Company to the Trustee to such effect, without any further action
required on the part of the Trustee or any Holder.
SECTION 6.04. EXECUTION AND DELIVERY OF GUARANTY. The execution by each
Guarantor of the Indenture (or a supplemental indenture in the form of Exhibit
B) evidences the Note Guaranty of such Guarantor, whether or not the person
signing as an officer of the Guarantor still holds that office at the time of
authentication of any Note. The delivery of any Note by the Trustee after
authentication constitutes due delivery of the Note Guaranty set forth in the
Indenture on behalf of each Guarantor.
SECTION 6.05. LIMITATION ON GUARANTOR LIABILITY. Notwithstanding anything
to the contrary in this Article, each Guarantor, and by its acceptance of Notes,
each Holder, hereby confirms that it is the intention of all such parties that
the Note Guaranty of such Guarantor not constitute a fraudulent conveyance under
applicable fraudulent conveyance provisions of the United States Bankruptcy Code
or any comparable provision of state law. To effectuate that intention, the
Trustee, the Holders and the Guarantors hereby irrevocably agree that the
obligations of each Guarantor under its Note Guaranty are limited to the maximum
amount that would not render the Guarantor's obligations subject to avoidance
under applicable fraudulent conveyance provisions of the United States
Bankruptcy Code or any comparable provision of state law.
SECTION 6.06. ARTICLE 6 NOT TO PREVENT EVENTS OF DEFAULT. The failure to
make a payment on account of principal or interest or Liquidated Damages, if
any, on the Notes by reason of any provision in this Article 6 shall not be
construed as preventing the occurrence of any Event of Default under Section
5.01.
SECTION 6.07. WAIVER BY THE GUARANTORS. Each Guarantor hereby irrevocably
waives diligence, presentment, demand of payment, demand of performance, filing
of claims with a court in the event of insolvency of bankruptcy of the Issuer,
any right to require a proceeding first against the Issuer, the benefit of
discussion, protest, notice and all demand whatsoever and covenants that this
Guarantee shall not be discharged except by complete performance of the
obligations contained in the Notes, in this Indenture and in this Article 6.
SECTION 6.08. SUBROGATION AND CONTRIBUTION. Upon making any payment with
respect to any obligation of the Issuer under this Article, the Guarantor making
such payment will be subrogated to the rights of the payee against the Issuer
with respect to such obligation, PROVIDED that the Guarantor may not enforce
either any right of subrogation, or any right to receive payment in the nature
of contribution, or otherwise, from any other Guarantor, with respect to such
payment so long as any amount payable by the Issuer hereunder or under the Notes
remains unpaid.
SECTION 6.09. STAY OF ACCELERATION. If acceleration of the time for
payment of any amount payable by the Issuer under the Indenture or the Notes is
stayed upon the insolvency, bankruptcy or reorganization of the Issuer, all such
amounts otherwise subject to acceleration under the terms of the Indenture are
nonetheless payable by the Guarantors hereunder forthwith on demand by the
Trustee or the Holders.
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ARTICLE 7
THE TRUSTEE
SECTION 7.01. GENERAL. (a) The duties and responsibilities of the Trustee
are as provided by the Trust Indenture Act and as set forth herein. Whether or
not expressly so provided, every provision of the Indenture relating to the
conduct or affecting the liability of or affording protection to the Trustee is
subject to this Article.
(b) Except during the continuance of an Event of Default, the Trustee need
perform only those duties that are specifically set forth in the Indenture and
no others, and no implied covenants or obligations will be read into the
Indenture against the Trustee. In case an Event of Default has occurred and is
continuing, the Trustee shall exercise those rights and powers vested in it by
the Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
SECTION 7.02. CERTAIN RIGHTS OF TRUSTEE. Subject to Trust Indenture Act
Sections 315(a) through (d):
(a) The Trustee may rely, and will be protected in acting or
refraining from acting, upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper Person. The Trustee need not investigate any fact or matter
stated in the document, but the Trustee, in its discretion, may make
further inquiry or investigation into such facts or matters as it sees fit.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel conforming to Section
12.05 and the Trustee will not be liable for any action it takes or omits
to take in good faith in reliance on the certificate or opinion.
(c) The Trustee may act through its attorneys and agents and will
not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee will be under no obligation to exercise any of the
rights or powers vested in it by the Indenture at the request or direction
of any of the Holders, unless such Holders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction.
(e) The Trustee will not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within its
rights or powers or for any action it takes or omits to take in accordance
with the direction of the Holders in accordance with Section 5.04 relating
to the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred upon
the Trustee, under the Indenture.
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(f) The Trustee may consult with counsel, and the written advice of
such counsel or any Opinion of Counsel will be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon.
(g) No provision of the Indenture will require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of its duties hereunder, or in the exercise of its rights
or powers, unless it receives indemnity satisfactory to it against any
loss, liability or expense.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee, in its individual
or any other capacity, may become the owner or pledgee of Notes and may
otherwise deal with the Company or its Affiliates with the same rights it would
have if it were not the Trustee. Any Agent may do the same with like rights.
However, the Trustee is subject to Trust Indenture Act Sections 310(b) and 311.
For purposes of Trust Indenture Act Section 311(b)(4) and (6):
(a) "CASH TRANSACTION" means any transaction in which full payment
for goods or securities sold is made within seven days after delivery of
the goods or securities in currency or in checks or other orders drawn upon
banks or bankers and payable upon demand; and
(b) "SELF-LIQUIDATING PAPER" means any draft, bill of exchange,
acceptance or obligation which is made, drawn, negotiated or incurred for
the purpose of financing the purchase, processing, manufacturing, shipment,
storage or sale of goods, wares or merchandise and which is secured by
documents evidencing title to, possession of, or a lien upon, the goods,
wares or merchandise or the receivables or proceeds arising from the sale
of the goods, wares or merchandise previously constituting the security,
provided the security is received by the Trustee simultaneously with the
creation of the creditor relationship arising from the making, drawing,
negotiating or incurring of the draft, bill of exchange, acceptance or
obligation.
SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee (a) makes no
representation as to the validity or adequacy of the Indenture or the Notes, (b)
is not accountable for the Company's use or application of the proceeds from the
Notes and (c) is not responsible for any statement in the Notes other than its
certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULT. If any Default occurs and is continuing
and is known to the Trustee, the Trustee will send notice of the Default to each
Holder within 90 days after it occurs, unless the Default has been cured;
PROVIDED that, except in the case of a default in the payment of the principal
of or interest or Liquidated Damages, if any, on any Note, the Trustee may
withhold the notice if and so long as the board of directors, the executive
committee or a trust committee of directors of the Trustee in good faith
determines that withholding the notice is in the interest of the Holders. Notice
to Holders under this Section will be given in the manner and to the extent
provided in Trust Indenture Act Section 313(c).
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. Within 60 days after each May
15, beginning with May 15, 2002, the Trustee will mail to each Holder, as
provided in Trust Indenture Act Section 313(c), a brief report dated as of such
May 15, if required by Trust Indenture Act Section 313(a).
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SECTION 7.07. COMPENSATION AND INDEMNITY. (a) The Company will pay the
Trustee compensation as agreed upon in writing for its services. The
compensation of the Trustee is not limited by any law on compensation of a
Trustee of an express trust. The Company will reimburse the Trustee upon request
for all reasonable out-of-pocket expenses, disbursements and advances incurred
or made by the Trustee, including the reasonable compensation and expenses of
the Trustee's agents and counsel.
(b) The Company will indemnify the Trustee for, and hold it harmless
against, any loss or liability or expense incurred by it without negligence or
bad faith on its part arising out of or in connection with the acceptance or
administration of the Indenture and its duties under the Indenture and the
Notes, including the costs and expenses of defending itself against any claim or
liability and of complying with any process served upon it or any of its
officers in connection with the exercise or performance of any of its powers or
duties under the Indenture and the Notes.
(c) To secure the Company's payment obligations in this Section, the
Trustee will have a lien prior to the Notes on all money or property held or
collected by the Trustee, in its capacity as Trustee, except money or property
held in trust to pay principal of, and interest or Liquidated Damages, if any,
on particular Notes.
SECTION 7.08. REPLACEMENT OF TRUSTEE. (a) (i) The Trustee may resign at
any time by written notice to the Company.
(ii) The Holders of a majority in principal amount of the
outstanding Notes may remove the Trustee by written notice to the Trustee.
(iii) If the Trustee is no longer eligible under Section 7.10 or in
the circumstances described in Trust Indenture Act Section 310(b), any
Holder that satisfies the requirements of Trust Indenture Act Section
310(b) may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
(iv) The Company may remove the Trustee if: (A) the Trustee is no
longer eligible under Section 7.10; (B) the Trustee is adjudged a bankrupt
or an insolvent; (C) a receiver or other public officer takes charge of the
Trustee or its property; or (D) the Trustee becomes incapable of acting.
A resignation or removal of the Trustee and appointment of a successor Trustee
will become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
(b) If the Trustee has been removed by the Holders, Holders of a majority
in principal amount of the Notes may appoint a successor Trustee with the
consent of the Company. Otherwise, if the Trustee resigns or is removed, or if a
vacancy exists in the office of Trustee for any reason, the Company will
promptly appoint a successor Trustee. If the successor Trustee does not deliver
its written acceptance within 30 days after the retiring Trustee resigns or is
removed, the retiring Trustee, the Company or the Holders of a majority in
principal amount of the outstanding Notes may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
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(c) Upon delivery by the successor Trustee of a written acceptance of its
appointment to the retiring Trustee and to the Company, (i) the retiring Trustee
will transfer all property held by it as Trustee to the successor Trustee,
subject to the lien provided for in Section 7.07, (ii) the resignation or
removal of the retiring Trustee will become effective, and (iii) the successor
Trustee will have all the rights, powers and duties of the Trustee under the
Indenture. Upon request of any successor Trustee, the Company will execute any
and all instruments for fully and vesting in and confirming to the successor
Trustee all such rights, powers and trusts. The Company will give notice of any
resignation and any removal of the Trustee and each appointment of a successor
Trustee to all Holders, and include in the notice the name of the successor
Trustee and the address of its Corporate Trust Office.
(d) Notwithstanding replacement of the Trustee pursuant to this Section,
the Company's obligations under Section 7.07 will continue for the benefit of
the retiring Trustee.
(e) The Trustee agrees to give the notices provided for in, and otherwise
comply with, Trust Indenture Act Section 310(b).
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all of its
corporate trust business to, another corporation or national banking
association, the resulting, surviving or transferee corporation or national
banking association without any further act will be the successor Trustee with
the same effect as if the successor Trustee had been named as the Trustee in the
Indenture.
SECTION 7.10. ELIGIBILITY. The Indenture must always have a Trustee that
satisfies the requirements of Trust Indenture Act Section 310(a) and has a
combined capital and surplus of at least $25,000,000 as set forth in its most
recent published annual report of condition.
SECTION 7.11. MONEY HELD IN TRUST. The Trustee will not be liable for
interest on any money received by it except as it may agree with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law and except for money held in trust under
Article 8.
ARTICLE 8
DEFEASANCE AND DISCHARGE
SECTION 8.01. DISCHARGE OF ISSUER'S OBLIGATIONS. (a) Subject to
paragraph (b), the Issuer's obligations under the Notes and the Indenture, and
each Guarantor's obligations under its Note Guaranty, will terminate if:
(1) all Notes previously authenticated and delivered (other than
(a) destroyed, lost or stolen Notes that have been replaced or (b) Notes
that are paid pursuant to Section 4.01 or (c) Notes for whose payment money
or U.S. Government Obligations have been held in trust and then repaid to
the Issuer pursuant to Section 8.05) have been delivered to the Trustee for
cancellation and the Issuer has paid all sums payable by it hereunder; or
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(2) (A) the Notes mature within one year, or all of them are to be
called for redemption within one year under arrangements satisfactory to
the Trustee for giving the notice of redemption,
(B) the Issuer irrevocably deposits in trust with the Trustee,
as trust funds solely for the benefit of the Holders, money or U.S.
Government Obligations or a combination thereof sufficient, in the
opinion of a nationally recognized firm of independent public
accountants expressed in a written certificate delivered to the
Trustee, without consideration of any reinvestment, to pay principal
of and premium, interest and Liquidated Damages, if any, on the Notes
to maturity or redemption, as the case may be, and to pay all other
sums payable by it hereunder,
(C) no Default has occurred and is continuing on the date of
the deposit,
(D) the deposit will not result in a breach or violation of, or
constitute a default under, the Indenture or any other agreement or
instrument to which the Issuer is a party or by which it is bound, and
(E) the Issuer delivers to the Trustee an Officers' Certificate
and an Opinion of Counsel, in each case stating that all conditions
precedent provided for herein relating to the satisfaction and
discharge of the Indenture have been complied with.
(b) After satisfying the conditions in clause (a)(1), only the Issuer's
obligations under Section 7.07 will survive. After satisfying the conditions in
clause (a)(2), only the Issuer's obligations in Article 2 and Sections 4.01,
4.02, 7.07, 7.08, 8.05 and 8.06 will survive. In either case, the Trustee, upon
the request and at the cost and expense of the Issuer, will acknowledge in
writing the discharge of the Issuer's obligations under the Notes and the
Indenture other than the surviving obligations.
SECTION 8.02. LEGAL DEFEASANCE. On the 91st day following the deposit
referred to in clause (1), the Issuer will be deemed to have paid and will be
discharged from its obligations in respect of the Notes and the Indenture, other
than its obligations in Article 2 and Sections 4.01, 4.02, 7.07, 7.08, 8.05 and
8.06, and each Guarantor's obligations under its Note Guaranty will terminate,
PROVIDED the following conditions have been satisfied:
(1) The Issuer has irrevocably deposited in trust with the Trustee,
as trust funds solely for the benefit of the Holders, money or U.S.
Government Obligations or a combination thereof sufficient, in the opinion
of a nationally recognized firm of independent public accountants expressed
in a written certificate thereof delivered to the Trustee, without
consideration of any reinvestment, to pay principal of and premium,
interest and Liquidated Damages, if any, on the Notes to maturity or
redemption, as the case may be, PROVIDED that any redemption before
maturity has been irrevocably provided for under arrangements satisfactory
to the Trustee.
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(2) The deposit will not result in a breach or violation of, or
constitute a default under, the Indenture or any other agreement or
instrument to which the Issuer is a party or by which it is bound.
(3) The Issuer has delivered to the Trustee either (x) a ruling
received from the Internal Revenue Service to the effect that the Holders
will not recognize income, gain or loss for federal income tax purposes as
a result of the defeasance and will be subject to federal income tax on the
same amount and in the same manner and at the same times as would otherwise
have been the case or (y) an Opinion of Counsel, based on a change in law
after the date of the Indenture, to the same effect as the ruling described
in clause (x).
(4) The Issuer has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance have
been complied with.
Prior to the end of the 91-day period, none of the Issuer's obligations
under the Indenture will be discharged. Thereafter, the Trustee, upon the
request and at the cost and expense of the Issuer, will acknowledge in writing
the discharge of the Issuer's obligations under the Notes and the Indenture
except for the surviving obligations specified above.
SECTION 8.03. COVENANT DEFEASANCE. After the 91st day following the
deposit referred to in clause (1), the Issuer's obligations set forth in
Sections 4.06 through 4.13, inclusive and clause (iii) of Section 4.14, and each
Guarantor's obligations under its Note Guaranty, will terminate, and clauses
(iii), (iv), (v), (vi) and (ix) of Section 5.01 will no longer constitute Events
of Default, PROVIDED the following conditions have been satisfied:
(1) The Issuer has complied with clauses (1), (2) and (4) of
Section 8.02; and
(2) the Issuer has delivered to the Trustee an Opinion of Counsel
to the effect that the Holders will not recognize income, gain or loss for
federal income tax purposes as a result of the defeasance and will be
subject to federal income tax on the same amount and in the same manner and
at the same times as would otherwise have been the case.
Except as specifically stated above, none of the Issuer's obligations under
the Indenture will be discharged.
SECTION 8.04. APPLICATION OF TRUST MONEY. Subject to Section 8.05, the
Trustee will hold in trust the money or U.S. Government Obligations deposited
with it pursuant to Section 8.01, 8.02 or 8.03, and apply the deposited money
and the proceeds from deposited U.S. Government Obligations to the payment of
principal of and premium, interest and Liquidated Damages, if any, on the Notes
in accordance with the Notes and the Indenture. Such money and U.S. Government
Obligations need not be segregated from other funds except to the extent
required by law.
SECTION 8.05. REPAYMENT TO ISSUER. Subject to Sections 7.07, 8.01, 8.02
and 8.03, the Trustee will promptly pay to the Issuer upon request any excess
money held by the Trustee at any time and thereupon be relieved from all
liability with respect to such money. The Trustee will pay to the Issuer upon
written request any money deposited with or paid to the Trustee for the payment
of the principal of, premium, interest or Liquidated Damages, if any, with
respect to
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the Notes and not applied but remaining unclaimed for two years after the date
upon which such After payment to the Company, Holders entitled to such
principal, premium, interest or Liquidated Damages, shall have become due and
payable, shall, upon the written request of the Issuer and unless otherwise
required by mandatory provisions of applicable escheat or abandoned or unclaimed
property law, be repaid to the Issuer by the Trustee. Thereafter, the Holder of
the Notes must look solely to the Issuer for any payment such Holder may be
entitled to collect, unless otherwise required by mandatory provisions of
applicable escheat or abandoned or unclaimed property laws, and all liability of
the Trustee with respect to such money shall thereupon cease.
SECTION 8.06. REINSTATEMENT. If and for so long as the Trustee is unable
to apply any money or U.S. Government Obligations held in trust pursuant to
Section 8.01, 8.02 or 8.03 by reason of any legal proceeding or by reason of any
order or judgment of any court or governmental authority enjoining, restraining
or otherwise prohibiting such application, the Issuer's obligations under the
Indenture and the Notes will be reinstated as though no such deposit in trust
had been made. If the Issuer makes any payment of principal of or interest or
Liquidated Damages, if any, on any Notes because of the reinstatement of its
obligations, it will be subrogated to the rights of the Holders of such Notes to
receive such payment from the money or U.S. Government Obligations held in
trust.
SECTION 8.07. INDEMNITY FOR U.S. GOVERNMENT OBLIGATIONS. The Issuer shall
pay and indemnify the Trustee against any tax, fee or other charge imposed on or
assessed against the U.S. Government Obligations deposited pursuant to Sections
8.01, 8.02 or 8.03.
ARTICLE 9
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. AMENDMENTS WITHOUT CONSENT OF HOLDERS. The Company, the
Issuer, the Guarantors and the Trustee may amend or supplement the Indenture or
the Notes without notice to or the consent of any Holder
(a) to cure any ambiguity, defect or inconsistency in the Indenture
or the Notes that does not adversely affect the interests of the Holders;
(b) to comply with Section 4.14;
(c) to comply with any requirements of the Commission in connection
with the qualification of the Indenture under the Trust Indenture Act;
(d) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee;
(e) to provide for uncertificated Notes in addition to or in place
of certificated Notes;
(f) to provide for any Guarantee of the Notes, to secure the Notes
or to confirm and evidence the release, termination or discharge of any
Guarantee of or Lien securing the Notes when such release, termination or
discharge is permitted by the Indenture;
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(g) to provide for or confirm the issuance of Additional Notes; or
(h) to make any other change that does not adversely affect the
legal rights of any Holder.
SECTION 9.02. AMENDMENTS WITH CONSENT OF HOLDERS. (a) Except as otherwise
provided in Sections 5.01, 5.03 and 5.06 or paragraph (b), the Company, the
Issuer, the Guarantors and the Trustee may amend the Indenture and the Notes
with the written consent of the Holders of a majority in principal amount of the
outstanding Notes, and the Holders of a majority in principal amount of the
outstanding Notes by written notice to the Trustee may waive future compliance
by the Company, the Issuer and the Guarantors with any provision of the
Indenture or the Notes.
(b) Notwithstanding the provisions of paragraph (a), without the consent
of each Holder affected, an amendment or waiver may not
(i) reduce the amount of Notes whose Holders must consent to an
amendment, supplement or waiver,
(ii) reduce the rate of or change the time for payment of any
interest, including default interest, on any Note,
(iii) reduce principal of or change the fixed maturity of any Note or
alter the provisions (including related definitions) with respect to
redemptions described under Section 3.01 or with respect to mandatory
offers to repurchase Notes described under Section 4.10 and 4.12,
(iv) make any Note payable in money other than that stated in the
Note,
(v) modify the ranking or priority of the Notes or any Guarantee,
(vi) make any change in Section 5.03 or 5.06,
(vii) release any Guarantor from any of its obligations under its
Guarantee or the Indenture otherwise than in accordance with the Indenture,
or
(viii) waive a continuing Default or Event of Default in the payment
of principal of or interest or Liquidated Damages on the Notes.
(c) It is not necessary for Holders to approve the particular form of any
proposed amendment, supplement or waiver, but is sufficient if their consent
approves the substance thereof.
(d) An amendment, supplement or waiver under this Section will become
effective on receipt by the Trustee of written consents from the Holders of the
requisite percentage in principal amount of the outstanding Notes. After an
amendment, supplement or waiver under this Section becomes effective, the Issuer
will send to the Holders affected thereby a notice briefly describing the
amendment, supplement or waiver. The Issuer will send supplemental indentures to
Holders upon request. Any failure of the Issuer to send such notice, or any
defect
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therein, will not, however, in any way impair or affect the validity of any such
supplemental indenture or waiver.
SECTION 9.03. EFFECT OF CONSENT. (a) After an amendment, supplement or
waiver becomes effective, it will bind every Holder unless it is of the type
requiring the consent of each Holder affected. If the amendment, supplement or
waiver is of the type requiring the consent of each Holder affected, the
amendment, supplement or waiver will bind each Holder that has consented to it
and every subsequent Holder of a Note that evidences the same debt as the Note
of the consenting Holder.
(b) If an amendment, supplement or waiver changes the terms of a Note, the
Trustee may require the Holder to deliver it to the Trustee so that the Trustee
may place an appropriate notation of the changed terms on the Note and return it
to the Holder, or exchange it for a new Note that reflects the changed terms.
The Trustee may also place an appropriate notation on any Note thereafter
authenticated. However, the effectiveness of the amendment, supplement or waiver
is not affected by any failure to annotate or exchange Notes in this fashion.
SECTION 9.04. TRUSTEE'S RIGHTS AND OBLIGATIONS. The Trustee is entitled to
receive, and will be fully protected in relying upon, an Opinion of Counsel
stating that the execution of any amendment, supplement or waiver authorized
pursuant to this Article is authorized or permitted by the Indenture. If the
Trustee has received such an Opinion of Counsel, it shall sign the amendment,
supplement or waiver so long as the same does not adversely affect the rights of
the Trustee. The Trustee may, but is not obligated to, execute any amendment,
supplement or waiver that affects the Trustee's own rights, duties or immunities
under the Indenture.
SECTION 9.05. CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental
indenture executed pursuant to this Article shall conform to the requirements of
the Trust Indenture Act.
SECTION 9.06. PAYMENTS FOR CONSENTS. Neither the Issuer, the Company nor
any of its Subsidiaries or Affiliates may, directly or indirectly, pay or cause
to be paid any consideration, whether by way of interest, fee or otherwise, to
any Holder for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of the Indenture or the Notes unless such consideration
is offered to be paid or agreed to be paid to all Holders of the Notes that
consent, waive or agree to amend such term or provision within the time period
set forth in the solicitation documents relating to the consent, waiver or
amendment.
ARTICLE 10
SUBORDINATION OF NOTES
SECTION 10.01. NOTES SUBORDINATED TO SENIOR DEBT OF THE ISSUER. The Issuer
covenants and agrees, and each Holder of the Notes by his acceptance thereof
likewise covenants and agrees, that the payment of the principal and interest on
the Notes is subordinated, to the extent and in the manner provided in this
Article 10, to the prior payment in full of all Senior Debt of the Issuer.
"SENIOR DEBT OF THE ISSUER" means the principal of and interest on:
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(1) all Indebtedness of the Issuer;
(2) lease obligations of the Issuer;
(3) all Indebtedness, secured or unsecured, in connection with the
acquisition or improvement of any property or asset or the acquisition of
any business by the Issuer;
(4) all Indebtedness secured by any mortgage, lien, pledge, charge
or encumbrance upon property owned by the Issuer and all indebtedness
secured in the manner specified in this clause (4) even if the Issuer has
not assumed or become liable for the payment thereof;
(5) all customer deposits held in escrow accounts by the Issuer
pending closing of the related sales;
(6) all indebtedness of the Issuer created or arising under any
conditional sale or other title retention agreement with respect to
property acquired by the Issuer or otherwise representing the deferred and
unpaid balance of the purchase price of any such property, including all
indebtedness created or arising in the manner specified in this clause (6)
even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of
such property;
(7) guarantees by the Issuer, direct or indirect, of any
indebtedness of another Person of the types referred to in clauses (1),
(2), (3), (4), (5) or (6); and
(8) contingent obligations of the Issuer in respect of, or to
purchase or otherwise acquire or be responsible or liable for through the
purchase of products or services irrespective of whether such products are
delivered or such services are rendered, any such indebtedness referred to
in clauses (1), (2), (3), (4), (5) or (6),
which indebtedness, lease obligation, deposit, guarantee or contingent
obligation the Issuer has directly or indirectly created, incurred, assumed,
guaranteed, or otherwise become liable or responsible for, whether currently
outstanding or hereafter created. Any reference in this definition to any
indebtedness shall be deemed to include any renewals, extensions, refundings,
amendments and modifications of any such indebtedness issued in exchange for
such indebtedness; PROVIDED, HOWEVER, that Senior Debt of the Issuer shall not
include, without limitation, (i) the Notes issued under this Indenture, (ii) the
Issuer's 9 3/4% Subordinated Notes due 2005, (iii) accounts payable or any other
indebtedness to trade creditors created or assumed by the Issuer in the ordinary
course of business in connection with the obtaining of materials or services,
(iv) any liability for federal, state or local taxes owed or owing by the Issuer
and (v) any Indebtedness as to which, in the instrument creating or evidencing
the same or pursuant to which the same is outstanding, it is provided that such
indebtedness is on a parity with or otherwise not superior in right of payment
to the Notes.
This Article 10 shall constitute a continuing offer to all persons who, in
reliance upon such provisions, become holders of, or continue to hold, Senior
Debt of the Issuer, and such provisions are made for the benefit of the holders
of Senior Debt of the Issuer, and such holders are made obligees hereunder and
any one or more of them may enforce such provisions.
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SECTION 10.02. ISSUER NOT TO MAKE PAYMENTS WITH RESPECT TO NOTES IN CERTAIN
CIRCUMSTANCES.
(a) Upon the maturity of the principal of any Senior Debt of the Issuer
(other than payment of sinking fund installments) by lapse of time, acceleration
or otherwise, all principal thereof and interest thereon shall first be paid in
full, or such payment duly provided for in cash or in a manner satisfactory to
the holders of such Senior Debt of the Issuer, before any deposit is made
pursuant to Article 8 hereof or any payment is made on account of the principal
of or interest on the Notes or to acquire any of the Notes or on account of the
mandatory redemption provisions in the Notes (except mandatory redemption
payments made in respect of Notes acquired by the Issuer before the maturity of
such Senior Debt of the Issuer), including any payment pursuant to Section 4.10
or 4.12.
(b) Unless Section 10.03 shall be applicable, upon (1) the occurrence of a
Payment Default with respect to any Senior Debt of the Issuer and receipt by the
Trustee and the Issuer of written notice of such occurrence or (2) upon
acceleration of such Senior Debt of the Issuer, then no deposit pursuant to
Article 8 hereof and no payment or distribution of any assets of the Issuer of
any kind or character shall be made by the Issuer or the Trustee on account of
principal of or interest on the Notes or on account of the purchase or
redemption or other acquisition of Notes, including any payment pursuant to
Section 4.10 or 4.12, unless and until such Payment Default shall have been
cured or waived in writing or shall have ceased to exist or such Senior Debt of
the Issuer shall have been discharged, after which the Issuer shall resume
making any and all required payments in respect of the Notes, including any
missed payments.
(c) Unless Section 10.03 shall be applicable, upon (1) the occurrence of a
Non-Payment Default and (2) receipt by the Trustee of written notice of such
occurrence, then no deposit pursuant to Article 8 hereof and no payment or
distribution of any assets of the Issuer of any kind or character shall be made
by the Issuer or the Trustee on account of any principal of or interest on the
Notes or on account of the purchase or redemption or other acquisition of Notes,
including any payment pursuant to Section 4.10 or 4.12, for a period ("PAYMENT
BLOCKAGE PERIOD") commencing on the earlier of the date of receipt by the
Trustee of such written notice from the holders of Senior Debt of the Issuer or
of a Guarantor or any representative of a holder of Senior Debt of the Issuer or
of a Guarantor unless and until (subject to any blockage of payment that may
then be in effect under subsection (a) or (b) of this Section 10.02) the earlier
of (x) more than 120 days shall have elapsed since receipt of such written
notice by the Trustee, (y) such Non-Payment Default shall have been cured or
waived in writing or shall have ceased to exist or such Senior Debt of the
Issuer or of a Guarantor shall have been discharged or (z) such Payment Blockage
Period shall have been terminated by written notice to the Issuer or the
relevant Guarantor, as the case may be, or to the Trustee from the holders of
the Senior Debt of the Issuer or any representative of the holders of the Senior
Debt of the Issuer or of a Guarantor initiating such Payment Blockage Period,
after which, in the case of clause (x), (y) or (z), the Issuer shall promptly
resume making any and all required payments in respect of the Notes, including
any missed payments. In no event shall a Payment Blockage Period extend beyond
120 days from the date of the receipt by the Trustee of the notice referred to
in clause (2) hereof (the "INITIAL PERIOD"). Any number of additional Payment
Blockage Periods may be commenced during the Initial Period; PROVIDED, HOWEVER,
that no such additional period shall extend beyond the Initial Period. After the
expiration of the Initial Period, no Payment Blockage Period may be commenced on
the basis of a Non-Payment Default on the Senior Debt of the Issuer or Senior
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Debt of a Guarantor which was the basis of a Payment Blockage Period commenced
during the Initial Period until at least 270 consecutive days have elapsed from
the last day of the Initial Period. No Non-Payment Default with respect to
Senior Debt of the Issuer or Senior Debt of a Guarantor which existed or was
continuing on the date of the commencement of any Payment Blockage Period and of
which the applicable holder(s) of Senior Debt of the Issuer or Senior Debt of a
Guarantor are aware shall be, or be made, the basis for the commencement of a
second Payment Blockage Period whether or not within a period of 270 consecutive
days unless such event of default shall have been cured or waived for a period
of not less than 90 consecutive days.
(d) In the event that notwithstanding the provisions of this Section 10.02
the Issuer shall make any deposit pursuant to Article 8 hereof or any payment or
distribution of any character to the Trustee on account of the principal of or
interest on the Notes, or on account of the mandatory redemption provisions
contained in this Indenture, including any payment pursuant to Section 4.10 or
4.12, after the happening of an event of default with respect to any Senior Debt
of the Issuer based on a default in the payment of the principal of or interest
on Senior Debt of the Issuer, or after receipt by the Trustee of written notice
as provided in this Section 10.02 of an event of default with respect to any
Senior Debt of the Issuer, or after the acceleration of the Notes pursuant to
Section 5.01, then, but only if the Trustee is in receipt of the notice
specified in Section 10.06, unless and until such default or event of default
shall have been cured or waived or shall have ceased to exist, or such
acceleration shall have been rescinded, such payment or deposit (subject to the
provisions of Sections 10.05 and 10.06) shall be held by the Trustee in trust
for the benefit of, and, if the Senior Debt of the Issuer shall have been
declared immediately due and payable, shall be paid forthwith over and delivered
to, the holders of Senior Debt of the Issuer (pro rata as to each of such
holders on the basis of the respective amounts of Senior Debt of the Issuer held
by them) or their representative or the trustee under the indenture or other
agreement (if any) pursuant to which Senior Debt of the Issuer may have been
issued, as their respective interests may appear, such payments to be made in
accordance with an Officers' Certificate as provided in Section 10.13 (on which
the Trustee may conclusively rely) identifying all holders of Senior Debt of the
Issuer and the principal amount of Senior Debt of the Issuer then outstanding
held by each and stating the reasons why such Officers' Certificate is being
delivered to the Trustee, for application to the payment of all Senior Debt of
the Issuer remaining unpaid to the extent necessary to pay all Senior Debt of
the Issuer in full in accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Debt of the
Issuer. In the event of the failure of any Holder of a Note to endorse or assign
any such payment or distribution, each holder of Senior Debt of the Issuer is
hereby irrevocably authorized to endorse or assign the same. The Issuer shall
give prompt written notice to the Trustee of any default under any Senior Debt
of the Issuer or under any agreement pursuant to which Senior Debt of the Issuer
may have been issued, as required by Section 4.17.
SECTION 10.03. NOTES SUBORDINATED TO PRIOR PAYMENT OF ALL SENIOR DEBT OF
THE ISSUER ON DISSOLUTION, WINDING UP, LIQUIDATION OR REORGANIZATION OF ISSUER.
In the event of (i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relating
to the Issuer, its creditors or its property, (ii) any case or proceeding for
the liquidation, dissolution or other winding-up of the Issuer, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
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(iii) any assignment by the Issuer for the benefit of creditors, or (iv) any
other marshalling of the assets of the Issuer:
(a) the holders of all Senior Debt of the Issuer shall first be entitled
to receive payment in full (or to have such payment duly provided for) of the
principal and interest due thereon (including any interest thereon accruing
after commencement of any such proceeding) before the Holders of the Notes are
entitled to receive any payment or any distribution, whether in cash, securities
or other property, on account of the principal of or interest on the Notes;
(b) any payment or distribution of assets of the Issuer of any kind or
character, whether in cash, property or securities (other than securities of the
Issuer as reorganized or readjusted or securities of the Issuer or any other
Issuer, trust or corporation provided for by a plan of reorganization or
readjustment, junior, or the payment of which is otherwise subordinate, at least
to the extent provided in this Article 10, to the payment of all Senior Debt of
the Issuer at the time outstanding and to the payment of all securities issued
in exchange therefor to the holders of the Senior Debt of the Issuer at the time
outstanding), to which the Holders of the Notes or the Trustee on behalf of the
Holders of the Notes would be entitled except for the provisions of this Article
10, including any such payment or distribution which may be payable or
deliverable by reason of the payment of any other indebtedness of the Issuer
being subordinated to the payment of the Notes, shall be paid by the liquidating
trustee or agent or other person making such payment or distribution directly to
the holders of Senior Debt of the Issuer or their representative(s), or to the
trustee under any indenture under which Senior Debt of the Issuer may have been
issued (pro rata as to each such holder, representative or trustee on the basis
of the respective amounts of unpaid Senior Debt of the Issuer held or
represented by each), to the extent necessary to make payment in full of all
Senior Debt of the Issuer remaining unpaid after giving effect to any concurrent
payment or distribution or provision therefor to the holders of such Senior Debt
of the Issuer; and
(c) in the event that notwithstanding the foregoing provisions of this
Section 10.03, any payment or distribution of assets of the Issuer of any kind
or character, whether in cash, property or securities shall be received by the
Trustee or the Holders of the Notes on account of principal or interest on the
Notes before all Senior Debt of the Issuer is paid in full, or effective
provisions made for its payment, such payment or distribution (subject to the
provisions of Sections 10.05 and 10.06) shall be received and held in trust for
and shall be paid over or delivered forthwith to the liquidating trustee, agent
or other person making such payment or distribution or to the holders of the
Senior Debt of the Issuer or their representative, or to the trustee under any
indenture under which Senior Debt of the Issuer may have been issued (pro rata
as provided in subsection (b) above), for application to the payment of such
Senior Debt of the Issuer until all such Senior Debt of the Issuer shall have
been paid in full, after giving effect to any concurrent payment or distribution
or provision therefor to the holders of such Senior Debt of the Issuer.
If the Issuer effects a transaction permitted by Section 4.14, such
transaction shall not be deemed to be a dissolution, winding up, liquidation or
reorganization of the Issuer for purposes of this Section 10.03.
The Issuer shall give prompt written notice to the Trustee of any
dissolution, winding up, liquidation or reorganization of the Issuer, assignment
for the benefit of creditors by the Issuer or any other marshalling of assets of
the Issuer.
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SECTION 10.04. HOLDERS TO BE SUBROGATED TO RIGHTS OF HOLDERS OF SENIOR DEBT
OF THE ISSUER.
Subject to the payment in full of all Senior Debt of the Issuer, the
Holders of the Notes shall be subrogated to the rights of the holders of Senior
Debt of the Issuer to receive payments or distributions of assets of the Issuer
applicable to the Senior Debt of the Issuer until all amounts owing on the Notes
shall be paid in full, and for the purpose of such subrogation no payments or
distributions to the holders of Senior Debt of the Issuer by virtue of this
Article 10 which otherwise would have been made to the Holders of the Notes
shall, as among the Issuer, its creditors other than the holders of Senior Debt
of the Issuer and the Holders of the Notes, be deemed to be payment by the
Issuer to or on account of the Senior Debt of the Issuer, it being understood
that the provisions of this Article 10 are intended solely for the purpose of
defining the relative rights of the Holders of the Notes, on the one hand, and
the holders of the Senior Debt of the Issuer, on the other hand.
If any payment or distribution to which the Holders would otherwise have
been entitled but for the provisions of this Article 10 shall have been applied,
pursuant to the provisions of this Article 10, to the payment of all amounts
payable under the Senior Debt of the Issuer, then and in such case, the Holders
shall be entitled to receive from the holders of such Senior Debt of the Issuer
at the time outstanding any payments or distributions received by such holders
of Senior Debt of the Issuer in excess of the amount sufficient to pay all
amounts payable under or in respect of the Senior Debt of the Issuer in full.
SECTION 10.05. OBLIGATIONS OF THE ISSUER UNCONDITIONAL.
Nothing contained in this Article 10 or elsewhere in this Indenture or in
any Note is intended to or shall impair, as among the Issuer, its creditors
other than holders of Senior Debt of the Issuer and the Holders of the Notes,
the obligation of the Issuer, which is absolute and unconditional, to pay to the
Holders of the Notes the principal of and interest on the Notes as and when the
same shall become due and payable in accordance with their terms, or is intended
to or shall affect the relative rights of the Holders of the Notes and creditors
of the Issuer other than the holders of the Senior Debt of the Issuer, nor shall
anything herein or therein prevent the Trustee or the Holder of any Note from
exercising all remedies otherwise permitted by applicable law upon the
occurrence of a Default under this Indenture, subject to the rights, if any,
under this Article 10 of the holders of Senior Debt of the Issuer in respect of
cash, property or securities of the Issuer received upon the exercise of any
such remedy.
Upon any distribution of assets of the Issuer referred to in this Article
10, the Trustee, subject to the provisions of Article 7, and the Holders of the
Notes shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending, or a certificate of the liquidating
trustee or agent or other person making any distribution to the Trustee or to
the Holders of the Notes, for the purpose of ascertaining the persons entitled
to participate in such distribution, the holders of the Senior Debt and other
indebtedness of the Issuer, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent thereto or to
this Article 10.
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SECTION 10.06. TRUSTEE ENTITLED TO ASSUME PAYMENTS NOT PROHIBITED IN
ABSENCE OF NOTICE.
The Trustee shall not at any time be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee, and the Trustee shall not be required to withhold payment to the
Holders of Notes as provided in Section 10.02(d), unless and until the Trustee
shall have received written notice thereof at its Corporate Trust Office from
the Issuer or from one or more holders of Senior Debt of the Issuer or from any
representative thereof or trustee therefor identifying the specific sections of
this Indenture involved and describing in detail the facts that would obligate
the Trustee to withhold payments to Holders of Notes, as well as any other facts
required by the next succeeding paragraph of this Section 10.06; and, prior to
the receipt of any such written notice, the Trustee, subject to the provisions
of Article 7, shall be entitled to assume conclusively that no such facts exist.
The Trustee shall be entitled to rely on the delivery to it of a written
notice by a Person representing himself to be a holder of Senior Debt of the
Issuer (or a trustee on behalf of such holder) to establish that such notice has
been given by a holder of Senior Debt of the Issuer or a trustee on behalf of
any such holder. In the event that the Trustee determines in good faith that
further evidence is required with respect to the right of any Person as a holder
of Senior Debt of the Issuer to participate in any payment or distribution
pursuant to this Article 10, the Trustee may request such person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Debt held by such Person, the extent to which such person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such person under this Article 10, and if such evidence is not
furnished the Trustee may defer any payment to such person pending judicial
determination as to the right of such person to receive such payment.
SECTION 10.07. APPLICATION BY TRUSTEE OF MONIES DEPOSITED WITH IT.
Except as provided in Section 8.04, any deposit of monies by the Issuer
with the Trustee or any Paying Agent (whether or not in trust) for the payment
of the principal of or interest on any Notes shall be subject to the provisions
of Sections 10.01, 10.02, 10.03 and 10.04, except that, if prior to the opening
of business on the date on which by the terms of this Indenture any such monies
may become payable for any purpose (including, without limitation, the payment
of either the principal or the interest on any Note), the Trustee shall not have
received with respect to such monies the notice provided for in Section 10.06,
then the Trustee shall have full power and authority to receive such monies and
to apply the same to the purpose for which they were received and shall not be
affected by any notice to the contrary which may be received by it on or after
such date, without, however, limiting any rights that holders of Senior Debt of
the Issuer may have to recover any such payments from the Holders in accordance
with the provisions of this Article 10.
SECTION 10.08. SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS OF
ISSUER OR HOLDERS OF SENIOR DEBT OF THE ISSUER.
No right of any present or future holders of any Senior Debt of the Issuer
to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Issuer or
by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Issuer with the terms of this Indenture, regardless
69
of any knowledge thereof which any such holder may have or be otherwise charged
with. The holders of Senior Debt of the Issuer may extend, renew, modify or
amend the terms of the Senior Debt of the Issuer or any security therefor and
release, sell or exchange such security and otherwise deal freely with the
Issuer, all without affecting the liabilities and obligations of the parties to
this Indenture or the Holders.
SECTION 10.09. HOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE SUBORDINATION OF
NOTES.
Each Holder of the Notes by his acceptance thereof authorizes and expressly
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article 10 and
appoints the Trustee his attorney-in-fact for such purpose, including, in the
event of any dissolution, winding up, liquidation or reorganization of the
Issuer (whether in bankruptcy, insolvency or receivership proceedings, voluntary
liquidation or upon assignment for the benefit of creditors or otherwise)
tending towards liquidation of the business and assets of the Issuer, the timely
filing of a claim for the unpaid balance of its or his Notes in the form
required in said proceedings and cause said claim to be approved. If the Trustee
does not file a proper claim or proof of debt in the form required in such
proceeding on or prior to 30 days before the expiration of the time to file such
claim or claims, then the holders of Senior Debt of the Issuer have the right to
file and are hereby authorized to file an appropriate claim for and on behalf of
the Holders of said Notes.
SECTION 10.10. RIGHT OF TRUSTEE TO HOLD SENIOR DEBT OF THE ISSUER.
The Trustee, in its individual capacity, shall be entitled to all of the
rights set forth in this Article 10 in respect of any Senior Debt of the Issuer
at any time held by it to the same extent as any other holder of Senior Debt of
the Issuer, and nothing in this Indenture shall be construed to deprive the
Trustee of any of its rights as such holder.
SECTION 10.11. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR DEBT OF THE
ISSUER.
With respect to the holders of Senior Debt of the Issuer, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Debt of the Issuer shall be
read into this Indenture against the Trustee. The Trustee shall not be deemed to
owe any fiduciary duty to the holders of Senior Debt of the Issuer and the
Trustee shall not be liable to any holder of Senior Debt of the Issuer if it
shall pay over or deliver to Holders of Notes, the Issuer or any other person
monies or assets to which any holder of Senior Debt of the Issuer shall be
entitled by virtue of this Article 10 or otherwise.
SECTION 10.12. ARTICLE 10 NOT TO PREVENT EVENTS OF DEFAULT.
The failure to make a payment on account of principal or interest on the
Notes by reason of any provision in this Article 10 shall not be construed as
preventing the occurrence of an Event of Default under Section 5.01.
SECTION 10.13. OFFICERS' CERTIFICATE.
If there occurs an event referred to in the first sentence of Section
10.02(d) or the first sentence of Section 10.03, the Issuer shall promptly give
to the Trustee an Officers' Certificate
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(on which the Trustee may conclusively rely) identifying all holders of Senior
Debt of the Issuer and the principal amount of Senior Debt of the Issuer then
outstanding held by each such holder and stating the reasons why such Officers'
Certificate is being delivered to the Trustee.
ARTICLE 11
SUBORDINATION OF GUARANTEES
SECTION 11.01. GUARANTEES SUBORDINATION TO SENIOR DEBT OF A GUARANTOR.
Each Guarantor covenants and agrees, and each Holder of the Notes by his
acceptance thereof likewise covenants and agrees, that the payments pursuant to
the Guarantee by such Guarantor shall be subordinated in accordance with the
following provisions of this Article 11 to the prior payment in full of all
Senior Debt of a Guarantor for such Guarantor.
"SENIOR DEBT OF A GUARANTOR" means the Principal of and interest on:
(1) all Indebtedness of a Guarantor;
(2) lease obligations of a Guarantor;
(3) all Indebtedness, secured or unsecured, in connection with the
acquisition or improvement of any property or asset or the acquisition of
any business by a Guarantor;
(4) all Indebtedness secured by any mortgage, lien, pledge, charge
or encumbrance upon property owned by a Guarantor and all indebtedness
secured in the manner specified in this clause (4) even if such Guarantor
has not assumed or become liable for the payment thereof;
(5) all customer deposits held by a Guarantor in escrow accounts
pending closing of the related sales;
(6) all indebtedness of a Guarantor created or arising under any
conditional sale or other title retention agreement with respect to
property acquired by a Guarantor or otherwise representing the deferred and
unpaid balance of the purchase price of any such property, including all
Indebtedness created or arising in the manner specified in this clause (6)
even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of
such property;
(7) guarantees by a Guarantor, direct or indirect, of any
indebtedness of another Person of the types referred to in clauses (1),
(2), (3), (4), (5) or (6); and
(8) contingent obligations of a Guarantor in respect of, or to
purchase or otherwise acquire or be responsible or liable for through the
purchase of products or services, irrespective of whether such products are
delivered or such services are rendered, any such indebtedness referred to
in clauses (1), (2), (3), (4), (5) or (6),
which indebtedness, lease obligation, deposit, guarantee or contingent
obligation a Guarantor has directly or indirectly created, incurred, assumed,
guaranteed or otherwise become liable or
71
responsible for, whether currently outstanding or hereafter created. All
references to indebtedness include any renewals, extensions, refundings,
amendments and modifications of any such Indebtedness issued in exchange for
such indebtedness; PROVIDED, HOWEVER, that Senior Debt of a Guarantor shall not
include, without limitation (i) a Guarantee, (ii) the guarantee by a Guarantor
of the Issuers 9 3/4% Subordinated Notes due 2005, (iii) accounts payable or any
other indebtedness to trade creditors created or assumed by a Guarantor in the
ordinary course of business in connection with the obtaining of materials or
services, (iv) any liability for federal, state or local taxes owed or owing by
a Guarantor and (v) any Indebtedness as to which, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such indebtedness is on a parity with or otherwise not superior in right of
payment to a Guarantee.
This Article 11 shall constitute a continuing offer to all persons who, in
reliance upon such provisions, become holders of, or continue to hold, Senior
Debt of a Guarantor, and such provisions are made for the benefit of the holders
of Senior Debt of a Guarantor, and such holders are made obligees hereunder and
any one or more of them may enforce such provisions.
SECTION 11.02. GUARANTOR NOT TO MAKE PAYMENTS WITH RESPECT TO NOTES IN
CERTAIN CIRCUMSTANCES.
(a) Upon the maturity of the principal of any Senior Debt of a Guarantor
(other than payment of sinking fund installments) by lapse of time, acceleration
or otherwise, all principal thereof and interest thereon shall first be paid in
full, or such payment duly provided for in cash or in a manner satisfactory to
the holders of such Senior Debt of a Guarantor, before any payment, pursuant to
the Guarantee, is made on account of the principal of or interest on the Notes
or to acquire any of the Notes or on account of the mandatory redemption
provisions in the Notes (except mandatory redemption payments made in respect of
Notes acquired by such Guarantor before the maturity of such Senior Debt of a
Guarantor), including any payment pursuant to Section 4.10 or 4.12.
(b) Unless Section 11.03 shall be applicable, upon (1) the occurrence of a
Payment Default with respect to any Senior Debt of a Guarantor and receipt by
the relevant Guarantor and the Trustee of written notice of such occurrence or
(2) upon the acceleration of such Senior Debt of a Guarantor, then no payment or
distribution of any assets of such Guarantor of any kind or character shall be
made by such Guarantor or the Trustee on account of principal of or interest on
the Notes or on account of the purchase or redemption or other acquisition of
Notes, including any payment pursuant to Section 4.10 or 4.12, unless and until
such Payment Default shall have been cured or waived in writing or shall have
ceased to exist or such Senior Debt of a Guarantor shall have been discharged,
after which the relevant Guarantor shall resume making any and all required
payments in respect of the Notes, including any missed payments.
(c) Unless Section 11.03 shall be applicable, upon (1) the occurrence of a
Non-Payment Default and (2) receipt by the Trustee of written notice of such
occurrence, then no payment or distribution of any assets of the relevant
Guarantor of any kind or character shall be made by such Guarantor or the
Trustee on account of any principal of or interest on the Notes or on account of
the purchase or redemption or other acquisition of Notes, including, any payment
pursuant to Section 4.10 or 4.12, for a period ("GUARANTEE PAYMENT BLOCKAGE
PERIOD") commencing on the earlier of the date of receipt by the Trustee of such
written notice from the holders of Senior Debt of a Guarantor or of the Issuer,
or any representative of a holder of Senior
72
Debt of a Guarantor or of the Issuer unless and until (subject to any blockage
of payment that may then be in effect under subsection (a) or (b) of this
Section 11.02) the earlier of (x) more than 120 days shall have elapsed since
receipt of such written notice by the Trustee, (y) such Non-Payment Default
shall have been cured or waived in writing or shall have ceased to exist or such
Senior Debt of a Guarantor or of the Issuer shall have been discharged or (z)
such Guarantee Payment Blockage Period shall have been terminated by written
notice to the relevant Guarantor or to the Issuer, as the case may be, or to the
Trustee from the holders of the Senior Debt of a Guarantor or of the Issuer or
any representative of the holders of the Senior Debt of a Guarantor or of the
Issuer initiating such Guarantee Payment Blockage Period, after which, in the
case of clause (x), (y) or (z), the relevant Guarantor shall promptly resume
making any and all required payments in respect of the Notes, including any
missed payments. In no event shall a Guarantee Payment Blockage Period extend
beyond 120 days from the date of the receipt by the Trustee of the notice
referred to in clause (2) hereof (the "GUARANTEE INITIAL Period"). Any number of
additional Guarantee Payment Blockage Periods may be commenced during the
Guarantee Initial Period; PROVIDED, HOWEVER, that no such additional period
shall extend beyond the Initial Period. After the expiration of the Guarantee
Initial Period, no Guarantee Payment Blockage Period may be commenced on the
basis of a Non-Payment Default on the Senior Debt of the Issuer or Senior Debt
of a Guarantor which was the basis of a Guarantee Payment Blockage Period
commenced during the Guarantee Initial Period until at least 270 consecutive
days have elapsed from the last day of the Guarantee Initial Period. No
Non-Payment Default with respect to Senior Debt of the Issuer or Senior Debt of
a Guarantor which existed or was continuing on the date of the commencement of
any Guarantee Payment Blockage Period and of which the applicable holder(s) of
Senior Debt of the Issuer or Senior Debt of a Guarantor are aware shall be, or
be made, the basis for the commencement of a second Guarantee Payment Blockage
Period whether or not within a period of 270 consecutive days unless such event
of default shall have been cured or waived for a period of not less than 90
consecutive days.
(d) In the event that notwithstanding the provisions of this Section 11.02
a Guarantor shall make, pursuant to its Guarantee, any payment or distribution
of any character to the Trustee on account of the principal of or interest on
the Notes, or on account of the mandatory redemption provisions contained in
this Indenture, including any payment pursuant to Section 4.10 or 4.12, after
the happening of an event of default with respect to any Senior Debt of a
Guarantor based on a default in the payment of the principal of or interest on
Senior Debt of a Guarantor, or after receipt by the Trustee of written notice as
provided in this Section 11.02 of an event of default with respect to any Senior
Debt of a Guarantor, or after the acceleration of the Notes pursuant to Section
5.01, then, but only if the Trustee is in receipt of the notice specified in
Section 11.06, unless and until such default or event of default shall have been
cured or waived or shall have ceased to exist, or such acceleration shall have
been rescinded, such payment (subject to the provisions of Sections 11.05 and
11.06) shall be held by the Trustee in trust for the benefit of, and, if the
Senior Debt of a Guarantor shall have been declared immediately due and payable,
shall be paid forthwith over and delivered to, the holders of Senior Debt of a
Guarantor (pro rata as to each of such holders on the basis of the respective
amounts of Senior Debt of a Guarantor held by them) or their representative or
the trustee under the indenture or other agreement (if any) pursuant to which
Senior Debt of a Guarantor may have been issued, as their respective interests
may appear, such payments to be made in accordance with an Officers' Certificate
as provided in Section 11.13 (on which the Trustee may conclusively rely)
identifying all holders of Senior Debt of a Guarantor and the principal amount
of Senior Debt of a Guarantor then outstanding held by each and stating the
reasons why such Officers' Certificate is being
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delivered to the Trustee, for application to the payment of all Senior Debt of a
Guarantor remaining unpaid to the extent necessary to pay all Senior Debt of a
Guarantor in full in accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Debt of a
Guarantor. In the event of the failure of any Holder of a Note to endorse or
assign any such payment or distribution, each holder of Senior Debt of a
Guarantor is hereby irrevocably authorized to endorse or assign the same. The
relevant Guarantor shall give prompt written notice to the Trustee of any
default under any Senior Debt of a Guarantor or under any agreement pursuant to
which Senior Debt of a Guarantor may have been issued, as required by Section
4.17.
SECTION 11.03. GUARANTEE SUBORDINATED TO PRIOR PAYMENT OF ALL SENIOR DEBT
OF A GUARANTOR ON DISSOLUTION, WINDING UP, LIQUIDATION OR REORGANIZATION OF A
GUARANTOR.
In the event of (i) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relating
to a Guarantor, its creditors or its property, (ii) any case or proceeding for
the liquidation, dissolution or other winding-up of a Guarantor, voluntary or
involuntary, whether or not involving insolvency or bankruptcy proceedings,
(iii) any assignment by a Guarantor for the benefit of creditors, or (iv) any
other marshalling of the assets of a Guarantor:
(a) the holders of all Senior Debt of a Guarantor shall first be entitled
to receive payment in full (or to have such payment duly provided for) of the
principal and interest due thereon (including any interest thereon accruing
after commencement of any such proceeding) before the Holders of the Notes are
entitled to receive, pursuant to this Guarantee any payment or any distribution,
whether in cash, securities or other property, on account of the principal of or
interest on the Notes;
(b) any payment or distribution of assets of the Issuer of any kind or
character, whether in cash, property or securities (other than securities of a
Guarantor as reorganized or readjusted or securities of a Guarantor or any other
Issuer, trust or corporation provided for by a plan of reorganization or
readjustment, junior, or the payment of which is otherwise subordinate, at least
to the extent provided in this Article 11, to the payment of all Senior Debt of
a Guarantor at the time outstanding and to the payment of all securities issued
in exchange therefor to the holders of the Senior Debt of a Guarantor at the
time outstanding), to which the Holders of the Notes or the Trustee on behalf of
the Holders of the Notes would be entitled, pursuant to this Guarantee except
for the provisions of this Article 11, including any such payment or
distribution which may be payable or deliverable by reason of the payment of any
other indebtedness of a Guarantor being subordinated to the payment of the
Notes, shall be paid by the liquidating trustee or agent or other person making
such payment or distribution directly to the holders of Senior Debt of a
Guarantor or their representative(s), or to the trustee under any indenture
under which Senior Debt of a Guarantor may have been issued (pro rata as to each
such holder, representative or trustee on the basis of the respective amounts of
unpaid Senior Debt of a Guarantor held or represented by each), to the extent
necessary to make payment in full of all Senior Debt of a Guarantor remaining
unpaid after giving effect to any concurrent payment or distribution or
provision therefor to the holders of such Senior Debt of a Guarantor; and
(c) in the event that notwithstanding the foregoing provisions of this
Section 11.03, any payment or distribution of assets of a Guarantor of any kind
or character, whether in cash, property or securities shall be received,
pursuant to the Guarantee, by the Trustee or the Holders
74
of the Notes on account of principal or interest on the Notes before all Senior
Debt of a Guarantor is paid in full, or effective provisions made for its
payment, such payment or distribution(subject to the provisions of Sections
11.05 and 11.06) shall be received and held in trust for and shall be paid over
or delivered to the liquidating trustee, agent or other person making such
payment or distribution or to the holders of the Senior Debt of a Guarantor
remaining unpaid or unprovided for or their representative, or to the trustee
under any indenture under which Senior Debt of a Guarantor may have been issued
(pro rata as provided in subsection (b) above), for application to the payment
of such Senior Debt of a Guarantor until all such Senior Debt of a Guarantor
shall have been paid in full, after giving effect to any concurrent payment or
distribution or provision therefor to the holders of such Senior Debt of a
Guarantor.
If a Guarantor effects a transaction permitted by Section 4.14, such
transaction shall not be deemed to be a dissolution, winding up, liquidation or
reorganization of a Guarantor for purposes of this Section 11.03.
A Guarantor shall give prompt written notice to the Trustee of any
dissolution, winding up, liquidation or reorganization of such Guarantor,
assignment for the benefit of creditors by such Guarantor or any other
marshalling of assets of such Guarantor.
SECTION 11.04. HOLDERS TO BE SUBROGATED TO RIGHTS OF HOLDERS OF SENIOR DEBT
OF A GUARANTOR.
Subject to the payment in full of all Senior Debt of a Guarantor, the
Holders of the Notes shall be subrogated to the rights of the holders of Senior
Debt of a Guarantor to receive payments or distributions of assets of a
Guarantor applicable to the Senior Debt of a Guarantor until all amounts owing
under the Guarantee shall be paid in full and for the purpose of such
subrogation no payments or distributions to the holders of Senior Debt of a
Guarantor by virtue of this Article 11 which otherwise would have been made to
the Holders of the Notes, shall, as between a Guarantor, its creditors other
than holders of its Senior Debt of a Guarantor and the Holders, be deemed to be
a payment by such Guarantor to or on account of the Senior Debt of a Guarantor,
it being understood that the provisions of this Article 11 are intended solely
for the purpose of defining the relative rights of the holders of Senior Debt of
a Guarantor on the one hand and the Holders on the other hand.
If any payment or distribution to which the Holders would otherwise have
been entitled but for the provisions of this Article 11 shall have been applied,
pursuant to the provisions of this Article 11, to the payment of all amounts
payable under the Senior Debt of a Guarantor, then and in such case, the Holders
shall be entitled to receive from the holders of such Senior Debt of a Guarantor
at the time outstanding any payments or distributions received by such holders
of such Senior Debt of a Guarantor in excess of the amount sufficient to pay all
amounts payable under or in respect of such Senior Debt of a Guarantor in full.
SECTION 11.05. OBLIGATIONS OF THE GUARANTORS UNCONDITIONAL.
Nothing contained in this Article 11 or elsewhere in this Indenture or in
any Note is intended to or shall impair, as between the Guarantors and the
Holders, the obligations of each Guarantor, which are absolute and
unconditional, to pay to the Holders the principal of and interest on the Notes
as and when the same shall become due and payable in accordance with the
provisions of the Guarantees or is intended to or shall affect the relative
rights of the Holders and
75
creditors of a Guarantor other than the holders of the Senior Debt of a
Guarantor, nor shall anything herein or therein prevent the Trustee or any
Holder from exercising all remedies otherwise permitted by applicable law upon
the occurrence of a Default under this Indenture, subject to the rights, if any,
under this Article 11 of the holders of Senior Debt of a Guarantor in respect of
cash, property or securities of a Guarantor received upon the exercise of any
such remedy.
Upon any distribution of assets of a Guarantor referred to in this Article
11, the Trustee, subject to the provisions of Article 7, and the Holders of the
Notes shall be entitled to rely upon any order or decree made by any court of
competent jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending, or a certificate of the liquidating
trustee or agent or other person making any distribution to the Trustee or to
the Holders of the Notes, for the purpose of ascertaining the persons entitled
to participate in such distribution, the holders of the Senior Debt and other
indebtedness of such Guarantor, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 11.
SECTION 11.06. TRUSTEE ENTITLED TO ASSUME PAYMENTS NOT PROHIBITED IN
ABSENCE OF NOTICE.
The Trustee shall not at any time be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee, and the Trustee shall not be required to withhold payment to the
Holders of Notes as provided in Section 11.02(d), unless and until the Trustee
shall have received written notice thereof at its Corporate Trust Office from a
Guarantor or from one or more holders of Senior Debt of a Guarantor or from any
representative thereof or trustee therefor identifying the specific sections of
this Indenture involved and describing in detail the facts that would obligate
the Trustee to withhold payments to Holders of Notes, as well as any other facts
required by the next succeeding paragraph of this Section 11.06; and, prior to
the receipt of any such written notice, the Trustee, subject to the provisions
of Article 7, shall be entitled to assume conclusively that no such facts exist.
The Trustee shall be entitled to rely on the delivery to it of a written
notice by a Person representing himself to be a holder of Senior Debt of a
Guarantor (or a trustee on behalf of such holder) to establish that such notice
has been given by a holder of Senior Debt of a Guarantor or a trustee on behalf
of any such holder. In the event that the Trustee determines in good faith that
further evidence is required with respect to the right of any Person as a holder
of Senior Debt of a Guarantor to participate in any payment or distribution
pursuant to this Article 11, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Debt of a Guarantor held by such person, the extent to which such person
is entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such person under this Article 11, and if such
evidence is not furnished the Trustee may defer any payment to such person
pending judicial determination as to the right of such person to receive such
payment.
SECTION 11.07. APPLICATION BY TRUSTEE OF MONIES DEPOSITED WITH IT.
Except as provided in Sections 8.04, any deposit of monies by a Guarantor
with the Trustee or any Paying Agent (whether or not in trust) for the payment
of the principal of or interest on any Notes shall be subject to the provisions
of Sections 11.01, 11.02, 11.03 and 11.04,
76
except that, if prior to the opening of business on the date on which by the
terms of this Indenture any such monies may become payable for any purpose
(including, without limitation, the payment, pursuant to this Guarantee, of
either the principal or the interest on any Note), the Trustee shall not have
received with respect to such monies the notice provided for in Section 11.06,
then the Trustee shall have full power and authority to receive such monies and
to apply the same to the purpose for which they were received and shall not be
affected by any notice to the contrary which may be received by it on or after
such date, without, however, limiting any rights that holders of Senior Debt of
a Guarantor may have to recover any such payments from the Holders in accordance
with the provisions of this Article 11.
SECTION 11.08. SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS OF
ANY GUARANTOR OR HOLDERS OF SENIOR DEBT OF A GUARANTOR.
No right of any present or future holders of any Senior Debt of a Guarantor
to enforce subordination as provided herein shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of any Guarantor
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by any Guarantor with the terms of this Indenture, regardless of
any knowledge thereof which any such holder may have or be otherwise charged
with. The holders of Senior Debt of a Guarantor may extend, renew, modify or
amend the terms of the Senior Debt of a Guarantor or any security therefor and
release, sell or exchange such security and otherwise deal freely with any
Guarantor, all without affecting the liabilities and obligations of the parties
to this Indenture or the Holders.
SECTION 11.09. HOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE SUBORDINATION OF
NOTES.
Each Holder of the Notes by his acceptance thereof authorizes and expressly
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article 11 and
appoints the Trustee his attorney-in-fact for such purpose, including, in the
event of any dissolution, winding up, liquidation or reorganization of a
Guarantor (whether in bankruptcy, insolvency or receivership proceedings,
voluntary liquidation or upon assignment for the benefit of creditors or
otherwise) tending towards liquidation of the business and assets of such
Guarantor, the timely filing of a claim for the unpaid balance, pursuant to the
relevant Guarantee, of its Notes in the form required in said proceedings and
cause said claim to be approved. If the Trustee does not file a proper claim or
proof of debt in the form required in such proceeding on or prior to 30 days
before the expiration of the time to file such claim or claims, then the holders
of Senior Debt of a Guarantor have the right to file and are hereby authorized
to file an appropriate claim for and on behalf of the Holders of said Notes.
SECTION 11.10. RIGHT OF TRUSTEE TO HOLD SENIOR DEBT OF A GUARANTOR.
The Trustee in its individual capacity, shall be entitled to all of the
rights set forth in this Article 11 in respect of any Senior Debt of a Guarantor
at any time held by it to the same extent as any other holder of such Senior
Debt of a Guarantor, and nothing in this Indenture shall be construed to deprive
the Trustee of any of its rights as such holder.
77
SECTION 11.11. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR DEBT OF A
GUARANTOR.
With respect to the holders of Senior Debt of a Guarantor, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article 11, and no implied covenants or
obligations with respect to the holders of Senior Debt of a Guarantor shall be
read into this Indenture against the Trustee. The Trustee shall not be deemed to
owe any fiduciary duty to the holders of Senior Debt of a Guarantor and the
Trustee shall not be liable to any holder of Senior Debt of a Guarantor if it
shall pay over or deliver to Holders of Notes, the relevant Guarantor or any
other person monies or assets to which any holder of Senior Debt of a Guarantor
shall be entitled by virtue of this Article 11 or otherwise.
SECTION 11.12. ARTICLE 11 NOT TO PREVENT EVENTS OF DEFAULT.
The failure to make a payment on account of principal or interest on the
Notes by reason of any provision in this Article 11 shall not be construed as
preventing the occurrence of an Event of Default under Section 5.01.
SECTION 11.13. SUBORDINATION OF INDEBTEDNESS OWED BY THE ISSUER TO A
GUARANTOR.
Any indebtedness owed by the Issuer to a Guarantor shall be subordinate to
all obligations of the Issuer with respect to the Notes and this Indenture to
the same extent as the Notes are subordinated to Senior Debt of the Issuer.
SECTION 11.14. OFFICERS' CERTIFICATE.
If there occurs an event referred to in the first sentence of Section
11.02(c) or the first sentence of Section 11.03, the relevant Guarantor shall
promptly give to the Trustee an Officers' Certificate (on which the Trustee may
conclusively rely) identifying all holders of Senior Debt of a Guarantor and the
principal amount of Senior Debt of a Guarantor then outstanding held by each
such holder and stating the reasons why such Officers' Certificate is being
delivered to the Trustee.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT OF 1939. The Indenture shall incorporate
and be governed by the provisions of the Trust Indenture Act that are required
to be part of and to govern indentures qualified under the Trust Indenture Act.
SECTION 12.02. HOLDER COMMUNICATIONS; HOLDER ACTIONS. (a) The rights of
Holders to communicate with other Holders with respect to the Indenture or the
Notes are as provided by the Trust Indenture Act, and the Company and the
Trustee shall comply with the requirements of Trust Indenture Act Section
312(a). Neither the Company, the Issuer nor the Trustee will be held accountable
by reason of any disclosure of information as to names and addresses of Holders
made pursuant to the Trust Indenture Act.
78
(b) (i) Any request, demand, authorization, direction, notice, consent to
amendment, supplement or waiver or other action provided by this Indenture to be
given or taken by a Holder (an "ACT") may be evidenced by an instrument signed
by the Holder delivered to the Trustee. The fact and date of the execution of
the instrument, or the authority of the person executing it, may be proved in
any manner that the Trustee deems sufficient.
(ii) The Trustee may make reasonable rules for action by or at a
meeting of Holders, which will be binding on all the Holders.
(c) Any act by the Holder of any Note binds that Holder and every
subsequent Holder of a Note that evidences the same debt as the Note of the
acting Holder, even if no notation thereof appears on the Note. Subject to
paragraph (d), a Holder may revoke an act as to its Notes, but only if the
Trustee receives the notice of revocation before the date the amendment or
waiver or other consequence of the act becomes effective.
(d) The Issuer may, but is not obligated to, fix a record date (which need
not be within the time limits otherwise prescribed by Trust Indenture Act
Section 316(c)) for the purpose of determining the Holders entitled to act with
respect to any amendment or waiver or in any other regard, except that during
the continuance of an Event of Default, only the Trustee may set a record date
as to notices of default, any declaration or acceleration or any other remedies
or other consequences of the Event of Default. If a record date is fixed, those
Persons that were Holders at such record date and only those Persons will be
entitled to act, or to revoke any previous act, whether or not those Persons
continue to be Holders after the record date. No act will be valid or effective
for more than 90 days after the record date.
SECTION 12.03. NOTICES. (a) Any notice or communication to the Issuer or
the Company will be deemed given if in writing (i) when delivered in person or
(ii) five days after mailing when mailed by first class mail, or (iii) when sent
by facsimile transmission, with transmission confirmed. Notices or
communications to a Guarantor will be deemed given if given to the Issuer. Any
notice to the Trustee will be effective only upon receipt. In each case the
notice or communication should be addressed as follows:
if to the Issuer:
K. Hovnanian Enterprises, Inc.
10 Highway 35
P.O. Box 500
Red Bank, NJ 007701
732-747-7159
if to the Trustee:
First Union National Bank
21 South Street
Morristown, NJ 07960
ATTN: Corporate Trust Administration
(K. Hovnanian Enterprises, Inc. Senior Subordinated Notes due 2012)
973-682-4531
79
The Issuer or the Trustee by notice to the other may designate additional or
different addresses for subsequent notices or communications.
(b) Except as otherwise expressly provided with respect to published
notices, any notice or communication to a Holder will be deemed given when
mailed to the Holder at its address as it appears on the Register by first class
mail or, as to any Global Note registered in the name of DTC or its nominee, as
agreed by the Issuer, the Trustee and DTC. Copies of any notice or communication
to a Holder, if given by the Issuer or the Company, will be mailed to the
Trustee at the same time. Defect in mailing a notice or communication to any
particular Holder will not affect its sufficiency with respect to other Holders.
(c) Where the Indenture provides for notice, the notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and the waiver will be the equivalent of the notice. Waivers of
notice by Holders must be filed with the Trustee, but such filing is not a
condition precedent to the validity of any action taken in reliance upon such
waivers.
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any
request or application by the Issuer or the Company to the Trustee to take any
action under the Indenture, the Issuer or the Company will furnish to the
Trustee:
(a) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in the Indenture
relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that all such conditions precedent
relating to the proposed action have been complied with.
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in the Indenture must include:
(a) a statement that each person signing the certificate or opinion
has read the covenant or condition and the related definitions;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statement or opinion contained in the
certificate or opinion is based;
(c) a statement that, in the opinion of each such person, that
person has made such examination or investigation as is necessary to enable
the person to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether or not, in the opinion of each such
person, such condition or covenant has been complied with, PROVIDED that an
Opinion of Counsel may rely on an Officers' Certificate or certificates of
public officials with respect to matters of fact.
SECTION 12.06. PAYMENT DATE OTHER THAN A BUSINESS DAY. If any payment with
respect to a payment of any principal of, premium, if any, or interest or
Liquidated Damages, if any, on any Note (including any payment to be made on any
date fixed for redemption or
80
purchase of any Note) is due on a day which is not a Business Day, then the
payment need not be made on such date, but may be made on the next Business Day
with the same force and effect as if made on such date, and no interest will
accrue for the intervening period.
SECTION 12.07. GOVERNING LAW. The Indenture, including any Note Guaranties,
and the Notes shall be governed by, and construed in accordance with, the laws
of the State of New York.
SECTION 12.08. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. The Indenture
may not be used to interpret another indenture or loan or debt agreement of the
Issuer, the Company or any Subsidiary of the Company, and no such indenture or
loan or debt agreement may be used to interpret the Indenture.
SECTION 12.09. SUCCESSORS. All agreements of the Issuer, the Company or any
Guarantor in the Indenture and the Notes will bind its successors. All
agreements of the Trustee in the Indenture will bind its successor.
SECTION 12.10. DUPLICATE ORIGINALS. The parties may sign any number of
copies of the Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
SECTION 12.11. SEPARABILITY. In case any provision in the Indenture or in
the Notes is invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions will not in any way be affected or
impaired thereby.
SECTION 12.12. TABLE OF CONTENTS AND HEADINGS. The Table of Contents,
Cross-Reference Table and headings of the Articles and Sections of the Indenture
have been inserted for convenience of reference only, are not to be considered a
part of the Indenture and in no way modify or restrict any of the terms and
provisions of the Indenture.
SECTION 12.13. NO LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES,
INCORPORATORS AND STOCKHOLDERS. No director, officer, employee, incorporator,
member or stockholder of the Issuer, the Company or any Guarantor, as such, will
have any liability for any obligations of the Issuer, the Company or such
Guarantor under the Notes, any Note Guaranty or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations. Each Holder of Notes
by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes.
81
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused the Indenture to be duly
executed as of the date first written above.
K. HOVNANIAN ENTERPRISES, INC.
as Issuer
/s/ J. Larry Sorsby
-------------------
By: J. Larry Sorsby
Title: Executive Vice President
Chief Financial Officer
HOVNANIAN ENTERPRISES, INC.
as the Company
/s/ J. Larry Sorsby
------------------------
By: J. Larry Sorsby
Title: Executive Vice President
Chief Financial Officer
GUARANTORS:
ALL SEASONS, INC.
ARROW PROPERTIES, INC.
BALLANTRAE DEVELOPMENT CORP.
BALLANTRAE HOME SALES, INC.
CONDOMINIUM COMMUNITY (BOWIE NEW
TOWN), INC.
CONDOMINIUM COMMUNITY (LARGO TOWN), INC.
CONDOMINIUM COMMUNITY (PARK PLACE), INC.
CONDOMINIUM COMMUNITY (QUAIL RUN), INC.
CONDOMINIUM COMMUNITY (TRUMAN DRIVE), INC.
CONSULTANTS CORPORATION
DESIGNED CONTRACTS. INC.
EXC, INC.
FORTIS HOMES, INC.
HOUSING-HOME SALES, INC.
HOVNANIAN AT TARPON LAKES I, INC.
HOVNANIAN DEVELOPMENTS OF FLORIDA, INC.
HOVNANIAN PENNSYLVANIA, INC.
K. HOV INTERNATIONAL, INC.
K. HOVNANIAN ACQUISITIONS, INC.
K. HOVNANIAN AT ASHBURN VILLAGE, INC.
K. HOVNANIAN AT ATLANTIC CITY, INC.
K. HOVNANIAN AT BALLANTRAE ESTATES, INC.
K. HOVNANIAN AT BARRINGTON, INC.
K. HOVNANIAN AT BEDMINSTER II, INC.
K. HOVNANIAN AT BEDMINSTER, INC.
K. HOVNANIAN AT BELMONT, INC.
K. HOVNANIAN AT BERNARDS IV, INC.
K. HOVNANIAN AT BRANCHBURG III, INC.
K. HOVNANIAN AT BRIDGEPORT, INC.
K. HOVNANIAN AT BRIDGEWATER IV, INC.
K. HOVNANIAN AT BRIDGEWATER V, INC.
K. HOVNANIAN AT BRIDGEWATER VI, INC.
K. HOVNANIAN AT BULL RUN, INC.
K. HOVNANIAN AT BURLINGTON III, INC.
K. HOVNANIAN AT BURLINGTON, INC.
K. HOVNANIAN AT CALABRIA, INC.
K. HOVNANIAN AT CAMERON CHASE, INC.
K. HOVNANIAN AT CARMEL DEL MAR, INC.
K. HOVNANIAN AT CAROLINA COUNTRY
CLUB I, INC.
K. HOVNANIAN AT CAROLINA COUNTRY
CLUB II, INC.
K. HOVNANIAN AT CAROLINA COUNTRY
CLUB III, INC.
K. HOVNANIAN AT CASTILE, INC.
K. HOVNANIAN AT CEDAR GROVE I, INC.
K. HOVNANIAN AT CEDAR GROVE II, INC.
K. HOVNANIAN AT CHAPARRAL, INC.
K. HOVNANIAN AT CLARKSTOWN, INC.
K. HOVNANIAN AT COCONUT CREEK, INC.
K. HOVNANIAN AT CRESTLINE, INC.
K. HOVNANIAN AT CRYSTAL SPRINGS, INC.
K. HOVNANIAN AT DOMINGUEZ, INC.
K. HOVNANIAN AT DOMINION RIDGE, INC.
K. HOVNANIAN AT EAST BRUNSWICK VI, INC.
K. HOVNANIAN AT EAST BRUNSWICK VIII,
INC.
K. HOVNANIAN AT EAST WHITELAND I, INC.
K. HOVNANIAN AT EXETER HILLS, INC.
K. HOVNANIAN AT FAIR LAKES GLEN, INC.
K. HOVNANIAN AT FAIR LAKES, INC.
K. HOVNANIAN AT FREEHOLD TOWNSHIP, INC.
K. HOVNANIAN AT FREEHOLD TOWNSHIP I, INC.
K. HOVNANIAN AT FT. MYERS I, INC.
K. HOVNANIAN AT FT. MYERS II, INC.
K. HOVNANIAN AT GREAT NOTCH, INC.
K. HOVNANIAN AT HACKETTSTOWN, INC.
K. HOVNANIAN AT HALF MOON BAY, INC.
K. HOVNANIAN AT HAMPTON OAKS, INC.
K. HOVNANIAN AT HANOVER, INC.
K. HOVNANIAN AT HERSHEY'S MILL, INC. (a
PA Corp)
K. HOVNANIAN AT HIGHLAND VINEYARDS, INC.
K. HOVNANIAN AT HOLLY CREST, INC.
K. HOVNANIAN AT HOPEWELL IV, INC.
K. HOVNANIAN AT HOPEWELL V, INC.
K. HOVNANIAN AT HOPEWELL VI, INC.
K. HOVNANIAN AT HOWELL TOWNSHIP, INC.
K. HOVNANIAN AT HUNTER ESTATES, INC.
K. HOVNANIAN AT JACKSONVILLE II, INC.
K. HOVNANIAN AT JEFFERSON, INC.
K. HOVNANIAN AT JERSEY CITY III, INC.
K. HOVNANIAN AT KINGS GRANT I, INC.
K. HOVNANIAN AT KLOCKNER FARMS, INC.
K. HOVNANIAN AT LA TERRAZA, INC.
K. HOVNANIAN AT LA TROVATA, INC.
K. HOVNANIAN AT LAKEWOOD, INC.
K. HOVNANIAN AT LAWRENCE V, INC.
K. HOVNANIAN AT LOWER SAUCON II, INC.
K. HOVNANIAN AT LOWER SAUCON, INC.
K. HOVNANIAN AT MAHWAH II, INC.
K. HOVNANIAN AT MAHWAH IV, INC.(Whalepond)
K. HOVNANIAN AT MAHWAH IX, INC.
K. HOVNANIAN AT MAHWAH V, INC.
K. HOVNANIAN AT MAHWAH VI, INC. (Norfolk)
K. HOVNANIAN AT MAHWAH VII, INC.
K. HOVNANIAN AT MAHWAH VIII, INC.
K. HOVNANIAN AT MANALAPAN, INC.
K. HOVNANIAN AT MARLBORO II, INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP IV, INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP VI, INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP VII,
INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP III,
INC.
K. HOVNANIAN AT MEDFORD I, INC.
K. HOVNANIAN AT MERRIMACK, INC.
K. HOVNANIAN AT METRO DC SOUTH, INC.
K. HOVNANIAN AT MONTCLAIR NJ, INC.
K. HOVNANIAN AT MONTCLAIR, INC.
K. HOVNANIAN AT MONTGOMERY I, INC.
K. HOVNANIAN AT NEWARK URBAN RENEWAL
CORPORATION I, INC.
K. HOVNANIAN AT NEWARK URBAN RENEWAL
CORPORATION IV, INC.
K. HOVNANIAN AT NEWARK URBAN RENEWAL
CORPORATION V, INC.
K. HOVNANIAN AT NORTH BERGEN, INC.
K. HOVNANIAN AT NORTH BRUNSWICK IV, INC.
K. HOVNANIAN AT NORTHERN WESTCHESTER, INC.
K. HOVNANIAN AT NORTHLAKE, INC.
K. HOVNANIAN AT OCEAN WALK, INC.
K. HOVNANIAN AT P.C. PROPERTIES, INC.
K. HOVNANIAN AT PARK RIDGE, INC.
K. HOVNANIAN AT PASCO I, INC.
K. HOVNANIAN AT PASCO II, INC.
K. HOVNANIAN AT PEEKSKILL, INC.
K. HOVNANIAN AT PEMBROKE SHORES, INC.
K. HOVNANIAN AT PERKIOMEN I, INC.
K. HOVNANIAN AT PERKIOMEN II, INC.
K. HOVNANIAN AT PLAINSBORO III, INC.
K. HOVNANIAN AT POLO TRACE, INC.
K. HOVNANIAN AT PORT IMPERIAL NORTH, INC.
K. HOVNANIAN AT PRINCETON, INC.
K. HOVNANIAN AT RANCHO CHRISTIANITOS, INC.
K. HOVNANIAN AT RARITAN I, INC.
K. HOVNANIAN AT READINGTON II, INC.
K. HOVNANIAN AT RESERVOIR RIDGE, INC.
K. HOVNANIAN AT RIVER OAKS, INC.
K. HOVNANIAN AT SAN SEVAINE, INC.
K. HOVNANIAN AT SARATOGA, INC.
K. HOVNANIAN AT SCOTCH PLAINS II, INC.
K. HOVNANIAN AT SCOTCH PLAINS, INC.
K. HOVNANIAN AT SENECA CROSSING, INC.
K. HOVNANIAN AT SMITHVILLE, INC.
K. HOVNANIAN AT SMITHVILLE III, INC.
K. HOVNANIAN AT SOMERS POINT, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK II, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK III, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK IV, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK V, INC.
K. HOVNANIAN AT SPRING RIDGE, INC.
K. HOVNANIAN AT STONE CANYON, INC.
K. HOVNANIAN AT STONEGATE, INC. (a CA
Corporation)
K. HOVNANIAN AT STONEGATE, INC. (a VA
Corporation)
K. HOVNANIAN AT STONY POINT, INC.
K. HOVNANIAN AT STUART ROAD, INC.
K. HOVNANIAN AT SULLY STATION, INC.
K. HOVNANIAN AT SUMMERWOOD, INC.
K. HOVNANIAN AT SYCAMORE, INC.
K. HOVNANIAN AT TANNERY HILL, INC.
K. HOVNANIAN AT THE BLUFF, INC.
K. HOVNANIAN AT THE CEDARS, INC.
K. HOVNANIAN AT THE GLEN, INC.
K. HOVNANIAN AT THE RESERVE AT MEDFORD,
INC.
K. HOVNANIAN AT THORNBURY, INC.
K. HOVNANIAN AT TIERRASANTA, INC.
K. HOVNANIAN AT TUXEDO, INC.
K. HOVNANIAN AT UNION TOWNSHIP I, INC.
K. HOVNANIAN AT UPPER FREEHOLD TOWNSHIP I,
INC.
K. HOVNANIAN AT UPPER MAKEFIELD I, INC.
K. HOVNANIAN AT UPPER MERION, INC.
K. HOVNANIAN AT VAIL RANCH, INC.
K. HOVNANIAN AT VALLEYBROOK II, INC.
K. HOVNANIAN AT VALLEYBROOK, INC.
K. HOVNANIAN AT WALL TOWNSHIP VI, INC.
K. HOVNANIAN AT WALL TOWNSHIP VIII, INC.
K. HOVNANIAN AT WASHINGTONVILLE, INC.
K. HOVNANIAN AT WAYNE III, INC.
K. HOVNANIAN AT WAYNE V, INC.
K. HOVNANIAN AT WAYNE VI, INC.
K. HOVNANIAN AT WAYNE VII, INC.
K. HOVNANIAN AT WILDROSE, INC.
K. HOVNANIAN AT WINSTON TRAILS, INC.
K. HOVNANIAN AT WOODMONT, INC.
K. HOVNANIAN AVIATION, INC.
K. HOVNANIAN COMPANIES NORTHEAST, INC.
K. HOVNANIAN COMPANIES OF CALIFORNIA, INC.
K. HOVNANIAN COMPANIES OF FLORIDA, INC.
K. HOVNANIAN COMPANIES OF MARYLAND, INC.
K. HOVNANIAN COMPANIES OF METRO
WASHINGTON, INC.
K. HOVNANIAN COMPANIES OF NEW YORK, INC.
K. HOVNANIAN COMPANIES OF NORTH CAROLINA,
INC.
K. HOVNANIAN COMPANIES OF PENNSYLVANIA,
INC.
K. HOVNANIAN COMPANIES OF SOUTHERN
CALIFORNIA, INC.
K. HOVNANIAN CONSTRUCTION MANAGEMENT, INC.
K. HOVNANIAN'S DESIGN GALLERY, INC.
K. HOVNANIAN DEVELOPMENTS OF CALIFORNIA,
INC.
K. HOVNANIAN DEVELOPMENTS OF MARYLAND,
INC.
K. HOVNANIAN DEVELOPMENTS OF METRO
WASHINGTON, INC.
K. HOVNANIAN DEVELOPMENTS OF NEW JERSEY,
INC.
K. HOVNANIAN DEVELOPMENTS OF NEW YORK,
INC.
K. HOVNANIAN DEVELOPMENTS OF SOUTH
CAROLINA, INC.
K. HOVNANIAN DEVELOPMENTS OF TEXAS, INC.
K. HOVNANIAN EQUITIES, INC.
K. HOVNANIAN FLORIDA DIVISION, INC.
K. HOVNANIAN FORECAST ACQUISITION, INC.
K. HOVNANIAN FORECAST HOMES, INC.
K. HOVNANIAN INVESTMENT PROPERTIES OF NEW
JERSEY, INC.
K. HOVNANIAN MARINE, INC.
K. HOVNANIAN PORT IMPERIAL URBAN RENEWAL,
INC.
K. HOVNANIAN PROPERTIES OF EAST BRUNSWICK
II, INC.
K. HOVNANIAN PROPERTIES OF NB THEATRE,
INC.
K. HOVNANIAN PROPERTIES OF NEWARK URBAN
RENEWAL CORPORATION, INC.
K. HOVNANIAN PROPERTIES OF NORTH BRUNSWICK
II, INC.
K. HOVNANIAN PROPERTIES OF NORTH BRUNSWICK
V, INC.
K. HOVNANIAN PROPERTIES OF PISCATAWAY,
INC.
K. HOVNANIAN PROPERTIES OF RED BANK, INC.
K. HOVNANIAN PROPERTIES OF WALL, INC.
K. HOVNANIAN REAL ESTATE INVESTMENT, INC.
K. HOVNANIAN REAL ESTATE OF FLORIDA, INC.
K. HOVNANIAN SOUTHEAST FLORIDA, INC.
K. HOVNANIAN SOUTHEAST REGION, INC.
K. HOVNANIAN'S FOUR SEASONS OF THE PALM
BEACHES, INC.
KHC ACQUISITION, INC.
KINGS GRANT EVESHAM CORP.
LANDARAMA, INC.
MATZEL & MUMFORD OF DELAWARE, INC.
M & M AT LONG BRANCH, INC.
NEW K. HOVNANIAN DEVELOPMENTS OF FLORIDA,
INC.
PARK VILLAGE REALTY, INC.
PARTHENON GROUP, INC.
PINE BROOK CO., INC.
QUE CORPORATION
REFLECTIONS OF YOU INTERIORS, INC.
STONEBROOK HOMES, INC.
THE MATZEL & MUMFORD ORGANIZATION, INC.
THE NEW FORTIS CORPORATION
THE SOUTHAMPTON CORPORATION
TROPICAL SERVICE BUILDERS, INC.
WASHINGTON HOMES OF DELAWARE, INC.
WASHINGTON HOMES OF WEST VIRGINIA, INC.
WASHINGTON HOMES, INC.
WASHINGTON HOMES, INC. OF VIRGINIA
WESTMINSTER HOMES (CHARLOTTE), INC.
WESTMINSTER HOMES OF TENNESSEE, INC.
WESTMINSTER HOMES, INC.
WH LAND I, INC
WH LAND II, INC.
WH PROPERTIES, INC.
ARBOR WEST, L.L.C.
K. HOVNANIAN AT ST. MARGARETS, L.L.C.
K. HOVNANIAN AT ARBOR HEIGHTS, L.L.C.
K. HOVNANIAN AT ASHBURN VILLAGE, L.L.C.
K. HOVNANIAN AT BARNEGAT I, L.L.C.
K. HOVNANIAN AT BERKELEY, L.L.C.
K. HOVNANIAN AT BERNARDS V, L.L.C.
K. HOVNANIAN AT BLOOMS CROSSING, L.L.C.
K. HOVNANIAN AT BLUE HERON PINES, L.L.C.
K. HOVNANIAN AT BRENBROOKE, L.L.C.
K. HOVNANIAN AT CAMDEN I, L.L.C.
K. HOVNANIAN AT CARMEL VILLAGE, L.L.C.
K. HOVNANIAN AT CEDAR GROVE III, L.L.C.
K. HOVNANIAN AT CHESTER I, L.L.C.
K. HOVNANIAN AT CLIFTON, L.L.C.
K. HOVNANIAN AT COLUMBIA TOWN CENTER,
L.L.C.
K. HOVNANIAN AT CRANBURY, L.L.C.
K. HOVNANIAN AT CURRIES WOODS, L.L.C.
K. HOVNANIAN AT ENCINITAS RANCH,
L.L.C.
K. HOVNANIAN AT FORECAST, L.L.C.
K. HOVNANIAN AT GUTTENBERG, L.L.C.
K. HOVNANIAN AT HAMBURG, L.L.C.
K. HOVNANIAN AT HAMBURG CONTRACTORS,
L.L.C.
K. HOVNANIAN AT JACKSON, L.L.C.
K. HOVNANIAN AT JERSEY CITY IV, L.L.C.
K. HOVNANIAN AT KENT ISLAND, L.L.C.
K. HOVNANIAN AT KINCAID, L.L.C.
K. HOVNANIAN AT KING FARM, L.L.C.
K. HOVNANIAN AT LAFAYETTE ESTATES, L.L.C.
K. HOVNANIAN AT LAKE RIDGE CROSSING,
L.L.C.
K. HOVNANIAN AT LAKE TERRAPIN, L.L.C.
K. HOVNANIAN AT LAWRENCE V, L.L.C.
K. HOVNANIAN AT LINWOOD, L.L.C.
K. HOVNANIAN AT LITTLE EGG HARBOR, L.L.C.
K. HOVNANIAN AT LITTLE EGG HARBOR
CONTRACTORS, L.L.C.
K. HOVNANIAN AT LOWER MORELAND I, L.L.C.
K. HOVNANIAN AT LOWER MORELAND II, L.L.C.
K. HOVNANIAN AT LOWER SAUCON II, L.L.C.
K. HOVNANIAN AT MANSFIELD I, LLC
K. HOVNANIAN AT MANSFIELD II, LLC
K. HOVNANIAN AT MANSFIELD III, L.L.C.
K. HOVNANIAN AT MARLBORO TOWNSHIP VIII,
L.L.C.
K. HOVNANIAN AT MARLBORO VI, L.L.C.
K. HOVNANIAN AT MARLBORO VII, L.L.C.
K. HOVNANIAN AT MENIFEE, L.L.C.
K. HOVNANIAN AT MIDDLETOWN, L.L.C.
K. HOVNANIAN AT MT. OLIVE TOWNSHIP, L.L.C.
K. HOVNANIAN AT NORTH BRUNSWICK VI, L.L.C.
K. HOVNANIAN AT NORTH HALEDON, L.L.C.
K. HOVNANIAN AT NORTHAMPTON, L.L.C.
K. HOVNANIAN AT NORTHFIELD, L.L.C.
K. HOVNANIAN AT PACIFIC BLUFFS, L.L.C.
K. HOVNANIAN AT PARAMUS, L.L.C.
K. HOVNANIAN AT PARK LANE, L.L.C.
K. HOVNANIAN AT PRINCE WILLIAM, L.L.C.
K. HOVNANIAN AT RANCHO SANTA MARGARITA,
L.L.C.
K. HOVNANIAN AT RIVERBEND, L.L.C.
K. HOVNANIAN AT RODERUCK. L.L.C.
K. HOVNANIAN AT ROWLAND HEIGHTS, L.L.C.
K. HOVNANIAN AT SAYREVILLE, L.L.C.
K. HOVNANIAN AT SOUTH AMBOY, L.L.C.
K. HOVNANIAN AT SOUTH BANK, L.L.C.
K. HOVNANIAN AT SOUTH BRUNSWICK, L.L.C.
K. HOVNANIAN AT SPRING HILL ROAD, L.L.C.
K. HOVNANIAN AT ST. MARGARETS, L.L.C.
K. HOVNANIAN AT SUNSETS, L.L.C.
K. HOVNANIAN AT THE GABLES, L.L.C.
K. HOVNANIAN AT UPPER FREEHOLD TOWNSHIP
II, L.L.C.
K. HOVNANIAN AT UPPER FREEHOLD TOWNSHIP
III, L.L.C.
K. HOVNANIAN AT WANAQUE, L.L.C.
K. HOVNANIAN AT WASHINGTON, L.L.C.
K. HOVNANIAN AT WAYNE VIII, L.L.C.
K. HOVNANIAN AT WAYNE IX, L.L.C.
K. HOVNANIAN AT WEST MILFORD, L.L.C.
K. HOVNANIAN AT WEST WINDSOR, L.L.C.
K. HOVNANIAN AT WILLOW BROOK, L.L.C.
K. HOVNANIAN AT WINCHESTER, L.L.C.
K. HOVNANIAN AT WOODHILL ESTATES, L.L.C.
K. HOVNANIAN AT WOOLWICH, L.L.C.
K. HOVNANIAN CENTRAL ACQUISITIONS, L.L.C.
K. HOVNANIAN COMPANIES OF METRO D.C.
NORTH, L.L.C.
K. HOVNANIAN EASTERN PENNSYLVANIA, L.L.C.
K. HOVNANIAN FORECAST, L.L.C.
K. HOVNANIAN NORTH CENTRAL ACQUISITIONS,
L.L.C.
K. HOVNANIAN NORTH JERSEY ACQUISITIONS,
L.L.C.
K. HOVNANIAN SHORE ACQUISITIONS, L.L.C.
K. HOVNANIAN SOUTH JERSEY ACQUISITION,
L.L.C.
K. HOVNANIAN SOUTHERN NEW JERSEY, L.L.C.
K. HOVNANIAN'S FOUR SEASONS, L.L.C.
K. HOVNANIAN'S PRIVATE HOME PORTFOLIO,
L.L.C.
KINGS COURT AT MONTGOMERY, L.L.C.
M&M AT APPLE RIDGE, L.L.C.
M&M AT BROOKHILL, L.L.C.
M&M AT HERITAGE WOODS, L.L.C.
M&M AT THE HIGHLANDS, L.L.C.
M&M AT EAST MILL, L.L.C.
M&M AT MORRISTOWN, L.L.C.
M&M AT ROOSEVELT, L.L.C.
M&M AT SHERIDAN, L.L.C.
M&M AT SPARTA, L.L.C.
M&M AT SPINNAKER POINTE, L.L.C.
M&M AT SPRUCE HOLLOW, L.L.C.
M&M AT SPRUCE MEADOWS, L.L.C.
M&M AT SPRUCE RUN, L.L.C.
MATZEL & MUMFORD AT CRANBURY KNOLL, L.L.C.
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
MATZEL & MUMFORD AT HERITAGE LANDING,
L.L.C.
MATZEL & MUMFORD AT MONTGOMERY, L.L.C.
MATZEL & MUMFORD AT PHILLIPSBURG, L.L.C.
MATZEL & MUMFORD AT SOUTH BRUNSWICK,
L.L.C.
MATZEL & MUMFORD AT WOODLAND CREST, L.L.C.
SECTION 14 OF THE HILLS, L.L.C.
THE LANDINGS AT SPINNAKER POINTE, L.L.C.
WESTMINSTER HOMES OF ALABAMA, L.L.C.
WESTMINSTER HOMES OF MISSISSIPPI, L.L.C.
WESTMINSTER HOMES OF SOUTH CAROLINA,
L.L.C.
GOODMAN FAMILY BUILDERS, L.P.
M & M INVESTMENTS, L.P.
WASHABAMA, L.P.
/s/ J. Larry Sorsby
-------------------------------------
By: J. Larry Sorsby
Title: Executive Vice President
Chief Financial Officer
FIRST UNION NATIONAL BANK,
as Trustee
By: /s/ S. Roche
--------------------
Name: Stephanie Roche
Title: Vice President
EXHIBIT A
[FACE OF NOTE]
K. HOVNANIAN ENTERPRISES, INC.
8.875% Senior Subordinated Note Due 2012
[CUSIP] [ISIN] _______________
No. $_______________
K. Hovnanian Enterprises, Inc., a New Jersey corporation (the "ISSUER",
which term includes any successor under the Indenture hereinafter referred to),
for value received, promises to pay to ____________________, or its registered
assigns, the principal sum of ____________ DOLLARS ($______) on April 1, 2012
Initial Interest Rate: 8.875% per annum.
Interest Payment Dates: April 1 and October 1, commencing October 1, 2002.
Regular Record Dates: March 15 and September 15.
Reference is hereby make to the further provisions of this Note set forth
on the reverse hereof, which will for all purposes have the same effect as if
set forth at this place.
IN WITNESS WHEREOF, the Issuer has caused this Note to be signed manually
or by facsimile by its duly authorized officers.
Date: K. HOVNANIAN ENTERPRISES, INC.
By:
------------------------------
Name:
Title:
A-1
(Form of Trustee's Certificate of Authentication)
This is one of the 8.875% Senior Subordinated Notes Due 2012 described in
the Indenture referred to in this Note.
FIRST UNION NATIONAL BANK,
as Trustee
By:
---------------------------------
Authorized Signatory
A-2
[REVERSE SIDE OF NOTE]
K. HOVNANIAN ENTERPRISES, INC.
8.875% Senior Subordinated Note Due 2012
1. PRINCIPAL AND INTEREST.
The Issuer promises to pay the principal of this Note on April 1, 2012.
The Issuer promises to pay interest on the principal amount of this Note on
each interest payment date, as set forth on the face of this Note, at the rate
of 8.875% per annum.
Interest will be payable semiannually (to the holders of record of the
Notes at the close of business on the March 15 or September 15 immediately
preceding the interest payment date) on each interest payment date, commencing
October 1, 2002.
The Holder of this Note is entitled to the benefits of the Registration
Rights Agreement, dated March 26, 2002, between the Issuer, the Guarantors party
thereto and the Initial Purchasers named therein (the "REGISTRATION RIGHTS
AGREEMENT"). In the event that neither the Exchange Offer Registration Statement
(as defined in the Registration Rights Agreement) nor the Shelf Registration
Statement (as defined in the Registration Rights Agreement) is declared
effective on or prior to the date that is 150 days after the Issue Date (the
"EFFECTIVENESS DEADLINE"), the Holder shall be entitled to Liquidated Damages as
specified in the Registration Rights Agreement until the Exchange Offer
Registration Statement or the Shelf Registration Statement is declared effective
by the Commission. If the Exchange Offer Registration Statement is declared
effective but the Exchange Offer is not consummated on or prior to the earlier
to occur of 40 Business Days after the date of effectiveness of the Exchange
Offer Registration Statement, the Issuer shall be required to pay Liquidated
Damages as specified in the Registration Rights Agreement.
Interest on this Note will accrue from the most recent date to which
interest has been paid on this Note or the Note surrendered in exchange for this
Note (or, if there is no existing default in the payment of interest and if this
Note is authenticated between a regular record date and the next interest
payment date, from such interest payment date) or, if no interest has been paid,
from the Issue Date. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
The Issuer will pay interest on overdue principal, premium, if any, and, to
the extent lawful, interest and Liquidated Damages, if any, at a rate per annum
that is 1% in excess of 8.875%. Interest and Liquidated Damages not paid when
due and any interest on principal, premium or interest not paid when due will be
paid to the Persons that are Holders on a special record date, which will be the
15th day preceding the date fixed by the Issuer for the payment of such
interest, whether or not such day is a Business Day. At least 15 days before a
special record date, the Issuer will send to each Holder and to the Trustee a
notice that sets forth the special record date, the payment date and the amount
of interest to be paid.
A-3
2. INDENTURES; SUBORDINATION; NOTE GUARANTY.
This is one of the Notes issued under an Indenture dated as of March 26,
2002 (as amended from time to time, the "INDENTURE"), among the Issuer, the
Guarantors party thereto and First Union National Bank, as Trustee. Capitalized
terms used herein are used as defined in the Indenture unless otherwise
indicated. The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act. The
Notes are subject to all such terms, and Holders are referred to the Indenture
and the Trust Indenture Act for a statement of all such terms. To the extent
permitted by applicable law, in the event of any inconsistency between the terms
of this Note and the terms of the Indenture, the terms of the Indenture will
control.
The Notes are general unsecured obligations of the Issuer. The Indenture
limits the original aggregate principal amount of the Notes to $150,000,000, but
Additional Notes in an aggregate principal amount of up to $150,000,000 may be
issued pursuant to the Indenture, and the originally issued Notes and all such
Additional Notes vote together for all purposes as a single class. This Note is
subordinated as set forth in the Indenture. This Note is guaranteed, on a
subordinated basis, as set forth in the Indenture.
3. REDEMPTION AND REPURCHASE; DISCHARGE PRIOR TO REDEMPTION OR MATURITY.
This Note is subject to optional redemption, and may be the subject of an
Offer to Purchase, as further described in the Indenture. There is no sinking
fund or mandatory redemption applicable to this Note.
If the Issuer deposits with the Trustee money or U.S. Government
Obligations sufficient to pay the then outstanding principal of, premium and
Liquidated Damages, if any, and accrued interest on the Notes to redemption or
maturity, the Company may in certain circumstances be discharged from the
Indenture and the Notes or may be discharged from certain of its obligations
under certain provisions of the Indenture.
4. REGISTERED FORM; DENOMINATIONS; TRANSFER; EXCHANGE.
The Notes are in registered form without coupons in denominations of $1,000
principal amount and any multiple of $1,000 in excess thereof. A Holder may
register the transfer or exchange of Notes in accordance with the Indenture. The
Trustee may require a Holder to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. Pursuant to the Indenture, there are certain periods during which the
Trustee will not be required to issue, register the transfer of or exchange any
Note or certain portions of a Note.
5. DEFAULTS AND REMEDIES.
If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the Notes may declare all the Notes to be due and payable. If a bankruptcy or
insolvency default with respect to the Issuer occurs and is continuing, the
Notes automatically become due and payable. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. The Trustee may
require indemnity
A-4
satisfactory to it before it enforces the Indenture or the Notes. Subject to
certain limitations, Holders of a majority in principal amount of the Notes then
outstanding may direct the Trustee in its exercise of remedies.
6. AMENDMENT AND WAIVER.
Subject to certain exceptions, the Indenture and the Notes may be amended,
or default may be waived, with the consent of the Holders of a majority in
principal amount of the outstanding Notes. Without notice to or the consent of
any Holder, the Issuer and the Trustee may amend or supplement the Indenture or
the Notes to, among other things, cure any ambiguity, defect or inconsistency.
7. AUTHENTICATION.
This Note is not valid until the Trustee (or Authenticating Agent) signs
the certificate of authentication on the other side of this Note.
A-5
8. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder or an assignee,
such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties),
JT TEN (= joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian) and U/G/M/A/ (= Uniform Gifts to Minors Act).
The Company will furnish a copy of the Indenture to any Holder upon written
request and without charge.
A-6
[FORM OF NOTATION ON NOTE RELATING TO GUARANTEE]
GUARANTEE
The undersigned (the "GUARANTORS") have unconditionally guaranteed, jointly
and severally (such guarantee by each Guarantor being referred to herein as the
"GUARANTEE") (i) the due and punctual payment of the principal of and interest
on the Notes, whether at maturity, by acceleration or otherwise, the due and
punctual payment of interest on the overdue principal and interest, if any, on
the Notes, to the extent lawful, and the due and punctual performance of all
other obligations of the Issuer to the Holders or the Trustee all in accordance
with the terms set forth in Article 6 of the Indenture and (ii) in case of any
extension of time of payment or renewal of any Notes or any of such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise.
The obligations of the Guarantors under this Guarantee are subordinated to
all Senior Debt of a Guarantor, as set forth in Article 11 of the Indenture.
No past, present or future stockholder, officer, director, employee or
incorporator, as such, of any of the Guarantors shall have any liability under
the Guarantee by reason of such person's status as stockholder, officer,
director, employee or incorporator. Each Holder of a Note by accepting a Note
waives and releases all such liability. This waiver and release are part of the
consideration for the issuance of the Guarantee.
Each Holder of a Note by accepting a Note agrees that any Guarantor named
below shall have no further liability with respect to its Guarantee if such
Guarantor otherwise ceases to be liable in respect of its Guarantee in
accordance with the terms of the Indenture.
The Guarantee shall not be valid or obligatory for any purpose until the
certificate of authentication on the Notes upon which the Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
[Guarantors]
By:
------------------------------
Title:
A-7
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s)
and transfer(s) unto
Insert Taxpayer Identification No.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Please print or typewrite name and address including zip code of assignee
- --------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing
- --------------------------------------------------------------------------------
attorney to transfer said Note on the books of the Issuer with full power of
substitution in the premises.
A-8
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES BEARING A RESTRICTED
LEGEND]
In connection with any transfer of this Note occurring prior to ______________,
the undersigned confirms that such transfer is made without utilizing any
general solicitation or general advertising and further as follows:
CHECK ONE
/ / (1) This Note is being transferred to a "qualified institutional
buyer" in compliance with Rule 144A under the Securities Act of 1933, as amended
and certification in the form of Exhibit F to the Indenture is being furnished
herewith.
/ / (2) This Note is being transferred to a Non-U.S. Person in compliance
with the exemption from registration under the Securities Act of 1933, as
amended, provided by Regulation S thereunder, and certification in the form of
Exhibit E to the Indenture is being furnished herewith.
OR
/ / (3) This Note is being transferred other than in accordance with (1) or
(2) above and documents are being furnished which comply with the conditions of
transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee is not obligated to
register this Note in the name of any Person other than the Holder hereof unless
and until the conditions to any such transfer of registration set forth herein
and in the Indenture have been satisfied.
Date:______________________
--------------------------------
Seller
By
-------------------------------
NOTICE: The signature to this assignment must
correspond with the name as written upon the
face of the within-mentioned instrument in
every particular, without alteration or any
change whatsoever.
A-9
Signature Guarantee:(1)
--------------------------
By
-------------------------------------
To be executed by an executive officer
- ----------
(1) Signatures must be guaranteed by an "ELIGIBLE GUARANTOR INSTITUTION"
meeting the requirements of the Registrar, which requirements include
membership or participation in the Note Transfer Agent Medallion Program
("STAMP") or such other "SIGNATURE GUARANTEE PROGRAM" as may be determined
by the Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
A-10
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have all of this Note purchased by the Company pursuant to
Section 4.10 or Section 4.12 of the Indenture, check the box: / /
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.10 or Section 4.12 of the Indenture, state the amount (in
original principal amount) below:
$____________________
Date:____________
Your Signature:
----------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:(1)
---------------------------
- ----------
(1) Signatures must be guaranteed by an "ELIGIBLE GUARANTOR INSTITUTION"
meeting the requirements of the Registrar, which requirements include
membership or participation in the Note Transfer Agent Medallion Program
("STAMP") or such other "SIGNATURE GUARANTEE PROGRAM" as may be determined
by the Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
A-11
SCHEDULE OF EXCHANGES OF NOTES(1)
The following exchanges of a part of this Global Note for Physical Notes or a
part of another Global Note have been made:
PRINCIPAL AMOUNT OF
THIS GLOBAL NOTE
AMOUNT OF DECREASE AMOUNT OF INCREASE IN FOLLOWING SUCH SIGNATURE OF
IN PRINCIPAL AMOUNT PRINCIPAL AMOUNT OF DECREASE (OR AUTHORIZED OFFICER
DATE OF EXCHANGE OF THIS GLOBAL NOTE THIS GLOBAL NOTE INCREASE) OF TRUSTEE
- ---------------------- ------------------- ---------------------- -------------------- -------------------
- ----------
(1) For Global Notes
A-12
EXHIBIT B
SUPPLEMENTAL INDENTURE
dated as of __________, ____
among
K. HOVNANIAN ENTERPRISES, INC.
HOVNANIAN ENTERPRISES, INC.
The Guarantors Party Hereto
and
FIRST UNION NATIONAL BANK
as Trustee
----------------------------
8.875% Senior Subordinated Notes due 2012
B-1
THIS SUPPLEMENTAL INDENTURE (this "SUPPLEMENTAL INDENTURE"), entered into
as of __________, ____, among K. Hovnanian Enterprises, Inc., a New Jersey
corporation (the "ISSUER"), Hovnanian Enterprises, Inc. (the "COMPANY"), [list
each new guarantor and its jurisdiction of incorporation] (each an
"UNDERSIGNED") and First Union National Bank, as trustee (the "TRUSTEE").
RECITALS
WHEREAS, the Issuer, Company, the Guarantors party thereto and the Trustee
entered into the Indenture, dated as of March 26, 2002 (the "INDENTURE"),
relating to the Company's 8.875% Senior Subordinated Notes due 2012 (the
"NOTES");
WHEREAS, as a condition to the Trustee entering into the Indenture and the
purchase of the Notes by the Holders, the Company agreed pursuant to the
Indenture to cause any newly acquired or created Restricted Subsidiaries to
provide Guaranties.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained and intending to be legally bound, the parties the Indenture
hereby agree as follows:
Section 1. Capitalized terms used herein and not otherwise defined herein
are used as defined in the Indenture.
Section 2. Each Undersigned, by its execution of this Supplemental
Indenture, agrees to be a Guarantor under the Indenture and to be bound by the
terms of the Indenture applicable to Guarantors, including, but not limited to,
Article 6 and Article 11 thereof.
Section 3. This Supplemental Indenture shall be governed by and construed
in accordance with the laws of the State of New York.
Section 4. This Supplemental Indenture may be signed in various
counterparts which together will constitute one and the same instrument.
Section 5. This Supplemental Indenture is an amendment supplemental to the
Indenture and the Indenture and this Supplemental Indenture will henceforth be
read together.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed as of the date first above written.
K. HOVNANIAN ENTERPRISES, INC.,
as Issuer
By:
---------------------------------
Name:
Title:
HOVNANIAN ENTERPRISES, INC.,
By:
---------------------------------
Name:
Title:
[GUARANTOR]
By:
---------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK,
as Trustee
By:
---------------------------------
Name:
Title:
EXHIBIT C
RESTRICTED LEGEND
THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE NEXT
SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE
HOLDER
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB"), (B) IT HAS ACQUIRED
THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(a) (1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "IAI"),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE OR ANY
BENEFICIAL INTEREST HEREIN, EXCEPT (A) TO THE COMPANY OR ANY OF ITS
SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING
THE REQUIREMENTS OF RULE 903 OR 904 OF REGULATION S OF THE SECURITIES ACT, (D)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT,
(E) TO AN IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND,
IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF LESS THAN
$250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH TRANSFER IS
IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL ACCEPTABLE TO THE ISSUER) OR (G) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN
INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTIONS" AND "UNITED STATES" HAVE
THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT.
THE INDENTURE CONTAINS A PROVISION
C-1
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN
VIOLATION OF THE FOREGOING.
C-2
EXHIBIT D
DTC LEGEND
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ANY
OF ITS SUBSIDIARIES OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS A BENEFICIAL INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE ARE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN
PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE ARE LIMITED TO TRANSFERS
MADE IN ACCORDANCE WITH THE TRANSFER PROVISIONS OF THE INDENTURE.
D-1
EXHIBIT E
Regulation S Certificate
________, _____
First Union National Bank
21 South Street
Morristown, NJ 07960
Attention: Corporate Trust Administration
Re: K. Hovnanian Enterprises, Inc.
8.875% Senior Subordinated Notes due 2012 (the "NOTES")
Issued under the Indenture (the "INDENTURE") dated
AS OF MARCH 26, 2002 RELATING TO THE NOTES
Dear Sirs:
Terms are used in this Certificate as used in Regulation S ("Regulation S")
under the Securities Act of 1933, as amended (the "Securities Act"), except as
otherwise stated herein.
[CHECK A OR B AS APPLICABLE.]
/ / A. This Certificate relates to our proposed transfer of $____
principal amount of Notes issued under the Indenture. We hereby
certify as follows:
1. The offer and sale of the Notes was not and will not be made
to a person in the United States (unless such person is
excluded from the definition of "U.S. person" pursuant to Rule
902(k)(2)(vi) or the account held by it for which it is acting
is excluded from the definition of "U.S. person" pursuant to
Rule 902(k)(2)(i) under the circumstances described in Rule
902(g)(3)) and such offer and sale was not and will not be
specifically targeted at an identifiable group of U.S.
citizens abroad.
2. Unless the circumstances described in the parenthetical in
paragraph 1 above are applicable, either (a) at the time the
buy order was originated, the buyer was outside the United
States or we and any person acting on our behalf reasonably
believed that the buyer was outside the United States or (b)
the transaction was executed in, on or through the facilities
of a designated offshore securities market, and neither we nor
any person acting on our behalf knows that the transaction was
pre-arranged with a buyer in the United States.
3. Neither we, any of our affiliates, nor any person acting on
our or their behalf has made any directed selling efforts in
the United States with respect to the Notes.
E-1
4. The proposed transfer of Notes is not part of a plan or scheme
to evade the registration requirements of the Securities Act.
5. If we are a dealer or a person receiving a selling concession,
fee or other remuneration in respect of the Notes, and the
proposed transfer takes place during the Restricted Period (as
defined in the Indenture), or we are an officer or director of
the Company or an Initial Purchaser (as defined in the
Indenture), we certify that the proposed transfer is being
made in accordance with the provisions of Rule 904(b) of
Regulation S.
/ / B. This Certificate relates to our proposed exchange of $____
principal amount of Notes issued under the Indenture for an equal
principal amount of Notes to be held by us. We hereby certify as
follows:
1. At the time the offer and sale of the Notes was made to us,
either (i) we were not in the United States or (ii) we were
excluded from the definition of "U.S. person" pursuant to Rule
902(k)(2)(vi) or the account held by us for which we were
acting was excluded from the definition of "U.S. person"
pursuant to Rule 902(k)(2)(i) under the circumstances
described in Rule 902(g)(3); and we were not a member of an
identifiable group of U.S. citizens abroad.
2. Unless the circumstances described in paragraph 1(ii) above
are applicable, either (a) at the time our buy order was
originated, we were outside the United States or (b) the
transaction was executed in, on or through the facilities of a
designated offshore securities market and we did not
pre-arrange the transaction in the United States.
3. The proposed exchange of Notes is not part of a plan or scheme
to evade the registration requirements of the Securities Act.
You and the Company are entitled to rely upon this Certificate and are
irrevocably authorized to produce this Certificate or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[NAME OF SELLER (FOR TRANSFERS) OR]
OWNER (FOR EXCHANGES)]
By:
---------------------------------
Name:
Title:
Address:
Date:________________________
E-2
EXHIBIT F
Rule 144A Certificate
_________, _____
First Union National Bank
21 South Street
Morristown, NJ 07960
Attention: Corporate Trust Administration
Re: K. Hovnanian Enterprises, Inc.
8.875% Senior Subordinated Notes due 2012 (the "NOTES")
Issued under the Indenture (the "INDENTURE") dated
AS OF MARCH 26, 2002 RELATING TO THE NOTES
Ladies and Gentlemen:
TO BE COMPLETED BY PURCHASER IF (1) ABOVE IS CHECKED.
This Certificate relates to:
[CHECK A OR B AS APPLICABLE.]
/ / A. Our proposed purchase of $____ principal amount of Notes issued
under the Indenture.
/ / B. Our proposed exchange of $____ principal amount of Notes issued
under the Indenture for an equal principal amount of Notes to be
held by us.
We and, if applicable, each account for which we are acting, are a
qualified institutional buyer within the meaning of Rule 144A ("Rule 144A")
under the Securities Act of 1933, as amended (the "Securities Act"). If we are
acting on behalf of an account, we exercise sole investment discretion with
respect to such account. We are aware that the transfer of Notes to us, or such
exchange, as applicable, is being made in reliance upon the exemption from the
provisions of Section 5 of the Securities Act provided by Rule 144A. Prior to
the date of this Certificate we have received such information regarding the
Company as we have requested pursuant to Rule 144A(d)(4) or have determined not
to request such information.
F-1
You and the Company are entitled to rely upon this Certificate and are
irrevocably authorized to produce this Certificate or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[NAME OF PURCHASER (FOR TRANSFERS
OR OWNER (FOR EXCHANGES)]
By:
-------------------------------
Name:
Title:
Address:
Date:____________________
F-2
EXHIBIT G
Institutional Accredited Investor Certificate
First Union National Bank
21 South Street
Morristown, NJ 07960
Attention: Corporate Trust Administration
Re: K. Hovnanian Enterprises, Inc.
8.875% Senior Subordinated Notes due 2012 (the "NOTES")
Issued under the Indenture (the "INDENTURE") dated
AS OF MARCH 26, 2002 RELATING TO THE NOTES
Ladies and Gentlemen:
This Certificate relates to:
[CHECK A, B OR C AS APPLICABLE.]
/ / A. Our proposed purchase of $____ principal amount of Notes issued
under the Indenture.
/ / B. Our proposed purchase of $____ principal amount of a beneficial
interest in a Global Note
/ / C. Our proposed exchange of $____ principal amount of Notes issued
under the Indenture for an equal principal amount of Notes to be
held by us.
We hereby confirm that:
1. We are an institutional "accredited investor" within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act of 1933, as amended (the "Securities Act") (an
"Institutional Accredited Investor").
2. Any acquisition of Notes by us will be for our own account or
for the account of one or more other Institutional Accredited
Investors as to which we exercise sole investment discretion.
3. We have such knowledge and experience in financial and
business matters that we are capable of evaluating the merits
and risks of an investment in the Notes and we and any
accounts for which we are acting are able to bear the economic
risks of and an entire loss of our or their investment in the
Notes.
G-1
4. We are not acquiring the Notes or beneficial interest therein
with a view to any distribution thereof in a transaction that
would violate the Securities Act or the securities laws of any
State of the United States or any other applicable
jurisdiction; PROVIDED that the disposition of our property
and the property of any accounts for which we are acting as
fiduciary will remain at all times within our and their
control.
5. We acknowledge that the Notes have not been registered under
the Securities Act and that the Notes may not be offered or
sold within the United States or to or for the benefit of U.S.
persons except as set forth below.
6. The principal amount of Notes to which this Certificate
relates is at least equal to $250,000.
We agree for the benefit of the Company, on our own behalf and on behalf of
each account for which we are acting, that we will not resell or otherwise
transfer this note or any beneficial interest herein, except (A) to the company
or any of its subsidiaries, (B) to a person whom the we reasonably believes is a
QIB purchasing for its own account or for the account of a QIB in a transaction
meeting the requirements of Rule 144A, (C) in an offshore transaction meeting
the requirements of Rule 903 or 904 of Regulation S of the Securities Act, (D)
in a transaction meeting the requirements of Rule 144 under the Securities Act,
(E) to an IAI that, prior to such transfer, furnishes the Trustee a signed
letter containing certain representations and agreements relating to the
transfer of this Note (the form of which can be obtained from the Trustee) and,
if such transfer is in respect of an aggregate principal amount of less than
$250,000, an opinion of counsel acceptable to the company that such transfer is
in compliance with the Securities Act, (F) in accordance with another exemption
form the registration requirements of the Securities Act (and based upon an
opinion of counsel acceptable to the Company) or (G) pursuant to an effective
Registration Statement, and in each case, in accordance with the applicable
securities laws of any state of the United States or any other applicable
jurisdiction.
Prior to the registration of any transfer in accordance with (f) or (g)
above, we acknowledge that the Company reserves the right to require the
delivery of such legal opinions, certifications or other evidence as may
reasonably be required in order to determine that the proposed transfer is being
made in compliance with the Securities Act and applicable state securities laws.
We acknowledge that no representation is made as to the availability of any Rule
144 exemption from the registration requirements of the Securities Act.
We understand that the Trustee will not be required to accept for
registration of transfer any Notes acquired by us, except upon presentation of
evidence satisfactory to the Company and the Trustee that the foregoing
restrictions on transfer have been complied with. We further agree to provide to
any person acquiring any of the Notes or any beneficial interest therein from us
a notice advising such person that resales of the Notes are restricted as stated
herein.
We agree to notify you promptly in writing if any of our acknowledgments,
representations or agreements herein ceases to be accurate and complete.
G-2
We represent to you that we have full power to make the foregoing
acknowledgments, representations and agreements on our own behalf and on behalf
of any account for which we are acting.
You and the Company are entitled to rely upon this Certificate and are
irrevocably authorized to produce this Certificate or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[NAME OF PURCHASER (FOR TRANSFERS)
OR OWNER (FOR EXCHANGES)]
By:
---------------------------------
Name:
Title:
Address:
Date:_________________
G-3
Upon transfer of certificated Notes, the Notes would be registered in the
name of the new beneficial owner as follows:
By:
-------------------------------------
Date:
-----------------------------------
Taxpayer ID number:
---------------------
G-4
EXHIBIT H
[COMPLETE FORM I OR FORM II AS APPLICABLE.]
[FORM I]
CERTIFICATE OF BENEFICIAL OWNERSHIP
To: First Union National Bank
21 South Street
Morristown, NJ 07960
Attention: Corporate Trust Administration OR
[Euroclear Bank S.A./N.V., as operator of the Euroclear System] OR
[Clearstream Banking, SOCIETE ANONYME]
Re: K. Hovnanian Enterprises, Inc.
8.875% Senior Subordinated Notes due 2012 (the "NOTES")
Issued under the Indenture (the "INDENTURE") dated
AS OF MARCH 26, 2002 RELATING TO THE NOTES
Ladies and Gentlemen:
We are the beneficial owner of $____ principal amount of Notes issued under
the Indenture and represented by a Regulation S Temporary Global Note (as
defined in the Indenture).
We hereby certify as follows:
[CHECK A OR B AS APPLICABLE.]
/ / A. We are a non-U.S. person (within the meaning of Regulation S under
the Securities Act of 1933, as amended).
/ / B. We are a U.S. person (within the meaning of Regulation S under the
Securities Act of 1933, as amended) that purchased the Notes in a
transaction that did not require registration under the Securities
Act of 1933, as amended.
H-1
You and the Company are entitled to rely upon this Certificate and are
irrevocably authorized to produce this Certificate or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[NAME OF BENEFICIAL OWNER]
By:
---------------------------------
Name:
Title:
Address:
Date:_______________________
[FORM II]
CERTIFICATE OF BENEFICIAL OWNERSHIP
To: First Union National Bank
21 South Street
Morristown, NJ 07960
Attention: Corporate Trust Administration
Re: K. Hovnanian Enterprises, Inc.
8.875% Senior Subordinated Notes due 2012 (the "NOTES")
Issued under the Indenture (the "INDENTURE") dated
AS OF MARCH 26, 2002 RELATING TO THE NOTES
Ladies and Gentlemen:
This is to certify that based solely on certifications we have received in
writing, by tested telex or by electronic transmission from member organizations
("Member Organizations") appearing in our records as persons being entitled to a
portion of the principal amount of Notes represented by a Regulation S Temporary
Global Note issued under the above-referenced Indenture, that as of the date
hereof, $____ principal amount of Notes represented by the Regulation S
Temporary Global Note being submitted herewith for exchange is beneficially
owned by persons that are either (i) non-U.S. persons (within the meaning of
Regulation S under the Securities Act of 1933, as amended) or (ii) U.S. persons
that purchased the Notes in a transaction that did not require registration
under the Securities Act of 1933, as amended.
We further certify that (i) we are not submitting herewith for exchange any
portion of such Regulation S Temporary Global Note excepted in such Member
Organization certifications and (ii) as of the date hereof we have not received
any notification from any Member Organization to the effect that the statements
made by such Member Organization with respect to
H-2
any portion of such Regulation S Temporary Global Note submitted herewith for
exchange are no longer true and cannot be relied upon as of the date hereof.
You and the Company are entitled to rely upon this Certificate and are
irrevocably authorized to produce this Certificate or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Yours faithfully,
[EUROCLEAR BANK S.A./N.V., as operator of
the Euroclear System]
OR
[CLEARSTREAM BANKING, SOCIETE ANONYME]
By:
---------------------------------------
Name:
Title:
Address:
Date:_________________
H-3
EXHIBIT I
THIS NOTE IS A TEMPORARY GLOBAL NOTE. PRIOR TO THE EXPIRATION OF THE RESTRICTED
PERIOD APPLICABLE HERETO, BENEFICIAL INTERESTS HEREIN MAY NOT BE HELD BY ANY
PERSON OTHER THAN (1) A NON-U.S. PERSON OR (2) A U.S. PERSON THAT PURCHASED SUCH
INTEREST IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"). BENEFICIAL INTERESTS HEREIN ARE NOT
EXCHANGEABLE FOR PHYSICAL NOTES OTHER THAN A PERMANENT GLOBAL NOTE IN ACCORDANCE
WITH THE TERMS OF THE INDENTURE. TERMS IN THIS LEGEND ARE USED AS USED IN
REGULATION S UNDER THE SECURITIES ACT.
I-1
EXHIBIT 4.3
SENIOR NOTES
A/B EXCHANGE
REGISTRATION RIGHTS AGREEMENT
Dated as of March 26, 2002
by and among
K. Hovnanian Enterprises, Inc.
Hovnanian Enterprises, Inc.
And certain of its Subsidiaries
and
Salomon Smith Barney Inc.
Banc of America Securities LLC
Credit Suisse First Boston Corporation
PNC Capital Markets, Inc.
================================================================================
This Registration Rights Agreement (this "AGREEMENT") is made and entered into
as of March 26, 2002, by and among K. Hovnanian Enterprises, Inc., a New Jersey
corporation (the "COMPANY"), Hovnanian Enterprises, Inc., a Delaware corporation
(the "HOVNANIAN"), and certain subsidiary guarantors of Hovnanian party hereto
(together with Hovnanian, the "GUARANTORS") and Salomon Smith Barney Inc., Banc
of America Securities LLC, Credit Suisse First Boston Corporation, PNC Capital
Markets, Inc. (each an "INITIAL PURCHASER" and, collectively, the "INITIAL
PURCHASERS"), each of whom has agreed to purchase the Company's 8.000% Series A
Senior Notes due 2012 (the "SERIES A SENIOR NOTES") pursuant to the Purchase
Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated March 19,
2002 (the "PURCHASE AGREEMENT"), by and among the Company, the Guarantors and
the Initial Purchasers. In order to induce the Initial Purchasers to purchase
the Series A Senior Notes, the Company has agreed to provide the registration
rights set forth in this Agreement. The execution and delivery of this Agreement
is a condition to the obligations of the Initial Purchasers set forth in Section
9 of the Purchase Agreement. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to them by the Indenture, dated March
26, 2002 by and among the Company, the Guarantors and First Union National Bank,
as Trustee, relating to the Series A Senior Notes (the "INDENTURE").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
ACT: The Securities Act of 1933, as amended.
AFFILIATE: As defined in Rule 144 of the Act.
BROKER-DEALER: Any broker or dealer registered under the Exchange Act.
CERTIFICATED SECURITIES: Definitive Notes, as defined in the Indenture.
CLOSING DATE: The date hereof.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for purposes of
this Agreement upon the occurrence of (a) the filing and effectiveness under the
Act of the Exchange Offer Registration Statement relating to the Series B Senior
Notes to be issued in the Exchange Offer, (b) the maintenance of such Exchange
Offer Registration Statement continuously effective and the keeping of the
Exchange Offer open for a period not less than the period required pursuant to
Section 3(b) hereof and (c) the delivery by the Company to the Registrar under
the Indenture of Series B Senior Notes in the same aggregate principal amount as
the aggregate principal amount of Series A Senior Notes tendered by Holders
thereof pursuant to the Exchange Offer.
CONSUMMATION DEADLINE: As defined in Section 3(b) hereof.
EFFECTIVENESS DEADLINE: As defined in Sections 3(a) and 4(a) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
1
EXCHANGE OFFER: The exchange and issuance by the Company of a principal
amount of Series B Senior Notes (which shall be registered pursuant to the
Exchange Offer Registration Statement) equal to the outstanding principal amount
of Series A Senior Notes that are tendered by such Holders in connection with
such exchange and issuance.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Initial Purchasers propose to
sell the Series A Senior Notes to certain "qualified institutional buyers," as
such term is defined in Rule 144A under the Act and pursuant to Regulation S
under the Act.
FILING DEADLINE: As defined in Sections 3(a) and 4(a) hereof.
HOLDERS: As defined in Section 2 hereof.
PROSPECTUS: The prospectus included in a Registration Statement at the time
such Registration Statement is declared effective, as amended or supplemented by
any prospectus supplement and by all other amendments thereto, including
post-effective amendments, and all material incorporated by reference into such
Prospectus.
RECOMMENCEMENT DATE: As defined in Section 6(d) hereof.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Company and the
Guarantors relating to (a) an offering of Series B Senior Notes pursuant to an
Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, in each case, (i) that
is filed pursuant to the provisions of this Agreement and (ii) including the
Prospectus included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
REGULATION S: Regulation S promulgated under the Act.
RULE 144: Rule 144 promulgated under the Act.
SERIES B SENIOR NOTES: The Company's 8.000% Series B Senior Notes due 2012
to be issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as
contemplated by Section 4 hereof.
SERIES B SENIOR SUBORDINATED NOTES: The Company's 8.875% Series B Senior
Subordinated Notes due 2012 to be issued pursuant to a Subordinated Indenture,
dated March 26, 2002 among the Company, the Guarantors and First Union National
Bank, as Trustee: (i) in the Exchange Offer or (ii) as contemplated by Section 4
hereof.
SHELF REGISTRATION STATEMENT: As defined in Section 6(b) hereof.
SUSPENSION NOTICE: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in
effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each Series A Senior Note, until the
earliest to occur of (a) the date on which such Series A Senior Note is
exchanged in the Exchange Offer for a Series B Senior Note which is entitled to
be resold to the public by the Holder thereof without complying with the
prospectus delivery requirements of the
2
Act, (b) the date on which such Series A Senior Note has been disposed of in
accordance with a Shelf Registration Statement (and the purchasers thereof have
been issued Series B Senior Notes), or (c) the date on which such Series A
Senior Note is distributed to the public pursuant to Rule 144 or Regulation S
under the Act (and purchasers thereof have been issued Series B Senior Notes)
and each Series B Senior Note until the date on which such Series B Senior Note
is disposed of by a Broker-Dealer pursuant to the "Plan of Distribution"
contemplated by the Exchange Offer Registration Statement (including the
delivery of the Prospectus contained therein).
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities (each,
a "HOLDER") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable federal
law (after the procedures set forth in Section 6(a)(i) below have been complied
with), the Company and the Guarantors shall (i) cause the Exchange Offer
Registration Statement to be filed with the Commission as soon as practicable
after the Closing Date, but in no event later than 90 days after the Closing
Date (such 90th day being the "FILING DEADLINE"), (ii) use its reasonable best
efforts to cause such Exchange Offer Registration Statement to become effective
at the earliest possible time, but in no event later than 150 days after the
Closing Date (such 150th day being the "EFFECTIVENESS DEADLINE"), (iii) in
connection with the foregoing, (A) file all pre-effective amendments to such
Exchange Offer Registration Statement as may be necessary in order to cause it
to become effective, (B) file, if applicable, a post-effective amendment to such
Exchange Offer Registration Statement pursuant to Rule 430A under the Act and
(C) cause all necessary filings, if any, in connection with the registration and
qualification of the Series B Senior Notes to be made under the Blue Sky laws of
such jurisdictions as are necessary to permit Consummation of the Exchange
Offer, and (iv) upon the effectiveness of such Exchange Offer Registration
Statement, commence and Consummate the Exchange Offer. The Exchange Offer shall
be on the appropriate form permitting (i) registration of the Series B Senior
Notes to be offered in exchange for the Series A Senior Notes that are Transfer
Restricted Securities and (ii) resales of Series B Senior Notes by
Broker-Dealers that tendered into the Exchange Offer Series A Senior Notes that
such Broker-Dealer acquired for its own account as a result of market making
activities or other trading activities (other than Series A Senior Notes
acquired directly from the Company or any of its Affiliates) as contemplated by
Section 3(c) below.
(b) The Company and the Guarantors shall use their respective reasonable
best efforts to cause the Exchange Offer Registration Statement to be effective
continuously for the period specified in Section 3(c) below, and shall keep the
Exchange Offer open for a period of not less than the minimum period required
under applicable federal and state securities laws to Consummate the Exchange
Offer; PROVIDED, HOWEVER, that in no event shall such period be less than 20
Business Days. The Company and the Guarantors shall cause the Exchange Offer to
comply with all applicable federal and state securities laws. No securities
other than the Series B Senior Notes and the Series B Senior Subordinated Notes
shall be included in the Exchange Offer Registration Statement. The Company and
the Guarantors shall use their respective best efforts to cause the Exchange
Offer to be Consummated on the earliest practicable date after the Exchange
Offer Registration Statement has become effective, but in no event later than 40
business days thereafter (such 40th day being the "CONSUMMATION DEADLINE").
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Series A Senior Notes
acquired directly from the Company or any Affiliate of the Company), may
exchange such Transfer Restricted Securities pursuant to the Exchange Offer.
Such "Plan of Distribution" section shall also contain all other information
with respect to such sales by such Broker-Dealers that
3
the Commission may require in order to permit such sales pursuant thereto, but
such "Plan of Distribution" shall not name any such Broker-Dealer or disclose
the amount of Transfer Restricted Securities held by any such Broker-Dealer,
except to the extent required by the Commission as a result of a change in
policy, rules or regulations after the date of this Agreement. See the Shearman
& Sterling no-action letter (available July 2, 1993).
Because such Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with its initial sale of any Series B
Senior Notes received by such Broker-Dealer in the Exchange Offer, the Company
and Guarantors shall permit the use of the Prospectus contained in the Exchange
Offer Registration Statement by such Broker-Dealer to satisfy such prospectus
delivery requirement. To the extent necessary to ensure that the prospectus
contained in the Exchange Offer Registration Statement is available for sales of
Series B Senior Notes by Broker-Dealers, the Company and the Guarantors agree to
use their respective best efforts to keep the Exchange Offer Registration
Statement continuously effective, supplemented, amended and current as required
by and subject to the provisions of Sections 6(a) and (c) hereof and in
conformity with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of one year from the Consummation Deadline or such shorter period as will
terminate when all Transfer Restricted Securities covered by such Registration
Statement have been sold pursuant thereto. The Company and the Guarantors shall
provide sufficient copies of the latest version of such Prospectus to such
Broker-Dealers, promptly upon request, and in no event later than one day after
such request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) SHELF REGISTRATION. If (i) the Exchange Offer is not permitted by
applicable law (after the Company and the Guarantors have complied with the
procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of Transfer
Restricted Securities shall notify the Company within 20 Business Days following
the Consummation Deadline that (A) such Holder was prohibited by law or
Commission policy from participating in the Exchange Offer or (B) such Holder
may not resell the Series B Senior Notes acquired by it in the Exchange Offer to
the public without delivering a prospectus and the Prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such Holder or (C) such Holder is a Broker-Dealer and holds Series A
Senior Notes acquired directly from the Company or any of its Affiliates, then
the Company and the Guarantors shall:
(x) cause to be filed, on or prior to 30 days after the earlier of (i) the
date on which the Company determines that the Exchange Offer Registration
Statement cannot be filed as a result of clause (a)(i) above and (ii) the date
on which the Company receives the notice specified in clause (a)(ii) above,
(such earlier date, the "FILING DEADLINE"), a shelf registration statement
pursuant to Rule 415 under the Act (which may be an amendment to the Exchange
Offer Registration Statement (the "SHELF REGISTRATION STATEMENT")), relating to
all Transfer Restricted Securities, and
(y) shall use their respective reasonable best efforts to cause such Shelf
Registration Statement to become effective on or prior to 90 days after the
Filing Deadline for the Shelf Registration Statement (such 90th day the
"EFFECTIVENESS DEADLINE").
If, after the Company has filed an Exchange Offer Registration Statement
that satisfies the requirements of Section 3(a) above, the Company is required
to file and make effective a Shelf Registration Statement solely because the
Exchange Offer is not permitted under applicable federal law (i.e., clause
(a)(i) above), then the filing of the Exchange Offer Registration Statement
shall be deemed to satisfy the requirements of clause (x) above; PROVIDED that,
in such event, the Company shall remain obligated to meet the Effectiveness
Deadline set forth in clause (y).
4
To the extent necessary to ensure that the Shelf Registration Statement is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a) and the other securities required
to be registered therein pursuant to Section 6(b)(ii) hereof, the Company and
the Guarantors shall use their respective reasonable best efforts to keep any
Shelf Registration Statement required by this Section 4(a) continuously
effective, supplemented, amended and current as required by and subject to the
provisions of Sections 6(b) and (c) hereof and in conformity with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time, for a period of at least two
years (as extended pursuant to Section 6(d)) following the Closing Date, or such
shorter period as will terminate when all Transfer Restricted Securities covered
by such Shelf Registration Statement have been sold pursuant thereto.
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE
SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to liquidated damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the applicable Filing Deadline, (ii) any such
Registration Statement has not been declared effective by the Commission on or
prior to the applicable Effectiveness Deadline, (iii) the Exchange Offer has not
been Consummated on or prior to the Consummation Deadline or (iv) any
Registration Statement required by this Agreement is filed and declared
effective but shall thereafter cease to be effective or fail to be usable for
its intended purpose without being succeeded immediately by a post-effective
amendment to such Registration Statement that cures such failure and that is
itself declared effective within 5 days of filing such post-effective amendment
to such Registration Statement (each such event referred to in clauses (i)
through (iv), a "REGISTRATION DEFAULT"), then the Company and the Guarantors
hereby jointly and severally agree to pay to each Holder of Transfer Restricted
Securities affected thereby liquidated damages in an amount equal to $.05 per
week per $1,000 in principal amount of Transfer Restricted Securities held by
such Holder for each week or portion thereof that the Registration Default
continues for the first 90-day period immediately following the occurrence of
such Registration Default. The amount of the liquidated damages shall increase
by an additional $.05 per week per $1,000 in principal amount of Transfer
Restricted Securities with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of liquidated
damages of $.25 per week per $1,000 in principal amount of Transfer Restricted
Securities; PROVIDED that the Company and the Guarantors shall in no event be
required to pay liquidated damages for more than one Registration Default at any
given time. Notwithstanding anything to the contrary set forth herein, (1) upon
filing of the Exchange Offer Registration Statement (and/or, if applicable, the
Shelf Registration Statement), in the case of (i) above, (2) upon the
effectiveness of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (ii) above, (3)
upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon
the filing of a post-effective amendment to the Registration Statement or an
additional Registration Statement that causes the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement) to again be
declared effective or made usable in the case of (iv) above, the liquidated
damages payable with respect to the Transfer Restricted Securities as a result
of such clause (i), (ii), (iii) or (iv), as applicable, shall cease.
5
All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Notes. Notwithstanding the fact that any securities for which liquidated damages
are due cease to be Transfer Restricted Securities, all obligations of the
Company and the Guarantors to pay liquidated damages with respect to securities
shall survive until such time as such obligations with respect to such
securities shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the Exchange
Offer, the Company and the Guarantors shall (x) comply with all applicable
provisions of Section 6(c) below, (y) use their respective reasonable best
efforts to effect such exchange and to permit the resale of Series B Senior
Notes by Broker-Dealers that tendered in the Exchange Offer Series A Senior
Notes that such Broker-Dealer acquired for its own account as a result of its
market making activities or other trading activities (other than Series A Senior
Notes acquired directly from the Company or any of its Affiliates) being sold in
accordance with the intended method or methods of distribution thereof, and (z)
comply with all of the following provisions:
(i) If, following the date hereof there has been announced a change
in Commission policy with respect to exchange offers such as the Exchange
Offer, that in the reasonable opinion of counsel to the Company raises a
substantial question as to whether the Exchange Offer is permitted by
applicable federal law, the Company and the Guarantors hereby agree to seek a
no-action letter or other favorable decision from the Commission allowing the
Company and the Guarantors to Consummate an Exchange Offer for such Transfer
Restricted Securities. The Company and the Guarantors hereby agree to pursue
the issuance of such a decision to the Commission staff level. In connection
with the foregoing, the Company and the Guarantors hereby agree to take all
such other actions as may be requested by the Commission or otherwise
required in connection with the issuance of such decision, including without
limitation (A) participating in telephonic conferences with the Commission,
(B) delivering to the Commission staff an analysis prepared by counsel to the
Company setting forth the legal bases, if any, upon which such counsel has
concluded that such an Exchange Offer should be permitted and (C) diligently
pursuing a resolution (which need not be favorable) by the Commission staff.
(ii) As a condition to its participation in the Exchange Offer, each
Holder of Transfer Restricted Securities (including, without limitation, any
Holder who is a Broker Dealer) shall furnish, upon the request of the
Company, prior to the Consummation of the Exchange Offer, a written
representation to the Company and the Guarantors (which may be contained in
the letter of transmittal contemplated by the Exchange Offer Registration
Statement) to the effect that (A) it is not an Affiliate of the Company, (B)
it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a
distribution of the Series B Senior Notes to be issued in the Exchange Offer
and (C) it is acquiring the Series B Senior Notes in its ordinary course of
business. As a condition to its participation in the Exchange Offer each
Holder using the Exchange Offer to participate in a distribution of the
Series B Senior Notes shall acknowledge and agree that, if the resales are of
Series B Senior Notes obtained by such Holder in exchange for Series A Senior
Notes acquired directly from the Company or an Affiliate thereof, it (1)
could not, under Commission policy as in effect on the date of this
Agreement, rely on the position of the Commission enunciated in MORGAN
STANLEY AND CO., INC. (available June 5, 1991) and EXXON CAPITAL HOLDINGS
CORPORATION (available May 13, 1988), as interpreted in the Commission's
letter to SHEARMAN & STERLING dated July 2, 1993, and similar no-action
letters (including, if applicable, any no-action letter obtained pursuant to
clause (i) above), and (2) must comply with the registration and prospectus
delivery requirements of the Act in connection with a secondary resale
transaction and that such a secondary resale transaction must be covered by
an effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K.
6
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantors shall provide a supplemental letter
to the Commission (A) stating that the Company and the Guarantors are
registering the Exchange Offer in reliance on the position of the Commission
enunciated in EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988),
MORGAN STANLEY AND CO., INC. (available June 5, 1991) as interpreted in the
Commission's letter to SHEARMAN & STERLING dated July 2, 1993, and, if
applicable, any no-action letter obtained pursuant to clause (i) above, (B)
including a representation that neither the Company nor any Guarantor has
entered into any arrangement or understanding with any Person to distribute
the Series B Senior Notes to be received in the Exchange Offer and that, to
the best of the Company's and each Guarantor's information and belief, each
Holder participating in the Exchange Offer is acquiring the Series B Senior
Notes in its ordinary course of business and has no arrangement or
understanding with any Person to participate in the distribution of the
Series B Senior Notes received in the Exchange Offer and (C) any other
undertaking or representation required by the Commission as set forth in any
no-action letter obtained pursuant to clause (i) above, if applicable.
(b) SHELF REGISTRATION STATEMENT. In connection with the Shelf
Registration Statement, the Company and the Guarantors shall:
(i) comply with all the provisions of Section 6(c) below and use
their respective reasonable best efforts to effect such registration to permit
the sale of the Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof (as indicated in the
information furnished to the Company pursuant to Section 4(b) hereof), and
pursuant thereto the Company and the Guarantors will prepare and file with the
Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof within the time periods and otherwise in
accordance with the provisions hereof.
(ii) issue, upon the request of any Holder or purchaser of Series A
Senior Notes covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Senior Notes having an aggregate principal amount equal to
the aggregate principal amount of Series A Senior Notes sold pursuant to the
Shelf Registration Statement and surrendered to the Company for cancellation;
the Company shall register Series B Senior Notes on the Shelf Registration
Statement for this purpose and issue the Series B Senior Notes to the
purchaser(s) of securities subject to the Shelf Registration Statement in the
names as such purchaser(s) shall designate.
(c) GENERAL PROVISIONS. In connection with any Registration Statement and
any related Prospectus required by this Agreement, the Company and the
Guarantors shall:
(i) use their respective reasonable best efforts to keep such
Registration Statement continuously effective and provide all requisite
financial statements for the period specified in Section 3 or 4 of this
Agreement, as applicable. Upon the occurrence of any event that would cause
any such Registration Statement or the Prospectus contained therein (A) to
contain an untrue statement of material fact or omit to state any material
fact necessary to make the statements therein not misleading or (B) not to be
effective and usable for resale of Transfer Restricted Securities during the
period required by this Agreement, the Company and the Guarantors shall file
promptly an appropriate amendment to such Registration Statement curing such
defect, and, if Commission review is required, use their respective best
efforts to cause such amendment to be declared effective as soon as
practicable.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as may be
necessary to keep such Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, as the case may be; cause the
Prospectus to be supplemented by any required Prospectus supplement, and as
so supplemented to be filed pursuant to
7
Rule 424 under the Act, and to comply fully with Rules 424, 430A and 462, as
applicable, under the Act in a timely manner; and comply with the provisions
of the Act with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers thereof set forth
in such Registration Statement or supplement to the Prospectus;
(iii) advise each Holder promptly and, if requested by such Holder,
confirm such advice in writing, (A) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to
any applicable Registration Statement or any post-effective amendment
thereto, when the same has become effective, (B) of any request by the
Commission for amendments to the Registration Statement or amendments or
supplements to the Prospectus or for additional information relating thereto,
(C) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of the
Transfer Restricted Securities for offering or sale in any jurisdiction, or
the initiation of any proceeding for any of the preceding purposes, and (D)
of the existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any document incorporated
by reference therein untrue, or that requires the making of any additions to
or changes in the Registration Statement in order to make the statements
therein not misleading, or that requires the making of any additions to or
changes in the Prospectus in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. If at
any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending the
qualification or exemption from qualification of the Transfer Restricted
Securities under state securities or Blue Sky laws, the Company and the
Guarantors shall use their respective reasonable best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event contemplated by
Section 6(c)(iii)(D) above shall exist or have occurred, prepare a supplement
or post-effective amendment to the Registration Statement or related
Prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers of
Transfer Restricted Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading;
(v) furnish to each Holder in connection with such exchange or sale,
if any, before filing with the Commission, copies of any Registration
Statement or any Prospectus included therein or any amendments or supplements
to any such Registration Statement or Prospectus (including all documents
incorporated by reference after the initial filing of such Registration
Statement), which documents will be subject to the review and comment of such
Holders in connection with such sale, if any, for a period of at least five
Business Days, and the Company will not file any such Registration Statement
or Prospectus or any amendment or supplement to any such Registration
Statement or Prospectus (including all such documents incorporated by
reference) to which such Holders shall reasonably object within five Business
Days after the receipt thereof. A Holder shall be deemed to have reasonably
objected to such filing if such Registration Statement, amendment, Prospectus
or supplement, as applicable, as proposed to be filed, contains an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading or fails to comply with the
applicable requirements of the Act;
(vi) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to each Holder in connection with such
exchange or sale, if any, make the Company's and the Guarantors'
representatives available for discussion of such document and other customary
due diligence matters, and include such information in such document prior to
the filing thereof as such Holders may reasonably request;
8
(vii) make available, at reasonable times, for inspection by each
Holder and any attorney or accountant retained by such Holders, all financial
and other records, pertinent corporate documents of the Company and the
Guarantors and cause the Company's and the Guarantors' officers, directors
and employees to supply all information reasonably requested by any such
Holder, attorney or accountant in connection with such Registration Statement
or any post-effective amendment thereto subsequent to the filing thereof and
prior to its effectiveness;
(viii)if requested by any Holders in connection with such exchange or
sale, promptly include in any Registration Statement or Prospectus, pursuant
to a supplement or post-effective amendment if necessary, such information as
such Holders may reasonably request to have included therein, including,
without limitation, information relating to the "Plan of Distribution" of the
Transfer Restricted Securities; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as practicable
after the Company is notified of the matters to be included in such
Prospectus supplement or post-effective amendment;
(ix) furnish to each Holder in connection with such exchange or sale,
without charge, at least one copy of the Registration Statement, as first
filed with the Commission, and of each amendment thereto, including all
documents incorporated by reference therein and all exhibits (including
exhibits incorporated therein by reference);
(x) deliver to each Holder without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Company and
the Guarantors hereby consent to the use (in accordance with law) of the
Prospectus and any amendment or supplement thereto by each selling Holder in
connection with the offering and the sale of the Transfer Restricted
Securities covered by the Prospectus or any amendment or supplement thereto;
(xi) upon the request of any Holder, enter into such agreements
(including underwriting agreements) and make such representations and
warranties and take all such other actions in connection therewith in order
to expedite or facilitate the disposition of the Transfer Restricted
Securities pursuant to any applicable Registration Statement contemplated by
this Agreement as may be reasonably requested by any Holder in connection
with any sale or resale pursuant to any applicable Registration Statement. In
such connection, the Company and the Guarantors shall:
(A) upon request of any Holder, furnish (or in the case of
paragraphs (2) and (3), use its best efforts to cause to be furnished) to
each Holder, upon Consummation of the Exchange Offer or upon the
effectiveness of the Shelf Registration Statement, as the case may be:
(1) a certificate, dated such date, signed on behalf of the
Company and each Guarantor by (x) the President or any Vice President
and (y) a principal financial or accounting officer of the Company and
such Guarantor, confirming, as of the date thereof, the matters set
forth in Sections 6(x), 9(a) and 9(b) of the Purchase Agreement and
such other similar matters as such Holders may reasonably request;
(2) an opinion, dated the date of Consummation of the Exchange
Offer or the date of effectiveness of the Shelf Registration
Statement, as the case may be, of counsel for the Company and the
Guarantors covering matters similar to those set forth in paragraph
(e) of Section 9 of the Purchase Agreement and such other matter as
such Holder may reasonably request, and in any event including a
statement to the effect that such counsel has participated in
conferences with officers and other representatives of the Company and
the Guarantors, representatives of the independent public accountants
for the Company and the Guarantors and have considered the matters
required to be stated therein and the statements contained therein,
although such counsel has not independently
9
verified the accuracy, completeness or fairness of such statements;
and that such counsel advises that, on the basis of the foregoing
(relying as to materiality to the extent such counsel deems
appropriate upon the statements of officers and other representatives
of the Company and the Guarantors and without independent check or
verification), no facts came to such counsel's attention that caused
such counsel to believe that the applicable Registration Statement, at
the time such Registration Statement or any post-effective amendment
thereto became effective and, in the case of the Exchange Offer
Registration Statement, as of the date of Consummation of the Exchange
Offer, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the Prospectus
contained in such Registration Statement as of its date and, in the
case of the opinion dated the date of Consummation of the Exchange
Offer, as of the date of Consummation, contained an untrue statement
of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Without
limiting the foregoing, such counsel may state further that such
counsel assumes no responsibility for, and has not independently
verified, the accuracy, completeness or fairness of the financial
statements, notes and schedules and other financial data included in
any Registration Statement contemplated by this Agreement or the
related Prospectus; and
(3) a customary comfort letter, dated the date of Consummation
of the Exchange Offer, or as of the date of effectiveness of the Shelf
Registration Statement, as the case may be, from the Company's
independent accountants, in the customary form and covering matters of
the type customarily covered in comfort letters to underwriters in
connection with underwritten offerings, and affirming the matters set
forth in the comfort letter delivered pursuant to Section 9(h) of the
Purchase Agreement; and
(B) deliver such other documents and certificates as may be
reasonably requested by the selling Holders to evidence compliance with the
matters covered in clause (A) above and with any customary conditions
contained in any agreement entered into by the Company and the Guarantors
pursuant to this clause (xi);
(xii) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders and their counsel in connection with the
registration and qualification of the Transfer Restricted Securities under
the securities or Blue Sky laws of such jurisdictions as the selling Holders
may request and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the applicable Registration Statement; PROVIDED,
HOWEVER, that neither the Company nor any Guarantor shall be required to
register or qualify as a foreign corporation or other entity, as applicable,
where it is not now so qualified or to take any action that would subject it
to the service of process in suits or to taxation, other than as to matters
and transactions relating to the Registration Statement, in any jurisdiction
where it is not now so subject;
(xiii)in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Transfer Restricted Securities to
be sold and not bearing any restrictive legends; and to register such
Transfer Restricted Securities in such denominations and such names as the
selling Holders may request at least two Business Days prior to such sale of
Transfer Restricted Securities;
(xiv) use their respective reasonable best efforts to cause the
disposition of the Transfer Restricted Securities covered by the Registration
Statement to be registered with or approved by such other governmental
agencies or authorities as may be necessary to enable the seller or sellers
thereof to consummate the disposition of such Transfer Restricted Securities,
subject to the proviso contained in clause (xii) above;
10
(xv) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of a Registration Statement covering such
Transfer Restricted Securities and provide the Trustee under the Indenture
with printed certificates for the Transfer Restricted Securities which are
in a form eligible for deposit with the Depository Trust Company;
(xvi) otherwise use their respective reasonable best efforts to
comply with all applicable rules and regulations of the Commission, and
make generally available to its security holders with regard to any
applicable Registration Statement, as soon as practicable, a consolidated
earnings statement meeting the requirements of Rule 158 (which need not be
audited) covering a twelve-month period beginning after the effective date
of the Registration Statement (as such term is defined in paragraph (c) of
Rule 158 under the Act);
(xvii)cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by this
Agreement and, in connection therewith, cooperate with the Trustee and the
Holders to effect such changes to the Indenture as may be required for such
Indenture to be so qualified in accordance with the terms of the TIA; and
execute and use its best efforts to cause the Trustee to execute, all
documents that may be required to effect such changes and all other forms and
documents required to be filed with the Commission to enable such Indenture
to be so qualified in a timely manner; and
(xviii) provide promptly to each Holder, upon request, each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(d) RESTRICTIONS ON HOLDERS. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof (in each case, a
"SUSPENSION NOTICE"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration Statement
until (i) such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is
advised in writing by the Company that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus (in each case, the "RECOMMENCEMENT
DATE"). Each Holder receiving a Suspension Notice hereby agrees that it will
either (i) destroy any Prospectuses, other than permanent file copies, then in
such Holder's possession which have been replaced by the Company with more
recently dated Prospectuses or (ii) deliver to the Company (at the Company's
expense) all copies, other than permanent file copies, then in such Holder's
possession of the Prospectus covering such Transfer Restricted Securities that
was current at the time of receipt of the Suspension Notice. The time period
regarding the effectiveness of such Registration Statement set forth in Section
3 or 4 hereof, as applicable, shall be extended by a number of days equal to the
number of days in the period from and including the date of delivery of the
Suspension Notice to the date of delivery of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantors' performance
of or compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses; (ii) all fees and
expenses of compliance with federal securities and state Blue Sky or securities
laws; (iii) all expenses of printing (including printing certificates for the
Series B Senior Notes to be issued in the Exchange Offer and printing of
Prospectuses), messenger and delivery services and telephone; (iv) all fees and
disbursements of counsel for the Company, the Guarantors and the Holders of
Transfer Restricted Securities; (v) all application and filing fees in
connection with listing the Series B Senior Notes on a national securities
exchange or automated quotation system pursuant to the requirements hereof; and
(vi) all fees and disbursements of independent certified public accountants of
the
11
Company and the Guarantors (including the expenses of any special audit and
comfort letters required by or incident to such performance).
The Company will, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Guarantors
will reimburse the Initial Purchasers and the Holders of Transfer Restricted
Securities who are tendering Series A Senior Notes in the Exchange Offer and/or
selling or reselling Series A Senior Notes or Series B Senior Notes pursuant to
the "Plan of Distribution" contained in the Exchange Offer Registration
Statement or the Shelf Registration Statement, as applicable, for the reasonable
fees and disbursements of not more than one counsel, who shall be Davis Polk &
Wardwell, unless another firm shall be chosen by the Holders of a majority in
principal amount of the Transfer Restricted Securities for whose benefit such
Registration Statement is being prepared. Notwithstanding the foregoing, such
Holders shall be responsible for any and all underwriting discounts and
commissions and prior to employing counsel in connection with an Exchange Offer,
the Initial Purchasers will notify the Company and the Company's counsel and
provide them reasonable opportunity to discuss the need for separate counsel;
PROVIDED, HOWEVER, the Initial Purchasers shall at all times retain the sole
right to employ separate counsel.
SECTION 8. INDEMNIFICATION
(a) Each of the Company and the Guarantors agrees, jointly and severally,
to indemnify and hold harmless each Holder, its directors, officers and each
Person, if any, who controls such Holder (within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act), from and against any and all losses,
claims, damages, liabilities, judgments, (including without limitation, any
legal or other expenses incurred in connection with investigating or defending
any matter, including any action that could give rise to any such losses,
claims, damages, liabilities or judgments) caused by any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement, preliminary prospectus or Prospectus (or any amendment or supplement
thereto) provided by the Company to any Holder or any prospective purchaser of
Series B Senior Notes or registered Series A Senior Notes, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by an untrue statement or omission or alleged untrue statement or
omission that is based upon information relating to any of the Holders furnished
in writing to the Company by any of the Holders.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Company and the Guarantors, and
their respective directors and officers, and each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company, or the Guarantors to the same extent as the foregoing indemnity
from the Company and the Guarantors set forth in Section 8(a) above, but only
with reference to information relating to such Holder furnished in writing to
the Company by such Holder expressly for use in any Registration Statement. In
no event shall any Holder, its directors, officers or any Person who controls
such Holder be liable or responsible for any amount in excess of the amount by
which the total amount received by such Holder with respect to its sale of
Transfer Restricted Securities pursuant to a Registration Statement exceeds (i)
the amount paid by such Holder for such Transfer Restricted Securities and (ii)
the amount of any damages that such Holder, its directors, officers or any
Person who controls such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission.
12
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 8(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by a majority of the
Holders, in the case of the parties indemnified pursuant to Section 8(a), and by
the Company and Guarantors, in the case of parties indemnified pursuant to
Section 8(b). The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
liabilities and judgments by reason of any settlement of any action (i) effected
with its written consent or (ii) effected without its written consent if the
settlement is entered into more than twenty business days after the indemnifying
party shall have received a request from the indemnified party for reimbursement
for the fees and expenses of counsel (in any case where such fees and expenses
are at the expense of the indemnifying party) and, prior to the date of such
settlement, the indemnifying party shall have failed to comply with such
reimbursement request. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement or compromise of, or
consent to the entry of judgment with respect to, any pending or threatened
action in respect of which the indemnified party is or could have been a party
and indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i) includes
an unconditional release of the indemnified party from all liability on claims
that are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section 8
is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Guarantors, on the one hand, and the Holders, on the other hand, from their sale
of Transfer Restricted Securities or (ii) if the allocation provided by clause
8(d)(i) is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause 8(d)(i) above
but also the relative fault of the Company and the Guarantors, on the one hand,
and of the Holder, on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The relative
fault of the Company and the Guarantors, on the one hand, and of the Holder, on
the other hand, shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or such
13
Guarantor, on the one hand, or by the Holder, on the other hand, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company, the Guarantors and each Holder agree that it would not be just
and equitable if contribution pursuant to this Section 8(d) were determined by
pro rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter, including any action that
could have given rise to such losses, claims, damages, liabilities or judgments.
Notwithstanding the provisions of this Section 8, no Holder, its directors, its
officers or any Person, if any, who controls such Holder shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the
total received by such Holder with respect to the sale of Transfer Restricted
Securities pursuant to a Registration Statement exceeds (i) the amount paid by
such Holder for such Transfer Restricted Securities and (ii) the amount of any
damages which such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Holders' obligations to contribute
pursuant to this Section 8(d) are several in proportion to the respective
principal amount of Transfer Restricted Securities held by each Holder hereunder
and not joint.
SECTION 9. RULE 144A AND RULE 144
The Company and each Guarantor agree with each Holder, for so long as any
Transfer Restricted Securities remain outstanding and during any period in which
the Company or such Guarantor (i) is not subject to Section 13 or 15(d) of the
Exchange Act, to make available, upon request of any Holder, to such Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
designated by such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of
the Exchange Act, to make all filings required thereby in a timely manner in
order to permit resales of such Transfer Restricted Securities pursuant to Rule
144.
SECTION 10. MISCELLANEOUS
(a) REMEDIES. The Company and the Guarantors acknowledge and agree that
any failure by the Company and/or the Guarantors to comply with their respective
obligations under Sections 3 and 4 hereof may result in material irreparable
injury to the Initial Purchasers or the Holders for which there is no adequate
remedy at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of any such failure, the Initial Purchasers or
any Holder may obtain such relief as may be required to specifically enforce the
Company's and the Guarantor's obligations under Sections 3 and 4 hereof. The
Company and the Guarantors further agree to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. Neither the Company nor any Guarantor
will, on or after the date of this Agreement, enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor any Guarantor has previously entered into any agreement
granting any registration rights with respect to its securities to any Person.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's and
the Guarantors' securities under any agreement in effect on the date hereof.
14
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(c)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose Transfer Restricted Securities are being tendered pursuant to
the Exchange Offer, and that does not affect directly or indirectly the rights
of other Holders whose Transfer Restricted Securities are not being tendered
pursuant to such Exchange Offer, may be given by the Holders of a majority of
the outstanding principal amount of Transfer Restricted Securities subject to
such Exchange Offer.
(d) THIRD PARTY BENEFICIARY. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent they may
deem such enforcement necessary or advisable to protect its rights or the rights
of Holders hereunder.
(e) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or the Guarantors:
c/o Hovnanian Enterprises, Inc.
10 Highway 35
P.O. Box 500
Red Bank, NJ 07701
Telecopier No.: 732-747-6835
Attention: Corporate Controller
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Ave.
New York, NY 10017
Telecopier No.: 212-455-2502
Attention: Vincent Pagano, Jr., Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express
15
assignment, subsequent Holders; PROVIDED, that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Transfer Restricted
Securities in violation of the terms hereof or of the Purchase Agreement or the
Indenture. If any transferee of any Holder shall acquire Transfer Restricted
Securities in any manner, whether by operation of law or otherwise, such
Transfer Restricted Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Transfer Restricted Securities such
Person shall be conclusively deemed to have agreed to be bound by and to perform
all of the terms and provisions of this Agreement, including the restrictions on
resale set forth in this Agreement and, if applicable, the Purchase Agreement,
and such Person shall be entitled to receive the benefits hereof.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(j) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) ENTIRE AGREEMENT. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
16
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
K. HOVNANIAN ENTERPRISES, INC.
/s/ J. Larry Sorsby
--------------------
By: J. Larry Sorsby
Title: Executive Vice President
Chief Financial Officer
HOVNANIAN ENTERPRISES, INC.
/s/ J. Larry Sorsby
--------------------
By: J. Larry Sorsby
Title: Executive Vice President
Chief Financial Officer
GUARANTORS:
ALL SEASONS, INC.
ARROW PROPERTIES, INC.
BALLANTRAE DEVELOPMENT CORP.
BALLANTRAE HOME SALES, INC.
CONDOMINIUM COMMUNITY (BOWIE NEW TOWN),
INC.
CONDOMINIUM COMMUNITY (LARGO TOWN), INC.
CONDOMINIUM COMMUNITY (PARK PLACE), INC.
CONDOMINIUM COMMUNITY (QUAIL RUN), INC.
CONDOMINIUM COMMUNITY (TRUMAN DRIVE),INC.
CONSULTANTS CORPORATION
DESIGNED CONTRACTS. INC.
EXC, INC.
FORTIS HOMES, INC.
HOUSING-HOME SALES, INC.
HOVNANIAN AT TARPON LAKES I, INC.
HOVNANIAN DEVELOPMENTS OF FLORIDA, INC.
HOVNANIAN PENNSYLVANIA, INC.
K. HOV INTERNATIONAL, INC.
K. HOVNANIAN ACQUISITIONS, INC.
K. HOVNANIAN AT ASHBURN VILLAGE, INC.
K. HOVNANIAN AT ATLANTIC CITY, INC.
K. HOVNANIAN AT BALLANTRAE ESTATES, INC.
K. HOVNANIAN AT BARRINGTON, INC.
K. HOVNANIAN AT BEDMINSTER II, INC.
K. HOVNANIAN AT BEDMINSTER, INC.
K. HOVNANIAN AT BELMONT, INC.
K. HOVNANIAN AT BERNARDS IV, INC.
K. HOVNANIAN AT BRANCHBURG III, INC.
17
K. HOVNANIAN AT BRIDGEPORT, INC.
K. HOVNANIAN AT BRIDGEWATER IV, INC.
K. HOVNANIAN AT BRIDGEWATER V, INC.
K. HOVNANIAN AT BRIDGEWATER VI, INC.
K. HOVNANIAN AT BULL RUN, INC.
K. HOVNANIAN AT BURLINGTON III, INC.
K. HOVNANIAN AT BURLINGTON, INC.
K. HOVNANIAN AT CALABRIA, INC.
K. HOVNANIAN AT CAMERON CHASE, INC.
K. HOVNANIAN AT CARMEL DEL MAR, INC.
K. HOVNANIAN AT CAROLINA COUNTRY CLUB I,
INC.
K. HOVNANIAN AT CAROLINA COUNTRY CLUB II,
INC.
K. HOVNANIAN AT CAROLINA COUNTRY CLUB
III, INC.
K. HOVNANIAN AT CASTILE, INC.
K. HOVNANIAN AT CEDAR GROVE I, INC.
K. HOVNANIAN AT CEDAR GROVE II, INC.
K. HOVNANIAN AT CHAPARRAL, INC.
K. HOVNANIAN AT CLARKSTOWN, INC.
K. HOVNANIAN AT COCONUT CREEK, INC.
K. HOVNANIAN AT CRESTLINE, INC.
K. HOVNANIAN AT CRYSTAL SPRINGS, INC.
K. HOVNANIAN AT DOMINGUEZ, INC.
K. HOVNANIAN AT DOMINION RIDGE, INC.
K. HOVNANIAN AT EAST BRUNSWICK VI, INC.
K. HOVNANIAN AT EAST BRUNSWICK VIII, INC.
K. HOVNANIAN AT EAST WHITELAND I, INC.
K. HOVNANIAN AT EXETER HILLS, INC.
K. HOVNANIAN AT FAIR LAKES GLEN, INC.
K. HOVNANIAN AT FAIR LAKES, INC.
K. HOVNANIAN AT FREEHOLD TOWNSHIP, INC.
K. HOVNANIAN AT FREEHOLD TOWNSHIP I, INC.
K. HOVNANIAN AT FT. MYERS I, INC.
K. HOVNANIAN AT FT. MYERS II, INC.
K. HOVNANIAN AT GREAT NOTCH, INC.
K. HOVNANIAN AT HACKETTSTOWN, INC.
K. HOVNANIAN AT HALF MOON BAY, INC.
K. HOVNANIAN AT HAMPTON OAKS, INC.
K. HOVNANIAN AT HANOVER, INC.
K. HOVNANIAN AT HERSHEY'S MILL, INC.
(a PA Corp)
K. HOVNANIAN AT HIGHLAND VINEYARDS, INC.
K. HOVNANIAN AT HOLLY CREST, INC.
K. HOVNANIAN AT HOPEWELL IV, INC.
K. HOVNANIAN AT HOPEWELL V, INC.
K. HOVNANIAN AT HOPEWELL VI, INC.
K. HOVNANIAN AT HOWELL TOWNSHIP, INC.
K. HOVNANIAN AT HUNTER ESTATES, INC.
K. HOVNANIAN AT JACKSONVILLE II, INC.
K. HOVNANIAN AT JEFFERSON, INC.
K. HOVNANIAN AT JERSEY CITY III, INC.
18
K. HOVNANIAN AT KINGS GRANT I, INC.
K. HOVNANIAN AT KLOCKNER FARMS, INC.
K. HOVNANIAN AT LA TERRAZA, INC.
K. HOVNANIAN AT LA TROVATA, INC.
K. HOVNANIAN AT LAKEWOOD, INC.
K. HOVNANIAN AT LAWRENCE V, INC.
K. HOVNANIAN AT LOWER SAUCON II, INC.
K. HOVNANIAN AT LOWER SAUCON, INC.
K. HOVNANIAN AT MAHWAH II, INC.
K. HOVNANIAN AT MAHWAH IV, INC.
(Whalepond)
K. HOVNANIAN AT MAHWAH IX, INC.
K. HOVNANIAN AT MAHWAH V, INC.
K. HOVNANIAN AT MAHWAH VI, INC. (Norfolk)
K. HOVNANIAN AT MAHWAH VII, INC.
K. HOVNANIAN AT MAHWAH VIII, INC.
K. HOVNANIAN AT MANALAPAN, INC.
K. HOVNANIAN AT MARLBORO II, INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP IV,
INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP VI,
INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP VII,
INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP III,
INC.
K. HOVNANIAN AT MEDFORD I, INC.
K. HOVNANIAN AT MERRIMACK, INC.
K. HOVNANIAN AT METRO DC SOUTH, INC.
K. HOVNANIAN AT MONTCLAIR NJ, INC.
K. HOVNANIAN AT MONTCLAIR, INC.
K. HOVNANIAN AT MONTGOMERY I, INC.
K. HOVNANIAN AT NEWARK URBAN RENEWAL
CORPORATION I, INC.
K. HOVNANIAN AT NEWARK URBAN RENEWAL
CORPORATION IV, INC.
K. HOVNANIAN AT NEWARK URBAN RENEWAL
CORPORATION V, INC.
K. HOVNANIAN AT NORTH BERGEN, INC.
K. HOVNANIAN AT NORTH BRUNSWICK IV, INC.
K. HOVNANIAN AT NORTHERN WESTCHESTER,
INC.
K. HOVNANIAN AT NORTHLAKE, INC.
K. HOVNANIAN AT OCEAN WALK, INC.
K. HOVNANIAN AT P.C. PROPERTIES, INC.
K. HOVNANIAN AT PARK RIDGE, INC.
K. HOVNANIAN AT PASCO I, INC.
K. HOVNANIAN AT PASCO II, INC.
K. HOVNANIAN AT PEEKSKILL, INC.
K. HOVNANIAN AT PEMBROKE SHORES, INC.
K. HOVNANIAN AT PERKIOMEN I, INC.
K. HOVNANIAN AT PERKIOMEN II, INC.
K. HOVNANIAN AT PLAINSBORO III, INC.
K. HOVNANIAN AT POLO TRACE, INC.
K. HOVNANIAN AT PORT IMPERIAL NORTH, INC.
K. HOVNANIAN AT PRINCETON, INC.
K. HOVNANIAN AT RANCHO CHRISTIANITOS,
INC.
19
K. HOVNANIAN AT RARITAN I, INC.
K. HOVNANIAN AT READINGTON II, INC.
K. HOVNANIAN AT RESERVOIR RIDGE, INC.
K. HOVNANIAN AT RIVER OAKS, INC.
K. HOVNANIAN AT SAN SEVAINE, INC.
K. HOVNANIAN AT SARATOGA, INC.
K. HOVNANIAN AT SCOTCH PLAINS II, INC.
K. HOVNANIAN AT SCOTCH PLAINS, INC.
K. HOVNANIAN AT SENECA CROSSING, INC.
K. HOVNANIAN AT SMITHVILLE, INC.
K. HOVNANIAN AT SMITHVILLE III, INC.
K. HOVNANIAN AT SOMERS POINT, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK II, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK III, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK IV, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK V, INC.
K. HOVNANIAN AT SPRING RIDGE, INC.
K. HOVNANIAN AT STONE CANYON, INC.
K. HOVNANIAN AT STONEGATE, INC. (a CA
Corporation)
K. HOVNANIAN AT STONEGATE, INC. (a VA
Corporation)
K. HOVNANIAN AT STONY POINT, INC.
K. HOVNANIAN AT STUART ROAD, INC.
K. HOVNANIAN AT SULLY STATION, INC.
K. HOVNANIAN AT SUMMERWOOD, INC.
K. HOVNANIAN AT SYCAMORE, INC.
K. HOVNANIAN AT TANNERY HILL, INC.
K. HOVNANIAN AT THE BLUFF, INC.
K. HOVNANIAN AT THE CEDARS, INC.
K. HOVNANIAN AT THE GLEN, INC.
K. HOVNANIAN AT THE RESERVE AT MEDFORD,
INC.
K. HOVNANIAN AT THORNBURY, INC.
K. HOVNANIAN AT TIERRASANTA, INC.
K. HOVNANIAN AT TUXEDO, INC.
K. HOVNANIAN AT UNION TOWNSHIP I, INC.
K. HOVNANIAN AT UPPER FREEHOLD
TOWNSHIP I, INC.
K. HOVNANIAN AT UPPER MAKEFIELD I, INC.
K. HOVNANIAN AT UPPER MERION, INC.
K. HOVNANIAN AT VAIL RANCH, INC.
K. HOVNANIAN AT VALLEYBROOK II, INC.
K. HOVNANIAN AT VALLEYBROOK, INC.
K. HOVNANIAN AT WALL TOWNSHIP VI, INC.
K. HOVNANIAN AT WALL TOWNSHIP VIII, INC.
K. HOVNANIAN AT WASHINGTONVILLE, INC.
K. HOVNANIAN AT WAYNE III, INC.
K. HOVNANIAN AT WAYNE V, INC.
K. HOVNANIAN AT WAYNE VI, INC.
K. HOVNANIAN AT WAYNE VII, INC.
K. HOVNANIAN AT WILDROSE, INC.
20
K. HOVNANIAN AT WINSTON TRAILS, INC.
K. HOVNANIAN AT WOODMONT, INC.
K. HOVNANIAN AVIATION, INC.
K. HOVNANIAN COMPANIES NORTHEAST, INC.
K. HOVNANIAN COMPANIES OF CALIFORNIA,
INC.
K. HOVNANIAN COMPANIES OF FLORIDA, INC.
K. HOVNANIAN COMPANIES OF MARYLAND, INC.
K. HOVNANIAN COMPANIES OF METRO
WASHINGTON, INC.
K. HOVNANIAN COMPANIES OF NEW YORK, INC.
K. HOVNANIAN COMPANIES OF NORTH CAROLINA,
INC.
K. HOVNANIAN COMPANIES OF PENNSYLVANIA,
INC.
K. HOVNANIAN COMPANIES OF SOUTHERN
CALIFORNIA, INC.
K. HOVNANIAN CONSTRUCTION MANAGEMENT,
INC.
K. HOVNANIAN'S DESIGN GALLERY, INC.
K. HOVNANIAN DEVELOPMENTS OF CALIFORNIA,
INC.
K. HOVNANIAN DEVELOPMENTS OF MARYLAND,
INC.
K. HOVNANIAN DEVELOPMENTS OF METRO
WASHINGTON, INC.
K. HOVNANIAN DEVELOPMENTS OF NEW JERSEY,
INC.
K. HOVNANIAN DEVELOPMENTS OF NEW YORK,
INC.
K. HOVNANIAN DEVELOPMENTS OF SOUTH
CAROLINA, INC.
K. HOVNANIAN DEVELOPMENTS OF TEXAS, INC.
K. HOVNANIAN EQUITIES, INC.
K. HOVNANIAN FLORIDA DIVISION, INC.
K. HOVNANIAN FORECAST ACQUISITION, INC.
K. HOVNANIAN FORECAST HOMES, INC.
K. HOVNANIAN INVESTMENT PROPERTIES OF NEW
JERSEY, INC.
K. HOVNANIAN MARINE, INC.
K. HOVNANIAN PORT IMPERIAL URBAN RENEWAL,
INC.
K. HOVNANIAN PROPERTIES OF EAST BRUNSWICK
II, INC.
K. HOVNANIAN PROPERTIES OF NB THEATRE,
INC.
K. HOVNANIAN PROPERTIES OF NEWARK URBAN
RENEWAL CORPORATION, INC.
K. HOVNANIAN PROPERTIES OF NORTH
BRUNSWICK II, INC.
K. HOVNANIAN PROPERTIES OF NORTH
BRUNSWICK V, INC.
K. HOVNANIAN PROPERTIES OF PISCATAWAY,
INC.
K. HOVNANIAN PROPERTIES OF RED BANK, INC.
K. HOVNANIAN PROPERTIES OF WALL, INC.
K. HOVNANIAN REAL ESTATE INVESTMENT, INC.
K. HOVNANIAN REAL ESTATE OF FLORIDA, INC.
21
K. HOVNANIAN SOUTHEAST FLORIDA, INC.
K. HOVNANIAN SOUTHEAST REGION, INC.
K. HOVNANIAN'S FOUR SEASONS OF THE PALM
BEACHES, INC.
KHC ACQUISITION, INC.
KINGS GRANT EVESHAM CORP.
LANDARAMA, INC.
MATZEL & MUMFORD OF DELAWARE, INC.
M & M AT LONG BRANCH, INC.
NEW K. HOVNANIAN DEVELOPMENTS OF FLORIDA,
INC.
PARK VILLAGE REALTY, INC.
PARTHENON GROUP, INC.
PINE BROOK CO., INC.
QUE CORPORATION
REFLECTIONS OF YOU INTERIORS, INC.
STONEBROOK HOMES, INC.
THE MATZEL & MUMFORD ORGANIZATION, INC.
THE NEW FORTIS CORPORATION
THE SOUTHAMPTON CORPORATION
TROPICAL SERVICE BUILDERS, INC.
WASHINGTON HOMES OF DELAWARE, INC.
WASHINGTON HOMES OF WEST VIRGINIA, INC.
WASHINGTON HOMES, INC.
WASHINGTON HOMES, INC. OF VIRGINIA
WESTMINSTER HOMES (CHARLOTTE), INC.
WESTMINSTER HOMES OF TENNESSEE, INC.
WESTMINSTER HOMES, INC.
WH LAND I, INC
WH LAND II, INC.
WH PROPERTIES, INC.
ARBOR WEST, L.L.C.
K. HOVNANIAN AT ST. MARGARETS, L.L.C.
K. HOVNANIAN AT ARBOR HEIGHTS, L.L.C.
K. HOVNANIAN AT ASHBURN VILLAGE, L.L.C.
K. HOVNANIAN AT BARNEGAT I, L.L.C.
K. HOVNANIAN AT BERKELEY, L.L.C.
K. HOVNANIAN AT BERNARDS V, L.L.C.
K. HOVNANIAN AT BLOOMS CROSSING, L.L.C.
K. HOVNANIAN AT BLUE HERON PINES, L.L.C.
K. HOVNANIAN AT BRENBROOKE, L.L.C.
K. HOVNANIAN AT CAMDEN I, L.L.C.
K. HOVNANIAN AT CARMEL VILLAGE, L.L.C.
K. HOVNANIAN AT CEDAR GROVE III, L.L.C.
K. HOVNANIAN AT CHESTER I, L.L.C.
K. HOVNANIAN AT CLIFTON, L.L.C.
K. HOVNANIAN AT COLUMBIA TOWN CENTER,
L.L.C.
K. HOVNANIAN AT CRANBURY, L.L.C.
K. HOVNANIAN AT CURRIES WOODS, L.L.C.
K. HOVNANIAN AT ENCINITAS RANCH, L.L.C.
K. HOVNANIAN AT FORECAST, L.L.C.
22
K. HOVNANIAN AT GUTTENBERG, L.L.C.
K. HOVNANIAN AT HAMBURG, L.L.C.
K. HOVNANIAN AT HAMBURG CONTRACTORS,
L.L.C.
K. HOVNANIAN AT JACKSON, L.L.C.
K. HOVNANIAN AT JERSEY CITY IV, L.L.C.
K. HOVNANIAN AT KENT ISLAND, L.L.C.
K. HOVNANIAN AT KINCAID, L.L.C.
K. HOVNANIAN AT KING FARM, L.L.C.
K. HOVNANIAN AT LAFAYETTE ESTATES, L.L.C.
K. HOVNANIAN AT LAKE RIDGE CROSSING,
L.L.C.
K. HOVNANIAN AT LAKE TERRAPIN, L.L.C.
K. HOVNANIAN AT LAWRENCE V, L.L.C.
K. HOVNANIAN AT LINWOOD, L.L.C.
K. HOVNANIAN AT LITTLE EGG HARBOR, L.L.C.
K. HOVNANIAN AT LITTLE EGG HARBOR
CONTRACTORS, L.L.C.
K. HOVNANIAN AT LOWER MORELAND I, L.L.C.
K. HOVNANIAN AT LOWER MORELAND II, L.L.C.
K. HOVNANIAN AT LOWER SAUCON II, L.L.C.
K. HOVNANIAN AT MANSFIELD I, LLC
K. HOVNANIAN AT MANSFIELD II, LLC
K. HOVNANIAN AT MANSFIELD III, L.L.C.
K. HOVNANIAN AT MARLBORO TOWNSHIP VIII,
L.L.C.
K. HOVNANIAN AT MARLBORO VI, L.L.C.
K. HOVNANIAN AT MARLBORO VII, L.L.C.
K. HOVNANIAN AT MENIFEE, L.L.C.
K. HOVNANIAN AT MIDDLETOWN, L.L.C.
K. HOVNANIAN AT MT. OLIVE TOWNSHIP,
L.L.C.
K. HOVNANIAN AT NORTH BRUNSWICK VI,
L.L.C.
K. HOVNANIAN AT NORTH HALEDON, L.L.C.
K. HOVNANIAN AT NORTHAMPTON, L.L.C.
K. HOVNANIAN AT NORTHFIELD, L.L.C.
K. HOVNANIAN AT PACIFIC BLUFFS, L.L.C.
K. HOVNANIAN AT PARAMUS, L.L.C.
K. HOVNANIAN AT PARK LANE, L.L.C.
K. HOVNANIAN AT PRINCE WILLIAM, L.L.C.
K. HOVNANIAN AT RANCHO SANTA MARGARITA,
L.L.C.
K. HOVNANIAN AT RIVERBEND, L.L.C.
K. HOVNANIAN AT RODERUCK. L.L.C.
K. HOVNANIAN AT ROWLAND HEIGHTS, L.L.C.
K. HOVNANIAN AT SAYREVILLE, L.L.C.
K. HOVNANIAN AT SOUTH AMBOY, L.L.C.
K. HOVNANIAN AT SOUTH BANK, L.L.C.
K. HOVNANIAN AT SOUTH BRUNSWICK, L.L.C.
K. HOVNANIAN AT SPRING HILL ROAD, L.L.C.
K. HOVNANIAN AT ST. MARGARETS, L.L.C.
K. HOVNANIAN AT SUNSETS, L.L.C.
K. HOVNANIAN AT THE GABLES, L.L.C.
K. HOVNANIAN AT UPPER FREEHOLD
TOWNSHIP II, L.L.C.
23
K. HOVNANIAN AT UPPER FREEHOLD
TOWNSHIP III, L.L.C.
K. HOVNANIAN AT WANAQUE, L.L.C.
K. HOVNANIAN AT WASHINGTON, L.L.C.
K. HOVNANIAN AT WAYNE VIII, L.L.C.
K. HOVNANIAN AT WAYNE IX, L.L.C.
K. HOVNANIAN AT WEST MILFORD, L.L.C.
K. HOVNANIAN AT WEST WINDSOR, L.L.C.
K. HOVNANIAN AT WILLOW BROOK, L.L.C.
K. HOVNANIAN AT WINCHESTER, L.L.C.
K. HOVNANIAN AT WOODHILL ESTATES, L.L.C.
K. HOVNANIAN AT WOOLWICH, L.L.C.
K. HOVNANIAN CENTRAL ACQUISITIONS, L.L.C.
K. HOVNANIAN COMPANIES OF METRO D.C.
NORTH, L.L.C.
K. HOVNANIAN EASTERN PENNSYLVANIA, L.L.C.
K. HOVNANIAN FORECAST, L.L.C.
K. HOVNANIAN NORTH CENTRAL ACQUISITIONS,
L.L.C.
K. HOVNANIAN NORTH JERSEY ACQUISITIONS,
L.L.C.
K. HOVNANIAN SHORE ACQUISITIONS, L.L.C.
K. HOVNANIAN SOUTH JERSEY ACQUISITION,
L.L.C.
K. HOVNANIAN SOUTHERN NEW JERSEY, L.L.C.
K. HOVNANIAN'S FOUR SEASONS, L.L.C.
K. HOVNANIAN'S PRIVATE HOME PORTFOLIO,
L.L.C.
KINGS COURT AT MONTGOMERY, L.L.C.
M&M AT APPLE RIDGE, L.L.C.
M&M AT BROOKHILL, L.L.C.
M&M AT HERITAGE WOODS, L.L.C.
M&M AT THE HIGHLANDS, L.L.C.
M&M AT EAST MILL, L.L.C.
M&M AT MORRISTOWN, L.L.C.
M&M AT ROOSEVELT, L.L.C.
M&M AT SHERIDAN, L.L.C.
M&M AT SPARTA, L.L.C.
M&M AT SPINNAKER POINTE, L.L.C.
M&M AT SPRUCE HOLLOW, L.L.C.
M&M AT SPRUCE MEADOWS, L.L.C.
M&M AT SPRUCE RUN, L.L.C.
MATZEL & MUMFORD AT CRANBURY KNOLL,
L.L.C.
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
MATZEL & MUMFORD AT HERITAGE LANDING,
L.L.C.
MATZEL & MUMFORD AT MONTGOMERY, L.L.C.
MATZEL & MUMFORD AT PHILLIPSBURG, L.L.C.
MATZEL & MUMFORD AT SOUTH BRUNSWICK,
L.L.C.
MATZEL & MUMFORD AT WOODLAND CREST,
L.L.C.
SECTION 14 OF THE HILLS, L.L.C.
THE LANDINGS AT SPINNAKER POINTE, L.L.C.
WESTMINSTER HOMES OF ALABAMA, L.L.C.
WESTMINSTER HOMES OF MISSISSIPPI, L.L.C.
WESTMINSTER HOMES OF SOUTH CAROLINA,
L.L.C.
24
GOODMAN FAMILY BUILDERS, L.P.
M & M INVESTMENTS, L.P.
WASHABAMA, L.P.
/s/ J. Larry Sorsby
--------------------
By: J. Larry Sorsby
Title: Executive Vice President
Chief Financial Officer
25
SALOMON SMITH BARNEY INC.
By: /s/ Marc E. Schneider
----------------------
Name: Marc Schneider
Title: Director
BANC OF AMERICA SECURITIES LLC
By: /s/ S. T. Jaeger
-----------------
Name: Stephan T. Jaeger
Title: Vice President
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ Eric A. Anderson
----------------------
Name: Eric A. Anderson
Title: Managing Director
PNC CAPITAL MARKETS, INC.
By: /s/ J. Scott Holmes
----------------------
Name: J. Scott Holmes
Title: Managing Director
26
EXHIBIT 4.4
SENIOR SUBORDINATED NOTES
A/B EXCHANGE
REGISTRATION RIGHTS AGREEMENT
Dated as of March 26, 2002
by and among
K. Hovnanian Enterprises, Inc.
Hovnanian Enterprises, Inc.
And certain of its Subsidiaries
and
Salomon Smith Barney Inc.
Banc of America Securities LLC
Credit Suisse First Boston Corporation
================================================================================
This Registration Rights Agreement (this "AGREEMENT") is made and entered into
as of March 26, 2002, by and among K. Hovnanian Enterprises, Inc., a New Jersey
corporation (the "COMPANY"), Hovnanian Enterprises, Inc., a Delaware corporation
(the "HOVNANIAN"), and certain subsidiary guarantors of Hovnanian party hereto
(together with Hovnanian, the "GUARANTORS") and Salomon Smith Barney Inc., Banc
of America Securities LLC, Credit Suisse First Boston Corporation, (each an
"INITIAL PURCHASER" and, collectively, the "INITIAL PURCHASERS"), each of whom
has agreed to purchase the Company's 8.875% Series A Senior Subordinated Notes
due 2012 (the "SERIES A SENIOR SUBORDINATED NOTES") pursuant to the Purchase
Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated March 19,
2002 (the "PURCHASE AGREEMENT"), by and among the Company, the Guarantors and
the Initial Purchasers. In order to induce the Initial Purchasers to purchase
the Series A Senior Subordinated Notes, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the obligations of the Initial Purchasers set
forth in Section 9 of the Purchase Agreement. Capitalized terms used herein and
not otherwise defined shall have the meaning assigned to them by the Indenture,
dated March 26, 2002 by and among the Company, the Guarantors and First Union
National Bank, as Trustee, relating to the Series A Senior Subordinated Notes
(the "INDENTURE").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
ACT: The Securities Act of 1933, as amended.
AFFILIATE: As defined in Rule 144 of the Act.
BROKER-DEALER: Any broker or dealer registered under the Exchange Act.
CERTIFICATED SECURITIES: Definitive Notes, as defined in the Indenture.
CLOSING DATE: The date hereof.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for purposes
of this Agreement upon the occurrence of (a) the filing and effectiveness under
the Act of the Exchange Offer Registration Statement relating to the Series B
Senior Subordinated Notes to be issued in the Exchange Offer, (b) the
maintenance of such Exchange Offer Registration Statement continuously effective
and the keeping of the Exchange Offer open for a period not less than the period
required pursuant to Section 3(b) hereof and (c) the delivery by the Company to
the Registrar under the Indenture of Series B Senior Subordinated Notes in the
same aggregate principal amount as the aggregate principal amount of Series A
Senior Subordinated Notes tendered by Holders thereof pursuant to the Exchange
Offer.
CONSUMMATION DEADLINE: As defined in Section 3(b) hereof.
EFFECTIVENESS DEADLINE: As defined in Sections 3(a) and 4(a) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
1
EXCHANGE OFFER: The exchange and issuance by the Company of a principal
amount of Series B Senior Subordinated Notes (which shall be registered pursuant
to the Exchange Offer Registration Statement) equal to the outstanding principal
amount of Series A Senior Subordinated Notes that are tendered by such Holders
in connection with such exchange and issuance.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.
EXEMPT RESALES: The transactions in which the Initial Purchasers propose
to sell the Series A Senior Subordinated Notes to certain "qualified
institutional buyers," as such term is defined in Rule 144A under the Act and
pursuant to Regulation S under the Act.
FILING DEADLINE: As defined in Sections 3(a) and 4(a) hereof.
HOLDERS: As defined in Section 2 hereof.
PROSPECTUS: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
RECOMMENCEMENT DATE: As defined in Section 6(d) hereof.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Company and the
Guarantors relating to (a) an offering of Series B Senior Subordinated Notes
pursuant to an Exchange Offer or (b) the registration for resale of Transfer
Restricted Securities pursuant to the Shelf Registration Statement, in each
case, (i) that is filed pursuant to the provisions of this Agreement and (ii)
including the Prospectus included therein, all amendments and supplements
thereto (including post-effective amendments) and all exhibits and material
incorporated by reference therein.
REGULATION S: Regulation S promulgated under the Act.
RULE 144: Rule 144 promulgated under the Act.
SERIES B SENIOR NOTES: The Company's 8.000% Series B Senior Notes due 2012
to be issued pursuant to a Senior Indenture, dated March 26, 2002 among the
Company, the Guarantors and First Union National Bank, as Trustee: (i) in the
Exchange Offer or (ii) as contemplated by Section 4 hereof.
SERIES B SENIOR SUBORDINATED NOTES: The Company's 8.875% Series B Senior
Subordinated Notes due 2012 to be issued pursuant to the Indenture: (i) in the
Exchange Offer or (ii) as contemplated by Section 4 hereof.
SHELF REGISTRATION STATEMENT: As defined in Section 6(b) hereof.
SUSPENSION NOTICE: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
in effect on the date of the Indenture.
2
TRANSFER RESTRICTED SECURITIES: Each Series A Senior Subordinated Note,
until the earliest to occur of (a) the date on which such Series A Senior
Subordinated Note is exchanged in the Exchange Offer for a Series B Senior
Subordinated Note which is entitled to be resold to the public by the Holder
thereof without complying with the prospectus delivery requirements of the Act,
(b) the date on which such Series A Senior Subordinated Note has been disposed
of in accordance with a Shelf Registration Statement (and the purchasers thereof
have been issued Series B Senior Subordinated Notes), or (c) the date on which
such Series A Senior Subordinated Note is distributed to the public pursuant to
Rule 144 or Regulation S under the Act (and purchasers thereof have been issued
Series B Senior Subordinated Notes) and each Series B Senior Subordinated Note
until the date on which such Series B Senior Subordinated Note is disposed of by
a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including the delivery of the Prospectus
contained therein).
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities (each,
a "HOLDER") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable federal
law (after the procedures set forth in Section 6(a)(i) below have been complied
with), the Company and the Guarantors shall (i) cause the Exchange Offer
Registration Statement to be filed with the Commission as soon as practicable
after the Closing Date, but in no event later than 90 days after the Closing
Date (such 90th day being the "FILING DEADLINE"), (ii) use its reasonable best
efforts to cause such Exchange Offer Registration Statement to become effective
at the earliest possible time, but in no event later than 150 days after the
Closing Date (such 150th day being the "EFFECTIVENESS DEADLINE"), (iii) in
connection with the foregoing, (A) file all pre-effective amendments to such
Exchange Offer Registration Statement as may be necessary in order to cause it
to become effective, (B) file, if applicable, a post-effective amendment to such
Exchange Offer Registration Statement pursuant to Rule 430A under the Act and
(C) cause all necessary filings, if any, in connection with the registration and
qualification of the Series B Senior Subordinated Notes to be made under the
Blue Sky laws of such jurisdictions as are necessary to permit Consummation of
the Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer
Registration Statement, commence and Consummate the Exchange Offer. The Exchange
Offer shall be on the appropriate form permitting (i) registration of the Series
B Senior Subordinated Notes to be offered in exchange for the Series A Senior
Subordinated Notes that are Transfer Restricted Securities and (ii) resales of
Series B Senior Subordinated Notes by Broker-Dealers that tendered into the
Exchange Offer Series A Senior Subordinated Notes that such Broker-Dealer
acquired for its own account as a result of market making activities or other
trading activities (other than Series A Senior Subordinated Notes acquired
directly from the Company or any of its Affiliates) as contemplated by Section
3(c) below.
(b) The Company and the Guarantors shall use their respective reasonable
best efforts to cause the Exchange Offer Registration Statement to be effective
continuously for the period specified in Section 3(c) below, and shall keep the
Exchange Offer open for a period of not less than the minimum period required
under applicable federal and state securities laws to Consummate the Exchange
Offer; PROVIDED, HOWEVER, that in no event shall such period be less than 20
Business Days. The Company and the Guarantors shall cause the Exchange Offer to
comply with all applicable federal and state securities laws. No securities
other than the Series B Senior Notes and the Series B Senior Subordinated Notes
shall be included in the Exchange Offer Registration Statement. The Company and
the Guarantors shall use their respective best efforts to cause the Exchange
Offer to be Consummated on the earliest practicable date after the Exchange
Offer Registration Statement has become effective, but in no event later than 40
business days thereafter (such 40th day being the "CONSUMMATION DEADLINE").
3
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Series A Senior Subordinated
Notes acquired directly from the Company or any Affiliate of the Company), may
exchange such Transfer Restricted Securities pursuant to the Exchange Offer.
Such "Plan of Distribution" section shall also contain all other information
with respect to such sales by such Broker-Dealers that the Commission may
require in order to permit such sales pursuant thereto, but such "Plan of
Distribution" shall not name any such Broker-Dealer or disclose the amount of
Transfer Restricted Securities held by any such Broker-Dealer, except to the
extent required by the Commission as a result of a change in policy, rules or
regulations after the date of this Agreement. See the Shearman & Sterling
no-action letter (available July 2, 1993).
Because such Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with its initial sale of any Series B
Senior Subordinated Notes received by such Broker-Dealer in the Exchange Offer,
the Company and Guarantors shall permit the use of the Prospectus contained in
the Exchange Offer Registration Statement by such Broker-Dealer to satisfy such
prospectus delivery requirement. To the extent necessary to ensure that the
prospectus contained in the Exchange Offer Registration Statement is available
for sales of Series B Senior Subordinated Notes by Broker-Dealers, the Company
and the Guarantors agree to use their respective best efforts to keep the
Exchange Offer Registration Statement continuously effective, supplemented,
amended and current as required by and subject to the provisions of Sections
6(a) and (c) hereof and in conformity with the requirements of this Agreement,
the Act and the policies, rules and regulations of the Commission as announced
from time to time, for a period of one year from the Consummation Deadline or
such shorter period as will terminate when all Transfer Restricted Securities
covered by such Registration Statement have been sold pursuant thereto. The
Company and the Guarantors shall provide sufficient copies of the latest version
of such Prospectus to such Broker-Dealers, promptly upon request, and in no
event later than one day after such request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) SHELF REGISTRATION. If (i) the Exchange Offer is not permitted by
applicable law (after the Company and the Guarantors have complied with the
procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of Transfer
Restricted Securities shall notify the Company within 20 Business Days following
the Consummation Deadline that (A) such Holder was prohibited by law or
Commission policy from participating in the Exchange Offer or (B) such Holder
may not resell the Series B Senior Subordinated Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and the Prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for such resales by such Holder or (C) such Holder is a Broker-Dealer
and holds Series A Senior Subordinated Notes acquired directly from the Company
or any of its Affiliates, then the Company and the Guarantors shall:
(x) cause to be filed, on or prior to 30 days after the earlier of (i) the
date on which the Company determines that the Exchange Offer Registration
Statement cannot be filed as a result of clause (a)(i) above and (ii) the date
on which the Company receives the notice specified in clause (a)(ii) above,
(such earlier date, the "FILING DEADLINE"), a shelf registration statement
pursuant to Rule 415 under the Act (which may be an amendment to the Exchange
Offer Registration Statement (the "SHELF REGISTRATION STATEMENT")), relating to
all Transfer Restricted Securities, and
(y) shall use their respective reasonable best efforts to cause such Shelf
Registration Statement to become effective on or prior to 90 days after the
Filing Deadline for the Shelf Registration Statement (such 90th day the
"EFFECTIVENESS DEADLINE").
4
If, after the Company has filed an Exchange Offer Registration Statement
that satisfies the requirements of Section 3(a) above, the Company is required
to file and make effective a Shelf Registration Statement solely because the
Exchange Offer is not permitted under applicable federal law (i.e., clause
(a)(i) above), then the filing of the Exchange Offer Registration Statement
shall be deemed to satisfy the requirements of clause (x) above; PROVIDED that,
in such event, the Company shall remain obligated to meet the Effectiveness
Deadline set forth in clause (y).
To the extent necessary to ensure that the Shelf Registration Statement is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a) and the other securities required
to be registered therein pursuant to Section 6(b)(ii) hereof, the Company and
the Guarantors shall use their respective reasonable best efforts to keep any
Shelf Registration Statement required by this Section 4(a) continuously
effective, supplemented, amended and current as required by and subject to the
provisions of Sections 6(b) and (c) hereof and in conformity with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time, for a period of at least two
years (as extended pursuant to Section 6(d)) following the Closing Date, or such
shorter period as will terminate when all Transfer Restricted Securities covered
by such Shelf Registration Statement have been sold pursuant thereto.
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE
SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to liquidated damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the applicable Filing Deadline, (ii) any such
Registration Statement has not been declared effective by the Commission on or
prior to the applicable Effectiveness Deadline, (iii) the Exchange Offer has not
been Consummated on or prior to the Consummation Deadline or (iv) any
Registration Statement required by this Agreement is filed and declared
effective but shall thereafter cease to be effective or fail to be usable for
its intended purpose without being succeeded immediately by a post-effective
amendment to such Registration Statement that cures such failure and that is
itself declared effective within 5 days of filing such post-effective amendment
to such Registration Statement (each such event referred to in clauses (i)
through (iv), a "REGISTRATION DEFAULT"), then the Company and the Guarantors
hereby jointly and severally agree to pay to each Holder of Transfer Restricted
Securities affected thereby liquidated damages in an amount equal to $.05 per
week per $1,000 in principal amount of Transfer Restricted Securities held by
such Holder for each week or portion thereof that the Registration Default
continues for the first 90-day period immediately following the occurrence of
such Registration Default. The amount of the liquidated damages shall increase
by an additional $.05 per week per $1,000 in principal amount of Transfer
Restricted Securities with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of liquidated
damages of $.25 per week per $1,000 in principal amount of Transfer Restricted
Securities; PROVIDED that the Company and the Guarantors shall in no event be
required to pay liquidated damages for more than one Registration Default at any
given time. Notwithstanding anything to the contrary set forth herein, (1) upon
filing of the Exchange Offer Registration Statement (and/or, if applicable, the
Shelf Registration Statement), in the case of (i) above, (2) upon the
effectiveness of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration
5
Statement), in the case of (ii) above, (3) upon Consummation of the Exchange
Offer, in the case of (iii) above, or (4) upon the filing of a post-effective
amendment to the Registration Statement or an additional Registration Statement
that causes the Exchange Offer Registration Statement (and/or, if applicable,
the Shelf Registration Statement) to again be declared effective or made usable
in the case of (iv) above, the liquidated damages payable with respect to the
Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or
(iv), as applicable, shall cease.
All accrued liquidated damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Notes. Notwithstanding the fact that any securities for which liquidated damages
are due cease to be Transfer Restricted Securities, all obligations of the
Company and the Guarantors to pay liquidated damages with respect to securities
shall survive until such time as such obligations with respect to such
securities shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) EXCHANGE OFFER REGISTRATION STATEMENT. In connection with the Exchange
Offer, the Company and the Guarantors shall (x) comply with all applicable
provisions of Section 6(c) below, (y) use their respective reasonable best
efforts to effect such exchange and to permit the resale of Series B Senior
Subordinated Notes by Broker-Dealers that tendered in the Exchange Offer Series
A Senior Subordinated Notes that such Broker-Dealer acquired for its own account
as a result of its market making activities or other trading activities (other
than Series A Senior Subordinated Notes acquired directly from the Company or
any of its Affiliates) being sold in accordance with the intended method or
methods of distribution thereof, and (z) comply with all of the following
provisions:
(i) If, following the date hereof there has been announced a change in
Commission policy with respect to exchange offers such as the Exchange Offer,
that in the reasonable opinion of counsel to the Company raises a substantial
question as to whether the Exchange Offer is permitted by applicable federal
law, the Company and the Guarantors hereby agree to seek a no-action letter
or other favorable decision from the Commission allowing the Company and the
Guarantors to Consummate an Exchange Offer for such Transfer Restricted
Securities. The Company and the Guarantors hereby agree to pursue the
issuance of such a decision to the Commission staff level. In connection with
the foregoing, the Company and the Guarantors hereby agree to take all such
other actions as may be requested by the Commission or otherwise required in
connection with the issuance of such decision, including without limitation
(A) participating in telephonic conferences with the Commission, (B)
delivering to the Commission staff an analysis prepared by counsel to the
Company setting forth the legal bases, if any, upon which such counsel has
concluded that such an Exchange Offer should be permitted and (C) diligently
pursuing a resolution (which need not be favorable) by the Commission staff.
(ii) As a condition to its participation in the Exchange Offer, each
Holder of Transfer Restricted Securities (including, without limitation, any
Holder who is a Broker Dealer) shall furnish, upon the request of the
Company, prior to the Consummation of the Exchange Offer, a written
representation to the Company and the Guarantors (which may be contained in
the letter of transmittal contemplated by the Exchange Offer Registration
Statement) to the effect that (A) it is not an Affiliate of the Company, (B)
it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a
distribution of the Series B Senior Subordinated Notes to be issued in the
Exchange Offer and (C) it is acquiring the Series B Senior Subordinated Notes
in its ordinary course of business. As a condition to its participation in
the Exchange Offer each Holder using the Exchange Offer to participate in a
distribution of the Series B Senior Subordinated Notes shall acknowledge and
agree that, if the resales are of Series B Senior Subordinated Notes obtained
by such Holder in exchange for Series A Senior Subordinated Notes acquired
directly from the Company or an Affiliate thereof, it (1) could not, under
Commission policy as in effect on
6
the date of this Agreement, rely on the position of the Commission enunciated
in MORGAN STANLEY AND CO., INC. (available June 5, 1991) and EXXON CAPITAL
HOLDINGS CORPORATION (available May 13, 1988), as interpreted in the
Commission's letter to SHEARMAN & STERLING dated July 2, 1993, and similar
no-action letters (including, if applicable, any no-action letter obtained
pursuant to clause (i) above), and (2) must comply with the registration and
prospectus delivery requirements of the Act in connection with a secondary
resale transaction and that such a secondary resale transaction must be
covered by an effective registration statement containing the selling
security holder information required by Item 507 or 508, as applicable, of
Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantors shall provide a supplemental letter
to the Commission (A) stating that the Company and the Guarantors are
registering the Exchange Offer in reliance on the position of the Commission
enunciated in EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988),
MORGAN STANLEY AND CO., INC. (available June 5, 1991) as interpreted in the
Commission's letter to SHEARMAN & STERLING dated July 2, 1993, and, if
applicable, any no-action letter obtained pursuant to clause (i) above, (B)
including a representation that neither the Company nor any Guarantor has
entered into any arrangement or understanding with any Person to distribute
the Series B Senior Subordinated Notes to be received in the Exchange Offer
and that, to the best of the Company's and each Guarantor's information and
belief, each Holder participating in the Exchange Offer is acquiring the
Series B Senior Subordinated Notes in its ordinary course of business and has
no arrangement or understanding with any Person to participate in the
distribution of the Series B Senior Subordinated Notes received in the
Exchange Offer and (C) any other undertaking or representation required by
the Commission as set forth in any no-action letter obtained pursuant to
clause (i) above, if applicable.
(b) SHELF REGISTRATION STATEMENT. In connection with the Shelf
Registration Statement, the Company and the Guarantors shall:
(i) comply with all the provisions of Section 6(c) below and use their
respective reasonable best efforts to effect such registration to permit the
sale of the Transfer Restricted Securities being sold in accordance with the
intended method or methods of distribution thereof (as indicated in the
information furnished to the Company pursuant to Section 4(b) hereof), and
pursuant thereto the Company and the Guarantors will prepare and file with the
Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof within the time periods and otherwise in
accordance with the provisions hereof.
(ii) issue, upon the request of any Holder or purchaser of Series A
Senior Subordinated Notes covered by any Shelf Registration Statement
contemplated by this Agreement, Series B Senior Subordinated Notes having an
aggregate principal amount equal to the aggregate principal amount of Series A
Senior Subordinated Notes sold pursuant to the Shelf Registration Statement and
surrendered to the Company for cancellation; the Company shall register Series B
Senior Subordinated Notes on the Shelf Registration Statement for this purpose
and issue the Series B Senior Subordinated Notes to the purchaser(s) of
securities subject to the Shelf Registration Statement in the names as such
purchaser(s) shall designate.
(c) GENERAL PROVISIONS. In connection with any Registration Statement and
any related Prospectus required by this Agreement, the Company and the
Guarantors shall:
(i) use their respective reasonable best efforts to keep such
Registration Statement continuously effective and provide all requisite
financial statements for the period specified in Section 3 or 4 of this
Agreement, as applicable. Upon the occurrence of any event that would cause
any such Registration Statement or the Prospectus contained therein (A) to
contain an untrue statement of material fact or omit to state any material
fact necessary to make the statements therein not misleading or (B) not to be
effective and usable for resale of Transfer Restricted Securities during the
period required by this Agreement, the Company
7
and the Guarantors shall file promptly an appropriate amendment to such
Registration Statement curing such defect, and, if Commission review is
required, use their respective best efforts to cause such amendment to be
declared effective as soon as practicable.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as may be
necessary to keep such Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, as the case may be; cause the
Prospectus to be supplemented by any required Prospectus supplement, and as
so supplemented to be filed pursuant to Rule 424 under the Act, and to comply
fully with Rules 424, 430A and 462, as applicable, under the Act in a timely
manner; and comply with the provisions of the Act with respect to the
disposition of all securities covered by such Registration Statement during
the applicable period in accordance with the intended method or methods of
distribution by the sellers thereof set forth in such Registration Statement
or supplement to the Prospectus;
(iii) advise each Holder promptly and, if requested by such Holder,
confirm such advice in writing, (A) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to
any applicable Registration Statement or any post-effective amendment
thereto, when the same has become effective, (B) of any request by the
Commission for amendments to the Registration Statement or amendments or
supplements to the Prospectus or for additional information relating thereto,
(C) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of the
Transfer Restricted Securities for offering or sale in any jurisdiction, or
the initiation of any proceeding for any of the preceding purposes, and (D)
of the existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any document incorporated
by reference therein untrue, or that requires the making of any additions to
or changes in the Registration Statement in order to make the statements
therein not misleading, or that requires the making of any additions to or
changes in the Prospectus in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. If at
any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending the
qualification or exemption from qualification of the Transfer Restricted
Securities under state securities or Blue Sky laws, the Company and the
Guarantors shall use their respective reasonable best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event contemplated by
Section 6(c)(iii)(D) above shall exist or have occurred, prepare a supplement
or post-effective amendment to the Registration Statement or related
Prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers of
Transfer Restricted Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading;
(v) furnish to each Holder in connection with such exchange or sale,
if any, before filing with the Commission, copies of any Registration
Statement or any Prospectus included therein or any amendments or supplements
to any such Registration Statement or Prospectus (including all documents
incorporated by reference after the initial filing of such Registration
Statement), which documents will be subject to the review and comment of such
Holders in connection with such sale, if any, for a period of at least five
Business Days, and the Company will not file any such Registration Statement
or Prospectus or any amendment or supplement to any such Registration
Statement or Prospectus (including all such documents incorporated by
reference) to which such Holders shall reasonably object within five Business
Days after the receipt thereof. A Holder shall be deemed to have reasonably
objected to such filing if such Registration Statement, amendment, Prospectus
or supplement, as applicable, as proposed to be filed, contains an untrue
statement of a material fact or omit to
8
state any material fact necessary to make the statements therein not
misleading or fails to comply with the applicable requirements of the Act;
(vi) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to each Holder in connection with such
exchange or sale, if any, make the Company's and the Guarantors'
representatives available for discussion of such document and other customary
due diligence matters, and include such information in such document prior to
the filing thereof as such Holders may reasonably request;
(vii) make available, at reasonable times, for inspection by each
Holder and any attorney or accountant retained by such Holders, all financial
and other records, pertinent corporate documents of the Company and the
Guarantors and cause the Company's and the Guarantors' officers, directors
and employees to supply all information reasonably requested by any such
Holder, attorney or accountant in connection with such Registration Statement
or any post-effective amendment thereto subsequent to the filing thereof and
prior to its effectiveness;
(viii) if requested by any Holders in connection with such exchange or
sale, promptly include in any Registration Statement or Prospectus, pursuant
to a supplement or post-effective amendment if necessary, such information as
such Holders may reasonably request to have included therein, including,
without limitation, information relating to the "Plan of Distribution" of the
Transfer Restricted Securities; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as practicable
after the Company is notified of the matters to be included in such
Prospectus supplement or post-effective amendment;
(ix) furnish to each Holder in connection with such exchange or sale,
without charge, at least one copy of the Registration Statement, as first
filed with the Commission, and of each amendment thereto, including all
documents incorporated by reference therein and all exhibits (including
exhibits incorporated therein by reference);
(x) deliver to each Holder without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Company and
the Guarantors hereby consent to the use (in accordance with law) of the
Prospectus and any amendment or supplement thereto by each selling Holder in
connection with the offering and the sale of the Transfer Restricted
Securities covered by the Prospectus or any amendment or supplement thereto;
(xi) upon the request of any Holder, enter into such agreements
(including underwriting agreements) and make such representations and
warranties and take all such other actions in connection therewith in order
to expedite or facilitate the disposition of the Transfer Restricted
Securities pursuant to any applicable Registration Statement contemplated by
this Agreement as may be reasonably requested by any Holder in connection
with any sale or resale pursuant to any applicable Registration Statement. In
such connection, the Company and the Guarantors shall:
(A) upon request of any Holder, furnish (or in the case of paragraphs
(2) and (3), use its best efforts to cause to be furnished) to each
Holder, upon Consummation of the Exchange Offer or upon the effectiveness
of the Shelf Registration Statement, as the case may be:
(1) a certificate, dated such date, signed on behalf of the
Company and each Guarantor by (x) the President or any Vice President
and (y) a principal financial or accounting officer of the Company and
such Guarantor, confirming, as of the date thereof, the matters set
forth in Sections 6(x), 9(a) and 9(b) of the Purchase Agreement and
such other similar matters as such Holders may reasonably request;
9
(2) an opinion, dated the date of Consummation of the Exchange
Offer or the date of effectiveness of the Shelf Registration
Statement, as the case may be, of counsel for the Company and the
Guarantors covering matters similar to those set forth in paragraph
(e) of Section 9 of the Purchase Agreement and such other matter as
such Holder may reasonably request, and in any event including a
statement to the effect that such counsel has participated in
conferences with officers and other representatives of the Company and
the Guarantors, representatives of the independent public accountants
for the Company and the Guarantors and have considered the matters
required to be stated therein and the statements contained therein,
although such counsel has not independently verified the accuracy,
completeness or fairness of such statements; and that such counsel
advises that, on the basis of the foregoing (relying as to materiality
to the extent such counsel deems appropriate upon the statements of
officers and other representatives of the Company and the Guarantors
and without independent check or verification), no facts came to such
counsel's attention that caused such counsel to believe that the
applicable Registration Statement, at the time such Registration
Statement or any post-effective amendment thereto became effective
and, in the case of the Exchange Offer Registration Statement, as of
the date of Consummation of the Exchange Offer, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the case of the opinion
dated the date of Consummation of the Exchange Offer, as of the date
of Consummation, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. Without limiting the foregoing, such
counsel may state further that such counsel assumes no responsibility
for, and has not independently verified, the accuracy, completeness or
fairness of the financial statements, notes and schedules and other
financial data included in any Registration Statement contemplated by
this Agreement or the related Prospectus; and
(3) a customary comfort letter, dated the date of Consummation of
the Exchange Offer, or as of the date of effectiveness of the Shelf
Registration Statement, as the case may be, from the Company's
independent accountants, in the customary form and covering matters of
the type customarily covered in comfort letters to underwriters in
connection with underwritten offerings, and affirming the matters set
forth in the comfort letter delivered pursuant to Section 9(h) of the
Purchase Agreement; and
(B) deliver such other documents and certificates as may be reasonably
requested by the selling Holders to evidence compliance with the matters
covered in clause (A) above and with any customary conditions contained in
any agreement entered into by the Company and the Guarantors pursuant to
this clause (xi);
(xii) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders and their counsel in connection with the
registration and qualification of the Transfer Restricted Securities under
the securities or Blue Sky laws of such jurisdictions as the selling Holders
may request and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Transfer Restricted
Securities covered by the applicable Registration Statement; PROVIDED,
HOWEVER, that neither the Company nor any Guarantor shall be required to
register or qualify as a foreign corporation or other entity, as applicable,
where it is not now so qualified or to take any action that would subject it
to the service of process in suits or to taxation, other than as to matters
and transactions relating to the Registration Statement, in any jurisdiction
where it is not now so subject;
(xiii) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Transfer Restricted Securities to
be sold and not bearing any
10
restrictive legends; and to register such Transfer Restricted Securities in
such denominations and such names as the selling Holders may request at least
two Business Days prior to such sale of Transfer Restricted Securities;
(xiv) use their respective reasonable best efforts to cause the
disposition of the Transfer Restricted Securities covered by the Registration
Statement to be registered with or approved by such other governmental
agencies or authorities as may be necessary to enable the seller or sellers
thereof to consummate the disposition of such Transfer Restricted Securities,
subject to the proviso contained in clause (xii) above;
(xv) provide a CUSIP number for all Transfer Restricted Securities not
later than the effective date of a Registration Statement covering such
Transfer Restricted Securities and provide the Trustee under the Indenture
with printed certificates for the Transfer Restricted Securities which are in
a form eligible for deposit with the Depository Trust Company;
(xvi) otherwise use their respective reasonable best efforts to comply
with all applicable rules and regulations of the Commission, and make
generally available to its security holders with regard to any applicable
Registration Statement, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be audited)
covering a twelve-month period beginning after the effective date of the
Registration Statement (as such term is defined in paragraph (c) of Rule 158
under the Act);
(xvii) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by this
Agreement and, in connection therewith, cooperate with the Trustee and the
Holders to effect such changes to the Indenture as may be required for such
Indenture to be so qualified in accordance with the terms of the TIA; and
execute and use its best efforts to cause the Trustee to execute, all
documents that may be required to effect such changes and all other forms and
documents required to be filed with the Commission to enable such Indenture
to be so qualified in a timely manner; and
(xviii) provide promptly to each Holder, upon request, each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(d) RESTRICTIONS ON HOLDERS. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof (in each case, a
"SUSPENSION NOTICE"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration Statement
until (i) such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is
advised in writing by the Company that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus (in each case, the "RECOMMENCEMENT
DATE"). Each Holder receiving a Suspension Notice hereby agrees that it will
either (i) destroy any Prospectuses, other than permanent file copies, then in
such Holder's possession which have been replaced by the Company with more
recently dated Prospectuses or (ii) deliver to the Company (at the Company's
expense) all copies, other than permanent file copies, then in such Holder's
possession of the Prospectus covering such Transfer Restricted Securities that
was current at the time of receipt of the Suspension Notice. The time period
regarding the effectiveness of such Registration Statement set forth in Section
3 or 4 hereof, as applicable, shall be extended by a number of days equal to the
number of days in the period from and including the date of delivery of the
Suspension Notice to the date of delivery of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
11
(a) All expenses incident to the Company's and the Guarantors' performance
of or compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses; (ii) all fees and
expenses of compliance with federal securities and state Blue Sky or securities
laws; (iii) all expenses of printing (including printing certificates for the
Series B Senior Subordinated Notes to be issued in the Exchange Offer and
printing of Prospectuses), messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for the Company, the Guarantors and the
Holders of Transfer Restricted Securities; (v) all application and filing fees
in connection with listing the Series B Senior Subordinated Notes on a national
securities exchange or automated quotation system pursuant to the requirements
hereof; and (vi) all fees and disbursements of independent certified public
accountants of the Company and the Guarantors (including the expenses of any
special audit and comfort letters required by or incident to such performance).
The Company will, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Guarantors
will reimburse the Initial Purchasers and the Holders of Transfer Restricted
Securities who are tendering Series A Senior Subordinated Notes in the Exchange
Offer and/or selling or reselling Series A Senior Subordinated Notes or Series B
Senior Subordinated Notes pursuant to the "Plan of Distribution" contained in
the Exchange Offer Registration Statement or the Shelf Registration Statement,
as applicable, for the reasonable fees and disbursements of not more than one
counsel, who shall be Davis Polk & Wardwell, unless another firm shall be chosen
by the Holders of a majority in principal amount of the Transfer Restricted
Securities for whose benefit such Registration Statement is being prepared.
Notwithstanding the foregoing, such Holders shall be responsible for any and all
underwriting discounts and commissions and prior to employing counsel in
connection with an Exchange Offer, the Initial Purchasers will notify the
Company and the Company's counsel and provide them reasonable opportunity to
discuss the need for separate counsel; PROVIDED, HOWEVER, the Initial Purchasers
shall at all times retain the sole right to employ separate counsel.
SECTION 8. INDEMNIFICATION
(a) Each of the Company and the Guarantors agrees, jointly and severally,
to indemnify and hold harmless each Holder, its directors, officers and each
Person, if any, who controls such Holder (within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act), from and against any and all losses,
claims, damages, liabilities, judgments, (including without limitation, any
legal or other expenses incurred in connection with investigating or defending
any matter, including any action that could give rise to any such losses,
claims, damages, liabilities or judgments) caused by any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement, preliminary prospectus or Prospectus (or any amendment or supplement
thereto) provided by the Company to any Holder or any prospective purchaser of
Series B Senior Subordinated Notes or registered Series A Senior Subordinated
Notes, or caused by any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as such losses, claims, damages, liabilities or
judgments are caused by an untrue statement or omission or alleged untrue
statement or omission that is based upon information relating to any of the
Holders furnished in writing to the Company by any of the Holders.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless the Company and the Guarantors, and
their respective directors and officers, and each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
the Company, or the
12
Guarantors to the same extent as the foregoing indemnity from the Company and
the Guarantors set forth in Section 8(a) above, but only with reference to
information relating to such Holder furnished in writing to the Company by such
Holder expressly for use in any Registration Statement. In no event shall any
Holder, its directors, officers or any Person who controls such Holder be liable
or responsible for any amount in excess of the amount by which the total amount
received by such Holder with respect to its sale of Transfer Restricted
Securities pursuant to a Registration Statement exceeds (i) the amount paid by
such Holder for such Transfer Restricted Securities and (ii) the amount of any
damages that such Holder, its directors, officers or any Person who controls
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 8(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by a majority of the
Holders, in the case of the parties indemnified pursuant to Section 8(a), and by
the Company and Guarantors, in the case of parties indemnified pursuant to
Section 8(b). The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
liabilities and judgments by reason of any settlement of any action (i) effected
with its written consent or (ii) effected without its written consent if the
settlement is entered into more than twenty business days after the indemnifying
party shall have received a request from the indemnified party for reimbursement
for the fees and expenses of counsel (in any case where such fees and expenses
are at the expense of the indemnifying party) and, prior to the date of such
settlement, the indemnifying party shall have failed to comply with such
reimbursement request. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement or compromise of, or
consent to the entry of judgment with respect to, any pending or threatened
action in respect of which the indemnified party is or could have been a party
and indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i) includes
an unconditional release of the indemnified party from all liability on claims
that are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section 8
is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
13
appropriate to reflect the relative benefits received by the Company and the
Guarantors, on the one hand, and the Holders, on the other hand, from their sale
of Transfer Restricted Securities or (ii) if the allocation provided by clause
8(d)(i) is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause 8(d)(i) above
but also the relative fault of the Company and the Guarantors, on the one hand,
and of the Holder, on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The relative
fault of the Company and the Guarantors, on the one hand, and of the Holder, on
the other hand, shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company or such Guarantor, on the one hand, or by the Holder, on the other hand,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company, the Guarantors and each Holder agree that it would not be
just and equitable if contribution pursuant to this Section 8(d) were determined
by pro rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter, including any action that
could have given rise to such losses, claims, damages, liabilities or judgments.
Notwithstanding the provisions of this Section 8, no Holder, its directors, its
officers or any Person, if any, who controls such Holder shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the
total received by such Holder with respect to the sale of Transfer Restricted
Securities pursuant to a Registration Statement exceeds (i) the amount paid by
such Holder for such Transfer Restricted Securities and (ii) the amount of any
damages which such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Holders' obligations to contribute
pursuant to this Section 8(d) are several in proportion to the respective
principal amount of Transfer Restricted Securities held by each Holder hereunder
and not joint.
SECTION 9. RULE 144A AND RULE 144
The Company and each Guarantor agree with each Holder, for so long as any
Transfer Restricted Securities remain outstanding and during any period in which
the Company or such Guarantor (i) is not subject to Section 13 or 15(d) of the
Exchange Act, to make available, upon request of any Holder, to such Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
designated by such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of
the Exchange Act, to make all filings required thereby in a timely manner in
order to permit resales of such Transfer Restricted Securities pursuant to Rule
144.
SECTION 10. MISCELLANEOUS
(a) REMEDIES. The Company and the Guarantors acknowledge and agree that
any failure by the Company and/or the Guarantors to comply with their respective
obligations under Sections 3 and 4 hereof may result in material irreparable
injury to the Initial Purchasers or the Holders for which there is no adequate
remedy at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of any such failure, the Initial Purchasers or
any Holder may obtain such relief as may be required to specifically enforce the
Company's and the Guarantor's obligations under Sections 3 and 4 hereof. The
Company and the Guarantors further agree to waive the defense in any action for
specific performance that a remedy at law would be adequate.
14
(b) NO INCONSISTENT AGREEMENTS. Neither the Company nor any Guarantor
will, on or after the date of this Agreement, enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor any Guarantor has previously entered into any agreement
granting any registration rights with respect to its securities to any Person.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's and
the Guarantors' securities under any agreement in effect on the date hereof.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(c)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose Transfer Restricted Securities are being tendered pursuant to
the Exchange Offer, and that does not affect directly or indirectly the rights
of other Holders whose Transfer Restricted Securities are not being tendered
pursuant to such Exchange Offer, may be given by the Holders of a majority of
the outstanding principal amount of Transfer Restricted Securities subject to
such Exchange Offer.
(d) THIRD PARTY BENEFICIARY. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent they may
deem such enforcement necessary or advisable to protect its rights or the rights
of Holders hereunder.
(e) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or the Guarantors:
c/o Hovnanian Enterprises, Inc.
10 Highway 35
P.O. Box 500
Red Bank, NJ 07701
Telecopier No.: 732-747-6835
Attention: Corporate Controller
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Ave.
New York, NY 10017
Telecopier No.: 212-455-2502
Attention: Vincent Pagano, Jr., Esq.
15
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders; PROVIDED, that nothing herein shall be deemed to permit any assignment,
transfer or other disposition of Transfer Restricted Securities in violation of
the terms hereof or of the Purchase Agreement or the Indenture. If any
transferee of any Holder shall acquire Transfer Restricted Securities in any
manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
Person shall be entitled to receive the benefits hereof.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(j) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) ENTIRE AGREEMENT. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
16
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
K. HOVNANIAN ENTERPRISES, INC.
/s/ J. Larry Sorsby
---------------------
By: J. Larry Sorsby
Title: Executive Vice President
Chief Financial Officer
HOVNANIAN ENTERPRISES, INC.
/s/ J. Larry Sorsby
---------------------
By: J. Larry Sorsby
Title: Executive Vice President
Chief Financial Officer
GUARANTORS:
ALL SEASONS, INC.
ARROW PROPERTIES, INC.
BALLANTRAE DEVELOPMENT CORP.
BALLANTRAE HOME SALES, INC.
CONDOMINIUM COMMUNITY (BOWIE NEW TOWN), INC.
CONDOMINIUM COMMUNITY (LARGO TOWN), INC.
CONDOMINIUM COMMUNITY (PARK PLACE), INC.
CONDOMINIUM COMMUNITY (QUAIL RUN), INC.
CONDOMINIUM COMMUNITY (TRUMAN DRIVE), INC.
CONSULTANTS CORPORATION
DESIGNED CONTRACTS. INC.
EXC, INC.
FORTIS HOMES, INC.
HOUSING-HOME SALES, INC.
HOVNANIAN AT TARPON LAKES I, INC.
HOVNANIAN DEVELOPMENTS OF FLORIDA, INC.
HOVNANIAN PENNSYLVANIA, INC.
K. HOV INTERNATIONAL, INC.
K. HOVNANIAN ACQUISITIONS, INC.
K. HOVNANIAN AT ASHBURN VILLAGE, INC.
K. HOVNANIAN AT ATLANTIC CITY, INC.
K. HOVNANIAN AT BALLANTRAE ESTATES, INC.
K. HOVNANIAN AT BARRINGTON, INC.
K. HOVNANIAN AT BEDMINSTER II, INC.
K. HOVNANIAN AT BEDMINSTER, INC.
K. HOVNANIAN AT BELMONT, INC.
K. HOVNANIAN AT BERNARDS IV, INC.
17
K. HOVNANIAN AT BRANCHBURG III, INC.
K. HOVNANIAN AT BRIDGEPORT, INC.
K. HOVNANIAN AT BRIDGEWATER IV, INC.
K. HOVNANIAN AT BRIDGEWATER V, INC.
K. HOVNANIAN AT BRIDGEWATER VI, INC.
K. HOVNANIAN AT BULL RUN, INC.
K. HOVNANIAN AT BURLINGTON III, INC.
K. HOVNANIAN AT BURLINGTON, INC.
K. HOVNANIAN AT CALABRIA, INC.
K. HOVNANIAN AT CAMERON CHASE, INC.
K. HOVNANIAN AT CARMEL DEL MAR, INC.
K. HOVNANIAN AT CAROLINA COUNTRY CLUB I, INC.
K. HOVNANIAN AT CAROLINA COUNTRY CLUB II, INC.
K. HOVNANIAN AT CAROLINA COUNTRY CLUB III, INC.
K. HOVNANIAN AT CASTILE, INC.
K. HOVNANIAN AT CEDAR GROVE I, INC.
K. HOVNANIAN AT CEDAR GROVE II, INC.
K. HOVNANIAN AT CHAPARRAL, INC.
K. HOVNANIAN AT CLARKSTOWN, INC.
K. HOVNANIAN AT COCONUT CREEK, INC.
K. HOVNANIAN AT CRESTLINE, INC.
K. HOVNANIAN AT CRYSTAL SPRINGS, INC.
K. HOVNANIAN AT DOMINGUEZ, INC.
K. HOVNANIAN AT DOMINION RIDGE, INC.
K. HOVNANIAN AT EAST BRUNSWICK VI, INC.
K. HOVNANIAN AT EAST BRUNSWICK VIII, INC.
K. HOVNANIAN AT EAST WHITELAND I, INC.
K. HOVNANIAN AT EXETER HILLS, INC.
K. HOVNANIAN AT FAIR LAKES GLEN, INC.
K. HOVNANIAN AT FAIR LAKES, INC.
K. HOVNANIAN AT FREEHOLD TOWNSHIP, INC.
K. HOVNANIAN AT FREEHOLD TOWNSHIP I, INC.
K. HOVNANIAN AT FT. MYERS I, INC.
K. HOVNANIAN AT FT. MYERS II, INC.
K. HOVNANIAN AT GREAT NOTCH, INC.
K. HOVNANIAN AT HACKETTSTOWN, INC.
K. HOVNANIAN AT HALF MOON BAY, INC.
K. HOVNANIAN AT HAMPTON OAKS, INC.
K. HOVNANIAN AT HANOVER, INC.
K. HOVNANIAN AT HERSHEY'S MILL, INC. (a PA Corp)
K. HOVNANIAN AT HIGHLAND VINEYARDS, INC.
K. HOVNANIAN AT HOLLY CREST, INC.
K. HOVNANIAN AT HOPEWELL IV, INC.
K. HOVNANIAN AT HOPEWELL V, INC.
K. HOVNANIAN AT HOPEWELL VI, INC.
K. HOVNANIAN AT HOWELL TOWNSHIP, INC.
K. HOVNANIAN AT HUNTER ESTATES, INC.
K. HOVNANIAN AT JACKSONVILLE II, INC.
K. HOVNANIAN AT JEFFERSON, INC.
18
K. HOVNANIAN AT JERSEY CITY III, INC.
K. HOVNANIAN AT KINGS GRANT I, INC.
K. HOVNANIAN AT KLOCKNER FARMS, INC.
K. HOVNANIAN AT LA TERRAZA, INC.
K. HOVNANIAN AT LA TROVATA, INC.
K. HOVNANIAN AT LAKEWOOD, INC.
K. HOVNANIAN AT LAWRENCE V, INC.
K. HOVNANIAN AT LOWER SAUCON II, INC.
K. HOVNANIAN AT LOWER SAUCON, INC.
K. HOVNANIAN AT MAHWAH II, INC.
K. HOVNANIAN AT MAHWAH IV, INC. (Whalepond)
K. HOVNANIAN AT MAHWAH IX, INC.
K. HOVNANIAN AT MAHWAH V, INC.
K. HOVNANIAN AT MAHWAH VI, INC. (Norfolk)
K. HOVNANIAN AT MAHWAH VII, INC.
K. HOVNANIAN AT MAHWAH VIII, INC.
K. HOVNANIAN AT MANALAPAN, INC.
K. HOVNANIAN AT MARLBORO II, INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP IV, INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP VI, INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP VII, INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP III, INC.
K. HOVNANIAN AT MEDFORD I, INC.
K. HOVNANIAN AT MERRIMACK, INC.
K. HOVNANIAN AT METRO DC SOUTH, INC.
K. HOVNANIAN AT MONTCLAIR NJ, INC.
K. HOVNANIAN AT MONTCLAIR, INC.
K. HOVNANIAN AT MONTGOMERY I, INC.
K. HOVNANIAN AT NEWARK URBAN RENEWAL
CORPORATION I, INC.
K. HOVNANIAN AT NEWARK URBAN RENEWAL
CORPORATION IV, INC.
K. HOVNANIAN AT NEWARK URBAN RENEWAL
CORPORATION V, INC.
K. HOVNANIAN AT NORTH BERGEN, INC.
K. HOVNANIAN AT NORTH BRUNSWICK IV, INC.
K. HOVNANIAN AT NORTHERN WESTCHESTER, INC.
K. HOVNANIAN AT NORTHLAKE, INC.
K. HOVNANIAN AT OCEAN WALK, INC.
K. HOVNANIAN AT P.C. PROPERTIES, INC.
K. HOVNANIAN AT PARK RIDGE, INC.
K. HOVNANIAN AT PASCO I, INC.
K. HOVNANIAN AT PASCO II, INC.
K. HOVNANIAN AT PEEKSKILL, INC.
K. HOVNANIAN AT PEMBROKE SHORES, INC.
K. HOVNANIAN AT PERKIOMEN I, INC.
K. HOVNANIAN AT PERKIOMEN II, INC.
K. HOVNANIAN AT PLAINSBORO III, INC.
K. HOVNANIAN AT POLO TRACE, INC.
K. HOVNANIAN AT PORT IMPERIAL NORTH, INC.
K. HOVNANIAN AT PRINCETON, INC.
19
K. HOVNANIAN AT RANCHO CHRISTIANITOS, INC.
K. HOVNANIAN AT RARITAN I, INC.
K. HOVNANIAN AT READINGTON II, INC.
K. HOVNANIAN AT RESERVOIR RIDGE, INC.
K. HOVNANIAN AT RIVER OAKS, INC.
K. HOVNANIAN AT SAN SEVAINE, INC.
K. HOVNANIAN AT SARATOGA, INC.
K. HOVNANIAN AT SCOTCH PLAINS II, INC.
K. HOVNANIAN AT SCOTCH PLAINS, INC.
K. HOVNANIAN AT SENECA CROSSING, INC.
K. HOVNANIAN AT SMITHVILLE, INC.
K. HOVNANIAN AT SMITHVILLE III, INC.
K. HOVNANIAN AT SOMERS POINT, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK II, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK III, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK IV, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK V, INC.
K. HOVNANIAN AT SPRING RIDGE, INC.
K. HOVNANIAN AT STONE CANYON, INC.
K. HOVNANIAN AT STONEGATE, INC. (a CA
Corporation)
K. HOVNANIAN AT STONEGATE, INC. (a VA
Corporation)
K. HOVNANIAN AT STONY POINT, INC.
K. HOVNANIAN AT STUART ROAD, INC.
K. HOVNANIAN AT SULLY STATION, INC.
K. HOVNANIAN AT SUMMERWOOD, INC.
K. HOVNANIAN AT SYCAMORE, INC.
K. HOVNANIAN AT TANNERY HILL, INC.
K. HOVNANIAN AT THE BLUFF, INC.
K. HOVNANIAN AT THE CEDARS, INC.
K. HOVNANIAN AT THE GLEN, INC.
K. HOVNANIAN AT THE RESERVE AT MEDFORD, INC.
K. HOVNANIAN AT THORNBURY, INC.
K. HOVNANIAN AT TIERRASANTA, INC.
K. HOVNANIAN AT TUXEDO, INC.
K. HOVNANIAN AT UNION TOWNSHIP I, INC.
K. HOVNANIAN AT UPPER FREEHOLD TOWNSHIP I, INC.
K. HOVNANIAN AT UPPER MAKEFIELD I, INC.
K. HOVNANIAN AT UPPER MERION, INC.
K. HOVNANIAN AT VAIL RANCH, INC.
K. HOVNANIAN AT VALLEYBROOK II, INC.
K. HOVNANIAN AT VALLEYBROOK, INC.
K. HOVNANIAN AT WALL TOWNSHIP VI, INC.
K. HOVNANIAN AT WALL TOWNSHIP VIII, INC.
K. HOVNANIAN AT WASHINGTONVILLE, INC.
K. HOVNANIAN AT WAYNE III, INC.
K. HOVNANIAN AT WAYNE V, INC.
K. HOVNANIAN AT WAYNE VI, INC.
K. HOVNANIAN AT WAYNE VII, INC.
20
K. HOVNANIAN AT WILDROSE, INC.
K. HOVNANIAN AT WINSTON TRAILS, INC.
K. HOVNANIAN AT WOODMONT, INC.
K. HOVNANIAN AVIATION, INC.
K. HOVNANIAN COMPANIES NORTHEAST, INC.
K. HOVNANIAN COMPANIES OF CALIFORNIA, INC.
K. HOVNANIAN COMPANIES OF FLORIDA, INC.
K. HOVNANIAN COMPANIES OF MARYLAND, INC.
K. HOVNANIAN COMPANIES OF METRO
WASHINGTON, INC.
K. HOVNANIAN COMPANIES OF NEW YORK, INC.
K. HOVNANIAN COMPANIES OF NORTH CAROLINA, INC.
K. HOVNANIAN COMPANIES OF PENNSYLVANIA, INC.
K. HOVNANIAN COMPANIES OF SOUTHERN
CALIFORNIA, INC.
K. HOVNANIAN CONSTRUCTION MANAGEMENT, INC.
K. HOVNANIAN'S DESIGN GALLERY, INC.
K. HOVNANIAN DEVELOPMENTS OF CALIFORNIA, INC.
K. HOVNANIAN DEVELOPMENTS OF MARYLAND, INC.
K. HOVNANIAN DEVELOPMENTS OF METRO
WASHINGTON, INC.
K. HOVNANIAN DEVELOPMENTS OF NEW JERSEY, INC.
K. HOVNANIAN DEVELOPMENTS OF NEW YORK, INC.
K. HOVNANIAN DEVELOPMENTS OF SOUTH
CAROLINA, INC.
K. HOVNANIAN DEVELOPMENTS OF TEXAS, INC.
K. HOVNANIAN EQUITIES, INC.
K. HOVNANIAN FLORIDA DIVISION, INC.
K. HOVNANIAN FORECAST ACQUISITION, INC.
K. HOVNANIAN FORECAST HOMES, INC.
K. HOVNANIAN INVESTMENT PROPERTIES OF NEW
JERSEY, INC.
K. HOVNANIAN MARINE, INC.
K. HOVNANIAN PORT IMPERIAL URBAN RENEWAL, INC.
K. HOVNANIAN PROPERTIES OF EAST BRUNSWICK II,
INC.
K. HOVNANIAN PROPERTIES OF NB THEATRE, INC.
K. HOVNANIAN PROPERTIES OF NEWARK URBAN
RENEWAL CORPORATION, INC.
K. HOVNANIAN PROPERTIES OF NORTH BRUNSWICK
II, INC.
K. HOVNANIAN PROPERTIES OF NORTH BRUNSWICK
V, INC.
K. HOVNANIAN PROPERTIES OF PISCATAWAY, INC.
K. HOVNANIAN PROPERTIES OF RED BANK, INC.
K. HOVNANIAN PROPERTIES OF WALL, INC.
K. HOVNANIAN REAL ESTATE INVESTMENT, INC.
21
K. HOVNANIAN REAL ESTATE OF FLORIDA, INC.
K. HOVNANIAN SOUTHEAST FLORIDA, INC.
K. HOVNANIAN SOUTHEAST REGION, INC.
K. HOVNANIAN'S FOUR SEASONS OF THE PALM
BEACHES, INC.
KHC ACQUISITION, INC.
KINGS GRANT EVESHAM CORP.
LANDARAMA, INC.
MATZEL & MUMFORD OF DELAWARE, INC.
M & M AT LONG BRANCH, INC.
NEW K. HOVNANIAN DEVELOPMENTS OF FLORIDA, INC.
PARK VILLAGE REALTY, INC.
PARTHENON GROUP, INC.
PINE BROOK CO., INC.
QUE CORPORATION
REFLECTIONS OF YOU INTERIORS, INC.
STONEBROOK HOMES, INC.
THE MATZEL & MUMFORD ORGANIZATION, INC.
THE NEW FORTIS CORPORATION
THE SOUTHAMPTON CORPORATION
TROPICAL SERVICE BUILDERS, INC.
WASHINGTON HOMES OF DELAWARE, INC.
WASHINGTON HOMES OF WEST VIRGINIA, INC.
WASHINGTON HOMES, INC.
WASHINGTON HOMES, INC. OF VIRGINIA
WESTMINSTER HOMES (CHARLOTTE), INC.
WESTMINSTER HOMES OF TENNESSEE, INC.
WESTMINSTER HOMES, INC.
WH LAND I, INC
WH LAND II, INC.
WH PROPERTIES, INC.
ARBOR WEST, L.L.C.
K. HOVNANIAN AT ST. MARGARETS, L.L.C.
K. HOVNANIAN AT ARBOR HEIGHTS, L.L.C.
K. HOVNANIAN AT ASHBURN VILLAGE, L.L.C.
K. HOVNANIAN AT BARNEGAT I, L.L.C.
K. HOVNANIAN AT BERKELEY, L.L.C.
K. HOVNANIAN AT BERNARDS V, L.L.C.
K. HOVNANIAN AT BLOOMS CROSSING, L.L.C.
K. HOVNANIAN AT BLUE HERON PINES, L.L.C.
K. HOVNANIAN AT BRENBROOKE, L.L.C.
K. HOVNANIAN AT CAMDEN I, L.L.C.
K. HOVNANIAN AT CARMEL VILLAGE, L.L.C.
K. HOVNANIAN AT CEDAR GROVE III, L.L.C.
K. HOVNANIAN AT CHESTER I, L.L.C.
K. HOVNANIAN AT CLIFTON, L.L.C.
K. HOVNANIAN AT COLUMBIA TOWN CENTER, L.L.C.
K. HOVNANIAN AT CRANBURY, L.L.C.
K. HOVNANIAN AT CURRIES WOODS, L.L.C.
K. HOVNANIAN AT ENCINITAS RANCH, L.L.C.
22
K. HOVNANIAN AT FORECAST, L.L.C.
K. HOVNANIAN AT GUTTENBERG, L.L.C.
K. HOVNANIAN AT HAMBURG, L.L.C.
K. HOVNANIAN AT HAMBURG CONTRACTORS, L.L.C.
K. HOVNANIAN AT JACKSON, L.L.C.
K. HOVNANIAN AT JERSEY CITY IV, L.L.C.
K. HOVNANIAN AT KENT ISLAND, L.L.C.
K. HOVNANIAN AT KINCAID, L.L.C.
K. HOVNANIAN AT KING FARM, L.L.C.
K. HOVNANIAN AT LAFAYETTE ESTATES, L.L.C.
K. HOVNANIAN AT LAKE RIDGE CROSSING, L.L.C.
K. HOVNANIAN AT LAKE TERRAPIN, L.L.C.
K. HOVNANIAN AT LAWRENCE V, L.L.C.
K. HOVNANIAN AT LINWOOD, L.L.C.
K. HOVNANIAN AT LITTLE EGG HARBOR, L.L.C.
K. HOVNANIAN AT LITTLE EGG HARBOR
CONTRACTORS, L.L.C.
K. HOVNANIAN AT LOWER MORELAND I, L.L.C.
K. HOVNANIAN AT LOWER MORELAND II, L.L.C.
K. HOVNANIAN AT LOWER SAUCON II, L.L.C.
K. HOVNANIAN AT MANSFIELD I, LLC
K. HOVNANIAN AT MANSFIELD II, LLC
K. HOVNANIAN AT MANSFIELD III, L.L.C.
K. HOVNANIAN AT MARLBORO TOWNSHIP VIII, L.L.C.
K. HOVNANIAN AT MARLBORO VI, L.L.C.
K. HOVNANIAN AT MARLBORO VII, L.L.C.
K. HOVNANIAN AT MENIFEE, L.L.C.
K. HOVNANIAN AT MIDDLETOWN, L.L.C.
K. HOVNANIAN AT MT. OLIVE TOWNSHIP, L.L.C.
K. HOVNANIAN AT NORTH BRUNSWICK VI, L.L.C.
K. HOVNANIAN AT NORTH HALEDON, L.L.C.
K. HOVNANIAN AT NORTHAMPTON, L.L.C.
K. HOVNANIAN AT NORTHFIELD, L.L.C.
K. HOVNANIAN AT PACIFIC BLUFFS, L.L.C.
K. HOVNANIAN AT PARAMUS, L.L.C.
K. HOVNANIAN AT PARK LANE, L.L.C.
K. HOVNANIAN AT PRINCE WILLIAM, L.L.C.
K. HOVNANIAN AT RANCHO SANTA MARGARITA, L.L.C.
K. HOVNANIAN AT RIVERBEND, L.L.C.
K. HOVNANIAN AT RODERUCK. L.L.C.
K. HOVNANIAN AT ROWLAND HEIGHTS, L.L.C.
K. HOVNANIAN AT SAYREVILLE, L.L.C.
K. HOVNANIAN AT SOUTH AMBOY, L.L.C.
K. HOVNANIAN AT SOUTH BANK, L.L.C.
K. HOVNANIAN AT SOUTH BRUNSWICK, L.L.C.
K. HOVNANIAN AT SPRING HILL ROAD, L.L.C.
K. HOVNANIAN AT ST. MARGARETS, L.L.C.
K. HOVNANIAN AT SUNSETS, L.L.C.
K. HOVNANIAN AT THE GABLES, L.L.C.
K. HOVNANIAN AT UPPER FREEHOLD TOWNSHIP II,
23
L.L.C.
K. HOVNANIAN AT UPPER FREEHOLD TOWNSHIP III,
L.L.C.
K. HOVNANIAN AT WANAQUE, L.L.C.
K. HOVNANIAN AT WASHINGTON, L.L.C.
K. HOVNANIAN AT WAYNE VIII, L.L.C.
K. HOVNANIAN AT WAYNE IX, L.L.C.
K. HOVNANIAN AT WEST MILFORD, L.L.C.
K. HOVNANIAN AT WEST WINDSOR, L.L.C.
K. HOVNANIAN AT WILLOW BROOK, L.L.C.
K. HOVNANIAN AT WINCHESTER, L.L.C.
K. HOVNANIAN AT WOODHILL ESTATES, L.L.C.
K. HOVNANIAN AT WOOLWICH, L.L.C.
K. HOVNANIAN CENTRAL ACQUISITIONS, L.L.C.
K. HOVNANIAN COMPANIES OF METRO D.C. NORTH,
L.L.C.
K. HOVNANIAN EASTERN PENNSYLVANIA, L.L.C.
K. HOVNANIAN FORECAST, L.L.C.
K. HOVNANIAN NORTH CENTRAL ACQUISITIONS, L.L.C.
K. HOVNANIAN NORTH JERSEY ACQUISITIONS, L.L.C.
K. HOVNANIAN SHORE ACQUISITIONS, L.L.C.
K. HOVNANIAN SOUTH JERSEY ACQUISITION, L.L.C.
K. HOVNANIAN SOUTHERN NEW JERSEY, L.L.C.
K. HOVNANIAN'S FOUR SEASONS, L.L.C.
K. HOVNANIAN'S PRIVATE HOME PORTFOLIO, L.L.C.
KINGS COURT AT MONTGOMERY, L.L.C.
M&M AT APPLE RIDGE, L.L.C.
M&M AT BROOKHILL, L.L.C.
M&M AT HERITAGE WOODS, L.L.C.
M&M AT THE HIGHLANDS, L.L.C.
M&M AT EAST MILL, L.L.C.
M&M AT MORRISTOWN, L.L.C.
M&M AT ROOSEVELT, L.L.C.
M&M AT SHERIDAN, L.L.C.
M&M AT SPARTA, L.L.C.
M&M AT SPINNAKER POINTE, L.L.C.
M&M AT SPRUCE HOLLOW, L.L.C.
M&M AT SPRUCE MEADOWS, L.L.C.
M&M AT SPRUCE RUN, L.L.C.
MATZEL & MUMFORD AT CRANBURY KNOLL, L.L.C.
MATZEL & MUMFORD AT FREEHOLD, L.L.C.
MATZEL & MUMFORD AT HERITAGE LANDING, L.L.C.
MATZEL & MUMFORD AT MONTGOMERY, L.L.C.
MATZEL & MUMFORD AT PHILLIPSBURG, L.L.C.
MATZEL & MUMFORD AT SOUTH BRUNSWICK, L.L.C.
MATZEL & MUMFORD AT WOODLAND CREST, L.L.C.
SECTION 14 OF THE HILLS, L.L.C.
THE LANDINGS AT SPINNAKER POINTE, L.L.C.
WESTMINSTER HOMES OF ALABAMA, L.L.C.
WESTMINSTER HOMES OF MISSISSIPPI, L.L.C.
24
WESTMINSTER HOMES OF SOUTH CAROLINA, L.L.C.
GOODMAN FAMILY BUILDERS, L.P.
M & M INVESTMENTS, L.P.
WASHABAMA, L.P.
/s/ J. Larry Sorsby
---------------------
By: J. Larry Sorsby
Title: Executive Vice President
Chief Financial Officer
25
SALOMON SMITH BARNEY INC.
By: /s/ Marc E. Schneider
-----------------------
Name: Marc Schneider
Title: Director
BANC OF AMERICA SECURITIES LLC
By: /s/ S. T. Jaeger
-------------------
Name: Stephan T. Jaeger
Title: Vice President
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ Eric A. Anderson
-----------------------
Name: Eric A. Anderson
Title: Managing Director
26
EXHIBIT 5.1
[SIMPSON THACHER & BARTLETT LETTERHEAD]
June 6, 2002
K. Hovnanian Enterprises, Inc.
10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
Ladies and Gentlemen:
We have acted as counsel to K. Hovnanian Enterprises, Inc., a New Jersey
corporation (the "Company"), and to Hovnanian Enterprises, Inc., a Delaware
corporation ("Hovnanian"), and certain subsidiaries of Hovnanian (together with
Hovnanian, the "Guarantors"), in connection with the Registration Statement on
Form S-4 (the "Registration Statement") filed by the Company and the Guarantors
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended, relating to the issuance by the Company of
(1) $100,000,000 aggregate principal amount of 8.000% Senior Notes due 2012 (the
"Senior Exchange Securities") and the issuance by the Guarantors of guarantees
(the "Senior Guarantees"), with respect to the Senior Exchange Securities and
(2) $150,000,000 aggregate principal amount of 8.875% Senior Subordinated Notes
due 2012 (the "Subordinated Exchange Securities") and the issuance by the
Guarantors of guarantees (the "Subordinated Guarantees"), with respect to the
Subordinated Exchange Securities. The Senior Exchange Securities and the Senior
Guarantees will be issued under an indenture (the "Senior Indenture") dated as
of March 26, 2002, among the Company, the Guarantors and Wachovia Bank, National
Association, formerly known as First Union National Bank, as Trustee (the
"Senior Trustee"). The Subordinated Exchange Securities and the Subordinated
Guarantees will be issued under an
2
indenture (the "Subordinated Indenture") dated as of March 26, 2002, among the
Company, the Guarantors and Wachovia Bank, National Association, formerly known
as First Union National Bank, as Trustee (the "Subordinated Trustee"). The
Senior Exchange Securities will be offered by the Company in exchange for
$100,000,000 aggregate principal amount of its outstanding 8.000% Senior Notes
due 2012 (the "Senior Securities") and the Subordinated Exchange Securities will
be offered by the Company in exchange for $150,000,000 aggregate principal
amount of its outstanding 8.875% Senior Subordinated Notes due 2012 (the
"Subordinated Securities").
We have examined the Registration Statement and the Senior Indenture and
the Subordinated Indenture, both of which have been filed with the Commission as
exhibits to the Registration Statement. We also have examined the originals, or
duplicates or certified or conformed copies, of such records, agreements,
instruments and other documents and have made such other and further
investigations as we have deemed relevant and necessary in connection with the
opinions expressed herein. As to questions of fact material to this opinion, we
have relied upon certificates of public officials and of officers and
representatives of the Company and the Guarantors.
In rendering the opinions set forth below, we have assumed the genuineness
of all signatures, the legal capacity of natural persons, the authenticity of
all documents submitted to us as originals, the conformity to original documents
of all documents submitted to us as duplicates or certified or conformed copies,
and the authenticity of the originals of such latter documents. We also have
assumed that the Senior Indenture is the valid and legally binding obligation of
the Senior Trustee and that the Subordinated Indenture is the valid and legally
binding obligation of the Subordinated Trustee. We have assumed further that (1)
the Company and the Guarantors have duly authorized, executed and delivered each
of the Senior Indenture and the Subordinated
3
Indenture and (2) execution, delivery and performance by the Company and the
Guarantors of (a) the Senior Indenture and the Senior Securities and the Senior
Guarantees do not and will not violate the laws of the State of New Jersey or
any other applicable laws (excepting the laws of the State of New York and the
Federal laws of the United States) and (b) the Subordinated Indenture and the
Subordinated Securities and the Subordinated Guarantees do not and will not
violate the laws of the State of New Jersey or any other applicable laws
(excepting the laws of the State of New York and the Federal laws of the United
States).
Based upon the foregoing, and subject to the qualifications and
limitations stated herein, we are of the opinion that:
1. When the Senior Exchange Securities have been duly executed,
authenticated, issued and delivered in accordance with the provisions of the
Senior Indenture upon the exchange, the Senior Exchange Securities will
constitute valid and legally binding obligations of the Company enforceable
against the Company in accordance with their terms.
2. When (1) the Senior Exchange Securities have been duly executed,
authenticated, issued and delivered in accordance with the provisions of the
Senior Indenture upon the exchange and (2) the Senior Guarantees have been duly
issued, the Senior Guarantees will constitute valid and legally binding
obligations of the Senior Guarantors enforceable against the Senior Guarantors
in accordance with their terms.
3. When the Subordinated Exchange Securities have been duly executed,
authenticated, issued and delivered in accordance with the provisions of the
Subordinated Indenture upon the exchange, the Subordinated Exchange Securities
will constitute valid and legally binding obligations of the Company enforceable
against the Company in accordance with their terms.
4. When (1) the Subordinated Exchange Securities have been duly executed,
authenticated, issued and delivered in accordance with the provisions of the
Subordinated Indenture upon the exchange and (2) the Subordinated Guarantees
have been duly issued, the Subordinated Guarantees will constitute valid and
legally binding obligations of the Subordinated Guarantors enforceable against
the Subordinated Guarantors in accordance with their terms.
Our opinions set forth above are subject to the effects of (1) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting
4
creditors' rights generally, (2) general equitable principles (whether
considered in a proceeding in equity or at law) and (3) an implied covenant of
good faith and fair dealing.
We are members of the Bar of the State of New York, and we do not express
any opinion herein concerning any law other than the law of the State of New
York, the Federal law of the United States and the Delaware General Corporation
Law.
We hereby consent to the filing of this opinion letter as Exhibit 5 to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Prospectus included in the Registration Statement.
Very truly yours,
/s/ Simpson Thacher & Bartlett
SIMPSON THACHER & BARTLETT
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Three Months
Ended January 31, Year Ended October 31,
----------------- ----------------------
2002 2001 2001 2000 1999 1998 1997
---- ---- ---- ---- ---- ---- ----
(Dollars in thousands)
Net Income (Loss) 18,161 6,923 63,686 33,163 30,075 25,403 (6,970)
Add:
Federal and State Inc Taxes 11,636 4,637 42,668 18,655 19,674 15,141 (5,154)
Extraordinary Loss 868 748
Interest Expensed Residential & Commercial 13,702 9,505 51,446 34,956 31,570 39,352 37,704
Interest Expensed Mortgage & Finance
Subsidiaries 848 601 3,180 2,491 3,240 3,099 1,778
Amortization of Bond Prepaid Expense 247 230 976 670 549 625 636
Minority Interest 123 (63) (38) 910
----------------------------------------------------------------------------------
Total Earnings 44,717 21,833 161,918 90,845 85,976 84,368 27,994
==================================================================================
Fixed Charges:
Interest Incurred Residential & Commercial 11,477 11,572 47,272 38,878 24,594 28,947 34,777
Interest Incurred Mortgage & Finance
Subsidiaries 848 601 3,180 2,491 3,240 3,099 1,778
Amortization of Bond Prepaid Expense 247 230 976 670 1,033 1,043 636
Amortization of Bond Discount 99 89 367 30
----------------------------------------------------------------------------------
Total Fixed Charges 12,671 12,492 51,795 42,069 28,867 33,089 37,191
==================================================================================
Ratio of Earnings to Fixed Charges 3.5 1.7 3.1 2.2 3.0 2.5 0.8
Insufficient Earnings to Cover Fixed Charges 9,197
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-4) and related prospectus of Hovnanian
Enterprises, Inc. (the "Company"), K. Hovnanian Enterprises, Inc. and certain
subsidiaries of the Company for the registration of $100,000,000 aggregate
principal amount of 8.000% Senior Notes due 2012 and $150,000,000 aggregate
principal amount of 8.875% Senior Subordinated Notes due 2012 and to the
incorporation by reference therein of our report dated December 11, 2001,
with respect to the consolidated financial statements of the Company included
in its Annual Report (Form 10-K) for the year ended October 31, 2001, filed
with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
New York, New York
June 3, 2002
Exhibit 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(b)(2)___
WACHOVIA BANK, NATIONAL ASSOCIATION
(FORMERLY FIRST UNION NATIONAL BANK)
(Name of Trustee)
22-1147033
(Jurisdiction of Incorporation or (I.R.S. Employer
Organization if not a U.S. National Bank) Identification No.)
301 SOUTH COLLEGE STREET, CHARLOTTE, NORTH CAROLINA 28288-0630
(Address of Principal Executive Offices) (Zip Code)
K. HOVNANIAN ENTERPRISES, INC.
(Name of Obligor)
NEW JERSEY 22-2423583
(State of Incorporation) (I.R.S. Employer
Identification No.)
10 HIGHWAY 35, PO BOX 500 REDBANK, NJ 07701
(Address of Principal Executive Offices) (Zip Code)
DEBT SECURITIES
(Title of Indenture Securities)
GENERAL
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT:
Comptroller of the Currency, Washington, D.C.
Board of Governors of the Federal Reserve System, New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
The Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF VOTING SECURITIES
OF THE TRUSTEE:
COL. A COL. B
------ ------
TITLE OF CLASS AMOUNT OUTSTANDING
Not applicable
ITEM 4. TRUSTEESHIP UNDER OTHER INDENTURES:
IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY
OTHER SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, FURNISH THE FOLLOWING INFORMATION:
(a) TITLE OF THE SECURITIES OUTSTANDING UNDER EACH SUCH OTHER
INDENTURE.
Not Applicable
(b) A BRIEF STATEMENT OF THE FACTS RELIED UPON AS A BASIS FOR THE CLAIM
THAT NO CONFLICTING INTEREST WITHIN THE MEANING OF SECTION 310(B)(1) OF THE ACT
ARISES AS A RESULT OF THE TRUSTEESHIP UNDER ANY SUCH OTHER INDENTURE, INCLUDING
A STATEMENT AS TO HOW THE INDENTURE SECURITIES WILL RANK AS COMPARED WITH THE
SECURITIES ISSUED UNDER SUCH OTHER INDENTURE.
Not Applicable.
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR OR
UNDERWRITERS.
IF THE TRUSTEE OR ANY OF THE DIRECTORS OR EXECUTIVE OFFICERS OF THE
TRUSTEE IS A DIRECTOR, OFFICER, PARTNER, EMPLOYEE, APPOINTEE, OR REPRESENTATIVE
OF THE OBLIGOR OR OF ANY UNDERWRITER FOR THE OBLIGOR, IDENTIFY EACH SUCH PERSON
HAVING ANY SUCH CONNECTION AND STATE THE NATURE OF EACH SUCH CONNECTION.
Not Applicable
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE
TRUSTEE OWNED BENEFICIALLY BY THE OBLIGOR AND EACH DIRECTOR, PARTNER AND
EXECUTIVE OFFICER OF THE OBLIGOR.
COL. A COL. B COL. C COL. D.
------ ------ ------ -------
Percentage of Voting
Amount owned securities represented
Name of Owner Title of Class beneficially by amount given in Col. C
Not Applicable
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE
TRUSTEE OWNED BENEFICIALLY BY EACH UNDERWRITER FOR THE OBLIGOR AND EACH
DIRECTOR, PARTNER, AND EXECUTIVE OFFICER OF EACH SUCH UNDERWRITER.
- -------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D.
- ------ ------ ------ -------
Percentage of Voting
Amount owned securities represented
Name of Owner Title of Class beneficially by amount given in Col. C
Not Applicable
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO SECURITIES OF THE OBLIGOR OWNED
BENEFICIALLY OR HELD AS COLLATERAL SECURITY FOR THE OBLIGATIONS IN DEFAULT BY
THE TRUSTEE.
- -------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D.
- ------ ------ ------ -------
Whether the Amount owned beneficially Percent of class
securities are or held as collateral represented by
voting or non voting obligations in default by amt given in Col C
Not Applicable Trustee
ITEM 9. SECURITIES OF THE UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF AN UNDERWRITER FOR THE OBLIGOR, FURNISH
THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OF SUCH UNDERWRITER ANY
OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE.
COL. A. COL. B. COL. C. COL. D.
- --------------------------------------------------------------------------------------------------------------
AMOUNT OWNED BENEFICIALLY PERCENT OF CLASS
NAME OF OR HELD AS COLLATERAL REPRESENTED BY
ISSUER AND AMOUNT SECURITY FOR OBLIGATIONS AMOUNT GIVEN IN
TITLE OF CLASS OUTSTANDING IN DEFAULT BY TRUSTEE COL. C.
Not applicable
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT VOTING SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF
THE TRUSTEE (1) OWNS 10 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR
OR (2) IS AN AFFILIATE, OTHER THAN A SUBSIDIARY, OF THE OBLIGOR, FURNISH THE
FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF SUCH PERSON.
COL. A. COL. B. COL. C. COL. D.
- --------------------------------------------------------------------------------------------------------------
AMOUNT OWNED BENEFICIALLY PERCENT OF VOTING
NAME OF OR HELD AS COLLATERAL SECURITIES
ISSUER AND AMOUNT SECURITY FOR OBLIGATIONS REPRESENTED BY AMOUNT
TITLE OF CLASS OUTSTANDING IN DEFAULT BY TRUSTEE GIVEN IN COL. C.
- --------------------------------------------------------------------------------------------------------------
Not Applicable
ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON
OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF THE
TRUSTEE, OWNS 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR,
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OF SUCH PERSON
ANY OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE.
COL. A. COL. B. COL. C. COL. D.
- --------------------------------------------------------------------------------------------------------------
AMOUNT OWNED BENEFICIALLY PERCENT OF VOTING
NAME OF OR HELD AS COLLATERAL SECURITIES
ISSUER AND AMOUNT SECURITY FOR OBLIGATIONS REPRESENTED BY AMOUNT
TITLE OF CLASS OUTSTANDING IN DEFAULT BY TRUSTEE GIVEN IN COL. C.
- --------------------------------------------------------------------------------------------------------------
Not Applicable
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
EXCEPT AS NOTED IN THE INSTRUCTIONS, IF THE OBLIGOR IS INDEBTED TO THE
TRUSTEE, FURNISH THE FOLLOWING INFORMATION:
COL. A. COL. B. COL. C. COL. D.
- --------------------------------------------------------------------------------------------------------------
NATURE OF INDEBTEDNESS AMOUNT OUTSTANDING DATE DUE
- --------------------------------------------------------------------------------------------------------------
Not Applicable
ITEM 13. DEFAULTS BY THE OBLIGOR.
(a) STATE WHETHER THERE IS OR HAS BEEN A DEFAULT WITH RESPECT TO THE
SECURITIES UNDER THIS INDENTURE. EXPLAIN THE NATURE OF ANY SUCH DEFAULT.
None
(b) IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY
OTHER SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, OR IS TRUSTEE FOR MORE THAN ONE
OUTSTANDING SERIES OF SECURITIES UNDER THE INDENTURE, STATE WHETHER THERE HAS
BEEN DEFAULT UNDER ANY SUCH INDENTURE OR SERIES, IDENTIFY THE INDENTURE OR
SERIES AFFECTED, AND EXPLAIN THE NATURE OF ANY SUCH DEFAULT.
None
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
IF ANY UNDERWRITER IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
Not Applicable
ITEM 15. FOREIGN TRUSTEE.
IDENTIFY THE ORDER OR RULE PURSUANT TO WHICH THE FOREIGN TRUSTEE IS
AUTHORIZED TO ACT AS SOLE TRUSTEE UNDER INDENTURES QUALIFIED OR TO BE QUALIFIED
UNDER THE ACT.
Not Applicable
ITEM 16. LISTS OF EXHIBITS.
1* -COPY OF ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT.
2 -NO CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE BUSINESS IS FURNISHED
SINCE THIS AUTHORITY IS CONTAINED IN THE ARTICLES OF ASSOCIATION OF THE TRUSTEE.
3* -COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST POWERS.
4* -COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, AS NOW IN EFFECT.
5 -NOT APPLICABLE.
6 -THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(b) OF THE ACT.
7** -A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED PURSUANT TO THE
LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING AUTHORITY.
8 -NOT APPLICABLE
9 -NOT APPLICABLE
*EXHIBIT THUS DESIGNATED HAS HERETOFORE BEEN FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, HAVE NOT BEEN AMENDED SINCE FILING AND ARE INCORPORATED
HEREIN BY REFERENCE (SEE EXHIBIT T-1 REGISTRATION NUMBER 333-86372).
** AS OF 3/31/02, THE TRUSTEE WAS TWO SEPARATE NATIONAL BANKING ASSOCIATIONS
HENCE THERE ARE TWO SEPARATE REPORTS ATTACHED
IN ANSWERING ANY ITEM IN THIS STATEMENT OF ELIGIBILITY AND
QUALIFICATION WHICH RELATES TO MATTERS PECULIARLY WITHIN THE KNOWLEDGE OF THE
OBLIGOR OR OF ITS DIRECTORS OR OFFICERS, OR AN UNDERWRITER FOR THE OBLIGOR, THE
UNDERSIGNED, WACHOVIA BANK, NATIONAL ASSOCIATION (FORMERLY FIRST UNION NATIONAL
BANK), HAS RELIED UPON INFORMATION FURNISHED TO IT BY THE OBLIGOR OR SUCH
UNDERWRITER.
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE TRUST INDENTURE ACT OF 1939 THE
TRUSTEE, WACHOVIA BANK, NATIONAL ASSOCIATION (FORMERLY FIRST UNION NATIONAL
BANK), A NATIONAL BANKING ASSOCIATION ORGANIZED AND EXISTING UNDER THE LAWS OF
THE UNITED STATES, HAS DULY CAUSED THIS STATEMENT OF ELIGIBILITY TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ALL IN THE TOWN OF
MORRISTOWN, AND STATE OF NEW JERSEY, ON THE 22 DAY OF MAY, 2002
WACHOVIA BANK, NATIONAL ASSOCIATION
(FORMERLY FIRST UNION NATIONAL BANK)
(TRUSTEE)
(CORPORATE SEAL)
BY: /S/ STEPHANIE ROCHE
-------------------------
VICE PRESIDENT
CONSENT OF TRUSTEE
PURSUANT TO THE REQUIREMENTS OF SECTION 321 (b) OF THE TRUST INDENTURE
ACT OF 1939, AND IN CONNECTION WITH THE PROPOSED ISSUE OF K. HOVNANIAN
ENTERPRISES, INC. WE HEREBY CONSENT THAT REPORTS OF EXAMINATIONS BY FEDERAL,
STATE, TERRITORIAL OR DISTRICT AUTHORITIES MAY BE FURNISHED BY SUCH AUTHORITIES
TO THE SECURITIES AND EXCHANGE COMMISSION UPON REQUEST THEREFOR.
WACHOVIA BANK, NATIONAL ASSOCATION
(FORMERLY FIRST UNION NATIONAL BANK)
BY: /S/ STEPHANIE ROCHE
-----------------------
VICE PRESIDENT
MORRISTOWN, NJ
MAY 22, 2002
EXHIBIT T-7
REPORT OF CONDITION
Consolidating domestic and foreign subsidiaries of the Wachovia Bank, National
Association, at the close of business on March 31, 2002, published in response
to call made by Comptroller of the Currency, under title 12, United States Code,
Section 161. Charter Number 1559 Comptroller of the Currency.
STATEMENT OF RESOURCES AND LIABILITIES
ASSETS
THOUSAND OF DOLLARS
-------------------
Cash and balance due from depository institutions:
Noninterest-bearing balances and currency and coin......... 2,471,466
Interest-bearing balances.................................. 298,663
Securities................................................... /////////
Hold-to-maturity securities................................ 8,824
Available-for-sale securities.............................. 6,320,594
Federal funds sold and securities purchased under agreements //////////
to resell 1,066,041
Loans and lease financing receivables:
Loan and leases held for sale 369,481
Loan and leases, net of unearned income......48,708,954
LESS: Allowance for loan and lease losses.......718,907
LESS: Allocated transfer risk reserve.................0
Loans and leases, net of unearned income, allowance, and
reserve................................................. 47,990,047
Trading Assets .............................. 586,517
Premises and fixed assets (including capitalized leases)...... 835,290
Other real estate owned....................................... 19,794
Investment in unconsolidated subsidiaries and associated //////////
companies..................................................... 0
Customer's liability to this bank on acceptances outstanding... 14,270
Intangible assets.............................................
Goodwill.................................................. 7,076,522
Other intangible Assets.................................... 1,865,824
Other assets.................................................. 3,194,125
TOTAL ASSETS............................................... 72,117,458
LIABILITIES
Deposits:
In domestic offices..................................... 42,721,166
Noninterest-bearing........................ 7,505,623
Interest-bearing......................... 35,215,543
In foreign offices, Edge and Agreement subsidiaries,
and IBFs................................................ 4,232,893
Noninterest-bearing............................. 0
Interest-bearing.............................4,232,893
Federal funds purchased and securities sold under agreements
to repurchase 3,191,918
Trading liabilities........................................... 519,957
Other borrowed money:......................................... 3,772,435
Bank's liability on acceptances executed and outstanding..... 14,270
Subordinated notes and debentures............................ 2,325,300
Other liabilities............................................ 1,528,389
TOTAL LIABILITIES............................................ 58,306,328
Minority Interest in consolidated subsidiaries............... 0
EQUITY CAPITAL
Perpetual preferred stock and related surplus................. 0
Common Stock.................................................. 53,182
Surplus....................................................... 13,390,540
Retained Earnings........................ 338,026
Accumulated other comprehensive income........................ 29,382
Other Equity Capital components........... 0
Total equity capital.......................................... 13,811,130
Total liabilities and equity capital.... 72,117,458
EXHIBIT T-7
REPORT OF CONDITION
Consolidating domestic and foreign subsidiaries of the First Union National
Bank, at the close of business on March 31, 2002, published in response to call
made by Comptroller of the Currency, under title 12, United States Code, Section
161. Charter Number 1 Comptroller of the Currency.
STATEMENT OF RESOURCES AND LIABILITIES
ASSETS
THOUSAND OF DOLLARS
-------------------
Cash and balance due from depository institutions:
Noninterest-bearing balances and currency and coin......... 8,227,000
Interest-bearing balances.................................. 4,256,000
Securities................................................... /////////
Hold-to-maturity securities................................ 0
Available-for-sale securities.............................. 47,671,000
Federal funds sold and securities purchased under agreements //////////
to resell 7,350,000
Loans and lease financing receivables:
Loan and leases held for sale 7,102,000
Loan and leases, net of unearned income......115,198,000
LESS: Allowance for loan and lease losses......2,247,000
LESS: Allocated transfer risk reserve.................0
Loans and leases, net of unearned income, allowance, and
reserve................................................. 112,951,000
Trading Assets .............................. 18,180,000
Premises and fixed assets (including capitalized leases)...... 2,566,000
Other real estate owned....................................... 87,000
Investment in unconsolidated subsidiaries and associated //////////
companies..................................................... 492,000
Customer's liability to this bank on acceptances outstanding... 874,000
Intangible assets.............................................
Goodwill................................................. 2,253,000
Other intangible Assets...................... 325,000
Other assets.................................................. 14,563,000
TOTAL ASSETS............................................... 226,897,000
LIABILITIES
Deposits:
In domestic offices..................................... 130,068,000
Noninterest-bearing..................... .. 20,202,000
Interest-bearing.........................109,866,000
In foreign offices, Edge and Agreement subsidiaries,
and IBFs................................................ 10,718,000
Noninterest-bearing............................. 28,000
Interest-bearing.............................10,690,000
Federal funds purchased and securities sold under agreements
to repurchase 21,543,000
Trading liabilities........................................ 13,593,000
Other borrowed money:......................................... 18,549,000
Bank's liability on acceptances executed and outstanding..... 877,000
Subordinated notes and debentures............................ 5,993,000
Other liabilities............................................ 8,516,000
TOTAL LIABILITIES............................................ 209,857,000
Minority Interest in consolidated subsidiaries............... 977,000
EQUITY CAPITAL
Perpetual preferred stock and related surplus................. 0
Common Stock.................................................. 455,000
Surplus....................................................... 13,462,000
Retained Earnings........................ 2,052,000
Accumulated other comprehensive income........................ 94,000
Other Equity Capital components........... 0
Total equity capital.......................................... 16,063,000
TOTAL LIABILITIES AND EQUITY CAPITAL.... 226,897,000
