As filed with the Securities and Exchange Commission on December __, 2000
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
___________
Hovnanian Enterprises, Inc. K. Hovnanian Enterprises, Inc
(Exact name of Registrant as (Exact name of Registrant as
specified in its charter) specified in its charter)
Delaware New Jersey
(State or other jurisdiction of incorporation)
22-1851059 22-2423583
(I.R.S. Employer Identification No.)
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
__________________
10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
(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:
Peter S. Reinhart, Esq. Vincent Pagano, Jr., Esq.
Hovnanian Enterprises, Inc. Simpson Thacher & Bartlett
10 Highway 35 425 Lexington avenue
P.O. Box 500 New York, New York 10017
Red Bank, New Jersey (212) 455-2000
(732) 747-7800
__________________
Approximate date of commencement of proposed sale of the securities 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 Maximum Maximum Amount of
Securities to Amount to Offering Price Aggregate Registration Fee
be Registered be Registered Per Unit (1) Offering Price (1) (2)
- ------------------------------------------------------------------------------------------------------------------------
10 1/2 % Senior Notes due 2007................ $150,000,000 100% $150,000,000 $ 37,500
- ------------------------------------------------------------------------------------------------------------------------
Guarantees of 10 1/2 % Senior Notes due 2007.. (3) (3) (3) None
========================================================================================================================
Total.................................. $150,000,000 100% $150,000,000 $ 37,500
========================================================================================================================
(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.
(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
Address Including Zip Code,
State Or Other And Telephone Number
Exact Name Of Registrant Jurisdiction Of I.R.S. Employer Including Area Code, Of
As Specified In Its Incorporation Or Identification Registrant's Principal
Charter Organization Number Executive Offices
- ------------------------ ---------------- --------------- ---------------------------------
K. Hovnanian at Hopewell New Jersey 22-1732674 10 Highway 35, P.O. Box 500, Red
Ill, Inc. Bank, NJ 07701
(732) 747-7800
Recreational Development New Jersey 22-1757811 10 Highway 35, P.O. Box 500, Red
Corp., Inc. Bank, NJ 07701
(732) 747-7800
Pine Brook Company, Inc. New Jersey 22-1762833 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Bedminster, New Jersey 22-1945452 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at The Bluff, New Jersey 22-1841019 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Atlantic New Jersey 22-1945458 10 Highway 35, P.O. Box 500, Red
City, Inc. Bank, NJ 07701
(732) 747-7800
Hovnanian Properties of New Jersey 22-1945461 10 Highway 35, P.O. Box 500, Red
Atlantic County, Inc. Bank, NJ 07701
(732) 747-7800
Montego Bay I Acquisition Florida 22-1945488 10 Highway 35, P.O. Box 500, Red
Corp., Inc. Bank, NJ 07701
(732) 747-7800
Pike Utilities, Inc. Florida 59-1321247 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
Arrow Properties, Inc. New Jersey 22-1945442 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian Real Estate New Jersey 22-1945444 10 Highway 35, P.O. Box 500, Red
Investment, Inc. Bank, NJ 07701
(732) 747-7800
Hovnanian Texas, Inc. Texas 22-1945449 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
Landarama, Inc. New Jersey 22-1978612 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
Tropical Service Builders, Florida 59-1426699 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
Hovnanian Pennsylvania, Pennsylvania 22-1097670 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Properties of New Jersey 22-2057909 10 Highway 35, P.O. Box 500, Red
North Brunswick V, Inc. Bank, NJ 07701
(732) 747-7800
Address Including Zip Code,
State Or Other And Telephone Number
Exact Name Of Registrant Jurisdiction Of I.R.S. Employer Including Area Code, Of
As Specified In Its Incorporation Or Identification Registrant's Principal
Charter Organization Number Executive Offices
- ------------------------ ---------------- --------------- ---------------------------------
K. Hovnanian at Mahwah New Jersey 22-2246316 10 Highway 35, P.O. Box 500, Red
VIII, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Wall New Jersey 22-2262938 10 Highway 35, P.O. Box 500, Red
Township IV, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at New Jersey 22-2343552 10 Highway 35, P.O. Box 500, Red
Montville, Inc. Bank, NJ 07701
(732) 747-7800
Hovnanian of Palm Beach, Florida 59-1973196 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Companies of Florida 22-2349530 10 Highway 35, P.O. Box 500, Red
Florida, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Freehold New Jersey 22-2348977 10 Highway 35, P.O. Box 500, Red
Township, Inc. Bank, NJ 07701
(732) 747-7800
Hovnanian Properties of Florida 22-2360970 10 Highway 35, P.O. Box 500, Red
Lake Worth, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Companies of Pennsylvania 22-2390174 10 Highway 35, P.O. Box 500, Red
Pennsylvania, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Properties of New Jersey 22-2380821 10 Highway 35, P.O. Box 500, Red
Hamilton, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Scotch New Jersey 22-2380821 10 Highway 35, P.O. Box 500, Red
Plains, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Wayne IV, New Jersey 22-2406468 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
Hovnanian Developments of Florida 22-24166224 10 Highway 35, P.O. Box 500, Red
Florida, Inc. Bank, NJ 07701
(732) 747-7800
Montego Bay II Acquisition Florida 22-2416620 10 Highway 35, P.O. Box 500, Red
Corp., Inc. Bank, NJ 07701
(732) 747-7800
Hovnanian of Palm Beach Florida 22-2525727 10 Highway 35, P.O. Box 500, Red
VII, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Wall New Jersey 22-2422378 10 Highway 35, P.O. Box 500, Red
Township II, Inc. Bank, NJ 07701
(732) 747-7800
Hovnanian of Palm Beach Florida 22-2428059 10 Highway 35, P.O. Box 500, Red
IX, Inc. Bank, NJ 07701
(732) 747-7800
Hovnanian at Tarpon Lakes Florida 22-2436504 10 Highway 35, P.O. Box 500, Red
I, Inc. Bank, NJ 07701
(732) 747-7800
Address Including Zip Code,
State Or Other And Telephone Number
Exact Name Of Registrant Jurisdiction Of I.R.S. Employer Including Area Code, Of
As Specified In Its Incorporation Or Identification Registrant's Principal
Charter Organization Number Executive Offices
- ------------------------ ---------------- --------------- ---------------------------------
K. Hovnanian Companies New Jersey 22-2445216 10 Highway 35, P.O. Box 500, Red
Northeast, Inc. Bank, NJ 07701
(732) 747-7800
Kings Grant Evesham Corp. New Jersey 22-2445215 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Manalapan, New Jersey 22-2442998 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Wall New Jersey 22-2442914 10 Highway 35, P.O. Box 500, Red
Township, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at East New Jersey 22-2459186 10 Highway 35, P.O. Box 500, Red
Brunswick VII, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Companies New Jersey 22-2459186 10 Highway 35, P.O. Box 500, Red
of Central Jersey, Inc. Bank, NJ 07701
(732) 747-7800
Hovnanian of Palm Beach XI, Florida 22-2457945 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at South New Jersey 22-2458485 10 Highway 35, P.O. Box 500, Red
Brunswick II, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Lawrence New Jersey 22-2571403 10 Highway 35, P.O. Box 500, Red
Square, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Tarpon Florida 22-2510592 10 Highway 35, P.O. Box 500, Red
Lakes III, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Horizon New Jersey 22-2500651 10 Highway 35, P.O. Box 500, Red
Heights, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Reservoir New Jersey 22-2510587 10 Highway 35, P.O. Box 500, Red
Ridge, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Jersey City New Jersey 22-2562961 10 Highway 35, P.O. Box 500, Red
I, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Investment New Jersey 22-2541361 10 Highway 35, P.O. Box 500, Red
Properties of New Bank, NJ 07701
Jersey, Inc. (732) 747-7800
K. Hovnanian at Ft. Myers Florida 22-2652958 10 Highway 35, P.O. Box 500, Red
I, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Howell New Jersey 22-2562956 10 Highway 35, P.O. Box 500, Red
Township II, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Klockner New Jersey 22-2572443 10 Highway 35, P.O. Box 500, Red
Farms, Inc. Bank, NJ 07701
(732) 747-7800
Address Including Zip Code,
State Or Other And Telephone Number
Exact Name Of Registrant Jurisdiction Of I.R.S. Employer Including Area Code, Of
As Specified In Its Incorporation Or Identification Registrant's Principal
Charter Organization Number Executive Offices
- ---------------------------- ---------------- -------------- --------------------------------
K. Hovnanian at Jensen Beach, Florida 22-2572443 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
Molly Pitcher Construction New Jersey 22-2577062 10 Highway 35, P.O. Box 500, Red
Co., Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Mahwah VII, New Jersey 22-2592139 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Wayne III, Inc. New Jersey 22-2607669 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian Properties of New Jersey 22-2577062 10 Highway 35, P.O. Box 500, Red
East Brunswick II, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Kings Grant I, New Jersey 22-2601064 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
The New Fortis Corporation North Carolina 56-1458833 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Clarkstown, New York 22-2618176 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Companies of New New York 22-2618171 10 Highway 35, P.O. Box 500, Red
York, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Developments of New York 22-2626492 10 Highway 35, P.O. Box 500, Red
New York, Inc. Bank, NJ 07701
(732) 747-7800
Dryer Associates, Inc. New Jersey 22-2626494 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Pasco I, Inc. Florida 22-2636392 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Lakewood, Inc. New Jersey 22-2618178 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Martin Downs Florida 22-2593811 10 Highway 35, P.O. Box 500, Red
II, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Aviation, Inc. Delaware 22-2627859 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian Investment New Jersey 22-2627866 10 Highway 35, P.O. Box 500, Red
Properties, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Ft. Myers II, Florida 22-2636393 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
Address Including Zip Code,
State Or Other And Telephone Number
Exact Name Of Registrant Jurisdiction Of I.R.S. Employer Including Area Code, Of
As Specified In Its Incorporation Or Identification Registrant's Principal
Charter Organization Number Executive Offices
- ---------------------------- ---------------- -------------- --------------------------------
K. Hovnanian at Bernards II, New Jersey 22-2643596 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at South New Jersey 22-2652530 10 Highway 35, P.O. Box 500, Red
Brunswick III, Inc. Bank, NJ 07701
(732) 747-7800
Minerva Group, Inc. New Jersey 22-2652839 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian Developments of New Jersey 22-2664563 10 Highway 35, P.O. Box 500, Red
New Jersey, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Bridgewater V, New Jersey 22-2713924 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at North New Jersey 22-2788417 10 Highway 35, P.O. Box 500, Red
Brunswick II, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at New York 22-2717887 10 Highway 35, P.O. Box 500, Red
Washingtonville, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Peekskill, Inc. New York 22-2718071 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Newark I, Inc. New Jersey 22-2722766 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Carmel, Inc. New York 22-2749185 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at East Windsor New Jersey 22-2741139 10 Highway 35, P.O. Box 500, Red
I, Inc. Bank, NJ 07701
(732) 747-7800
Parthenon Group, Inc. New Jersey 22-2748658 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Marlboro New Jersey 22-2748659 10 Highway 35, P.O. Box 500, Red
Township II, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Somerset III, New Jersey 22-2748659 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
R.C.K. Community Management New York 22-2758195 10 Highway 35, P.O. Box 500, Red
Co., Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Montclair, NJ, New Jersey 22-2759221 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
Address Including Zip Code,
State Or Other And Telephone Number
Exact Name Of Registrant Jurisdiction Of I.R.S. Employer Including Area Code, Of
As Specified In Its Incorporation Or Identification Registrant's Principal
Charter Organization Number Executive Offices
- ---------------------------- ---------------- -------------- --------------------------------
K. Hovnanian at East Brunswick New Jersey 22-2809056 10 Highway 35, P.O. Box 500, Red
VI, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Hackettstown, New Jersey 22-2765936 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Companies of North Carolina 22-2765939 10 Highway 35, P.O. Box 500, Red
North Carolina, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Montville II, New Jersey 22-2765937 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Wall Township New Jersey 22-3434644 10 Highway 35, P.O. Box 500, Red
VII, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Bridgewater New Jersey 22-2765938 10 Highway 35, P.O. Box 500, Red
II, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Merrimack, Inc. New Hampshire 22-2821914 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Bernards III, New Jersey 22-2774853 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
Eastern National Title Florida 22-2774781 10 Highway 35, P.O. Box 500, Red
Insurance Agency, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Wayne V, Inc. New Jersey 22-2790299 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Pasco II, Inc. Florida 22-2790300 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Delray Beach Florida 22-2837106 10 Highway 35, P.O. Box 500, Red
II, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Branchburg I, New Jersey 22-2790298 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Plainsboro II, New Jersey 22-2790297 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Northern New York 22-2814372 10 Highway 35, P.O. Box 500, Red
Westchester, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Marlboro New Jersey 22-2847875 10 Highway 35, P.O. Box 500, Red
Township, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at West Orange, New Jersey 22-2820279 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
State Or Other And Telephone Number
Exact Name Of Registrant Jurisdiction Of I.R.S. Employer Including Area Code, Of
As Specified In Its Incorporation Or Identification Registrant's Principal
Charter Organization Number Executive Offices
- --------------------------- ------------------------ ------------------ ----------------------------------
Eastern Title Agency, Inc. New Jersey 22-2822803 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian Properties of New Jersey 22-2869319 10 Highway 35, P.O. Box 500, Red
Franklin, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Mahwah II, Inc. New Jersey 22-2859315 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
New England Community New Hampshire 22-2870386 10 Highway 35, P.O. Box 500, Red
Management Company, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Howell New Jersey 22-2859308 10 Highway 35, P.O. Box 500, Red
Township, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at South New Jersey 22-2859309 10 Highway 35, P.O. Box 500, Red
Brunswick IV, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Wall Township New Jersey 22-2859303 10 Highway 35, P.O. Box 500, Red
VI, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Properties of New Jersey 22-2859305 10 Highway 35, P.O. Box 500, Red
Piscataway, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Mahwah V, Inc. New Jersey 22-28068663 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Merrimack II, New Hampshire 22-3003600 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Newark Urban New Jersey 22-2885748 10 Highway 35, P.O. Box 500, Red
Renewal Corporation I Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Lawrence Florida 22-2870382 10 Highway 35, P.O. Box 500, Red
Grove, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Cedar Grove I, New Jersey 22-2892342 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Cedar Grove New Jersey 22-2892341 10 Highway 35, P.O. Box 500, Red
II, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at North New Jersey 22-2892493 10 Highway 35, P.O. Box 500, Red
Brunswick III, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Jersey City New Jersey 22-2935352 10 Highway 35, P.O. Box 500, Red
II, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Burlington, New Jersey 22-2949611 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
Address Including Zip Code,
State Or Other And Telephone Number
Exact Name Of Registrant Jurisdiction Of I.R.S. Employer Including Area Code, Of
As Specified In Its Incorporation Or Identification Registrant's Principal
Charter Organization Number Executive Offices
- --------------------------- ------------------------- ------------------ ----------------------------------
K. Hovnanian at South New Jersey 22-2937570 10 Highway 35, P.O. Box 500, Red
Brunswick V., Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Half Moon Bay, Florida 22-2915380 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Jacksonville Florida 22-2914590 10 Highway 35, P.O. Box 500, Red
II, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Branchburg II, New Jersey 22-2926245 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Embassy Lakes, Florida 22-2920201 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at The Reserve at New Jersey 22-2934223 10 Highway 35, P.O. Box 500, Red
Medford, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Branchburg New Jersey 22-2961099 10 Highway 35, P.O. Box 500, Red
III, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Lower Saucon, Pennsylvania 22-2961090 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
Jersey City Danforth CSO, Inc. New Jersey 22-2976939 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at East Windsor New Jersey 22-2974415 10 Highway 35, P.O. Box 500, Red
II, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Marlboro New Jersey 22-3027961 10 Highway 35, P.O. Box 500, Red
Township III, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Newark Urban New Jersey 22-3027956 10 Highway 35, P.O. Box 500, Red
Renewal Corp. III, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Somerset VIII, New Jersey 22-2998840 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Readington, New Jersey 22-3002434 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Hopewell I, New Jersey 22-3027962 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Newark Urban New Jersey 22-3027957 10 Highway 35, P.O. Box 500, Red
Renewal Corp. IV, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Newark Urban New Jersey 22-3027960 10 Highway 35, P.O. Box 500, Red
Renewal Corp. V, Inc. Bank, NJ 07701
(732) 747-7800
Address Including Zip Code,
State Or Other And Telephone Number
Exact Name Of Registrant Jurisdiction Of I.R.S. Employer Including Area Code, Of
As Specified In Its Incorporation Or Identification Registrant's Principal
Charter Organization Number Executive Offices
- --------------------------- ------------------------- ------------------ ----------------------------------
K. Hovnanian at Plainsboro New Jersey 22-3027955 10 Highway 35, P.O. Box 500, Red
III, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Mahwah IV, Inc. New Jersey 22-3015286 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Pompano Beach, Florida 22-3011835 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Jersey City New Jersey 22-3016528 10 Highway 35, P.O. Box 500, Red
III, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Properties of New Jersey 22-3017267 10 Highway 35, P.O. Box 500, Red
Newark Urban Renewal Bank, NJ 07701
Corporation, Inc. (732) 747-7800
K. Hovnanian at North New Jersey 22-3036037 10 Highway 35, P.O. Box 500, Red
Brunswick IV, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Bridgewater New Jersey 22-4049666 10 Highway 35, P.O. Box 500, Red
IV, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at South New Jersey 22-3039668 10 Highway 35, P.O. Box 500, Red
Brunswick, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Perkiomen I, Pennsylvania 22-3094743 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Valleybrook, New Jersey 22-3057022 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Ocean New Jersey 22-3094742 10 Highway 35, P.O. Box 500, Red
Township, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Plainsboro I, New Jersey 22-30645323 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Real Estate of Florida 65-0215569 10 Highway 35, P.O. Box 500, Red
Florida, Inc. Bank, NJ 07701
(732) 747-7800
Western Financial Services, Florida 65-0224445 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Wayne, Inc. New Jersey 22-3085521 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian Properties of Red New Jersey 22-3092532 10 Highway 35, P.O. Box 500, Red
Bank, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Hanover, Inc. New Jersey 22-3133218 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
Address Including Zip Code,
Exact Name Of Registrant State Or Other And Telephone Number
As Jurisdiction Of I.R.S. Employer Including Area Code, Of
Specified In Its Incorporation Or Identification Registrant's Principal
Charter Organization Number Executive Offices
- ------------------------- -------------------- ----------------------- -------------------------------------
K. Hovnanian at Lake Florida 22-3133152 10 Highway 35, P.O. Box 500, Red
Charleston, Inc. Bank, NJ 07701
(732) 747-7800
New K. Hovnanian Developments Florida 58-2003324 10 Highway 35, P.O. Box 500, Red
of Florida, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Companies of Virginia 22-3169584 10 Highway 35, P.O. Box 500, Red
Metro Washington, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Montgomery I, Pennsylvania 22-3165601 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
EXC, Inc. Delaware 22-3178077 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian Developments of Virginia 22-3188615 10 Highway 35, P.O. Box 500, Red
Metro Washington, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Ashburn Virginia 22-3178078 10 Highway 35, P.O. Box 500, Red
Village, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Woodmont, Inc. Virginia 52-1785667 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Fairway Views, Florida 22-3188598 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Carolina Florida 22-3188607 10 Highway 35, P.O. Box 500, Red
Country Club I, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Chapel Trail, Florida 22-3188602 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Treasure Coast, Florida 22-3188616 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Upper Merion, Pennsylvania 22-3188608 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Mahwah VI, Inc. New Jersey 22-3188612 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Medford I, Inc. New Jersey 22-3188613 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hov International, Inc. New Jersey 22-3188610 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Montclair, Inc. Virginia 22-3188614 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
Address Including Zip Code,
Exact Name Of Registrant State Or Other And Telephone Number
As Jurisdiction Of I.R.S. Employer Including Area Code, Of
Specified In Its Incorporation Or Identification Registrant's Principal
Charter Organization Number Executive Offices
- ------------------------- -------------------- ----------------------- -------------------------------------
K. Hovnanian at Bull Run, Inc. Virginia 22-3192910 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Sully Station, Virginia 22-3188746 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Spring Ridge, New Jersey 22-3192909 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Marine, Inc. New Jersey 22-3196910 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at River Oaks, Virginia 22-3199603 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Holly Crest, Virginia 22-3214275 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Properties of New Jersey 22-3219172 10 Highway 35, P.O. Box 500, Red
Route 35, Inc. Bank, NJ 07701
(732) 747-7800
Stonebrook Homes, Inc. California 33-0553884 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Winston Florida 22-3219184 10 Highway 35, P.O. Box 500, Red
Trails, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Lakes of Boca Florida 22-3230729 10 Highway 35, P.O. Box 500, Red
Raton, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Lake Florida 22-3240225 10 Highway 35, P.O. Box 500, Red
Charleston II, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Lake Florida 22-3240226 10 Highway 35, P.O. Box 500, Red
Charleston III, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Bridgewater New Jersey 22-3243298 10 Highway 35, P.O. Box 500, Red
VI, Inc. Bank, NJ 07701
(732) 747-7800
KHIPE, Inc. New Jersey 22-3244134 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Fair Lakes, Virginia 22-3249049 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Carolina Florida 22-3247085 10 Highway 35, P.O. Box 500, Red
Country Club II, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Valleybrook New Jersey 22-3252533 10 Highway 35, P.O. Box 500, Red
II, Inc. Bank, NJ 07701
(732) 747-7800
Address Including Zip Code,
Exact Name Of Registrant State Or Other And Telephone Number
As Jurisdiction Of I.R.S. Employer Including Area Code, Of
Specified In Its Incorporation Or Identification Registrant's Principal
Charter Organization Number Executive Offices
- ------------------------- -------------------- ----------------------- -------------------------------------
K. Hovnanian at Park Ridge, Virginia 22-3253530 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Belmont, Inc. Virginia 22-3253529 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Winston Trails Florida 22-3263586 10 Highway 35, P.O. Box 500, Red
II, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Fair Lakes Glen, Virginia 22-3261224 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Pembroke Florida 22-3273708 10 Highway 35, P.O. Box 500, Red
Shores, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Carolina Florida 22-3273706 10 Highway 35, P.O. Box 500, Red
Country Club III, Inc. Bank, NJ 07701
(732) 747-7800
Governor's Abstract Co., Inc. Pennsylvania 22-3278556 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Coconut Creek, Florida 22-3275859 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Polo Trace, Florida 22-3284165 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
Founders Title Agency, Inc. Virginia 22-3293533 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Bernards IV, New Jersey 22-3292171 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Perkiomen II, Pennsylvania 22-3301197 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Wayne II, Inc. New Jersey 22-3301196 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Upper Pennsylvania 22-3302321 10 Highway 35, P.O. Box 500, Red
Makefield I, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Companies of California 22-3301757 10 Highway 35, P.O. Box 500, Red
California, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Terraza, Inc. California 22-3303807 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian Developments of California 22-3303806 10 Highway 35, P.O. Box 500, Red
California, Inc. Bank, NJ 07701
(732) 747-7800
Address Including Zip Code,
State Or Other And Telephone Number
Exact Name Of Registrant Jurisdiction Of I.R.S. Employer Including Area Code, Of
As Specified In Its Incorporation Or Identification Registrant's Principal
Charter Organization Number Executive Offices
- ------------------------------ ---------------- --------------- ----------------------------------
KHC Acquisition, Inc. California 22-3303802 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Stuart Road, Virginia 22-3312918 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Highland California 22-3309241 10 Highway 35, P.O. Box 500, Red
Vineyards, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Ballantrae, Florida 22-3309139 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
Ballantrae Home Sales, Inc. Florida 22-3312524 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian Companies at California 22-3312525 10 Highway 35, P.O. Box 500, Red
Wildrose, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Greenbrook, New Jersey 22-3415873 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Hunter Virginia 22-3321100 10 Highway 35, P.O. Box 500, Red
Estates, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Carmel Del California 22-3320550 10 Highway 35, P.O. Box 500, Red
mar, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Vail Ranch, California 22-3320537 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Princeton, Inc. New Jersey 22-3322125 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Raritan I, Inc. New Jersey 22-3326386 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Calabria, Inc. California 22-3324654 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Seneca Maryland 22-3331047 10 Highway 35, P.O. Box 500, Red
Crossing, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Companies of Maryland 22-3331050 10 Highway 35, P.O. Box 500, Red
Maryland, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Developments of Maryland 22-3331045 10 Highway 35, P.O. Box 500, Red
Maryland, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Exeter Hills, Virginia 22-3331043 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
Address Including Zip Code,
State Or Other And Telephone Number
Exact Name Of Registrant Jurisdiction Of I.R.S. Employer Including Area Code, Of
As Specified In Its Incorporation Or Identification Registrant's Principal
Charter Organization Number Executive Offices
- ------------------------------ ---------------- --------------- ----------------------------------
K. Hovnanian Florida Region, Florida 22-3331674 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Southeast Florida 22-3331675 10 Highway 35, P.O. Box 500, Red
Florida, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Berlin, Inc. New Jersey 22-3330582 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at East Brunswick New Jersey 22-3330584 10 Highway 35, P.O. Box 500, Red
VI, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Bedminster II, New Hampshire 22-3331038 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Inverrary I, Florida 22-3332195 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Mahwah IX, Inc. New Jersey 22-3337896 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Northlake, Inc. California 22-3336696 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Hopewell IV, New Jersey 22-3345622 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Locust Grove New Jersey 22-3359254 10 Highway 35, P.O. Box 500, Red
I, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Castile, Inc. California 22-3356308 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Tierrasanta, California 22-3351875 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Preston, Inc. Maryland 22-3367625 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Bernards III, New Jersey 22-3356307 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Wayne VI, Inc. New Jersey 22-3367624 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian Properties of New Jersey 22-3360859 10 Highway 35, P.O. Box 500, Red
North Center Drive, Inc. Bank, NJ 07701
(732) 747-7800
Ballantrae Development Corp. Florida 22-3366681 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
Address Including Zip Code,
State Or Other And Telephone Number
Exact Name Of Registrant Jurisdiction Of I.R.S. Employer Including Area Code, Of
As Specified In Its Incorporation Or Identification Registrant's Principal
Charter Organization Number Executive Offices
- ------------------------------ ---------------- --------------- ----------------------------------
K. Hovnanian at La Trovata, California 22-3369099 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Rancho California 22-3369102 10 Highway 35, P.O. Box 500, Red
Cristianitos, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Tannery Hill, New Jersey 22-3396608 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Properties of New Jersey 22-3406661 10 Highway 35, P.O. Box 500, Red
N.B. Theatre, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Crystal New Jersey 22-3406656 10 Highway 35, P.O. Box 500, Red
Springs, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at The Cedars, New Jersey 22-3406664 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Construction New Jersey 22-3406668 10 Highway 35, P.O. Box 500, Red
Management, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Acquisitions, Inc. New Jersey 22-3406671 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Burlington II, New Jersey 22-3407458 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Burlington New Jersey 22-3412130 10 Highway 35, P.O. Box 500, Red
III, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Ballantrae Florida 22-309425 10 Highway 35, P.O. Box 500, Red
Estates, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Smithville, New Jersey 22-3418731 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Jefferson, Inc. New Jersey 22-3427233 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Upper Freehold New Jersey 22-3421542 10 Highway 35, P.O. Box 500, Red
Township I, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Hershey's Pennsylvania 22-3445102 10 Highway 35, P.O. Box 500, Red
Mill, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Dominion Virginia 22-3433318 10 Highway 35, P.O. Box 500, Red
Ridge, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Port Imperial New Jersey 22-3450185 10 Highway 35, P.O. Box 500, Red
North, Inc. Bank, NJ 07701
(732) 747-7800
Address Including Zip Code,
State Or Other And Telephone Number
Exact Name Of Registrant Jurisdiction Of I.R.S Employer Including Area Code, Of
As Specified In Its Incorporation Or Identification Registrant's Principal
Charter Organization Number Executive Offices
- ------------------------------ ---------------- ---------------- -----------------------------------
K. Hovnanian at Union Township New Jersey 22-3464497 10 Highway 35, P.O. Box 500, Red
I, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at East Brunswick New Jersey 22-2776654 10 Highway 35, P.O. Box 500, Red
VIII, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Manalapan II, New Jersey 22-2765935 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Hopewell V, New Jersey 22-3464499 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Hopewell VI, New Jersey 22-3465709 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Cameron Chase, Virginia 22-3459993 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Thornbury, Inc. Pennsylvania 22-3462983 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Wayne VII, Inc. New Jersey 22-3464498 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian Scotch Plains II, New Jersey 22-3464496 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Marlboro New Jersey 22-3467252 10 Highway 35, P.O. Box 500, Red
Township IV, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Port Imperial New Jersey 22-3471929 10 Highway 35, P.O. Box 500, Red
Urban Renewal, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at East Whiteland Pennsylvania 22-3483220 10 Highway 35, P.O. Box 500, Red
I, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Stonegate, Inc. Virginia 22-3481223 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Crestline, Inc. California 22-3493450 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at San Sevaine, California 22-3493454 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Sycamore, Inc. California 22-3493456 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian Companies of California 22-3493449 10 Highway 35, P.O. Box 500, Red
Southern California, Inc. Bank, NJ 07701
(732) 747-7800
Address Including Zip Code,
State Or Other And Telephone Number
Exact Name Of Registrant Jurisdiction Of I.R.S Employer Including Area Code, Of
As Specified In Its Incorporation Or Identification Registrant's Principal
Charter Organization Number Executive Offices
- ------------------------------ ---------------- ---------------- -----------------------------------
K. Hovnanian at Smithville II, New Jersey 22-2776387 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Stony Point, New York 22-2758195 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Stone Canyon, California 22-3512641 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Tuxedo, Inc. New York 22-3516266 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Bridgeport, California 22-3547807 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Saratoga, Inc. California 22-3657806 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Chaparral, Inc. California 22-3565730 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Ocean Walk, California 22-3565732 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Lower Saugon Pennsylvania 22-3602924 10 Highway 35, P.O. Box 500, Red
II, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Stonegate, Inc. California 22-3582033 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Barrington, Virginia 22-3583846 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Hampton Oaks, Virginia 22-3583845 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at P.C. Homes, Virginia 22-3583847 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at P.C. Virginia 22-3583840 10 Highway 35, P.O. Box 500, Red
Properties, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Summerwood, Virginia 22-3583842 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at The Glen Virginia 22-3618411 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian's Four Seasons of Florida 22-3618584 10 Highway 35, P.O. Box 500, Red
the Palm Beaches, Inc. Bank, NJ 07701
(732) 747-7800
Address Including Zip Code,
State Or Other And Telephone Number
Exact Name Of Registrant Jurisdiction Of I.R.S Employer Including Area Code, Of
As Specified In Its Incorporation Or Identification Registrant's Principal
Charter Organization Number Executive Offices
- ------------------------------ ---------------- ---------------- -----------------------------------
K. Hovnanian at Wall Township New Jersey 22-3434643 10 Highway 35, P.O. Box 500, Red
VIII, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at North Jersey New Jersey 22-3556344 10 Highway 35, P.O. Box 500, Red
Acquisition, L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Central New Jersey 22-3556343 10 Highway 35, P.O. Box 500, Red
Acquisition, L.L.C Bank, NJ 07701
(732) 747-7800
K. Hovnanian Shore New Jersey 22-3556342 10 Highway 35, P.O. Box 500, Red
Acquisition, L.L.C Bank, NJ 07701
(732) 747-7800
K. Hovnanian South Jersey New Jersey 22-3556341 10 Highway 35, P.O. Box 500, Red
Acquisition, L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Mansfield I, New Jersey 22-3556345 10 Highway 35, P.O. Box 500, Red
L.L.C Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Mansfield II, New Jersey 22-3556346 10 Highway 35, P.O. Box 500, Red
L.L.C Bank, NJ 07701
(732) 747-7800
K. Hovnanian North Central New Jersey 22-3554986 10 Highway 35, P.O. Box 500, Red
Acquisition, L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Wayne VIII, New Jersey 22-3618348 10 Highway 35, P.O. Box 500, Red
L.L.C Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Bernards V, New Jersey 22-3618587 10 Highway 35, P.O. Box 500, Red
L.L.C Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Wanaque, L.L.C New Jersey 22-3626037 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Chester I, New Jersey 22-3618347 10 Highway 35, P.O. Box 500, Red
L.L.C Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Winchester, California 52-2147836 10 Highway 35, P.O. Box 500, Red
L.L.C Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Middletown, New Jersey 22-3630452 10 Highway 35, P.O. Box 500, Red
L.L.C Bank, NJ 07701
(732) 747-7800
K. Hovnanian's Four Seasons, California 52-2147837 10 Highway 35, P.O. Box 500, Red
L.L.C Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Menifee, L.L.C California 52-2147832 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at North Delaware 22-3627814 10 Highway 35, P.O. Box 500, Red
Brunswick VI, L.L.C Bank, NJ 07701
(732) 747-7800
Address Including Zip Code,
State Or Other And Telephone Number
Exact Name Of Registrant Jurisdiction Of I.R.S Employer Including Area Code, Of
As Specified In Its Incorporation Or Identification Registrant's Principal
Charter Organization Number Executive Offices
- ------------------------- ------------------- ----------------- ---------------------------------
K. Hovnanian at Carmel California 52-2147831 10 Highway 35, P.O. Box 500, Red
Village, L.L.C Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Lawrence, New Jersey 22-3638073 10 Highway 35, P.O. Box 500, Red
L.L.C Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Blue Heron New Jersey 22-3630449 10 Highway 35, P.O. Box 500, Red
Pines, L.L.C Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Jackson, New Jersey 22-3630450 10 Highway 35, P.O. Box 500, Red
L.L.C Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Roland California 22-2147833 10 Highway 35, P.O. Box 500, Red
Heights, L.L.C Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Berkeley, New Jersey 22-3644632 10 Highway 35, P.O. Box 500, Red
L.L.C Bank, NJ 07701
(732) 747-7800
K. Hovnanian at King Farm, Virginia 22-3647924 10 Highway 35, P.O. Box 500, Red
L.L.C Bank, NJ 07701
(732) 747-7800
K. Hovnanian at South Bank, Virginia 22-3655682 10 Highway 35, P.O. Box 500, Red
L.L.C Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Prince Virginia 22-3647925 10 Highway 35, P.O. Box 500, Red
William, L.L.C Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Lake Terrapin, Virginia 22-3647920 10 Highway 35, P.O. Box 500, Red
L.L.C Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Clifton, L.L.C. New Jersey 22-3655976 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Upper Freehold New Jersey 22-3655975 10 Highway 35, P.O. Box 500, Red
Township II, L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Jersey City New Jersey 22-3655974 10 Highway 35, P.O. Box 500, Red
IV, L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Rancho Santa California 33-0890775 10 Highway 35, P.O. Box 500, Red
Margarita, L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Lafayette New Jersey 22-3658926 10 Highway 35, P.O. Box 500, Red
Estates, L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Arbor Heights, California 33-0890769 10 Highway 35, P.O. Box 500, Red
L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at South Amboy, New Jersey 22-3663105 10 Highway 35, P.O. Box 500, Red
L.L.C. Bank, NJ 07701
(732) 747-7800
Address Including Zip Code,
State Or Other And Telephone Number
Exact Name Of Registrant Jurisdiction Of I.R.S Employer Including Area Code, Of
As Specified In Its Incorporation Or Identification Registrant's Principal
Charter Organization Number Executive Offices
- ------------------------- ------------------- ----------------- ---------------------------------
K. Hovnanian at the Gables, California 33-0890769 10 Highway 35, P.O. Box 500, Red
L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Linwood, New Jersey 22-3663731 10 Highway 35, P.O. Box 500, Red
L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Riverbend, California 33-0890777 10 Highway 35, P.O. Box 500, Red
L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Kincaid, Maryland 22-3664456 10 Highway 35, P.O. Box 500, Red
L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Upper Freehold New Jersey 22-3666680 10 Highway 35, P.O. Box 500, Red
Township III, L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Northfield, New Jersey 22-3665826 10 Highway 35, P.O. Box 500, Red
L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Kent Island, Maryland 22-3668315 10 Highway 35, P.O. Box 500, Red
L.L.C. Bank, NJ 07701
(732) 747-7800
The Matzel & Mumford New Jersey 22-3670677 10 Highway 35, P.O. Box 500, Red
Organization, Inc. Bank, NJ 07701
(732) 747-7800
M & M Investments, LP New Jersey 22-3685183 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Ashburn Maryland 22-3681031 10 Highway 35, P.O. Box 500, Red
Village, L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Co. Metro DC Maryland 22-3683159 10 Highway 35, P.O. Box 500, Red
North, L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Mansfield New Jersey 22-3683839 10 Highway 35, P.O. Box 500, Red
Ill., L.L.C. Bank, NJ 07701
(732) 747-7800
Goodman Family of Builders, Texas 75-2653675 10 Highway 35, P.O. Box 500, Red
LP Bank, NJ 07701
(732) 747-7800
K. Hovnanian Developments of Texas 22-3685786 10 Highway 35, P.O. Box 500, Red
Texas, Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Brenbrooke, Virginia 22-3683842 10 Highway 35, P.O. Box 500, Red
L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Spring Hill Maryland 22-3688868 10 Highway 35, P.O. Box 500, Red
Road, L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at St. Margarets, Maryland 22-3688864 10 Highway 35, P.O. Box 500, Red
L.L.C. Bank, NJ 07701
(732) 747-7800
Address Including Zip Code,
State Or Other And Telephone Number
Exact Name Of Registrant Jurisdiction Of I.R.S Employer Including Area Code, Of
As Specified In Its Incorporation Or Identification Registrant's Principal
Charter Organization Number Executive Offices
- ------------------------- ------------------- ----------------- ---------------------------------
Matzel & Mumford of Delaware, Delaware 22-3686728 10 Highway 35, P.O. Box 500, Red
Inc. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Paramus, New Jersey 22-3687884 10 Highway 35, P.O. Box 500, Red
L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Blooms Maryland 22-3688865 10 Highway 35, P.O. Box 500, Red
Crossing, L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Encinitas California 33-0890770 10 Highway 35, P.O. Box 500, Red
Ranch, L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Pacific Bluffs, California 33-0890774 10 Highway 35, P.O. Box 500, Red
L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian Sunsets, L.L.C. California 33-0890768 10 Highway 35, P.O. Box 500, Red
Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Willow Brook, Maryland 22-3709105 10 Highway 35, P.O. Box 500, Red
L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Park Lane, California 33-0896285 10 Highway 35, P.O. Box 500, Red
L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian West Milford, New Jersey 22-3740951 10 Highway 35, P.O. Box 500, Red
L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Washington, New Jersey 22-3743403 10 Highway 35, P.O. Box 500, Red
L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Roderuck, Maryland 22-3756336 10 Highway 35, P.O. Box 500, Red
L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at Columbia Town Maryland 22-3757772 10 Highway 35, P.O. Box 500, Red
Center, L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian's Private Home New Jersey 22-3766856 10 Highway 35, P.O. Box 500, Red
Portfolio, L.L.C. Bank, NJ 07701
(732) 747-7800
K. Hovnanian at North Haledon, New Jersey Waiting 10 Highway 35, P.O. Box 500, Red
L.L.C. Bank, NJ 07701
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted. Neither the
Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated December __, 2000
PROSPECTUS
$150,000,000
K. Hovnanian Enterprises, Inc.
Offer to Exchange All Outstanding
10 1/2% Senior Notes Due 2007
for
10 1/2% Senior Notes Due 2007
Which Have Been Registered Under
The Securities Act Of 1933
The Exchange Offer Will Expire at 5:00 p.m., New York City Time,
on , 2001, Unless Extended.
__________________
The Exchange Offer The Exchange Notes
. We will exchange all outstanding notes that are . The exchange notes are being offered in order to
validly tendered and not validly withdrawn for an satisfy certain of our obligations under the
equal principal amount of exchange notes that are registration rights agreement entered into in connection
freely tradeable. with the placement of the outstanding notes.
. You may withdraw tenders of outstanding notes at . The terms of the exchange notes to be issued in the
any time prior to the expiration date of the exchange exchange offer are substantially identical to the
offer. outstanding notes, except that the exchange notes will
be freely tradeable.
. The exchange offer expires at 5:00 p.m., New York
City time, on _________, 2001, unless extended. We Resales of Exchange Notes
do not currently intend to extend the expiration
date. . The exchange notes may be sold in the over-the-counter
market, in negotiated transactions or through a
combination of such methods. The exchange notes will be
. The exchange of outstanding notes for exchange eligible for trading in The Portal(SM) Market.
notes in the exchange offer will not be a taxable
event for U.S. federal income tax purposes.
. We will not receive any proceeds from the exchange
offer.
You should consider carefully the risk factors beginning on page 8
of this prospectus before participating in the exchange offer.
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such 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.
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 such outstanding notes were
acquired by such 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 the
exchange offer, we will make this prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal defense.
__________________
This Prospectus is dated , 2000.
1
TABLE OF CONTENTS
Prospectus Summary................................ 1
K. Hovnanian...................................... 7
Use of Proceeds................................... 7
Recent Developments............................... 7
Ratio of Earnings to Fixed Charges................ 7
Risk Factors...................................... 8
Selected Historical Consolidated
Financial Information............................ 13
The Exchange Offer................................ 15
Description of Exchange Notes..................... 25
Material United States Federal Tax
Considerations................................... 61
Plan of Distribution.............................. 61
Forward-Looking Statements........................ 61
Legal Matters..................................... 62
Experts........................................... 62
Where You Can Find More Information............... 62
__________________
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 may only be used where it is
legal to sell these securities. The information in this document may only be
accurate as of the date of this document.
__________________
PROSPECTUS SUMMARY
This brief summary highlights selected information from the
prospectus. It may not contain all of the information that is important to you.
K. Hovnanian urges you to carefully read and review the entire prospectus and
the other documents to which it refers to fully understand the terms of the
exchange securities and the exchange offer. As used in this offering memorandum,
except as the context otherwise requires, references to "Hovnanian", "us", "we",
"our" or "Company" means Hovnanian Enterprises, Inc., a Delaware corporation,
together with its consolidated subsidiaries, including K. Hovnanian Enterprises,
Inc. (the "Issuer" or "K. Hovnanian"), a New Jersey corporation.
Summary of the Terms of the Exchange Offer
General............................................ On October 2, 2000, K. Hovnanian completed a private offering of
the outstanding notes, which consist of $150,000,000
aggregate principal amount of its 10 1/2% Senior Notes due
2007. In connection with the private offering, we entered
into a registration rights agreement in which we agreed,
among other things, to deliver this prospectus to you and to
complete an exchange offer for the outstanding notes.
The Exchange Offer................................. We are offering to exchange up to $150,000,000 aggregate
principal amount of our 10 1/2% Senior Notes due 2007 which
have been registered under the Securities Act for a like
aggregate principal amount of the outstanding notes.
Outstanding notes may be exchanged only 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 and 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
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 staff of the Securities and
Exchange Commission set forth in no-action letters issued to
third parties, we believe that exchange notes issued in the
exchange offer may be offered for resale, resold, or
otherwise transferred by you, without compliance with the
registration and prospectus delivery requirements of the
Securities Act, if:
(1) you acquire the exchange notes in the ordinary course
of your business;
1
(2) you are not engaging in and do not intend to engage in
a distribution of the exchange notes;
(3) do not have an arrangement or understanding with any
person to participate in a distribution of the exchange
notes; and
(4) you are not an affiliate of K. Hovnanian within the
meaning of Rule 405 under Securities Act.
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:
(1) you cannot rely on the applicable interpretations of
the staff of the SEC; and
(2) you must comply with the registration and prospectus
delivery requirements of the Securities Act in connection
with any resale transaction.
If you are a broker or dealer seeking to 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 offer to
resell, resale, or other transfer of the exchange notes that
you receive in the exchange offer.
Any holder of outstanding notes who
. is an affiliate of K. Hovnanian
. does not acquire exchange notes in the ordinary course of
its business
. tenders in the exchange offer with the intention to
participate, or for the purpose of participating, in a
distribution of exchange notes
cannot rely on the position of the staff of the SEC enunciated in Morgan
Stanley & Co. Incorporated, Exxon Capital Holdings Corporation, as interpreted
in the SEC's letter to Shearman & Sterling dated July 2, 1993, or similar no-
action letters and, in the absence of an exemption therefrom, must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with the resale of the exchange notes.
Expiration Date.................................... The exchange offer will expire at 5:00 p.m., New York City
time, on , 2001 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 exchange for any reason, without expense to
you, promptly after the expiration or termination of the
exchange offer.
2
Interest on the Exchange
Securities and the Outstanding
Notes............................................ The exchange notes 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 . Such interest
will be payable semi-annually on each April 1 and October 1,
commencing April 1, 2001. 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."
Exchange Agent..................................... First Union National Bank is serving as exchange agent for
the exchange offer.
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 also 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:
. any exchange notes that you receive will be acquired in the
ordinary course of your business
. you have no arrangement or understanding with any person or
entity to participate in a distribution of the exchange notes
. if you are a broker-dealer that will receive exchange notes
for your own account in exchange for outstanding securities
that were acquired as a result of market-making activities,
you will deliver a prospectus, as required by law, in
connection with any resale of such exchange notes
. you are not an "affiliate," as defined in Rule 405 of the
Securities Act, of K. Hovnanian or, if you are an affiliate,
you will comply with any applicable registration and
prospectus delivery requirements of the Securities Act
Special Procedures for Beneficial
Owners.......................................... If you are a beneficial owner of outstanding notes which are
registered in the name of a broker, dealer, commercial bank,
trust company or other nominee, and you wish to tender such
3
outstanding notes in the exchange offer, you should contact
such registered holder promptly and instruct such registered
holder to tender 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 or any other documents required by the letter of
transmittal or comply with the applicable procedures under
DTC's Automated Tender Offer Program 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."
Effect on Holders of Outstanding
Notes........................................... As a result of the making of, and upon acceptance for
exchange of all validly tendered outstanding notes pursuant
to the terms of the exchange offer, we will have fulfilled a
covenant contained in the registration rights agreement and,
accordingly, we will not be obligated to pay liquidated
damages as described in the registration rights agreement.
If you are a holder of outstanding notes and you do not
tender your outstanding notes in the exchange offer, you
will continue to hold such outstanding notes and you will be
entitled to all the rights and limitations applicable to the
outstanding notes in the indenture, except for any rights
under the registration rights agreement that by their terms
terminate upon the consummation of the exchange offer.
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
Exchange....................................... All untendered outstanding notes will continue to be subject
to the restrictions on transfer provided for 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 the 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 pursuant to the exchange offer.
Exchange Agent..................................... First Union National Bank is the exchange agent for the
exchange offer. The address and telephone number of the
exchange agent are set forth in the section captioned "The
Exchange Offer--Exchange Agent" of this prospectus.
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 and
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 notes
and the outstanding notes will be governed by the same indenture. Except where
the context requires otherwise, references in this prospectus to "notes" or
"securities" are references to both outstanding notes and exchange notes.
Issuer............................................. K. Hovnanian Enterprises, Inc.
Securities Offered................................. We are offering $150.0 million aggregate principal amount of
10 1/2% Senior Notes due 2007.
Maturity Date...................................... October 1, 2007.
Interest Payment Dates............................. Every April 1 and October 1, beginning April 1, 2001.
Optional Redemption................................ We may redeem any or all of the notes at any time upon
payment of a "make-whole price." In addition, we may redeem
notes at any time prior to October 1, 2003 with the net cash
proceeds of one or more public equity offerings so long as
at least $97.5 million principal amount of notes remains
outstanding.
Change of Control.................................. Upon a change of control as described in the section
"Description of Exchange Notes," 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:
. junior to the rights of our secured creditors to the extent
of their security in our assets;
. equal with the rights of creditors under our other
unsecured unsubordinated debt, including our revolving
credit agreement; and
. senior to the rights of creditors under debt expressly
subordinated to these notes.
The guarantee of each of the guarantors will also not be
secured by any collateral. Your right to payment under any
guarantee will be:
. junior to the rights of secured creditors to the extent of
their security in the guarantor's assets;
. equal with the rights of creditors under the guarantor's
other unsecured unsubordinated debt; and
. senior to the rights of creditors under the guarantor's
debt that is expressly subordinated to the guarantee.
5
Certain Covenants.................................. The indenture governing the notes will, among other things,
restrict our ability and the ability of the guarantors to:
. borrow money;
. pay dividends on our common stock;
. repurchase our common stock;
. make investments in subsidiaries that are not restricted;
. sell certain assets;
. incur certain liens;
. merge with or into other companies; and
. enter into certain transactions with our affiliates.
For more details, see the section "Description of Notes"
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 of the
offering of outstanding securities, see "Use of Proceeds."
6
K. HOVNANIAN
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), Metro D.C. (northern Virginia and Maryland), Texas,
North Carolina, southern California and Poland. We market our homes to first-
time buyers, first- and second-time move-up buyers, luxury buyers, active adult
buyers and empty nesters. We offer a variety of homestyles at prices ranging in
the United States from $94,000 to $921,000 with an average sales price in fiscal
1999 of $241,000. We are currently offering homes for sale in 118 communities.
Since the incorporation of our predecessor company in 1959, we have delivered in
excess of 66,000 homes, including 4,230 homes in the twelve months ended July
31, 2000. In addition, we provide financial services (mortgage loans and title
insurance) to our homebuilding customers.
We have successfully strengthened our market positions through recent and
pending acquisitions, including our positions in the New Jersey market through
the acquisition of Matzel and Mumford, in the Dallas-Fort Worth market through
the acquisition of Goodman Family of Builders L.P. and in the North Carolina and
Metro D.C. markets through our pending merger with Washington Homes.
We employed approximately 1,500 full-time associates as of July 31, 2000.
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.
USE OF PROCEEDS
The exchange offer is intended to satisfy our obligations under the
registration rights agreement 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 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 canceled 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 repay outstanding debt under our revolving credit agreement.
Our revolving credit agreement expires on July 31, 2003, and bears interest
at either the prime rate plus 0.25% or LIBOR plus 1.70% at our election.
RECENT DEVELOPMENTS
On August 28, 2000 Hovnanian and Washington Homes, Inc. entered into an
Agreement and Plan of Merger providing for the merger of Washington Homes, Inc.
into a wholly-owned subisidiary of Hovnanian. The Merger and related
transactions are expected to close in late January, 2001, following shareholder
approval. For more information on this transaction, see the information that
has been incorporated by reference herein from the Current Report on Form 8-K
filed on December 14, 2000 with the Securities and Exchange Commission.
RATIOS OF EARNINGS TO FIXED CHARGES
For purposes of computing the ratios 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 (interest charges and preferred share dividend
requirements of subsidiaries, adjusted to a pretax basis), less interest
capitalized, less preferred share dividend requirements of subsidiaries adjusted
to a pretax basis and less undistributed earnings of affiliates whose debt is
not guaranteed by the Hovnanian.
The following table sets forth the ratios of earnings to fixed charges for
Hovnanian for the periods indicated.
Nine months ended Years ended October 31,
July 31, 2000 1999 1998 1997
------------- ---- ---- ----
Ratio of earnings to fixed charges ....... 1.6 3.0 2.6 (a)
(a) Earnings for the year ended October 31, 1997 were insufficient to cover
fixed charges for such period by $9,197,000.
7
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, the outstanding notes may only be transferred in limited
circumstances under the 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:
. your outstanding notes and either:
. a properly completed and executed letter of transmittal and all other
required documentation or
. a book-entry delivery by 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 duty 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 captions "The Exchange Offer" and
"Plan of Distribution" in this prospectus.
Substantial Leverage--Our substantial debt could adversely affect our financial
health and prevent us from fulfilling our obligations under these notes.
We have a significant amount of debt. As of July 31, 2000, assuming we had
completed the offering and the Washington Homes merger on that date, our
consolidated debt would have been $510.0 million. This offering will not reduce
our debt. The amount of our debt could have important consequences to you. For
example, it could:
. limit our ability to obtain future financing for working capital,
capital expenditures, acquisitions, debt service requirements or other
requirements;
. 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;
. limit our flexibility in planning for, or reacting to, changes in our
business;
. place us at a competitive disadvantage because we have more debt than
some of our competitors; and
. 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
8
ability to meet our debt service obligations, because borrowings under our
revolving credit facilities bear interest at floating rates.
Based on our current level of operations, we believe our cash flow from
operations, available cash and available borrowings under our revolving credit
facilities will be adequate to meet our future liquidity needs for the long
term. We can not assure you, however, that in the future our business will
generate sufficient cash flow from operations or that borrowings will be
available to us under our revolving credit facilities in an amount sufficient to
enable us to pay our indebtedness, including these 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. We can not assure you that we will
be able to refinance any of our debt, including our revolving credit facilities
and these notes, on commercially reasonable terms or at all.
The indentures governing these notes and our other outstanding debt 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. 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.
General Economic, Real Estate and Other Conditions--Future changes in business
conditions could adversely affect our business, including our ability to build
homes at prices our customers are willing or able to pay.
The homebuilding industry is cyclical and is significantly affected by
changes in general and local economic conditions, such as:
. employment levels;
. availability of financing for home buyers;
. interest rates;
. consumer confidence; and
. 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 homebuilding business.
Our success in developing, building and selling homes depends in part upon
the continued availability of suitable undeveloped land at acceptable prices.
The availability of undeveloped land for purchase at favorable prices depends on
a number of factors outside of our control, including the risk of competitive
over-bidding of land prices and restrictive governmental regulation. Should
suitable land opportunities become less available, our operating results could
be adversely affected.
Land inventory risk can be substantial for homebuilders. 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.
In our business, 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. Although we employ various measures
designed to manage inventory risks, we can give no assurance that such measures
will be successful.
9
The homebuilding industry has from time to time experienced significant
difficulties, including:
. shortages of qualified trades people;
. reliance on local contractors, who may be inadequately capitalized;
. shortages of materials; and
. increases in the cost of certain materials (particularly increases in
the price of lumber, framing and cement, which are significant
components of home construction costs).
These difficulties could cause us to take longer and pay more costs to
build our homes. We may not be able to recapture increased costs by raising
prices in many cases because we fixed 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.
We Depend on the Northeast Market.
We presently conduct, and will continue after the Washington Homes merger
to conduct, most of our business in the Northeast. Home prices in the Northeast,
including in some of the markets in which we operate, have declined from time to
time, particularly as a result of slow economic growth. We cannot be certain
that the current economic growth trend in the Northeast will continue. If home
prices decline in one or more of the markets in which we operate, our results of
operations may be adversely affected.
Interest Rates; Mortgage Financing--Future increases in interest rates could
prevent potential customers from buying our homes and adversely affect our
business.
Virtually all our customers finance their acquisitions through lenders
providing mortgage financing. Increases in interest rates or decreases in
availability of mortgage financing could depress the market 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 homes to
potential buyers who need financing. This could adversely affect our results of
operations.
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 such financing could
adversely affect our sales.
Governmental Regulation and Environmental Matters--Governmental regulations
could increase the cost and availability of our development and homebuilding
projects and adversely affect our business.
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.
Despite our past ability to obtain necessary permits and approvals for our
communities, 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
have a material adverse effect on our 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.
10
Competition--Homebuilding is very competitive, and competitive conditions could
adversely affect our results of operations.
The homebuilding industry is highly competitive and fragmented.
Homebuilders compete not only for home buyers, but also for desirable
properties, financing, raw materials and skilled labor. We compete with other
local, regional and national homebuilders, often within larger subdivisions
designed, planned and developed by such homebuilders. Some of our competitors
also have greater sales and financial resources. In addition, resales of homes
and the availability of rental housing provide additional competition.
The competitive conditions in the homebuilding industry could result in:
. difficulty in acquiring suitable land at acceptable prices;
. increased selling incentives;
. lower sales; or
. delays in construction.
Any of these problems could adversely affect results of operations.
Future Capital Requirements--Our future growth requires additional capital whose
availability is not assured.
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. We can give no
assurance as to the terms or availability of such additional capital. Moreover,
the indentures for our outstanding debt 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 adversely affect our
future growth and results of operations.
We may have difficulty consummating or integrating mergers and acquisitions,
including the Washington Homes merger, and certain consequences of those
acquisitions that we do complete could adversely affect our operating results.
Although we expect to close the Washington Homes merger by late January,
2001, the merger is subject to significant conditions, including shareholder and
regulatory approvals and the ability of either side to terminate the agreement
if our share price goes above or below specified thresholds. As a result, we
cannot be certain that it will be consummated. Although we have not recently
announced any acquisitions or mergers other than the Washington Homes merger, 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. We can give no assurance
that we will be able to realize the earnings enhancements that may be available.
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 indenture.
If a change of control occurs as described in the section "Description of
Exchange Notes" under the heading "Certain Covenants," we would be required to
offer to purchase your notes at 101% of their principal amount, together with
all accrued and unpaid interest, if any. If a purchase offer obligation arises
under the indenture governing your 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 can give no
assurance that we would have sufficient funds to pay the purchase price for all
debt that we are required to repurchase or repay. After giving effect to this
offering, we would not have sufficient funds available to purchase all of such
outstanding debt.
11
Lack of Public Market for the Notes--We can not assure you that an active
trading market will develop for these notes.
These notes are a new issue of securities. There is no active public
trading market for these notes. We do not intend to apply for listing of these
notes on a security exchange. The liquidity of the trading market in the notes,
and the market prices quoted for the 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, we cannot assure you that an active
trading market will develop for your notes, that you will be able to sell your
notes, or that, even if you can sell your notes, that you will be able to sell
them at an acceptable price.
Fraudulent Conveyance Issues--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:
. such guarantee was incurred with fraudulent intent; or
. such guarantor did not receive fair consideration or reasonably
equivalent value for issuing its guarantee and
1) insolvent at the time of the guarantee;
2) rendered insolvent by reason of the guarantee;
3) engaged in a business or transaction for which its assets
constituted unreasonably small capital to carry on its business;
or
4) ended to incur, or believed that it would incur, debt beyond its
ability to pay such debt as it matured.
The measures of insolvency for purposes of determining whether a fraudulent
conveyance occurred would 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:
. 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
. 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.
12
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following selected historical consolidated financial information for
the three years ended October 31, 1999 are derived from the audited consolidated
financial statements of Hovnanian Enterprises, Inc. The financial data for the
nine month periods ended July 31, 2000 and 1999 are 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 nine months ended July 31, 2000 are not necessarily indicative of the
results that may be expected for the entire year ending October 31, 2000. The
data should be read in conjunction with the consolidated financial statements,
related notes, and other financial information incorporated by reference herein.
Nine Months Ended Year Ended
July 31, October 31,
--------------------- --------------------------------
2000 1999 1999 1998 1997
-------- --------- -------- --------- --------
($ in thousands, except average selling prices)
Income Statement Data
Total revenues........................................... $784,019 $648,291 $948,287 $941,947 $784,136
======== ======== ======== ======== ========
Home and land sale revenues (1).......................... $766,321 $628,602 $920,630 $904,280 $754,662
Cost of sales............................................ 614,574 494,581 730,025 748,941 634,317
Inventory impairment loss (2)............................ 1,517 1,633 2,091 3,994 14,019
-------- -------- -------- -------- --------
Homebuilding gross margin................................ 150,230 132,388 188,514 151,345 106,326
Selling, general and administrative expense.............. 76,495 56,460 81,396 67,519 62,475
Corporate general and administrative expenses............ 24,361 20,869 28,652 21,048 15,088
Home and land sales interest expense..................... 24,256 21,237 29,175 32,151 30,467
(Loss) income from financial services.................... (1,140) 1,070 1,044 2,088 (45)
(Loss) income from investment properties................. -- -- (1,373) 4,406 (11,906)
Income (loss) from collateral mortgage financing......... 49 (19) 15 11 (24)
Other income (net of other operations)................... (1,541) 1,844 1,640 4,160 1,555
-------- -------- -------- -------- --------
Income (loss) before income taxes and extraordinary
loss.................................................... 22,486 36,717 50,617 41,292 (12,124)
State and federal income taxes........................... 7,485 14,659 19,674 15,141 (5,154)
-------- -------- -------- -------- --------
Income (loss) before extraordinary loss.................. 15,001 22,058 30,943 26,151 (6,970)
======== ======== ======== ======== ========
Extraordinary loss from extinguishment of debt net of
Taxes................................................... -- (868) (868) (748) --
Net income (loss)........................................ $ 15,001 $ 21,190 $ 30,075 $ 25,403 $ (6,970)
======== ======== ======== ======== ========
Selected Operating Data
New homes delivered:
Northeast Region........................................ 1,323 1,499 2,063 2,530 2,128
Metro D.C............................................... 185 127 198 152 70
Texas................................................... 668 -- 66 -- --
North Carolina.......................................... 465 508 756 687 695
California.............................................. 375 351 514 457 365
Florida................................................. 50 119 159 241 418
Other................................................... 11 11 12 71 41
-------- -------- -------- -------- --------
Total............................................... 3,077 2,615 3,768 4,138 3,717
======== ======== ======== ======== ========
Net sales contracts:
Northeast Region......................................... 1,506 1,379 1,885 2,375 2,438
Metro D.C................................................ 241 182 232 170 73
Texas.................................................... 693 -- 25 -- --
North Carolina........................................... 501 600 728 690 694
California............................................... 369 380 524 439 456
Florida.................................................. 69 112 123 164 351
Other.................................................... 47 6 18 39 61
-------- -------- -------- -------- --------
Total.................................................... 3,426 2,659 3,535 3,877 4,073
======== ======== ======== ======== ========
Backlog at period end:
Number of homes.......................................... 2,270 1,725 1,921 1,681 1,872
Dollar value using base prices........................... $584,008 $394,990 $460,660 $381,816 $374,314
Average selling price for delivered homes................ $248,026 $237,512 $241,123 $216,444 $196,881
Other Data
Gross margin percentage (3).............................. 19.8% 21.5% 20.9% 17.3% 15.6%
EBITDA (4)............................................... $ 55,502 $ 66,383 $ 91,277 $ 90,594 $ 59,713
Interest incurred (5).................................... $ 28,093 $ 17,705 $ 24,594 $ 28,947 $ 34,777
Ratio of EBITDA to interest incurred..................... 2.0x 3.7x 3.7x 3.1x 1.7x
Ratio of total debt to EBITDA(6)......................... N/A N/A 3.6x 2.5x 5.5x
Balance Sheet Data
Housing inventories....................................... $616,426 $527,230 $375,733 $410,393
Total assets.............................................. $841,518 $712,861 $589,102 $637,082
Total debt (6)............................................ $432,461 $330,194 $ 29,065 $328,696
Stockholders' equity...................................... $246,397 $236,426 $201,392 $178,762
____________________
(1) Land sales for the periods presented were $3,144,000 for the nine months
ended July 31, 2000, $7,508,000 for the nine months ended July 31, 1999,
$12,017,000, $8,636,000 and $22,855,000 for the years ended October 31,
1999, 1998 and 1997, respectively.
13
(2) In accordance with the provisions of Financial Accounting Standards No. 121
("FAS 121"), the Company records impairment losses on inventories related
to communities under development or inventories and long-lived assets held
for sale. Under FAS 121, communities under development are impaired if the
undiscounted cash flows estimated to be generated from 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 writeoffs 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 $1,517,000 for the nine months ended July 31, 2000, $1,633,000
for the nine months ended July 31, 1999 and $2,091,000, $5,032,000 and
$28,465,000 for the years ended October 31, 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 the Company's 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.
14
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. The offer described in the immediately preceding sentence is
referred to in this prospectus as the "exchange offer." Holders may tender some
or all of their outstanding notes pursuant to the exchange offer.
As of the date of this prospectus, $150,000,000 aggregate principal amount
of the outstanding notes. This prospectus, together with the letter of
transmittal, is first being sent to holders of outstanding notes on or about
, 2001.
Purpose and Effect of the Exchange Offer
We have entered into a registration rights agreement 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 30 days thereafter. The exchange notes will have terms substantially
identical 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
registration rights agreement. The outstanding notes were issued on October 2,
2000.
Under the circumstances set forth below, we will use our reasonable best
efforts to cause the SEC 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:
. if applicable law does not permit the exchange offer after we have
sought a no-action letter or other favorable decision from the SEC and
we have taken all such other actions as may be requested by the SEC or
otherwise required in connection with such decision
. if any holder of the outstanding notes notifies us within 20 business
days following the consummation deadline of the exchange offer that
(i) such holder was prohibited by law or SEC policy from participating
in the exchange offer, (ii) such 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 resale by that holder or (iii) such 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 the registration rights
agreement, we will be required to pay liquidated damages to holders of the
outstanding notes. Please read "Description of Exchange Notes--Registration
Rights; Liquidated Damages" for more details regarding the registration rights
agreement.
Each holder of outstanding notes that wishes to exchange such outstanding
notes for transferable exchange notes in the exchange offer will be required to
make the following written representations:
. such holder is not an affiliate of K. Hovnanian within the meaning of
Rule 405 of the Securities Act
. such holder is not engaged in, and does not intend to engage in, and
has no arrangement with any person to participate in the distribution
of the exchange notes
. such holder is acquiring the exchange notes in the ordinary course of
its business
15
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 such exchange notes. See "Plan of Distribution."
Resale of Exchange Notes
Based on interpretations by the staff of the Commission, as set forth in
no-action letters issued to third parties, we believe that exchange notes issued
pursuant to the exchange offer may be offered for resale, resold, or otherwise
transferred by any exchange note holders without compliance with the
registration and prospectus delivery provisions of the Securities Act, if:
. such holder is not an affiliate of K. Hovnanian within the meaning of
Rule 405 under the Securities Act
. such holder is not engaged in, does not intend to engage in, and has
no arrangement or understanding with any person to participate in a
distribution of the exchange notes
. such holder is acquiring exchange notes in the ordinary course of its
business
Any holder who tenders in the exchange offer with the intention of
participating in any manner in a distribution of the exchange notes:
. cannot rely on the position of the Commission set forth in Morgan
Stanley and Co., Inc., Exxon Capital Holdings Corporation, as
interpreted in the Commission's letter to Shearman & Sterling dated
July 2, 1993, or similar no action letters
. must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with a secondary resale
transaction and that such secondary resale transaction must be covered
by an effective registration statement
This prospectus may be used for an offer to resell, resale or other
retransfer 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 pursuant
to the exchange offer outstanding notes that are validly tendered and not
withdrawn prior to the expiration date. We will issue $1,000 principal amount of
exchange notes in exchange for each $1,000 principal amount of outstanding notes
surrendered under the exchange offer. Outstanding notes may only be tendered in
multiples of $1,000.
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 under the registration rights agreement to file, and
cause to be effective, a registration statement. The exchange notes will
evidence the same debt as the outstanding notes. The exchange notes will be
issued under and entitled to the benefits of the same indenture that authorized
the issuance of the outstanding notes. Consequently, both series will be treated
as a single class of debt securities under that indenture. For a description of
the indenture, see "Description of Exchange Notes."
16
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, $150 million aggregate principal amount
of the outstanding notes 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 the registration rights agreement, 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 indenture relating to the
outstanding notes and the 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 such holders. Subject to the terms of the registration rights
agreement, we expressly reserve the right to amend or terminate the exchange
offer, and not 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 , 2001. 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.
In order to extend the period of time during which the exchange offer is
open, we will give oral or written notice of such extension to the exchange
agent. We will notify 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:
. to delay accepting for exchange any outstanding notes
. 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 of the Exchange
Offer" have not been satisfied, by giving oral or written notice of
such delay, extension or termination to the exchange agent
. subject to the terms of the registration rights agreement, to amend
the terms of the exchange offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof 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 such amendment in a manner reasonably calculated to inform the holders
of outstanding notes of such amendment.
17
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:
. 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
. the exchange offer, or the making of any exchange by a holder of
outstanding notes, would violate applicable law or any applicable
interpretation of the staff of the SEC
. 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
. the representations described under "--Procedures for Tendering" and
"Plan of Distribution."
. such other representations as may be reasonably necessary under
applicable SEC 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 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 will be threatened or in effect with
respect to the registration statement of which this prospectus constitutes a
part or the qualification of the indenture under the Trust Indenture Act of
1939.
Procedures for Tendering
Only a holder of outstanding notes may tender such outstanding notes in the
exchange offer. To tender in the exchange offer, a holder must:
18
. 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 the letter of transmittal so requires; and
mail or deliver such letter of transmittal or facsimile to the
exchange agent prior to the expiration date or
. comply with DTC's Automated Tender Offer Program procedures described
below
In addition, either:
. the exchange agent must receive outstanding notes along with the
letter of transmittal or
. the exchange agent must receive, prior to the expiration date, a
timely confirmation of book-entry transfer of such 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
. 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.
The tender by a holder that is not withdrawn prior to the expiration date
will constitute an agreement between such holder and us in accordance with the
terms and subject to the conditions set forth in this prospectus and in the
letter of transmittal.
The method of delivery of outstanding notes, letters of transmittal, and
all other required documents is at your election and risk. Rather than mail
these items, we recommend that holders 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.
Any beneficial owner of outstanding notes that are registered in the name
of a broker, dealer, commercial bank, trust company, or other nominee who wishes
to participate in the exchange offer should promptly contact the person through
which it beneficially owns such outstanding notes and instruct that person to
tender outstanding notes on behalf of such beneficial owner. If such beneficial
owner wishes to tender on its own behalf, it must, prior to completing and
executing the letter of transmittal and delivering its outstanding notes either:
. make appropriate arrangements to register ownership of the outstanding
notes in such owner's name or
. obtain a properly completed bond power from the registered holder of
outstanding notes
The transfer of registered ownership may take considerable time and may not
be completed prior to the expiration date.
Signatures on a 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 17Ad-
15 under the Exchange Act unless the outstanding notes surrendered for exchange
are tendered:
. 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
. for the account of an eligible institution
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
19
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, the persons should so indicate when
signing. Unless waived by us, they should also submit evidence satisfactory to
us of their authority to deliver the letter of transmittal.
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, transmit their acceptance of the exchange electronically. They may do
so by causing DTC to transfer the outstanding notes to the exchange agent in
accordance with its 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, to the effect that:
. 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
. such 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)
. the agreement may be enforced 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:
. outstanding notes or a timely book-entry confirmation of such
outstanding notes into the exchange agent's account at DTC
. 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:
. the exchange notes acquired pursuant to the exchange offer are being
acquired in the ordinary course of business of the person receiving
the exchange notes (whether or not the person is the holder of the
outstanding notes);
. neither the holder nor any such other person is engaging in or intends
to engage in a distribution of the exchange notes;
. neither the holder nor any such other person has an arrangement or
understanding with any person to participate in a distribution of the
exchange notes;
. neither the holder nor any such other person is an affiliate of
Hovnanian, or if either is an affiliate, it will comply with the
registration and prospectus delivery requirements of the Securities
Act.
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 such 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
20
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.
Book-Entry Transfer
The exchange agent will make a request to establish an account with respect
to the outstanding notes at DTC, as book-entry transfer facility, for purposes
of the exchange offer promptly after the date of this prospectus. Any financial
institution that is a participant in DTC's system may make book-entry delivery
of outstanding notes by causing DTC to transfer the outstanding notes into the
exchange agent's account at DTC in accordance with DTC's procedures for
transfer. Holders of outstanding notes who are unable to deliver confirmation of
the book-entry tender of their outstanding notes into the exchange agent's
account at DTC or all other documents required by the letter of transmittal to
the exchange agent on or prior to the expiration date must tender their
outstanding notes according to the guaranteed delivery procedures below.
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 tender if:
. the tender is made through an eligible institution
. prior to the expiration date, the exchange agent receives from such
eligible institution either a properly completed and duly executed
notice of guaranteed delivery, letter of transmittal (by facsimile
transmission, mail, or hand delivery) or a properly transmitted
agent's message and notice of guaranteed delivery:
. 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
. stating that the tender is being made thereby
. 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
21
. the exchange agent receives such properly completed and executed
letter of transmittal (or facsimile thereof), as well as all tendered
outstanding notes in proper form for transfer or a book-entry
confirmation, 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, holders of outstanding
notes may withdraw their tenders at any time prior to the expiration date.
For a withdrawal to be effective:
. 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
. holders must comply with the appropriate procedures of DTC's Automated
Tender Offer Program system.
Any such notice of withdrawal must:
. specify the name of the person who tendered the outstanding notes to
be withdrawn
. identify the outstanding notes to be withdrawn (including the
principal amount of the outstanding notes)
. 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:
. the serial numbers of the particular certificates to be withdrawn
. 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 procedure 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
securities 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 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
First Union National Bank has been appointed as the exchange agent for the
exchange offer. First Union also acts as trustee under the indenture. 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:
22
Delivery to: First Union National Bank, Exchange Agent
By Mail: By Overnight Courier Delivery: By Hand:
First Union National Bank First Union National Bank First Union National Bank
Attn: Marcia Rice Attn: Marcia Rice Attn: Marcia Rice
Corporate Trust Operations Reorg Corporate Trust Operations Reorg Corporate Trust 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 28288-1153 Charlotte NC 28288-1153
By Facsimile Transmissions:
(704) 590-7628
Facsimile Confirmation:
(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 that as set forth
above, such delivery or instructions will not be effective.
Fees and Expenses
We will bear the expenses of soliciting tenders. The principal solicitation
is being made by mail; however, we make additional solicitation by telegraph,
telephone or in person by our officers and regular employees and those of 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 $_____. They include:
. SEC registration fees
. fees and expenses of the exchange agent and trustee
. accounting and legal fees and printing costs
. 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.
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:
23
. 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
. tendered outstanding notes are registered in the name of any person
other than the person signing the letter of transmittal or
. 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:
. 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
. otherwise set forth in the offering circular 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 registration rights agreement, we do not intend to
register resales of the outstanding notes under the Securities Act. Based on
interpretations of the SEC staff, exchange notes issued pursuant to the exchange
offer may be offered for resale, resold or otherwise transferred by their
holders (other than any such 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 the
holders acquired the exchange notes in the ordinary course of the holders'
business and the holders have no arrangement or understanding with respect to
the distribution of the exchange notes to be acquired in the exchange offer. Any
holder who tenders in the exchange offer for the purpose of participating in a
distribution of the exchange notes:
. could not rely on the applicable interpretations of the SEC
. must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with a secondary resale
transaction
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.
24
DESCRIPTION OF EXCHANGE NOTES
General
The form and terms of the exchange notes and the outstanding notes are
identical in all material respects except that the registration rights and
related liquidated damages provisions, and the transfer restrictions applicable
to the outstanding notes do not apply to the exchange notes. All references to
"Notes" in this section are references to both outstanding notes and exchange
notes, unless otherwise specified.
We issued the outstanding 10 1/2% Senior Notes due 2007 under an indenture,
dated as of October 2, 2000, among us, the Guarantors and First Union National
Bank, as trustee. 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 of
1939. The exchange notes will be issued under the same indenture.
This description of the exchange notes contains definitions of terms,
including those defined under the caption "Definitions of Certain Terms Used
in the Indenture". The following discussion includes a summary description of
certain material terms of the indenture, the registration rights agreement, and
the exchange notes. Because this is a summary, it does not include all of the
information that is included in the indenture, the registration rights
agreement, or the exchange notes.
You should read the indenture and the 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 notes and the exchange notes constitute a single series of
debt securities under the indenture. If the Exchange Offer is consummated,
holders of notes who do not exchange their notes in the Exchange Offer will
vote together with the holders of the registered notes for all relevant purposes
under the indenture. Accordingly, when determining whether the required holders
have given notice, consent or waiver or taken any other action permitted under
the indenture, any outstanding notes that remain outstanding after the Exchange
Offer will be aggregated with the registered notes. All references herein to
specified percentages in aggregate principal amount of notes outstanding shall
be deemed to mean, at any time after the Exchange Offer is consummated,
percentages in aggregate principal amount of notes and registered notes
outstanding.
The exchange notes will bear interest from the date the exchange notes are
first issued under the Indenture at the rate per annum shown on the cover page
of this offering memorandum, payable semi-annually on April 1 and October 1 of
each year, commencing April 1, 2001, 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. The exchange notes will mature on October 1,
2007, and will be issued in denominations of $1,000 and integral multiples
thereof.
The exchange notes are limited to an aggregate principal amount of $200.0
million. The exchange notes are guaranteed by the Company and each of the
Guarantors pursuant to the guarantees (the "Guarantees") described below.
The exchange notes are general unsecured obligations of the Issuer and rank
senior in right of payment to all our future Indebtedness of the Issuer that is,
by its terms, expressly subordinated in right of payment to the exchange notes
and pari passu in right of payment with all our existing and future unsecured
Indebtedness of the Issuer that is not so subordinated. The Guarantees are
general unsecured obligations of the Company and the Guarantors and will rank
senior in right of payment to all future Indebtedness of the Company and the
Guarantors that is, by its terms, expressly subordinated in right of payment to
the Guarantees and rank pari passu in right of payment with all existing and
future unsecured Indebtedness of the Company and the Guarantors that is not so
subordinated.
25
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 notes
against those assets. At July 31, 2000, as adjusted to give effect to the
transactions described under "Use of Proceeds" and the merger of Washington
Homes, the Company, the Issuer and the Guarantors would have had approximately
$510.0 million (including the Notes) of Indebtedness outstanding, of which $19.5
million would have been secured by assets of the Company and its Restricted
Subsidiaries and $100.0 million of which would have been subordinated to the
Notes. In addition, the Indebtedness under the revolving credit agreement is
secured by a pledge of the stock of KHL, Inc., a wholly owned subsidiary of the
Company, which is not a guarantor of the notes.
Redemption
The notes are subject to redemption upon not less than 30 nor more than 60
days' notice by mail, at any time, as a whole or in part, at the election of the
Issuer, at a price equal to the sum of (i) 100% of the principal amount thereof
plus accrued and unpaid interest and liquidated damages, if any, thereon to the
redemption date plus (ii) the Make-Whole Amount, if any.
The term "Make-Whole Amount" shall mean, in connection with any optional
redemption of any note, the excess, if any, of (i) the aggregate present value
as of the date of such redemption of each dollar of principal being redeemed and
the amount of interest (exclusive of interest accrued to the redemption date)
that would have been payable in respect of such dollar if such prepayment had
not been made, determined by discounting, on a semiannual basis, such principal
and interest at the Reinvestment Rate (determined on the business day preceding
the date of such redemption) from the respective dates on which such principal
and interest would have been payable if such payment had not been made, over
(ii) the aggregate principal amount of the notes being redeemed.
The term "Reinvestment Rate" shall mean 0.50% (one-half of one percent)
plus the arithmetic mean of the yields under the respective headings "This Week"
and "Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the maturity of the principal being prepaid. If no maturity
exactly corresponds to such maturity, yields for the two published maturities
most closely corresponding to such maturity shall be calculated pursuant to the
immediately preceding sentence and the Reinvestment Rate shall be interpolated
or extrapolated from such yields on a straight-line basis, rounding in each of
such relevant periods to the nearest month. For the purpose of calculating the
Reinvestment Rate, the most recent Statistical Release published prior to the
date of determination of the Make-Whole Amount shall be used.
The term "Statistical Release" shall mean the statistical release
designated "H.15(519)" or any successor publication which is published weekly by
the Federal Reserve System and which establishes yields on actively traded U.S.
government securities adjusted to constant maturities or, if such statistical
release is not published at the time of any determination under the indenture,
then such other reasonably comparable index which shall be designated by the
Issuer.
The Issuer may redeem notes, at any time prior to October 1, 2003, with the
net cash proceeds of one or more Public Equity Offerings by the Company, at a
redemption price equal to 110.5% of the principal amount of such notes, plus
accrued and unpaid interest and liquidated damages, if any, to the date of
redemption, provided, however, that after each such redemption not less than
$97.5 million principal amount of notes (excluding any notes held by the Company
or any of its Affiliates) remains outstanding. Notice of any such redemption
must be given within 60 days after the date of the closing of the relevant
Public Equity Offering.
Selection of the notes or portions thereof for redemption pursuant to the
foregoing shall be made by the 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 notes are to be redeemed at the registered
address of such Holder. On and after the redemption date, interest ceases to
accrue on the notes or portions thereof called for redemption.
There is no sinking fund for the notes.
26
The Guarantees
The Company and 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 Notes,
including our obligations to pay principal, premium, if any, and interest with
respect to the notes. The Guarantees will be general unsecured obligations of
the Company and the Guarantors and will rank pari passu with all existing and
future unsecured Indebtedness of the Guarantors that is not, by its terms,
expressly subordinated in right of payment to the Guarantees. 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 Guarantee or pursuant to its contribution obligations under
the Indenture, will result in the obligations of such Guarantor under its
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 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 Indenture requires that each existing and future Restricted Subsidiary
(other than KHL, Inc. and K. Hovnanian Poland, Inc.) be a Guarantor. The
Company is permitted to cause any Unrestricted Subsidiary to be a Guarantor.
The 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 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 from the Company to the Trustee to such effect,
without any further action required on the part of the 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
Indenture. Such covenants are applicable (unless waived or amended as permitted
by the Indenture) so long as any of the notes are outstanding or until the notes
are defeased pursuant to provisions described under "Defeasance of Indenture."
Repurchase of Notes upon Change of Control. 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.
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
27
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.
The Issuer will comply with applicable law, including Section 14(e) of the
Securities Exchange Act of 1934 (the "Exchange Act") and Rule l4e-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 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 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 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 Indenture will require the payment of money for 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 indenture, a change of control will also have occurred under the
indenture governing the Issuer's 9 3/4% Subordinated Notes due 2005, 9 1/8%
Senior Notes due 2009 and under the revolving credit agreement. 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 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 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 notes when required upon a Change of
Control will result in an Event of Default with respect to the 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 Notes which
may be tendered to the Company upon the occurrence of a Change of Control.
Limitations on Indebtedness. The 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 (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.
Notwithstanding the foregoing, the provisions of the Indenture will not
prevent the incurrence of:
(1) Permitted Indebtedness,
(2) Refinancing Indebtedness,
(3) Non-Recourse Indebtedness,
28
(4) any Guarantee of Indebtedness represented by the Notes, and
(5) any guarantee of Indebtedness incurred under Credit Facilities in
compliance with the 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 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.
Limitations on Restricted Payments. The 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
29
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 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
30
(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 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 Indenture will also provide 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 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
31
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 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:
(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 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 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 Net
Cash Proceeds Offer 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 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 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 (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 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 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 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.
32
Limitations on Restrictions Affecting Restricted Subsidiaries. The
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 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 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 indenture or the notes,
(j) purchase money obligations that impose restrictions on the
property so acquired of the nature described in clause (3)
of the preceding paragraph,
33
(k) Liens permitted under the 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 indenture
provides that 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 Guarantees 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:
(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 notes or a Guarantee, as the case may be, and the
indenture,
(2) immediately after giving effect to such transaction, no Default or
Event of Default has occurred and is continuing,
(3) in the case of a transaction involving the Company, immediately after
giving effect to such transaction and the use of any net proceeds therefrom,
on a pro forma basis, the Consolidated Net Worth of the Company or the
Successor as the case may be, would be at least equal to the Consolidated Net
Worth of the Company immediately prior to such transaction (exclusive of any
adjustments to Consolidated Net Worth attributable to transaction costs) less
any amount treated as a Restricted Payment in connection with such
transaction in accordance with the Indenture, and
(4) 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:
34
(a) 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 as provided under "The
Guarantees" above, or
(b) 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 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 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.
Events of Default
The following are Events of Default under the 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 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 notes,
the Guarantees or the 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 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:
35
(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;
(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 or decree remains unstayed and in effect for 60 days, or
(9) 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).
A Default as described in subclause (3) 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
covenants described under "Certain Covenants--Repurchase of 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 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 (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 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) 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 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.
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
36
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 on the notes or that
resulted from the failure to comply with the covenant entitled "Repurchase of
Notes upon Change of Control") if the Trustee determines that withholding such
notice is in the Holders' interest.
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.
Defeasance of Indenture
The indenture permits the Company, the Issuer and the Guarantors to
terminate all of their respective obligations under the indenture with respect
to the notes and the Guarantees, other than the obligation to pay interest on
and the principal of the notes and certain other obligations, at any time by
(1) depositing in trust with the 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 Notes to their maturity, and
(2) complying with certain other conditions, including delivery to the
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 indenture permits the Company, the Issuer and the
Guarantors to terminate all of their obligations under the indenture with
respect to the notes and the Guarantees (including the obligations to pay
interest on and the principal of the notes and certain other obligations), at
any time by
(1) depositing in trust with the 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 notes to their maturity, and
(2) complying with certain other conditions, including delivery to the
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 Indenture.
Transfer and Exchange
A Holder may transfer or exchange notes only in accordance with the
provisions of the 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 indenture.
Amendment, Supplement and Waiver
Subject to certain exceptions, the indenture, the notes or the Guarantees
may be amended or supplemented with the consent (which may include consents
obtained in connection with a tender offer or exchange offer for notes) of the
Holders of at least a majority in principal amount of the notes then
outstanding, and any existing Default under, or compliance with any provision of
the Indenture may be waived (other than any continuing Default or Event of
Default in the payment of interest on or the principal of the notes) with the
consent (which may include
37
consents obtained in connection with a tender offer or exchange offer for notes)
of the Holders of a majority in principal amount of the notes then outstanding.
Without the consent of any Holder, the Company, the Issuer, the Guarantors and
the Trustee may amend or supplement the indenture, the notes or the 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
indenture; to provide for uncertificated notes in addition to or in place of
certificated 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 indenture, ceases to be liable on its
Guarantee.
Without the consent of each Holder affected, the Company, the Issuer, the
Guarantors and the Trustee may not:
(1) reduce the amount of 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 note,
(3) reduce the principal of or change the fixed maturity of any note or
alter the provisions (including related definitions) with respect to
redemptions described under "Optional Redemption" or with respect to
mandatory offers to repurchase Notes described under "Limitations on
Dispositions of Assets" or "Repurchase of Notes upon Change of
Control,"
(4) make any note payable in money other than that stated in the 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 Indenture,
(6) modify the ranking or priority of the notes or any Guarantee,
(7) release any Guarantor from any of its obligations under its Guarantee
or the indenture otherwise than in accordance with the indenture, or
(8) waive a continuing Default or Event of Default in the payment of
principal of or interest on the notes.
The right of any Holder to participate in any consent required or sought
pursuant to any provision of the 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 indenture.
Concerning the Trustee
The indenture contains certain limitations on the rights of the Trustee, as
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 Trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest (as defined in the Indenture),
it must eliminate such conflict or resign. The Trustee is also trustee with
respect to our 9 3/4% Subordinated Notes due 2005 and 9 1/8% Senior Notes due
2009.
Governing Law
The indenture, the notes and the Guarantees will be governed by the laws of
the State of New York without giving effect to principles of conflict of laws.
38
Definitions of Certain Terms Used in the Indenture
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
terms used in the 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),
(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 (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,
(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
39
(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;
(3) Continuing Directors cease to constitute at least a majority of the
Board of Directors of the Company;
40
(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);
41
(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,
(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
42
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 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.
43
"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 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 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 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 Notes as are
required pursuant to the provisions described under the caption "Certain
Covenants--Repurchase of 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.
"Guarantee" means the guarantee of the Notes by the Company and each
Guarantor under the Indenture.
"Guarantors" means (i) initially, each of the Company's Subsidiaries,
except the Issuer, four subsidiaries formerly engaged in the issuance of
collateralized mortgage obligations, a mortgage lending subsidiary, a subsidiary
holding and licensing Hovnanian trade name and a subsidiary engaged in
homebuilding activities in Poland and (ii) each of the Company's Subsidiaries
which becomes a Guarantor of the Notes pursuant to the provisions of the
Indenture.
"Holder" means the Person in whose name a Note is registered in the books
of the Registrar for the Notes.
44
"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 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.
45
"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 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 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 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.
"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
46
(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.
"Notes" means the notes offered pursuant to this prospectus supplement.
"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 $250
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 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;
47
(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 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 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 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,
48
(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 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,
(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 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 ,
49
(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.
"Public Equity Offering" means an underwritten public offering of Common
Equity of the Company pursuant to an effective registration statement filed
under the Securities Act (excluding registration statements filed on Form S-8 or
any successor form).
"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 Indenture, but only to
the extent that
50
(1) the Refinancing Indebtedness is subordinated, if at all, to the Notes
or the 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 Notes,
(3) 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
(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.
"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 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
51
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. The Unrestricted Subsidiaries will be the following: K.
Hovnanian Mortgage, Inc., Hovnanian Financial Services I, Inc., Hovnanian
Financial Services II, Inc., Hovnanian Financial Services III, Inc. and
Hovnanian Financial Services IV, Inc.
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 Indenture, to the extent
provided therein, (2) the Company must be permitted under the "Limitations on
Restricted Payments" covenant set forth in the 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 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 Trustee
The indenture contains certain limitations on the rights of the 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 trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest it must
eliminate that conflict within 90 days, apply to the SEC for permission to
continue or resign.
The holders of a majority in principal amount of the outstanding notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the trustee, subject to certain
52
exceptions. The indenture provides that in case an Event of Default shall occur
(which shall not be cured), the 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 trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
holder of notes, unless that holder shall have offered to the 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 indenture and
registration rights agreement without charge by writing to Hovnanian at 10
Highway 35, Red Bank, NJ 07701, Attention: Corporate Controller.
Book-Entry, Delivery and Form
We initially offered and sold the outstanding notes to QIBs in reliance on
Rule 144A ("Rule 144A Notes"). We also offered and sold in offshore
transactions in reliance on Regulation S ("Regulation S Notes").
Rule 144A Notes were initially represented by one or more notes in
registered, global form without interest coupons (collectively, the "Rule 144A
Global Notes"). The Rule 144A Global Notes were deposited upon issuance with
the trustee as custodian for The Depository Trust Company ("DTC"), in New York,
New York, and registered in the name of DTC or its nominee, in each case for
credit to an account of a direct or indirect participant as described below.
Regulation S Notes were initially were represented by one or more temporary
Global Notes in registered, global form without interest coupons (collectively,
the "Regulation S Temporary Global Notes"). The Regulation S Temporary Global
Notes are registered in the name of a nominee of DTC for credit to the
subscribers' respective accounts at Euroclear and Clearstream. Beneficial
interests in the Regulation S Temporary Global Notes may be held only through
Euroclear or Clearstream.
Within a reasonable time period after the expiration of the period of 40
days commencing on the day after the latest of the commencement of the private
offering and the original Issue Date (as defined) of the notes (such period
through and including such 40th day, the "Restricted Period"), the Regulation S
Temporary Global Notes will be exchanged for one or more permanent Global Notes
(collectively, the "Regulation S Permanent Global Notes" and, together with the
Regulation S Temporary Global Notes, the "Regulation S Global Notes" (the
Regulation S Global Notes and Rule 144A Global Notes, collectively being the
"Global Notes")) upon delivery to DTC of certification of compliance with the
transfer restrictions applicable to the notes and pursuant to Regulation S as
provided in the indenture. During the Restricted Period, beneficial interests
in the Regulation S Temporary Global Notes were held only through Euroclear or
Clearstream (as indirect participants in DTC), unless transferred to a person
that takes delivery in the form of an interest in the corresponding Rule 144A
Global Notes in accordance with the certification requirements described below.
See "--Book-Entry, Delivery and Form--Exchanges between Regulation S Notes and
Rule 144A Notes." Beneficial interests in the Rule 144A Global Notes may not be
exchanged for beneficial interests in the Regulation S Global Notes at any time
except in the limited circumstances described below. See "--Book-Entry,
Delivery and Form--Exchanges between Regulation S Notes and Rule 144A Notes."
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 ("Certificated Notes") except in the limited
circumstances described below. See "--Book-Entry, Delivery and Form--Exchange
of Book-Entry Notes for Certificated Notes."
Rule 144A Notes (including beneficial interests in the Rule 144A Global
Notes) were subject to certain restrictions on transfer and will bear a
restrictive legend as described under "Notice to Investors." In addition,
transfer of beneficial interests in the Global Notes will be subject to the
applicable rules and procedures of DTC and its direct or indirect participants
(including, if applicable, those of Euroclear and Clearstream), which may change
from time to time.
The notes may be presented for registration of transfer and exchange at the
offices of the Registrar.
53
Depository Procedures
DTC has advised us that DTC is a limited-purpose trust company created to
hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between Participants through electronic book-entry changes
in accounts of Participants. The Participants include securities brokers and
dealers (including the initial purchaser), banks, trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly (collectively, the "Indirect Participants").
Persons who are not Participants may beneficially own securities held by or on
behalf of DTC only through the Participants or Indirect Participants. The
ownership interest and transfer of ownership interest of each actual purchaser
of each security held by or on behalf of DTC are recorded on the records of the
Participants and Indirect Participants.
DTC has also advised us that pursuant to procedures established by it,
(1) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the initial purchaser with portions of the
principal amount of Global Notes; and
(2) ownership of such interests in the Global Notes will be shown on, and
the transfer ownership thereof will be effected only through, records
maintained by DTC (with respect to Participants) or by Participants
and the Indirect Participants (with respect to other owners of
beneficial interests in the Global Notes).
Investors in the Rule 144A Global Notes may hold interests therein directly
through DTC or indirectly through organizations such as Euroclear and
Clearstream. Investors in the Regulation S Global Notes must initially hold
their interests therein through Euroclear or Clearstream, if they are
Participants in such systems, or indirectly through organizations which are
Participants in such systems. After the expiration of the Restricted Period
(but not earlier), investors may also hold interests in the Regulation S Global
Notes through organizations other than Euroclear and Clearstream that are
Participants in the DTC system. Euroclear and Clearstream will hold interests
in the Regulation S Global Notes on behalf of their Participants through
customers' securities accounts in their respective names on the books of their
respective depositaries. The depositaries, in turn, will hold such interests in
the Regulation S Global Notes in customers' securities accounts in the
depositaries' names on the books of DTC. All interests in a Global Note,
including those held through Euroclear or Clearstream, may be subject to the
procedures and requirements of DTC. Those interests held by Euroclear or
Clearstream may also be subject to the procedures and requirements of such
system.
The laws of some states require that certain persons take physical delivery
in definitive form of securities they own. Consequently, the ability to
transfer beneficial interest in a Global Note to such persons may be limited to
that extent. Because DTC can act only on behalf of Participants, which in turn
act on behalf of Indirect Participants and certain banks, the ability of a
person having a beneficial interest in a Global Note to pledge such interest to
persons or entities that do not participate in the DTC system, or otherwise take
actions in respect of such interests, may be affected by the lack of physical
certificate evidencing such interests. For certain other restrictions on the
transferability of the notes, see "--Book-Entry, Delivery and Form--Exchange of
Book-Entry Notes for Certificated Notes" and "--Book-Entry, Delivery and Form--
Exchanges between Regulation S Notes and Rule 144A Notes."
Except as described below, owners of interests in the Global Notes will not
have notes registered in their names, will not receive physical delivery of
notes in certificated form and will not be considered the registered owners or
holders thereof under the indenture for any purpose.
Payments in respect of the principal and premium and liquidated damages, if
any, and interest on a Global Note registered in the name of DTC or its nominee
will be payable by the trustee to DTC or its nominee in its capacity as the
registered holder under the indenture. Under the terms of the indenture, we and
the trustee will treat the persons in whose names the notes, including the
Global Notes, are registered as the owners thereof for the purpose of receiving
such payments and for any and all other purposes whatsoever.
54
Consequently, none of us, the trustee nor any agent of the Company or the
trustee has or will have any responsibility or liability for:
(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of
beneficial ownership interests in the Global Notes, or for
maintaining, supervising or reviewing any of DTC's records or any
Participant's or Indirect Participant's records relating to the
beneficial ownership interests in the Global Notes; or
(2) any other matter relating to the actions and practices of DTC or any
of its Participants or Indirect Participants.
DTC has advised the Company that its current practice, upon receipt of any
payment in respect of securities such as the notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the relevant security
such as the Global Notes as shown on the records of DTC. Payments by
Participants and the Indirect Participants to the beneficial owners of notes
will be governed by standing instructions and customary practices and will not
be the responsibility of DTC, the trustee or the Company. Neither the Company
nor the trustee will be liable for any delay by DTC or its Participants in
identifying the beneficial owners of the notes, and the Company and the trustee
may conclusively rely on and will be protected in relying on instructions from
DTC or its nominee as the registered owner of the notes for all purposes.
Except for trades involving only Euroclear and Clearstream participants,
interests in the Global Notes will trade in DTC's Same-Day Funds Settlement
System and secondary market trading activity in such interests will therefore
settle in immediately available funds, subject in all cases to the rules and
procedures of DTC and its participants.
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 and Clearstream will be effected in the ordinary way
in accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
notes described herein, cross-market transfers between 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; however, such
cross-market transactions will require delivery of instructions to Euroclear or
Clearstream, as the case may be, by the counterparty in such system in
accordance with the rules and procedures and within the established deadlines
(Brussels time) of such system. Euroclear or Clearstream, as the case may be,
will, if the transaction meets its settlement requirements, 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 Note in DTC,
and making or receiving payment in accordance with normal procedures for same-
day fund 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 accounts of a Euroclear or
Clearstream Participant purchasing an interest in a Global Note from a
Participant in DTC will be credited, and any such 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 or
Clearstream) immediately following the settlement date of DTC. Cash received in
Euroclear or Clearstream as a result of sales of interests in a Global Note by
or through a Euroclear or Clearstream 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. DTC has advised
the Company that it will take any action permitted to be taken by a holder of
notes only at the direction of one or more Participants to whose account DTC
interests in the Global Notes are credited and only in respect of such portion
of the aggregate principal amount of the notes as to which such Participant or
Participants have given direction. However, if there is an Event of Default
under the notes, DTC reserves the right to exchange Global Notes for legended
notes in certificated form, and to distribute such notes to its Participants.
55
The information in this section concerning DTC, Euroclear and Clearstream
and their book-entry systems has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
Although DTC, Euroclear and Clearstream have agreed to the foregoing
procedures to facilitate transfers of interests in the Regulation S Global Notes
and in the Rule 144A Global Notes among Participants in DTC, Euroclear and
Clearstream, they are under no obligation to perform or to continue to perform
such procedures, and such procedures may be discontinued at any time. None of
the Company, the initial purchaser or the trustee will have any responsibility
for the performance by DTC, Euroclear or Clearstream or their respective
Participants or indirect Participants of their respective obligations under the
rules and procedures governing their operations.
Exchange of Book-Entry Notes for Certificated Notes
A Global Note is exchangeable for Certificated Notes if:
(1) DTC (a) notifies the Company that it is unwilling or unable to
continue as depositary for the Global Note and the Company thereupon
fails to appoint a successor depositary or (b) has ceased to be a
clearing agency registered under the Exchange Act;
(2) The Company, at its option, notifies the trustee in writing that it
elects to cause the issuance of the notes in certificated form; or
(3) there shall have occurred and be continuing to occur a Default or an
Event of Default with respect to the notes.
In addition, beneficial interests 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 trustee 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 (in accordance with its customary procedures) and will bear, in the
case of the Rule 144A Global Notes or the Regulation S Temporary Global Notes,
the restrictive legend referred to in "Notice to Investors" unless the Company
determines otherwise, in compliance with applicable law.
Exchanges between Regulation S Notes and Rule 144A Notes
Prior to the expiration of the Restricted Period, a beneficial interest in
the Regulation S Global Notes were to be transferred to a person who takes
delivery in the form of an interest in the corresponding Rule 144A Global Notes
only upon receipt by the trustee of a written certification from the transferor
to the effect that such transfer is being made
(1) to a person whom the transferor reasonably believes is a Qualified
Institutional Buyer in a transaction meeting the requirements of Rule
144A; or
(2) pursuant to another exemption from the registration requirements under
the Securities Act which is accompanied by an opinion of counsel
regarding availability of such exemption; and
(3) in accordance with all applicable securities laws of any state of the
United States or any other jurisdiction.
Beneficial interests in the Rule 144A Global Notes may be transferred to a
person who takes delivery in the form of an interest in the Regulation S Global
Notes, whether before or after the expiration of the Restricted Period, only if
the transferor first delivers to the trustee a written certificate to the effect
that such transfer is being made in accordance with Rule 903 or 904 of
Regulation S or Rule 144 (if available) and that, if such transfer occurs prior
to the expiration of the Restricted Period, the interest transferred will be
held immediately thereafter through Euroclear or Clearstream.
56
Any beneficial interest in one of the Global Notes that is transferred to a
person who takes delivery in the form of an interest in another Global Note
will, upon transfer, cease to be an interest in such Global Note and become an
interest in such other Global Note, and accordingly, will thereafter be subject
to all transfer restrictions and other procedures applicable to beneficial
interests in such other Global Note for as long as it remains such an interest.
Transfers involving an exchange of a beneficial interest in the Regulation
S Global Notes for a beneficial interest in the Rule 144A Global Notes or vice
versa will be effected by DTC by means of an instruction originated by the
trustee through the DTC/Deposit Withdraw at Custodian system. Accordingly, in
connection with such transfer, appropriate adjustments will be made to reflect a
decrease in the principal amount of the Regulation S Global Notes and a
corresponding increase in the principal amount of the Rule 144A Global Notes or
vice versa, as applicable.
Payments; Certifications by Holders of the Regulation S Temporary Global Notes
A holder of a beneficial interest in the Regulation S Temporary Global
Notes must provide Euroclear or Clearstream, as the case may be, with a
certificate in the form required by the indenture certifying that the beneficial
owner of the interest in the Regulation S Temporary Global Notes is either not a
U.S. Person (as defined below) or has purchased such interest in a transaction
that is exempt from the registration requirements under the Securities Act (the
"Regulation S Certificate"), and Euroclear or Clearstream, as the case may be,
must provide to the trustee (or the Paying Agent if other than the trustee) a
certificate in the form required by the indenture, prior to any exchange of such
beneficial interest for a beneficial interest in the Regulation S Permanent
Global Notes.
"U.S. Person" means
(1) any individual resident in the United States;
(2) any partnership or corporation organized or incorporated under the
laws of the United States;
(3) any estate of which an executor or administrator is a U.S. Person
(other than an estate governed by foreign law and of which at least
one executor or administrator is a non-U.S. Person who has sole or
shared investment discretion with respect to its assets);
(4) any trust of which any trustee is a U.S. Person (other than a trust of
which at least one trustee is a non-U.S. Person who has sole or shared
investment discretion with respect to its assets and no beneficiary of
the trust (and no settlor if the trust is revocable) is a U.S.
Person):
(5) any agency or branch of a foreign entity located in the United States;
(6) any non-discretionary or similar account (other than an estate or
trust) held by a dealer or other fiduciary for the benefit or account
of a U.S. Person;
(7) any discretionary or similar account (other than an estate or trust)
held by a dealer or other fiduciary organized, incorporated or (if an
individual) resident in the United States (other than such an account
held for the benefit or account of a non-U.S. Person):
(8) any partnership or corporation organized or incorporated under the
laws of a foreign jurisdiction and formed by a U.S. Person principally
for the purpose of investing in securities not registered under the
Securities Act (unless it is organized or incorporated, and owned, by
accredited investors within the meaning of Rule 501(a) under the
Securities Act who are not natural persons, estates or trusts);
provided, however, that the term "U.S. Person" shall not include:
(a) a branch or agency of a U.S. Person that is located and
operating outside the United States for valid business
purposes as a locally regulated branch or agency engaged in
the banking or insurance business;
57
(b) any employee benefit plan established and administered in
accordance with the law, customary practices and
documentation of a foreign country; and
(c) the international organizations set forth in Section
902(o)(7) of Regulation S under the Securities Act and any
other similar international organizations, and their
agencies, affiliates and pension plans.
Certificated Notes
Subject to certain conditions, any person having a beneficial interest in
the Global Note may, upon request to the trustee, exchange such beneficial
interest for notes in the form of Certificated Notes. Upon any such issuance,
the trustee is required to register such Certificated Notes in the name of, and
cause the same to be delivered to, such person or persons (or the nominee of any
thereof). All such Certificated Notes issued in exchange for the Rule 144A
Global Note or the Regulation S Temporary Global Note would be subject to the
legend requirements described herein under "Notice to Investors." In addition,
if:
(1) We notify the trustee in writing that the Depositary is no longer
willing or able to act as a depositary and we are unable to locate a
qualified successor within 90 days; or
(2) We, at our option, notify the trustee in writing that we elect to
cause the issuance of notes in the form of Certificated Notes under
the indenture;
then, upon surrender by the Global Note holder of its Global Note, Certificated
Notes will be issued to each person that the Global Note holder and the
Depositary identify as being the beneficial owner of the related notes.
Neither we nor the trustee will be liable for any delay by the Global Note
holder or the Depositary in identifying the beneficial owners of notes and we
and the trustee may conclusively rely on, and will be protected in relying on,
instructions from the Global Note holder or the Depositary for all purposes.
Same Day Settlement And Payment
The 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 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.
Registration Rights; Liquidated Damages
The Company, the Issuer, the Guarantors and the initial purchasers entered
into the registration rights agreement on October 2, 2000. Pursuant to the
registration rights agreement, the Company, the Issuer and the Guarantors agreed
to file with the SEC the Exchange Offer Registration Statement on the
appropriate form under the Securities Act with respect to the exchange 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 New Notes. If:
(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 SEC 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:
58
(a) based on an opinion of counsel, it is prohibited by law or
SEC policy from participating in the exchange offer; or
(b) it is a broker-dealer and owns notes acquired directly from
the Issuer,
the Company, the Issuer and the Guarantors will file with the SEC a Shelf
Registration Statement to cover resales of the 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 Guarantors will use their reasonable best
efforts to cause the applicable registration statement to be declared effective
as promptly as possible by the SEC.
For purposes of the preceding, "Transfer Restricted Securities" means each:
(1) note, until the earliest to occur of:
(a) the date on which that note is exchanged in the Exchange
Offer for a New 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 note has been disposed of in
accordance with a Shelf Registration Statement (and
purchasers thereof have been issued New Notes); or
(c) the date on which that note is distributed to the public
pursuant to Rule 144 under the Securities Act; and
(2) New Note issued to a broker-dealer until the date on which that New
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 registration rights agreement provides that:
(1) The Company, the Issuer and the Guarantors will file an Exchange Offer
Registration Statement with the SEC on or prior to 90 days after the
Closing Date;
(2) the Company, the Issuer and the Guarantors will use their reasonable
best efforts to have the Exchange Offer Registration Statement
declared effective by the SEC on or prior to 150 days after the
Closing Date;
(3) unless the Exchange Offer would not be permitted by applicable law or
SEC policy, the Company, the Issuer and the Guarantors will 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
SEC, New Notes in exchange for all notes tendered prior thereto in the
Exchange Offer; and
(4) if obligated to file the Shelf Registration Statement, the Company,
the Issuer and the Guarantors will file the Shelf Registration
Statement with the SEC 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 SEC on or prior to
90 days after that obligation arises.
The Company, the Issuer and the Guarantors will pay liquidated damages to
each holder of notes upon the occurrence of any of the following:
59
(1) the Company, the Issuer and the Guarantors fail to file any of the
Registration Statements required by the registration rights agreement
on or before the date specified for that filing;
(2) any of such Registration Statements is not declared effective by the
SEC on or prior to the date specified for that effectiveness (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
(each such event referred to in clauses (1) through (4) above 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 notes held by that holder; and
(2) an additional $.05 per week per $1,000 principal amount of 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 notes.
All accrued liquidated damages will be paid on each Damages Payment Date to
the Global 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 notes will be required to make certain representations to the
Company, the Issuer and the Guarantors (as described in the 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 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.
60
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 U.S. 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
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such 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 such 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 date, we will make this
prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such 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
pursuant to 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 such
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
such broker-dealer or the purchasers of any such exchange notes. Any broker-
dealer that resells exchange notes that were received by it for its own account
pursuant to the exchange offer and any broker or dealer that participates in a
distribution of such exchange notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale or exchange
notes and any commission or concessions received by any such 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 date to
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such 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 initial
purchasers of the outstanding notes directly from us) and will indemnify the
holders of the notes (including any broker-dealers) against certain liabilities,
including liabilities under the statement of a material fact contained in the
registration statement or prospectus or (2) an omission or alleged omission to
state in the registration statement or the prospectus a material fact that is
necessary to make the statements therein, in light of the circumstances under
which they were made, 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 the holder.
FORWARD-LOOKING STATEMENTS
This offering memorandum includes "forward-looking statements" including,
in particular, the statements about our plans, strategies and prospects under
the headings "Prospectus Summary." Although we believe that our
61
plans, intentions and 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. Important factors that could cause
actual results to differ materially from the forward-looking statements we make
in this offering memorandum, including under the heading "Risk Factors." All
forward-looking statements attributable to the Company 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 relating 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, 1999 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.
The consolidated financial statements incorporated in this prospectus by
reference from Washington Homes, Inc.'s Current Report on Form 8-K dated
September 20, 2000, for the year ended July 31, 2000 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority 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
offices located at 500 West Madison Street, 14th Floor, Chicago, Illinois 60661
and 7 World Trade Center, Suite 1300, New York, New York 10048. 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 American Stock Exchange, and reports, proxy statements and
other information also can be inspected at the offices of the American Stock
Exchange, 86 Trinity Place, New York, New York 10006.
This prospectus is part of a registration statement filed with the SEC.
The SEC 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 SEC 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.
Hovnanian has filed the following documents with the Commission and these
documents are incorporated herein by reference:
. Annual Report on Form 10-K for the fiscal year ended October 31, 1999,
Registration File No. 1-8551, and
. Quarterly Reports on Form 10-Q for the quarters ended January 31,
2000, April 30, 2000 and July 31, 2000, Registration File No. 1-8551
. Current Report on Form 8-K of Washington Homes, Inc. filed on
September 20, 2000.
62
. Current Report on Form 8-K filed on December 14, 2000.
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 offering made by this prospectus are to 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).
63
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 another 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 1029(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
24
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 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 is 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.
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
25
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.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
1.1 Purchase Agreement, dated September 27, 2000 among K. Hovnanian
Enterprises, Inc., Hovnanian Enterprises, Inc. and certain of its
Subsidiaries and Donaldson, Lufkin and Jenrette Securities Corporation,
Salomon Smith Barney, Inc. and PNC Capital Markets, Inc.
4.1 Indenture, dated as of October 2, 2000 among K. Hovnanian Enterprises,
Inc., the Guarantors party named therein, and First Union National Bank
as trustee.
4.2 Registration Rights Agreement, dated as of October 2, 2000 among K.
Hovnanian Enterprises, Inc., Hovnanian Enterprises, Inc. and certain of
its Subsidiaries and Donaldson, Lufkin and Jenrette Securities
Corporation, Salomon Smith Barney, Inc. and PNC Capital Markets, Inc.
5.1 Opinion of Simpson Thacher & Bartlett *
12.1 Statement re: Computation of Ratios of Earnings to Fixed Charges*
21.1 Subsidiaries of the Registrant
23.1 Consent of Simpson Thacher & Bartlett (contained in 5.1)*
23.2 Consent of Ernst & Young LLP
23.3 Consent of Deloitte & Touche LLP
24.1 Powers of Attorney
25.1 Statement of eligibility and qualification under the Trust Indenture
Act of 1939
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.
Item 22. Undertakings
The undersigned registrant hereby undertakes:
1. 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 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.
2. 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.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore
unenforceable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Hovnanian Enterprises, Inc. certifies that it has reasonable grounds to believe
that it meets all the requirements for filing on Form S-4 and 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
December 27, 2000.
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 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.
- ------------------------------------------------------------------------------------------------------------------------
Signature Title Date
--------- ----- ----
- ------------------------------------------------------------------------------------------------------------------------
/s/ Kevork S. Hovnanian
---------------------------- Chairman of the Board December 27, 2000
Kevork S. Hovnanian
- ------------------------------------------------------------------------------------------------------------------------
/s/ Ara K. Hovnanian
----------------------------- Chief Executive Officer, President and December 27, 2000
Ara K. Hovnanian Director
- ------------------------------------------------------------------------------------------------------------------------
/s/ Paul W. Buchanan
----------------------------- Senior Vice President - Corporate December 27, 2000
Paul W. Buchanan Controller and Director
- ------------------------------------------------------------------------------------------------------------------------
/s/ Peter S. Reinhart
----------------------------- Senior Vice President, General December 27, 2000
Peter S. Reinhart Counsel/Secretary and Director
- ------------------------------------------------------------------------------------------------------------------------
/s/ J. Larry Sorsby
----------------------------- Executive Vice President, Chief December 27, 2000
J. Larry Sorsby Financial Officer and Director
- ------------------------------------------------------------------------------------------------------------------------
_____________________________ Director December __, 2000
Arthur M. Greenbaum
- ------------------------------------------------------------------------------------------------------------------------
_____________________________ Director December __, 2000
Desmond P. McDonald
- ------------------------------------------------------------------------------------------------------------------------
_____________________________ Director December __, 2000
Stephen D. Weinroth
- ------------------------------------------------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
- -------------------------------------------------------------------------------------------------------------------
Signature Title Date
--------- ----- ----
- -------------------------------------------------------------------------------------------------------------------
/s/ Kevork S. Hovnanian Chairman of the Board December 27, 2000
----------------------------------
Kevork S. Hovnanian
- -------------------------------------------------------------------------------------------------------------------
/s/ Ara K. Hovnanian Chief Executive Officer, December 27, 2000
---------------------------------- President and Director
Ara K. Hovnanian
- -------------------------------------------------------------------------------------------------------------------
/s/ Paul W. Buchanan Senior Vice President - December 27, 2000
---------------------------------- Corporate Controller and Director
Paul W. Buchanan
- -------------------------------------------------------------------------------------------------------------------
/s/ Peter S. Reinhart Senior Vice President, General December 27, 2000
---------------------------------- Counsel/Secretary and Director
Peter S. Reinhart
- -------------------------------------------------------------------------------------------------------------------
/s/ J. Larry Sorsby Executive Vice President, Chief December 27, 2000
---------------------------------- Financial Officer and Director
J. Larry Sorsby
- -------------------------------------------------------------------------------------------------------------------
Director December __, 2000
__________________________________
Arthur M. Greenbaum
- -------------------------------------------------------------------------------------------------------------------
Director December __, 2000
__________________________________
Desmond P. McDonald
- -------------------------------------------------------------------------------------------------------------------
Director December __, 2000
__________________________________
Stephen D. Weinroth
- -------------------------------------------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
K. Hovnanian Enterprises, Inc. certifies that it has reasonable grounds to
believe that it meets all the requirements for filing on Form S-4 and 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, December 27, 2000.
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 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.
- ------------------------------------------------------------------------------------------------------------------------
Signature Title Date
--------- ----- ----
- ------------------------------------------------------------------------------------------------------------------------
/s/ Kevork S. Hovnanian
--------------------------- Chairman of the Board December 27, 2000
Kevork S. Hovnanian
- ------------------------------------------------------------------------------------------------------------------------
/s/ Ara K. Hovnanian
--------------------------- Chief Executive Officer, President and December 27, 2000
Ara K. Hovnanian Director
- ------------------------------------------------------------------------------------------------------------------------
/s/ Paul W. Buchanan
--------------------------- Senior Vice President - Corporate December 27, 2000
Paul W. Buchanan Controller and Director
- ------------------------------------------------------------------------------------------------------------------------
/s/ Peter S. Reinhart
--------------------------- Senior Vice President, General December 27, 2000
Peter S. Reinhart Counsel/Secretary and Director
- ------------------------------------------------------------------------------------------------------------------------
/s/ J. Larry Sorsby
--------------------------- Executive Vice President, Chief December 27, 2000
J. Larry Sorsby Financial Officer and Director
- ------------------------------------------------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
- -------------------------------------------------------------------------------------------------------------------
Signature Title Date
--------- ----- ----
- -------------------------------------------------------------------------------------------------------------------
/s/ Kevork S. Hovnanian Chairman of the Board December 27, 2000
-------------------------------
Kevork S. Hovnanian
- -------------------------------------------------------------------------------------------------------------------
/s/ Ara K. Hovnanian Chief Executive Officer, December 27, 2000
-------------------------------
Ara K. Hovnanian President and Director
- -------------------------------------------------------------------------------------------------------------------
/s/ Paul W. Buchanan Senior Vice President - Corporate December 27, 2000
-------------------------------
Paul W. Buchanan Controller and Director
- -------------------------------------------------------------------------------------------------------------------
/s/ Peter S. Reinhart Senior Vice President, General December 27, 2000
-------------------------------
Peter S. Reinhart Counsel/Secretary and Director
- -------------------------------------------------------------------------------------------------------------------
/s/ J. Larry Sorsby Executive Vice President, Chief December 27, 2000
-------------------------------
J. Larry Sorsby Financial Officer and Director
- -------------------------------------------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
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 December 27, 2000.
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 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.
- -------------------------------------------------------------------------------------------------------------------
Signature Title Date
--------- ----- ----
- -------------------------------------------------------------------------------------------------------------------
/s/ Kevork S. Hovnanian Chairman of the Board December 27, 2000
---------------------------
Kevork S. Hovnanian
- -------------------------------------------------------------------------------------------------------------------
/s/ Ara K. Hovnanian Chief Executive Officer, December 27, 2000
---------------------------
Ara K. Hovnanian President and Director
- -------------------------------------------------------------------------------------------------------------------
/s/ Paul W. Buchanan Senior Vice President - Corporate December 27, 2000
---------------------------
Paul W. Buchanan Controller and Director
- -------------------------------------------------------------------------------------------------------------------
/s/ Peter S. Reinhart Senior Vice President, General December 27, 2000
---------------------------
Peter S. Reinhart Counsel/Secretary and Director
- -------------------------------------------------------------------------------------------------------------------
/s/ J. Larry Sorsby Executive Vice President, Chief December 27, 2000
---------------------------
J. Larry Sorsby Financial Officer and Director
- -------------------------------------------------------------------------------------------------------------------
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
- -------------------------------------------------------------------------------------------------------------------
Signature Title Date
--------- ----- ----
- -------------------------------------------------------------------------------------------------------------------
/s/ Kevork S. Hovnanian Chairman of the Board December 27, 2000
---------------------------
Kevork S. Hovnanian
- -------------------------------------------------------------------------------------------------------------------
/s/ Ara K. Hovnanian Chief Executive Officer, December 27, 2000
---------------------------
Ara K. Hovnanian President and Director
- -------------------------------------------------------------------------------------------------------------------
/s/ Paul W. Buchanan Senior Vice President - Corporate December 27, 2000
---------------------------
Paul W. Buchanan Controller and Director
- -------------------------------------------------------------------------------------------------------------------
/s/ Peter S. Reinhart Senior Vice President, General December 27, 2000
---------------------------
Peter S. Reinhart Counsel/Secretary and Director
- -------------------------------------------------------------------------------------------------------------------
/s/ J. Larry Sorsby Executive Vice President, Chief December 27, 2000
---------------------------
J. Larry Sorsby Financial Officer and Director
- -------------------------------------------------------------------------------------------------------------------
Exhibit 1.1
K. HOVNANIAN ENTERPRISES, INC.
as ISSUER
HOVNANIAN ENTERPRISES, INC.
and CERTAIN OF ITS SUBSIDIARIES
as GUARANTORS
$150,000,000
10.5% Series A Senior Notes due 2007
Purchase Agreement
September 27, 2000
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON SMITH BARNEY INC.
PNC CAPITAL MARKETS, INC.
$150,000,000
K. Hovnanian Enterprises, Inc.
10.5% Series A Senior Notes due 2007
Guaranteed by
Hovnanian Enterprises, Inc.
and certain of its Subsidiaries
PURCHASE AGREEMENT
------------------
September 27, 2000
DONALDSON, LUFKIN& JENRETTE
SECURITIES CORPORATION
SALOMON SMITH BARNEY INC.
PNC CAPITAL MARKETS, INC.
c/o Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
K. Hovnanian Enterprises, Inc., a New Jersey corporation (the "Company"),
proposes to issue and sell to Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ"), Salomon Smith Barney Inc. and PNC Capital Markets, Inc.
(each an "Initial Purchaser" and collectively the "Initial Purchasers") an
aggregate of $150 million in principal amount of its 10.5% Series A Senior Notes
due 2007 (the "Series A Notes") guaranteed (the " Guarantees") by Hovnanian
Enterprises, Inc., a Delaware corporation (" Hovnanian") and the subsidiary
guarantors listed on Schedule A hereto (together with Hovnanian, the
"Guarantors"). The Series A Notes are to be issued pursuant to the provisions of
an Indenture to be dated as of the Closing Date (as amended, the "Indenture")
among the Company, the Guarantors and First Union National Bank, as Trustee (the
"Trustee"). Capitalized terms used
1
but not defined herein shall have the meanings given to such terms in the
Indenture.
Section 1. Offering Memorandum. The Series A Notes will be offered and
sold to the Initial Purchasers pursuant to one or more exemptions from the
registration requirements under the Securities Act of 1933, as amended (the
"Act"). The Company and the Guarantors have prepared a preliminary offering
memorandum, dated September 20, 2000 (the "Preliminary Offering Memorandum") and
a final offering memorandum, dated September 27, 2000 (the "Offering
Memorandum"), relating to the Series A Notes and the Guarantees.
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Series A Notes (and all
securities issued in exchange therefor, in substitution thereof or upon
conversion thereof) shall bear the following legend:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S.
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)
OF REGULATION D 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
2
RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF
RULE 903 OR 904 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 NOTES 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 FROM 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 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 TRANSACTION" 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."
Section 2. Agreements to Sell and Purchase. On the basis of the
representations and warranties contained in this Agreement, and subject to its
terms and conditions, the Company agrees to issue and sell to the Initial
Purchasers, and each Initial Purchaser agrees, severally and not jointly, to
purchase from the Company the principal amount of Series A Notes set forth
opposite the name of such Initial Purchaser on Schedule B hereto at a purchase
price equal to 96.475% of the principal amount thereof (the "Purchase Price").
3
Section 3. Terms of Offering. The Initial Purchasers have advised the
Company that the Initial Purchasers will make offers (the "Exempt Resales") of
the Series A Notes purchased hereunder on the terms set forth in the Offering
Memorandum, as amended or supplemented, solely to (i) persons whom the Initial
Purchasers reasonably believe to be "qualified institutional buyers" as defined
in Rule 144A under the Act ("QIBs") and (ii) persons permitted to purchase the
Series A Notes in offshore transactions in reliance upon Regulation S under the
Act (each, a "Regulation S Purchaser") (such persons specified in clauses (i)
and (ii) being referred to herein as the "Eligible Purchasers"). The Initial
Purchasers will offer the Series A Notes to Eligible Purchasers initially at a
price equal to 97.6% of the principal amount thereof. Such price may be changed
at any time without notice.
Holders (including subsequent transferees) of the Series A Notes will have
the registration rights set forth in the registration rights agreement (the
"Registration Rights Agreement"), to be dated the Closing Date, in substantially
the form of Exhibit A hereto, for so long as such Series A Notes constitute
"Transfer Restricted Securities" (as defined in the Registration Rights
Agreement). Pursuant to the Registration Rights Agreement, the Company and the
Guarantors will agree to file with the Securities and Exchange Commission (the
"Commission") under the circumstances set forth therein, (i) a registration
statement under the Act (the "Exchange Offer Registration Statement") relating
to the Company's 10.5% Series B Senior Notes due 2007 (the "Series B Notes"), to
be offered in exchange for the Series A Notes (such offer to exchange being
referred to as the "Exchange Offer") and the Guarantees thereof and (ii) a shelf
registration statement pursuant to Rule 415 under the Act (the "Shelf
Registration Statement" and, together with the Exchange Offer Registration
Statement, the "Registration Statements") relating to the resale by certain
holders of the Series A Notes and to use its best efforts to cause such
Registration Statements to be declared and remain effective and usable for the
periods specified in the Registration Rights Agreement and to consummate the
Exchange Offer. This Agreement, the Indenture, the Notes, the Guarantees and the
Registration Rights Agreement are hereinafter sometimes referred to collectively
as the "Operative Documents."
Section 4. Deliver and Payment.
(a) Delivery of, and payment of the Purchase Price for, the Series A
Notes shall be made at the offices of Simpson Thacher & Bartlett, 425
Lexington Avenue, New York, NY 10017 or such other location as may be
mutually acceptable. Such delivery and payment shall be made at 9:30 a.m.
New York City time, on October 2, 2000 or at such other time on the same
date or such other date as shall be agreed upon by the Initial
4
Purchasers and the Company in writing. The time and date of such delivery
and the payment for the Series A Notes are herein called the
"Closing Date."
(b) One or more of the Series A Notes in definitive global form,
registered in the name of Cede & Co., as nominee of the Depository Trust
Company ("DTC"), having an aggregate principal amount corresponding to the
aggregate principal amount of the Series A Notes (collectively, the
"Global Note"), shall be delivered by the Company to the Initial Purchasers
(or as the Initial Purchasers direct) in each case with any transfer taxes
thereon duly paid by the Company against payment by the Initial Purchasers
of the Purchase Price thereof by wire transfer in same day funds to the
order of the Company. The Global Note shall be made available to the
Initial Purchasers for inspection not later than 9:30 a.m., New York City
time, on the business day immediately preceding the Closing Date.
Section 5. Agreements of the Company and Hovnanian. Company and Hovnanian
agree with the Initial Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if requested by the
Initial Purchasers, confirm such advice in writing, (A) of the issuance by any
state securities commission of any stop order suspending the qualification or
exemption from qualification of any Series A Notes for offering or sale in any
jurisdiction designated by the Initial Purchasers pursuant to Section 5(e)
hereof, or the initiation of any proceeding by any state securities commission
or any other federal or state regulatory authority for such purpose and (B) of
the happening of any event during the period referred to in Section 5(c) below
that makes any statement of a material fact made in the Preliminary Offering
Memorandum or the Offering Memorandum untrue or that requires any additions to
or changes in the Preliminary Offering Memorandum or the Offering Memorandum in
order to make the statements therein not misleading. The Company and the
Guarantors shall use their best efforts to prevent the issuance of any stop
order or order suspending the qualification or exemption of any Series A Notes
under any state securities or Blue Sky laws and, if at any time any state
securities commission or other federal or state regulatory authority shall issue
an order suspending the qualification or exemption of any Series A Notes under
any state securities or Blue Sky laws, the Company and the Guarantors shall use
their best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time.
(b) To furnish the Initial Purchasers and those persons identified by the
Initial Purchasers to the Company as many copies of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments or
5
supplements thereto, as the Initial Purchasers may reasonably request for the
time period specified in Section 5(c). Subject to the Initial Purchasers'
compliance with their representations and warranties and agreements set forth in
Section 7 hereof, the Company consents to the use of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments and supplements
thereto required pursuant hereto, by the Initial Purchasers in connection with
Exempt Resales.
(c) During such period as in the opinion of counsel for the Initial
Purchasers an Offering Memorandum is required by law to be delivered in
connection with Exempt Resales by the Initial Purchasers, (A) not to make any
amendment or supplement to the Offering Memorandum of which the Initial
Purchasers shall not previously have been advised or to which the Initial
Purchasers shall reasonably object after being so advised and (B) to prepare
promptly upon the Initial Purchasers' reasonable request, any amendment or
supplement to the Offering Memorandum which may be necessary or advisable in
connection with such Exempt Resales.
(d) If, during the period referred to in Section 5(c) above, any event
shall occur or condition shall exist as a result of which, in the opinion of
counsel to the Initial Purchasers, it becomes necessary to amend or supplement
the Offering Memorandum in order to make the statements therein, in the light of
the circumstances when such Offering Memorandum is delivered to an Eligible
Purchaser, not misleading, or if, in the opinion of counsel to the Initial
Purchasers, it is necessary to amend or supplement the Offering Memorandum to
comply with any applicable law, forthwith to prepare an appropriate amendment or
supplement to such Offering Memorandum so that the statements therein, as so
amended or supplemented, will not, in the light of the circumstances when it is
so delivered, be misleading, or so that such Offering Memorandum will comply
with applicable law, and to furnish to the Initial Purchasers and such other
persons as the Initial Purchasers may designate such number of copies thereof as
the Initial Purchasers may reasonably request.
(e) Prior to the sale of all Series A Notes pursuant to Exempt Resales as
contemplated hereby, to cooperate with the Initial Purchasers and counsel to the
Initial Purchasers in connection with the registration or qualification of the
Series A Notes for offer and sale to the Initial Purchasers and pursuant to
Exempt Resales under the securities or Blue Sky laws of such jurisdictions as
the Initial Purchasers may request and to continue such registration or
qualification in effect so long as required for Exempt Resales and to file such
consents to service of process or other documents as may be necessary in order
to effect such registration or qualification; provided, however, that neither
the Company nor any Guarantor shall be required in connection therewith to
qualify as a foreign
6
corporation in any jurisdiction in which it is not now so qualified or to take
any action that would subject it to general consent to service of process or
taxation other than as to matters and transactions relating to the Preliminary
Offering Memorandum, the Offering Memorandum or Exempt Resales, in any
jurisdiction in which it is not now so subject.
(f) So long as the Notes are outstanding, to furnish to the Initial
Purchasers as soon as available copies of all reports or other communications
furnished by the Company or any of the Guarantors to its security holders or
furnished to or filed with the Commission or any national securities exchange on
which any class of securities of the Company or any of the Guarantors is listed
and such other publicly available information concerning the Company, Hovnanian
and/or its subsidiaries as the Initial Purchasers may reasonably request.
(g) So long as any of the Series A Notes remain outstanding and during any
period in which the Company and the Guarantors are not subject to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
to make available to any holder of Series A Notes in connection with any sale
thereof and any prospective purchaser of such Series A Notes from such holder,
the information ("Rule 144A Information") required by Rule 144A(d)(4) under the
Act.
(h) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of the obligations of the Company and the
Guarantors under this Agreement, including: (A) the fees, disbursements and
expenses of counsel to the Company and the Guarantors and accountants of the
Company and the Guarantors in connection with the sale and delivery of the
Series A Notes to the Initial Purchasers and pursuant to Exempt Resales, and all
other fees and expenses in connection with the preparation, printing and
distribution of the Preliminary Offering Memorandum, the Offering Memorandum and
all amendments and supplements to any of the foregoing (including financial
statements), including the mailing and delivering of copies thereof to the
Initial Purchasers and persons designated by them in the quantities specified
herein, (B) all costs and expenses related to the transfer and delivery of the
Series A Notes to the Initial Purchasers and pursuant to Exempt Resales,
including any transfer or other taxes payable thereon, (C) all costs of printing
or producing this Agreement, the other Operative Documents and any other
agreements or documents in connection with the offering, purchase, sale or
delivery of the Series A Notes, (D) all expenses in connection with the
registration or qualification of the Series A Notes and the Guarantees for offer
and sale under the securities or Blue Sky laws of the several states and all
costs of printing or producing any preliminary and
8
supplemental Blue Sky memoranda in connection therewith (including the filing
fees and fees and disbursements of counsel for the Initial Purchasers in
connection with such registration or qualification and memoranda relating
thereto), (E) the cost of printing certificates representing the Series A Notes
and the Guarantees, (F) all expenses and listing fees in connection with the
application for quotation of the Series A Notes in the National Association of
Securities Dealers, Inc. ("NASD") Automated Quotation System -PORTAL ("PORTAL"),
(G) the fees and expenses of the Trustee and the Trustee's counsel in connection
with the Indenture, the Notes and the Guarantees, (H) the costs and charges of
any transfer agent, registrar and/or depositary (including DTC), (I) any fees
charged by rating agencies for the rating of the Notes, (J) all costs and
expenses of the Exchange Offer and any Registration Statement, as set forth in
the Registration Rights Agreement, and (K) and all other costs and expenses
incident to the performance of the obligations of the Company and the Guarantors
hereunder for which provision is not otherwise made in this Section.
(i) To use its best efforts to effect the inclusion of the Series A Notes
in PORTAL and to maintain the listing of the Series A Notes on PORTAL for so
long as the Series A Notes are outstanding.
(j) To obtain the approval of DTC for "book-entry" transfer of the Notes,
and to comply with all of its agreements set forth in the representation letters
of the Company and the Guarantors to DTC relating to the approval of the Notes
by DTC for "book-entry" transfer.
(k) During the period beginning on the date hereof and continuing to and
including the Closing Date, not to offer, sell, contract to sell or otherwise
transfer or dispose of any debt securities of the Company or any Guarantor or
any warrants, rights or options to purchase or otherwise acquire debt securities
of the Company or any Guarantor substantially similar to the Notes and the
Guarantees (other than (A) the Notes and the Guarantees and (B) commercial paper
issued in the ordinary course of business), without the prior written consent of
DLJ.
(l) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Act) that would be
integrated with the sale of the Series A Notes to the Initial Purchasers or
pursuant to Exempt Resales in a manner that would require the registration of
any such sale of the Series A Notes under the Act.
(m) Not to voluntarily claim, and to actively resist any attempts to claim,
the benefit of any usury laws against the holders of any Notes and the related
Guarantees.
9
(n) To cause the Exchange Offer to be made in the appropriate form to
permit Series B Notes and guarantees thereof by the Guarantors registered
pursuant to the Act to be offered in exchange for the Series A Notes and the
Subsidiary Guarantees and to comply with all applicable federal and state
securities laws in connection with the Exchange Offer.
(o) To comply with all of its agreements set forth in the Registration
Rights Agreement.
(p) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by it prior to the
Closing Date and to satisfy all conditions precedent to the delivery of the
Series A Notes and the Guarantees.
SECTION 6. Representations and Warranties of the Company and
Hovnanian. The Company and Hovnanian represent and warrant to each of the
Initial Purchasers that:
(a) The Preliminary Offering Memorandum and the Offering Memorandum do not,
and any supplement or amendment to them will not, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties contained in this Section 6(a) shall not apply to
statements in or omissions from the Preliminary Offering Memorandum or the
Offering Memorandum (or any supplement or amendment thereto) based upon
information relating to the Initial Purchasers furnished to the Company in
writing by the Initial Purchasers expressly for use therein. No stop order
preventing the use of the Preliminary Offering Memorandum or the Offering
Memorandum, or any amendment or supplement thereto, or any order asserting that
any of the transactions contemplated by this Agreement are subject to the
registration requirements of the Act, has been issued.
(b) Each of the Company, Hovnanian and its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation and has the corporate power and
authority to carry on its business as described in the Preliminary Offering
Memorandum and the Offering Memorandum and to own, lease and operate its
properties, and each is duly qualified and is in good standing as a foreign
corporation authorized to do business in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the business, prospects,
10
financial condition or results of operations of Hovnanian and its subsidiaries,
taken as a whole (a "Material Adverse Effect").
(c) All outstanding shares of capital stock of the Company and Hovnanian
have been duly authorized and validly issued and are fully paid, non-assessable
and not subject to any preemptive or similar rights.
(d) All of the outstanding shares of capital stock of each of Hovnanian's
subsidiaries have been duly authorized and validly issued and are fully paid and
non-assessable, and are owned by Hovnanian, directly or indirectly through one
or more subsidiaries, free and clear of any security interest, claim, lien,
encumbrance or adverse interest of any nature (each, a "Lien").
(e) This Agreement has been duly authorized, executed and delivered by the
Company and Hovnanian.
(f) The Indenture has been duly authorized by the Company and each of the
Guarantors and, on the Closing Date, will have been validly executed and
delivered by the Company and each of the Guarantors. When the Indenture has been
duly executed and delivered by the Company and each of the Guarantors, and,
assuming the Indenture is a valid and binding obligation of the Trustee, the
Indenture will be a valid and binding agreement of the Company and each
Guarantor, enforceable against the Company and each Guarantor in accordance with
its terms except as the enforceability thereof may be limited by the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing. On the Closing Date, the
Indenture will conform in all material respects to the requirements of the Trust
Indenture Act of 1939, as amended (the "TIA" or "Trust Indenture Act"), and the
rules and regulations of the Commission applicable to an indenture which is
qualified thereunder.
(g) The Series A Notes have been duly authorized and, on the Closing Date,
will have been validly executed and delivered by the Company. When the Series A
Notes have been issued, executed and authenticated in accordance with the
provisions of the Indenture and delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement, the Series A Notes
will be entitled to the benefits of the Indenture and will be valid and binding
obligations of the Company, enforceable in accordance with their terms except as
the enforceability thereof may be limited by the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether
11
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing. On the Closing Date, the Series A Notes will conform as
to legal matters to the description thereof contained in the Offering
Memorandum.
(h) On the Closing Date, the Series B Notes will have been duly authorized
by the Company. When the Series B Notes are issued, executed and authenticated
in accordance with the terms of the Exchange Offer and the Indenture, the Series
B Notes will be entitled to the benefits of the Indenture and will be the valid
and binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as the enforceability thereof may be limited
by the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
(i) The Guarantee to be endorsed on the Series A Notes by each Guarantor
has been duly authorized by such Guarantor and, on the Closing Date, will have
been duly executed and delivered by each such Guarantor. When the Series A Notes
have been issued, executed and authenticated in accordance with the Indenture
and delivered to and paid for by the Initial Purchasers in accordance with the
terms of this Agreement, the Guarantee of each Guarantor endorsed thereon will
be entitled to the benefits of the Indenture and will be the valid and binding
obligation of such Guarantor, enforceable against such Guarantor in accordance
with its terms, except as the enforceability thereof may be limited by the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing. On the
Closing Date, the Guarantees to be endorsed on the Series A Notes will conform
as to legal matters to the description thereof contained in the Offering
Memorandum.
(j) The Guarantee to be endorsed on the Series B Notes by each Guarantor
has been duly authorized by such Guarantor and, when issued, will have been duly
executed and delivered by each such Guarantor. When the Series B Notes have been
issued, executed and authenticated in accordance with the terms of the Exchange
Offer and the Indenture, the Guarantee of each Guarantor endorsed thereon will
be entitled to the benefits of the Indenture and will be the valid and binding
obligation of such Guarantor, enforceable against such Guarantor in accordance
with its terms, except as the enforceability thereof may be limited by the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting
12
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing. When the Series B Notes are issued, authenticated and delivered, the
Guarantees to be endorsed on the Series B Notes will conform as to legal matters
to the description thereof contained in the Offering Memorandum.
(k) The Registration Rights Agreement has been duly authorized by the
Company and each of the Guarantors and, on the Closing Date, will have been duly
executed and delivered by the Company and each of the Guarantors. When the
Registration Rights Agreement has been duly executed and delivered, the
Registration Rights Agreement will be a valid and binding agreement of the
Company and each of the Guarantors, enforceable against the Company and each
Guarantor in accordance with its terms except as the enforceability thereof may
be limited by the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing. On the Closing Date, the Registration Rights Agreement will conform as
to legal matters to the description thereof in the Offering Memorandum.
(l) Neither the Company, Hovnanian nor any of its subsidiaries is in
violation of its respective charter or by-laws or in default in the performance
of any obligation, agreement, covenant or condition contained in any indenture,
loan agreement, mortgage, lease or other agreement or instrument that is
material to the Company, Hovnanian and its subsidiaries, taken as a whole, to
which the Company, Hovnanian or any of its subsidiaries is a party or by which
the Company, Hovnanian or any of its subsidiaries or their respective property
is bound.
(m) The execution, delivery and performance of this Agreement and the other
Operative Documents by the Company and each of the Guarantors, as applicable,
compliance by the Company and each of the Guarantors with all provisions hereof
and thereof and the consummation of the transactions contemplated hereby and
thereby will not (A) require any consent, approval, authorization or other order
of, or qualification with, any court or governmental body or agency (except such
consents as may be required under the securities or Blue Sky laws of the various
states), (B) conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the charter or by-laws of the Company or any
Guarantor or any indenture, loan agreement, mortgage, lease or other agreement
or instrument that is material to the Company or Hovnanian and its subsidiaries,
taken as a whole, to which the Company or the Guarantors is a party or by which
the Company or the Guarantors or their respective property is bound, (C) violate
or conflict with any applicable law or any rule, regulation,
13
judgment, order or decree of any court or any governmental body or agency having
jurisdiction over the Company, Hovnanian or any of its subsidiaries or their
respective property, (D) result in the imposition or creation of (or the
obligation to create or impose) a Lien under, any agreement or instrument to
which the Company, Hovnanian or any of its subsidiaries is a party or by which
the Company, Hovnanian or any of its subsidiaries or their respective property
is bound, or (E) result in the termination, suspension or revocation of any
Authorization (as defined below) of the Company, Hovnanian or any of its
subsidiaries or result in any other impairment of the rights of the holder of
any such Authorization; except where the failure to be valid and in full force
and effect or to be in compliance, the occurrence of any such event or the
presence of any such restriction or to have any such Authorization would not,
singly or in the aggregate have a Material Adverse Effect;
(n) The execution, delivery and performance of the Merger Agreement by the
Company and Hovnanian, compliance by the Company and Hovnanian with all
provisions hereof and thereof and the consummation of the transactions
contemplated hereby and thereby will not (A) to the knowledge of the Company or
Hovnanian, require any consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency (except such
consents (i) listed in the Merger Agreement and (ii) as may be required under
the securities or Blue Sky laws of the various states), (B) conflict with or
constitute a breach of any of the terms or provisions of, or a default under,
the charter or bylaws of the Company or Hovnanian or any indenture, loan
agreement, mortgage, lease or other agreement or instrument that is material to
the Company or Hovnanian and its subsidiaries, taken as a whole, to which the
Company or Hovnanian is a party or by which the Company or Hovnanian or their
respective property is bound, ir (C) violate or conflict with any applicable law
or any rule, regulation, judgment, order or decree of any court or any
governmental body or agency having jurisdiction over the Company, Hovnanian or
any of its subsidiaries or their respective property;
(o) There are no legal or governmental proceedings pending or threatened to
which the Company, Hovnanian or any of its subsidiaries is or could be a party
or to which any of their respective property is or could be subject, which might
result, singly or in the aggregate, in a Material Adverse Effect.
(p) Except as disclosed in the Offering Memorandum, neither the Company,
Hovnanian nor any of its subsidiaries has violated any foreign, federal, state
or local law or regulation relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes, pollutants
or contaminants ("Environmental Laws"), any provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or any
14
provisions of the Foreign Corrupt Practices Act or the rules and regulations
promulgated thereunder, except for such violations which, singly or in the
aggregate, would not have a Material Adverse Effect.
(q) Except as disclosed in the Offering Memorandum, each of the Company,
Hovnanian and its subsidiaries has such permits, licenses, consents, exemptions,
franchises, authorizations and other approvals (each, an "Authorization") of,
and has made all filings with and notices to, all governmental or regulatory
authorities and self-regulatory organizations and all courts and other
tribunals, including without limitation, under any applicable Environmental
Laws, as are necessary to own, lease, license and operate its respective
properties and to conduct its business, except where the failure to have any
such Authorization or to make any such filing or notice would not, singly or in
the aggregate, have a Material Adverse Effect. Each such Authorization is valid
and in full force and effect and each of the Company, Hovnanian and its
subsidiaries is in compliance with all the terms and conditions thereof and with
the rules and regulations of the authorities and governing bodies having
jurisdiction with respect thereto; and no event has occurred (including, without
limitation, the receipt of any notice from any authority or governing body)
which allows or, after notice or lapse of time or both, would allow, revocation,
suspension or termination of any such Authorization or results or, after notice
or lapse of time or both, would result in any other impairment of the rights of
the holder of any such Authorization; except where such failure to be valid and
in full force and effect or to be in compliance, the occurrence of any such
event or the presence of any such restriction would not, singly or in the
aggregate, have a Material Adverse Effect.
(r) The accountants, Ernst & Young LLP and Deloitte & Touche, that have
certified the financial statements and supporting schedules included in the
Preliminary Offering Memorandum and the Offering Memorandum are independent
public accountants with respect to the Company and the Guarantors and Washington
Homes, Inc., as applicable, as required by the Act and the Exchange Act.
(s) The historical financial statements, together with related schedules
and notes forming part of the Offering Memorandum (and any amendment or
supplement thereto), present fairly the consolidated financial position, results
of operations and changes in financial position of Hovnanian and its
subsidiaries and Washington Homes, Inc. and its subsidiaries, on the basis
stated in the Offering Memorandum at the respective dates or for the respective
periods to which they apply; such statements and related schedules and notes
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein; and the other
15
financial and statistical information and data set forth in the Offering
Memorandum (and any amendment or supplement thereto) are, in all material
respects, accurately presented and prepared on a basis consistent with such
financial statements and the books and records of Hovnanian and Washington
Homes, Inc., as applicable.
(t) The pro forma financial statements included in the Preliminary
Offering Memorandum and the Offering Memorandum have been prepared on a basis
consistent with the historical financial statements of Hovnanian and its
subsidiaries and give effect to assumptions used in the preparation thereof on a
reasonable basis and in good faith and present fairly the historical and
proposed transactions contemplated by the Preliminary Offering Memorandum and
the Offering Memorandum. The other pro forma financial and statistical
information and data included in the Offering Memorandum are, in all material
respects, accurately presented and prepared on a basis consistent with the pro
forma financial statements.
(u) The Company and Hovnanian are not and, after giving effect to the
offering and sale of the Series A Notes and the application of the net proceeds
thereof as described in the Offering Memorandum, will not be, an "investment
company," as such term is defined in the Investment Company Act of 1940, as
amended.
(v) There are no contracts, agreements or understandings between the
Company or Hovnanian and any person granting such person the right to require
the Company or Hovnanian to file a registration statement under the Act with
respect to any securities of the Company or Hovnanian or to require the Company
or Hovnanian to include such securities with the Notes and Guarantees registered
pursuant to any Registration Statement.
(w) Neither the Company, Hovnanian nor any of its subsidiaries nor any
agent thereof acting on the behalf of them has taken, and none of them will
take, any action that might cause this Agreement or the issuance or sale of the
Series A Notes to violate Regulation G (12 C.F.R. Part 207), Regulation T (12
C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R.
Part 224) of the Board of Governors of the Federal Reserve System.
(x) No "nationally recognized statistical rating organization" as such term
is defined for purposes of Rule 436(g)(2) under the Act has indicated to the
Company or Hovnanian that it is considering (1) the downgrading, suspension, or
withdrawal of, or any review for a possible change that does not indicate the
direction of the possible change in, any rating so assigned or (2) any change in
the
16
outlook for any rating of the Company, any Guarantor or any securities of the
Company or Hovnanian;
(y) Since the respective dates as of which information is given in the
Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (A) there has not occurred any material adverse change or any
development involving a prospective material adverse change in the condition,
financial or otherwise, or the earnings, business, management or operations of
the Company, Hovnanian and its subsidiaries, taken as a whole, (B) there has not
been any material adverse change or any development involving a prospective
material adverse change in the capital stock or in the long-term debt of the
Company, Hovnanian or any of its subsidiaries and (C) neither the Company,
Hovnanian nor any of its subsidiaries has incurred any material liability or
obligation, direct or contingent.
(z) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all the information specified in, and
meeting the requirements of, Rule 144A(d)(4) under the Act.
(aa) When the Series A Notes and the Guarantees are issued and delivered
pursuant to this Agreement, neither the Series A Notes nor the Guarantees will
be of the same class (within the meaning of Rule 144A under the Act) as any
security of the Company or Hovnanian that is listed on a national securities
exchange registered under Section 6 of the Exchange Act or that is quoted in a
United States automated inter-dealer quotation system.
(bb) No form of general solicitation or general advertising (as defined in
Regulation D under the Act) was used by the Company, Hovnanian or any of their
respective representatives (other than the Initial Purchasers, as to whom the
Company and Hovnanian make no representation) in connection with the offer and
sale of the Series A Notes contemplated hereby, including, but not limited to,
articles, notices or other communications published in any newspaper, magazine,
or similar medium or broadcast over television or radio, or any seminar or
meeting whose attendees have been invited by any general solicitation or general
advertising. No securities of the same class as the Series A Notes have been
issued and sold by the Company within the six-month period immediately prior to
the date hereof.
(cc) Prior to the effectiveness of any Registration Statement, the
Indenture is not required to be qualified under the TIA.
17
(dd) None of the Company, Hovnanian nor any of their respective affiliates
or any person acting on its or their behalf (other than the Initial
Purchasers, as to whom the Company and Hovnanian make no representation) has
engaged or will engage in any directed selling efforts within the meaning of
Regulation S under the Act ("Regulation S") with respect to the Series A Notes
or the Guarantees.
(ee) The Company, Hovnanian and their respective affiliates and all persons
acting on their behalf (other than the Initial Purchasers, as to whom the
Company and the Guarantors make no representation) have complied with and will
comply with the offering restrictions requirements of Regulation S in connection
with the offering of the Series A Notes outside the United States and, in
connection therewith, the Offering Memorandum will contain the disclosure
required by Rule 902(h).
(ff) Each of the Company and Hovnanian is a "reporting issuer", as defined
in Rule 902 under the Act.
(gg) The Series A Notes offered and sold by the Company or Hovnanian in
reliance on Regulation S have been and will be offered and sold only in offshore
transactions.
(hh) The sale of the Series A Notes by the Company or Hovnanian pursuant to
Regulation S is not part of a plan or scheme to evade the registration
provisions of the Act.
(ii) No registration under the Act of the Series A Notes or the Guarantees
is required for the sale of the Series A Notes and the Guarantees to the Initial
Purchasers as contemplated hereby or for the Exempt Resales assuming the
accuracy of the Initial Purchasers' representations and warranties and
agreements set forth in Section 7 hereof.
The Company acknowledges that the Initial Purchasers and, for purposes of
the opinions to be delivered to the Initial Purchaser pursuant to Section 9
hereof, counsel to the Company and the Guarantors and counsel to the Initial
Purchasers will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
Section 7. Initial Purchasers' Representations and Warranties. Each of the
Initial Purchasers, severally and not jointly, represents and warrants to the
Company and the Guarantors, and agrees that:
18
(a) Such Initial Purchaser is a QIB with such knowledge and experience in
financial and business matters as is necessary in order to evaluate the merits
and risks of an investment in the Series A Notes.
(b) Such Initial Purchaser (A) is not acquiring the Series A Notes with a
view to any distribution thereof or with any present intention of offering or
selling any of the Series A Notes in a transaction that would violate the Act or
the securities laws of any state of the United States or any other applicable
jurisdiction and (B) will be reoffering and reselling the Series A Notes only to
(x) QIBs in reliance on the exemption from the registration requirements of the
Act provided by Rule 144A and (y) in offshore transactions in reliance upon
Regulation S under the Act.
(c) Such Initial Purchaser agrees that no form of general solicitation or
general advertising (within the meaning of Regulation D under the Act) has been
or will be used by such Initial Purchaser or any of its representatives in
connection with the offer and sale of the Series A Notes pursuant hereto,
including, but not limited to, articles, notices or other communications
published in any newspaper, magazine or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising.
(d) Such Initial Purchaser agrees that, in connection with Exempt Resales,
such Initial Purchaser will solicit offers to buy the Series A Notes only from,
and will offer to sell the Series A Notes only to, Eligible Purchasers. Each
Initial Purchaser further agrees that it will offer to sell the Series A Notes
only to, and will solicit offers to buy the Series A Notes only from (A)
Eligible Purchasers that the Initial Purchaser reasonably believes are QIBs and
(B) Regulation S Purchasers, in each case, that agree that (x) the Series A
Notes purchased by them may be resold, pledged or otherwise transferred within
the time period referred to under Rule 144(k) (taking into account the
provisions of Rule 144(d) under the Act, if applicable) under the Act, as in
effect on the date of the transfer of such Series A Notes, only (1) to the
Company, Hovnanian or any of its subsidiaries, (2) 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 under the Act,
(3) in an offshore transaction (as defined in Rule 902 under the Act) meeting
the requirements of Rule 904 of the Act, (4) in a transaction meeting the
requirements of Rule 144 under the Act, (5) to an Accredited Institution that,
prior to such transfer, furnishes the Trustee a signed letter containing certain
representations and agreements relating to the registration of transfer of such
Series A Note (the form of which is substantially the same as Annex A to the
Offering Memorandum) and, if such transfer is in respect of an aggregate
principal amount of Series A Notes less than $250,000, an opinion of
19
counsel acceptable to the Company that such transfer is in compliance with the
Act, (6) in accordance with another exemption from the registration requirements
of the Act (and based upon an opinion of counsel acceptable to the Company) or
(7) 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 (y) they will deliver to each person to
whom such Series A Notes or an interest therein is transferred a notice
substantially to the effect of the foregoing.
(e) Such Initial Purchaser and its affiliates or any person acting on its
or their behalf have not engaged or will not engage in any directed selling
efforts within the meaning of Regulation S with respect to the Series A Notes or
the Guarantees.
(f) The Series A Notes offered and sold by such Initial Purchaser pursuant
hereto in reliance on Regulation S have been and will be offered and sold only
in offshore transactions.
(g) The sale of the Series A Notes offered and sold by such Initial
Purchaser pursuant hereto in reliance on Regulation S is not part of a plan or
scheme to evade the registration provisions of the Act.
(h) Such Initial Purchaser agrees that it has not offered or sold and will
not offer or sell the Series A Notes in the United States or to, or for the
benefit or account of, a U.S. Person (other than a distributor), in each case,
as defined in Rule 902 under the Act (i) as part of its distribution at any time
and (ii) otherwise until 40 days after the later of the commencement of the
offering of the Series A Notes pursuant hereto and the Closing Date, other than
in accordance with Regulation S of the Act or another exemption from the
registration requirements of the Act. Such Initial Purchaser agrees that, during
such 40-day restricted period, it will not cause any advertisement with respect
to the Series A Notes (including any "tombstone" advertisement) to be published
in any newspaper or periodical or posted in any public place and will not issue
any circular relating to the Series A Notes, except such advertisements as are
permitted by and include the statements required by Regulation S.
(i) Such Initial Purchaser agrees that, at or prior to confirmation of a
sale of Series A Notes by it to any distributor, dealer or person receiving a
selling concession, fee or other remuneration during the 40-day restricted
period referred to in Rule 903(c)(2) under the Act, it will send to such
distributor, dealer or person receiving a selling concession, fee or other
remuneration a confirmation or notice to substantially the following effect:
20
"The Series A Notes covered hereby have not been registered under the
U.S. Securities Act of 1933, as amended (the "Securities Act"), and
may not be offered and sold within the United States or to, or for the
account or benefit of, U.S. persons (i) as part of your distribution
at any time or (ii) otherwise until 40 days after the later of the
commencement of the Offering and the Closing Date, except in either
case in accordance with Regulation S under the Securities Act (or Rule
144A or to Accredited Institutions in transactions that are exempt
from the registration requirements of the Securities Act), and in
connection with any subsequent sale by you of the Series A Notes
covered hereby in reliance on Regulation S during the period referred
to above to any distributor, dealer or person receiving a selling
concession, fee or other remuneration, you must deliver a notice to
substantially the foregoing effect. Terms used above have the meanings
assigned to them in Regulation S."
Such Initial Purchaser acknowledges that the Company and the Guarantors
and, for purposes of the opinions to be delivered to each Initial Purchasers
pursuant to Section 9 hereof, counsel to the Company and the Guarantors and
counsel to the Initial Purchasers will rely upon the accuracy and truth of the
foregoing representations and such Initial Purchaser hereby consents to such
reliance.
Section 8. Indemnification. (a) The Company and Hovnanian, jointly and
severally, agree to indemnify and hold harmless each Initial Purchaser, its
directors, its officers and each person, if any, who controls any Initial
Purchaser 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
and 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 the Offering Memorandum (or any amendment or
supplement thereto), the Preliminary Offering Memorandum or any Rule 144A
Information provided by the Company or Hovnanian to any holder or prospective
purchaser of Series A Notes pursuant to Section 5(g) 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
any such untrue statement or omission or alleged untrue statement or omission
based upon information relating to any Initial Purchaser furnished in writing to
the Company or Hovnanian by such Initial Purchaser through you expressly for use
therein; provided, however, that the foregoing indemnity agreement with respect
to any Preliminary Offering
21
Memorandum shall not inure to the benefit of any Initial Purchaser who failed to
deliver a Final Offering Memorandum, as then amended or supplemented (so long as
the Final Offering Memorandum and any amendment or supplement thereto was
provided by the Company or Hovnanian to the several Initial Purchasers in the
requisite quantity and on a timely basis to permit proper delivery on or prior
to the Closing Date) to the person asserting any losses, claims, damages,
liabilities or judgements caused by any untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Offering Memorandum,
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, if such material misstatement or omission or alleged material
misstatement or omission was cured in the Final Offering Memorandum, as so
amended or supplemented.
(b) Each Initial Purchaser agrees, severally and not jointly, to indemnify
and hold harmless the Company and Hovnanian, and their respective directors and
officers and each person, if any, who controls Hovnanian within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, to the same extent as
the foregoing indemnity from the Company and Hovnanian to such Initial Purchaser
but only with reference to information relating to such Initial Purchaser
furnished in writing to the Company or Hovnanian by such Initial Purchaser
expressly for use in the Preliminary Offering Memorandum or the Offering
Memorandum.
(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 party") 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), the Initial Purchasers 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
such Initial Purchaser). 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
22
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 DLJ, in the case
of parties indemnified pursuant to Section 8(a), and by the Company or
Hovnanian, 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 the indemnification provided for in this Section 8 is
unavailable to an indemnified party or insufficient 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 and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company and Hovnanian on the one hand and the Initial Purchasers on the other
hand from the offering of the Series A Notes or (ii) if the allocation provided
by clause 8(d)(i) above 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 Hovnanian on
the one hand and the Initial Purchasers on the other
23
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 benefits received by the Company and
Hovnanian on the one hand and the Initial Purchasers on the other hand shall be
deemed to be in the same proportion as the total net proceeds from the offering
(after deducting underwriting discounts and commissions but before deducting
expenses) received by the Company and Hovnanian, and the total discounts and
commissions received by the Initial Purchasers, bear to the total price to
investors of the Series A Notes, in each case as set forth in the table on the
cover page of the Offering Memorandum. The relative fault of the Company and
Hovnanian on the one hand and the Initial Purchasers, 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 and Hovnanian on
the one hand or the Initial Purchasers 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, Hovnanian and the Initial Purchasers 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 Initial Purchasers 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 Initial Purchaser shall be required to contribute any amount in
excess of the amount by which the total discounts and commissions received by
such Initial Purchasers exceeds the amount of any damages which such Initial
Purchaser 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 Initial Purchasers' obligations to contribute pursuant to
this Section 8(d) are several in proportion to the respective principal amount
of Series A Notes purchased by each of the Initial Purchasers hereunder and not
joint.
24
(e) The remedies provided for in this Section 8 are not exclusive and shall
not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
Section 9. Conditions of Initial Purchasers Obligations. The several
obligations of the Initial Purchasers to purchase the Series A Notes under this
Agreement are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company, Hovnanian and
its subsidiaries contained in this Agreement shall be true and correct on the
Closing Date with the same force and effect as if made on and as of the Closing
Date.
(b) On or after the date hereof, (i) there shall not have occurred any
downgrading, suspension or withdrawal of, nor shall any notice have been given
of any potential or intended downgrading, suspension or withdrawal of, or of any
review (or of any potential or intended review) for a possible change that does
not indicate the direction of the possible change in, any rating of the Company
or Hovnanian or any securities of the Company or Hovnanian (including, without
limitation, the placing of any of the foregoing ratings on credit watch with
negative or developing implications or under review with an uncertain direction)
by any "nationally recognized statistical rating organization" as such term is
defined for purposes of Rule 436(g)(2) under the Act, (ii) there shall not have
occurred any change, nor shall any notice have been given of any potential or
intended change, in the outlook for any rating of the Company or Hovnanian or
any securities of the Company or Hovnanian by any such rating organization and
(iii) no such rating organization shall have given notice that it has assigned
(or is considering assigning) a lower rating to the Series A Notes than that on
which the Series A Notes were marketed.
(c) You shall have received on the Closing Date a certificate dated the
Closing Date, signed by Ara K. Hovnanian and J. Larry Sorsby, in their
capacities as President-Chief Executive Officer and Chief Financial Officer-
Treasurer of Hovnanian, confirming the matters set forth in Sections 6(w), 9(a)
and 9(b) and that, in all material respects, the Company and Hovnanian have
complied with all of the agreements and satisfied all of the conditions herein
contained and required to be complied with or satisfied by the Company and
Hovnanian on or prior to the Closing Date.
(d) Since the respective dates as of which information is given in the
Offering Memorandum other than as set forth in the Offering Memorandum
(exclusive of any amendments or supplements thereto subsequent to the date of
this Agreement), (i) there shall not have occurred any change or any development
25
involving a prospective change in the condition, financial or otherwise, or the
earnings, business, management or operations of Hovnanian and its subsidiaries,
taken as a whole, (ii) there shall not have been any change or any development
involving a prospective change in the capital stock or in the long-term debt of
the Company or Hovnanian and (iii) neither the Company, Hovnanian, nor any of
its subsidiaries shall have incurred any liability or obligation, direct or
contingent, the effect of which, in any such case described in clause 9(d)(i),
9(d)(ii) or 9(d)(iii), in your judgment, is material and adverse and, in your
judgment, makes it impracticable to market the Series A Notes on the terms and
in the manner contemplated in the Offering Memorandum.
(e) You shall have received on the Closing Date an opinion (satisfactory to
you and counsel for the Initial Purchasers), dated the Closing Date, of Simpson
Thacher & Bartlett, New York, New York, counsel for the Company, to the effect
that:
(i) the Series A Notes have been duly authorized by the Company and
assuming due authentication thereof by the Trustee and your payment and
delivery in accordance with the terms of this Agreement, will be entitled
to the benefits of the Indenture and will be valid and binding obligations
of the Company, enforceable in accordance with their terms except as the
enforceability thereof may be limited by the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing;
(ii) assuming the guarantee of the Series A Notes has been duly
authorized and issued by the Guarantors, when the Series A Notes have been
executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Initial Purchasers in
accordance with the terms of this Agreement, such guarantee will be valid
and binding obligations of such Guarantors except as the enforceability
thereof may be limited by the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to
or affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an implied
covenant of good faith and fair dealing;
(iii) the Indenture has been duly authorized, executed and delivered
by the Company and the Guarantors and, assuming the Indenture is a valid
and legally binding obligation of the Trustee, constitutes a valid and
binding agreement of the Company and the Guarantors, enforceable in
26
accordance with its terms except as the enforceability thereof may be
limited by the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of
good faith and fair dealing;
(iv) the Indenture complies as to form in all material respects with
the requirements of the TIA, and the rules and regulations of the
Commission applicable to an indenture which is qualified thereunder. It is
not necessary in connection with the offer, sale and delivery of the Series
A Notes to the Initial Purchasers in the manner contemplated by this
Agreement or in connection with the Exempt Resales to qualify the Indenture
under the TIA;
(v) this Agreement has been duly authorized, executed and delivered
by the Company and Hovnanian;
(vi) the Registration Rights Agreement has been duly authorized,
executed and delivered by the Company and the Guarantors and is a valid and
binding agreement of the Company and the Guarantors, enforceable in
accordance with its terms except as the enforceability thereof may be
limited by the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of
good faith and fair dealing and as rights to indemnity and contribution
thereunder may be limited by applicable law;
(vii) the Series B Notes have been duly authorized
(viii) neither the Company nor Hovnanian is and, after giving effect
to the offering and sale of the Series A Notes and the application of the
proceeds thereof as described in the Offering Memorandum, will be, an
"investment company" as such term is defined in the Investment Company Act
of 1940, as amended;
(ix) no registration under the Act of the Series A Notes or the
Guarantees is required for the sale of the Series A Notes and the
Guarantees to the Initial Purchasers solely in the manner contemplated by
this Agreement or for the Exempt Resales assuming that (1) each Initial
Purchaser is a QIB or a Regulation S Purchaser, (2) the accuracy of, and
compliance with, the Initial Purchaser's representations and agreements
27
contained in Section 7 of this Agreement and (3) the accuracy of the
representations of the Company and the Guarantors set forth in Sections
6(cc), 6(dd), 6(ee), 6(ff) and 6(gg) of this Agreement;
(x) the statements under the captions "Description of Notes" in the
Offering Memorandum, insofar as such statements purport to constitute a
summary of certain terms of documents referred to therein, constitute
accurate summaries of the terms of such documents;
(xi) the statements set forth in the Offering memorandum under the
caption "Certain United States Federal Income Tax Consequences to Non-U.S.
Persons," insofar as they purport to constitute summaries of matters of
United States federal tax law and regulations or legal conclusions with
respect thereto, constitute accurate summaries of the matters described in
all material respects;
(xii) (A) each document, if any, filed pursuant to the Exchange Act
and incorporated by reference in the Offering Memorandum (except for
financial statements and other financial data included therein as to which
no opinion need be expressed) complied when so filed as to form with the
Exchange Act, (B) such counsel has no reason to believe that, as of the
date of the Offering Memorandum or as of the Closing Date, the Offering
Memorandum, as amended or supplemented, if applicable (except for the
financial statements and other financial data, as aforesaid) contains any
untrue statement of a material fact or omits 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.
In rendering such opinion, Simpson Thacher & Bartlett may rely as to
matters involving the application of laws of any jurisdiction other than the
State of New York, the General Corporation Law of the State of Delaware or the
Federal Law of the United States, to the extent they deem proper and specified
in such opinion, upon the opinion of Peter S. Reinhart, Esq., Senior Vice
President and General Counsel for the Company.
The opinion of described in Section 9(e) above shall be rendered to you at
the request of the Company and the Guarantors and shall so state therein. In
giving such opinions with respect to the matters covered by Section 9(e)(xii),
Simpson Thacher & Bartlett may state that their opinion and belief are based
upon their participation in the preparation of the Offering Memorandum and any
amendments or supplements thereto and documents incorporated therein by
reference and review and discussion of the contents thereof, but is without
independent check or verification except as specified.
28
(f) You shall have received on the Closing Date an opinion (satisfactory
to you and counsel to the Initial Purchasers), dated the Closing Date, of Peter
S. Reinhart, Esq., Senior Vice President and General Counsel for the Company, to
the effect of that:
(i) each of the Company, Hovnanian and the subsidiary guarantors
which are material and which are listed on a schedule to such opinion (the
"Material Subsidiaries") has been duly incorporated, is validly existing as
a corporation or a limited liability company in good standing under the
laws of its jurisdiction of incorporation or formation and has the
corporate power and authority to carry on its business as described in the
Offering Memorandum and to own, lease and operate its properties;
(ii) each of the Company, Hovnanian and the Material Subsidiaries is
duly qualified and is in good standing as a foreign corporation or limited
liability company authorized to do business in each jurisdiction in which
the nature of its business or its ownership or leasing 27 of property
requires such qualification, except where the failure to be so qualified
would not have a Material Adverse Effect;
(iii) all the outstanding shares of capital stock of the Company,
Hovnanian and the Material Subsidiaries have been duly authorized and
validly issued and are fully paid, non-assessable and not subject to any
preemptive or similar rights;
(iv) the guarantee of the Series A Notes has been duly authorized by
each of the Guarantors and, when the Series A Notes have been executed and
authenticated in accordance with the provisions of the Indenture and
delivered to and paid for by the Initial Purchasers in accordance with the
terms of this Agreement, such guarantee will be valid and binding
obligations of each such Guarantor except as (A) the enforceability thereof
may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and (B) rights of acceleration and the
availability of equitable remedies may be limited by equitable principles
of general applicability;
(v) this Agreement and the Registration Rights Agreement have been
duly authorized, executed and delivered by the Guarantors;
(vi) neither the Company, Hovnanian nor any of the Material
Subsidiaries is in violation of its respective charter or by-laws and, to
the best of such counsel's knowledge after due inquiry, neither the
Company,
29
Hovnanian nor any of the Material Subsidiaries is in default in the
performance of any obligation, agreement, covenant or condition contained
in any indenture, loan agreement, mortgage, lease or other agreement or
instrument that is material to the Company, Hovnanian and its subsidiaries,
taken as a whole, to which the Company, Hovnanian and its subsidiaries is a
party or by which the Company, Hovnanian or its subsidiaries or their
respective property is bound;
(vii) the execution, delivery and performance of this Agreement, the
Registration Rights Agreement, the Indenture and the Series A Notes by the
Company, the execution, delivery and performance of this Agreement, the
Registration Rights Agreement, the Indenture and the guarantee of the
Series A Notes by the Guarantors, the execution, delivery and performance
of the Merger Agreement by Hovnanian, the compliance by the Company and the
Guarantors with all the provisions hereof and thereof and the consummation
of the transactions contemplated hereby and thereby will not (A) require
any consent, approval, authorization or other order of, or qualification
with, any court or governmental body or agency (except (i) those listed in
the Merger Agreement and (ii) such as may be required under the securities
or Blue Sky laws of the various states), (B) conflict with or constitute a
breach of any of the terms or provisions of, or a default under, the
charter or by-laws of the Company, Hovnanian or any of its subsidiaries or
any indenture, loan agreement, mortgage, lease or other agreement or
instrument that is material to the Company or Hovnanian and its
subsidiaries, taken as a whole, to which the Company, Hovnanian and its
subsidiaries is a party or by which the Company, Hovnanian or its
subsidiaries or their respective property is bound, (C) violate or conflict
with any applicable law or any rule, regulation, judgment, order or decree
of any court or any governmental body or agency having jurisdiction over
the Company, Hovnanian, any of its subsidiaries or their respective
property, (D) result in the imposition or creation of (or the obligation to
create or impose) a Lien under any agreement or instrument to which the
Company, Hovnanian or any of its subsidiaries is a party or by which the
Company, Hovnanian or any of its subsidiaries or their respective property
is bound or (E) result in the suspension, termination or revocation of any
Authorization of the Company, Hovnanian or any of its subsidiaries or any
other impairment of the rights of the holder of any such Authorization;
except where the failure to be valid and in full force and effect or to be
in compliance, the occurrence of any such event or the presence of any such
restriction or to have any such Authorization would not, singly or in the
aggregate, have a Material Adverse Effect;
30
(viii) after due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company,
Hovnanian or any of its subsidiaries is or could be a party or to which any
of their respective property is or could be subject, which might result,
singly or in the aggregate, in a Material Adverse Effect;
(ix) neither the Company, Hovnanian nor any of its subsidiaries has
violated any Environmental Law, any provisions of the Employee Retirement
Income Security Act of 1974, as amended, or any provisions of the Foreign
Corrupt Practices Act or the rules and regulations promulgated thereunder,
except for such violations which, singly or in the aggregate, would not
have a Material Adverse Effect;
(x) each of the Company, Hovnanian and its subsidiaries has such
Authorizations of, and has made all filings with and notices to, all
governmental or regulatory authorities and self-regulatory organizations
and all courts and other tribunals, including, without limitation, under
any applicable Environmental Laws, as are necessary to own, lease, license
29 and operate its respective properties and to conduct its business,
except where the failure to have any such Authorization or to make any such
filing or notice would not, singly or in the aggregate, have a material
adverse effect on the business, prospects, financial condition or results
of operations of Hovnanian and its subsidiaries, taken as a whole; each
such Authorization is valid and in full force and effect and each of the
Company, Hovnanian and its subsidiaries is in compliance with all the terms
and conditions thereof and with the rules and regulations of the
authorities and governing bodies having jurisdiction with respect thereto;
and no event has occurred (including, without limitation, the receipt of
any notice from any authority or governing body) which allows or, after
notice or lapse of time or both, would allow, revocation, suspension or
termination of any such Authorization or results or, after notice or lapse
of time or both, would result in any other impairment of the rights of the
holder of any such Authorization; except where such failure to be valid and
in full force and effect or to be in compliance, the occurrence of any such
event or the presence of any such restriction would not, singly or in the
aggregate, have a Material Adverse Effect;
(xi) to the best of such counsel's knowledge after due inquiry,
there are no contracts, agreements or understandings between the Company or
Hovnanian and any person granting such person the right to require the
Company or Hovnanian to file a registration statement under the Act with
respect to any securities of the Company or Hovnanian or to require the
Company or Hovnanian to include such securities with the
31
Series A Notes and Guarantees registered pursuant to any Registration
Statement; and
(xii) (A) each document, if any, filed pursuant to the Exchange Act and
incorporated by reference in the Offering Memorandum (except for financial
statements and other financial data included therein as to which no opinion
need be expressed) complied when so filed as to form with the Exchange Act,
(B) such counsel has no reason to believe that, as of the date of the
Offering Memorandum or as of the Closing Date, the Offering Memorandum, as
amended or supplemented, if applicable (except for the financial statements
and other financial data, as aforesaid) contains any untrue statement of a
material fact or omits 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.
In rendering such opinion, such counsel may rely as to matters involving
the application of laws of any jurisdiction other than the State of New Jersey,
to 30 the extent they deem proper and specified in such opinion, upon the
opinion of Simpson Thacher & Bartlett, Counsel for the Company.
(g) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Davis Polk & Wardwell, New York, New York, counsel for the
Initial Purchasers, in form and substance reasonably satisfactory to the Initial
Purchasers.
(h) The Initial Purchasers shall have received, on each of the date hereof
and the Closing Date, a letter dated the date hereof or the Closing Date, as the
case may be, in form and substance satisfactory to you, from Ernst & Young LLP
and Deloitte & Touche LLP, independent public accountants, containing the
information and statements of the type ordinarily included in accountants'
"comfort letters" to Initial Purchasers with respect to the financial statements
and certain financial information contained in or incorporated by reference into
the Offering Memorandum.
(i) The Series A Notes shall have been rated "BB- " by Standard & Poor's
Corporation and "Ba3" by Moody's Investors Service, Inc
(j) The Series A Notes shall have been approved by the NASD for trading
and duly listed in PORTAL.
(k) Each Initial Purchaser shall have received a counterpart, conformed as
executed, of the Indenture which shall have been entered into by the Company,
the Guarantors and the Trustee..
32
(l) The Company and the Guarantors shall have executed the
Registration Rights Agreement and each Initial Purchaser shall have received an
original copy thereof, duly executed by the Company and the Guarantors.
(m) Neither the Company nor Hovnanian shall have failed on or prior to the
Closing Date to perform or comply with any of the agreements herein contained
and required to be performed or complied with by the Company and Hovnanian on or
prior to the Closing Date.
SECTION 10. Effectiveness of Agreement and Termination. This Agreement
shall become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time on or prior to the Closing
Date by you by written notice to the Company and Hovnanian if any of the
following has occurred: (i) any outbreak or escalation of hostilities or other
31 national or international calamity or crisis or change in economic conditions
or in the financial markets of the United States or elsewhere that, in your
judgment, is material and adverse and, in the Initial Purchasers' judgment,
makes it impracticable to market the Series A Notes on the terms and in the
manner contemplated in the Offering Memorandum, (ii) the suspension or material
limitation of trading in securities or other instruments on the New York Stock
Exchange, the American Stock Exchange, the Chicago Board of Options Exchange,
the Chicago Mercantile Exchange, the Chicago Board of Trade or the Nasdaq
National Market or limitation or prices for securities or other instruments on
any such exchange or the Nasdaq National Market, (iii) the suspension of trading
of any securities of the Company or Hovnanian on any exchange or in the
over-the-counter market, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority which in your opinion materially and
adversely affects, or will materially and adversely affect, the business,
prospects, financial condition or results of operations of Hovnanian and its
subsidiaries, taken as a whole, (v) the declaration of a banking moratorium by
either federal or New York State authorities or (vi) the taking of any action by
any federal, state or local government or agency in respect of its monetary or
fiscal affairs which in your opinion has a material adverse effect on the
financial markets in the United States.
If on the Closing Date any one or more of the Initial Purchasers shall fail
or refuse to purchase the Series A Notes which it or they have agreed to
purchase hereunder on such date and the aggregate principal amount of the Series
A Notes which such defaulting Initial Purchaser or Initial Purchasers, as the
case may be, agreed but failed or refused to purchase is not more than one-tenth
of the
33
aggregate principal amount of the Series A Notes to be purchased on such date by
all Initial Purchasers, each non-defaulting Initial Purchaser shall be obligated
severally, in the proportion which the principal amount of the Series A Notes
set forth opposite its name in Schedule B bears to the aggregate principal
amount of the Series A Notes which all the non-defaulting Initial Purchasers, as
the case may be, have agreed to purchase, or in such other proportion as you may
specify, to purchase the Series A Notes which such defaulting Initial Purchaser
or Initial Purchasers, as the case may be, agreed but failed or refused to
purchase on such date; provided that in no event shall the aggregate principal
amount of the Series A Notes which any Initial Purchaser has agreed to purchase
pursuant to Section 2 hereof be increased pursuant to this Section 10 by an
amount in excess of one-ninth of such principal amount of the Series A Notes
without the written consent of such Initial Purchaser. If on the Closing Date
any Initial Purchaser or Initial Purchasers shall fail or refuse to purchase the
Series A Notes and the aggregate principal amount of the Series A Notes with
respect to which such default occurs is more than one-tenth of the aggregate
principal amount of the Series A Notes to be purchased by all Initial Purchasers
and arrangements satisfactory to the Initial Purchasers, the Company and
Hovnanian for purchase of such the Series A Notes are not made within 48 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Initial Purchaser, the Company and Hovnanian. In any such
case which does not result in termination of this Agreement, either you, the
Company or Hovnanian shall have the right to postpone the Closing Date, but in
no event for longer than seven days, in order that the required changes, if any,
in the Offering Memorandum or any other documents or arrangements may be
effected. Any action taken under this paragraph shall not relieve any defaulting
Initial Purchaser from liability in respect of any default of any such Initial
Purchaser under this Agreement.
SECTION 11. Miscellaneous. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (i) if to the Company or Hovnanian, to
K. Hovnanian Enterprises, Inc., 10 Highway 35, P.O. Box 500, Red Bank, New
Jersey 07701 and (ii) if to the Initial Purchaser, c/o Donaldson, Lufkin &
Jenrette Securities Corporation, 277 Park Avenue, New York, New York 10172,
Attention: Syndicate Department, or in any case to such other address as the
person to be notified may have requested in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, Hovnanian and the several
Initial Purchasers set forth in or made pursuant to this Agreement shall remain
operative and in full force and effect, and will survive delivery of and payment
for the Series A Notes, regardless of (i) any investigation, or statement as to
the results thereof, made by or on behalf of any Initial Purchaser, the officers
or directors of any Initial Purchaser, any person controlling any Initial
Purchaser, the Company
34
or Hovnanian, the officers or directors of the Company or Hovnanian or any
person controlling the Company or Hovnanian, (ii) acceptance of the Series A
Notes and payment for them hereunder and (iii) termination of this Agreement.
If for any reason the Series A Notes are not delivered by or on behalf of
the Company as provided herein (other than as a result of any termination of
this Agreement pursuant to Section 10), the Company and Hovnanian, jointly and
severally, agree to reimburse the several Initial Purchasers for all out-of-
pocket expenses (including the fees and disbursements of counsel) incurred by
them. Notwithstanding any termination of this Agreement, the Company and
Hovnanian, jointly and severally, shall be liable for all expenses which they
have agreed to pay pursuant to Section 5(h) hereof. The Company and Hovnanian,
jointly and severally, also agree to reimburse the several Initial Purchasers,
their directors and officers and any persons controlling any of the Initial
Purchasers for any and all fees and expenses (including, without limitation, the
fees disbursements of counsel) incurred by them in connection with enforcing
their rights hereunder (including, without limitation, their rights under
Section 8 hereof).
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, Hovnanian, the Initial
Purchasers, the Initial Purchasers' directors and officers, any controlling
persons referred to herein, the Company's and Hovnanian's directors and their
respective successors and assigns, all as and to the extent provided in this
Agreement, and no other person shall acquire or have any right under or by
virtue of this Agreement. The term "successors and assigns" shall not include a
purchaser of any of the Series A Notes from any of the several Initial
Purchasers merely because of such purchase.
This Agreement shall be governed and construed in accordance with the laws
of the State of New York.
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
35
Please confirm that the foregoing correctly sets forth the agreement
between the Company, Hovnanian and the several Initial Purchasers.
Very truly yours,
K. HOVNANIAN ENTERPRISES, INC.
____________________________________
By: J. Larry Sorsby
Title:
HOVNANIAN ENTERPRISES, INC.
As Guarantor
____________________________________
By: J. Larry Sorsby
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
Acting severally on behalf of
themselves and the several
Initial Purchasers named in
Schedule B hereto
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
__________________________________
By:
Title:
36
SALOMON SMITH BARNEY INC.
_________________________
By:
Title:
PNC CAPITAL MARKETS, INC.
_________________________
By:
Title:
37
SCHEDULE A
----------
GUARANTORS
HOVNANIAN ENTERPRISES, INC.
K. HOVNANIAN AT HOPEWELL ILL, INC.
RECREATIONAL DEVELOPMENT CORP., INC.
PINE BROOK COMPANY, INC.
K. HOVNANIAN AT BEDMINSTER, INC.
K. HOVNANIAN AT THE BLUFF, INC.
K. HOVNANIAN AT ATLANTIC CITY, INC.
HOVNANIAN PROPERTIES OF ATLANTIC COUNTY, INC.
MONTEGO BAY I ACQUISITION CORP., INC.
PIKE UTILITIES, INC.
ARROW PROPERTIES, INC.
K. HOVNANIAN REAL ESTATE INVESTMENT, INC.
HOVNANIAN TEXAS, INC.
LANDARAMA, INC.
TROPICAL SERVICE BUILDERS, INC.
HOVNANIAN PENNSYLVANIA, INC.
K. HOVNANIAN PROPERTIES OF NORTH BRUNSWICK V, INC.
K. HOVNANIAN DEVELOPMENTS OF TEXAS, INC.
THE MATZEL & MUMFORD ORGANIZATION, INC.
M & M INVESTMENTS, L.P.
MATZEL & MUMFORD OF DELAWARE, INC.
PARK VILLAGE REALTY, INC.
GOODMAN FAMILY OF BUILDERS, L.P.
REFLECTIONS OF YOU INTERIORS, INC.
HEXTER FAIR LAND TITLE COMPANY I, INC.
K. HOVNANIAN AT MAHWAH VIII, INC.
K. HOVNANIAN AT WALL TOWNSHIP IV, INC.
K. HOVNANIAN AT MONTVILLE, INC.
HOVNANIAN OF PALM BEACH, INC.
K. HOVNANIAN COMPANIES OF FLORIDA, INC.
K. HOVNANIAN AT FREEHOLD TOWNSHIP, INC.
HOVNANIAN PROPERTIES OF LAKE WORTH, INC.
K. HOVNANIAN COMPANIES OF PENNSYLVANIA, INC.
K. HOVNANIAN PROPERTIES OF HAMILTON, INC.
K. HOVNANIAN AT SCOTCH PLAINS, INC.
K. HOVNANIAN AT WAYNE IV, INC.
HOVNANIAN DEVELOPMENTS OF FLORIDA, INC.
MONTEGO BAY II ACQUISITION CORP., INC.
38
HOVNANIAN OF PALM BEACH VII, INC.
K. HOVNANIAN AT WALL TOWNSHIP II, INC.
K. HOVNANIAN ENTERPRISES, INC.
HOVNANIAN OF PALM BEACH IX, INC.
HOVNANIAN AT TARPON LAKES I, INC.
K. HOVNANIAN COMPANIES NORTHEAST, INC.
KINGS GRANT EVESHAM CORP.
K. HOVNANIAN AT MANALAPAN, INC.
K. HOVNANIAN AT WALL TOWNSHIP, INC.
K. HOVNANIAN AT EAST BRUNSWICK VII, INC.
K. HOVNANIAN COMPANIES OF CENTRAL JERSEY, INC.
K. HOVNANIAN OF PALM BEACH XI, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK II, INC.
K. HOVNANIAN AT LAWRENCE SQUARE, INC.
K. HOVNANIAN AT TARPON LAKES III, INC.
K. HOVNANIAN AT HORIZON HEIGHTS, INC.
K. HOVNANIAN AT RESERVOIR RIDGE, INC. K.
K. HOVNANIAN AT JERSEY CITY I, INC.
K. HOVNANIAN INVESTMENT PROPERTIES OF NEW JERSEY, INC.
K. HOVNANIAN AT FT. MYERS I, INC.
K. HOVNANIAN AT HOWELL TOWNSHIP II, INC.
K. HOVNANIAN AT KLOCKNER FARMS, INC.
K. HOVNANIAN AT JENSEN BEACH, INC.
MOLLY PITCHER CONSTRUCTION CO., INC.
K. HOVNANIAN AT MAHWAH VII, INC.
K. HOVNANIAN AT WAYNE III, INC.
K. HOVNANIAN PROPERTIES OF EAST BRUNSWICK II, INC.
K. HOVNANIAN AT KINGS GRANT I, INC.
THE NEW FORTIS CORPORATION
K. HOVNANIAN AT CLARKSTOWN, INC.
K. HOVNANIAN COMPANIES OF NEW YORK, INC.
K. HOVNANIAN DEVELOPMENTS OF NEW YORK, INC.
DRYER ASSOCIATES, INC.
K. HOVNANIAN AT PASCO I, INC.
K. HOVNANIAN AT LAKEWOOD, INC.
K. HOVNANIAN AT MARTIN DOWNS II, INC.
K. HOVNANIAN AVIATION, INC.
K. HOVNANIAN INVESTMENT PROPERTIES, INC.
K. HOVNANIAN AT FT. MYERS II, INC.
K. HOVNANIAN AT BERNARDS II, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK III, INC.
MINERVA GROUP, INC.
K. HOVNANIAN DEVELOPMENTS OF NEW JERSEY, INC.
39
K. HOVNANIAN AT BRIDGEWATER V, INC.
K. HOVNANIAN AT NORTH BRUNSWICK II, INC.
K. HOVNANIAN AT WASHINGTONVILLE, INC.
K. HOVNANIAN AT PEEKSKILL, INC.
K. HOVNANIAN AT NEWARK I, INC.
K. HOVNANIAN AT CARMEL, INC.
K. HOVNANIAN AT EAST WINDSOR I, INC.
PARTHENON GROUP, INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP II, INC.
K. HOVNANIAN AT SOMERSET III, INC.
R.C.K. COMMUNITY MANAGEMENT CO., INC.
K. HOVNANIAN AT MONTCLAIR, NJ, INC.
K. HOVNANIAN AT EAST BRUNSWICK VI, INC.
K. HOVNANIAN AT HACKETTSTOWN, INC.
K. HOVNANIAN COMPANIES OF NORTH CAROLINA, INC.
K. HOVNANIAN AT MONTVILLE II, INC.
K. HOVNANIAN AT WALL TOWNSHIP VII, INC.
K. HOVNANIAN AT BRIDGEWATER II, INC.
K. HOVNANIAN AT MERRIMACK, INC.
K. HOVNANIAN AT BERNARDS III, INC.
K. HOVNANIAN AT WAYNE V, INC.
K. HOVNANIAN AT PASCO II, INC.
K. HOVNANIAN AT DELRAY BEACH II, INC.
K. HOVNANIAN AT BRANCHBURG I, INC. K.
K. HOVNANIAN AT PLAINSBORO II, INC.
K. HOVNANIAN AT NORTHERN WESTCHESTER, INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP, INC.
K. HOVNANIAN AT WEST ORANGE, INC.
EASTERN TITLE AGENCY, INC.
K. HOVNANIAN PROPERTIES OF FRANKLIN, INC.
K. HOVNANIAN AT MAHWAH II, INC.
NEW ENGLAND COMMUNITY MANAGEMENT COMPANY, INC.
K. HOVNANIAN AT HOWELL TOWNSHIP, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK IV, INC.
K. HOVNANIAN AT WALL TOWNSHIP VI, INC.
K. HOVNANIAN PROPERTIES OF PISCATAWAY, INC.
K. HOVNANIAN AT MAHWAH V, INC.
K. HOVNANIAN AT MERRIMACK II, INC.
K. HOVNANIAN AT NEWARK URBAN RENEWAL CORPORATION I
K. HOVNANIAN AT LAWRENCE GROVE, INC.
K. HOVNANIAN AT CEDAR GROVE I, INC.
K. HOVNANIAN AT CEDAR GROVE II, INC. K.
HOVNANIAN AT NORTH BRUNSWICK III, INC.
40
K. HOVNANIAN AT JERSEY CITY II, INC.
K. HOVNANIAN AT BURLINGTON, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK V, INC.
K. HOVNANIAN AT HALF MOON BAY, INC.
K. HOVNANIAN AT JACKSONVILLE II, INC.
K. HOVNANIAN AT BRANCHBURG II, INC.
K. HOVNANIAN AT EMBASSY LAKES, INC.
K. HOVNANIAN AT THE RESERVE AT MEDFORD, INC.
K. HOVNANIAN AT BRANCHBURG III, INC.
K. HOVNANIAN AT LOWER SAUCON, INC.
JERSEY CITY DANFORTH CSO, INC.
K. HOVNANIAN AT EAST WINDSOR II, INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP III, INC.
K. HOVNANIAN AT NEWARK URBAN RENEWAL CORP. III, INC.
K. HOVNANIAN AT SOMERSET VIII, INC.
K. HOVNANIAN AT READINGTON, INC.
K. HOVNANIAN AT HOPEWELL I, INC.
K. HOVNANIAN AT NEWARK URBAN RENEWAL CORP. IV, INC.
K. HOVNANIAN AT NEWARK URBAN RENEWAL CORP. V, INC.
K. HOVNANIAN AT PLAINSBORO III, INC.
K. HOVNANIAN AT MAHWAH IV, INC.
K. HOVNANIAN AT POMPANO BEACH, INC.
K. HOVNANIAN AT JERSEY CITY III, INC.
K. HOVNANIAN PROPERTIES OF NEWARK URBAN RENEWAL CORPORATION, INC.
K. HOVNANIAN AT NORTH BRUNSWICK IV, INC.
K. HOVNANIAN AT BRIDGEWATER IV, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK, INC.
K. HOVNANIAN AT PERKIOMEN I, INC.
K. HOVNANIAN AT VALLEYBROOK, INC.
K. HOVNANIAN AT OCEAN TOWNSHIP, INC.
K. HOVNANIAN AT PLAINSBORO I, INC.
K. HOVNANIAN REAL ESTATE OF FLORIDA, INC.
WESTERN FINANCIAL SERVICES, INC.
K. HOVNANIAN AT WAYNE, INC.
K. HOVNANIAN PROPERTIES OF RED BANK, INC.
K. HOVNANIAN AT HANOVER, INC.
K. HOVNANIAN AT LAKE CHARLESTON, INC.
NEW K. HOVNANIAN DEVELOPMENTS OF FLORIDA, INC.
K. HOVNANIAN COMPANIES OF METRO WASHINGTON, INC.
K. HOVNANIAN AT MONTGOMERY I, INC. EXC, INC.
K. HOVNANIAN DEVELOPMENTS OF METRO WASHINGTON, INC.
K. HOVNANIAN AT ASHBURN VILLAGE, INC.
41
K. HOVNANIAN AT WOODMONT, INC.
K. HOVNANIAN AT FAIRWAY VIEWS, INC.
K. HOVNANIAN AT CAROLINA COUNTRY CLUB I, INC.
K. HOVNANIAN AT CHAPEL TRAIL, INC.
K. HOVNANIAN TREASURE COAST, INC. K.
K. HOVNANIAN AT UPPER MERION, INC.
K. HOVNANIAN AT MAHWAH VI, INC.
K. HOVNANIAN AT MEDFORD I, INC.
K. HOV INTERNATIONAL, INC.
K. HOVNANIAN AT MONTCLAIR, INC.
K. HOVNANIAN AT BULL RUN, INC.
K. HOVNANIAN AT SULLY STATION, INC.
K. HOVNANIAN AT SPRING RIDGE, INC.
K. HOVNANIAN MARINE, INC.
K. HOVNANIAN AT RIVER OAKS, INC.
K. HOVNANIAN AT HOLLY CREST, INC.
K. HOVNANIAN PROPERTIES OF ROUTE 35, INC.
STONEBROOK HOMES, INC.
K. HOVNANIAN AT WINSTON TRAILS, INC.
K. HOVNANIAN AT LAKES OF BOCA RATON, INC.
K. HOVNANIAN AT LAKE CHARLESTON II, INC.
K. HOVNANIAN AT LAKE CHARLESTON III, INC.
K. HOVNANIAN AT BRIDGEWATER VI, INC.
KHIPE, INC.
K. HOVNANIAN AT FAIR LAKES, INC.
K. HOVNANIAN AT CAROLINA COUNTRY CLUB II, INC.
K. HOVNANIAN AT VALLEYBROOK II, INC.
K. HOVNANIAN AT PARK RIDGE, INC.
K. HOVNANIAN AT BELMONT, INC.
K. HOVNANIAN AT WINSTON TRAILS II, INC.
K. HOVNANIAN FAIR LAKES GLEN, INC.
K. HOVNANIAN AT PEMBROKE SHORES, INC.
K. HOVNANIAN AT CAROLINA COUNTRY CLUB III, INC.
GOVERNOR'S ABSTRACT CO., INC.
K. HOVNANIAN AT COCONUT CREEK, INC.
K. HOVNANIAN AT POLO TRACE, INC.
FOUNDERS TITLE AGENCY, INC.
K. HOVNANIAN AT BERNARDS IV, INC.
K. HOVNANIAN AT PERKIOMEN II, INC.
K. HOVNANIAN AT WAYNE II, INC.
K. HOVNANIAN AT UPPER MAKEFIELD I, INC.
K. HOVNANIAN COMPANIES OF CALIFORNIA, INC.
K. HOVNANIAN AT TERRAZA, INC.
42
K. HOVNANIAN DEVELOPMENTS OF CALIFORNIA, INC.
KHC ACQUISITION, INC.
K. HOVNANIAN AT STUART ROAD, INC.
K. HOVNANIAN AT HIGHLAND VINEYARDS, INC.
K. HOVNANIAN AT BALLANTRAE, INC.
BALLANTRAE HOME SALES, INC.
K. HOVNANIAN COMPANIES AT WILDROSE, INC.
K. HOVNANIAN AT GREENBROOK, INC.
K. HOVNANIAN AT HUNTER ESTATES, INC.
K. HOVNANIAN AT CARMEL DEL MAR, INC.
K. HOVNANIAN AT VAIL RANCH, INC.
K. HOVNANIAN AT PRINCETON, INC.
K. HOVNANIAN AT RARITAN I, INC.
K. HOVNANIAN AT CALABRIA, INC.
K. HOVNANIAN AT SENECA CROSSING, INC.
K. HOVNANIAN COMPANIES OF MARYLAND, INC.
K. HOVNANIAN DEVELOPMENTS OF MARYLAND, INC.
K. HOVNANIAN AT EXETER HILLS, INC.
K. HOVNANIAN FLORIDA REGION, INC.
K. HOVNANIAN SOUTHEAST FLORIDA, INC.
K. HOVNANIAN AT BERLIN, INC.
K. HOVNANIAN AT EAST BRUNSWICK VI, INC.
K. HOVNANIAN AT BEDMINSTER II, INC.
K. HOVNANIAN AT INVERRARY I, INC.
K. HOVNANIAN AT MAHWAH IX, INC.
K. HOVNANIAN AT NORTHLAKE, INC.
K. HOVNANIAN AT HOPEWELL IV, INC.
K. HOVNANIAN AT LOCUST GROVE I, INC.
K. HOVNANIAN AT CASTILE, INC.
K. HOVNANIAN AT TIERRASANTA, INC.
K. HOVNANIAN AT PRESTON, INC.
K. HOVNANIAN AT BERNARDS III, INC.
K. HOVNANIAN AT WAYNE VI, INC.
K. HOVNANIAN PROPERTIES OF NORTH CENTER DRIVE, INC.
BALLANTRAE DEVELOPMENT CORP.
K. HOVNANIAN AT LA TROVATA, INC.
K. HOVNANIAN AT RANCHO CRISTIANITOS, INC.
K. HOVNANIAN AT TANNERY HILL, INC.
K. HOVNANIAN PROPERTIES OF N.B. THEATRE, INC.
K. HOVNANIAN AT CRYSTAL SPRINGS, INC.
K. HOVNANIAN AT THE CEDARS, INC.
K. HOVNANIAN CONSTRUCTION MANAGEMENT, INC.
K. HOVNANIAN ACQUISITIONS, INC.
43
K. HOVNANIAN AT BURLINGTON II, INC.
K. HOVNANIAN AT BURLINGTON III, INC.
K. HOVNANIAN AT BALLANTRAE ESTATES, INC.
K. HOVNANIAN AT SMITHVILLE, INC.
K. HOVNANIAN AT JEFFERSON, INC.
K. HOVNANIAN AT UPPER FREEHOLD TOWNSHIP I, INC.
K. HOVNANIAN AT HERSHEY'S MILL, INC.
K. HOVNANIAN AT DOMINION RIDGE, INC.
K. HOVNANIAN AT PORT IMPERIAL NORTH, INC.
K. HOVNANIAN AT UNION TOWNSHIP I, INC.
K. HOVNANIAN AT EAST BRUNSWICK VIII, INC.
K. HOVNANIAN AT MANALAPAN II, INC.
K. HOVNANIAN AT HOPEWELL V, INC.
K. HOVNANIAN AT HOPEWELL VI, INC.
K. HOVNANIAN AT CAMERON CHASE, INC.
K. HOVNANIAN AT THORNBURY, INC.
K. HOVNANIAN AT WAYNE VII, INC.
K. HOVNANIAN SCOTCH PLAINS II, INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP IV, INC.
K. HOVNANIAN PORT IMPERIAL URBAN RENEWAL, INC.
K. HOVNANIAN AT EAST WHITELAND I, INC.
K. HOVNANIAN AT STONEGATE, INC.
K. HOVNANIAN AT CRESTLINE, INC.
K. HOVNANIAN AT SAN SEVAINE, INC.
K. HOVNANIAN AT SYCAMORE, INC.
K. HOVNANIAN COMPANIES OF SOUTHERN CALIFORNIA, INC.
K. HOVNANIAN AT SMITHVILLE II, INC.
K. HOVNANIAN AT STONY POINT, INC.
K. HOVNANIAN AT STONE CANYON, INC.
K. HOVNANIAN AT TUXEDO, INC.
K. HOVNANIAN AT BRIDGEPORT, INC.
K. HOVNANIAN AT SARATOGA, INC.
K. HOVNANIAN AT CHAPARRAL, INC.
K. HOVNANIAN AT OCEAN WALK, INC.
K. HOVNANIAN AT LOWER SAUGON II, INC.
K. HOVNANIAN AT STONEGATE, INC.
K. HOVNANIAN AT BARRINGTON, INC.
K. HOVNANIAN AT HAMPTON OAKS, INC.
K. HOVNANIAN AT P.C. HOMES, INC.
K. HOVNANIAN AT P.C. PROPERTIES, INC.
K. HOVNANIAN AT SUMMERWOOD, INC.
44
K. HOVNANIAN AT THE GLEN
K. HOVNANIAN'S FOUR SEASONS OF THE PALM BEACHES, INC.
K. HOVNANIAN AT WALL TOWNSHIP VIII, INC.
K. HOVNANIAN AT NORTH JERSEY ACQUISITION, L.L.C.
K. HOVNANIAN CENTRAL ACQUISITION, L.L.C.
K. HOVNANIAN SHORE ACQUISITION, L.L.C.
K. HOVNANIAN SOUTH JERSEY ACQUISITION, L.L.C.
K. HOVNANIAN AT MANSFIELD I, L.L.C.
K. HOVNANIAN AT MANSFIELD II, L.L.C.
K. HOVNANIAN NORTH CENTRAL ACQUISITION, L.L.C.
K. HOVNANIAN AT WAYNE VIII, L.L.C.
K. HOVNANIAN AT BERNARDS V, L.L.C.
K. HOVNANIAN AT WANAQUE, L.L.C.
K. HOVNANIAN AT CHESTER I, L.L.C.
K. HOVNANIAN AT WINCHESTER, L.L.C.
K. HOVNANIAN AT MIDDLETOWN, L.L.C.
K. HOVNANIAN'S FOUR SEASONS, L.L.C.
K. HOVNANIAN AT MENIFEE, L.L.C.
K. HOVNANIAN AT NORTH BRUNSWICK VI, L.L.C.
K. HOVNANIAN AT CARMEL VILLAGE, L.L.C.
K. HOVNANIAN AT LAWRENCE, L.L.C.
K. HOVNANIAN AT BLUE HERON PINES, L.L.C.
K. HOVNANIAN AT JACKSON, L.L.C.
K. HOVNANIAN AT ROLAND HEIGHTS, L.L.C.
K. HOVNANIAN AT BERKELEY, L.L.C.
K. HOVNANIAN AT KING FARM, L.L.C.
K. HOVNANIAN AT SOUTH BANK, L.L.C.
K. HOVNANIAN AT PRINCE WILLIAM, L.L.C.
K. HOVNANIAN AT LAKE TERRAPIN, L.L.C.
K. HOVNANIAN AT GUTTENBERG, L.L.C.
K. HOVNANIAN AT KING FARM, L.L.C.
K. HOVNANIAN AT SOUTH BANK, L.L.C.
K. HOVNANIAN AT CLIFTON, L.L.C.
K. HOVNANIAN AT JERSEY CITY IV, L.L.C.
K. HOVNANIAN AT LAFAYETTE ESTATES, L.L.C.
K. HOVNANIAN AT UPPER FREEHOLD TOWNSHIP II, L.L.C.
K. HOVNANIAN AT KINCAID, L.L.C.
K. HOVNANIAN AT LINWOOD, L.L.C.
K. HOVNANIAN AT SOUTH AMBOY, L.L.C.
K. HOVNANIAN AT UPPER FREEHOLD TOWNSHIP III, L.L.C.
K. HOVNANIAN AT BRENBROOKE, L.L.C.
45
K. HOVNANIAN AT BLOOMS CROSSING, L.L.C.
K. HOVNANIAN AT SPRING HILL ROAD, L.L.C.
K. HOVNANIAN AT ST. MARGARETS, L.L.C.
K. HOVNANIAN AT PARAMUS, L.L.C.
K. HOVNANIAN AT WILLOW BROOK, L.L.C.
K. HOVNANIAN AT WEST MILFORD, L.L.C.
WHI HOLDING CO., INC.
46
SCHEDULE B
----------
Principal Amount
of Series A Notes
Initial Purchasers to be Purchased
------------------ ---------
Donaldson, Lufkin & Jenrette Securities Corporation $ 90,000,000
Salomon Smith Barney Inc. $ 37,500,000
PNC Capital Markets, Inc. $ 22,500,000
------------
Total $150,000,000
47
EXHIBIT A
---------
Form of Registration Rights Agreement
48
Exhibit 4.1
====================
K. HOVNANIAN ENTERPRISES, INC.,
as Issuer
the Guarantors party hereto
and
FIRST UNION NATIONAL BANK,
as Trustee
--------------------
Indenture
Dated as of October 2, 2000
--------------------
10 1/2%
Senior Notes
Due 2007
====================
CROSS-REFERENCE TABLE/1/
------------------------
TIA Sections Indenture Sections
- ------------ ------------------
(S) 310 (a) ................................................................ 7.10
(b) ................................................................ 7.08
(S) 312 .................................................................... 10.02
(S) 313 .................................................................... 7.06
(S) 314 (a) ................................................................ 4.15, 4.16
(c) ................................................................ 10.04
(e) ................................................................ 10.05
(S) 315 (a) ................................................................ 7.01, 7.02
(b) ................................................................ 7.02, 7.05
(c) ................................................................ 7.01
(d) ................................................................ 7.02
(e) ................................................................ 5.09
(S) 316 (a) ................................................................ 2.06, 5.01, 5.03, 5.04
(b) ................................................................ 5.06
(c) ................................................................ 10.02
(S) 317 (a) (1) ............................................................ 5.07
(a) (2) ............................................................ 5.07
(b) ................................................................ 2.04
(S) 318 .................................................................... 10.01
2
TABLE OF CONTENTS
-----------------
PAGE
----
RECITALS
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions .............................................................................. 2
SECTION 1.02. Rules of Construction .................................................................... 28
ARTICLE 2
THE NOTES
SECTION 2.01. Form, Dating and Denominations; Legends .................................................. 28
SECTION 2.02. Execution and Authentication; Exchange Notes; Additional Notes ........................... 30
SECTION 2.03. Registrar, Paying Agent and Authenticating Agent; Paying Agent to Hold Money in Trust .... 31
SECTION 2.04. Replacement Notes ........................................................................ 31
SECTION 2.05. Outstanding Notes ........................................................................ 32
SECTION 2.06. Temporary Notes .......................................................................... 32
SECTION 2.07. Cancellation ............................................................................. 33
SECTION 2.08. CUSIP and CINS Numbers ................................................................... 33
SECTION 2.09. Registration, Transfer and Exchange ...................................................... 33
SECTION 2.10. Restrictions on Transfer and Exchange .................................................... 36
SECTION 2.11. Regulation S Temporary Global Notes ...................................................... 38
ARTICLE 3
REDEMPTION; OFFER TO PURCHASE
SECTION 3.01. Optional Redemption ...................................................................... 39
SECTION 3.02. Redemption with Proceeds of Public Equity Offering ....................................... 40
SECTION 3.03. Method and Effect of Redemption .......................................................... 40
SECTION 3.04. Offer to Purchase ........................................................................ 41
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Notes ......................................................................... 44
SECTION 4.02. Maintenance of Office or Agency .......................................................... 45
SECTION 4.03. Existence ................................................................................ 45
PAGE
----
SECTION 4.04. Payment of Taxes and Other Claims.......................................................... 45
SECTION 4.05. Maintenance of Properties and Insurance.................................................... 46
SECTION 4.06. Limitations on Indebtedness................................................................ 46
SECTION 4.07. Limitation on Restricted Payments.......................................................... 47
SECTION 4.08. Limitation on Liens........................................................................ 50
SECTION 4.09. Limitations on Restrictions Affecting Restricted Subsidiaries.............................. 50
SECTION 4.10. Limitations on Dispositions of Assets...................................................... 52
SECTION 4.11. Guarantees by Restricted Subsidiaries...................................................... 53
SECTION 4.12. Repurchase of Notes upon a Change of Control............................................... 53
SECTION 4.13. Limitation on Transactions with Affiliates................................................. 54
SECTION 4.14. Limitations on Mergers, Consolidations and Sales of Assets................................. 56
SECTION 4.15. Reports to Holders of Notes................................................................ 57
SECTION 4.16. Reports to Trustee......................................................................... 57
ARTICLE 5
REMEDIES
SECTION 5.01. Events of Default.......................................................................... 58
SECTION 5.02. Other Remedies............................................................................. 60
SECTION 5.03. Waiver of Defaults by Majority of Holders.................................................. 60
SECTION 5.04. Direction of Proceedings................................................................... 60
SECTION 5.05. Application of Moneys Collected by Trustee................................................. 61
SECTION 5.06. Proceedings by Noteholders................................................................. 62
SECTION 5.07. Proceedings by Trustee..................................................................... 62
SECTION 5.08. Remedies Cumulative and Continuing......................................................... 62
SECTION 5.09. Undertaking to Pay Costs................................................................... 63
SECTION 5.10. Notice of Defaults......................................................................... 63
SECTION 5.11. Waiver of Stay, Extension or Usury Laws.................................................... 63
ARTICLE 6
GUARANTEE
SECTION 6.01. Guarantee.................................................................................. 64
SECTION 6.02. Obligations of each Guarantor Unconditional................................................ 65
SECTION 6.03. Release of a Guarantor..................................................................... 65
SECTION 6.04. Execution and Delivery of Guaranty......................................................... 66
SECTION 6.05. Limitation on Guarantor Liability.......................................................... 66
SECTION 6.06. Article 6 Not to Prevent Events of Default................................................. 66
SECTION 6.07. Waiver by the Guarantors................................................................... 66
SECTION 6.08. Subrogation and Contribution............................................................... 66
ii
PAGE
----
SECTION 6.09. Stay of Acceleration.......................................................... 66
ARTICLE 7
THE TRUSTEE
SECTION 7.01. General....................................................................... 67
SECTION 7.02. Certain Rights of Trustee..................................................... 67
SECTION 7.03. Individual Rights of Trustee.................................................. 68
SECTION 7.04. Trustee's Disclaimer.......................................................... 69
SECTION 7.05. Notice of Default............................................................. 69
SECTION 7.06. Reports by Trustee to Holders................................................. 69
SECTION 7.07. Compensation and Indemnity.................................................... 69
SECTION 7.08. Replacement of Trustee........................................................ 70
SECTION 7.09. Successor Trustee by Merger................................................... 71
SECTION 7.10. Eligibility................................................................... 71
SECTION 7.11. Money Held in Trust........................................................... 71
ARTICLE 8
DEFEASANCE AND DISCHARGE
SECTION 8.01. Discharge of Issuer's Obligations............................................. 71
SECTION 8.02. Legal Defeasance.............................................................. 72
SECTION 8.03. Covenant Defeasance........................................................... 73
SECTION 8.04. Application of Trust Money.................................................... 74
SECTION 8.05. Repayment to Issuer........................................................... 74
SECTION 8.06. Reinstatement................................................................. 74
SECTION 8.07. Indemnity for U.S. Government Obligations...................................... 75
ARTICLE 9
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Amendments Without Consent of Holders......................................... 75
SECTION 9.02. Amendments With Consent of Holders............................................ 76
SECTION 9.03. Effect of Consent............................................................. 77
SECTION 9.04. Trustee's Rights and Obligations.............................................. 77
SECTION 9.05. Conformity with Trust Indenture Act........................................... 77
SECTION 9.06. Payments for Consents......................................................... 78
iii
PAGE
----
ARTICLE 10
MISCELLANEOUS
SECTION 10.01. Trust Indenture Act of 1939................................................ 78
SECTION 10.02. Noteholder Communications; Noteholder Actions.............................. 78
SECTION 10.03. Notices.................................................................... 79
SECTION 10.04. Certificate and Opinion as to Conditions Precedent......................... 80
SECTION 10.05. Statements Required in Certificate or Opinion.............................. 80
SECTION 10.06. Payment Date Other Than a Business Day..................................... 81
SECTION 10.07. Governing Law.............................................................. 81
SECTION 10.08. No Adverse Interpretation of Other Agreements............................... 81
SECTION 10.09. Successors................................................................. 81
SECTION 10.10. Duplicate Originals........................................................ 81
SECTION 10.11. Separability............................................................... 81
SECTION 10.12. Table of Contents and Headings............................................. 81
SECTION 10.13. 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
iv
INDENTURE, dated as of October 2, 2000, 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 Company has duly authorized the execution and delivery of the
Indenture to provide for the issuance of up to $150,000,000 aggregate principal
amount of the Issuer's 10 1/2% Senior Notes Due 2007, 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)
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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,
(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.
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"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;
(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)
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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
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(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
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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 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.
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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:
(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
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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.
"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
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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.
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"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 Morgan Guaranty Trust Company of New York, Brussels
Office, or 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
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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 the Company and each
Guarantor under the Indenture.
"Guarantors" means (a) initially, each of the Company's Restricted
Subsidiaries in existence on the Issue Date, except the Issuer, KHL, Inc. and K.
Hovnanian Poland, Inc. 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.
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"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 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
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(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 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
14
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 April 1, 2001.
"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.
"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
15
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-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,
16
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 3.04.
"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 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
17
(a) Indebtedness under Credit Facilities which does not exceed $250
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
18
(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
19
(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 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,
20
(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,
(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,
21
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.
"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.
22
"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.
"Public Equity Offering" means an underwritten public offering of Common
Equity of the Company pursuant to an effective registration statement filed
under the Securities Act (excluding registration statements filed on Form S-8 or
any successor form).
"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,
23
(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 on or about 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.
"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:
24
(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.
25
"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:
26
K. Hovnanian Mortgage, Inc., Hovnanian Financial Services I, Inc.,
Hovnanian Financial Services II, Inc., Hovnanian Financial Services III, Inc.
and Hovnanian Financial Services IV. Inc.
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
27
(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.
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
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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
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.
29
(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 $50,000,000 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,
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(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 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
31
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.
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
32
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 CINS Numbers. The Issuer in issuing the Notes may
use "CUSIP" and "CINS" numbers, and the Trustee will use CUSIP numbers or CINS
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 CINS 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
33
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 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,
34
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 (iii) 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, (iv) 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 (v) 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.27 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
35
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
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.
36
(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.
(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 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.
37
(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.
(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
38
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 the
Issuer may redeem the Notes, in whole or in part, at a redemption price equal to
the sum of (i) 100% of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the redemption date plus
(ii) the Make-Whole Amount (as defined below), if any.
The term "Make-Whole Amount" shall mean, in connection with any optional
redemption of any Note, the excess, if any, of (i) the aggregate present value
as of the date of such redemption of each dollar of principal being redeemed and
the amount of interest (exclusive of interest accrued to the redemption date)
that would have been payable in respect of such dollar if such prepayment had
not been made, determined by discounting, on a semiannual basis, such principal
and interest at the Reinvestment Rate (determined on the business day preceding
the date of such redemption) from the respective dates on which such principal
and interest would have been payable if such payment had not been made, over
(ii) the aggregate principal amount of the Notes being redeemed.
The term "Reinvestment Rate" shall mean 0.50% (one-half of one percent)
plus the arithmetic mean of the yields under the respective headings "This Week"
and "Last Week" published in the Statistical Release under the caption "Treasury
39
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the maturity of the principal being prepaid. If no maturity
exactly corresponds to such maturity, yields for the two published maturities
most closely corresponding to such maturity shall be calculated pursuant to the
immediately preceding sentence and the Reinvestment Rate shall be interpolated
or extrapolated from such yields on a straight-line basis, rounding in each of
such relevant periods to the nearest month. For the purpose of calculating the
Reinvestment Rate, the most recent Statistical Release published prior to the
date of determination of the Make-Whole Amount shall be used.
The term "Statistical Release" shall mean the statistical release
designated "H.15(519)" or any successor publication which is published weekly by
the Federal Reserve System and which established yields on actively traded U.S.
government securities adjusted to constant maturities or, if such statistical
release is not published at the time of any determination under the Indenture,
then such other reasonably comparable index which shall be designated by the
Issuer.
The Issuer shall calculate the Make-Whole Amount as set forth in this
Section 3. 01 and provide amount of the Make-Whole Amount to the Trustee in the
Officer's Certificate required pursuant to Section 3.03.
Section 3.02. Redemption with Proceeds of Public Equity Offering. At any
time and from time to time prior to October 1, 2003, the Issuer may redeem Notes
with the net cash proceeds received by the Company from any Public Equity
Offering at a redemption price equal to 110.50% of the principal amount plus
accrued and unpaid interest and Liquidated Damages, if any, to the redemption
date, in an aggregate principal amount for all such redemptions not to exceed
35% of the original aggregate principal amount of the Notes offered on the Issue
Date, provided that
(a) in each case the redemption takes place not later than 60 days after
the closing of the related Public Equity Offering, and
(b) not less than $97,500,000 principal amount of the Notes remains
outstanding immediately thereafter.
Section 3.03. 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
40
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 and any Make-Whole Amount;
(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 CINS number, no representation
is being made as to the correctness of the CUSIP or CINS 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.
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Section 3.04. 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
42
(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);
(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
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(xiv) if any Note contains a CUSIP or CINS number, no representation
is being made as to the correctness of the CUSIP or CINS 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.
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
44
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.
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.
45
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:
(i) Permitted Indebtedness,
(ii) Refinancing Indebtedness,
46
(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
47
(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:
(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
48
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;
(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
49
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.
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,
50
(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 (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,
(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,
(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,
51
(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
52
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, Inc.) 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
53
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 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
54
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:
(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,
55
(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 Sale 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,
(ii) immediately after giving effect to such transaction, no Default
or Event of Default has occurred and is continuing,
(iii) in the case of a transaction involving the Company, immediately
after giving effect to such transaction and the use of any net proceeds
therefrom, on a pro forma basis, the Consolidated Net Worth of the Company
or the Successor as the case may be, would be at least equal to the
Consolidated Net Worth of the Company immediately prior to such transaction
(exclusive of any adjustments to Consolidated Net Worth attributable to
transaction costs) less any amount treated as a Restricted Payment in
connection with such transaction in accordance with the Indenture, and
56
(iv) 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 57 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
57
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
58
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
59
(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).
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 60 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 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.
60
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 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
61
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 Noteholders. 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
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
62
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 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
63
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. The Company and 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
64
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
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
65
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 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.
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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.
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,
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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.
(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.
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(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
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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, 2001, 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.
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(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.
(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
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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 (i)
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,
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(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 (1), only the Issuer's
obligations under Section 7.07 will survive. After satisfying the conditions in
clause (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.
(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
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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 clauses (iii) and (iv) 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.
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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.
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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 Noteholder
(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;
(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
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(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 3.02 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 Noteholders 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
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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.
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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. Noteholder Communications; Noteholder 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.
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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 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 2007)
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.
80
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.
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.
81
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.
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.
82
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
By: __________________________________
Name:
Title:
HOVNANIAN ENTERPRISES, INC.
as the Company
By: __________________________________
Name:
Title:
GUARANTORS:
HOVNANIAN ENTERPRISES, INC.
K. HOVNANIAN AT HOPEWELL ILL, INC.
RECREATIONAL DEVELOPMENT CORP., INC.
PINE BROOK COMPANY, INC.
K. HOVNANIAN AT BEDMINSTER, INC.
K. HOVNANIAN AT THE BLUFF, INC.
K. HOVNANIAN AT ATLANTIC CITY, INC.
HOVNANIAN PROPERTIES OF ATLANTIC COUNTY, INC.
MONTEGO BAY I ACQUISITION CORP., INC.
PIKE UTILITIES, INC.
ARROW PROPERTIES, INC.
K. HOVNANIAN REAL ESTATE INVESTMENT, INC.
HOVNANIAN TEXAS, INC.
LANDARAMA, INC.
TROPICAL SERVICE BUILDERS, INC.
HOVNANIAN PENNSYLVANIA, INC.
K. HOVNANIAN PROPERTIES OF NORTH
BRUNSWICK V, INC.
K. HOVNANIAN DEVELOPMENTS OF TEXAS, INC.
THE MATZEL & MUMFORD ORGANIZATION, INC.
M & M INVESTMENTS, L.P.
MATZEL & MUMFORD OF DELAWARE, INC.
PARK VILLAGE REALTY, INC.
GOODMAN FAMILY OF BUILDERS, L.P.
REFLECTIONS OF YOU INTERIORS, INC.
HEXTER FAIR LAND TITLE COMPANY I, INC.
K. HOVNANIAN AT MAHWAH VIII, INC.
K. HOVNANIAN AT WALL TOWNSHIP IV, INC.
K. HOVNANIAN AT MONTVILLE, INC.
HOVNANIAN OF PALM BEACH, INC.
K. HOVNANIAN COMPANIES OF FLORIDA, INC.
K. HOVNANIAN AT FREEHOLD TOWNSHIP, INC.
HOVNANIAN PROPERTIES OF LAKE WORTH, INC.
K. HOVNANIAN COMPANIES OF PENNSYLVANIA, INC.
K. HOVNANIAN PROPERTIES OF HAMILTON, INC.
K. HOVNANIAN AT SCOTCH PLAINS, INC.
K. HOVNANIAN AT WAYNE IV, INC.
HOVNANIAN DEVELOPMENTS OF FLORIDA, INC.
MONTEGO BAY II ACQUISITION CORP., INC.
HOVNANIAN OF PALM BEACH VII, INC.
K. HOVNANIAN AT WALL TOWNSHIP II, INC.
K. HOVNANIAN ENTERPRISES, INC.
HOVNANIAN OF PALM BEACH IX, INC.
HOVNANIAN AT TARPON LAKES I, INC.
K. HOVNANIAN COMPANIES NORTHEAST, INC.
KINGS GRANT EVESHAM CORP.
K. HOVNANIAN AT MANALAPAN, INC.
K. HOVNANIAN AT WALL TOWNSHIP, INC.
K. HOVNANIAN AT EAST BRUNSWICK VII, INC.
K. HOVNANIAN COMPANIES OF CENTRAL JERSEY, INC.
HOVNANIAN OF PALM BEACH XI, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK II, INC.
K. HOVNANIAN AT LAWRENCE SQUARE, INC.
K. HOVNANIAN AT TARPON LAKES III, INC.
K. HOVNANIAN AT HORIZON HEIGHTS, INC.
K. HOVNANIAN AT RESERVOIR RIDGE, INC.
K. HOVNANIAN AT JERSEY CITY I, INC.
K. HOVNANIAN INVESTMENT PROPERTIES OF
NEW JERSEY, INC.
K. HOVNANIAN AT FT. MYERS I, INC.
K. HOVNANIAN AT HOWELL TOWNSHIP II, INC.
K. HOVNANIAN AT KLOCKNER FARMS, INC.
K. HOVNANIAN AT JENSEN BEACH, INC.
MOLLY PITCHER CONSTRUCTION CO., INC.
K. HOVNANIAN AT MAHWAH VII, INC.
K. HOVNANIAN AT WAYNE III, INC.
K. HOVNANIAN PROPERTIES OF EAST BRUNSWICK II, INC.
K. HOVNANIAN AT KINGS GRANT I, INC.
THE NEW FORTIS CORPORATION
K. HOVNANIAN AT CLARKSTOWN, INC.
K. HOVNANIAN COMPANIES OF NEW YORK, INC.
K. HOVNANIAN DEVELOPMENTS OF NEW YORK, INC.
DRYER ASSOCIATES, INC.
K. HOVNANIAN AT PASCO I, INC.
K. HOVNANIAN AT LAKEWOOD, INC.
K. HOVNANIAN AT MARTIN DOWNS II, INC.
K. HOVNANIAN AVIATION, INC.
K. HOVNANIAN INVESTMENT PROPERTIES, INC.
K. HOVNANIAN AT FT. MYERS II, INC.
K. HOVNANIAN AT BERNARDS II, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK III, INC.
MINERVA GROUP, INC.
K. HOVNANIAN DEVELOPMENTS OF NEW JERSEY, INC.
K. HOVNANIAN AT BRIDGEWATER V, INC.
K. HOVNANIAN AT NORTH BRUNSWICK II, INC.
K. HOVNANIAN AT WASHINGTONVILLE, INC.
K. HOVNANIAN AT PEEKSKILL, INC.
K. HOVNANIAN AT NEWARK I, INC.
K. HOVNANIAN AT CARMEL, INC.
K. HOVNANIAN AT EAST WINDSOR I, INC.
PARTHENON GROUP, INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP II, INC.
K. HOVNANIAN AT SOMERSET III, INC.
R.C.K. COMMUNITY MANAGEMENT CO., INC.
K. HOVNANIAN AT MONTCLAIR, NJ, INC.
K. HOVNANIAN AT EAST BRUNSWICK VI, INC.
K. HOVNANIAN AT HACKETTSTOWN, INC.
K. HOVNANIAN COMPANIES OF NORTH CAROLINA, INC.
K. HOVNANIAN AT MONTVILLE II, INC.
K. HOVNANIAN AT WALL TOWNSHIP VII, INC.
K. HOVNANIAN AT BRIDGEWATER II, INC.
K. HOVNANIAN AT MERRIMACK, INC.
K. HOVNANIAN AT BERNARDS III, INC.
K. HOVNANIAN AT WAYNE V, INC.
K. HOVNANIAN AT PASCO II, INC.
K. HOVNANIAN AT DELRAY BEACH II, INC.
K. HOVNANIAN AT BRANCHBURG I, INC.
K. HOVNANIAN AT PLAINSBORO II, INC.
K. HOVNANIAN AT NORTHERN WESTCHESTER, INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP, INC.
K. HOVNANIAN AT WEST ORANGE, INC.
EASTERN TITLE AGENCY, INC.
K. HOVNANIAN PROPERTIES OF FRANKLIN, INC.
K. HOVNANIAN AT MAHWAH II, INC.
NEW ENGLAND COMMUNITY MANAGEMENT COMPANY, INC.
K. HOVNANIAN AT HOWELL TOWNSHIP, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK IV, INC.
K. HOVNANIAN AT WALL TOWNSHIP VI, INC.
K. HOVNANIAN PROPERTIES OF PISCATAWAY, INC.
K. HOVNANIAN AT MAHWAH V, INC.
K. HOVNANIAN AT MERRIMACK II, INC.
K. HOVNANIAN AT NEWARK URBAN RENEWAL
CORPORATION I
K. HOVNANIAN AT LAWRENCE GROVE, INC.
K. HOVNANIAN AT CEDAR GROVE I, INC.
K. HOVNANIAN AT CEDAR GROVE II, INC.
K. HOVNANIAN AT NORTH BRUNSWICK III, INC.
K. HOVNANIAN AT JERSEY CITY II, INC.
K. HOVNANIAN AT BURLINGTON, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK V, INC.
K. HOVNANIAN AT HALF MOON BAY, INC.
K. HOVNANIAN AT JACKSONVILLE II, INC.
K. HOVNANIAN AT BRANCHBURG II, INC.
K. HOVNANIAN AT EMBASSY LAKES, INC.
K. HOVNANIAN AT THE RESERVE AT MEDFORD, INC.
K. HOVNANIAN AT BRANCHBURG III, INC.
K. HOVNANIAN AT LOWER SAUCON, INC.
JERSEY CITY DANFORTH CSO, INC.
K. HOVNANIAN AT EAST WINDSOR II, INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP III, INC.
K. HOVNANIAN AT NEWARK URBAN RENEWAL CORP. III, INC.
K. HOVNANIAN AT SOMERSET VIII, INC.
K. HOVNANIAN AT READINGTON, INC.
K. HOVNANIAN AT HOPEWELL I, INC.
K. HOVNANIAN AT NEWARK URBAN RENEWAL CORP. IV, INC.
K. HOVNANIAN AT NEWARK URBAN RENEWAL CORP. V, INC.
K. HOVNANIAN AT PLAINSBORO III, INC.
K. HOVNANIAN AT MAHWAH IV, INC.
K. HOVNANIAN AT POMPANO BEACH, INC.
K. HOVNANIAN AT JERSEY CITY III, INC.
K. HOVNANIAN PROPERTIES OF NEWARK URBAN
RENEWAL CORPORATION, INC.
K. HOVNANIAN AT NORTH BRUNSWICK IV, INC.
K. HOVNANIAN AT BRIDGEWATER IV, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK, INC.
K. HOVNANIAN AT PERKIOMEN I, INC.
K. HOVNANIAN AT VALLEYBROOK, INC.
K. HOVNANIAN AT OCEAN TOWNSHIP, INC.
K. HOVNANIAN AT PLAINSBORO I, INC.
K. HOVNANIAN REAL ESTATE OF FLORIDA, INC.
WESTERN FINANCIAL SERVICES, INC.
K. HOVNANIAN AT WAYNE, INC.
K. HOVNANIAN PROPERTIES OF RED BANK, INC.
K. HOVNANIAN AT HANOVER, INC.
K. HOVNANIAN AT LAKE CHARLESTON, INC.
NEW K. HOVNANIAN DEVELOPMENTS OF FLORIDA, INC.
K. HOVNANIAN COMPANIES OF METRO WASHINGTON, INC.
K. HOVNANIAN AT MONTGOMERY I, INC.
K. HOVNANIAN DEVELOPMENTS OF METRO
WASHINGTON, INC.
K. HOVNANIAN AT ASHBURN VILLAGE, INC.
K. HOVNANIAN AT WOODMONT, INC.
K. HOVNANIAN AT FAIRWAY VIEWS, INC.
K. HOVNANIAN AT CAROLINA COUNTRY CLUB I, INC.
K. HOVNANIAN AT CHAPEL TRAIL, INC.
K. HOVNANIAN TREASURE COAST, INC.
K. HOVNANIAN AT UPPER MERION, INC.
K. HOVNANIAN AT MAHWAH VI, INC.
K. HOVNANIAN AT MEDFORD I, INC.
K. HOV INTERNATIONAL, INC.
K. HOVNANIAN AT MONTCLAIR, INC.
K. HOVNANIAN AT BULL RUN, INC.
K. HOVNANIAN AT SULLY STATION, INC.
K. HOVNANIAN AT SPRING RIDGE, INC.
K. HOVNANIAN MARINE, INC.
K. HOVNANIAN AT RIVER OAKS, INC.
K. HOVNANIAN AT HOLLY CREST, INC.
K. HOVNANIAN PROPERTIES OF ROUTE 35, INC.
STONEBROOK HOMES, INC.
K. HOVNANIAN AT WINSTON TRAILS, INC.
K. HOVNANIAN AT LAKES OF BOCA RATON, INC.
K. HOVNANIAN AT LAKE CHARLESTON II, INC.
K. HOVNANIAN AT LAKE CHARLESTON III, INC.
K. HOVNANIAN AT BRIDGEWATER VI, INC.
KHIPE, INC.
K. HOVNANIAN AT FAIR LAKES, INC.
K. HOVNANIAN AT CAROLINA COUNTRY CLUB II, INC.
K. HOVNANIAN AT VALLEYBROOK II, INC.
K. HOVNANIAN AT PARK RIDGE, INC.
K. HOVNANIAN AT BELMONT, INC.
K. HOVNANIAN AT WINSTON TRAILS II, INC.
K. HOVNANIAN FAIR LAKES GLEN, INC.
K. HOVNANIAN AT PEMBROKE SHORES, INC.
K. HOVNANIAN AT CAROLINA COUNTRY CLUB III, INC.
GOVERNOR'S ABSTRACT CO., INC.
K. HOVNANIAN AT COCONUT CREEK, INC.
K. HOVNANIAN AT POLO TRACE, INC.
FOUNDERS TITLE AGENCY, INC.
K. HOVNANIAN AT BERNARDS IV, INC.
K. HOVNANIAN AT PERKIOMEN II, INC.
K. HOVNANIAN AT WAYNE II, INC.
K. HOVNANIAN AT UPPER MAKEFIELD I, INC.
K. HOVNANIAN COMPANIES OF CALIFORNIA, INC.
K. HOVNANIAN AT TERRAZA, INC.
K. HOVNANIAN DEVELOPMENTS OF CALIFORNIA, INC.
KHC ACQUISITION, INC.
K. HOVNANIAN AT STUART ROAD, INC.
K. HOVNANIAN AT HIGHLAND VINEYARDS, INC.
K. HOVNANIAN AT BALLANTRAE, INC.
BALLANTRAE HOME SALES, INC.
K. HOVNANIAN COMPANIES AT WILDROSE, INC.
K. HOVNANIAN AT GREENBROOK, INC.
K. HOVNANIAN AT HUNTER ESTATES, INC.
K. HOVNANIAN AT CARMEL DEL MAR, INC.
K. HOVNANIAN AT VAIL RANCH, INC.
K. HOVNANIAN AT PRINCETON, INC.
K. HOVNANIAN AT RARITAN I, INC.
K. HOVNANIAN AT CALABRIA, INC.
K. HOVNANIAN AT SENECA CROSSING, INC.
K. HOVNANIAN COMPANIES OF MARYLAND, INC.
K. HOVNANIAN DEVELOPMENTS OF MARYLAND, INC.
K. HOVNANIAN AT EXETER HILLS, INC.
K. HOVNANIAN FLORIDA REGION, INC.
K. HOVNANIAN SOUTHEAST FLORIDA, INC.
K. HOVNANIAN AT BERLIN, INC.
K. HOVNANIAN AT EAST BRUNSWICK VI, INC.
K. HOVNANIAN AT BEDMINSTER II, INC.
K. HOVNANIAN AT INVERRARY I, INC.
K. HOVNANIAN AT MAHWAH IX, INC.
K. HOVNANIAN AT NORTHLAKE, INC.
K. HOVNANIAN AT HOPEWELL IV, INC.
K. HOVNANIAN AT LOCUST GROVE I, INC.
K. HOVNANIAN AT CASTILE, INC.
K. HOVNANIAN AT TIERRASANTA, INC.
K. HOVNANIAN AT PRESTON, INC.
K. HOVNANIAN AT BERNARDS III, INC.
K. HOVNANIAN AT WAYNE VI, INC.
K. HOVNANIAN PROPERTIES OF NORTH CENTER
DRIVE, INC.
BALLANTRAE DEVELOPMENT CORP.
K. HOVNANIAN AT LA TROVATA, INC.
K. HOVNANIAN AT RANCHO CRISTIANITOS, INC.
K. HOVNANIAN AT TANNERY HILL, INC.
K. HOVNANIAN PROPERTIES OF N.B. THEATRE, INC.
K. HOVNANIAN AT CRYSTAL SPRINGS, INC.
K. HOVNANIAN AT THE CEDARS, INC.
K. HOVNANIAN CONSTRUCTION MANAGEMENT, INC.
K. HOVNANIAN ACQUISITIONS, INC.
K. HOVNANIAN AT BURLINGTON II, INC.
K. HOVNANIAN AT BURLINGTON III, INC.
K. HOVNANIAN AT BALLANTRAE ESTATES, INC.
K. HOVNANIAN AT SMITHVILLE, INC.
K. HOVNANIAN AT JEFFERSON, INC.
K. HOVNANIAN AT UPPER FREEHOLD TOWNSHIP I, INC.
K. HOVNANIAN AT HERSHEY'S MILL, INC.
K. HOVNANIAN AT DOMINION RIDGE, INC.
K. HOVNANIAN AT PORT IMPERIAL NORTH, INC.
K. HOVNANIAN AT UNION TOWNSHIP I, INC.
K. HOVNANIAN AT EAST BRUNSWICK VIII, INC.
K. HOVNANIAN AT MANALAPAN II, INC.
K. HOVNANIAN AT HOPEWELL V, INC.
K. HOVNANIAN AT HOPEWELL VI, INC.
K. HOVNANIAN AT CAMERON CHASE, INC.
K. HOVNANIAN AT THORNBURY, INC.
K. HOVNANIAN AT WAYNE VII, INC.
K. HOVNANIAN SCOTCH PLAINS II, INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP IV, INC.
K. HOVNANIAN PORT IMPERIAL URBAN RENEWAL, INC.
K. HOVNANIAN AT EAST WHITELAND I, INC.
K. HOVNANIAN AT STONEGATE, INC.
K. HOVNANIAN AT CRESTLINE, INC.
K. HOVNANIAN AT SAN SEVAINE, INC.
K. HOVNANIAN AT SYCAMORE, INC.
K. HOVNANIAN COMPANIES OF SOUTHERN CALIFORNIA, INC.
K. HOVNANIAN AT SMITHVILLE II, INC.
K. HOVNANIAN AT STONY POINT, INC.
K. HOVNANIAN AT STONE CANYON, INC.
K. HOVNANIAN AT TUXEDO, INC.
K. HOVNANIAN AT BRIDGEPORT, INC.
K. HOVNANIAN AT SARATOGA, INC.
K. HOVNANIAN AT CHAPARRAL, INC.
K. HOVNANIAN AT OCEAN WALK, INC.
K. HOVNANIAN AT LOWER SAUGON II, INC.
K. HOVNANIAN AT STONEGATE, INC.
K. HOVNANIAN AT BARRINGTON, INC.
K. HOVNANIAN AT HAMPTON OAKS, INC.
K. HOVNANIAN AT P.C. HOMES, INC.
K. HOVNANIAN AT P.C. PROPERTIES, INC.
K. HOVNANIAN AT SUMMERWOOD, INC.
K. HOVNANIAN AT THE GLEN
K. HOVNANIAN'S FOUR SEASONS OF THE PALM
BEACHES, INC.
K. HOVNANIAN AT WALL TOWNSHIP VIII, INC.
K. HOVNANIAN AT NORTH JERSEY ACQUISITION, L.L.C.
K. HOVNANIAN CENTRAL ACQUISITION, L.L.C.
K. HOVNANIAN SHORE ACQUISITION, L.L.C.
K. HOVNANIAN SOUTH JERSEY ACQUISITION, L.L.C.
K. HOVNANIAN AT MANSFIELD I, L.L.C.
K. HOVNANIAN AT MANSFIELD II, L.L.C.
K. HOVNANIAN NORTH CENTRAL ACQUISITION, L.L.C.
K. HOVNANIAN AT WAYNE VIII, L.L.C.
K. HOVNANIAN AT BERNARDS V, L.L.C.
K. HOVNANIAN AT WANAQUE, L.L.C.
K. HOVNANIAN AT CHESTER I, L.L.C.
K. HOVNANIAN AT WINCHESTER, L.L.C.
K. HOVNANIAN AT MIDDLETOWN, L.L.C.
K. HOVNANIAN'S FOUR SEASONS, L.L.C.
K. HOVNANIAN AT MENIFEE, L.L.C.
K. HOVNANIAN AT NORTH BRUNSWICK VI, L.L.C.
K. HOVNANIAN AT CARMEL VILLAGE, L.L.C.
K. HOVNANIAN AT LAWRENCE, L.L.C.
K. HOVNANIAN AT BLUE HERON PINES, L.L.C.
K. HOVNANIAN AT JACKSON, L.L.C.
K. HOVNANIAN AT ROLAND HEIGHTS, L.L.C.
K. HOVNANIAN AT BERKELEY, L.L.C.
K. HOVNANIAN AT KING FARM, L.L.C.
K. HOVNANIAN AT SOUTH BANK, L.L.C.
K. HOVNANIAN AT PRINCE WILLIAM, L.L.C.
K. HOVNANIAN AT LAKE TERRAPIN, L.L.C.
K. HOVNANIAN AT GUTTENBERG, L.L.C.
K. HOVNANIAN AT KING FARM, L.L.C.
K. HOVNANIAN AT SOUTH BANK, L.L.C.
K. HOVNANIAN AT CLIFTON, L.L.C.
K. HOVNANIAN AT JERSEY CITY IV, L.L.C.
K. HOVNANIAN AT LAFAYETTE ESTATES, L.L.C.
K. HOVNANIAN AT UPPER FREEHOLD TOWNSHIP II, L.L.C.
K. HOVNANIAN AT KINCAID, L.L.C.
K. HOVNANIAN AT LINWOOD, L.L.C.
K. HOVNANIAN AT SOUTH AMBOY, L.L.C.
K. HOVNANIAN AT UPPER FREEHOLD TOWNSHIP III, L.L.C.
K. HOVNANIAN AT BRENBROOKE, L.L.C.
K. HOVNANIAN AT BLOOMS CROSSING, L.L.C.
K. HOVNANIAN AT SPRING HILL ROAD, L.L.C.
K. HOVNANIAN AT ST. MARGARETS, L.L.C.
K. HOVNANIAN AT PARAMUS, L.L.C.
K. HOVNANIAN AT WILLOW BROOK, L.L.C.
K. HOVNANIAN AT WEST MILFORD, L.L.C.
WHI HOLDING CO., INC.
By: ______________________________________
Name:
Title:
FIRST UNION NATIONAL BANK, as Trustee
By: ______________________________________
Name:
Title:
EXHIBIT A
[FACE OF NOTE]
K. HOVNANIAN ENTERPRISES, INC.
10 1/2% Senior Note Due 2007
[CUSIP] [CINS] _______________
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 October 1, 2007
Initial Interest Rate: 10 1/2% per annum.
Interest Payment Dates: April 1 and October 1, commencing April 1, 2001.
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 10 1/2% Senior Notes Due 2007 described in the Indenture
referred to in this Note.
FIRST UNION NATIONAL BANK,
as Trustee
By: ____________________________________
Authorized Signatory
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[REVERSE SIDE OF NOTE]
K. HOVNANIAN ENTERPRISES, INC.
10 1/2% Senior Note Due 2007
1. Principal and Interest.
The Issuer promises to pay the principal of this Note on October 1, 2007.
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 10 1/2% 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
April 1, 2001.
The Holder of this Note is entitled to the benefits of the Registration
Rights Agreement, dated October 2, 2000, 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.
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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 10 1/2%. 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.
2. Indentures; Note Guaranty.
This is one of the Notes issued under an Indenture dated as of October 2,
2000 (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 $50,000,000 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.
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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 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.
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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.
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[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:
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[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.
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[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.
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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.
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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.
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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 of
Date of Exchange of this Global Note of this Global Note increase) Trustee
- ---------------- ------------------- ------------------- ------------------- ---------------------
________________________
/1/For Global Notes
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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
______________________
10 1/2%
SENIOR Notes due 2007
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 October 2, 2000 (the "Indenture"),
relating to the Company's 10 1/2% Senior Notes due 2007 (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 ? 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.
B-1
K. HOVNANIAN ENTERPRISES, INC.,
as Issuer
By:______________________________
Name:
Title:
HOVNANIAN ENTERPRISES, INC.,
as Issuer
By:______________________________
Name:
Title:
[GUARANTOR]
By:______________________________
Name:
Title:
FIRST UNION NATIONAL BANK,
as Trustee
By:______________________________
Name:
Title:
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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 COMPANY 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 COMPANY) OR (G) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY
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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-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 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.
10 1/2% Senior
Notes due 2007 (the "Notes")
Issued under the Indenture (the "Indenture") dated as
as of October 2, 2000 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
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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.
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
prearrange the transaction in the United States.
E-2
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-3
EXHIBIT F
Rule 144A Certificate
_________, ____
First Union National Bank
21 South Street
Morristown, NJ 07960
Attention: Corporate Trust Administration
Re: K. Hovnanian Enterprises, Inc.
10 1/2% Senior
Notes due 2007 (the "Notes")
Issued under the Indenture (the "Indenture") dated as
as of October 2, 2000 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.
10 1/2% Senior
Notes due 2007 (the "Notes")
Issued under the Indenture (the "Indenture") dated as
as of October 2, 2000 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.
G-1
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 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
G-2
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.
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
[Morgan Guaranty Trust Company of New York, Brussels office, or its
successors or assigns, as operator of the Euroclear System] OR
[Clearstream Banking, societe anonyme]
Re: K. Hovnanian Enterprises, Inc.
10 1/2% Senior Notes due 2007 (the "Notes")
Issued under the Indenture (the "Indenture") dated as
as of October 2, 2000 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
H-1
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.
10 1/2% Senior Notes due 2007 (the "Notes")
Issued under the Indenture (the "Indenture") dated as
as of October 2, 2000] 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.
H-2
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 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,
[MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, Brussels
office, or its successors or assigns, 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 4.2
A/B EXCHANGE
REGISTRATION RIGHTS AGREEMENT
Dated as of October 2, 2000
by and among
K. Hovnanian Enterprises, Inc.
Hovnanian Enterprises, Inc.
And certain of its Subsidiaries
and
Donaldson, Lufkin & Jenrette Securities Corporation
Salomon Smith Barney Inc.
PNC Capital Markets, Inc.
- --------------------------------------------------------------------------------
This Registration Rights Agreement (this "Agreement") is made and entered
---------
into as of September __, 2000, by and among K. Hovnanian Enterprises, Inc., a
New Jersey corporation (the "Company"), Hovnanian Enterprises, Inc., a Delaware
-------
corporation (the "Hovnanian"), and various subsidiary guarantors party hereto
---------
(together with Hovnanian, the "Guarantors" and Donaldson, Lufkin & Jenrette
----------
Securities Corporation, Salomon Smith Barney Inc., PNC Capital Markets, Inc.
(each an "Initial Purchaser" and, collectively, the "Initial Purchasers"), each
----------------- ------------------
of whom has agreed to purchase the Company's 10 1/2 % Series A Senior Notes due
2007 (the "Series A Notes") pursuant to the Purchase Agreement (as defined
--------------
below).
This Agreement is made pursuant to the Purchase Agreement, dated September
27, 2000, (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 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 the Indenture, dated October 2,
2000 between the Company, the Guarantors and First Union National Bank, as
Trustee, relating to the Series A Notes and the Series B 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
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 Notes in the same aggregate principal amount as the
aggregate principal amount of Series A 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 Notes (which shall be registered pursuant to the Exchange
Offer Registration Statement) equal to the outstanding principal amount of
Series A 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 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 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 Notes: The Company's 10 1/2 % Series B Senior Notes due 2007 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.
Transfer Restricted Securities: Each Series A Note, until the earliest to
------------------------------
occur of (a) the date on which such Series A Note is exchanged in the Exchange
Offer for a Series B 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 Note has been disposed of in
accordance with a Shelf Registration Statement (and the purchasers thereof have
been issued Series B Notes), or (c) the date on which such Series A Note is
distributed to the public pursuant to Rule 144 under the Act (and purchasers
thereof have been issued Series B Notes) and each Series B Note until the date
on which such Series B Note is disposed of by a Broker-Dealer pursuant to the
"Plan of
2
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 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 Notes to be offered
in exchange for the Series A Notes that are Transfer Restricted Securities and
(ii) resales of Series B Notes by Broker-Dealers that tendered into the Exchange
Offer Series A 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 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, 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 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 30
business days thereafter (such 30/th/ 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 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).
3
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
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 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 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
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).
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
4
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.
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.
5
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 Notes
by Broker-Dealers that tendered in the Exchange Offer Series A 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 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 Notes to be issued in the Exchange Offer and (C)
it is acquiring the Series B 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 Notes shall
acknowledge and agree that, if the resales are of Series B Notes obtained by
such Holder in exchange for Series A 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.
(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
6
distribute the Series B 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
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 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
Notes covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Notes having an aggregate principal amount equal to the
aggregate principal amount of Series A Notes sold pursuant to the Shelf
Registration Statement and surrendered to the Company for cancellation; the
Company shall register Series B Notes on the Shelf Registration Statement for
this purpose and issue the Series B 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 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
7
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;
(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;
8
(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(y), 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 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
9
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 letters delivered pursuant to Section 9(g) 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 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;
(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
10
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 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 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.
11
(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 Notes in the Exchange Offer and/or selling
or reselling Series A Notes or Series B 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) 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 Notes or registered Series A 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.
(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
12
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 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
13
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.
(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
14
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.: 732-747-7159
Attention: Corporate Controller
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Ave.
New York, NY 10017
Telecopier No.: 212-455-2502
Attention: Vince Pagano, 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 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.
15
(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, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(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.
By: _______________________________
Name:
Title:
HOVNANIAN ENTERPRISES, INC.
By: ________________________________
Name:
Title:
GUARANTORS:
HOVNANIAN ENTERPRISES, INC.
K. HOVNANIAN AT HOPEWELL ILL, INC.
RECREATIONAL DEVELOPMENT CORP., INC.
PINE BROOK COMPANY, INC.
K. HOVNANIAN AT BEDMINSTER, INC.
K. HOVNANIAN AT THE BLUFF, INC.
K. HOVNANIAN AT ATLANTIC CITY, INC.
HOVNANIAN PROPERTIES OF ATLANTIC COUNTY, INC.
MONTEGO BAY I ACQUISITION CORP., INC.
PIKE UTILITIES, INC.
ARROW PROPERTIES, INC.
K. HOVNANIAN REAL ESTATE INVESTMENT, INC.
HOVNANIAN TEXAS, INC.
LANDARAMA, INC.
TROPICAL SERVICE BUILDERS, INC.
HOVNANIAN PENNSYLVANIA, INC.
K. HOVNANIAN PROPERTIES OF NORTH BRUNSWICK V, INC.
K. HOVNANIAN DEVELOPMENTS OF TEXAS, INC.
THE MATZEL & MUMFORD ORGANIZATION, INC.
M & M INVESTMENTS, L.P.
MATZEL & MUMFORD OF DELAWARE, INC.
PARK VILLAGE REALTY, INC.
GOODMAN FAMILY OF BUILDERS, L.P.
REFLECTIONS OF YOU INTERIORS, INC.
HEXTER FAIR LAND TITLE COMPANY I, INC.
K. HOVNANIAN AT MAHWAH VIII, INC.
K. HOVNANIAN AT WALL TOWNSHIP IV, INC.
K. HOVNANIAN AT MONTVILLE, INC.
HOVNANIAN OF PALM BEACH, INC.
17
K. HOVNANIAN COMPANIES OF FLORIDA, INC.
K. HOVNANIAN AT FREEHOLD TOWNSHIP, INC.
HOVNANIAN PROPERTIES OF LAKE WORTH, INC.
K. HOVNANIAN COMPANIES OF
PENNSYLVANIA, INC.
K. HOVNANIAN PROPERTIES OF HAMILTON, INC.
K. HOVNANIAN AT SCOTCH PLAINS, INC.
K. HOVNANIAN AT WAYNE IV, INC.
HOVNANIAN DEVELOPMENTS OF FLORIDA, INC.
MONTEGO BAY II ACQUISITION CORP., INC.
HOVNANIAN OF PALM BEACH VII, INC.
K. HOVNANIAN AT WALL TOWNSHIP II, INC.
K. HOVNANIAN ENTERPRISES, INC.
HOVNANIAN OF PALM BEACH IX, INC.
HOVNANIAN AT TARPON LAKES I, INC.
K. HOVNANIAN COMPANIES NORTHEAST, INC.
KINGS GRANT EVESHAM CORP.
K. HOVNANIAN AT MANALAPAN, INC.
K. HOVNANIAN AT WALL TOWNSHIP, INC.
K. HOVNANIAN AT EAST BRUNSWICK VII, INC.
K. HOVNANIAN COMPANIES OF CENTRAL JERSEY, INC.
HOVNANIAN OF PALM BEACH XI, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK II, INC.
K. HOVNANIAN AT LAWRENCE SQUARE, INC.
K. HOVNANIAN AT TARPON LAKES III, INC.
K. HOVNANIAN AT HORIZON HEIGHTS, INC.
K. HOVNANIAN AT RESERVOIR RIDGE, INC.
K. HOVNANIAN AT JERSEY CITY I, INC.
K. HOVNANIAN INVESTMENT PROPERTIES OF NEW JERSEY,
INC.
K. HOVNANIAN AT FT. MYERS I, INC.
K. HOVNANIAN AT HOWELL TOWNSHIP II, INC.
K. HOVNANIAN AT KLOCKNER FARMS, INC.
K. HOVNANIAN AT JENSEN BEACH, INC.
MOLLY PITCHER CONSTRUCTION CO., INC.
K. HOVNANIAN AT MAHWAH VII, INC.
K. HOVNANIAN AT WAYNE III, INC.
K. HOVNANIAN PROPERTIES OF EAST BRUNSWICK II, INC.
K. HOVNANIAN AT KINGS GRANT I, INC.
THE NEW FORTIS CORPORATION
K. HOVNANIAN AT CLARKSTOWN, INC.
K. HOVNANIAN COMPANIES OF NEW YORK, INC.
K. HOVNANIAN DEVELOPMENTS OF NEW YORK, INC.
DRYER ASSOCIATES, INC.
K. HOVNANIAN AT PASCO I, INC.
K. HOVNANIAN AT LAKEWOOD, INC.
K. HOVNANIAN AT MARTIN DOWNS II, INC.
K. HOVNANIAN AVIATION, INC.
18
K. HOVNANIAN INVESTMENT PROPERTIES, INC.
K. HOVNANIAN AT FT. MYERS II, INC.
K. HOVNANIAN AT BERNARDS II, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK III, INC.
MINERVA GROUP, INC.
K. HOVNANIAN DEVELOPMENTS OF NEW JERSEY, INC.
K. HOVNANIAN AT BRIDGEWATER V, INC.
K. HOVNANIAN AT NORTH BRUNSWICK II, INC.
K. HOVNANIAN AT WASHINGTONVILLE, INC.
K. HOVNANIAN AT PEEKSKILL, INC.
K. HOVNANIAN AT NEWARK I, INC.
K. HOVNANIAN AT CARMEL, INC.
K. HOVNANIAN AT EAST WINDSOR I, INC.
PARTHENON GROUP, INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP II, INC.
K. HOVNANIAN AT SOMERSET III, INC.
R.C.K. COMMUNITY MANAGEMENT CO., INC.
K. HOVNANIAN AT MONTCLAIR, NJ, INC.
K. HOVNANIAN AT EAST BRUNSWICK VI, INC.
K. HOVNANIAN AT HACKETTSTOWN, INC.
K. HOVNANIAN COMPANIES OF NORTH CAROLINA, INC.
K. HOVNANIAN AT MONTVILLE II, INC.
K. HOVNANIAN AT WALL TOWNSHIP VII, INC.
K. HOVNANIAN AT BRIDGEWATER II, INC.
K. HOVNANIAN AT MERRIMACK, INC.
K. HOVNANIAN AT BERNARDS III, INC.
K. HOVNANIAN AT WAYNE V, INC.
K. HOVNANIAN AT PASCO II, INC.
K. HOVNANIAN AT DELRAY BEACH II, INC.
K. HOVNANIAN AT BRANCHBURG I, INC.
K. HOVNANIAN AT PLAINSBORO II, INC.
K. HOVNANIAN AT NORTHERN WESTCHESTER, INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP, INC.
K. HOVNANIAN AT WEST ORANGE, INC.
EASTERN TITLE AGENCY, INC.
K. HOVNANIAN PROPERTIES OF FRANKLIN, INC.
K. HOVNANIAN AT MAHWAH II, INC.
NEW ENGLAND COMMUNITY MANAGEMENT COMPANY, INC.
K. HOVNANIAN AT HOWELL TOWNSHIP, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK IV, INC.
K. HOVNANIAN AT WALL TOWNSHIP VI, INC.
K. HOVNANIAN PROPERTIES OF PISCATAWAY, INC.
K. HOVNANIAN AT MAHWAH V, INC.
K. HOVNANIAN AT MERRIMACK II, INC.
K. HOVNANIAN AT NEWARK URBAN RENEWAL CORPORATION I
K. HOVNANIAN AT LAWRENCE GROVE, INC.
19
K. HOVNANIAN AT CEDAR GROVE I, INC.
K. HOVNANIAN AT CEDAR GROVE II, INC.
K. HOVNANIAN AT NORTH BRUNSWICK III, INC.
K. HOVNANIAN AT JERSEY CITY II, INC.
K. HOVNANIAN AT BURLINGTON, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK V, INC.
K. HOVNANIAN AT HALF MOON BAY, INC.
K. HOVNANIAN AT JACKSONVILLE II, INC.
K. HOVNANIAN AT BRANCHBURG II, INC.
K. HOVNANIAN AT EMBASSY LAKES, INC.
K. HOVNANIAN AT THE RESERVE AT MEDFORD, INC.
K. HOVNANIAN AT BRANCHBURG III, INC.
K. HOVNANIAN AT LOWER SAUCON, INC.
JERSEY CITY DANFORTH CSO, INC.
K. HOVNANIAN AT EAST WINDSOR II, INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP III, INC.
K. HOVNANIAN AT NEWARK URBAN RENEWAL CORP. III,
INC.
K. HOVNANIAN AT SOMERSET VIII, INC.
K. HOVNANIAN AT READINGTON, INC.
K. HOVNANIAN AT HOPEWELL I, INC.
K. HOVNANIAN AT NEWARK URBAN RENEWAL CORP. IV,
INC.
K. HOVNANIAN AT NEWARK URBAN RENEWAL CORP. V, INC.
K. HOVNANIAN AT PLAINSBORO III, INC.
K. HOVNANIAN AT MAHWAH IV, INC.
K. HOVNANIAN AT POMPANO BEACH, INC.
K. HOVNANIAN AT JERSEY CITY III, INC.
K. HOVNANIAN PROPERTIES OF NEWARK URBAN RENEWAL
CORPORATION, INC.
K. HOVNANIAN AT NORTH BRUNSWICK IV, INC.
K. HOVNANIAN AT BRIDGEWATER IV, INC.
K. HOVNANIAN AT SOUTH BRUNSWICK, INC.
K. HOVNANIAN AT PERKIOMEN I, INC.
K. HOVNANIAN AT VALLEYBROOK, INC.
K. HOVNANIAN AT OCEAN TOWNSHIP, INC.
K. HOVNANIAN AT PLAINSBORO I, INC.
K. HOVNANIAN REAL ESTATE OF FLORIDA, INC.
WESTERN FINANCIAL SERVICES, INC.
K. HOVNANIAN AT WAYNE, INC.
K. HOVNANIAN PROPERTIES OF RED BANK, INC.
K. HOVNANIAN AT HANOVER, INC.
K. HOVNANIAN AT LAKE CHARLESTON, INC.
NEW K. HOVNANIAN DEVELOPMENTS OF FLORIDA, INC.
K. HOVNANIAN COMPANIES OF METRO WASHINGTON, INC.
K. HOVNANIAN AT MONTGOMERY I, INC. EXC, INC.
K. HOVNANIAN DEVELOPMENTS OF METRO
20
WASHINGTON, INC.
K. HOVNANIAN AT ASHBURN VILLAGE, INC.
K. HOVNANIAN AT WOODMONT, INC.
K. HOVNANIAN AT FAIRWAY VIEWS, INC.
K. HOVNANIAN AT CAROLINA COUNTRY CLUB I, INC.
K. HOVNANIAN AT CHAPEL TRAIL, INC.
K. HOVNANIAN TREASURE COAST, INC.
K. HOVNANIAN AT UPPER MERION, INC.
K. HOVNANIAN AT MAHWAH VI, INC.
K. HOVNANIAN AT MEDFORD I, INC.
K. HOV INTERNATIONAL, INC.
K. HOVNANIAN AT MONTCLAIR, INC.
K. HOVNANIAN AT BULL RUN, INC.
K. HOVNANIAN AT SULLY STATION, INC.
K. HOVNANIAN AT SPRING RIDGE, INC.
K. HOVNANIAN MARINE, INC.
K. HOVNANIAN AT RIVER OAKS, INC.
K. HOVNANIAN AT HOLLY CREST, INC.
K. HOVNANIAN PROPERTIES OF ROUTE 35, INC.
STONEBROOK HOMES, INC.
K. HOVNANIAN AT WINSTON TRAILS, INC.
K. HOVNANIAN AT LAKES OF BOCA RATON, INC.
K. HOVNANIAN AT LAKE CHARLESTON II, INC.
K. HOVNANIAN AT LAKE CHARLESTON III, INC.
K. HOVNANIAN AT BRIDGEWATER VI, INC.
KHIPE, INC.
K. HOVNANIAN AT FAIR LAKES, INC.
K. HOVNANIAN AT CAROLINA COUNTRY
CLUB II, INC.
K. HOVNANIAN AT VALLEYBROOK II, INC.
K. HOVNANIAN AT PARK RIDGE, INC.
K. HOVNANIAN AT BELMONT, INC.
K. HOVNANIAN AT WINSTON TRAILS II, INC.
K. HOVNANIAN FAIR LAKES GLEN, INC.
K. HOVNANIAN AT PEMBROKE SHORES, INC.
K. HOVNANIAN AT CAROLINA COUNTRY
CLUB III, INC.
GOVERNOR'S ABSTRACT CO., INC.
K. HOVNANIAN AT COCONUT CREEK, INC.
K. HOVNANIAN AT POLO TRACE, INC.
FOUNDERS TITLE AGENCY, INC.
K. HOVNANIAN AT BERNARDS IV, INC.
K. HOVNANIAN AT PERKIOMEN II, INC.
K. HOVNANIAN AT WAYNE II, INC.
K. HOVNANIAN AT UPPER MAKEFIELD I, INC.
K. HOVNANIAN COMPANIES OF CALIFORNIA, INC.
K. HOVNANIAN AT TERRAZA, INC.
K. HOVNANIAN DEVELOPMENTS OF CALIFORNIA, INC.
KHC ACQUISITION, INC.
21
K. HOVNANIAN AT STUART ROAD, INC.
K. HOVNANIAN AT HIGHLAND VINEYARDS, INC.
K. HOVNANIAN AT BALLANTRAE, INC.
BALLANTRAE HOME SALES, INC.
K. HOVNANIAN COMPANIES AT WILDROSE, INC.
K. HOVNANIAN AT GREENBROOK, INC.
K. HOVNANIAN AT HUNTER ESTATES, INC.
K. HOVNANIAN AT CARMEL DEL MAR, INC.
K. HOVNANIAN AT VAIL RANCH, INC.
K. HOVNANIAN AT PRINCETON, INC.
K. HOVNANIAN AT RARITAN I, INC.
K. HOVNANIAN AT CALABRIA, INC.
K. HOVNANIAN AT SENECA CROSSING, INC.
K. HOVNANIAN COMPANIES OF MARYLAND, INC.
K. HOVNANIAN DEVELOPMENTS OF MARYLAND, INC.
K. HOVNANIAN AT EXETER HILLS, INC.
K. HOVNANIAN FLORIDA REGION, INC.
K. HOVNANIAN SOUTHEAST FLORIDA, INC.
K. HOVNANIAN AT BERLIN, INC.
K. HOVNANIAN AT EAST BRUNSWICK VI, INC.
K. HOVNANIAN AT BEDMINSTER II, INC.
K. HOVNANIAN AT INVERRARY I, INC.
K. HOVNANIAN AT MAHWAH IX, INC.
K. HOVNANIAN AT NORTHLAKE, INC.
K. HOVNANIAN AT HOPEWELL IV, INC.
K. HOVNANIAN AT LOCUST GROVE I, INC.
K. HOVNANIAN AT CASTILE, INC.
K. HOVNANIAN AT TIERRASANTA, INC.
K. HOVNANIAN AT PRESTON, INC.
K. HOVNANIAN AT BERNARDS III, INC.
K. HOVNANIAN AT WAYNE VI, INC.
K. HOVNANIAN PROPERTIES OF NORTH CENTER DRIVE,
INC.
BALLANTRAE DEVELOPMENT CORP.
K. HOVNANIAN AT LA TROVATA, INC.
K. HOVNANIAN AT RANCHO CRISTIANITOS, INC.
K. HOVNANIAN AT TANNERY HILL, INC.
K. HOVNANIAN PROPERTIES OF N.B. THEATRE, INC.
K. HOVNANIAN AT CRYSTAL SPRINGS, INC.
K. HOVNANIAN AT THE CEDARS, INC.
K. HOVNANIAN CONSTRUCTION MANAGEMENT, INC.
K. HOVNANIAN ACQUISITIONS, INC.
K. HOVNANIAN AT BURLINGTON II, INC.
K. HOVNANIAN AT BURLINGTON III, INC.
K. HOVNANIAN AT BALLANTRAE ESTATES, INC.
K. HOVNANIAN AT SMITHVILLE, INC.
K. HOVNANIAN AT JEFFERSON, INC.
K. HOVNANIAN AT UPPER FREEHOLD
TOWNSHIP I, INC.
K. HOVNANIAN AT HERSHEY'S MILL, INC.
22
K. HOVNANIAN AT DOMINION RIDGE, INC.
K. HOVNANIAN AT PORT IMPERIAL NORTH, INC.
K. HOVNANIAN AT UNION TOWNSHIP I, INC.
K. HOVNANIAN AT EAST BRUNSWICK VIII, INC.
K. HOVNANIAN AT MANALAPAN II, INC.
K. HOVNANIAN AT HOPEWELL V, INC.
K. HOVNANIAN AT HOPEWELL VI, INC.
K. HOVNANIAN AT CAMERON CHASE, INC.
K. HOVNANIAN AT THORNBURY, INC.
K. HOVNANIAN AT WAYNE VII, INC.
K. HOVNANIAN SCOTCH PLAINS II, INC.
K. HOVNANIAN AT MARLBORO TOWNSHIP IV, INC.
K. HOVNANIAN PORT IMPERIAL URBAN RENEWAL,INC.
K. HOVNANIAN AT EAST WHITELAND I, INC.
K. HOVNANIAN AT STONEGATE, INC.
K. HOVNANIAN AT CRESTLINE, INC.
K. HOVNANIAN AT SAN SEVAINE, INC.
K. HOVNANIAN AT SYCAMORE, INC.
K. HOVNANIAN COMPANIES OF SOUTHERN
CALIFORNIA, INC.
K. HOVNANIAN AT SMITHVILLE II, INC.
K. HOVNANIAN AT STONY POINT, INC.
K. HOVNANIAN AT STONE CANYON, INC.
K. HOVNANIAN AT TUXEDO, INC.
K. HOVNANIAN AT BRIDGEPORT, INC.
K. HOVNANIAN AT SARATOGA, INC.
K. HOVNANIAN AT CHAPARRAL, INC.
K. HOVNANIAN AT OCEAN WALK, INC.
K. HOVNANIAN AT LOWER SAUGON II, INC.
K. HOVNANIAN AT STONEGATE, INC.
K. HOVNANIAN AT BARRINGTON, INC.
K. HOVNANIAN AT HAMPTON OAKS, INC.
K. HOVNANIAN AT P.C. HOMES, INC.
K. HOVNANIAN AT P.C. PROPERTIES, INC.
K. HOVNANIAN AT SUMMERWOOD, INC.
K. HOVNANIAN AT THE GLEN
K. HOVNANIAN'S FOUR SEASONS OF THE PALM
BEACHES, INC.
K. HOVNANIAN AT WALL TOWNSHIP VIII, INC.
K. HOVNANIAN AT NORTH JERSEY ACQUISITION, L.L.C.
K. HOVNANIAN CENTRAL ACQUISITION, L.L.C.
K. HOVNANIAN SHORE ACQUISITION, L.L.C.
K. HOVNANIAN SOUTH JERSEY ACQUISITION, L.L.C.
K. HOVNANIAN AT MANSFIELD I, L.L.C.
K. HOVNANIAN AT MANSFIELD II, L.L.C.
K. HOVNANIAN NORTH CENTRAL
ACQUISITION, L.L.C.
K. HOVNANIAN AT WAYNE VIII, L.L.C.
23
K. HOVNANIAN AT BERNARDS V, L.L.C.
K. HOVNANIAN AT WANAQUE, L.L.C.
K. HOVNANIAN AT CHESTER I, L.L.C.
K. HOVNANIAN AT WINCHESTER, L.L.C.
K. HOVNANIAN AT MIDDLETOWN, L.L.C.
K. HOVNANIAN'S FOUR SEASONS, L.L.C.
K. HOVNANIAN AT MENIFEE, L.L.C.
K. HOVNANIAN AT NORTH BRUNSWICK VI, L.L.C.
K. HOVNANIAN AT CARMEL VILLAGE, L.L.C.
K. HOVNANIAN AT LAWRENCE, L.L.C.
K. HOVNANIAN AT BLUE HERON PINES, L.L.C.
K. HOVNANIAN AT JACKSON, L.L.C.
K. HOVNANIAN AT ROLAND HEIGHTS, L.L.C.
K. HOVNANIAN AT BERKELEY, L.L.C.
K. HOVNANIAN AT KING FARM, L.L.C.
K. HOVNANIAN AT SOUTH BANK, L.L.C.
K. HOVNANIAN AT PRINCE WILLIAM, L.L.C.
K. HOVNANIAN AT LAKE TERRAPIN, L.L.C.
K. HOVNANIAN AT GUTTENBERG, L.L.C.
K. HOVNANIAN AT KING FARM, L.L.C.
K. HOVNANIAN AT SOUTH BANK, L.L.C.
K. HOVNANIAN AT CLIFTON, L.L.C.
K. HOVNANIAN AT JERSEY CITY IV, L.L.C.
K. HOVNANIAN AT LAFAYETTE ESTATES, L.L.C.
K. HOVNANIAN AT UPPER FREEHOLD
TOWNSHIP II, L.L.C.
K. HOVNANIAN AT KINCAID, L.L.C.
K. HOVNANIAN AT LINWOOD, L.L.C.
K. HOVNANIAN AT SOUTH AMBOY, L.L.C.
K. HOVNANIAN AT UPPER FREEHOLD TOWNSHIP III,
L.L.C.
K. HOVNANIAN AT BRENBROOKE, L.L.C.
K. HOVNANIAN AT BLOOMS CROSSING, L.L.C.
K. HOVNANIAN AT SPRING HILL ROAD, L.L.C.
K. HOVNANIAN AT ST. MARGARETS, L.L.C.
K. HOVNANIAN AT PARAMUS, L.L.C.
K. HOVNANIAN AT WILLOW BROOK, L.L.C.
K. HOVNANIAN AT WEST MILFORD, L.L.C
WHI HOLDING CO., INC.
By: ______________________________ _____________
Name:
Title:
24
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: ______________________________ ______________
Name:
Title:
SALOMON SMITH BARNEY INC.
By: ______________________________
Name:
Title:
PNC CAPITAL MARKETS, INC.
By: ______________________________
Name:
Title:
25
Exhibit 21.1
SCHEDULE OF SUBSIDIARY REGISTRANTS
Exact Name of Subsidiary Registrant As Specified in Its Charter
- ---------------------------------------------------------------
K. Hovnanian at Hopewell Ill., Inc.
Recreational Development Corp., Inc.
Pine Brook Company, Inc.
K. Hovnanian at Bedminster, Inc.
K. Hovnanian at The Bluff, Inc.
K. Hovnanian at Atlantic City, Inc.
Hovnanian Properties of Atlantic County, Inc.
Montego Bay I Can Corp., Inc.
Pike Utilities, Inc.
Arrow Properties, Inc.
K. Hovnanian Real Estate Investment, Inc.
Hovnanian Texas, Inc.
Landarama, Inc.
Tropical Service Builders, Inc.
Hovnanian Pennsylvania, Inc.
K. Hovnanian Properties of North Brunswick V, Inc.
K. Hovnanian at Mahwah VIII, Inc.
K. Hovnanian at Wall Township IV, Inc.
K. Hovnanian at Montville, Inc.
Hovnanian of Palm Beach, Inc.
K. Hovnanian Companies of Florida, Inc.
K. Hovnanian at Freehold Township, Inc.
Hovnanian Properties of Lake Worth, Inc.
K. Hovnanian Companies of Pennsylvania, Inc.
K. Hovnanian Properties of Hamilton, Inc.
K. Hovnanian at Scotch Plains, Inc.
K. Hovnanian at Wayne IV, Inc.
Hovnanian Developments of Florida, Inc.
Montego Bay II Acquisition Corp., Inc.
Hovnanian of Palm Beach VII, Inc.
K. Hovnanian at Wall Township II, Inc.
K. Hovnanian Enterprises, Inc.
Hovnanian of Palm Beach IX, Inc.
Hovnanian At Tarpon Lakes I, Inc.
K. Hovnanian Companies Northeast, Inc.
Kings Grant Evesham Corp.
K. Hovnanian at Manalapan, Inc.
K. Hovnanian at Wall Township, Inc.
K. Hovnanian at East Brunswick VII, Inc.
K. Hovnanian Companies of Central Jersey, Inc.
Hovnanian of Palm Beach XI, Inc.
K. Hovnanian at South Brunswick II, Inc.
K. Hovnanian at Lawrence Square, Inc.
K. Hovnanian at Tarpon Lakes III, Inc.
K. Hovnanian at Horizon Heights, Inc.
K. Hovnanian at Reservoir Ridge, Inc.
K. Hovnanian at Jersey City I, Inc.
K. Hovnanian Investment Properties of New Jersey, Inc.
K. Hovnanian at. Ft Myers I, Inc.
K. Hovnanian at Howell Township II, Inc.
K. Hovnanian at Klockner Farms, Inc.
K. Hovnanian Jensen Beach, Inc.
Molly Pitcher Construction Co., Inc.
K. Hovnanian at Mahwah VII, Inc.
K. Hovnanian at Wayne III, Inc.
K. Hovnanian Properties of East Brunswick II, Inc.
K. Hovnanian at Kings Grant I, Inc.
The New Fortis Corporation
K. Hovnanian at Clarkstown, Inc.
K. Hovnanian Companies of New York, Inc.
K. Hovnanian Developments of New York, Inc.
Dryer Associates, Inc.
K. Hovnanian at Pasco I, Inc.
K. Hovnanian at Lakewood, Inc.
K. Hovnanian at Martin Downs II, Inc.
K. Hovnanian Aviation, Inc.
K. Hovnanian Investment Properties, Inc.
K. Hovnanian At Ft. Myers II, Inc.
K. Hovnanian at Bernards II, Inc.
K. Hovnanian at South Brunswick III, Inc.
Minerva Group, Inc.
K. Hovnanian developments of New Jersey, Inc.
K. Hovnanian at Bridgewater V, Inc.
K. Hovnanian at North Brunswick II, Inc.
K. Hovnanian at Washingtonville, Inc.
K. Hovnanian at Peekskill, Inc.
K. Hovnanian at Newark I, Inc.
K. Hovnanian at Carmel, Inc.
K. Hovnanian at East Windsor I, Inc.
Parthenon Group, Inc.
K. Hovnanian at Marlboro Township II, Inc.
K. Hovnanian at Somerset III, Inc.
R.C.K. Community Management Co., Inc.
K. Hovnanian at Montclair, NJ, Inc.
K. Hovnanian at East Brunswick VI, Inc.
K. Hovnanian at Hackettstown, Inc.
K. Hovnanian Companies of North Carolina, Inc
K. Hovnanian at Montville II, Inc.
K. Hovnanian at Wall Township VII, Inc.
K. Hovnanian at Bridgewater II, Inc.
K. Hovnanian at Merrimack, Inc.
K. Hovnanian at Bernards III, Inc.
Eastern National Title Insurance Agency, Inc.
K. Hovnanian at Wayne V, Inc.
K. Hovnanian at Pasco II, Inc.
K. Hovnanian at Delray Beach II, Inc.
K. Hovnanian at Branchburg I, Inc.
K. Hovnanian at Plainsboro II, Inc.
K. Hovnanian at Northern Westchester, Inc.
K. Hovnanian Marlboro Township, Inc.
K. Hovnanian at West Orange, Inc.
Eastern Title Agency, Inc.
K. Hovnanian Properties of Franklin, Inc.
K. Hovnanian at Mahwah II, Inc.
New England Community Management Company, Inc.
K. Hovnanian at Howell Township, Inc.
K. Hovnanian at South Brunswick IV, Inc.
K. Hovnanian at Wall Township VI, Inc.
K. Hovnanian Properties of Piscataway, Inc.
K. Hovnanian at Mahwah V, Inc.
K. Hovnanian at Merrimack II, Inc.
K. Hovnanian at Newark Urban Renewal Corporation I
K. Hovnanian at Lawrence Grove, Inc.
K. Hovnanian at Cedar Grove I, Inc.
K. Hovnanian at Cedar Grove II, Inc.
K. Hovnanian at North Brunswick III, Inc.
K. Hovnanian at Jersey City II, Inc.
K. Hovnanian at Burlington, Inc.
K. Hovnanian at South Brunswick V, Inc.
K. Hovnanian at Half Moon Bay, Inc.
K. Hovnanian at Jacksonville II, Inc.
K. Hovnanian at Branchburg II, Inc.
K. Hovnanian at Embassy Lakes, Inc.
K. Hovnanian at The Reserve at Medford, Inc.
K. Hovnanian at Branchburg III, Inc.
K. Hovnanian at Lower Saucon, Inc.
Jersey City Danforth CSO, Inc.
K. Hovnanian at East Windsor II, Inc.
K. Hovnanian at Marlboro Township III, Inc.
K. Hovnanian at Newark Urban Renewal Corp. III, Inc.
K. Hovnanian at Somerset VIII, Inc.
K. Hovnanian at Readington, Inc.
K. Hovnanian at Hopewell I, Inc.
K. Hovnanian at Newark Urban Renewal corp. IV, Inc.
K. Hovnanian at Newark Urban Renewal Corp. V, Inc.
K. Hovnanian at Plainsboro III, Inc.
K. Hovnanian at Mahwah IV, Inc.
K. Hovnanian at Pompano Beach, Inc.
K. Hovnanian at Jersey City III, Inc.
K. Hovnanian Properties of Newark Urban Renewal Corporation, Inc.
K. Hovnanian at North Brunswick IV, Inc.
K. Hovnanian at Bridgewater IV, Inc.
K. Hovnanian at South Brunswick, Inc.
K. Hovnanian Perkiomen I, Inc.
K. Hovnanian at Valleybrook, Inc.
K. Hovnanian at Ocean Township, Inc.
K. Hovnanian at Plainsboro I, Inc.
K. Hovnanian Real Estate of Florida, Inc.
Western Financial Services, Inc.
K. Hovnanian at Wayne, Inc.
K. Hovnanian Properties of Red Bank, Inc.
K. Hovnanian at Hanover, Inc.
K. Hovnanian at Lake Charleston, Inc.
New K. Hovnanian Developments of Florida, Inc.
K. Hovnanian Companies of Metro Washington, Inc.
K. Hovnanian at Montgomery I, Inc.
EXC, Inc
K. Hovnanian Developments of Metro Washington, Inc.
K. Hovnanian at Ashburn Village, Inc.
K. Hovnanian at Woodmont, Inc.
K. Hovnanian at Fairway Views, Inc.
K. Hovnanian at Carolina Country Club I, Inc.
K. Hovnanian at Chapel Trail, Inc.
K. Hovnanian Treasure Coast, Inc.
K. Hovnanian at Upper Merion, Inc.
K. Hovnanian at Mahwah VI, Inc.
K. Hovnanian at Medford I, Inc.
K. Hov International, Inc.
K. Hovnanian at Montclair, Inc.
K. Hovnanian at Bull Run, Inc.
K. Hovnanian at Sully Station, Inc.
K. Hovnanian at Spring Ridge, Inc.
K. Hovnanian Marine, Inc.
K. Hovnanian at River Oaks, Inc.
K. Hovnanian at Holly Crest, Inc.
K. Hovnanian Properties of Route 35, Inc.
Stonebrook Homes, Inc.
K. Hovnanian at Winston Trails, Inc.
K. Hovnanian at Lakes of Boca Raton, Inc.
K. Hovnanian at Lake Charleston II, Inc.
K. Hovnanian at Lake Charleston III, Inc.
K. Hovnanian at Bridgewater VI, Inc.
KHIPE, Inc.
K. Hovnanian at Fair Lakes, Inc.
K. Hovnanian at Carolina Country Club II, Inc.
K. Hovnanian at Valleybrook II, Inc.
K. Hovnanian at Park Ridge, Inc.
K. Hovnanian at Belmont, Inc.
K. Hovnanian at Winston Trails II, Inc.
K. Hovnanian Fair Lakes Glen, Inc.
K. Hovnanian at Pembroke Shores, Inc.
K. Hovnanian At Carolina Country Club III, Inc.
Governor's Abstract Co., Inc.
K. Hovnanian at Coconut Creek, Inc.
K. Hovnanian at Polo Trace, Inc.
Founders Title Agency, Inc.
K. Hovnanian at Bernards IV, Inc.
K. Hovnanian at Perkiomen II, Inc.
K. Hovnanian at Wayne II, Inc.
K. Hovnanian at Upper Makefield I, Inc.
K. Hovnanian Companies of California, Inc.
K. Hovnanian at Terraza, Inc.
K. Hovnanian Developments of California, Inc.
KHC Acquisition, Inc.
K. Hovnanian at Stuart Road, Inc.
K. Hovnanian at Highland Vineyards, Inc.
K. Hovnanian at Ballantrae, Inc.
Ballantrae Home Sales, Inc.
K. Hovnanian Companies at Wildrose, Inc.
K. Hovnanian at Greenbrook, Inc.
K. Hovnanian at Hunter Estates, Inc.
K. Hovnanian at Carmel Delmar, Inc.
K. Hovnanian at Vail Ranch, Inc.
K. Hovnanian at Princeton, Inc.
K. Hovnanian at Raritan I, Inc.
K. Hovnanian at Calabria, Inc.
K. Hovnanian at Seneca Crossing, Inc.
K. Hovnanian Companies of Maryland, Inc.
K. Hovnanian Developments of Maryland, Inc.
K. Hovnanian at Exeter Hills, Inc.
K. Hovnanian Florida Region, Inc.
K. Hovnanian Southeast Florida, Inc.
K. Hovnanian at Berlin, Inc.
K. Hovnanian at East Brunswick VI, Inc.
K. Hovnanian at Bedminster II, Inc.
K. Hovnanian at Inverrary I, Inc.
K. Hovnanian at Mahwah IX, Inc.
K. Hovnanian at Northlake, Inc.
K. Hovnanian at Hopewell IV, Inc.
K. Hovnanian at Locust Grove I, Inc.
K. Hovnanian at Castile, Inc.
K. Hovnanian at Tierrasanta, Inc.
K. Hovnanian at Preston, Inc.
K. Hovnanian at Bernards III, Inc.
K. Hovnanian at Wayne VI, Inc.
K. Hovnanian Properties of North Center Drive, Inc.
K. Hovnanian at La Trovata, Inc.
K. Hovnanian at Rancho Cristianitos, Inc.
K. Hovnanian at Tannery Hill, Inc.
K. Hovnanian Properties of N.B. Theatre, Inc.
K. Hovnanian at Crystal Springs, Inc.
K. Hovnanian at The Cedars, Inc.
K. Hovnanian at Construction Management, Inc.
K. Hovnanian Acquisitions, Inc.
K. Hovnanian at Burlington II, Inc.
K. Hovnanian at Burlington III, Inc.
K. Hovnanian at Ballantrae Estates, Inc.
K. Hovnanian at Smithville, Inc.
K. Hovnanian at Upper Freehold Township I, Inc.
K. Hovnanian at Hershey's Mill, Inc.
K. Hovnanian at Dominion Ridge, Inc.
K. Hovnanian at Port Imperial North, Inc.
K. Hovnanian at Union Township I, Inc.
K. Hovnanian at East Brunswick VIII, Inc.
K. Hovnanian at Manalapan II, Inc.
K. Hovnanian at Hopewell V, Inc.
K. Hovnanian at Hopewell VI, Inc.
K. Hovnanian at Cameron Chase, Inc.
K. Hovnanian at Thornbury, Inc.
K. Hovnanian at Wayne VII, Inc.
K. Hovnanian Scotch Plains II, Inc.
K. Hovnanian at Marlboro Township IV, INC.
K. Hovnanian Port Imperial Urban Renewal, Inc.
K. Hovnanian at East Whiteland I, Inc.
K. Hovnanian at Stonegate, Inc.
K. Hovnanian at Crestline, Inc.
K. Hovnanian at San Sevaine, Inc.
K. Hovnanian at Sycamore, Inc.
K. Hovnanian Companies of Southern California, Inc.
K. Hovnanian at Smithville II, Inc.
K. Hovnanian at Stony Point, Inc.
K. Hovnanian at Stone Canyon, Inc.
K. Hovnanian at Tuxedo, Inc.
K. Hovnanian at Bridgeport, Inc.
K. Hovnanian at Saratoga, Inc.
K. Hovnanian at Chaparral, Inc.
K. Hovnanian at Ocean Walk, Inc.
K. Hovnanian at Lower Saugon II, Inc.
K. Hovnanian at Stonegate, Inc.
K. Hovnanian at Barrington, Inc.
K. Hovnanian at Hampton Oaks, Inc.
K. Hovnanian at P.C. Homes, Inc.
K. Hovnanian at P.C. Properties, Inc.
K. Hovnanian at Summerwood, Inc.
K. Hovnanian at The Glen
K. Hovnanian's Four Seasons of the Palm Beaches, Inc.
K. Hovnanian at Wall Township VIII, Inc.
K. Hovnanian at North Jersey Acquisition, L.L.C.
K. Hovnanian at Central Acquisition, L.L.C.
K. Hovnanian at Shore Acquisition, L.L.C.
K. Hovnanian at South Jersey Acquisition, L.L.C.
K. Hovnanian at Mansfield I, L.L.C.
K. Hovnanian at Mansfield II, L.L.C.
K. Hovnanian at North Central Acquisition, L.L.C.
K. Hovnanian at Wayne VIII, L.L.C.
K. Hovnanian at Bernards V, L.L.C
K. Hovnanian at Wanaque, L.L.C.
K. Hovnanian at Chester I, L.L.C.
K. Hovnanian at Winchester, L.L.C.
K. Hovnanian at Middletown, L.L.C.
K. Hovnanian's Four Seasons, L.L.C.
K. Hovnanian at Menifee, L.L.C.
K. Hovnanian at North Brunswick VI, L.L.C.
K. Hovnanian at Carmel Village, L.L.C.
K. Hovnanian at Lawrence, L.L.C.
K. Hovnanian at Blue Heron Pines, L.L.C.
K. Hovnanian at Jackson, L.L.C.
K. Hovnanian at Roland Heights, L.L.C.
K. Hovnanian at Berkeley, L.L.C.
K. Hovnanian at King Farm, L.L.C.
K. Hovnanian at South Bank, L.L.C.
K. Hovnanian at Prince William, L.L.C.
K. Hovnanian at Lake Terrapin, L.L.C.
K. Hovnanian at Clifton, LLC
K. Hovnanian at Upper Freehold Township II, L.L.C
K. Hovnanian at Jersey City IV, L.L.C
K. Hovnanian at Rancho Santa Margarita, L.L.C
K. Hovnanian at Lafayette Estates, L.L.C
K. Hovnanian at Arbor Heights, L.L.C
K. Hovnanian at South Amboy, L.L.C
K. Hovnanian at the Gables, L.L.C
K. Hovnanian at Linwood, L.L.C
K. Hovnanian at Riverbend, L.L.C
K. Hovnanian at Kincaid, L.L.C
K. Hovnanian at Upper Freehold Township III, L.L.C
K. Hovnanian at Northfield, L.L.C
K. Hovnanian at Kent Island, L.L.C
The Matzel & Mumford Organization, Inc.
M & M Investments, LP
K. Hovnanian at Ashburn Village, L.L.C
K. Hovnanian Co. Metro DC North, L.L.C
K. Hovnanian at Mansfield Ill., L.L.C
Goodman Family of Builders, LP
K. Hovnanian Developments of Texas, Inc.
K. Hovnanian at Brenbrooke, L.L.C
K. Hovnanian at Spring Hill Road, L.L.C
K. Hovnanian at St. Margarets, L.L.C
Matzel & Mumford of Delaware, Inc.
K. Hovnanian at Paramus, L.L.C
K. Hovnanian at Blooms Crossing, L.L.C
K. Hovnanian at Encinitas Ranch, L.L.C
K. Hovnanian Pacific Bluffs, L.L.C
K. Hovnanian Sunsets, L.L.C
K. Hovnanian at Willow Brook, L.L.C
K. Hovnanian at Park Lane, L.L.C
K. Hovnanian West Milford, L.L.C
K. Hovnanian at Washington, L.L.C
K. Hovnanian at Roderuck, L.L.C
K. Hovnanian at Columbia Town Center, L.L.C.
K. Hovnanian's Private Home Portfolio, L.L.C.
K. Hovnanian at North Haledon, L.L.C.
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 K. Hovnanian
Enterprises, Inc. and Hovnanian Enterprises, Inc. for the registration of
$150,000,000 10 1/2% Senior Notes due 2007 and to the incorporation by reference
therein of our report dated December 16, 1999, with respect to the consolidated
financial statements of Hovnanian Enterprises, Inc. included in its Annual
Report (Form 10-K) for the year ended October 31, 1999, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
---------------------
ERNST & YOUNG LLP
New York, New York
December 27, 2000
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
K. Hovnanian Enterprises, Inc. and Hovnanian Enterprises, Inc on Form S-4 of our
report dated September 6, 2000, appearing in the Current Report on Form 8-K of
Washington Homes, Inc. and to the reference to us under the heading "Experts" in
the Prospectus, which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
McLean, Virginia
December 27, 2000
Exhibit 24.1
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints J. Larry Sorsby 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, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
- ------------------------------------------------------------------------------------------------------------------------
Signature Title Date
--------- ----- ----
- ------------------------------------------------------------------------------------------------------------------------
/s/ Kevork S. Hovnanian Chairman of the Board December 27, 2000
----------------------------
Kevork S. Hovnanian
- ------------------------------------------------------------------------------------------------------------------------
/s/ Ara K. Hovnanian
----------------------------- Chief Executive Officer, President and December 27, 2000
Ara K. Hovnanian Director
- ------------------------------------------------------------------------------------------------------------------------
/s/ Paul W. Buchanan
----------------------------- Senior Vice President - Corporate December 27, 2000
Paul W. Buchanan Controller and Director
- ------------------------------------------------------------------------------------------------------------------------
/s/ Peter S. Reinhart
----------------------------- Senior Vice President, General December 27, 2000
Peter S. Reinhart Counsel/Secretary and Director
- ------------------------------------------------------------------------------------------------------------------------
/s/ J. Larry Sorsby
----------------------------- Executive Vice President, Chief December 27, 2000
J. Larry Sorsby Financial Officer and Director
- ------------------------------------------------------------------------------------------------------------------------
----------------------------- Director December ____, 2000
Arthur M. Greenbaum
- ------------------------------------------------------------------------------------------------------------------------
----------------------------- Director December ____, 2000
Desmond P. McDonald
- ------------------------------------------------------------------------------------------------------------------------
----------------------------- Director December ____, 2000
Stephen D. Weinroth
- ------------------------------------------------------------------------------------------------------------------------
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints J. Larry Sorsby 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, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
- ------------------------------------------------------------------------------------------------------------------------
Signature Title Date
--------- ----- ----
- ------------------------------------------------------------------------------------------------------------------------
/s/ Kevork S. Hovnanian
--------------------------- Chairman of the Board December 27, 2000
Kevork S. Hovnanian
- ------------------------------------------------------------------------------------------------------------------------
/s/ Ara K. Hovnanian
--------------------------- Chief Executive Officer, President and December 27, 2000
Ara K. Hovnanian Director
- ------------------------------------------------------------------------------------------------------------------------
/s/ Paul W. Buchanan
--------------------------- Senior Vice President - Corporate December 27, 2000
Paul W. Buchanan Controller and Director
- ------------------------------------------------------------------------------------------------------------------------
/s/ Peter S. Reinhart
--------------------------- Senior Vice President, General December 27, 2000
Peter S. Reinhart Counsel/Secretary and Director
- ------------------------------------------------------------------------------------------------------------------------
/s/ J. Larry Sorsby
--------------------------- Executive Vice President, Chief December 27, 2000
J. Larry Sorsby Financial Officer and Director
- ------------------------------------------------------------------------------------------------------------------------
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints J. Larry Sorsby 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, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
- -----------------------------------------------------------------------------------------------------------
Signature Title Date
--------- ----- ----
- -----------------------------------------------------------------------------------------------------------
/s/ Kevork S. Hovnanian
--------------------------- Chairman of the Board December 27, 2000
Kevork S. Hovnanian
- -----------------------------------------------------------------------------------------------------------
/s/ Ara K. Hovnanian
--------------------------- Chief Executive Officer, President and December 27, 2000
Ara K. Hovnanian Director
- -----------------------------------------------------------------------------------------------------------
/s/ Paul W. Buchanan
--------------------------- Senior Vice President - Corporate December 27, 2000
Paul W. Buchanan Controller and Director
- -----------------------------------------------------------------------------------------------------------
/s/ Peter S. Reinhart
--------------------------- Senior Vice President, General December 27, 2000
Peter S. Reinhart Counsel/Secretary and Director
- -----------------------------------------------------------------------------------------------------------
/s/ J. Larry Sorsby
--------------------------- Executive Vice President, Chief December 27, 2000
J. Larry Sorsby Financial Officer and Director
- -----------------------------------------------------------------------------------------------------------
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)___
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)
_______________
Hovnanian Enterprises, Inc.
(Name of Obligor)
Delaware 22-1851059
(State of Incorporation) (I.R.S. Employer
Identification No.)
10 Highway 35, P.O. Box 500,Redbank, NJ 07701
(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, 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 Percentage 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 Percentage 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 Percentage 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 Percentage 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 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.
- -----------------------------------------------------------------------------------------------------------------------
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 333-47985).
**Exhibits thus designated have 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 333-49145).
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,
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, 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 City of Morristown, and State of New Jersey, on the 19th
day of December, 2000
First Union National Bank
(Trustee)
(CORPORATE SEAL)
By: /s/ Stephanie Roche
-----------------------------
Vice President
Exhibit T-6
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.
FIRST UNION NATIONAL BANK
By: /s/ Stephanie Roche
-----------------------------------
Vice President
Morristown, NJ
December 19, 2000
EXHIBIT T-7
REPORT OF CONDITION
Consolidating domestic and foreign subsidiaries of the First Union National
Bank, at the close of business on September 30, 2000, published in response to
call made by Comptroller of the Currency, under title 12, United States Code,
Section 161. Charter Number 22693 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 ................... 7,814,000
Interest-bearing balances ............................................ 4,091,000
Securities ............................................................. /////////
Hold-to-maturity securities .......................................... 1,556,000
Available-for-sale securities ........................................ 48,764,000
Federal funds sold and securities purchased under agreements //////////
to resell ..................................................... 2,165,000
Loans and lease financing receivables:
Loan and leases, net of unearned income........................ 132,642,000
LESS: Allowance for loan and lease losses...................... 1,900,000
LESS: Allocated transfer risk reserve.......................... 0
Loans and leases, net of unearned income, allowance, and
reserve ....................................................... 130,742,000
Trading Assets ......................................................... 12,912,000
Premises and fixed assets (including capitalized leases) ............... 2,928,000
Other real estate owned ................................................ 107,000
Investment in unconsolidated subsidiaries and associated ............... //////////
companies .............................................................. 250,000
Customer's liability to this bank on acceptances outstanding ........... 967,000
Intangible assets ...................................................... 2,889,000
Other assets ........................................................... 12,662,000
Total assets ........................................................... 227,847,000
LIABILITIES
Deposits:
In domestic offices ........................................... 130,675,000
Noninterest-bearing ......................................... 20,065,000
Interest-bearing............................................. 110,610,000
In foreign offices, Edge and Agreement subsidiaries,
and IBFs ...................................................... 12,305,000
Noninterest-bearing ......................................... 39,000
Interest-bearing............................................. 12,266,000
Federal funds purchased and securities sold under agreements
to repurchase ................................................. 23,476,000
Demand notes issued to the U.S. Treasury ............................... 2,077,000
Trading liabilities .................................................... 6,979,000
Other borrowed money: .................................................. /////////
With a remaining maturity of one year or less ................. 16,205,000
With a remaining maturity of one year through three years ..... 4,039,000
With a remaining maturity of more than three years ............ 2,075,000
Bank's liability on acceptances executed and outstanding ............... 975,000
Subordinated notes and debentures ...................................... 5,993,000
Other liabilities ...................................................... 7,567,000
Total liabilities ...................................................... 212,366,000
EQUITY CAPITAL
Perpetual preferred stock and related surplus .......................... 161,000
Common Stock ........................................................... 455,000
Surplus ................................................................ 13,306,000
Undivided profits and capital reserves ................................. 2,381,000
Net unrealized holding gains (losses) on available-for-sale /////////
securities ............................................................ (817,000)
Cumulative foreign currency translation adjustments .................... (5,000)
Total equity capital ................................................... 15,481,000
Total liabilities and equity capital ................................... 227,847,000
Exhibit 99.1
LETTER OF TRANSMITTAL
With Respect to
K. HOVNANIAN ENTERPRISES, INC.
Offer to Exchange
10 1/2% Outstanding Senior Notes due 2007
for 10 1/2% Senior Notes due 2007
that have been registered
under the Securities Act of 1933
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON _______________, 2001 UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
By Overnight Mail or Courier: By Hand: By Mail:
First Union National Bank First Union National Bank First Union National Bank
Attn: Marsha Rice (the "Exchange Agent") Attn: Marsha Rice
Corporate Trust Operations Reorg Attn: Marsha Rice Corporate Trust Operations Reorg
1525 West W.T. Harris Blvd. Corporate Trust Operations Reorg 1525 West W.T. Harris Blvd.
Charlotte NC 28288-1153 1525 West W.T. Harris Blvd. Charlotte NC 28288-1153
Charlotte NC 28288-1153
By Facsimile Transmission:
(704) 590-7628
Confirm by Telephone:
(704) 590-7413
Information:
(704) 590-7413
Delivery of this instrument to an address other than as set forth above
or transmission of instructions via a facsimile number other than the ones
listed above will not constitute a valid delivery. The instructions accompanying
this Letter of Transmittal should be read carefully before this Letter of
Transmittal is completed.
The undersigned hereby acknowledges receipt of the Prospectus dated
__________, 2000 (the "Prospectus") of K. Hovnanian Enterprises, Inc. (the
"Issuer") and Hovnanian Enterprises, Inc., the parent of the Issuer and most of
the subsidiaries of Hovnanian Enterprises, Inc. (the "Guarantors," and each a
"Guarantor") and this Letter of Transmittal, which together constitute the
Issuer's offer (the "Exchange Offer") to exchange $1,000 principal amount of
their 10 1/2% Senior Notes due 2007, guaranteed by the Guarantors (the "Exchange
Notes") which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to a registration statement of which the
Prospectus is a part, for each $1,000 principal amount of their outstanding 10
1/2% Senior Notes due 2007, guaranteed by the Guarantors (the "Outstanding
Notes"), respectively. The term "Expiration Date" shall mean 5:00 p.m., New York
City time, on ____________, 2001, unless the Issuer, in its reasonable judgment,
extends the Exchange Offer, in which case the term shall mean the latest date
and time to which the Exchange Offer is extended. Capitalized terms used but not
defined herein have the meaning given to them in the Prospectus.
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE
INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL
2
COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE
EXCHANGE AGENT.
List below the Outstanding Notes to which this Letter of Transmittal
relates. If the space indicated is inadequate, the Certificate or Registration
Numbers and Principal Amounts should be listed on a separately signed schedule
affixed hereto.
- -----------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OUTSTANDING NOTES TENDERED HEREBY
- -----------------------------------------------------------------------------------------------------------------------
Name(s) and Address(es) of Registered Owner(s) Certificate or Aggregate Principal Principal Amount
(Please fill in) Registration Numbers* Amount Represented Tendered**
by Outstanding Notes
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Total Shares
- -----------------------------------------------------------------------------------------------------------------------
* Need not be completed by book-entry Holders.
** Unless otherwise indicated, the Holder will be deemed to have tendered the full aggregate principal amount
represented by such Outstanding Notes. All tenders must be in integral multiples of $1,000.
- -----------------------------------------------------------------------------------------------------------------------
This Letter of Transmittal is to be used if (i) certificates
representing Outstanding Notes are to be physically delivered to the Exchange
Agent herewith, (ii) tender of Outstanding Notes is to be made by book-entry
transfer to an account maintained by the Exchange Agent at The Depository Trust
Company ("DTC"), pursuant to the procedures set forth in "The Exchange Offer--
Procedures for Tendering" in the Prospectus or (iii) tender of the Outstanding
Notes is to be made according to the guaranteed delivery procedures described in
the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery
Procedures." See Instruction 2. Delivery of documents to a book-entry transfer
facility does not constitute delivery to the Exchange Agent. This Letter of
Transmittal must be completed, signed and delivered even if tender instructions
are being transmitted through the Book-Entry Transfer Facility Automated Tender
Offer Program ("ATOP").
As used in this Letter of Transmittal, the term "Holder" with respect
to the Exchange Offer means any person in whose name Outstanding Notes are
registered on the books of the Issuer or, with respect to interests in the
Global Outstanding Notes held by DTC, any DTC participant listed in an official
DTC proxy. The undersigned has completed, executed and delivered this Letter of
Transmittal to indicate the action the undersigned desires to take with respect
to the Exchange Offer. Holders who wish to tender their Outstanding Notes must
complete this letter in its entirety.
Holders of Outstanding Notes that are tendering by book-entry transfer
to the Exchange Agent's account at DTC can execute the tender through ATOP, for
which the transaction will be eligible. DTC participants that are accepting the
Exchange Offer must transmit their acceptances to DTC, which will verify the
acceptance and execute a book-entry delivery to the Exchange Agent's account at
DTC. DTC will then send an Agent's Message to the Exchange Agent for its
acceptance. Each DTC participant transmitting an acceptance of the Exchange
Offer through the ATOP procedures will be deemed to have agreed to be bound by
the terms of this Letter of Transmittal. Nevertheless, in order for such
acceptance
3
to constitute a valid tender of the DTC participant's Outstanding Notes, such
participant must complete and sign a Letter of Transmittal and deliver it to the
Exchange Agent before the Expiration Date.
. CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution _______________________________________
Account Number ______________________________________________________
Transaction Code Number _____________________________________________
Holders whose Outstanding Notes are not immediately available or who
cannot deliver their Outstanding Notes and all other documents required hereby
to the Exchange Agent on or prior to the Expiration Date must tender their
Outstanding Notes according to the guaranteed delivery procedure set forth in
the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery
Procedures." See Instruction 2.
. CHECK HERE IF TENDERED OUTSTANDING NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s) ________________________________________
Name of Eligible Institution that Guaranteed Delivery _____________
___________________________________________________________________
If delivery by book-entry transfer:
Account Number ___________________________________________________
Transaction Code Number __________________________________________
. CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:
Name ________________________________________________________________
Address _____________________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Outstanding Notes that were acquired
as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a Prospectus in connection with any resale of
such Exchange Notes; however, by so acknowledging and by delivering a
Prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
4
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Issuer the principal amount of the Outstanding
Notes indicated above. Subject to, and effective upon, the acceptance for
exchange of such Outstanding Notes tendered hereby, the undersigned hereby
exchanges, assigns and transfers to, or upon the order of, the Issuer all right,
title and interest in and to such Outstanding Notes as are being tendered
hereby, including all rights to accrued and unpaid interest thereon as of the
Expiration Date. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent the true and lawful agent and attorney-in-fact of the undersigned
(with full knowledge that said Exchange Agent acts as the agent of the Issuer in
connection with the Exchange Offer) to cause the Outstanding Notes to be
assigned, transferred and exchanged. The undersigned represents and warrants
that it has full power and authority to tender, exchange, assign and transfer
the Outstanding Notes and to acquire Exchange Notes issuable upon the exchange
of such tendered Outstanding Notes, and that when the same are accepted for
exchange, the Issuer will acquire good and unencumbered title to the tendered
Outstanding Notes, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim.
The undersigned represents to the Issuer that (i) the Exchange Notes
acquired pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the person receiving such Exchange Notes, whether or not
such person is the undersigned, and (ii) neither the undersigned nor any such
other person has an arrangement or understanding with any person to participate
in the distribution of such Exchange Notes. If the undersigned or the person
receiving the Exchange Notes covered hereby is a broker-dealer that is receiving
the Exchange Notes for its own account in exchange for Outstanding Notes that
were acquired as a result of market-making activities or other trading
activities, the undersigned acknowledges that it or such other person will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes; however, by so acknowledging
and by delivering a prospectus, the undersigned will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. The undersigned
and any such other person acknowledge that, if they are participating in the
Exchange Offer for the purpose of distributing the Exchange Notes, (A) they
cannot rely on the position of the staff of the Securities and Exchange
Commission enunciated in Morgan Stanley & Co., Inc., Exxon Capital Holdings
Corporation, as interpreted in the Commission's letter to Shearman & Sterling
dated July 2, 1993, or similar no-action letters and, in the absence of an
exemption therefrom, must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with the resale transaction and
(B) failure to comply with such requirements in such instance could result in
the undersigned or any such other person incurring liability under the
Securities Act for which such persons are not indemnified by the Issuer. If the
undersigned or the person receiving the Exchange Notes covered by this letter is
an affiliate (as defined under Rule 405 of the Securities Act) of the Issuer,
the undersigned represents to the Issuer that the undersigned understands and
acknowledges that such Exchange Notes may not be offered for resale, resold or
otherwise transferred by the undersigned or such other person without
registration under the Securities Act or an exemption therefrom.
The undersigned also warrants that it will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Issuer to
be necessary or desirable to complete the exchange, assignment and transfer of
tendered Outstanding Notes or transfer ownership of such Outstanding Notes on
the account books maintained by a book-entry transfer facility. The undersigned
further agrees that acceptance of any tendered Outstanding Notes by the Issuer
and the issuance of Exchange Notes in exchange therefor shall constitute
performance in full by the Issuer of their obligations under the Registration
Rights Agreement and that the Issuer shall have no further obligation or
liabilities thereunder for the registration of the Outstanding Notes or the
Exchange Notes.
5
The Exchange Offer is subject to certain conditions set forth in the
Prospectus under the caption "The Exchange Offer--Conditions to the Exchange
Offer." The undersigned recognizes that as a result of these conditions (which
may be waived, in whole or in part, by the Issuer), as more particularly set
forth in the Prospectus, the Issuer may not be required to exchange any of the
Outstanding Notes tendered hereby and, in such event, the Outstanding Notes not
exchanged will be returned to the undersigned at the address shown below the
signature of the undersigned.
All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. Tendered Outstanding Notes may be
withdrawn at any time prior to the Expiration Date.
Unless otherwise indicated in the box entitled "Special Registration
Instructions" or the box entitled "Special Delivery Instructions" in this Letter
of Transmittal, certificates for all Exchange Notes delivered in exchange for
tendered Outstanding Notes, and any Outstanding Notes delivered herewith but not
exchanged, will be registered in the name of the undersigned and shall be
delivered to the undersigned at the address shown below the signature of the
undersigned. If an Exchange Note is to be issued to a person other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this
Letter of Transmittal at an address different than the address(es) shown on this
Letter of Transmittal, the appropriate boxes of this Letter of Transmittal
should be completed. If Outstanding Notes are surrendered by Holder(s) that have
completed either the box entitled "Special Registration Instructions" or the box
entitled "Special Delivery Instructions" in this Letter of Transmittal,
signature(s) on this Letter of Transmittal must be guaranteed by an Eligible
Institution (defined in Instruction 2).
6
- -----------------------------------------------------------
SPECIAL REGISTRATION INSTRUCTIONS
To be completed ONLY if the Exchange Notes are to be issued
in the name of someone other than the undersigned.
Name: _______________________________________
Address: ____________________________________
Book-Entry Transfer Facility Account:
_____________________________________________
Employee Identification or Social Security Number:
___________________________________________________________
(Please print or type.)
- -----------------------------------------------------------
- -----------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
To be completed ONLY if the Exchange Notes are to be sent to
someone other than the undersigned, or to the undersigned at
an address other than that shown under "Description of
Outstanding Notes Tendered Hereby."
Name:________________________________________
Address:_____________________________________
_____________________________________________
_____________________________________________
(Please print or type.)
- -----------------------------------------------------------
7
________________________________________________________________________________
REGISTERED HOLDER(S) OF OUTSTANDING NOTES
OR DTC PARTICIPANT(S) SIGN HERE
(In addition, complete Substitute Form W-9 below.)
X ______________________________________________________________________________
X ______________________________________________________________________________
(Signature(s) of Registered Holder(s) or DTC Participant(s))
Must be signed by registered holder(s) or DTC participant(s) exactly as name(s)
appear(s) on the Outstanding Notes or on a security position listing as the
owner of the Outstanding Notes or by person(s) authorized to become registered
holder(s) by properly completed bond powers transmitted herewith. If signature
is by attorney-in-fact, trustee, executor, administrator, guardian, officer of a
corporation or other person acting in a fiduciary capacity, please provide the
following information. (Please print or type):
Name and Capacity (full title):
___________________________________________________________________
Address (including zip code):
___________________________________________________________________
___________________________________________________________________
Area Code and Telephone Number:
___________________________________________________________________
Taxpayer Identification or Social Security No.:
___________________________________________________________________
Dated: ____________________
SIGNATURE GUARANTEE
(If Required-- See Instruction 5)
Authorized Signature:
________________________________________________________________________________
(Signature of Representative of Signature Guarantor)
Name and Title:
________________________________________________________________________________
Area Code and Telephone Number:
________________________________________________________________________________
(Please print or type.)
Dated: ______________________
________________________________________________________________________________
8
THIS SUBSTITUTE FORM W-9 MUST BE COMPLETED AND SIGNED
PLEASE PROVIDE YOUR SOCIAL SECURITY NUMBER OR OTHER TAXPAYER
IDENTIFICATION NUMBER ON THE FOLLOWING SUBSTITUTE FORM W-9 AND CERTIFY THEREIN
THAT YOU ARE NOT SUBJECT TO BACKUP WITHHOLDING.
- ------------------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE Part 1--PLEASE PROVIDE YOUR TIN IN THE Social Security Number
BOX AT RIGHT AND CERTIFY BY SIGNING or
Form W-9 AND DATING BELOW. Employer Identification Number
______________________
Department of the
Treasury -------------------------------------------------------------------------------------------
Internal Revenue Service PART 2--Certification--Under the penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I
Payer's Request for am waiting for a number to be issued to me), and
Taxpayer Identification
Number (TIN) (2) I am not subject to backup withholding because (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service (the
"IRS") that I am subject to backup withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has notified me that I am no longer
subject to backup withholding.
CERTIFICATE INSTRUCTIONS--You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to backup withholding because
of under-reporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you received
another notification from the IRS that you are no longer subject to backup
withholding, do not cross out such item (2).
- ------------------------------------------------------------------------------------------------------------------------------------
SIGNATURE_______________________ Part 3--
Sign Here =>
DATE____________________________ Awaiting TIN .
- ------------------------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER, PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all reportable payments made to me will be withheld.
Signature ______________________________ Date ____________________
- --------------------------------------------------------------------------------
INSTRUCTIONS
FORMING PART OF THE TERMS AND
CONDITIONS OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Certificates.
All physically delivered Outstanding Notes or confirmation of any
book-entry transfer to the Exchange Agent's account at a book-entry transfer
facility of Outstanding Notes tendered by book-entry transfer, as well as a
properly completed and duly executed copy of this Letter of Transmittal or
facsimile thereof, and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent at any of its addresses set
forth herein on or prior to the Expiration Date. The method of delivery of this
Letter of Transmittal, the Outstanding Notes and any other required documents is
at the election and risk of the Holder, and except as otherwise provided below,
the delivery will be deemed made only when actually received by the Exchange
Agent. If such delivery is by mail, it is suggested that registered mail with
return receipt requested, properly insured, be used.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Outstanding Notes for exchange.
Delivery to an address other than as set forth herein, or instructions
via a facsimile number other than the ones set forth herein, will not constitute
a valid delivery.
2. Guaranteed Delivery Procedures.
Holders who wish to tender their Outstanding Notes, but whose
Outstanding Notes are not immediately available and thus cannot deliver their
Outstanding Notes, this Letter of Transmittal or any other required documents to
the Exchange Agent (or comply with the procedures for book-entry transfer) prior
to the Expiration Date, may effect a tender if:
(a) the tender is made through 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 an "eligible
guarantor institution" within the meaning of Rule 17 Ad-15 under
the Exchange Act (an "Eligible Institution");
(b) prior to the Expiration Date, the Exchange Agent received from
such Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by facsimile transmission, mail or
hand delivery) setting forth the name and address of the Holder,
the registration number(s) of such Outstanding Notes and the
principal amount of Outstanding Notes tendered, stating that the
tender is being made thereby and guaranteeing that, within three
(3) New York Stock Exchange trading days after the Expiration
Date, the Letter of Transmittal (or facsimile thereof), together
with the Outstanding Notes (or a confirmation of book-entry
transfer of such Outstanding Notes into the Exchange Agent's
account at DTC) and any other documents required by the Letter of
Transmittal, will be deposited by the Eligible Institution with
the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as all tendered Outstanding Notes in
proper form for transfer (or a confirmation of book-entry
transfer of such Outstanding Notes into the Exchange Agent's
account at DTC) and all other documents required by the Letter of
Transmittal, are received by the Exchange Agent within three (3)
New York Stock Exchange trading days after the Expiration Date.
Any Holder who wishes to tender Outstanding Notes pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed
2
Delivery relating to such Outstanding Notes prior to the Expiration Date.
Failure to complete the guaranteed delivery procedures outlined above will not,
of itself, affect the validity or effect a revocation of any Letter of
Transmittal form properly completed and executed by a Holder who attempted to
use the guaranteed delivery procedures.
3. Beneficial Owner Instructions.
Only a Holder of Outstanding Notes (i.e., a person in whose name
Outstanding Notes are registered on the books of the registrar or, with respect
to interests in the Global Outstanding Notes held by DTC, a DTC participant
listed in an official DTC proxy), or the legal representative or
attorney-in-fact of a Holder, may execute and deliver this Letter of
Transmittal. Any beneficial owner of Outstanding Notes who wishes to accept the
Exchange Offer must arrange promptly for the appropriate Holder to execute and
deliver this Letter of Transmittal on his or her behalf through the execution
and delivery to the appropriate Holder of the Instructions to Registered Holder
and/or DTC Participant from Beneficial Owner form accompanying this Letter of
Transmittal.
4. Partial Tenders; Withdrawals.
If less than the entire principal amount of Outstanding Notes evidenced
by a submitted certificate is tendered, the tendering Holder should fill in the
principal amount tendered in the column entitled "Principal Amount Tendered" of
the box entitled "Description of Outstanding Notes Tendered Hereby." A newly
issued Note for the principal amount of Outstanding Notes submitted but not
tendered will be sent to such Holder as soon as practicable after the Expiration
Date. All Outstanding Notes delivered to the Exchange Agent will be deemed to
have been tendered in full unless otherwise indicated.
Outstanding Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date, after which tenders of
Outstanding Notes are irrevocable. To be effective, a written, telegraphic or
facsimile transmission notice of withdrawal must be timely received by the
Exchange Agent. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Outstanding Notes to be withdrawn (the "Depositor"),
(ii) identify the Outstanding Notes to be withdrawn (including the registration
number(s) and principal amount of such Outstanding Notes, or, in the case of
Outstanding Notes transferred by book-entry transfer, the name and number of the
account at DTC to be credited), (iii) be signed by the Holder in the same manner
as the original signature on this Letter of Transmittal (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the Trustee with respect to the Outstanding Notes register the transfer of
such Outstanding Notes into the name of the person withdrawing the tender and
(iv) specify the name in which any such Outstanding Notes are to be registered,
if different from that of the Depositor. All questions as to the validity, form
and eligibility (including time of receipt) of such notices will be determined
by the Issuer, whose determination shall be final and binding on all parties.
Any Outstanding Notes so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offer and no Exchange Notes will be issued
with respect thereto unless the Outstanding Notes so withdrawn are validly
retendered. Any Outstanding Notes which have been tendered but which are not
accepted for exchange will be returned to the Holder thereof without cost to
such Holder as soon as practicable after withdrawal, rejection of tender or
termination of Exchange Offer.
5. Signature on this Letter of Transmittal; Written Instruments and
Endorsements; Guarantee of Signatures.
If this Letter of Transmittal is signed by the registered Holder(s) of
the Outstanding Notes tendered hereby, the signature must correspond with the
name(s) as written on the face of the certificates without alteration or
enlargement or any change whatsoever. If this Letter of Transmittal is signed by
a
3
participant in DTC, the signature must correspond with the name as it appears on
the security position listing as the owner of the Outstanding Notes.
If any of the Outstanding Notes tendered hereby are owned of record by
two or more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Outstanding Notes registered in different names are
tendered, it will be necessary to complete, sign and submit as many separate
copies of this Letter of Transmittal as there are different registrations of
Outstanding Notes.
Signatures of this Letter of Transmittal or a notice of withdrawal, as
the case may be, must be guaranteed by an Eligible Institution unless the
Outstanding Notes tendered hereby are tendered (i) by a registered Holder who
has not completed the box entitled "Special Registration Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution.
If this Letter of Transmittal is signed by the registered Holder or
Holders of Outstanding Notes (which term, for the purposes described herein,
shall include a participant in DTC whose name appears on a security listing as
the owner of the Outstanding Notes) listed and tendered hereby, no endorsements
of the tendered Outstanding Notes or separate written instruments of transfer or
exchange are required. In any other case, the registered Holder (or acting
Holder) must either properly endorse the Outstanding Notes or transmit properly
completed bond powers with this Letter of Transmittal (in either case, executed
exactly as the name(s) of the registered Holder(s) appear(s) on the Outstanding
Notes, and, with respect to a participant in DTC whose name appears on such
security position listing), with the signature on the Outstanding Notes or bond
power guaranteed by an Eligible Institution (except where the Outstanding Notes
are tendered for the account of an Eligible Institution).
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Issuer, proper evidence
satisfactory to the Issuer of their authority so to act must be submitted.
6. Special Registration and Delivery Instructions.
Tendering Holders should indicate, in the applicable box, the name and
address (or account at DTC) in which the Exchange Notes or substitute Notes for
principal amounts not tendered or not accepted for exchange are to be issued (or
deposited), if different from the names and addresses or accounts of the person
signing this Letter of Transmittal. In the case of issuance in a different name,
the employer identification number or social security number of the person named
must also be indicated and the tendering Holder should complete the applicable
box.
If no instructions are given, the Exchange Notes (and any Outstanding
Notes not tendered or not accepted) will be issued in the name of and sent to
the acting Holder of the Outstanding Notes or deposited at such Holder's account
at DTC.
7. Transfer Taxes.
The Issuer shall pay all transfer taxes, if any, applicable to the
transfer and exchange of Outstanding Notes to them or their order pursuant to
the Exchange Offer. If a transfer tax is imposed for any other reason other than
the transfer and exchange of Outstanding Notes to the Issuer, or its order
pursuant to the Exchange Offer, the amount of any such transfer taxes (whether
imposed on the registered Holder or any other person) will be payable by the
tendering Holder. If satisfactory evidence of payment
4
of such taxes or exception therefrom is not submitted herewith, the amount of
such transfer taxes will be collected from the tendering Holder by the Exchange
Agent.
Except as provided in this Instruction, it will not be necessary for
transfer stamps to be affixed to the Outstanding Notes listed in the Letter of
Transmittal.
8. Waiver of Conditions.
The Issuer reserves the right, in its reasonable judgment, to waive, in
whole or in part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
9. Mutilated, Lost, Stolen or Destroyed Outstanding Notes.
Any Holder whose Outstanding Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
10. Request for Assistance or Additional Copies.
Questions relating to the procedure for tendering as well as requests
for additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number(s) set forth
above. In addition, all questions relating to the Exchange Offer, as well as
requests for assistance or additional copies of the Prospectus and this Letter
of Transmittal, may be directed to the Exchange Agent, First Union National
Bank, by calling (704) 590-7413.
11. Validity and Form.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Outstanding Notes and withdrawal of tendered
Outstanding Notes will be determined by the Issuer in its sole discretion, which
determination will be final and binding. The Issuer reserves the absolute right
to reject any and all Outstanding Notes not properly tendered or any Outstanding
Notes the Issuer's acceptance of which would, in the opinion of counsel for the
Issuer, be unlawful. The Issuer also reserves the right, in its reasonable
judgment, to waive any defects, irregularities or conditions of tender as to
particular Outstanding Notes. The Issuer's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in this Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Outstanding Notes must
be cured within such time as the Issuer shall determine. Although the Issuer
intends to notify Holders of defects or irregularities with respect to tenders
of Outstanding Notes, neither the Issuer, the Exchange Agent nor any other
person shall incur any liability for failure to give such notification. Tenders
of Outstanding Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Outstanding Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering Holder as soon as practicable following the Expiration
Date.
IMPORTANT TAX INFORMATION
Under federal income tax law, a Holder tendering Outstanding Notes is
required to provide the Exchange Agent with such Holder's correct TIN on
Substitute Form W-9 above. If such Holder is an individual, the TIN is the
Holder's social security number. The Certificate of Awaiting Taxpayer
Identification Number should be completed if the tendering Holder has not been
issued a TIN and has applied for a number or intends to apply for a number in
the near future. If the Exchange Agent is not provided with the correct TIN, the
Holder may be subject to a $50 penalty imposed by the Internal Revenue Service.
In addition, payments that are made to such Holder may be subject to backup
withholding.
Certain Holders (including among others, all domestic corporations and
certain foreign individuals and foreign entities) are not subject to these
backup withholding and reporting requirements. Such a Holder, who satisfies one
or more of the conditions set forth in Part 2 of the Substitute Form W-9 should
execute the certification following such Part 2. In order for a foreign Holder
to qualify as an exempt recipient, that Holder must submit to the Exchange Agent
a properly completed Internal Revenue Service Form W-8, signed under penalties
of perjury, attesting to that Holder's exempt status. Such forms can be obtained
from the Exchange Agent.
If backup withholding applies, the Exchange Agent is required to
withhold 31% of any amounts otherwise payable to the Holder. Backup withholding
is not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
Purpose of Substitute Form W-9
To prevent backup withholding on payments that are made to a Holder,
the Holder is required to notify the Exchange Agent of his or her correct TIN by
completing the form herein certifying that the TIN provided on Substitute Form
W-9 is correct (or that such Holder is awaiting a TIN) and that (i) such Holder
is exempt, (ii) such Holder has not been notified by the Internal Revenue
Service that he or she is subject to backup withholding as a result of failure
to report all interest or dividends or (iii) the Internal Revenue Service has
notified such Holder that he or she is no longer subject to backup withholding.
What Number to Give the Exchange Agent
Each Holder is required to give the Exchange Agent the social security
number or employer identification number of the record Holder(s) of the
Outstanding Notes. If Outstanding Notes are in more than one name or are not in
the name of the actual Holder, consult the Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9, for additional guidance
on which number to report.
Certificate of Awaiting Taxpayer Identification Number
If the tendering Holder has not been issued a TIN and has applied for a
number or intends to apply for a number in the near future, write "Applied For"
in the space for the TIN on Substitute Form W-9, sign and date the form and the
Certificate of Awaiting Taxpayer Identification Number and return them to the
Exchange Agent. If such certificate is completed and the Exchange Agent is not
provided with the TIN within 60 days, the Exchange Agent will withhold 31% of
all payments made thereafter until a TIN is provided to the Exchange Agent.
IMPORTANT: This Letter of Transmittal or a facsimile thereof (together
with Outstanding Notes or confirmation of book-entry transfer and all other
required documents) or a Notice of Guaranteed Delivery must be received by the
Exchange Agent on or prior to the Expiration Date.
Exhibit 99.2
K. HOVNANIAN ENTERPRISES, INC.
Offer to Exchange
10 1/2% Outstanding Senior Notes due 2007
for 10 1/2% Senior Notes due 2007
that have been registered
under the Securities Act of 1933
, 2000
To Securities Dealers, Commercial Banks,
Trust Companies and Other Nominees:
K. Hovnanian Enterprises, Inc. (the "Issuer") and Hovnanian Enterprises,
Inc. and each of the other Guarantors (the "Guarantors", each a "Guarantor") are
offering (the "Exchange Offer") to exchange $1,000 in principal amount of the
Issuer's 10 1/2% Senior Notes due 2007 that have been registered under the
Securities Act of 1933, guaranteed by the Guarantors (the "Exchange Notes"), for
each $1,000 in principal amount of outstanding 10 1/2% Senior Notes due 2007,
guaranteed by the Guarantors (the "Outstanding Notes"). The terms of the
Exchange Notes are identical in all material respects (including principal
amount, interest rate and maturity) to the terms of the Outstanding Notes for
which they may be exchanged pursuant to the Exchange Offer, except that the
Exchange Notes are freely transferable by holders thereof, upon the terms and
subject to the conditions of the enclosed Prospectus, dated , 2000
(as the same may be amended or supplemented from time to time, the
"Prospectus"), and the enclosed Letter of Transmittal (the "Letter of
Transmittal"). The Outstanding Notes are unconditionally guaranteed (the "Old
Guarantees") by the Guarantors, and the Exchange Notes will be unconditionally
guaranteed (the "New Guarantees") by the Guarantors. Upon the terms and subject
to the conditions set forth in the Prospectus and the Letter of Transmittal, the
Guarantors offer to issue the New Guarantees with respect to all Exchange Notes
issued in the Exchange Offer in exchange for the outstanding Old Guarantees of
the Outstanding Notes for which such Exchange Notes are issued in exchange.
Throughout this letter, unless the context otherwise requires and whether so
expressed or not, references to the "Exchange Offer" include the Guarantor's
offer to exchange the New Guarantees for the Old Guarantees, references to the
"Exchange Notes" include the related New Guarantees and references to the
"Outstanding Notes" include the related Old Guarantees. The Issuer will accept
for exchange any and all Outstanding Notes properly tendered according to the
terms of the Prospectus and the Letter of Transmittal. Consummation of the
Exchange Offer is subject to certain conditions described in the Prospectus.
WE ARE ASKING YOU TO CONTACT YOUR CLIENTS FOR WHOM YOU HOLD
OUTSTANDING NOTES REGISTERED IN YOUR NAME OR IN THE NAME OF YOUR NOMINEE OR WHO
HOLD OUTSTANDING NOTES REGISTERED IN THEIR OWN NAMES.
The Issuer will not pay any fees or commissions to any broker or
dealer or other person for soliciting tenders of Outstanding Notes pursuant to
the Exchange Offer. You will, however, upon request, be reimbursed by the
Issuer for customary mailing and handling expenses incurred by you in forwarding
any of the enclosed materials to your clients. The Issuer will pay
2
all transfer taxes, if any, applicable to the tender of Outstanding Notes to it
or its order, except as otherwise provided in the Prospectus and the Letter of
Transmittal.
Enclosed are copies of the following documents:
1. A form of letter which you may send, as a cover letter to
accompany the Prospectus and related materials, to your clients
for whose accounts you hold Outstanding Notes registered in your
name or the name of your nominee, with space provided for
obtaining the clients' instructions with regard to the Exchange
Offer.
2. The Prospectus.
3. The Letter of Transmittal for your use in connection with the
tender of Outstanding Notes and for the information of your
clients.
4. A form of Notice of Guaranteed Delivery.
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
Your prompt action is requested. The Exchange Offer will expire at
5:00 P.M., New York City time, on [ ], 2001, unless the Exchange Offer is
extended by the Issuer. The time at which the Exchange Offer expires is referred
to as the "Expiration Date." Tendered Outstanding Notes may be withdrawn,
subject to the procedures described in the Prospectus, at any time prior to 5:00
P.M. on the Expiration Date.
To participate in the Exchange Offer, certificates for Outstanding
Notes, or a timely confirmation of a book-entry transfer of such Outstanding
Notes into the Exchange Agent's account at the Depository Trust Company,
together with a duly executed and properly completed Letter of Transmittal or
facsimile thereof, with any required signature guarantees, and any other
required documents, must be received by the Exchange Agent by the Expiration
Date as indicated in the Letter of Transmittal and the Prospectus.
If holders of the Outstanding Notes wish to tender, but it is
impracticable for them to forward their Outstanding Notes prior to the
Expiration Date or to comply with the book-entry transfer procedures on a timely
basis, a tender may be effected by following the guaranteed delivery procedures
described in the Prospectus under "The Exchange Offer -- Guaranteed Delivery
Procedures" and the Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the
Exchange Agent, First Union National Bank, by calling (704) 590-7413.
Very truly yours,
K. Hovnanian Enterprises, Inc.
3
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY PERSON AS AN AGENT OF THE ISSUER OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR
ANY OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT
TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS
AND THE LETTER OF TRANSMITTAL.
Exhibit 99.3
K. HOVNANIAN ENTERPRISES, INC.
Offer to Exchange
10 1/2% Outstanding Senior Notes due 2007
for 10 1/2% Senior Notes due 2007
that have been registered
under the Securities Act of 1933
__________, 2000
To Our Clients:
Enclosed for your consideration is a Prospectus, dated December __, 2000
(as the same may be amended or supplemented from time to time, the
"Prospectus"), and a Letter of Transmittal (the "Letter of Transmittal"),
relating to the offer (the "Exchange Offer") by K. Hovnanian Enterprises, Inc.
(the "Issuer") and Hovnanian Enterprises, Inc. (the "Company"), the parent of
the Issuer and most of the subsidiaries of the Company (the "Guarantors," and
each a "Guarantor") to exchange $1,000 principal amount of their 10 1/2% Senior
Notes due 2007, guaranteed by the Guarantors (the "Exchange Notes") which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a registration statement of which the Prospectus is a part,
for each $1,000 principal amount of their outstanding 10 1/2% Senior Notes due
2007, guaranteed by the Guarantors (the "Outstanding Notes"), respectively. The
terms of the Exchange Notes are identical in all material respects (including
principal amount, interest rate and maturity) to the terms of the Outstanding
Notes for which they may be exchanged pursuant to the Exchange Offer, except
that the Exchange Notes are freely transferable by holders thereof, upon the
terms and subject to the conditions of the enclosed Prospectus, dated ,
2000 (as the same may be amended or supplemented from time to time, the
"Prospectus"), and the enclosed Letter of Transmittal (the "Letter of
Transmittal"). The Outstanding Notes are unconditionally guaranteed (the "Old
Guarantees") by the Guarantors, and the Exchange Notes will be unconditionally
guaranteed (the "New Guarantees") by the Guarantors. Upon the terms and subject
to the conditions set forth in the Prospectus and the Letter of Transmittal, the
Guarantors offer to issue the New Guarantees with respect to all Exchange Notes
issued in the Exchange Offer in exchange for the outstanding Old Guarantees of
the Outstanding Notes for which such Exchange Notes are issued in exchange.
Throughout this letter, unless the context otherwise requires and whether so
expressed or not, references to the "Exchange Offer" include the Guarantor's
offer to exchange the New Guarantees for the Old Guarantees, references to the
"Exchange Notes" include the related New Guarantees and references to the
"Outstanding Notes" include the related Old Guarantees. The Issuer will accept
for exchange any and all Outstanding Notes properly tendered according to the
terms of the Prospectus and the Letter of Transmittal. Consummation of the
Exchange Offer is subject to certain conditions described in the Prospectus.
This material is being forwarded to you as the beneficial owner of
Outstanding Notes carried by us for your account or benefit but not registered
in your name. A tender of such Outstanding Notes may only be made by us as the
registered holder and pursuant to your instructions. Therefore, the Issuers
urge beneficial owners of Outstanding Notes registered in the
name of a broker, dealer, commercial bank, trust company or other nominee to
contact such registered holder promptly if such beneficial owners wish to tender
Outstanding Notes in the Exchange Offer.
Accordingly, we request instructions as to whether you wish to tender any
or all such Outstanding Notes held by us for your account, pursuant to the terms
and conditions set forth in the enclosed Prospectus and Letter of Transmittal.
However, we urge you to read the Prospectus carefully before instructing us as
to whether or not to tender your Outstanding Notes.
Your instructions to us should be forwarded as promptly as possible in
order to permit us to tender Outstanding Notes on your behalf in accordance with
the provisions of the Exchange Offer. The Exchange Offer will expire at 5:00
P.M., New York City Time, on , 2001, unless the Exchange Offer is extended
by the Issuer. The time the Exchange Offer expires is referred to as the
"Expiration Date." Tenders of Outstanding Notes may be withdrawn at any time
prior to the Expiration Date.
IF YOU WISH TO HAVE US TENDER ANY OR ALL OF YOUR OUTSTANDING NOTES, PLEASE
SO INSTRUCT US BY COMPLETING, EXECUTING AND RETURNING TO US THE INSTRUCTION FORM
ON THE REVERSE HEREOF. The accompanying Letter of Transmittal is furnished to
you for your information only and may not be used by you to tender Outstanding
Notes held by us and registered in our name for your account or benefit.
If we do not receive written instructions in accordance with the procedures
presented in the Prospectus and the Letter of Transmittal, we will not tender
any of the Outstanding Notes on your account.
Please carefully review the enclosed material as you consider the Exchange
Offer.
2
INSTRUCTIONS
INSTRUCTION TO REGISTERED HOLDER AND/OR DTC PARTICIPANT FROM BENEFICIAL OWNER
OF
10 1/2% Senior Notes due 2007
The undersigned acknowledge(s) receipt of the Prospectus dated _____, 2000
as the same may be amended or supplemented from time to time, the "Prospectus"),
and a Letter of Transmittal (the "Letter of Transmittal"), relating to the
offer (the "Exchange Offer") by K. Hovnanian Enterprises, Inc. (the "Issuer")
and Hovnanian Enterprises, Inc. (the "Company"), the parent of the Issuer and
most of the subsidiaries of the Company (the "Guarantors," and each a
"Guarantor") to exchange $1,000 principal amount of their 10 1/2% Senior Notes
due 2007, guaranteed by the Guarantors (the "Exchange Notes") which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a registration statement of which the Prospectus is a part, for each
$1,000 principal amount of their outstanding 10 1/2% Senior Notes due 2007,
guaranteed by the Guarantors (the "Outstanding Notes"), respectively, upon the
terms and subject to the conditions set forth in the Prospectus and the Letter
of Transmittal. Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus.
This will instruct you, the registered holder, as to the action to be taken
by you relating to the Exchange Offer with respect to the Outstanding Notes held
by you for the account of the undersigned.
The aggregate face amount of the Outstanding Notes held by you for the
account of the undersigned is (fill in amount):
$_____________ of the Outstanding Notes.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[_] To TENDER the following Outstanding Notes held by you for the account
of the undersigned (insert principal amount of Outstanding Notes to be tendered,
if any):
$_____________ of the Outstanding Notes.
[_] NOT TO TENDER any Outstanding Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Outstanding Notes held by
you for the account of the undersigned, it is understood that you are authorized
(a) to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
beneficial owner of the Outstanding Notes, including but not limited to the
representations that (i) the undersigned is acquiring the Exchange Notes in the
3
ordinary course of business of the undersigned, (ii) the undersigned is not
participating, does not intend to participate, and has no arrangement of
understanding with any person to participate, in the distribution of Exchange
Notes, (iii) the undersigned acknowledges that any person participating in the
Exchange Offer for the purpose of distributing the Exchange Notes must comply
with the registration and prospectus delivery requirements of the Securities Act
of 1933 (the "Securities Act"), as amended, in connection with any resale
transaction of the Exchange Notes acquired by such person and cannot rely on the
position of the Staff of the Securities and Exchange Commission set forth in
certain no-action letters (see the section of the Prospectus entitled "The
Exchange Offer -- Resale of Exchange Notes"), (iv) the undersigned understands
that a secondary resale transaction described in clause (iii) above should be
covered by an effective registration statement containing the selling security
holder information required by Item 507 of Regulation S-K of the Securities and
Exchange Commission, (v) the undersigned is not an "affiliate," as defined in
Rule 405 under the Securities Act, of the Issuer, (vi) if the undersigned is not
a broker-dealer, that it is not participating in, does not intend to participate
in, and has no arrangement or understanding with any person to participate in,
the distribution of Exchange Notes and (vii) if the undersigned is a broker-
dealer that will receive Exchange Notes for its own account in exchange for
Outstanding Notes that were acquired as a result of market-making activities or
other trading activities, it acknowledges that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such Exchange Notes received in respect of such Outstanding Notes pursuant to
the Exchange Offer, however, by so acknowledging and by delivering a prospectus,
the undersigned will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act; (b) to agree, on behalf of the undersigned,
as set forth in the Letter of Transmittal; and (c) to take such other action as
necessary under the Prospectus or the Letter of Transmittal to effect the valid
tender of Outstanding Notes.
____________________________________________________________________
SIGN HERE
Name of Beneficial Owner(s): _______________________________________
Signatures(s): _____________________________________________________
Name(s) (please print): ____________________________________________
Address(es): _______________________________________________________
Area Code and Telephone Number(s): _________________________________
Taxpayer Identification or Social Security Number(s): ______________
Date: ______________________________________________________________
____________________________________________________________________
4
EXHIBIT 99.4
NOTICE OF GUARANTEED DELIVERY
With Respect to
K. HOVNANIAN ENTERPRISES, INC.
Offer to Exchange
10 1/2% Outstanding Notes due 2007
for 10 1/2% Senior Notes due 2007
that have been registered
under the Securities Act of 1933
This form must be used by a holder of the 10 1/2% Senior Notes due 2007,
guaranteed by the Guarantors (the "Outstanding Notes") of K. Hovnanian
Enterprises, Inc. (the "Issuer") who wishes to tender Outstanding Notes to the
Exchange Agent pursuant to the guaranteed delivery procedures described in "The
Exchange Offer -- Guaranteed Delivery Procedures" of the Prospectus dated [_]
______, 2000 (the "Prospectus") and in Instruction 2 to the Letter of
Transmittal. Any holder who wishes to tender Outstanding Notes pursuant to such
guaranteed delivery procedures must ensure that the Exchange Agent receives this
Notice of Guaranteed Delivery prior to the Expiration Date of the Exchange
Offer. Capitalized terms not defined herein have the meanings ascribed to them
in the Prospectus or the Letter of Transmittal.
To: First Union National Bank, Exchange Agent
By Overnight Mail or Courier: By Hand: By Mail:
First Union National Bank First Union National Bank First Union National Bank
Attn: Marsha Rice Attn: Marsha Rice Attn: Marsha Rice
Corporate Trust Operations Reorg Corporate Trust Operations Reorg Corporate Trust 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 28288-1153 Charlotte NC 28288-1153
By Facsimile Transmission:
(704) 590-7628
Confirm by Telephone:
(704) 590-7413
Information:
(704) 590-7413
Delivery of this notice of guaranteed delivery to an address other than as
set forth above or transmission via a facsimile number other than as set forth
above will not constitute a valid delivery.
Please read the accompanying instructions carefully
Ladies and Gentlemen:
The undersigned hereby tenders to the Issuer, upon the terms and
subject to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Outstanding Notes specified below pursuant to the guaranteed delivery procedures
set forth in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the principal amount of Outstanding Notes listed
below:
- ------------------------------------------------------------------------------------------------------------------------------------
Certificate Number(s) (if known) Principal Amount Principal Amount
of Outstanding Notes Represented Tendered
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
The Depositary Trust Company
(check if Outstanding Notes will be tendered by book-entry transfer)
Account Number: ___________________________________________________________
- --------------------------------------------------------------------------------
SIGN HERE
Name of Holder: ____________________________________________________________
Signature(s): ________________________________________________________________
Name(s) (please print): _____________________________________________________
Address: _____________________________________________________________________
Telephone Number: ____________________________________________________________
Date: ________________________________________________________________________
- --------------------------------------------------------------------------------
2
- --------------------------------------------------------------------------------
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm which is a member of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., or is a
commercial bank or trust company having an office or correspondent in the United
States, or is otherwise an "eligible guarantor institution" within the meaning
of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended,
guarantees deposit with the Exchange Agent of the Letter of Transmittal (or
facsimile thereof), together with the Outstanding Notes tendered hereby in
proper form for transfer and any other required documents, all by 5:00 p.m., New
York City time, on the third business day following the Expiration Date.
SIGN HERE
Name of firm: _________________________________________________________________
Authorized Signature: _________________________________________________________
Name (please print): __________________________________________________________
Address: ______________________________________________________________________
_______________________________________________________________________
Telephone Number: _____________________________________________________________
Date: _________________________________________________________________________
DO NOT SEND NOTES WITH THIS FORM. ACTUAL SURRENDER OF NOTES MUST BE
MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
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INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any
other documents required by this Notice of Guaranteed Delivery must be
received by the Exchange Agent at its address set forth herein prior to
the Expiration Date. The method of delivery of this Notice of
Guaranteed Delivery and any other required documents to the Exchange
Agent is at the election and risk of the holder, and the delivery will
be deemed made only when actually received by the Exchange Agent. If
delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. Instead of delivery by mail, it is
recommended that the holder use an overnight or hand delivery service.
In all cases sufficient time should be allowed to assure timely
delivery. For a description of the guaranteed delivery procedure, see
Instruction 2 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the
Outstanding Notes referred to herein, the signatures must correspond
with the name(s) written on the face of the Outstanding Notes without
alteration, enlargement, or any change whatsoever.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Outstanding Notes listed, this Notice of Guaranteed
Delivery must be accompanied by appropriate bond powers, signed as the name of
the registered holder(s) appear(s) on the Outstanding Notes.
3
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing.
3. Requests for Assistance or Additional Copies. Questions and requests for
assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust
company, or other nominee for assistance concerning the Exchange Offer.
