$440,000,000 REVOLVING CREDIT FACILITY
AMENDED AND RESTATED CREDIT AGREEMENT
by and among
K. HOVNANIAN ENTERPRISES, INC.
(as the Borrower)
HOVNANIAN ENTERPRISES, INC.
(as a Guarantor)
and
THE BANKS PARTY HERETO
and
PNC BANK, NATIONAL ASSOCIATION, as Administrative Agent
Bank of America, N.A., as
Syndication Agent
Fleet National Bank, as
Documentation Agent
PNC Capital Markets, LLC
Banc of America Securities, LLC
as
Joint Lead Arrangers and Joint Book Runners
Amended and Restated June 21, 2002
1. CERTAIN DEFINITIONS 1
1.1 Certain Definitions. 1
1.2 Construction. 21
1.2.1. Number; Inclusion. 21
1.2.2. Determination. 21
1.2.3. Agent's Discretion and Consent. 21
1.2.4. Documents Taken as a Whole. 21
1.2.5. Headings. 22
1.2.6. Implied References to this Agreement. 22
1.2.7. Persons. 22
1.2.8. Modifications to Documents. 22
1.2.9. From, To and Through. 22
1.2.10. Shall; Will. 22
1.3 Accounting Principles. 22
2. REVOLVING CREDIT AND SWING LOAN FACILITIES 23
2.1 Revolving Credit Commitments. 23
2.1.1. Revolving Credit Loans. 23
2.1.2. Swing Loan Commitment. 23
2.1.3. Increase in Commitments After Closing Date. 23
2.1.4. Voluntary Reduction of Commitment. 24
2.2 Nature of Banks' Obligations with Respect to Revolving
Credit Loans. 24
2.3 Commitment Fees. 24
2.4 Revolving Credit Loan Requests; Swing Loan Requests. 25
2.4.1. Revolving Credit Loan Requests. 25
2.4.2. Swing Loan Requests. 25
2.5 Making Revolving Credit Loans and Swing Loans. 25
2.5.1. Generally. 25
2.5.2. Making Swing Loans. 26
2.6 Swing Loan Note. 26
2.7 Use of Proceeds. 26
2.8 Borrowings to Repay Swing Loans. 26
2.9 Letter of Credit Subfacility. 27
2.9.1. Issuance of Letters of Credit. 27
2.9.2. Letter of Credit Fees. 27
2.9.3. Disbursements, Reimbursement. 28
2.9.4. Repayment of Participation Advances. 29
2.9.5. Documentation. 29
2.9.6. Determinations to Honor Drawing Requests. 29
2.9.7. Nature of Participation and Reimbursement
Obligations. 30
2.9.8. Indemnity. 31
2.9.9. Liability for Acts and Omissions. 31
2.9.10. Sharing Letter of Credit Documentation. 32
2.10 Extension by Banks of the Expiration Date. 32
2.10.1. Requests; Approval by All Banks. 32
2.10.2. Approval by 80% Banks. 33
2.11 Designation of Subsidiaries and Release of Guarantors. 33
2.11.1. Release of Guarantors. 33
2.11.2. Designation of Non-Restricted Person. 34
2.11.3. Automatic Designation of Non-Restricted
Person. 34
2.11.4. Designation of Restricted Subsidiary. 35
3. INTEREST RATES 35
3.1 Interest Rate Options. 35
3.1.1. Revolving Credit Interest Rate Options. 35
3.1.2. Rate Quotations. 35
3.2 Interest Periods. 36
3.3 Interest After Default. 36
3.3.1. Default Rate. 36
3.3.2. Acknowledgment. 36
3.4 LIBO-Rate Unascertainable; Illegality; Increased
Costs; Deposits Not Available. 36
3.4.1. Unascertainable. 36
3.4.2. Illegality; Increased Costs; Deposits Not Available. 37
3.4.3. Agent's and Bank's Rights. 37
3.5 Selection of Interest Rate Options. 38
4. PAYMENTS 38
4.1 Payments. 38
4.2 Pro Rata Treatment of Banks. 38
4.3 Interest Payment Dates. 39
4.4 Voluntary Prepayments. 39
4.4.1. Right to Prepay. 39
4.4.2. Replacement of a Bank. 40
4.4.3. Change of Lending Office. 40
4.5 Mandatory Payments. 40
4.6 Additional Compensation in Certain Circumstances. 41
4.6.1. Increased Costs or Reduced Return Resulting from Taxes,
Reserves, Capital Adequacy Requirements, Expenses,
Etc. 41
4.6.2. Indemnity. 41
4.7 Notes. 42
4.8 Settlement Date Procedures. 42
5. REPRESENTATIONS AND WARRANTIES 43
5.1 Representations and Warranties. 43
5.1.1. Organization and Qualification. 43
5.1.2. Subsidiaries. 43
5.1.3. Power and Authority. 44
5.1.4. Validity and Binding Effect. 44
5.1.5. No Conflict. 44
5.1.6. Litigation. 44
5.1.7. Title to Properties. 45
5.1.8. Financial Statements. 45
5.1.9. Use of Proceeds; Margin Stock. 46
5.1.10. Full Disclosure. 46
5.1.11. Taxes. 46
5.1.12. Consents and Approvals. 47
5.1.13. No Event of Default; Compliance with
Instruments. 47
5.1.14. Patents, Trademarks, Copyrights, Licenses,
Etc. 47
5.1.15. Insurance. 47
5.1.16. Compliance with Laws. 47
5.1.17. Burdensome Restrictions. 47
5.1.18. Investment Companies; Regulated Entities. 48
5.1.19. Plans and Benefit Arrangements. 48
5.1.20. Employment Matters. 49
5.1.21. Environmental Matters. 49
5.1.22. Senior Debt Status. 49
5.2 Continuation of Representations. 50
6. CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT 50
6.1 First Loans and Letters of Credit. 50
6.1.1. Officer's Certificate. 50
6.1.2. Incumbency Certificate. 50
6.1.3. Delivery of Loan Documents . 51
6.1.4. Opinion of Counsel. 51
6.1.5. Legal Details. 51
6.1.6. Payment of Fees. 51
6.1.7. Consents. 51
6.1.8. Officer's Certificate Regarding MACs. 52
6.1.9. No Actions or Proceedings. 52
6.2 Each Additional Loan or Letter of Credit. 52
7. COVENANTS 52
7.1 Affirmative Covenants. 52
7.1.1. Preservation of Existence, Etc. 52
7.1.2. Payment of Liabilities, Including Taxes, Etc. 53
7.1.3. Maintenance of Insurance. 53
7.1.4. Maintenance of Properties and Leases. 53
7.1.5. Maintenance of Patents, Trademarks, Etc. 53
7.1.6. Visitation Rights. 53
7.1.7. Keeping of Records and Books of Account. 54
7.1.8. Plans and Benefit Arrangements. 54
7.1.9. Compliance with Laws. 54
7.1.10. Use of Proceeds. 54
7.1.11. Required Dividends of KHL. 55
7.2 Negative Covenants. 55
7.2.1. Indebtedness. 55
7.2.2. Liens. 55
7.2.3. Loans and Investments. 55
7.2.4. Liquidations, Mergers, Consolidations, Acquisitions. 55
7.2.5. Dispositions of Assets or Subsidiaries; Sale and Leaseback. 57
7.2.6. Restricted Payments; Restricted Investments. 57
7.2.7. Subsidiaries, Partnerships and Joint Ventures. 58
7.2.8. Continuation of or Change in Business. 58
7.2.9. Plans and Benefit Arrangements. 58
7.2.10. Borrowing Base. 58
7.2.11. Minimum ATNW. 59
7.2.12. Leverage Ratio. 59
7.2.13. Inventory and Land Purchase Limits. 59
7.2.14. Fiscal Year. 60
7.2.15. Changes in Subordinated Debt Documents. 60
7.3 Reporting Requirements. 60
7.3.1. Quarterly Financial Statements. 60
7.3.2. Annual Financial Statements. 61
7.3.3. Certificates of the Borrower. 61
7.3.4. Notice of Default. 62
7.3.5. Notice of Litigation. 62
7.3.6. Notice of Change in Debt Rating. 62
7.3.7. Budgets, Forecasts, Other Reports and Information. 62
7.3.8. Notices Regarding Plans and Benefit Arrangements. 63
8. DEFAULT 64
8.1 Events of Default. 64
8.1.1. Payments Under Loan Documents. 64
8.1.2. Breach of Warranty. 64
8.1.3. Breach of Certain Negative Covenants. 64
8.1.4. Breach of Other Covenants. 65
8.1.5. Defaults in Other Agreements or Indebtedness. 65
8.1.6. Final Judgments or Orders. 65
8.1.7. Loan Document Unenforceable. 65
8.1.8. Uninsured Losses; Proceedings Against Assets. 65
8.1.9. Notice of Lien or Assessment. 65
8.1.10. Insolvency. 66
8.1.11. Events Relating to Plans and Benefit
Arrangements. 66
8.1.12. Cessation of Business. 66
8.1.13. Change of Control. 67
8.1.14. Involuntary Proceedings. 67
8.1.15. Voluntary Proceedings. 67
8.2 Consequences of Event of Default. 67
8.2.1. Events of Default Other Than Bankruptcy, Insolvency or
Reorganization Proceedings. 67
8.2.2. Bankruptcy, Insolvency or Reorganization Proceedings. 68
8.2.3. Set-off. 68
8.2.4. Suits, Actions, Proceedings. 68
8.2.5. Application of Proceeds. 69
8.2.6. Other Rights and Remedies. 69
9. THE AGENT 69
9.1 Appointment. 69
9.2 Delegation of Duties. 70
9.3 Nature of Duties; Independent Credit Investigation. 70
9.4 Actions in Discretion of Agent; Instructions From the
Banks. 70
9.5 Reimbursement and Indemnification of Agent by the
Borrower. 71
9.6 Exculpatory Provisions; Limitation of Liability. 71
9.7 Reimbursement and Indemnification of Agent by Banks. 72
9.8 Reliance by Agent. 72
9.9 Notice of Default. 73
9.10 Notices. 73
9.11 Banks in Their Individual Capacities; Agents in its
Individual Capacity. 73
9.12 Holders of Notes. 73
9.13 Equalization of Banks. 74
9.14 Successor Agent. 74
9.15 Agent's Fee. 75
9.16 Availability of Funds. 75
9.17 Calculations. 75
9.18 Beneficiaries. 75
10. MISCELLANEOUS 76
10.1 Modifications, Amendments or Waivers. 76
10.1.1. Increase of Commitment. 76
10.1.2. Extension of Payment; Reduction of Principal,
Interest or Fees; Modification of Terms of
Payment. 76
10.1.3. Miscellaneous 76
10.2 No Implied Waivers; Cumulative Remedies; Writing
Required. 77
10.3 Reimbursement and Indemnification of Banks by the
Borrower; Taxes. 77
10.4 Holidays. 78
10.5 Funding by Branch, Subsidiary or Affiliate. 78
10.5.1. Notional Funding. 78
10.5.2. Actual Funding. 78
10.6 Notices. 79
10.7 Severability. 79
10.8 Governing Law. 80
10.9 Prior Understanding. 80
10.10 Duration; Survival. 80
10.11 Successors and Assigns. 80
10.12 Confidentiality. 82
10.12.1. General. 82
10.12.2. Sharing Information With Affiliates of the
Banks. 82
10.13 Counterparts. 83
10.14 Agent's or Bank's Consent. 83
10.15 Exceptions. 83
10.16 CONSENT TO FORUM; WAIVER OF JURY TRIAL. 83
10.17 Tax Withholding Clause. 84
10.18 Joinder of Guarantors. 84
10.19 Concerning Agent Terms. 85
10.20 Ratification of Notes and Loan Documents and Existing
Obligations. 85
LIST OF SCHEDULES AND EXHIBITS
SCHEDULES
SCHEDULE 1.1(A) - APPLICABLE MARGIN
SCHEDULE 1.1(B) - COMMITMENTS OF BANKS AND ADDRESSES FOR
NOTICES
SCHEDULE 1.1(C) - LISTING OF RESTRICTED SUBSIDIARIES,
JOINT VENTURES, MORTGAGE SUBSIDIARIES
AND NON-RESTRICTED PERSONS
SCHEDULE 1.1(E) - INCOME PRODUCING PROPERTIES
SCHEDULE 1.1(P) - PERMITTED LIENS
SCHEDULE 2.9.1 - EXISTING LETTERS OF CREDIT
SCHEDULE 5.1.2 - SUBSIDIARIES
SCHEDULE 5.1.12 - CONSENTS AND APPROVALS
SCHEDULE 7.2.1 - PERMITTED INDEBTEDNESS
EXHIBITS
EXHIBIT 1.1(A) - ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT 1.1.(B)(1) - BANK JOINDER
EXHIBIT 1.1(G) - GUARANTOR JOINDER
EXHIBIT 1.1(R) - REVOLVING CREDIT NOTE
EXHIBIT 1.1(S) - SWING LOAN NOTE
EXHIBIT 2.4.1 - LOAN REQUEST
EXHIBIT 2.4.2 - SWING LOAN REQUEST
EXHIBIT 7.3.3.1 - QUARTERLY COMPLIANCE CERTIFICATE
EXHIBIT 7.3.3.2 - BORROWING BASE CERTIFICATE
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT is dated June 21,
2002 and is made by and among K. HOVNANIAN ENTERPRISES, INC., a
New Jersey corporation (the "Borrower"), HOVNANIAN ENTERPRISES,
INC., a Delaware corporation ("Hovnanian" and a "Guarantor"), the
BANKS (as hereinafter defined), and PNC BANK, NATIONAL
ASSOCIATION, in its capacity as administrative agent for the Banks
under this Agreement (hereinafter referred to in such capacity as
the "Agent").
WITNESSETH:
WHEREAS, the Banks provided a $440,000,000 revolving credit
facility to the Borrower pursuant to a Credit Agreement dated
August 28, 2001 among the parties hereto (the "Original Credit
Agreement");
WHEREAS, the revolving credit shall be used to refinance
existing indebtedness, provide for letters of credit and provide
working capital and funds for general corporate purposes; WHEREAS,
the Borrower and the Banks have agreed that the Original Credit
Agreement be amended and restated as provided herein;
WHEREAS, the parties hereto intend that the Notes and other
Loan Documents delivered in connection with the Original Credit
Agreement be the "Loan Documents" hereunder and be of continued
force and effect.
NOW, THEREFORE, the parties hereto, in consideration of
their mutual covenants and agreements hereinafter set forth and
intending to be legally bound hereby, covenant and agree as
follows:
1. CERTAIN DEFINITIONS
1.1 Certain Definitions.
In addition to words and terms defined elsewhere in
this Agreement, the following words and terms shall have the
following meanings, respectively, unless the context hereof
clearly requires otherwise:
Actual Leverage shall mean the ratio of (x)(i)
Homebuilding Indebtedness minus (ii) Excess Cash to (y) Adjusted
Tangible Net Worth.
Additional Bank shall have the meaning assigned
to that term in Section 10.11(b) (Successors and Assigns).
Adjusted Operating Income shall mean for any
period the sum of (x) consolidated net income of Hovnanian for
such period, (y) to the extent deducted in arriving at such net
income, consolidated income taxes, consolidated interest expense,
Letter of Credit Fees, depreciation, amortization, non-cash
valuation charges or adjustments and (z) cash distributions
received by any Loan Party from Non-Restricted Persons during such
period. Adjusted Operating Income shall exclude net income or
loss of Non-Restricted Persons.
Adjusted Tangible Net Worth (or ATNW) shall
mean (x) consolidated shareholders equity of Hovnanian minus,
without duplication (y) (i) Intangibles, (ii) the Dollar amount of
Restricted Investments and (iii) equity (comprising "cost"
according to GAAP minus the amount of debt secured by applicable
mortgages) in residential inventory properties with Purchase Money
Mortgages, all as calculated and consolidated in accordance with
GAAP.
Affiliate as to any Person shall mean any other
Person (i)which directly or indirectly controls, is controlled by,
or is under common control with such Person, (ii)which
beneficially owns or holds 10% or more of any class of the voting
or other equity interests of such Person, or (iii)10% or more of
any class of voting interests or other equity interests of which
is beneficially owned or held, directly or indirectly, by such
Person. Control, as used in this definition, shall mean the
possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person,
whether through the ownership of voting securities, by contract or
otherwise, including the power to elect a majority of the
directors or trustees of a corporation or trust, as the case may
be.
Agent shall mean PNC Bank, National Association,
and its successors and assigns.
Agent's Fee shall have the meaning assigned to
that term in Section 9.15 (Agent's Fee).
Agent's Letter shall have the meaning assigned
to that term in Section 9.15 (Agent's Fee).
Agreement shall mean this Credit Agreement, as
the same may be supplemented or amended from time to time,
including all schedules and exhibits.
Annual Statements shall have the meaning
assigned to that term in Section 5.1.8((i) (Historical
Statements)).
Applicable Commitment Fee Rate shall mean the
percentage rate per annum at the indicated level of Debt Rating in
the pricing grid on Schedule 1.1(A) below the heading "Commitment
Fee." The Applicable Commitment Fee Rate shall be computed in
accordance with the parameters set forth on Schedule 1.1(A).
Applicable Letter of Credit Fee Rate shall mean
the percentage rate per annum at the indicated level of Debt
Rating in the pricing grid on Schedule 1.1(A) below the heading
"LOC Fee." The Applicable Letter of Credit Fee Rate shall be
computed in accordance with the parameters set forth on Schedule
1.1(A).
Applicable Margin shall mean, as applicable:
(A) the percentage spread to be added to Base
Rate under the Revolving Credit Base Rate Option at the indicated
level of Debt Rating in the pricing grid on Schedule 1.1(A) below
the heading "Base Rate Margin,"
(B) the percentage spread to be added to LIBO-
Rate under the Revolving Credit LIBO-Rate Option at the indicated
level of Debt Rating in the pricing grid on Schedule 1.1(A) below
the heading "Libor Margin".
The Applicable Margin shall be computed in accordance with the
parameters set forth on Schedule 1.1(A).
Assignee Bank shall have the meaning assigned to
such term in Section 2.10.2 (Approval by 80% Banks).
Assignment and Assumption Agreement shall mean
an Assignment and Assumption Agreement by and among a Purchasing
Bank, a Transferor Bank and the Agent, as Agent and on behalf of
the remaining Banks, substantially in the form of Exhibit 1.1(A).
Authorized Officer shall mean those individuals,
designated by written notice to the Agent from the Borrower,
authorized to execute notices, reports and other documents on
behalf of the Loan Parties required hereunder. The Borrower may
amend such list of individuals from time to time by giving written
notice of such amendment to the Agent.
Banks shall mean the financial institutions
named on Schedule 1.1(B) and their respective successors and
assigns as permitted hereunder, each of which is referred to
herein as a Bank.
Base Rate shall mean the greater of (i)the
interest rate per annum announced from time to time by the Agent
at its Principal Office as its then prime rate, which rate may not
be the lowest rate then being charged commercial borrowers by the
Agent, or (ii)the Federal Funds Effective Rate plus 1/2% per
annum.
Base Rate Option shall mean the Revolving Credit
Base Rate Option.
Benefit Arrangement shall mean at any time an
"employee benefit plan," within the meaning of Section 3(3) of
ERISA, which is neither a Plan nor a Multiemployer Plan and which
is maintained, sponsored or otherwise contributed to by the
Borrower.
Borrower shall mean K. Hovnanian Enterprises,
Inc., a corporation organized and existing under the laws of the
State of New Jersey and wholly-owned by Hovnanian.
Borrowing Base shall mean at any time, the
Dollar amount equal to the sum of the following items, each owned
free and clear of all Liens (except Permitted Liens of the type
described in items (i), (ii), (iii), (iv), (v) and (vi) of the
definition of "Permitted Liens") by the Borrower, Hovnanian or a
Restricted Subsidiary:
(i) 100% of Excess Cash;
(ii) 95% of Sold Homes;
(iii) 70% of Unsold Homes; and
(iv) 55% of Finished Lots and Land
Under Development;
provided however that the Borrowing Base shall exclude in all
events the Dollar amount of
(i) p
roperty located outside of the
United States of America in
excess of $10,000,000;
(ii) U
nimproved Land;
(iii) any residential or commercial
property owned by Hovnanian or any Subsidiary which is leased or
held for purposes of leasing primarily to unaffiliated third
parties; and
(iv) properties subject to any
Purchase Money Mortgage.
The determination of the Agent in respect of the Borrowing Base
shall be conclusive absent manifest error.
Borrowing Base Certificate shall mean the
Borrowing Base Certificate in the form of Exhibit 7.3.3.2 duly
completed and delivered by the Borrower pursuant to Section
7.3.3.2 (Borrowing Base Certificate).
Borrowing Date shall mean, with respect to any
Loan, the date for the making thereof or the renewal or conversion
thereof at or to the same or a different Interest Rate Option,
which shall be a Business Day.
Borrowing Tranche shall mean specified portions
of Loans outstanding as follows: (i)any Loans to which a LIBO-
Rate Option applies which become subject to the same Interest Rate
Option under the same Loan Request by the Borrower and which have
the same Interest Period shall constitute one Borrowing Tranche,
and (ii)all Loans to which a Base Rate Option applies shall
constitute one Borrowing Tranche.
Business Day shall mean any day other than a
Saturday or Sunday or a legal holiday on which commercial banks
are authorized or required to be closed for business at the
Principal Office and if the applicable Business Day relates to any
Loan to which the LIBO-Rate Option applies, such day must also be
a day on which dealings are carried on in the London interbank
market.
Capital Stock Retirement shall mean any
repurchase, redemption, acquisition or retirement of any capital
stock or other ownership interest of Hovnanian or of any warrants,
options or other rights to purchase such capital stock or other
ownership interest; provided that "Capital Stock Retirement" shall
not include the conversion or exchange of any of the foregoing
into shares of capital stock of Hovnanian.
Cash Flow shall mean Adjusted Operating Income
plus any decrease in any Sold Homes, Unsold Homes, Unimproved Land
or Finished Lots and Land Under Development which is not the
result of a valuation charge or adjustment (or minus any increase
in any of the foregoing categories).
Cash Flow Coverage Ratio shall mean the ratio,
as of any date of determination, of (x) Cash Flow for the prior
twelve (12) months to (y) four (4) multiplied by Fixed Charges for
the most-recently ended fiscal quarter.
Closing Date shall mean the Business Day on
which the first Loan shall be made, which shall be June 21 2002.
The closing shall take place at 11:00 a.m., Eastern time, on the
Closing Date at the offices of Buchanan Ingersoll Professional
Corporation, Philadelphia, Pennsylvania, or at such other time and
place as the parties agree.
Commitment shall mean as to any Bank its
Revolving Credit Commitment and, in the case of the Agent, its
Revolving Credit Commitment and its Swing Loan Commitment; and
Commitments shall mean the aggregate of the Revolving Credit
Commitments of all of the Banks, including the Swing Loan
Commitment of the Agent.
Commitment Fee shall have the meaning assigned
to that term in Section 2.3 (Commitment Fees).
Compliance Certificate shall have the meaning
assigned to such term in Section 7.3.3 (Certificates of the
Borrower).
Contamination shall mean the presence or release
or threat of release of Regulated Substances in, on, under or
emanating to or from any of the Property, which pursuant to
Environmental Laws requires notification or reporting to an
Official Body, or which pursuant to Environmental Laws requires
the investigation, cleanup, removal, remediation, containment,
abatement of or other response action or which otherwise
constitutes a violation of Environmental Laws.
Debt Rating shall mean the rating of Hovnanian's
senior unsecured long-term debt by each of Standard & Poor's and
Moody's.
Default Rate shall have the meaning assigned to
that term in Section 3.3.l (Default Rate).
Dividends shall mean any dividend or
distribution by a Person in respect of its capital stock or
ownership interests, whether in cash, property or securities.
Dollar, Dollars, U.S. Dollars and the symbol $
shall mean lawful money of the United States of America.
Drawing Date shall mean each date that an amount
is paid by the Letter of Credit Bank under any Letter of Credit.
Dwelling Unit shall mean a residential housing
unit held for sale by a Loan Party.
Environmental Complaint shall mean any written
complaint by any Person or Official Body setting forth a cause of
action for personal injury or property damage, natural resource
damage, contribution or indemnity for response costs, civil or
administrative penalties, criminal fines or penalties, or
declaratory or equitable relief arising under any Environmental
Laws or under any order, notice of violation, citation, subpoena,
request for information or other written notice or demand of any
type issued by an Official Body pursuant to any Environmental
Laws.
Environmental Laws shall mean all federal,
state, local and foreign Laws and any consent decrees, settlement
agreements, judgments, orders, directives, policies or programs
issued by or entered into with an Official Body pertaining or
relating to: (i)pollution or pollution control; (ii)protection of
human health or the environment; (iii)employee safety in the
workplace; (iv)the presence, use, management, generation,
manufacture, processing, extraction, treatment, recycling,
refining, reclamation, labeling, transport, storage, collection,
distribution, disposal or release or threat of release of
Regulated Substances; (v)the presence of Contamination; (vi)the
protection of endangered or threatened species; and (vii)the
protection of Environmentally Sensitive Areas.
Environmentally Sensitive Area shall mean (i)
any wetland as defined by applicable Environmental Laws; (ii) any
area designated as a coastal zone pursuant to applicable Laws,
including Environmental Laws; (iii) any area of historic or
archeological significance or scenic area as defined or designated
by applicable Laws, including Environmental Laws; (iv)habitats of
endangered species or threatened species as designated by
applicable Laws, including Environmental Laws; or (v) a floodplain
or other flood hazard area as defined pursuant to any applicable
Laws.
ERISA shall mean the Employee Retirement Income
Security Act of 1974, as the same may be amended or supplemented
from time to time, and any successor statute of similar import,
and the rules and regulations thereunder, as from time to time in
effect.
ERISA Group shall mean, at any time, the
Borrower and any entity (whether or not incorporated) that is
under common control with the Borrower within the meaning of
Section 4001 of ERISA, or the Borrower l and all other entities
which, together with the Borrower, are treated as a single
employer under Sections 414 (b) or (c) of the Internal Revenue
Code.
Event of Default shall mean any of the events
described in Section 8.1 (Events of Default) and referred to
therein as an "Event of Default."
Excess Cash shall mean cash that would appear on
a consolidated balance sheet of Hovnanian (to the extent not
pledged or encumbered in any way) in excess of $10,000,000.
Existing Related Business shall mean any
mortgage services, income property management and title insurance
businesses as such businesses are operated as of the Closing Date.
Expiration Date shall mean, with respect to the
Revolving Credit Commitments, July 30, 2005 as such may be
extended pursuant to Section 2.10 (Extension by Banks of the
Expiration Date).
Extending Bank shall have the meaning assigned
to such term in Section 2.10.2 (Approval by 80% Bank).
Federal Funds Effective Rate for any day shall
mean the rate per annum (based on a year of 360 days and actual
days elapsed and rounded upward to the nearest 1/100 of 1%)
announced by the Federal Reserve Bank of New York (or any
successor) on such day as being the weighted average of the rates
on overnight federal funds transactions arranged by federal funds
brokers on the previous trading day, as computed and announced by
such Federal Reserve Bank (or any successor) in substantially the
same manner as such Federal Reserve Bank computes and announces
the weighted average it refers to as the "Federal Funds Effective
Rate" as of the date of this Agreement; provided, if such Federal
Reserve Bank (or its successor) does not announce such rate on any
day, the "Federal Funds Effective Rate" for such day shall be the
Federal Funds Effective Rate for the last day on which such rate
was announced.
Financial Projections shall have the meaning
assigned to that term in Section 5.1.8((ii)) (Financial
Projections).
Finished Lots and Land Under Development shall
mean the Dollar amount of the lower of (x) actual cost (including
land costs and capitalized expenses relating thereto) or (y) the
market value (determined in accordance with GAAP) of any land that
has been granted Preliminary Approvals until a time which is the
earlier of when (x) it is "Unsold Homes" and (y) it is "Sold
Homes".
Fixed Charge Coverage Ratio shall mean the
ratio, as of any date of determination, of (x) Adjusted Operating
Income for the prior twelve (12) months to (y) four (4) multiplied
by Fixed Charges for the most-recently ended fiscal quarter.
Fixed Charges shall mean the sum of (i) interest
cost incurred on all Senior Homebuilding Indebtedness over the
past fiscal quarter; (ii) interest cost incurred on the
Subordinated Debt over the past fiscal quarter; (iii) 50% of the
interest cost incurred on all Purchase Money Mortgages over the
past fiscal quarter; (iv) Letter of Credit Fees accrued over the
past fiscal quarter; and (v) the interest component of capitalized
leases over the past fiscal quarter.
GAAP shall mean generally accepted accounting
principles as are in effect from time to time, subject to the
provisions of Section 1.3 [Accounting Principles], and applied on
a consistent basis both as to classification of items and amounts.
Governmental Acts shall have the meaning
assigned to that term in Section 2.9.8 (Indemnity).
Guarantor shall mean each of the parties to the
Guaranty Agreement (and designated as a "Guarantor" on Schedule
1.1(C)) and each other Person which joins the Guaranty Agreement
as a Guarantor after the date hereof pursuant to Section 10.18
(Joinder of Guarantors). As of the Closing Date, KHL shall not be
a Guarantor and Hovnanian shall be a Guarantor and all Restricted
Subsidiaries other than the Borrower and KHL shall be Guarantors.
Guarantor Joinder shall mean a joinder by a
Person as a Guarantor under the Guaranty Agreement in the form of
Exhibit 1.1(G).
Guaranty of any Person shall mean any obligation
of such Person guaranteeing or in effect guaranteeing any
Indebtedness of any other Person in any manner, whether directly
or indirectly.
Guaranty Agreement shall mean the Amended and
Restated Guaranty and Suretyship Agreement dated the Closing Date
and executed and delivered by each of the Guarantors to the Agent
for the benefit of the Banks.
Historical Statements shall have the meaning
assigned to that term in Section 5.1.8((i)) (Historical
Statements).
Homebuilding Indebtedness shall mean the sum of
(x) Senior Homebuilding Indebtedness and (y) Subordinated Debt.
Hovnanian shall mean Hovnanian Enterprises,
Inc., a Delaware corporation, shares of whose Class A Common Stock
are registered pursuant to the Securities Exchange Act of 1934.
Indebtedness shall mean, as to any Person at any
time, any and all indebtedness, obligations or liabilities
(whether matured or unmatured, liquidated or unliquidated, direct
or indirect, absolute or contingent, or joint or several) of such
Person for or in respect of: (i)borrowed money, (ii)amounts
raised under or liabilities in respect of any note purchase or
acceptance credit facility, (iii)reimbursement obligations
(contingent or otherwise) under any letter of credit, (iv)any
other transaction (including forward sale or purchase agreements,
capitalized leases and conditional sales agreements) having the
commercial effect of a borrowing of money entered into by such
Person to finance its operations or capital requirements (but not
including trade payables and accrued expenses incurred in the
ordinary course of business which are not more than ninety (90)
days past due or that are being contested in good faith by
appropriate proceedings), if and to the extent any of any of the
foregoing in this item (iv) would appear as a liability on the
balance sheet of such Person prepared on a consolidated basis in
accordance with GAAP, or (v)any Guaranty of Indebtedness for
borrowed money.
Ineligible Security shall mean any security
which may not be underwritten or dealt in by member banks of the
Federal Reserve System under Section 16 of the Banking Act of 1933
(12 U.S.C. Section 24, Seventh), as amended.
Insolvency Proceeding shall mean, with respect
to any Person, (a)a case, action or proceeding with respect to
such Person (i)before any court or any other Official Body under
any bankruptcy, insolvency, reorganization or other similar Law
now or hereafter in effect, or (ii)for the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator,
conservator (or similar official) of any Loan Party or otherwise
relating to the liquidation, dissolution, winding-up or relief of
such Person, or (b)any general assignment for the benefit of
creditors, composition, marshaling of assets for creditors, or
other, similar arrangement in respect of such Person's creditors
generally or any substantial portion of its creditors undertaken
under any Law.
Intangibles shall mean all patents, patent
applications, copyrights, trademarks, tradenames, goodwill,
organization expenses and other like items of Hovnanian and its
Subsidiaries which are treated as intangibles under GAAP.
Interest Period shall mean the period of time
selected by the Borrower in connection with (and to apply to) any
election permitted hereunder by the Borrower to have Revolving
Credit Loans bear interest under the LIBO-Rate Option. Subject to
the last sentence of this definition, such period shall be one,
two, three or six Months if Borrower selects the LIBO-Rate Option.
Such Interest Period shall commence on the effective date of such
Interest Rate Option, which shall be (i) the Borrowing Date if the
Borrower is requesting new Loans, or (ii) the date of renewal of
or conversion to the LIBO-Rate Option if the Borrower is renewing
or converting to the LIBO-Rate Option applicable to outstanding
Loans. Notwithstanding the second sentence hereof: (A) any
Interest Period which would otherwise end on a date which is not a
Business Day shall be extended to the next succeeding Business Day
unless such Business Day falls in the next calendar month, in
which case such Interest Period shall end on the next preceding
Business Day, and (B) the Borrower shall not select, convert to or
renew an Interest Period for any portion of the Loans that would
end after the Expiration Date.
Interest Rate Option shall mean any LIBO-Rate
Option or Base Rate Option.
Interim Statements shall have the meaning
assigned to that term in Section 5.1.8((i)) [Historical
Statements].
Internal Revenue Code shall mean the Internal
Revenue Code of 1986, as the same may be amended or supplemented
from time to time, and any successor statute of similar import,
and the rules and regulations thereunder, as from time to time in
effect.
Investment shall mean any loan or advance to or
on behalf of, or purchase, acquisition or ownership of any stock,
bonds, notes or securities of, or any partnership interest
(whether general or limited) or limited liability company interest
in, or any other similar investment or interest in, or any capital
contribution made to, any other Person, or any agreement to become
or remain liable to do any of the foregoing.
Investment in Related Business shall mean the
Investments by any of Hovnanian and the Restricted Subsidiaries
in (i)income-producing properties other than those listed on
Schedule 1.1E; or (ii )Existing Related Businesses.
Joint Ventures shall mean any Person in whom a
Loan Party has an ownership interest and which is not a
"Subsidiary". Each of the Joint Ventures as of the Closing Date
is listed on Schedule 1.1(C).
KHL shall mean KHL, Inc., a Delaware
corporation.
KHL Agreement shall mean KHL Agreement dated the
Closing Date and executed and delivered by KHL in respect of its
obligations to the Agent and the Banks.
Labor Contracts shall mean all employment
agreements, employment contracts, collective bargaining agreements
and other agreements among any Loan Party or Subsidiary of a Loan
Party and its employees.
Law shall mean any law (including common law),
constitution, statute, treaty, regulation, rule, ordinance,
opinion, release, ruling, order, injunction, writ, decree, bond,
judgment, authorization or approval, lien or award of or
settlement agreement with any Official Body.
Letter of Credit shall have the meaning assigned
to that term in Section 2.9.1 (Issuance of Letters of Credit).
Letter of Credit Bank shall have the meaning
assigned to that term in Section 2.9.1 (Issuance of Letters of
Credit).
Letter of Credit Borrowing shall have the
meaning assigned to such term in Section 2.9.3.4 (Disbursements,
Reimbursement).
Letter of Credit Fee shall have the meaning
assigned to that term in Section 2.9.2 (Letter of Credit Fees).
Letter of Credit Outstandings shall mean at any
time the sum of (i)the aggregate undrawn face amount of
outstanding Letters of Credit and (ii)the aggregate amount of all
unpaid and outstanding Reimbursement Obligations and Letter of
Credit Borrowings.
LIBO-Rate shall mean, with respect to the Loans
comprising any Borrowing Tranche to which the LIBO-Rate Option
applies for any Interest Period, the interest rate per annum
determined by the Agent by dividing (the resulting quotient
rounded upwards, if necessary, to the nearest 1/100th of 1% per
annum) (i)the rate of interest determined by the Agent in
accordance with its usual procedures (which determination shall be
conclusive absent manifest error) to be the average of the London
interbank offered rates for U.S. Dollars quoted by the British
Bankers' Association as set forth on Dow Jones Markets Service
(formerly known as Telerate) (or appropriate successor or, if the
British Bankers' Association or its successor ceases to provide
such quotes, a comparable replacement determined by the Agent)
display page 3750 (or such other display page on the Dow Jones
Markets Service system as may replace display page 3750) two (2)
Business Days prior to the first day of such Interest Period for
an amount comparable to such Borrowing Tranche and having a
borrowing date and a maturity comparable to such Interest Period
by (ii) a number equal to 1.00 minus the LIBO-Rate Reserve
Percentage. The LIBO-Rate may also be expressed by the following
formula:
LIBO-Rate = Average of London interbank offered rates
quoted
by BBA or appropriate successor as shown on
Dow Jones Markets Service display page 3750
1.00 - LIBO-Rate Reserve Percentage
The LIBO-Rate shall be adjusted with respect to any Loan to which
the LIBO-Rate Option applies that is outstanding on the effective
date of any change in the LIBO-Rate Reserve Percentage as of such
effective date. The Agent shall give prompt notice to the
Borrower of the LIBO-Rate as determined or adjusted in accordance
herewith, which determination shall be conclusive absent manifest
error.
LIBO-Rate Option shall mean the Revolving Credit
LIBO-Rate Option.
LIBO-Rate Reserve Percentage shall mean as of
any day the maximum percentage in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System
(or any successor) for determining the reserve requirements
(including supplemental, marginal and emergency reserve
requirements) with respect to eurocurrency funding (currently
referred to as "Eurocurrency Liabilities").
Lien shall mean any mortgage, deed of trust,
pledge, lien, security interest, charge or other encumbrance or
security arrangement of any nature whatsoever, whether voluntarily
or involuntarily given, including any conditional sale or title
retention arrangement, and any assignment, deposit arrangement or
lease intended as, or having the effect of, security.
LLC Interests shall have the meaning assigned to
such term in Section 5.1.2 (Subsidiaries ).
Loan Documents shall mean this Agreement, the
Agent's Letter, the Notes, the Stock Pledge, the Guaranty
Agreement, the KHL Agreement, and any other instruments,
certificates or documents delivered or contemplated to be
delivered hereunder or thereunder or in connection herewith or
therewith, as the same may be supplemented or amended from time to
time in accordance herewith or therewith, and Loan Document shall
mean any of the Loan Documents. Each of the Loan Documents under
the Original Credit Agreement( except for the Revolving Credit
Note of Credit Suisse First Boston) and the Revolving Credit Note
of National City of Pennsylvania and the Guaranty Agreement shall
be Loan Documents hereunder.
Loan Parties shall mean the Borrower, the
Guarantors and KHL.
Loan Request shall have the meaning assigned to
that term in Section 2.5 (Revolving Credit Loan Requests; Swing
Loan Requests).
Loans shall mean collectively all Revolving
Credit Loans and Swing Loans and Loan shall mean separately, any
Revolving Credit Loan or Swing Loan.
Material Adverse Change shall mean any set of
circumstances or events which (a)has or could reasonably be
expected to have any material adverse effect whatsoever upon the
validity or enforceability of this Agreement or any other Loan
Document, (b)is or could reasonably be expected to be material and
adverse to the business, properties, assets, financial condition,
results of operations or business prospects of the Loan Parties
taken as a whole, (c)impairs materially or could reasonably be
expected to impair materially the ability of the Loan Parties
taken as a whole to duly and punctually pay or perform their
material Indebtedness for borrowed money, or (d)impairs materially
or could reasonably be expected to impair materially the ability
of the Agent or any of the Banks, to the extent permitted, to
enforce their legal remedies pursuant to this Agreement or the
Notes, the Stock Pledge or the Guaranty Agreement.
Month, with respect to an Interest Period under
the LIBO-Rate Option, shall mean the interval between the days in
consecutive calendar months numerically corresponding to the first
day of such Interest Period. If any LIBO-Rate Interest Period
begins on a day of a calendar month for which there is no
numerically corresponding day in the month in which such Interest
Period is to end, the final month of such Interest Period shall be
deemed to end on the last Business Day of such final month.
Moody's shall mean Moody's Investors Service,
Inc. and its successors.
Mortgage Subsidiary shall mean each Subsidiary
which is in the business of making residential mortgage loans.
Each of the Mortgage Subsidiaries as of the Closing Date is listed
on Schedule 1.1(C).
Multiemployer Plan shall mean any employee
benefit plan which is a "multiemployer plan" within the meaning of
Section 4001(a)(3) of ERISA.
Non-approving Bank shall have the meaning
assigned to such term in Section 2.10.2 (Approval by 80% Banks).
Non-Restricted Person shall mean any (i) Joint
Venture and (ii) Subsidiary of Hovnanian which is not a Restricted
Subsidiary. Each of the Non-Restricted Persons as of the Closing
Date is listed on Schedule 1.1(C).
Notes shall mean the Revolving Credit Notes and
the Swing Note.
Notices shall have the meaning assigned to that
term in Section 10.6 (Notices).
Obligation shall mean any obligation or
liability of any of the Loan Parties to the Agent or any of the
Banks, howsoever created, arising or evidenced, whether direct or
indirect, absolute or contingent, now or hereafter existing, or
due or to become due, under or in connection with this Agreement,
any Notes, the Letters of Credit, the Agent's Letter or any other
Loan Document.
Official Body shall mean any national, federal,
state, local or other government or political subdivision or any
agency, authority, board, bureau, central bank, commission,
department or instrumentality of either, or any court, tribunal,
grand jury or arbitrator, in each case whether foreign or
domestic.
Original Credit Agreement shall have the meaning
assigned to such term in the preamble to this Agreement.
Participation Advance shall mean, with respect
to any Bank, such Bank's payment in respect of its participation
in a Letter of Credit Borrowing according to its Ratable Share
pursuant to Section 2.9.4 (Repayment of Participation Advances).
Partnership Interests shall have the meaning
assigned to such term in 5.1.2. (Subsidiaries).
PBGC shall mean the Pension Benefit Guaranty
Corporation established pursuant to Subtitle A of Title IV of
ERISA or any successor.
Permitted Acquisitions shall have the meaning
assigned to such term in Section 7.2.4 (Liquidations, Mergers,
Consolidations, Acquisitions).
Permitted Investments shall mean a Loan Party's
Investment in:
(a) (i) cash, marketable direct
obligations of the United States of America or any agency thereof,
and certificates of deposit, demand deposits, time deposits, or
repurchase agreements issued by any bank with a capital and
surplus of at least $25,000,000 organized under the laws of the
United States of America or any state thereof, provided that such
obligations, certificates of deposit, demand deposits, time
deposits, and repurchase agreements have a maturity of less than
one year from the date of purchase;
(ii) investment grade commercial
paper or debt having a maturity date of one year or less from the
date of purchase; and
(iii) funds holding assets primarily
consisting of those described in clause (i) hereof;
(b) loans or advances to employees of a
Loan Party in the ordinary course of business;
(c) any Person
that is or concurrently becomes a
Loan Party;
(d) purchase money notes not exceeding
$5,000,000 principal amount in the aggregate received incident to
sales of property by a Restricted Subsidiary;
(e) trade credit extended on usual and
customary terms in the ordinary course of business;
(f) loans to officers and directors to
the extent permitted by Section 7.2.6.2 (Restricted Payment;
Restricted Investments);
(g) marketable securities costing at the
time of purchase no more than $3,000,000 in the aggregate of any
one or more residential real estate developers and which are
registered under the Securities Exchange Act of 1934; and
(h) other Investments not in excess of
$5,000,000 in the aggregate.
Permitted Liens shall mean:
(i) Liens for taxes, assessments
or other governmental charges not yet payable or being contested
in good faith and as to which adequate reserves shall have been
established in accordance with GAAP;
(ii) Pledges or deposits made in
the ordinary course of business to secure payment of workers'
compensation, or to participate in any fund in connection with
workers' compensation, unemployment insurance, old-age pensions or
other social security programs;
(iii) Mechanics', materialmen's,
warehousemen's, carriers' or other like liens arising in the
ordinary course of business securing obligations which are not
overdue for a period longer than 30 days or which are being
contested in good faith by appropriate proceedings;
(iv) Good-faith pledges or deposits
made in the ordinary course of business to secure performance of
bids, tenders, contracts (other than for the repayment of borrowed
money) or leases, not in excess of the aggregate amount due
thereunder, or to secure statutory obligations, or surety, appeal,
indemnity, performance or other similar bonds required in the
ordinary course of business;
(v) Encumbrances consisting of
zoning restrictions, easements or other restrictions on the use of
real property, none of which materially impairs the use of such
property or the value thereof, and none of which is violated in
any material respect by existing or proposed structures or land
use;
(vi) Liens, security interests and
mortgages in favor of the Agent for the benefit of the Banks;
(vii) Liens on property leased by
any Loan Party or Subsidiary of a Loan Party under capital and
operating leases not prohibited by this Agreement securing
obligations of such Loan Party or Subsidiary to the lessor under
such leases;
(viii) Any Lien existing on the
date of this Agreement and described on Schedule 1.1(P), provided
that the principal amount secured thereby is not hereafter
increased, and no additional assets become subject to such Lien;
(ix) Purchase Money Mortgages and
Purchase Money Security Interests and Liens on real property owned
and occupied by Hovnanian or any Subsidiary; and
(x) The following, (A)if the
validity or amount thereof is being contested in good faith by
appropriate and lawful proceedings diligently conducted so long as
levy and execution thereon have been stayed and continue to be
stayed or (B)if a final judgment is entered and such judgment is
discharged within thirty (30) days of entry, and they do not in
the aggregate materially impair the ability of any Loan Party to
perform its Obligations hereunder or under the other Loan
Documents:
(1) Claims or Liens for
taxes, assessments or charges due and payable and subject to
interest or penalty, provided that the applicable Loan Party
maintains such reserves or other appropriate provisions as shall
be required by GAAP and pays all such taxes, assessments or
charges forthwith upon the commencement of proceedings to
foreclose any such Lien;
(2) Claims, Liens or
encumbrances upon, and defects of title to, real or personal
property, including any attachment of personal or real property or
other legal process prior to adjudication of a dispute on the
merits;
(3) Claims or Liens of
mechanics, materialmen, warehousemen, carriers, or other statutory
nonconsensual Liens; or
(4) Liens resulting from
final judgments or orders described in Section 8.1.6 (Final
Judgments or Orders).
(xi) Other Liens securing
obligations not in excess of $5,000,000 in the aggregate.
Person shall mean any individual, corporation,
partnership, limited liability company, association, joint-stock
company, trust, unincorporated organization, joint venture,
government or political subdivision or agency thereof, or any
other entity.
Plan shall mean at any time an employee pension
benefit plan (other than a Multiemployer Plan) which is covered
by Title IV of ERISA or is subject to the minimum funding
standards under Section 412 of the Internal Revenue Code in
respect of which the Borrower or any member of the ERISA Group is
an "employer" as defined in Section 3(5) of ERISA.
PNC Bank shall mean PNC Bank, National
Association, its successors and assigns.
Potential Default shall mean any event or
condition which with notice, passage of time or a determination by
the Agent or the Required Banks, or any combination of the
foregoing, would constitute an Event of Default.
Preliminary Approvals shall mean the following:
(i) in New Jersey, as defined in the Municipal Land Use Law
(N.J.S.A. 40:55D-1 et seq.) and (ii) for states other than New
Jersey, a point in time equivalent thereto.
Principal Office shall mean the main banking
office of the Agent in Pittsburgh, Pennsylvania or such other
location so designated by the Agent.
Prohibited Transaction shall mean any prohibited
transaction as defined in Section 4975 of the Internal Revenue
Code or Section 406 of ERISA for which neither an individual nor a
class exemption has been issued by the United States Department of
Labor.
Property shall mean all real property, both
owned and leased, of any Loan Party or Subsidiary of a Loan Party.
Purchase Money Mortgage shall mean any non-
recourse mortgages granted to secure Indebtedness of any Loan
Party.
Purchase Money Security Interest shall mean
Liens upon tangible personal property securing loans to any Loan
Party or deferred payments by such Loan Party or Subsidiary for
the purchase of such tangible personal property and excluding
Purchase Money Mortgages.
Purchasing Bank shall mean a Bank which becomes
a party to this Agreement by executing an Assignment and
Assumption Agreement.
Ratable Share shall mean the proportion that a
Bank's Commitment (excluding the Swing Loan Commitment) bears to
the Commitments (excluding the Swing Loan Commitment) of all of
the Banks.
Regulated Substances shall mean, without
limitation, any substance, material or waste, regardless of its
form or nature, defined under Environmental Laws as a "hazardous
substance," "pollutant," "pollution," "contaminant," "hazardous or
toxic substance," "extremely hazardous substance," "toxic
chemical," "toxic substance," "toxic waste," "hazardous waste,"
"special handling waste," "industrial waste," "residual waste,"
"solid waste," "municipal waste," "mixed waste," "infectious
waste," "chemotherapeutic waste," "medical waste," or "regulated
substance" or any other material, substance or waste, regardless
of its form or nature, which otherwise is regulated by
Environmental Laws.
Regulation U shall mean Regulation U, T or X as
promulgated by the Board of Governors of the Federal Reserve
System, as amended from time to time.
Reimbursement Obligation shall mean the
obligation of the Borrower to reimburse a Letter of Credit Bank
for draws under a Letter of Credit issued by such Bank under this
Agreement, except to the extent such obligation is represented by
a Revolving Credit Loan.
Reportable Event shall mean a reportable event
described in Section 4043 of ERISA and regulations thereunder with
respect to a Plan other than those events as to which the 30-day
notice is waived under the PBGC regulations.
Required Banks shall mean
(i) if there are no Loans,
Reimbursement Obligations or Letter of Credit Borrowings
outstanding, Banks whose Commitments (excluding the Swing Loan
Commitments) aggregate at least 66 2/3% of the Revolving Credit
Commitments of all of the Banks, or
(ii) if there are Loans,
Reimbursement Obligations, or Letter of Credit Borrowings
outstanding, any Bank or group of Banks if the sum of the Loans
(excluding the Swing Loans), Reimbursement Obligations and Letter
of Credit Borrowings of such Banks then outstanding aggregates at
least 66 2/3% of the total principal amount of all of the Loans
(excluding the Swing Loans), Reimbursement Obligations and Letter
of Credit Borrowings then outstanding.
Reimbursement Obligations and Letter of Credit Borrowings shall be
deemed, for purposes of this definition, to be in favor of the
Agent and not a participating Bank if such Bank has not made its
Participation Advance in respect thereof and shall be deemed to be
in favor of such Bank to the extent of its Participation Advance
if it has made its Participation Advance in respect thereof.
Required Environmental Notices shall mean all
notices, reports, plans, forms or other filings which pursuant to
Environmental Laws, Required Environmental Permits or at the
request or direction of an Official Body either must be submitted
to an Official Body or which otherwise must be maintained.
Required Environmental Permits shall mean all
permits, licenses, bonds, consents, programs, approvals or
authorizations required under Environmental Laws to own, occupy or
maintain the Property or which otherwise are required for the
operations and business activities of the Loan Parties.
Required Share shall have the meaning assigned
to such term in Section 4.8 (Settlement Date Procedures).
Restricted Investment shall mean a Loan Party's
Investment that constitutes a Subsidiary Investment in any Non-
Restricted Person or any Investment in Related Business.
Restricted Payments shall mean
(i) Dividends and Capital Stock
Retirement payments after January 31, 2001 by Hovnanian or
otherwise to the shareholders of Hovnanian; and
(ii) Payments (whether in the form
of principal payments, note repurchases or similar items) to the
holder of Subordinated Debt made on or after January 31, 2001;
provided, however, with respect to this item (ii), a refinancing
of the Subordinated Debt to the extent consisting of the repayment
of the Subordinated Debt and the incurring of new "Subordinated
Debt" within 60 days of such repayment shall not constitute a
"Restricted Payment".
Restricted Subsidiaries shall mean any
Subsidiary that has not been designated a Non-Restricted Person as
of the Closing Date or in accordance with Section 2.11
[Designation of Subsidiaries and Release of Guarantors]. Each of
the Restricted Subsidiaries as of the Closing Date is listed on
Schedule 1.1(C).
Revolving Credit Base Rate Option shall mean the
option of the Borrower to have Revolving Credit Loans bear
interest at the rate and under the terms and conditions set forth
in Section 3.1.1((i)) [Revolving Credit Base Rate Option].
Revolving Credit Commitment shall mean, as to
any Bank at any time, the amount set forth opposite its name on
Schedule 1.1(B) in the column labeled "Amount of Commitment for
Revolving Credit Loans" or on Schedule I to the Assignment and
Assumption Agreement pursuant to which such Bank became a party
hereto, and Revolving Credit Commitments shall mean the aggregate
Revolving Credit Commitments of all of the Banks. The Revolving
Credit Commitments shall not exceed at any time $440,000,000.
Revolving Credit LIBO-Rate Option shall mean the
option of the Borrower to have Revolving Credit Loans bear
interest at the rate and under the terms and conditions set forth
in Section 3.1.1((ii)) (Revolving Credit LIBO-Rate Option).
Revolving Credit Loans shall mean collectively
and Revolving Credit Loan shall mean separately all Revolving
Credit Loans or any Revolving Credit Loan made by the Banks or one
of the Banks to the Borrower pursuant to Section 2.1 (Revolving
Credit Commitments) or 2.9.3 (Disbursements, Reimbursement).
Revolving Credit Note shall mean any Revolving
Credit Note of the Borrower in the form of Exhibit 1.1(R) issued
by the Borrower at the request of a Bank pursuant to Section 4.7
(Notes) evidencing the Revolving Credit Loans to such Bank,
together with all amendments, extensions, renewals, replacements,
refinancings or refundings thereof in whole or in part.
Revolving Facility Usage shall mean at any time
the sum of the Revolving Credit Loans outstanding and the Letter
of Credit Outstandings.
SEC shall mean the Securities and Exchange
Commission or any governmental agencies substituted therefor.
Senior Homebuilding Indebtedness shall mean the
sum (without duplication) of (a) outstanding principal amount of
the Obligations, (b) letters of credit (whether or not issued
under this Agreement), (c) Guaranties by any Loan Party of any
obligation of any Person which is not a Restricted Subsidiary or
Hovnanian, (d) Senior Notes, (e) surety bonds (or similar
products) issued by bonding companies in lieu of cash payments or
cash deposits on contracts for any Loan Party to acquire land
inventory in respect of which a Loan Party is obligated and (f)
other Indebtedness of Hovnanian or a Restricted Subsidiary which
is permitted under this Agreement; provided however, that "Senior
Homebuilding Indebtedness" shall not include (i) obligations of
Hovnanian under the Keep-Well Guaranty dated July 16, 2001
previously provided to Bank One, NA, as agent for the benefit of
K. Hovnanian Mortgage Inc., (ii) debt secured by Purchase Money
Security Interests and Purchase Money Mortgages and (iii)
Subordinated Debt.
Senior Notes shall mean the (i) $150,000,000
principal amount 10 1/2% Senior Notes of the Borrower and
guaranteed by Hovnanian due October 2007 and (ii) $150,000,000 9
1/8% Senior Notes of the Borrower and guaranteed by Hovnanian due
in April 2009 and (iii) other notes sold or guaranteed by
Hovnanian or the Borrower from time to time after the Closing Date
on terms not materially less favorable to the Banks (as determined
by the Agent) as those described in clauses (i) and (ii) above
Settlement Date shall mean the date selected
from time to time by the Agent (after consulting the Borrower) on
which the Agents elects to effect settlement pursuant to Section
4.8 (Settlement Date Procedures).
Sold Homes shall mean the Dollar amount of the
capitalized construction costs of any Dwelling Unit upon which a
third party purchaser has paid a cash deposit pursuant to an
enforceable agreement of sale. Such cost shall include the
proportional costs of the land under the Dwelling Unit, site
improvements and soft costs incurred to date.
Standard & Poor's shall mean Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc.,
and its successors.
Stock Pledge shall mean the Stock Pledge
Agreement dated the Closing Date pursuant to which Hovnanian
pledges to the Agent on behalf of the Banks 100% of the capital
stock of KHL as security for the Obligations.
Subordinated Debt shall mean (i) the
$100,000,000 principal amount 9 3/4% Subordinated Notes of the
Borrower due June 1, 2005, and (ii) any other unsecured
indebtedness of the Borrower, Hovnanian, or any other Loan Party
which is subordinated by its terms to the prior payment in full of
the Obligations evidenced by this Agreement, the Notes and the
Letters of Credit, as may be outstanding from time to time, in a
manner no less favorable to the Banks than the terms of the
Subordinated Debt described in clause (i) above and which contain
covenants that are not materially less favorable to Hovnanian, the
Borrower or any other Loan Party than those contained in the
Subordinated Debt described in clause (i) above.
Subsidiary of any Person at any time, shall mean
a corporation, partnership, limited liability company or other
entity (x) whose assets and liabilities are consolidated with
Hovnanian in accordance with GAAP and (y) of which shares of stock
or other ownership interests having ordinary voting power (other
than stock or such other ownership interests having such power
only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or
the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such
Person. Unless otherwise qualified, all references to a
"Subsidiary" or to "Subsidiaries" in this Agreement shall refer to
a Subsidiary or Subsidiaries of Hovnanian.
Subsidiary Investment shall mean with respect
to any Subsidiary or Joint Venture the sum of (x) loans to such
Person by Hovnanian or a Restricted Subsidiary and (y) Hovnanian's
or a Restricted Subsidiary's share of equity in such Person.
Subsidiary Shares shall have the meaning
assigned to that term in Section 5.1.2 (Subsidiaries).
Swing Loan Commitment shall mean PNC Bank's
commitment to make Swing Loans to the Borrower pursuant to Section
2.1.2 (Swing Loan Commitment) hereof in an aggregate principal
amount of up to $10,000,000.
Swing Loan Note shall mean the Swing Loan Note
of the Borrower in the form of Exhibit 1.1(S) evidencing the Swing
Loans, together with all amendments, extensions, renewals,
replacements, refinancings or refundings thereof in whole or in
part.
Swing Loan Request shall mean a request for
Swing Loans made in accordance with Section 2.4.2 (Swing Loan
Requests) hereof.
Swing Loans shall mean collectively and Swing
Loan shall mean separately all Swing Loans or any Swing Loan made
by PNC Bank to the Borrower pursuant to Section 2.1.2 (Swing Loan
Commitment) hereof.
Total Debt Multiplier shall mean 2.40, subject
to adjustment as described in this definition.
(a) Total Debt Multiplier shall not at
any time be greater than 2.40 and shall decrease (under
circumstances described below) to 2.05 and then 1.95 and so forth
in increments of 10 basis points; similarly, at any time Total
Debt Multiplier shall increase (under circumstances described
below) it shall increase in 10 basis point increments up to 2.05
and then from 2.05 to 2.40. Such decreases and increases shall
occur as follows, with reference to the Fixed Charge Coverage
Ratio, but only when Actual Leverage is less than or equal to 2.2-
to-1.0.
(b) If the Fixed Charge Coverage Ratio
is less than 1.25-to-1.0 for two (2) consecutive quarters (for
purposes hereof the "reference quarters"):
(i) then for the second of such
quarters Total Debt Multiplier shall reduce to 2.05; and
(ii) for the next such quarter
after the reference quarters, and each subsequent consecutive
quarter in which the Fixed Charge Coverage Ratio is less than
1.25-to-1.0, Total Debt Multiplier shall reduce for each such
quarter in the increments described in subsection (a) of this
definition.
(c) If the Fixed Charge Ratio equals or
exceeds 1.25-to-1.0 for any quarter after the two (2) reference
quarters, then Total Debt Multiplier shall increase for such
quarters in the increments described in subsection (a) of this
definition.
Transferor Bank shall mean the selling Bank
pursuant to an Assignment and Assumption Agreement.
Unimproved Land shall mean the Dollar value of
land which has not been granted Preliminary Approvals, calculated
at the lower of (x) the actual cost (including land costs and
capital expenses relating thereto) or (y) the market value (as
determined in accordance with GAAP) thereof.
Unsold Dwelling Units shall mean the number of
Dwelling Units comprising from time to time "Unsold Homes".
Unsold Homes shall mean the Dollar amount of
capitalized construction costs of any Dwelling Unit being built
for which the construction of slab (or foundation) has been
completed and upon which no cash deposit has been paid pursuant to
an enforceable agreement of sale. Such Dollar amount shall include
the proportional costs of the land under the Dwelling Unit, site
improvements and soft costs actually incurred to date.
1.2 Construction.
Unless the context of this Agreement otherwise clearly
requires, the following rules of construction shall apply to this
Agreement and each of the other Loan Documents:
1.2.1. Number; Inclusion.
references to the plural include the singular,
the plural, the part and the whole; "or" has the inclusive meaning
represented by the phrase "and/or," and "including" has the
meaning represented by the phrase "including without limitation";
1.2.2. Determination.
references to "determination" of or by the Agent
or the Banks shall be deemed to include good-faith estimates by
the Agent or the Banks (in the case of quantitative
determinations) and good-faith beliefs by the Agent or the Banks
(in the case of qualitative determinations) and such determination
shall be conclusive absent manifest error;
1.2.3. Agent's Discretion and Consent.
whenever the Agent or the Banks are granted the
right herein to act in its or their sole discretion or to grant or
withhold consent such right shall be exercised in good faith;
1.2.4. Documents Taken as a Whole.
the words "hereof," "herein," "hereunder,"
"hereto" and similar terms in this Agreement or any other Loan
Document refer to this Agreement or such other Loan Document as a
whole and not to any particular provision of this Agreement or
such other Loan Document;
1.2.5. Headings.
the section and other headings contained in this
Agreement or such other Loan Document and the Table of Contents
(if any) preceding this Agreement or such other Loan Document are
for reference purposes only and shall not control or affect the
construction of this Agreement or such other Loan Document or the
interpretation thereof in any respect;
1.2.6. Implied References to this Agreement.
article, section, subsection, clause, schedule
and exhibit references are to this Agreement or other Loan
Document, as the case may be, unless otherwise specified;
1.2.7. Persons.
reference to any Person includes such Person's
successors and assigns but, if applicable, only if such successors
and assigns are permitted by this Agreement or such other Loan
Document, as the case may be, and reference to a Person in a
particular capacity excludes such Person in any other capacity;
1.2.8. Modifications to Documents.
reference to any agreement (including this
Agreement and any other Loan Document together with the schedules
and exhibits hereto or thereto), document or instrument means such
agreement, document or instrument as amended, modified, replaced,
substituted for, superseded or restated;
1.2.9. From, To and Through.
relative to the determination of any period of
time, "from" means "from and including," "to" means "to but
excluding," and "through" means "through and including"; and
1.2.10. Shall; Will.
references to "shall" and "will" are intended to
have the same meaning.
1.3 Accounting Principles.
Except as otherwise provided in this Agreement, all
computations and determinations as to accounting or financial
matters and all financial statements to be delivered pursuant to
this Agreement shall be made and prepared in accordance with GAAP
(including principles of consolidation where appropriate), and all
accounting or financial terms shall have the meanings ascribed to
such terms by GAAP; provided, however, that all accounting terms
used in Section 7.2 (Negative Covenants) (and all defined terms
used in the definition of any accounting term used in Section 7.2
(Negative Covenants) shall have the meaning given to such terms
(and defined terms) under GAAP as in effect on the date hereof
applied on a basis consistent with those used in preparing the
Annual Statements referred to in Section 5.1.8((i)) (Historical
Statements). In the event of any change after the date hereof in
GAAP, and if such change would result in the inability to
determine compliance with the financial covenants set forth in
Section 7.2 (Negative Covenants) based upon the Loan Parties'
regularly prepared financial statements by reason of the preceding
sentence, then the parties hereto agree to endeavor, in good
faith, to agree upon an amendment to this Agreement that would
adjust such financial covenants in a manner that would not affect
the substance thereof, but would allow compliance therewith to be
determined in accordance with the Loan Parties' financial
statements at that time.
2. REVOLVING CREDIT AND SWING LOAN FACILITIES
2.1 Revolving Credit Commitments.
2.1.1. Revolving Credit Loans.
Subject to the terms and conditions hereof and
relying upon the representations and warranties herein set forth,
each Bank severally agrees to make Revolving Credit Loans to the
Borrower at any time or from time to time on or after the date
hereof to the Expiration Date provided that after giving effect to
such Loan the aggregate amount of Revolving Credit Loans from such
Bank shall not exceed such Bank's Revolving Credit Commitment
minus such Bank's Ratable Share of the Letter of Credit
Outstandings. Within such limits of time and amount and subject
to the other provisions of this Agreement, the Borrower may
borrow, repay and reborrow pursuant to this Section 2.1.
2.1.2. Swing Loan Commitment.
Subject to the terms and conditions hereof and
relying upon the representations and warranties herein set forth,
PNC Bank shall make swing loans (the "Swing Loans") to the
Borrower at any time or from time to time after the date hereof
to, but not including, the Expiration Date, in an aggregate
principal amount up to but not in excess of the Swing Loan
Commitment. The Swing Loan Commitment is a sublimit of the
Revolving Credit Commitments and the aggregate principal amount of
the Swing Loans, the Revolving Credit Loans and the Letter of
Credit Outstandings of all the Banks at any one time outstanding
shall not exceed the Revolving Credit Commitments of all the
Banks. Within such limits of time and amount and subject to the
other provisions of this Agreement, the Borrower may borrow, repay
and reborrow pursuant to this Section 2.1.2. Swing Loans shall,
at the option of PNC Bank after consultation with the Borrower, be
repaid by the proceeds of a Revolving Credit Loan deemed to have
been made for such purpose pursuant to Section 2.8 (Borrowings to
Repay Swing Loans) and shall be subject to the provisions of
Section 4.8 (Settlement Date Procedures).
2.1.3. Increase in Commitments After Closing
Date.
Borrower may request at any time after the
Closing Date until June 21, 2003 that a new lender join this
Agreement as a "Bank" so as to increase the Commitments
outstanding hereunder. The selection of such new Bank shall be
subject to the Borrower's and Agent's consent, which shall not be
unreasonably withheld. The new Bank shall join this Agreement as
a Bank pursuant to the procedures contained in Section 10.11(b)
[Additional Bank]. The amount of such increase under this Section
2.1.3 shall not exceed $5,000,000 and the Revolving Credit
Commitments shall not exceed the Dollar limit set forth in the
definition thereof.
2.1.4. Voluntary Reduction of Commitment.
The Borrower shall have the right at any time
after the Closing Date (i) upon five (5) days' prior written
notice to the Agent to permanently reduce the Revolving Credit
Commitments, in a minimum amount of $500,000 and whole multiples
of $100,000 (provided that in no event shall the aggregate
Revolving Credit Commitments be reduced to an amount less than
$220,000,000) or (ii) at any time upon prepayment in full of the
Obligations, terminate completely the Commitments, without penalty
or premium except as hereinafter set forth, provided that any such
reduction or termination shall be accompanied by prepayment of the
Notes, together with outstanding Commitment Fees, and the full
amount of interest accrued on the principal sum to be prepaid (and
all amounts referred to in Section 4.6.2 [Indemnity] hereof), to
the extent that the aggregate amount thereof then outstanding
exceeds the Commitments as so reduced or terminated. Any notice
to reduce the Revolving Credit Commitments under this Section 2.1.
shall be irrevocable.
2.2 Nature of Banks' Obligations with Respect to Revolving
Credit Loans.
Each Bank shall be obligated to participate in each
request for Revolving Credit Loans pursuant to Section 2.4
[Revolving Credit Loan Requests; Swing Loan Requests] in
accordance with its Ratable Share. The aggregate of each Bank's
Revolving Credit Loans outstanding hereunder to the Borrower at
any time shall never exceed its Revolving Credit Commitment minus
its Ratable Share of the Letter of Credit Outstandings. The
obligations of each Bank hereunder are several. The failure of
any Bank to perform its obligations hereunder shall not affect the
Obligations of the Borrower to any other party nor shall any other
party be liable for the failure of such Bank to perform its
obligations hereunder. The Banks shall have no obligation to make
Revolving Credit Loans hereunder on or after the Expiration Date.
2.3 Commitment Fees.
Accruing from the date hereof until the Expiration
Date, the Borrower agrees to pay to the Agent for the account of
each Bank, as consideration for such Bank's Revolving Credit
Commitment hereunder, a nonrefundable commitment fee (the
"Commitment Fee") equal to the Applicable Commitment Fee Rate
(computed on the basis of a year of 365 or 366 days, as the case
may be, and actual days elapsed) on the average daily difference
between the amount of (i)such Bank's Revolving Credit Commitment
as the same may be constituted from time to time and the (ii)the
sum of such Bank's Revolving Credit Loans outstanding (plus, in
the case of PNC Bank, its Swing Loans outstanding) plus its
Ratable Share of Letter of Credit Outstandings. All Commitment
Fees shall be payable in arrears on the fifteenth (15) day of each
calendar quarter after the date hereof and on the Expiration Date
or upon acceleration of the Obligations.
2.4 Revolving Credit Loan Requests; Swing Loan Requests.
2.4.1. Revolving Credit Loan Requests.
Except as otherwise provided herein, the
Borrower may from time to time prior to the Expiration Date
request the Banks to make Revolving Credit Loans, or renew or
convert the Interest Rate Option applicable to existing Revolving
Credit Loans or pursuant to Section 3.2 (Interest Periods), by
delivering to the Agent, not later than 11:00 a.m., Eastern time,
(i)three (3) Business Days prior to the proposed Borrowing Date
with respect to the making of Revolving Credit Loans to which the
LIBO-Rate Option applies or the conversion to or the renewal of
the LIBO-Rate Option for any Loans; and (ii) on the day of either
the proposed Borrowing Date with respect to the making of a
Revolving Credit Loan to which the Base Rate Option applies or the
last day of the preceding Interest Period with respect to the
conversion to the Base Rate Option for any Loan, of a duly
completed request therefor substantially in the form of Exhibit
2.4.1 or a request by telephone promptly confirmed in writing by
letter or facsimile in such form (each, a "Loan Request"), it
being understood that the Agent may rely on the authority of any
individual making such a telephonic request without the necessity
of receipt of such written confirmation. Each Loan Request shall
be irrevocable and shall specify (i)the proposed Borrowing Date;
(ii)the aggregate amount of the proposed Loans comprising each
Borrowing Tranche, which shall be in integral multiples of $
500,000 and not less than $2,500,000 for each Borrowing Tranche to
which the LIBO-Rate Option applies and which shall be in integral
multiples of $100,000 and not less than $500,000 for Borrowing
Tranches to which the Base Rate Option applies; (iii)whether the
LIBO-Rate Option or Base Rate Option shall apply to the proposed
Loans comprising the applicable Borrowing Tranche; and (iv)in the
case of a Borrowing Tranche to which the LIBO-Rate Option applies,
an appropriate Interest Period for the Loans comprising such
Borrowing Tranche.
2.4.2. Swing Loan Requests.
Except as otherwise provided herein, the
Borrower may from time to time prior to the Expiration Date
request PNC Bank to make Swing Loans by delivery to PNC Bank not
later than 2:00 p.m. Eastern time on the proposed Borrowing Date
of a duly completed request therefor substantially in the form of
Exhibit 2.4.2 hereto or a request by telephone promptly confirmed
in writing by letter or facsimile (each, a "Swing Loan Request"),
it being understood that the Agent may rely on the authority of
any individual making such a telephonic request without the
necessity of receipt of such written confirmation. Each Swing
Loan Request shall be irrevocable and shall specify the proposed
Borrowing Date and the principal amount of such Swing Loan, which
shall be not less than $100,000.
2.5 Making Revolving Credit Loans and Swing Loans.
2.5.1. Generally.
The Agent shall, promptly after receipt by it of
a Loan Request pursuant to Section 2.4.1 [Revolving Credit Loan
Requests], but not later than 12:00 noon, notify the Banks of its
receipt of such Loan Request specifying: (i)the proposed
Borrowing Date and the time and method of disbursement of the
Revolving Credit Loans requested thereby; (ii)the amount and type
of each such Revolving Credit Loan and the applicable Interest
Period (if any); and (iii)the apportionment among the Banks of
such Revolving Credit Loans as determined by the Agent in
accordance with Section 2.2 (Nature of Banks' Obligations with
Respect to Revolving Credit Loans). Each Bank shall remit the
principal amount of each Revolving Credit Loan to the Agent such
that the Agent is able to, and the Agent shall, to the extent the
Banks have made funds available to it for such purpose and subject
to Section 6.2 (Each Additional Loan or Letter of Credit), fund
such Revolving Credit Loans to the Borrower in U.S. Dollars and
immediately available funds at the Principal Office prior to 2:30
p.m., Eastern time, on the applicable Borrowing Date, provided
that if any Bank fails to remit such funds to the Agent in a
timely manner, the Agent may elect in its sole discretion to fund
with its own funds the Revolving Credit Loans of such Bank on such
Borrowing Date, and such Bank shall be subject to the repayment
obligation in Section 9.16 (Availability of Funds).
2.5.2. Making Swing Loans.
Subject to the other provisions of this
Agreement, PNC Bank shall, after receipt by it of a Swing Loan
Request pursuant to Section 2.4.2 (Swing Loan Requests), fund such
Swing Loan to the Borrower in Dollars and immediately available
funds at the Principal Office as soon as reasonably practicable
after receipt by PNC Bank of said Swing Loan Request but in any
event by the close of business on the same Business Day.
2.6 Swing Loan Note.
The obligation of the Borrower to repay the unpaid
principal amount of the Swing Loans made to it by PNC Bank
together with interest thereon shall, if requested by PNC Bank, be
evidenced by the Swing Loan Note dated the Closing Date payable to
the order of PNC Bank in a face amount equal to the Swing Loan
Commitment.
2.7 Use of Proceeds.
The proceeds of the Revolving Credit Loans shall be
used to refinance existing indebtedness and provide for Letters of
Credit and provide working capital and funds for general corporate
purpose for the Borrower, Hovnanian and the Restricted
Subsidiaries, all in accordance with Section 7.1.10 (Use of
Proceeds).
2.8 Borrowings to Repay Swing Loans.
PNC Bank may, at its option, and upon consultation
with the Borrower, exercisable at any time for any reason
whatsoever, demand that each Bank shall make a Revolving Credit
Loan in an amount equal to such Bank's Ratable Share of the
aggregate principal amount of the outstanding Swing Loans made in
accordance with Section 2.5.2 (Making Swing Loans), plus, if PNC
Bank so requests, accrued interest thereon, provided that no Bank
shall be obligated in any event to make Revolving Credit Loans in
excess of its Revolving Credit Commitment. Revolving Credit Loans
made pursuant to the preceding sentence shall bear interest at the
Base Rate Option and shall be deemed to have been properly
requested in accordance with Section 2.4.1 (Revolving Credit Loan
Requests) without regard to any of the requirements of that
provision. PNC Bank shall provide notice to the Banks (which may
be telephonic or written notice by letter, facsimile or telex)
that such Revolving Credit Loans are to be made under this Section
2.8 and of the apportionment among the Banks, and the Banks shall
be unconditionally obligated to fund such Revolving Credit Loans
(whether or not the conditions specified in Section 2.4.1
(Revolving Credit Loan Requests) or Section 6.2 (Each Additional
Loan or Letter of Credit) are then satisfied) by the time PNC Bank
so requests, which shall not be earlier than three o'clock (3:00)
p.m. Eastern time on the Business Day next after the date the
Banks receive such notice from PNC Bank.
2.9 Letter of Credit Subfacility.
2.9.1. Issuance of Letters of Credit.
The Borrower may request the issuance of a
letter of credit (each a "Letter of Credit") on behalf of itself
or another Loan Party by the Agent or any Bank which issues a
Letter of Credit hereunder (such Bank, with respect to the
issuance of the Letter of Credit so requested by the Borrower,
being a "Letter of Credit Bank") by delivering to the Agent and
the Letter of Credit Bank a completed application and agreement
for letters of credit in such form as the Letter of Credit Bank
and the Agent may specify from time to time by no later than 10:00
a.m., Eastern time, at least three (3) Business Days, or such
shorter period as may be agreed to by the Letter of Credit Bank,
in advance of the proposed date of issuance. Each letter of
credit issued hereunder, including those issued under the terms of
the Original Credit Agreement and those issued or existing
pursuant to the Second Amended and Restated Credit Agreement dated
as of February 22, 2000 and thereafter made "Letters of Credit"
under the terms of the Original Credit Agreement, is described on
Schedule 2.9.1 and shall be deemed to be a "Letter of Credit"
hereunder as of the Closing Date. Subject to the terms and
conditions hereof and in reliance on the agreements of the other
Banks set forth in this Section 2.9, the Letter of Credit Bank
will issue a Letter of Credit provided that each Letter of Credit
shall in no event expire later than one (1) Business Day prior to
the Expiration Date and providing that in no event shall the
Letter of Credit Outstanding exceed, at any one time,
$125,000,000.
2.9.2. Letter of Credit Fees.
The Borrower shall pay (i)to the Agent for the
ratable account of the Banks a fee (the "Letter of Credit Fee")
equal to the Applicable Letter of Credit Fee Rate (computed on the
daily average Letter of Credit Outstandings) and (ii)to the Agent
on behalf of each respective Letter of Credit Bank for its own
account a fronting fee for Letters of Credit issued by such Letter
of Credit Bank equal to .125% per annum (computed on the basis of
a year of 365 or 366 days, as the case may be, and actual days
elapsed) and shall be payable quarterly in arrears commencing with
the fifteenth (15) day of each calendar quarter following issuance
of each Letter of Credit and on the Expiration Date. The Borrower
shall also pay to the Letter of Credit Bank for the Letter of
Credit Bank's sole account the Letter of Credit Bank's then in
effect customary fees and administrative expenses payable with
respect to the Letters of Credit as the Letter of Credit Bank may
generally charge or incur from time to time in connection with the
issuance, maintenance, modification (if any), assignment or
transfer (if any), negotiation, and administration of Letters of
Credit.
2.9.3. Disbursements, Reimbursement.
2.9.3.1 Immediately upon the
issuance of each Letter of Credit, each Bank shall be deemed to,
and hereby irrevocably and unconditionally agrees to, purchase
from the Letter of Credit Bank a participation in such Letter of
Credit and each drawing thereunder in an amount equal to such
Bank's Ratable Share of the maximum amount available to be drawn
under such Letter of Credit and the amount of such drawing,
respectively.
2.9.3.2 In the event of any
request for a drawing on or before 11:00 a.m. under a Letter of
Credit by the beneficiary or transferee thereof, the Letter of
Credit Bank shall promptly notify the Agent upon such request.
Provided that it shall have received such notice, the Agent will
promptly notify the Borrower and each Bank thereof, and the
Borrower shall be deemed to have requested that Revolving Credit
Loans be made by the Banks in an amount equal to the amount so
paid by the Letter of Credit Bank under the Base Rate Option to be
disbursed on the Drawing Date under such Letter of Credit, subject
to the amount of the unutilized portion of the Revolving Credit
Commitment and not subject to the conditions set forth in Section
6.2 (Each Additional Loan or Letter of Credit). Any notice given
by the Letter of Credit Bank or the Agent pursuant to this Section
2.9.3.2 may be oral if immediately confirmed in writing; provided
that the lack of such an immediate confirmation shall not affect
the conclusiveness or binding effect of such notice.
2.9.3.3 Each Bank shall upon any
notice pursuant to Section 2.9.3.2 (Disbursements, Reimbursement)
make available to the Agent on behalf of the Letter of Credit Bank
an amount in immediately available funds equal to its Ratable
Share of the amount of the drawing, whereupon the participating
Banks shall (subject to Section 2.9.3.4 (Disbursements,
Reimbursement)) each be deemed to have made a Revolving Credit
Loan under the Base Rate Option to the Borrower in that amount.
If any Bank so notified fails to make available to the Agent for
the account of the Agent on behalf of the Letter of Credit Bank
the amount of such Bank's Ratable Share of such amount by no later
than two o'clock (2:00) p.m., Eastern time on the Drawing Date,
then interest shall accrue on such Bank's obligation to make such
payment from the Drawing Date to the date on which such Bank makes
such payment (i) at a rate per annum equal to the Federal Funds
Effective Rate during the first three days following the Drawing
Date and (ii) at a rate per annum equal to the rate applicable to
Loans under the Revolving Credit Base Rate Option on and after the
fourth day following the Drawing Date. The Agent will promptly
give notice of the occurrence of the Drawing Date, but failure of
the Agent to give any such notice on the Drawing Date or in
sufficient time to enable any Bank to effect such payment on such
date shall not relieve such Bank from its obligation under this
Section 2.9.3.3.
2.9.3.4 With respect to any
unreimbursed drawing that is not converted into Revolving Credit
Loans under the Base Rate Option to the Borrower in whole or in
part as contemplated by Section 2.9.3.2 (Disbursements,
Reimbursement), the Borrower shall be deemed to have incurred from
the Agent a borrowing (each a "Letter of Credit Borrowing") in the
amount of such drawing. Such Letter of Credit Borrowing shall be
due and payable on demand (together with interest) and shall bear
interest at the rate per annum applicable to the Revolving Credit
Loans under the Base Rate Option. Each Bank's payment to the
Agent pursuant to Section 2.9.3.3 (Disbursements, Reimbursement)
shall be deemed to be a payment in respect of its participation in
such Letter of Credit Borrowing and shall constitute a
"Participation Advance" from such Bank in satisfaction of its
participation obligation under Section 2.9.3 (Disbursements,
Reimbursement).
2.9.4. Repayment of Participation Advances.
2.9.4.1 Upon (and only upon)
receipt by the Agent on behalf of the Letter of Credit Bank of
immediately available funds from the Borrower (i)in reimbursement
of any payment made by the on behalf of the Letter of Credit Bank
under the Letter of Credit with respect to which any Bank has made
a Participation Advance to the Agent on behalf of the Letter of
Credit Bank or (ii)in payment of interest on such a payment made
by the Agent under such a Letter of Credit, the Agent will pay to
each Bank, in the same funds as those received by the Agent, the
amount of such Bank's Ratable Share of such funds, except the
Agent shall retain the amount of the Ratable Share of such funds
of any Bank that did not make a Participation Advance in respect
of such payment by Agent. If the Letter of Credit Bank receives
any such payment prior to 1:00 p.m. on a Business Day and does not
make payment to any such Bank which has made such a Participation
Advance on the same Business Day, then such Bank shall be entitled
to receive such Letter of Credit Bank interest at the Federal
Funds Effective Rate for each day until such payment is made to
such Bank.
2.9.4.2 If the Agent or the
Letter of Credit Bank is required at any time to return to any
Loan Party, or to a trustee, receiver, liquidator, custodian, or
any official in any Insolvency Proceeding, any portion of the
payments made by any Loan Party pursuant to Section 2.9.4.1
(Repayment of Participation Advances) in reimbursement of a
payment made under the Letter of Credit or interest or fee
thereon, each Bank shall, on demand of the Agent on behalf of the
Letter of Credit Bank, forthwith return to the Agent the amount of
its Ratable Share of any amounts so returned by the Agent or such
Letter of Credit Bank plus interest thereon from the date such
demand is made to the date such amounts are returned by such Bank
to the Agent, at a rate per annum equal to the Federal Funds
Effective Rate in effect from time to time.
2.9.5. Documentation.
Each Loan Party agrees to be bound by the terms
of the Letter of Credit Bank's application and agreement for
letters of credit and the Letter of Credit Bank's written
regulations and customary practices relating to letters of credit,
though such interpretation may be different from such Loan Party's
own. In the event of a conflict between such application or
agreement and this Agreement, this Agreement shall govern. It is
understood and agreed that, except in the case of gross negligence
or willful misconduct, the Letter of Credit Bank shall not be
liable for any error, negligence and/or mistakes, whether of
omission or commission, in following any Loan Party's instructions
or those contained in the Letters of Credit or any modifications,
amendments or supplements thereto.
2.9.6. Determinations to Honor Drawing Requests.
In determining whether to honor any request for
drawing under any Letter of Credit by the beneficiary thereof, the
Letter of Credit Bank shall be responsible only to determine that
the documents and certificates required to be delivered under such
Letter of Credit have been delivered and that they comply on their
face with the requirements of such Letter of Credit.
2.9.7. Nature of Participation and Reimbursement
Obligations.
Each Bank's obligation in accordance with this
Agreement to make the Revolving Credit Loans or Participation
Advances, as contemplated by Section 2.9.3 (Disbursements,
Reimbursement), as a result of a drawing under a Letter of Credit,
and the obligations of the Borrower to reimburse the Agent upon a
draw under a Letter of Credit, shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance
with the terms of this Section 2.9 (Letter of Credit Subfacility)
under all circumstances, including the following circumstances:
(i) any set-off, counterclaim,
recoupment, defense or other right which such Bank may have
against the Agent, any Loan Party or any other Person for any
reason whatsoever;
(ii) the failure of any Loan Party
or any other Person to comply, in connection with a Letter of
Credit Borrowing, with the conditions set forth in Section 2.1
(Revolving Credit Commitments), 2.4 (Revolving Credit Loan
Requests; Swing Loan Requests), 2.4.2 (Swing Loan Requests) or 6.2
(Each Additional Loan or Letter of Credit), if applicable, or as
otherwise set forth in this Agreement for the making of a
Revolving Credit Loan, it being acknowledged that such conditions
are not required for the making of a Letter of Credit Borrowing
and the obligation of the Banks to make Participation Advances
under Section 2.9.3 (Disbursements, Reimbursement);
(iii) any lack of validity or
enforceability of any Letter of Credit;
(iv) the existence of any claim,
set-off, defense or other right which any Loan Party or any Bank
may have at any time against a beneficiary or any transferee of
any Letter of Credit (or any Persons for whom any such transferee
may be acting), the Agent, the Letter of Credit Bank or any Bank
or any other Person or, whether in connection with this Agreement,
the transactions contemplated herein or any unrelated transaction
(including any underlying transaction between any Loan Party or
Subsidiaries of a Loan Party and the beneficiary for which any
Letter of Credit was procured);
(v) any draft, demand, certificate
or other document presented under any Letter of Credit proving to
be forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any respect
even if the Letter of Credit Bank has been notified thereof;
(vi) payment by the Letter of
Credit Bank under any Letter of Credit against presentation of a
demand, draft or certificate or other document which does not
comply with the terms of such Letter of Credit;
(vii) any adverse change in the
business, operations, properties, assets, condition (financial or
otherwise) or prospects of any Loan Party or Subsidiaries of a
Loan Party;
(viii) any breach of this
Agreement or any other Loan Document by any party thereto;
(ix) the occurrence or continuance
of an Insolvency Proceeding with respect to any Loan Party;
(x) the fact that an Event of
Default or a Potential Default shall have occurred and be
continuing;
(xi) the fact that the Expiration
Date shall have passed or this Agreement or the Commitments
hereunder shall have been terminated; and
(xii) any other circumstance or
happening whatsoever, whether or not similar to any of the
foregoing.
2.9.8. Indemnity.
In addition to amounts payable as provided in
Section 9.5 (Reimbursement and Indemnification of Agent by the
Borrower), the Borrower hereby agrees to protect, indemnify, pay
and save harmless the Agent and any Letter of Credit Bank from and
against any and all claims, demands, liabilities, damages, losses,
costs, charges and expenses (including reasonable fees, expenses
and disbursements of counsel and allocated costs of internal
counsel) which the Agent or any Letter of Credit Bank may incur or
be subject to as a consequence, direct or indirect, of the
issuance of any Letter of Credit, other than as a result of (A)the
gross negligence or willful misconduct of the Agent or any Letter
of Credit Bank as determined by a final judgment of a court of
competent jurisdiction or (B)the wrongful dishonor by the Letter
of Credit Bank of a proper demand for payment made under any
Letter of Credit, except if such dishonor resulted from any act or
omission, whether rightful or wrongful, of any present or future
de jure or de facto government or governmental authority (all such
acts or omissions herein called "Governmental Acts").
2.9.9. Liability for Acts and Omissions.
As between any Loan Party and the Agent or any
Letter of Credit Bank, such Loan Party assumes all risks of the
acts and omissions of, or misuse of the Letters of Credit by, the
respective beneficiaries of such Letters of Credit. In
furtherance and not in limitation of the foregoing, neither the
Agent nor any Letter of Credit Bank shall not be responsible for:
(i)the form, validity, sufficiency, accuracy, genuineness or legal
effect of any document submitted by any party in connection with
the application for an issuance of any such Letter of Credit, even
if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged (even if the Agent
or any Letter of Credit Bank shall have been notified thereof);
(ii)the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any such Letter of
Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part, which may prove to be invalid or ineffective
for any reason; (iii)the failure of the beneficiary of any such
Letter of Credit, or any other party to which such Letter of
Credit may be transferred, to comply fully with any conditions
required in order to draw upon such Letter of Credit or any other
claim of any Loan Party against any beneficiary of such Letter of
Credit, or any such transferee, or any dispute between or among
any Loan Party and any beneficiary of any Letter of Credit or any
such transferee; (iv)errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise, whether or not they be in cipher;
(v)errors in interpretation of technical terms; (vi)any loss or
delay in the transmission or otherwise of any document required in
order to make a drawing under any such Letter of Credit or of the
proceeds thereof; (vii)the misapplication by the beneficiary of
any such Letter of Credit of the proceeds of any drawing under
such Letter of Credit; or (viii)any consequences arising from
causes beyond the control of the Agent or Letter of Credit Bank,
including any Governmental Acts, and none of the above shall
affect or impair, or prevent the vesting of, any of the Agent's or
any Letter of Credit Bank's rights or powers hereunder. Nothing
in the preceding sentence shall relieve the Agent or any Letter of
Credit Bank from liability for the Agent's or any Letter of Credit
Bank's gross negligence or willful misconduct in connection with
actions or omissions described in such clauses (i) through (viii)
of such sentence.
In furtherance and extension and not in
limitation of the specific provisions set forth above, any action
taken or omitted by the Agent or any Letter of Credit Bank under
or in connection with the Letters of Credit issued by it or any
documents and certificates delivered thereunder, if taken or
omitted in good faith, shall not put the Agent or any Letter of
Credit Bank under any resulting liability to any Loan Party or any
Bank.
2.9.10. Sharing Letter of Credit Documentation.
Each Letter of Credit Bank shall furnish to the
Agent copies of any letter of credit application and related
documentation to which such Letter of Credit Bank and a Loan Party
are parties and promptly after issuance, a copy of any Letter of
Credit or amendment to any Letter of Credit issued by such Bank.
2.10 Extension by Banks of the Expiration Date.
2.10.1. Requests; Approval by All Banks.
After delivery by the Borrower of the annual
financial statements to be provided under Section 7.3.2 (Annual
Financial Statements) for the fiscal year ending October 30, 2002
or any subsequent fiscal year, the Borrower may request a one-year
extension of the Expiration Date by written notice to the Banks
made by May 30, and the Banks agree to respond to the Borrower's
request for an extension no later than thirty (30) days following
receipt of the request; provided, however, that the failure of any
Bank to respond within such time period shall not in any manner
constitute an agreement by such Bank to extend the Expiration
Date. If all Banks elect to extend, the Expiration Date shall be
extended for a period of one year. If one or more Banks decline
to extend or do not respond to Borrower's request, the provisions
of Section 2.10.2 (Approval by 80% Banks) shall apply.
2.10.2. Approval by 80% Banks.
In the event that one or more Banks do not agree
to extend the Expiration Date or do not respond to Borrower's
request for an extension within the time required under Section
2.10.1 (Requests; Approval by All Banks) (each a "Non-approving
Bank"), but 80% of the Banks (measured by their Ratable Shares and
not per capita) agree to such extension within such time (each
such agreeing Bank being an "Extending Bank"), then the Borrower
may, at the Borrower's option, on or before July 31 of each year
notify the Agent and the Banks that the Borrower intends to employ
one or more of the following three (3) options: (i) cause the
Commitment of each Non-approving Bank to be terminated (after
which time such Non-approving Bank shall cease to be a "Bank"
hereunder) and cause the aggregate Commitments to be reduced by
the amount of such terminated Commitments, or (ii) require the
Non-approving Banks to sell, and allow (upon prior notice to the
Agent) the Extending Banks which have agreed to such extension
within the time required under Section 2.11.1 [Requests; Approval
by All Banks] or any financial institution approved by the Agent
and (absent an Event of Default) the Borrower (each such Person
referred to in this clause (ii) being an "Assignee Bank") to
purchase all of the outstanding Loans if any, of the Non-approving
Banks and succeed to and assume the Commitments and all other
rights, interests and obligations of the Non-approving Banks under
this Agreement and the other Loan Documents, or (iii) require the
Non-approving Bank to remain a Bank and require it to maintain its
Commitment and retain for such Non-approving Bank's Commitment the
"Expiration Date" established prior to the extension referred to
in this Section 2.10.2, all subject to the other provisions of
this Agreement. Any such purchase and assumption pursuant to
clause (ii) above shall be (1)pursuant to an Assignment and
Assumption Agreement and (2)subject to and in accordance with
Section 10.11 (Successors and Assigns). The Borrower shall pay
all amounts due and payable to the Non-approving Bank on the
effective date of such Assignment and Assumption Agreement. In
the event that the Agent shall become a Non-approving Bank, the
provisions of this Section 2.10 (Extension by Banks of the
Expiration Date) shall be subject to Section 9.14 (Successor
Agent). In the event that the Borrower has selected the option
described in clause (ii) above and if the Loans and Commitments of
a Non-approving Bank are, nevertheless, not fully assigned and
assumed pursuant to this Section 2.10.2, or terminated or retained
pursuant to clause (i) or clause (iii)above, as applicable, on or
before August 31 of such year, then the Expiration Date shall not
be extended for any Bank. Nothing in this Section 2.10.2 shall
expand the options provided in Section 4.4.2 (Replacement of a
Bank).
2.11 Designation of Subsidiaries and Release of Guarantors.
2.11.1. Release of Guarantors.
At any time when the Borrower wishes to cause
the Banks to release a Guarantor from its obligations under the
Guaranty Agreement (whether directly or in connection with the
designation of a Restricted Subsidiary as a Non-Restricted
Person), the consent of the Banks shall be required as described
below and shall be subject to the other provisions of this Section
2.11.
(a) For the release of any Guarantor (i)
whose assets are principally comprised of residential or
commercial property which is leased or held for the purposes of
leasing to unaffiliated third parties or (ii) in which any Loan
Party (or Loan Parties in the aggregate) has, at the time of such
release, a Subsidiary Investment less than $100,000, no consent of
the Banks shall be required and such request of the Borrower shall
be granted absent an Event of Default or Potential Default,
effective on the date specified by the Borrower which shall not be
earlier than five (5) Business Days after the receipt by the Agent
of such request;
(b) For the release of any Guarantor
(not described in item (a)(i) hereof) in which any Loan Party (or
Loan Parties in the aggregate) has, at the time of such release,
a Subsidiary Investment greater than or equal to $100,000 and less
than $1,000,000, the consent of Required Banks shall be required;
(c) For the release of Hovnanian or any
Guarantor (not described in item (a)(i) hereof) in which any Loan
Party (or Loan Parties in the aggregate) has, at the time of such
release, a Subsidiary Investment greater than or equal to
$1,000,000, the consent of 100% of the Banks shall be required;
and
(d) The designation of a Person as a
Non-Restricted Person for any reason shall not itself constitute a
release of any Guarantor.
2.11.2. Designation of Non-Restricted Person.
The Borrower may, by written notice delivered to
the Agent, designate as a Non-Restricted Person a Subsidiary
formerly designated a Restricted Subsidiary or a newly formed or
acquired Subsidiary, subject to: (i) the provisions of subsection
2.11.1 hereof in relation to Guaranties, (ii) the requirements of
Section 7 (Covenants) and in particular Section 7.2.10 (Borrowing
Base); and (iii) the requirement that such designation not cause
an Event of Default or Potential Default. Such designation shall
be effective on the date specified by the Borrower which shall not
be earlier than five (5) Business Days after the receipt by the
Agent of such notice.
2.11.3. Automatic Designation of Non-Restricted
Person.
Upon the occurrence of any event described in
Section 8.1.10 (Insolvency), Section 8.1.14 (Involuntary
Proceedings), Section 8.1.15 [Voluntary Proceedings], or the
winding-up or termination of business, with respect to any
Restricted Subsidiary, such Subsidiary shall automatically become
a Non-Restricted Person. Such designation as a Non-Restricted
Person shall, with respect such Person's obligations under the
Guaranty Agreement, if any, be subject to the requirements of
Section 2.11.1 (Release of Guarantors). The release of any
Subsidiary which is a Guarantor from its obligations under the
Guaranty Agreement pursuant to Section 2.11.1 (Release of
Guarantors) shall automatically cause such Subsidiary to be a Non-
Restricted Person.
2.11.4. Designation of Restricted Subsidiary.
The Borrower may by written notice delivered to
the Agent designate as a Restricted Subsidiary a Subsidiary
formerly designated a Non-Restricted Person or a newly formed or
acquired Subsidiary. Such designation is subject to (i)
compliance with Section 10.18 (Joinder of Guarantors); (ii) the
requirements of Section 7 (Covenants) and in particular Section
7.2.10 [Borrowing Base]; and (iii) the requirement that such
designation not cause an Event of Default or Potential Default.
Such designation shall be effective on the date specified by the
Borrower which shall not be earlier than five (5) Business Days
after the receipt by the Agent of such notice.
3. INTEREST RATES
3.1 Interest Rate Options.
The Borrower shall pay interest in respect of the
outstanding unpaid principal amount of the Loans as selected by it
from the Base Rate Option or LIBO-Rate Option set forth below
applicable to the Loans, it being understood that, subject to the
provisions of this Agreement, the Borrower may select different
Interest Rate Options and different Interest Periods to apply
simultaneously to the Loans comprising different Borrowing
Tranches and may convert to or renew one or more Interest Rate
Options with respect to all or any portion of the Loans comprising
any Borrowing Tranche, provided that there shall not be at any one
time outstanding more than ten (10) Borrowing Tranches in the
aggregate among all of the Loans, and provided further that only
the Base Rate Option shall apply to the Swing Loans. If at any
time the designated rate applicable to any Loan made by any Bank
exceeds such Bank's highest lawful rate, the rate of interest on
such Bank's Loan shall be limited to such Bank's highest lawful
rate.
3.1.1. Revolving Credit Interest Rate Options.
The Borrower shall have the right to select from
the following Interest Rate Options applicable to the Revolving
Credit Loans (subject to the provisions above regarding Swing
Loans):
(i) Revolving Credit Base Rate
Option: A fluctuating rate per annum (computed on the basis of a
year of 365 or 366 days, as the case may be, and actual days
elapsed) equal to the Base Rate plus the Applicable Margin, such
interest rate to change automatically from time to time effective
as of the effective date of each change in the Base Rate; or
(ii) Revolving Credit LIBO-Rate
Option: A rate per annum (computed on the basis of a year of 360
days and actual days elapsed) equal to the LIBO-Rate plus the
Applicable Margin.
3.1.2. Rate Quotations.
The Borrower may call the Agent on or before the
date on which a Loan Request is to be delivered to receive an
indication of the rates then in effect, but it is acknowledged
that such projection shall not be binding on the Agent or the
Banks nor affect the rate of interest which thereafter is actually
in effect when the election is made.
3.2 Interest Periods.
At any time when the Borrower shall select,
convert to or renew a LIBO-Rate Option, the Borrower shall notify
the Agent thereof at least three (3) Business Days prior to the
effective date of such LIBO-Rate Option by delivering a Loan
Request. The notice shall specify an Interest Period during which
such Interest Rate Option shall apply. Notwithstanding the
preceding sentence, in the case of the renewal of a LIBO-Rate
Option at the end of an Interest Period, the first day of the new
Interest Period shall be the last day of the preceding Interest
Period, without duplication in payment of interest for such day.
3.3 Interest After Default.
3.3.1. Default Rate.
To the extent permitted by Law, upon the
occurrence of an Event of Default under Section 8.1.1 (Payment
Under Loan Documents), Section 8.1.10 (Insolvency), Section 8.1.14
(Involuntary Proceedings), Section 8.1.15 (Voluntary Proceedings)
or the Obligations are accelerated under this Agreement and until
such time such Event of Default shall have been cured or waived,
each Obligation hereunder shall bear interest at a rate per annum
equal to the sum of the rate of interest applicable under the
Revolving Credit Base Rate Option plus an additional 3.0% per
annum from the time such Obligation becomes due and payable and
until it is paid in full (the "Default Rate").
3.3.2. Acknowledgment.
The Borrower acknowledges that the increase in
rate referred to in Section 3.3.1 (Default Rate) reflects, among
other things, the fact that such Loans or other amounts have
become a substantially greater risk given their default status and
that the Banks are entitled to additional compensation for such
risk; and all such interest shall be payable by Borrower upon
demand by Agent.
3.4 LIBO-Rate Unascertainable; Illegality; Increased
Costs; Deposits Not Available.
3.4.1. Unascertainable.
If on any date on which a LIBO-Rate would
otherwise be determined, the Agent shall have determined that:
(i) adequate and reasonable means
do not exist for ascertaining such LIBO-Rate, or
(ii) a contingency has occurred
which materially and adversely affects the London interbank
eurodollar market relating to the LIBO-Rate, the Agent shall have
the rights specified in Section 3.4.3 (Agent's and Bank's Rights).
3.4.2. Illegality; Increased Costs; Deposits Not
Available.
If at any time any Bank shall have determined
that:
(i) the making, maintenance or
funding of any Loan to which a LIBO-Rate Option applies has been
made impracticable or unlawful by compliance by such Bank in good
faith with any Law or any interpretation or application thereof by
any Official Body or with any request or directive of any such
Official Body (whether or not having the force of Law), or
(ii) such LIBO-Rate Option will not
adequately and fairly reflect the cost to such Bank of the
establishment or maintenance of any such Loan, or
(iii) after making all reasonable
efforts, deposits of the relevant amount in Dollars for the
relevant Interest Period for a Loan, or to banks generally, to
which a LIBO-Rate Option applies, respectively, are not available
to such Bank with respect to such Loan, or to banks generally, in
the interbank eurodollar market,
then the Agent shall have the rights specified in Section 3.4.3
(Agent's and Bank's Rights).
3.4.3. Agent's and Bank's Rights.
In the case of any event specified in Section
3.4.1 (Unascertainable) above, the Agent shall promptly so notify
the Banks and the Borrower thereof, and in the case of an event
specified in Section 3.4.2 (Illegality; Increased Costs; Deposits
Not Available) above, such Bank shall promptly so notify the Agent
and endorse a certificate to such notice as to the specific
circumstances of such notice, and the Agent shall promptly send
copies of such notice and certificate to the other Banks and the
Borrower. Upon such date as shall be specified in such notice
(which shall not be earlier than the date such notice is given),
the obligation of (A)the Banks, in the case of such notice given
by the Agent, or (B)such Bank, in the case of such notice given by
such Bank, to allow the Borrower to select, convert to or renew a
LIBO-Rate Option shall be suspended until the Agent shall have
later notified the Borrower, or such Bank shall have later
notified the Agent, of the Agent's or such Bank's, as the case may
be, determination that the circumstances giving rise to such
previous determination no longer exist. If at any time the Agent
makes a determination under Section 3.4.1 (Unascertainable) and
the Borrower has previously notified the Agent of its selection
of, conversion to or renewal of a LIBO-Rate Option and such
Interest Rate Option has not yet gone into effect, such
notification shall be deemed to provide for selection of,
conversion to or renewal of the Base Rate Option otherwise
available with respect to such Loans. If any Bank notifies the
Agent of a determination under Section 3.4.2 (Illegality;
Increased Costs; Deposits Not Available), the Borrower shall,
subject to the Borrower's indemnification Obligations under
Section 4.6.2 (Indemnity), as to any Loan of the Bank to which a
LIBO-Rate Option applies, on the date specified in such notice
either convert such Loan to the Base Rate Option otherwise
available with respect to such Loan or prepay such Loan in
accordance with Section 4.4 [Voluntary Prepayments]. Absent due
notice from the Borrower of conversion or prepayment, such Loan
shall automatically be converted to the Base Rate Option otherwise
available with respect to such Loan upon such specified date.
3.5 Selection of Interest Rate Options.
If the Borrower fails to select a new Interest Period
to apply to any Borrowing Tranche of Loans under the LIBO-Rate
Option at the expiration of an existing Interest Period applicable
to such Borrowing Tranche in accordance with the provisions of
Section 3.2 [Interest Periods], the Borrower shall be deemed to
have converted such Borrowing Tranche to the Revolving Credit Base
Rate Option, commencing upon the last day of the existing Interest
Period.
4. PAYMENTS
4.1 Payments.
All payments and prepayments to be made in respect of
principal, interest, Commitment Fees, Letter of Credit Fees,
Agent's Fee or other fees or amounts due from the Borrower
hereunder shall be payable prior to eleven o'clock (11:00) a.m.,
Eastern time, on the date when due without presentment, demand,
protest or notice of any kind, all of which are hereby expressly
waived by the Borrower, and without set-off, counterclaim or other
deduction of any nature, and an action therefor shall immediately
accrue. Such payments shall be made to the Agent at the Principal
Office for the account of PNC Bank with respect to the Swing Loans
and for the ratable accounts of the Banks with respect to the
Revolving Credit Loans in Dollars and in immediately available
funds, and the Agent shall promptly distribute such amounts to the
Banks in immediately available funds, provided that in the event
payments are received by eleven o'clock (11:00) a.m., Eastern
time, by the Agent with respect to the Loans and such payments are
not distributed to the Banks on the same day received by the
Agent, the Agent shall pay the Banks the Federal Funds Effective
Rate with respect to the amount of such payments for each day held
by the Agent and not distributed to the Banks. The Agent's and
each Bank's statement of account, ledger or other relevant record
shall, in the absence of manifest error, be conclusive as the
statement of the amount of principal of and interest on the Loans
and other amounts owing under this Agreement and shall be deemed
an "account stated."
4.2 Pro Rata Treatment of Banks.
Each borrowing shall be allocated to each Bank
according to its Ratable Share, and each selection of, conversion
to or renewal of any Interest Rate Option and each payment or
prepayment by the Borrower with respect to principal, interest,
Commitment Fees, Letter of Credit Fees, or other fees (except for
the Agent's Fee) or amounts due from the Borrower hereunder to the
Banks with respect to the Loans, shall (except as provided in
Section 3.4.3 (Agent's and Bank's Rights) in the case of an event
specified in Sections 3.4 (LIBO-Rate Unascertainable; Illegality,
Increased Costs, Deposits Not Available), 4.4.2 (Replacement of a
Bank) or 4.6 (Additional Compensation in Certain Circumstances))
be made in proportion to the applicable Loans outstanding from
each Bank and, if no such Loans are then outstanding, in
proportion to the Ratable Share of each Bank. Notwithstanding any
of the foregoing, each borrowing or payment or prepayment by the
Borrower of principal, interest, fees or other amounts from the
Borrower with respect to Swing Loans shall be made by or to PNC
Bank according to Section 2 (Revolving Credit and Swing Loan
Facilities).
4.3 Interest Payment Dates.
Interest on Loans to which the Base Rate Option
applies shall be due and payable in arrears on the first Business
Day of each calendar month after the date hereof and on the
Expiration Date or upon acceleration of the Loan. Interest on
Loans to which the LIBO-Rate Option applies shall be due and
payable on the last day of each Interest Period for those Loans
and, if such Interest Period is longer than three (3) Months, also
on the 90th day of such Interest Period. Interest on mandatory
prepayments of principal under Section 4.5 (Mandatory Payments)
shall be due on the date such mandatory prepayment is due.
Interest on the principal amount of each Loan or other monetary
Obligation shall be due and payable on demand after such principal
amount or other monetary Obligation becomes due and payable
(whether on the stated maturity date, upon acceleration or
otherwise).
4.4 Voluntary Prepayments.
4.4.1. Right to Prepay.
The Borrower shall have the right at its option
at any time and from time to time to prepay the Loans in whole or
part without premium or penalty (except as provided in Section
4.4.2 (Replacement of a Bank) below or in Section 4.6 (Additional
Compensation in Certain Circumstances)).
Whenever the Borrower desires to prepay any part of the Loans, it
shall provide a prepayment notice to the Agent no later than (A)
11:00 a.m., Eastern time, at least two (2) Business Days prior to
the date of prepayment of the Revolving Credit Loans to which the
LIBO-Rate Option applies, (B) 11:00 a.m., Eastern time, on the
date of prepayment of Revolving Credit Loans to which the Base
Rate Option applies or (C) 2:00 p.m., Eastern time, on the date of
prepayment of Swing Loans, setting forth the following
information:
(x) the date, which shall be a Business
Day, on which the proposed prepayment is to be made;
(y) a statement indicating the
application of the prepayment between the Swing Loans
and the Revolving Credit Loans; and
(z) the total principal amount of such
prepayment, which shall not be less than (i) $100,000
and in increments of $100,000 for any Swing Loans,
(ii) $500,000 and in increments of $100,000 for any
Revolving Credit Loan to which the Base Rate Option
applies or (iii) $2,500,000 and in increments of
$500,000 for any Revolving Credit Loan to which the
LIBO-Rate Option applies.
All prepayment notices shall be irrevocable.
The principal amount of the Loans for which a prepayment notice is
given, together with interest on such principal amount except with
respect to Loans to which the Base Rate Option applies, shall be
due and payable on the date specified in such prepayment notice as
the date on which the proposed prepayment is to be made. Except
as provided in Section 3.4.3 (Agent's and Bank's Rights), if the
Borrower prepays a Loan but fails to specify the applicable
Borrowing Tranche which the Borrower is prepaying, the prepayment
shall be applied first to Swing Loans, then to Loans to which the
Base Rate Option applies, and then to Loans to which the LIBO-Rate
Option applies. Any prepayment hereunder shall be subject to the
Borrower's Obligation to indemnify the Banks under Section 4.6.2
(Indemnity).
4.4.2. Replacement of a Bank.
In the event any Bank (i)gives notice under
Section 3.4 (LIBO-Rate Unascertainable; Illegality; Increased
Costs; Deposits Not Available) or Section 4.6.1 (Increased Costs
or Reduced Return Resulting from Taxes, Reserves, Capital Adequacy
Requirements, Expenses, Etc.), (ii)does not fund Revolving Credit
Loans because the making of such Loans would contravene any Law
applicable to such Bank, or (iii)becomes subject to the control of
an Official Body (other than normal and customary supervision),
then the Borrower shall have the right at its option, with the
consent of the Agent, which shall not be unreasonably withheld, to
prepay the Loans of such Bank in whole, together with all interest
accrued thereon, and terminate such Bank's Commitment within
ninety (90) days after (x)receipt of such Bank's notice under
Section 3.4 (LIBO-Rate Unascertainable; Illegality; Increased
Costs; Deposits Not Available) or 4.6.1 (Increased Costs or
Reduced Return Resulting from Taxes, Reserves, Capital Adequacy
Requirements, Expenses, Etc.), (y)the date such Bank has failed to
fund Revolving Credit Loans because the making of such Loans would
contravene Law applicable to such Bank, or (z)the date such Bank
became subject to the control of an Official Body, as applicable;
provided that the Borrower shall also pay to such Bank at the time
of such prepayment any amounts required under Section 4.6
(Additional Compensation in Certain Circumstances) and any accrued
interest due on such amount and any related fees; provided,
further, the remaining Banks shall have no obligation hereunder to
increase their Commitments. Notwithstanding the foregoing, the
Agent may only be replaced subject to the requirements of Section
9.14 (Successor Agent).
4.4.3. Change of Lending Office.
Each Bank agrees that upon the occurrence of any
event giving rise to increased costs or other special payments
under Section 3.4.2 (Illegality; Increased Costs; Deposits Not
Available) or 4.6.1 (Increased Costs or Reduced Return Resulting
from Taxes, Reserves, Capital Adequacy Requirements, Expenses,
Etc.) with respect to such Bank, it will if requested by the
Borrower, use reasonable efforts (subject to overall policy
considerations of such Bank) to designate another lending office
for any Loans or Letters of Credit affected by such event,
provided that such designation is made on such terms that such
Bank and its lending office suffer no economic, legal or
regulatory disadvantage, with the object of avoiding the
consequence of the event giving rise to the operation of such
Section. Nothing in this Section 4.4.3 (Change of Lending Office)
shall affect or postpone any of the Obligations of the Borrower or
any other Loan Party or the rights of the Agent or any Bank
provided in this Agreement.
4.5 Mandatory Payments.
The Borrower shall make mandatory payments of
principal (together with accrued interest thereon) to the Agent to
the extent by which Revolving Facility Usage exceeds at any time
the Commitments (as they may be reduced pursuant to Section 2.1.
(Voluntary Reduction of Commitment), Section 2.11.2 (Approval by
80% Banks) or otherwise) within three (3) Business Days after such
excess is calculated.
4.6 Additional Compensation in Certain Circumstances.
4.6.1. Increased Costs or Reduced Return
Resulting from Taxes, Reserves, Capital Adequacy
Requirements, Expenses, Etc.
If any Law, guideline or interpretation or any
change in any Law, guideline or interpretation or application
thereof by any Official Body charged with the interpretation or
administration thereof or compliance with any request or directive
(whether or not having the force of Law) of any central bank or
other Official Body:
(i) subjects any Bank to any tax
or changes the basis of taxation with respect to this Agreement,
the Notes, the Loans or payments by the Borrower of principal,
interest, Commitment Fees, or other amounts due from the Borrower
hereunder (except for taxes on the overall net income of such
Bank),
(ii) imposes, modifies or deems
applicable any reserve, special deposit or similar requirement
against credits or commitments to extend credit extended by, or
assets (funded or contingent) of, deposits with or for the account
of, or other acquisitions of funds by, any Bank, or
(iii) imposes, modifies or deems
applicable any capital adequacy or similar requirement (A)against
assets (funded or contingent) of, or letters of credit, other
credits or commitments to extend credit extended by, any Bank, or
(B)otherwise applicable to the obligations of any Bank under this
Agreement,
and the result of any of the foregoing is to increase the cost to,
reduce the income receivable by, or impose any expense upon any
Bank with respect to this Agreement, or the making, maintenance or
funding of any part of the Loans (or, in the case of any capital
adequacy or similar requirement, to have the effect of reducing
the rate of return on any Bank's capital, taking into
consideration such Bank's customary policies with respect to
capital adequacy) by an amount which such Bank in its sole
discretion deems to be material, such Bank shall from time to time
notify the Borrower and the Agent of the amount determined in good
faith (using any averaging and attribution methods employed in
good faith) by such Bank to be necessary to compensate such Bank
for such increase in cost, reduction of income, additional expense
or reduced rate of return. Such notice shall set forth in
reasonable detail the basis for such determination. Such amount
shall be due and payable by the Borrower to such Bank ten (10)
Business Days after such notice is given.
4.6.2. Indemnity.
In addition to the compensation required by
Section 4.6.1 (Increased Costs or Reduced Return Resulting from
Taxes, Reserves, Capital Adequacy Requirements, Expenses, Etc.),
the Borrower shall indemnify each Bank against all liabilities,
losses or expenses (including actual loss of margin, any loss or
expense incurred in liquidating or employing deposits from third
parties and any loss or expense incurred in connection with funds
acquired by a Bank to fund or maintain Loans subject to a LIBO-
Rate Option) which such Bank sustains or incurs as a consequence
of any:
(i) payment, prepayment,
conversion or renewal of any Loan to which a LIBO-Rate Option
applies on a day other than the last day of the corresponding
Interest Period (whether or not such payment or prepayment is
mandatory, voluntary or automatic and whether or not such payment
or prepayment is then due),
(ii) attempt by the Borrower to
revoke (expressly, by later inconsistent notices or otherwise) in
whole or part any Loan Requests under Section 2.4 (Revolving
Credit Loan Requests; Swing Loan Requests) or Section 3.2
(Interest Periods) or notice relating to prepayments under Section
4.4 (Voluntary Prepayments), or
(iii) default by the Borrower in the
performance or observance of any covenant or condition contained
in this Agreement or any other Loan Document, including any
failure of the Borrower to pay when due (by acceleration or
otherwise) any principal, interest, Commitment Fee, Letter of
Credit Fees, or any other amount due hereunder.
If any Bank sustains or incurs any such loss or
expense, it shall from time to time notify the Borrower of the
amount determined in good faith by such Bank (which determination
may include such assumptions, allocations of costs and expenses
and averaging or attribution methods as such Bank shall deem
reasonable) to be necessary to indemnify such Bank for such loss
or expense. Such notice shall set forth in reasonable detail the
basis for such determination. Such amount shall be due and
payable by the Borrower to such Bank ten (10) Business Days after
such notice is given.
4.7 Notes.
The Revolving Credit Loans made by each Bank shall, if
requested by such Bank, be evidenced by a Revolving Credit Note.
4.8 Settlement Date Procedures.
The Borrower may borrow, repay and reborrow Swing
Loans and PNC Bank may make Swing Loans as provided in Section
2.1.2 (Swing Loan Commitment) hereof. On any Business Day, the
Agent may notify each Bank of its Ratable Share of the total of
the Revolving Credit Loans and the Swing Loans (each a "Required
Share"). Prior to 2:30 p.m., Eastern time, on the date following
the date of such notice, each Bank shall pay to the Agent the
amount equal to the difference between its Required Share and its
Revolving Credit Loans, and the Agent shall pay to each Bank its
Ratable Share of all payments made by the Borrower to the Agent
with respect to the Revolving Credit Loans. The Agent shall also
effect settlement in accordance with the foregoing sentence on the
proposed Borrowing Dates for Revolving Credit Loans and on any
date when payments of principal of any Loan is required to be paid
by any Loan Party hereunder and may at its option, and in
consultation with the Borrower, effect settlement on any other
Business Day. These settlement procedures are established solely
as a matter of administrative convenience, and nothing contained
in this Section 4.8 shall relieve the Banks of their obligations
to fund Revolving Credit Loans on dates other than a Settlement
Date pursuant to Section 2.8 (Borrowings to Repay Swing Loans).
The Agent may at any time at its option for any reason whatsoever
require each Bank to pay immediately to the Agent such Bank's
Ratable Share of the outstanding Revolving Credit Loans and each
Bank may at any time require the Agent to pay immediately to such
Bank its Ratable Share of all payments made by the Borrower to the
Agent with respect to the Revolving Credit Loans.
5. REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties.
The Borrower and Hovnanian, jointly and severally,
represent and warrant to the Agent and to each of the Banks as
follows:
5.1.1. Organization and Qualification.
Each of the Borrower, KHL and Hovnanian is a
corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization and each other
Loan Party is a corporation, partnership or limited liability
company duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization except to the
extent the failure to do so could not, individually or in the
aggregate, reasonably be expected to cause a Material Adverse
Change. Each Loan Party has the lawful power to own or lease its
properties and to engage in the business it presently conducts or
proposes to conduct. Each Loan Party is duly licensed or
qualified and in good standing in each jurisdiction where the
failure to obtain them could, individually or in the aggregate,
reasonably be expected to cause a Material Adverse Change.
5.1.2. Subsidiaries.
As of the Closing Date, Schedule 5.1.2 states
the name of each of Hovnanian's Subsidiaries and its jurisdiction
of incorporation. Hovnanian and each Loan Party has good and
marketable title to all of the Subsidiary Shares, Partnership
Interests and LLC Interests it purports to own, free and clear in
each case of any Lien. All Subsidiary Shares, Partnership
Interests and LLC Interests have been validly issued, and all
Subsidiary Shares are fully paid and nonassessable. All capital
contributions and other consideration required to be made or paid
in connection with the issuance of the Partnership Interests and
LLC Interests have been made or paid, as the case may be.
Schedule 5.1.2 also sets forth, as to each of Hovnanian's
Subsidiaries, the percentage ownership of each owner of: the
issued and outstanding shares (referred to herein as the
"Subsidiary Shares") if such Subsidiary is a corporation, its
outstanding partnership interests (the "Partnership Interests") if
such Subsidiary is a partnership and its outstanding limited
liability company interests (the "LLC Interests") if such
Subsidiary is a limited liability company. Schedule 5.1.2 also
footnote the controlling interests of each Subsidiary if such
controlling interest is held by a Person other than Hovnanian or a
Subsidiary of Hovnanian.
5.1.3. Power and Authority.
Each Loan Party has full power to enter into,
execute, deliver and carry out this Agreement and the other Loan
Documents to which it is a party, to incur the Indebtedness
contemplated by the Loan Documents and to perform its Obligations
under the Loan Documents to which it is a party, and all such
actions have been duly authorized by all necessary proceedings on
its part.
5.1.4. Validity and Binding Effect.
This Agreement has been duly and validly
executed and delivered by each Loan Party, and each other Loan
Document which any Loan Party is required to execute and deliver
on or after the date hereof will have been duly executed and
delivered by such Loan Party on the required date of delivery of
such Loan Document. This Agreement and each other Loan Document
constitutes, or will constitute, legal, valid and binding
obligations of each Loan Party which is or will be a party thereto
on and after its date of delivery thereof, enforceable against
such Loan Party in accordance with its terms, except to the extent
that enforceability of any of such Loan Document may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforceability of creditors' rights
generally or limiting the right of specific performance.
5.1.5. No Conflict.
Neither the execution and delivery of this
Agreement or the other Loan Documents by any Loan Party nor the
consummation of the transactions herein or therein contemplated or
compliance with the terms and provisions hereof or thereof by any
of them will conflict with, constitute a default under or result
in any breach of (i)the terms and conditions of the certificate of
incorporation, bylaws, certificate of limited partnership,
partnership agreement, certificate of formation, limited liability
company agreement or other organizational documents of any Loan
Party or (ii)any Law or any material agreement or instrument or
order, writ, judgment, injunction or decree to which any Loan
Party is a party or by which it is bound or to which it is
subject, or result in the creation or enforcement of any Lien,
charge or encumbrance whatsoever upon any property (now or
hereafter acquired) of any Loan Party (other than Liens granted
under the Loan Documents) which could, individually or in the
aggregate, reasonably be expected to cause a Material Adverse
Change.
5.1.6. Litigation.
There are no actions, suits, proceedings or
investigations pending or, to the knowledge of any Loan Party,
threatened against such Loan Party at law or equity before any
Official Body which individually or in the aggregate may result in
any Material Adverse Change. None of the Loan Parties is in
violation of any order, writ, injunction or any decree of any
Official Body which may result in any Material Adverse Change.
5.1.7. Title to Properties.
Each Loan Party has good and marketable title to
or a valid leasehold interest in all properties, assets and other
rights which it purports to own or lease or which are reflected as
owned or leased on its books and records, free and clear of all
Liens and encumbrances, except Permitted Liens, and subject to the
terms and conditions of the applicable leases. All leases of
property are in full force and effect without the necessity for
any consent which has not previously been obtained upon
consummation of the transactions contemplated hereby.
5.1.8. Financial Statements.
(i) Historical Statements. The
Borrower has delivered to the Agent copies of Hovnanian's audited
consolidated year-end financial statements for and as of the end
of the fiscal year ended October 31, 2001 (the "Annual
Statements"). In addition, the Borrower has delivered to the
Agent copies of Hovnanian's unaudited consolidated interim
financial statements for the fiscal year to date and as of the end
of the fiscal quarter ended January 31, 2002 (the "Interim
Statements") (the Annual and Interim Statements being collectively
referred to as the "Historical Statements"). The Historical
Statements were compiled from the books and records maintained by
Hovnanian's management, are correct and complete and fairly
represent the consolidated financial condition of Hovnanian and
its Subsidiaries as of their dates and the results of operations
for the fiscal periods then ended and have been prepared in
accordance with GAAP consistently applied, subject (in the case of
the Interim Statements) to normal year-end audit adjustments.
(ii) Financial Projections. The
Borrower has delivered to the Agent and the Banks financial
projections of Hovnanian and its Subsidiaries for the period
ending October 31, 2005 derived from various assumptions of
Hovnanian's management (the "Financial Projections"). The
Financial Projections represent a reasonable range of possible
results in light of the history of the business, present and
foreseeable conditions and the intentions of Hovnanian's
management (it being understood that actual results may vary
materially from the Financial Projections). The Financial
Projections accurately reflect the liabilities of Hovnanian and
its Subsidiaries upon consummation of the transactions
contemplated hereby as of the Closing Date.
(iii) Accuracy of Financial
Statements. As of the Closing Date, neither Hovnanian nor any
Subsidiary of Hovnanian has any liabilities, contingent or
otherwise, or forward or long-term commitments that are required
by GAAP to be, but are not, disclosed in the Historical Statements
or in the notes thereto, and except as disclosed therein there are
no unrealized or anticipated losses from any commitments of
Hovnanian or any Subsidiary of Hovnanian which may cause a
Material Adverse Change. Since October 31, 2001, no Material
Adverse Change has occurred.
5.1.9. Use of Proceeds; Margin Stock.
5.1.9.1 General.
The Loan Parties intend to use the proceeds of
the Loans in accordance with Sections 2.7 (Use of Proceeds) and
7.1.10 (Use of Proceeds).
5.1.9.2 Margin Stock.
None of the Loan Parties engages or intends to
engage principally, or as one of its important activities, in the
business of extending credit for the purpose, immediately,
incidentally or ultimately, of purchasing or carrying margin stock
(within the meaning of Regulation U). No part of the proceeds of
any Loan has been or will be used, immediately, incidentally or
ultimately, to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying any
margin stock or to refund Indebtedness originally incurred for
such purpose, or for any purpose which entails a violation of or
which is inconsistent with the provisions of the regulations of
the Board of Governors of the Federal Reserve System. None of the
Loan Parties holds or intends to hold margin stock in such amounts
that more than 25% of the reasonable value of the assets of such
Loan Party are or will be represented by margin stock.
5.1.10. Full Disclosure.
Neither this Agreement nor any other Loan
Document, nor any certificate, statement, agreement or other
documents furnished to the Agent or any Bank in connection
herewith or therewith, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make
the statements contained herein and therein, in light of the
circumstances under which they were made, not misleading. There
is no fact known to any Loan Party which materially adversely
affects the business, property, assets, financial condition,
results of operations or business prospects of the Loan Parties
taken as a whole which has not been set forth in this Agreement or
in the certificates, statements, agreements or other documents
furnished in writing to the Agent and the Banks prior to or at the
date hereof in connection with the transactions contemplated
hereby.
5.1.11. Taxes.
All federal, state, local and other tax returns
required to have been filed with respect to the Loan Parties have
been filed, and payment or adequate provision has been made for
the payment of all taxes, fees, assessments and other governmental
charges which have or may become due pursuant to said returns or
to assessments received, except to the extent that such taxes,
fees, assessments and other charges are not material or are being
contested in good faith by appropriate proceedings diligently
conducted and for which such reserves or other appropriate
provisions, if any, as shall be required by GAAP shall have been
made. There are no agreements or waivers extending the statutory
period of limitations applicable to any federal income tax return
of any Loan Party for any period.
5.1.12. Consents and Approvals.
No consent, approval, exemption, order or
authorization of, or a registration or filing with, any Official
Body or any other Person is required by any Law or any agreement
in connection with the execution, delivery and carrying out of
this Agreement and the other Loan Documents by any Loan Party,
except as listed on Schedule 5.1.12, all of which shall have been
obtained or made on or prior to the Closing Date except as
otherwise indicated on Schedule 5.1.12.
5.1.13. No Event of Default; Compliance with
Instruments.
No event has occurred and is continuing and no
condition exists or will exist after giving effect to the
borrowings or other extensions of credit to be made on the Closing
Date under or pursuant to the Loan Documents which constitutes an
Event of Default or Potential Default. None of the Loan Parties
is in violation of (i)any term of its certificate of
incorporation, bylaws, certificate of limited partnership,
partnership agreement, certificate of formation, limited liability
company agreement or other organizational documents or (ii)any
material agreement or instrument to which it is a party or by
which it or any of its properties may be subject or bound where
such violation would constitute a Material Adverse Change.
5.1.14. Patents, Trademarks, Copyrights, Licenses,
Etc.
Each Loan Party owns or possesses all the
material patents, trademarks, service marks, trade names,
copyrights, licenses, registrations, franchises, permits and
rights necessary to own and operate its properties and to carry on
its business as presently conducted and planned to be conducted by
such Loan Party, without known possible, alleged or actual
material conflict with the rights of others.
5.1.15. Insurance.
No notice has been given or claim made and no
grounds exist to cancel or avoid any of insurance policies of the
type described in Section 7.1.3 (Maintenance of Insurance) or to
reduce the coverage provided thereby.
5.1.16. Compliance with Laws.
The Loan Parties are in compliance in all
material respects with all applicable Laws (other than
Environmental Laws which are specifically addressed in Section
5.1.21 (Environmental Matters)) in all jurisdictions in which any
Loan Party is presently or will be doing business except where the
failure to do so would not constitute a Material Adverse Change.
5.1.17. Burdensome Restrictions.
None of the Loan Parties is bound by any
contractual obligation, or subject to any restriction in any
organization document, or any requirement of Law which could
reasonably be expected to constitute a Material Adverse Change.
5.1.18. Investment Companies; Regulated Entities.
None of the Loan Parties is an "investment
company" registered or required to be registered under the
Investment Company Act of 1940 or under the "control" of an
"investment company" as such terms are defined in the Investment
Company Act of 1940 and shall not become such an "investment
company" or under such "control." None of the Loan Parties is
subject to any other Federal or state statute or regulation
limiting its ability to incur Indebtedness for borrowed money
(other than Regulation X of the Board of Governors of the Federal
Reserve System).
5.1.19. Plans and Benefit Arrangements.
(i) Except where the liability
that could reasonably be expected to result therefrom would not,
individually or in the aggregate, result in a Material Adverse
Change, (a) the Loan Parties and each other member of the ERISA
Group are in compliance in all material respects with any
applicable provisions of ERISA with respect to all Plans and, as
to the Borrower, Benefit Arrangements; (b) there has been no
Prohibited Transaction with respect to any such Benefit
Arrangement or any Plan which could result in any material
liability of the Loan Parties or any other member of the ERISA
Group; (c) the Loan Parties and all other members of the ERISA
Group have made when due any and all payments required to be made
under any agreement relating to a Multiemployer Plan or any Law
pertaining thereto; (d) with respect to each Plan the Loan Parties
and each other member of the ERISA Group (i)have fulfilled in all
respects their obligations under the minimum funding standards of
ERISA, (ii)have not incurred any liability to the PBGC, except for
premiums in the ordinary course which are not overdue and
(iii)have not had asserted against them any penalty for failure to
fulfill the minimum funding requirements of Section 302 of ERISA;
and (e) all Plans and Benefit Arrangements have been administered
in material compliance with their terms and applicable Law.
(ii) Except where the liability
that could reasonably be expected to result therefrom would not,
individually or in the aggregate, result in a Material Adverse
Change, no event requiring notice to the PBGC under Section
302(f)(4)(A) of ERISA has occurred or is reasonably expected to
occur with respect to any Plan, and no amendment with respect to
which security is required under Section 307 of ERISA has been
made or is reasonably expected to be made to any Plan.
(iii) Except where the liability
that could reasonably be expected to result therefrom would not,
individually or in the aggregate, result in a Material Adverse
Change, neither the Loan Parties nor any other member of the ERISA
Group has incurred or reasonably expects to incur any material
withdrawal liability under Section 4201 of ERISA to any
Multiemployer Plan or under Section 4063 or 4064 of ERISA to any
Plan;. Neither the Loan Parties nor any other member of the ERISA
Group has been notified by any Multiemployer Plan or Plan that
such Multiemployer Plan or Plan has been terminated within the
meaning of Sections 4041 A or 4064, respectively, of ERISA and,
to the best knowledge of the Borrower, no Multiemployer Plan is
reasonably expected to be reorganized or terminated, within the
meaning of Title IV of ERISA.
(iv) To the best knowledge of
Borrower, neither the Borrower nor any other member of the ERISA
Group has, within the preceding five years, entered into a
transaction to which either Section 4069 or Section 4212(c) of
ERISA could apply so as to subject Borrower or other member of the
ERISA Group to a liability, except where the liability that could
reasonably be expected to result therefrom would not result in a
Material Adverse Change.
5.1.20. Employment Matters.
Each of the Loan Parties is in compliance with
the Labor Contracts and all applicable Federal, state and local
labor and employment Laws including those related to equal
employment opportunity and affirmative action, labor relations,
minimum wage, overtime, child labor, medical insurance
continuation, worker adjustment and relocation notices,
immigration controls and worker and unemployment compensation,
where such failure to comply would constitute a Material Adverse
Change. There are no outstanding grievances, arbitration awards
or appeals therefrom arising out of the Labor Contracts or current
or threatened strikes, picketing, handbilling or other work
stoppages or slowdowns at facilities of any of the Loan Parties
which in any case would constitute a Material Adverse Change.
5.1.21. Environmental Matters.
None of the Loan Parties has received any
Environmental Complaint, including but not limited to those from
any Official Body or private Person alleging that such Loan Party
or any prior owner, operator or occupant of any of the Property is
a potentially responsible party under the Comprehensive
Environmental Response, Cleanup and Liability Act, 42 U.S.C. 9601,
et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
6901, et seq. or any analogous state or local Law, which could
reasonably be expected to constitute a Material Adverse Change and
none of the Loan Parties has any reason to believe that such an
Environmental Complaint might be received. There are no pending
or, to any Loan Party's knowledge, threatened Environmental
Complaints relating to any Loan Party or, to any Loan Party's
knowledge, any prior owner, operator or occupant of any of the
Properties pertaining to, or arising out of, any Contamination or
violations of Environmental Laws or Required Environmental Permits
which could reasonably be expected to constitute a Material
Adverse Change.
5.1.22. Senior Debt Status.
The Obligations of each Loan Party under this
Agreement, the Guaranty Agreement and each of the other Loan
Documents to which it is a party do rank and will rank at least
pari passu in priority of payment with all other Indebtedness of
such Loan Party except Indebtedness of such Loan Party to the
extent secured by Permitted Liens. There is no Lien upon or with
respect to any of the properties or income of any Loan Party which
secures Indebtedness or other obligations of any Person except for
Permitted Liens.
5.2 Continuation of Representations.
The Borrower and Hovnanian make the representations
and warranties in this Section 5 on the date hereof and on the
Closing Date and each date thereafter on which a Loan is made or a
Letter of Credit is issued as provided in and subject to Sections
6.1 (First Loans and Letters of Credit) and 6.2 (Each Additional
Loan or Letter of Credit).
6. CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT
The obligation of each Bank to make Loans and of the
Agent and the Letter of Credit Banks to issue Letters of Credit
hereunder is subject to the performance by each of the Loan
Parties of its Obligations to be performed hereunder at or prior
to the making of any such Loans or issuance of such Letters of
Credit and to the satisfaction of the following further
conditions:
6.1 First Loans and Letters of Credit.
On the Closing Date:
6.1.1. Officer's Certificate.
The representations and warranties of each of
the Loan Parties contained in Section 5 (Representation and
Warranties) and in each of the other Loan Documents shall be true
and correct on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as
of such date (except representations and warranties which relate
solely to an earlier date or time, which representations and
warranties shall be true and correct on and as of the specific
dates or times referred to therein), and each of the Loan Parties
shall have performed and complied with all covenants and
conditions hereof and thereof, no Event of Default or Potential
Default shall have occurred and be continuing or shall exist; and
there shall be delivered to the Agent for the benefit of each Bank
a certificate of each of the Loan Parties, dated the Closing Date
and signed by the Chief Executive Officer, President or Chief
Financial Officer of each of the Loan Parties, to each such
effect.
6.1.2. Incumbency Certificate.
There shall be delivered to the Agent for the
benefit of each Bank a certificate dated the Closing Date and
signed by the Secretary or an Assistant Secretary or the managing
member (or equivalent), as the case may be, of each of the Loan
Parties, certifying as appropriate as to:
(i) all action taken by each Loan
Party in connection with this Agreement and the other Loan
Documents;
(ii) the names of the officer or
officers authorized to sign this Agreement and the other Loan
Documents and the true signatures of such officer or officers and
specifying the Authorized Officers permitted to act on behalf of
each Loan Party for purposes of this Agreement and the true
signatures of such officers, on which the Agent and each Bank may
conclusively rely; and
(iii) as to Hovnanian and the
Borrower only, copies of its organizational documents, including
its certificate of incorporation, bylaws, certificate of limited
partnership, partnership agreement, certificate of formation, and
limited liability company agreement as in effect on the Closing
Date certified by the appropriate state official where such
documents are filed in a state office together with certificates
from the appropriate state officials as to the continued existence
and good standing of such Loan Party in each state where
organized, all as acceptable to the Agent.
6.1.3. Delivery of Loan Documents .
The Guaranty Agreement, the KHL Agreement , the
Stock Pledge and the other Loan Documents shall have been duly
executed and delivered by Hovnanian to the Agent on or before the
date hereof for the benefit of the Banks, together with
certificates evidencing 100% of the stock of KHL and stock powers
therefor executed in blank.
6.1.4. Opinion of Counsel.
There shall be delivered to the Agent for the
benefit of each Bank a written opinion of Peter Reinhart, Esquire,
in-house counsel for the Loan Parties, dated the Closing Date and
in form and substance satisfactory to the Agent and its counsel.
6.1.5. Legal Details.
All legal details and proceedings in connection
with the transactions contemplated by this Agreement and the other
Loan Documents shall be in form and substance satisfactory to the
Agent and counsel for the Agent, and the Agent shall have received
all such other counterpart originals or certified or other copies
of such documents and proceedings in connection with such
transactions, in form and substance satisfactory to the Agent and
said counsel, as the Agent or said counsel may reasonably request.
6.1.6. Payment of Fees.
The Borrower shall have paid or caused to be
paid to the Agent for itself and for the account of the Banks to
the extent not previously paid, all commitment and other fees
accrued through the Closing Date and the costs and expenses for
which the Agent and the Banks are entitled to be reimbursed.
6.1.7. Consents.
All material consents required to effectuate the
transactions contemplated hereby as set forth on Schedule 5.1.12
shall have been obtained.
6.1.8. Officer's Certificate Regarding MACs.
Since October 31, 2001, no Material Adverse
Change shall have occurred, and there shall have been delivered to
the Agent for the benefit of each Bank a certificate dated the
Closing Date and signed by the Chief Executive Officer, President
or Chief Financial Officer of each Loan Party to each such effect.
6.1.9. No Actions or Proceedings.
No action, proceeding, investigation, regulation
or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to
enjoin, restrain or prohibit, or to obtain damages in respect of,
this Agreement, the other Loan Documents or the consummation of
the transactions contemplated hereby or thereby.
6.2 Each Additional Loan or Letter of Credit.
At the time of making any Loans or issuing any Letters
of Credit other than Loans made or Letters of Credit issued on the
Closing Date and after giving effect to the proposed extensions of
credit: the representations and warranties of the Loan Parties
contained in Section 5 (Representations and Warranties) and in the
other Loan Documents shall be true and correct in all material
respects on and as of the date of such additional Loan or Letter
of Credit with the same effect as though such representations and
warranties had been made on and as of such date (except
representations and warranties which expressly relate solely to an
earlier date or time, which representations and warranties shall
be true and correct in all material respects on and as of the
specific dates or times referred to therein); no Event of Default
or Potential Default shall have occurred and be continuing or
shall exist; and the Borrower shall have delivered to the Agent a
duly executed and completed Loan Request or application for a
Letter of Credit as the case may be.
7. COVENANTS
7.1 Affirmative Covenants.
The Borrower and Hovnanian, jointly and severally,
covenant and agree that until payment in full of the Loans,
Reimbursement Obligations and Letter of Credit Borrowings, and
interest thereon, expiration or termination of all Letters of
Credit, satisfaction of all of the Loan Parties' other Obligations
under the Loan Documents and termination of the Commitments, they
shall, and shall cause the other Loan Parties to, comply at all
times with the following affirmative covenants:
7.1.1. Preservation of Existence, Etc.
Each Loan Party shall maintain its legal
existence as a corporation, limited partnership or limited
liability company and its license or qualification and good
standing in each jurisdiction in which its ownership or lease of
property or the nature of its business makes such license or
qualification necessary, except as otherwise expressly permitted
in Section 7.2.4 (Liquidations, Mergers, Consolidations,
Acquisitions) and except where failure to do so could not
reasonably be expected to constitute a Material Adverse Change
with respect to the Borrower or Hovnanian or with respect to the
Loan Parties taken as a whole.
7.1.2. Payment of Liabilities, Including Taxes,
Etc.
Each Loan Party shall duly pay and discharge all
material liabilities to which it is subject or which are asserted
against it, promptly as and when the same shall become due and
payable, including all material taxes, assessments and
governmental charges upon it or any of its properties, assets,
income or profits, prior to the date on which penalties attach
thereto, except to the extent that such liabilities, including
taxes, assessments or charges, are being contested in good faith
and by appropriate and lawful proceedings diligently conducted and
for which such reserve or other appropriate provisions, if any, as
shall be required by GAAP shall have been made, or to the extent
that failure to discharge any such liabilities would not result in
any additional liability which would adversely affect to a
material extent the financial condition of the Borrower or
Hovnanian or of the Loan Parties taken as a whole, provided that
the Loan Parties will pay all such liabilities forthwith upon the
commencement of proceedings to foreclose any Lien which may have
attached as security therefor.
7.1.3. Maintenance of Insurance.
Each Loan Party shall insure its properties and
assets against loss or damage by fire and such other insurable
hazards as such assets are commonly insured (including fire,
extended coverage, property damage, workers' compensation, public
liability, flood and business interruption insurance) and against
other risks (including errors and omissions) in such amounts as
similar properties and assets are insured by prudent companies in
similar circumstances carrying on similar businesses, and with
reputable and financially sound insurers, including self-insurance
to the extent customary.
7.1.4. Maintenance of Properties and Leases.
Each Loan Party shall maintain in good repair,
working order and condition (ordinary wear and tear excepted) in
accordance with the general practice of other businesses of
similar character and size, all of those properties necessary to
its business, and from time to time, such Loan Party will make or
cause to be made all appropriate repairs, renewals or replacements
thereof.
7.1.5. Maintenance of Patents, Trademarks, Etc.
Each Loan Party shall maintain in full force and
effect all patents, trademarks, service marks, trade names,
copyrights, licenses, franchises, permits and other authorizations
necessary for the ownership and operation of its properties and
business if the failure so to maintain the same would constitute a
Material Adverse Change.
7.1.6. Visitation Rights.
Each Loan Party shall permit any of the officers
or authorized employees or representatives of the Agent or (at the
expense of such Bank) any of the Banks to visit and inspect any of
its properties and to examine and make excerpts from its books and
records and discuss its business affairs, finances and accounts
with its officers, all in such detail and at such times and as
often as any of the Banks may reasonably request, provided that
each Bank shall provide the Borrower and the Agent with reasonable
notice prior to any visit or inspection. In the event any Bank
desires to conduct an audit of any Loan Party, such Bank shall
make a reasonable effort to conduct such audit contemporaneously
with any audit to be performed by the Agent.
7.1.7. Keeping of Records and Books of Account.
The Loan Parties shall maintain and keep proper
books of record and account which enable Hovnanian and its
Subsidiaries to issue financial statements in accordance with GAAP
and as otherwise required by applicable Laws of any Official Body
having jurisdiction over Hovnanian or any Subsidiary of Hovnanian,
and in which full, true and correct entries shall be made in all
material respects of all its dealings and business and financial
affairs.
7.1.8. Plans and Benefit Arrangements.
The Loan Parties shall, and shall cause each
member of the ERISA Group that is a Subsidiary to, and shall use
its reasonable best efforts to cause each other member of the
ERISA Group to, comply with ERISA, the Internal Revenue Code and
other applicable Laws applicable to Plans and, as to the Borrower,
Benefit Arrangements, except where such failure, alone or in
conjunction with any other failure, would not result in a Material
Adverse Change. Without limiting the generality of the foregoing,
the Loan Parties shall cause all of their Plans and shall use
reasonable best efforts to cause all Plans maintained by any
member of the ERISA Group, to be funded in accordance with the
minimum funding requirements of ERISA and shall make, and cause
each Subsidiary to, and shall use its reasonable best efforts to
cause each member of the ERISA Group to make, in a timely manner,
all contributions due to Plans and Multiemployer Plans except
where such failure, alone or in conjunction with any other
failure, would not result in a Material Adverse Change.
7.1.9. Compliance with Laws.
Each Loan Party shall comply with all applicable
Laws, including all Environmental Laws, in all respects, provided
that it shall not be deemed to be a violation of this Section
7.1.9 if any failure to comply with any Law would not result in
fines, penalties, remediation costs, other similar liabilities or
injunctive relief which in the aggregate would constitute a
Material Adverse Change.
7.1.10. Use of Proceeds.
The Loan Parties will use the Letters of Credit
and the proceeds of the Loans only for general corporate purposes
and for working capital for the Borrower, Hovnanian and the
Restricted Subsidiaries.
7.1.11. Required Dividends of KHL.
The Loan Parties shall cause KHL to pay to
Hovnanian, at least annually, all net income of KHL.
7.2 Negative Covenants.
The Borrower and Hovnanian, jointly and severally,
covenant and agree that until payment in full of the Loans,
Reimbursement Obligations and Letter of Credit Borrowings and
interest thereon, expiration or termination of all Letters of
Credit, satisfaction of all of the Loan Parties' other Obligations
hereunder and termination of the Commitments, they shall, and
shall cause the other Loan Parties to, comply with the following
negative covenants:
7.2.1. Indebtedness.
7.2.1.1 Each of the Loan Parties
shall not at any time create, incur, assume or suffer to exist any
secured indebtedness, except Indebtedness secured by Permitted
Liens.
7.2.1.2 KHL shall not incur
Indebtedness of any kind or suffer to exist any Lien on its
property or provide any Guaranty in respect of the Indebtedness or
other obligations of any Person, or become obligated to do so, and
no Loan Party shall allow any of the foregoing to occur.
7.2.1.3 The Loan Parties shall
not permit any Mortgage Subsidiary to incur or suffer to exist any
Indebtedness if, after giving effect thereto, the ratio of (x)
debt to (y) equity plus the amount of any loans or Guaranties
provided by Hovnanian of such Mortgage Subsidiary exceeds 12.0-to-
1.0.
7.2.2. Liens.
Each of the Loan Parties shall not at any time
create, incur, assume or suffer to exist any Lien on any of its
property or assets, tangible or intangible, now owned or hereafter
acquired, or agree or become liable to do so, except Permitted
Liens.
7.2.3. Loans and Investments.
Each of the Loan Parties shall not, at any time,
make or suffer to remain outstanding any Investment except
Permitted Investments and, to the extent permitted by Section
7.2.6 (Restricted Payments; Restricted Investments), Restricted
Investments.
7.2.4. Liquidations, Mergers, Consolidations,
Acquisitions.
Each of the Loan Parties shall not dissolve,
liquidate or wind-up its affairs, or become a party to any merger
or consolidation, or acquire by purchase, lease or otherwise all
or substantially all of the assets or capital stock of any other
Person, provided that
(1) any Loan Party other than the Borrower or
Hovnanian may consolidate or merge into another Loan Party (or any
Person that concurrently becomes a Loan Party) which is wholly-
owned by one or more of the other Loan Parties, and
(2) any Loan Party may consolidate or merge
with a Person who is not a Loan Party if the common stockholders
of Hovnanian prior to such transaction maintain at least 50% of
the voting control (direct or indirect) of the combined entity
after consummation of the transaction, and
(3) any Loan Party may acquire, whether by
purchase or by merger, (A) all or substantially all of the
ownership interests of another Person or (B) all or substantially
all of assets of another Person or of a business or division of
another Person (each, a "Permitted Acquisition"), provided that
each of the following requirements is met:
(i) if the Loan Parties are
acquiring the ownership interests in such Person, and such Person
is, or concurrently will be, designated a Restricted Subsidiary,
such Person shall execute a Guarantor Joinder and join this
Agreement as a Guarantor pursuant to Section 10.18 (Joinder of
Guarantors) and the Borrower shall have otherwise complied with
Section 2.11.4 (Designation of Restricted Subsidiary) on or before
the date of such Permitted Acquisition;
(ii) if such Person's shares are
registered as "public" shares under applicable law, the board of
directors or other equivalent governing body of such Person shall
have approved such Permitted Acquisition;
(iii) the business acquired, or the
business conducted by the Person whose ownership interests are
being acquired, as applicable, shall comply with Section 7.2.8
(Continuation of or Change in Business); and
(iv) no Potential Default or Event
of Default shall exist immediately prior to and after giving
effect to such Permitted Acquisition.
(4) the Loan Parties may make, whether by
purchase or merger or otherwise, Permitted Investments and, to the
extent permitted by Section 7.2.6 [Restricted Investments and
Restricted Payments], Restricted Investments and Restricted
Payments;
(5) the Loan Parties may liquidate or wind-up
Restricted Subsidiaries of Hovnanian which are not individually
material to Hovnanian, the Borrower or to the Loan Parties taken
as a whole; provided that the Loan Parties shall satisfy the
requirements of Section 2.11 [Designation of Subsidiaries and
Release of Guarantors], to the extent applicable;
(6) the Loan Parties may effectuate any sale
permitted by Section 7.2.5 as a merger or consolidation; and
(7) for the avoidance of doubt, any Loan Party
may effect or allow the liquidation or winding-up of any Non-
Restricted Person.
7.2.5. Dispositions of Assets or Subsidiaries;
Sale and Leaseback.
7.2.5.1 Each of the Loan Parties
shall not sell, convey, assign, lease, abandon or otherwise
transfer or dispose of, voluntarily or involuntarily, any of its
properties or assets, tangible or intangible (including sale,
assignment, discount or other disposition of accounts, contract
rights, chattel paper, equipment or general intangibles with or
without recourse or of capital stock, shares of beneficial
interest, partnership interests or limited liability company
interests of a Subsidiary of such Loan Party, but excluding
Investments in Non-Restricted Persons), except:
(i) any sale, transfer or lease of
assets in the ordinary course of business which are no longer
necessary or required in the conduct of such Loan Party's
business;
(ii) any sale, transfer or lease of
assets to a Loan Party;
(iii) any sale, transfer or lease of
assets in the ordinary course of business which are replaced by
substitute assets acquired not in violation of this Agreement; or
(iv) any sale and leaseback
permitted by Section 7.2.5.2.
7.2.5.2 The Loan Parties shall
not, directly or indirectly, sell, transfer or otherwise dispose
of real and/or personal property with a view directly or
indirectly to the leasing back of the same or of any similar
property except for (i) sales and leasebacks of sample model homes
and their contents; (ii) sales and leasebacks of any office
buildings and their contents, or (iii) sales and leasebacks in the
normal course of business.
7.2.6. Restricted Payments; Restricted Investments.
7.2.6.1 The Loan Parties shall not pay
or make Restricted Payments or Restricted Investments from and
after January 31, 2001 which exceed in the aggregate the sum of:
(i) $45,000,000;
(ii) 50% of net income of Hovnanian
(calculated and consolidated in accordance with GAAP) for all
fiscal quarters commencing on February 1, 2001 and thereafter; and
(iii) 50% of the proceeds (less
costs of issuance) of any issuance or sale of equity of Hovnanian
to any Person other than a Loan Party during all fiscal quarters
commencing on February 1, 2001 and thereafter.
7.2.6.2 Each of the Loan Parties shall
not enter into or carry out any transaction with any Affiliate
(including purchasing property or services from or selling
property or services to any Affiliate of any Loan Party or other
Person but excluding transactions between Loan Parties) unless
such transaction is not otherwise prohibited by this Agreement, is
entered into in the ordinary course of business upon fair and
reasonable arm's-length terms and is in accordance with all
applicable Law. Without limiting the foregoing, the aggregate
amount of all Indebtedness for owed or borrowed money owing to any
Loan Party by any officer or director, or relative thereof, shall
not exceed $4,000,000 in the aggregate owing at any one time and
all such Indebtedness shall bear interest at a rate not less than
the coupon rate on six month U.S. Treasury bills as of the date
such Indebtedness is incurred.
7.2.6.3 The Loan Parties shall not pay
or make (i) any Restricted Payment in respect of Dividends and
Capital Stock Retirement during the period commencing on February
1, 2001 which, in the aggregate, exceed an amount equal to (x)
$25,000,000 plus (y) 50% of Hovnanian's consolidated net income
(calculated and consolidated in accordance with GAAP) generated
after January 31, 2002 or (ii) any Restricted Payment in respect
of the Subordinated Debt in excess of $25,000,000 in the aggregate
after January 31, 2001.
7.2.7. Subsidiaries, Partnerships and Joint
Ventures.
Each of the Loan Parties shall not own or create
directly or indirectly any Subsidiaries other than (i) any
Subsidiary which has executed the Guaranty Agreement as Guarantor
on the Closing Date, (ii) KHL, (iii) any Subsidiary formed or
acquired after the Closing Date which joins the Guaranty Agreement
as a Guarantor pursuant to Section 10.18 (Joinder of Guarantors)
or (iv) any Non-Restricted Person.
7.2.8. Continuation of or Change in Business.
Each of the Loan Parties shall not engage in any
business other than the homebuilding business or Existing Related
Businesses.
7.2.9. Plans and Benefit Arrangements.
Each of the Loan Parties shall not engage in a
Prohibited Transaction with any Plan, Benefit Arrangement or
Multiemployer Plan which, alone or in conjunction with any other
circumstances or set of circumstances, results in liability under
ERISA, except where the liability that could reasonably be
expected to result therefrom would not result in a Material
Adverse Change.
7.2.10. Borrowing Base.
The Loan Parties shall not permit Senior
Homebuilding Indebtedness minus the face amount of outstanding
letters of credit (whether "Letters of Credit" or not) in respect
of which a Loan Party is obligated and which is issued to guaranty
or assure the installation of site improvements on (or appurtenant
to) land owned by a Loan Party to exceed at any time the Borrowing
Base. Pursuant thereto, the Borrower shall make (or cause to be
made), on the Business Day following the date on which any such
excess is calculated, payments of principal of Senior Homebuilding
Indebtedness sufficient to reduce to zero ($0) on such date any
such excess.
7.2.11. Minimum ATNW.
The Loan Parties shall not permit Adjusted
Tangible Net Worth to be less than the sum of: (i)$272,710,000 and
(ii) 50% of Hovnanian's consolidated net income (calculated and
consolidated in accordance with GAAP) for each fiscal quarter
commencing on February 1, 2002 and thereafter in which net income
was earned (as opposed to a net loss) and (iii) 50% of the
proceeds (less costs of issuance) of any issuance or sale of
equity of Hovnanian to any Person other than a Loan Party during
each fiscal quarter commencing on February 1, 2001 and thereafter.
7.2.12. Leverage Ratio.
(a) The Loan Parties shall not permit
Actual Leverage to exceed 2.20-to-1.0 in any two (2) consecutive
fiscal quarters in which the Fixed Charge Coverage Ratio is less
than 1.5-to-1.0; and
(b) The Loan Parties shall not permit
Actual Leverage to exceed the Total Debt Multiplier.
7.2.13. Inventory and Land Purchase Limits.
7.2.13.1 The Loan Parties shall
not permit:
(i) The Dollar value of Unimproved
Land to exceed twenty percent (20%) of the sum of Adjusted
Tangible Net Worth and the principal amount of the Subordinated
Debt, as calculated as of the end of each fiscal quarter;
(ii) The Dollar value of Finished
Lots and Land under Development plus Unimproved Land to exceed the
sum of Adjusted Tangible Net Worth and the principal amount of the
Subordinated Debt, as calculated as of the end of each fiscal
quarter; or
(iii) The number of Unsold Dwelling
Units existing as of the end of any fiscal quarter to exceed 25%
of the number of Dwelling Units conveyed by any Person who is a
Loan Party on the date of determination or any Person that was
acquired and merged or consolidated with and into a Person who is
a Loan Party on the date of determination to third party
purchasers within the previous twelve (12) months.
7.2.13.2 If the Fixed Charge
Coverage Ratio is less than 1.0-to-1.0 and the Cash Flow Coverage
Ratio is less than 1.1-to-1.0 for two (2) consecutive fiscal
quarters (referred to herein as the "prior two quarters"), then,
during the fiscal quarter following the prior two quarters, the
Loan Parties shall not purchase land (whether Unimproved Land or
otherwise) in amounts which exceed in such quarter the lesser of:
(x) the total land portion of "cost of
sales" as reflected in the financial statements delivered pursuant
to Section 7.3 [Reporting Requirements] for sales by the Loan
Parties to third party purchasers in arm's length transactions
during the immediately preceding fiscal quarter; and
(y) fifty percent (50%) of the total
land portion of "cost of sales" as reflected in the financial
statements delivered pursuant to Section 7.3 (Reporting
Requirements) for the average quarterly sales by the Loan Parties
to third party purchasers in arm's length transactions during the
preceding four (4) fiscal quarters.
7.2.14. Fiscal Year.
The Loan Parties shall not change their fiscal
year from the twelve-month period ending October 31.
7.2.15. Changes in Subordinated Debt Documents.
The Loan Parties shall not amend or modify any
provisions of the documents relating to the Subordinated Debt
without providing at least ten (10) calendar days' prior written
notice to the Agent and the Banks, and, if the same would
adversely affect the interests of the Agent and the Banks,
obtaining the prior written consent of the Required Banks. No
Loan Party shall directly or indirectly make any payment on the
Subordinated Debt which would violate the provisions of any
applicable subordination agreement or provision. Neither the
Senior Notes nor the Subordinated Debt shall become secured.
7.3 Reporting Requirements.
The Borrower and Hovnanian, jointly and severally,
covenant and agree that until payment in full of the Loans,
Reimbursement Obligations and Letter of Credit Borrowings and
interest thereon, expiration or termination of all Letters of
Credit, satisfaction of all of the Loan Parties' other Obligations
hereunder and under the other Loan Documents and termination of
the Commitments, they shall, and shall cause the other Loan
Parties to, furnish or cause to be furnished to the Agent and each
of the Banks:
7.3.1. Quarterly Financial Statements.
As soon as available and in any event within
fifty-five (55) calendar days after the end of each of the first
three fiscal quarters in each fiscal year of Hovnanian, financial
statements of Hovnanian, consisting of a consolidated and
consolidating balance sheet as of the end of such fiscal quarter
and related consolidated and consolidating statements of income,
stockholders' equity and cash flows for the fiscal quarter then
ended and the fiscal year through that date, all in reasonable
detail and certified (subject to normal year-end audit
adjustments) by the Chief Executive Officer, President, Treasurer
or Chief Financial Officer or principal accounting officer of
Hovnanian as having been prepared in accordance with GAAP,
consistently applied, and setting forth in comparative form the
respective financial statements for the corresponding date and
period in the previous fiscal year. The Loan Parties will be
deemed to have complied with the delivery requirements of this
Section 7.3.1 if within fifty-five (55) days after the end of
their fiscal quarter, the Borrower delivers to the Agent and each
of the Banks a copy of Hovnanian's Form 10-Q as filed with the SEC
and the financial statements contained therein meets the
requirements described in this Section 7.3.1.
7.3.2. Annual Financial Statements.
As soon as available and in any event within
ninety (90) days after the end of each fiscal year of Hovnanian,
financial statements of Hovnanian consisting of a consolidated
balance sheet as of the end of such fiscal year, and related
consolidated statements of income, stockholders' equity and cash
flows for the fiscal year then ended, all in reasonable detail and
setting forth in comparative form the financial statements as of
the end of and for the preceding fiscal year, and certified by
independent certified public accountants of nationally recognized
standing satisfactory to the Agent. The certificate or report of
accountants shall be free of qualifications (other than any
consistency qualification that may result from a change in the
method used to prepare the financial statements as to which such
accountants concur) and shall not indicate the occurrence or
existence of any event, condition or contingency which would
materially impair the prospect of payment or performance of any
covenant, agreement or duty of any Loan Party under any of the
Loan Documents or cause or constitute an Event of Default. The
Loan Parties will be deemed to have complied with the delivery
requirements of this Section 7.3.2 if within ninety (90) days
after the end of Hovnanian's fiscal year, the Borrower delivers to
the Agent and each of the Banks a copy of Hovnanian's Annual
Report and Form 10-K as filed with the SEC and the financial
statements and separately delivers the above-referenced
certification of public accountants.
7.3.3. Certificates of the Borrower.
7.3.3.1 Compliance Certificate.
Concurrently with the financial statements of Hovnanian furnished
to the Agent and to the Banks pursuant to Sections 7.3.1
(Quarterly Financial Statements) and 7.3.2 (Annual Financial
Statements):
(a) a certificate of the Borrower signed
by the Chief Executive Officer, President, Treasurer or Chief
Financial Officer or principal accounting officer of the Borrower,
in the form of Exhibit 7.3.3.1, to the effect that, except as
described pursuant to Section 7.3.3.2 (Borrowing Base
Certificate), (i)the representations and warranties of the
Borrower contained in Section 5.1 (Representations and Warranties)
and in the other Loan Documents are true and correct in all
material respects on and as of the date of such certificate with
the same effect as though such representations and warranties had
been made on and as of such date (except representations and
warranties which expressly relate solely to an earlier date or
time), (ii)no Event of Default or Potential Default exists and is
continuing on the date of such certificate and (iii)containing
calculations in sufficient detail to demonstrate compliance as of
the date of such financial statements with all financial covenants
contained in Section 7.2 (Negative Covenants).
(b) summary consolidated and
consolidating financial statements for each of (i) the Mortgage
Subsidiaries as a group; (ii) the Non-Restricted Persons as a
group and (iii) the Borrower, Hovnanian and the Restricted
Subsidiaries as a group;
(c) summary financial statements for
each Joint Venture in which any Loan Party has a Subsidiary
Investment greater than an amount equal to 2% of Adjusted Tangible
Net Worth as of the last day of the previous fiscal quarter of
Hovnanian; and
(d) to the extent not previously
disclosed in writing to the Agent and the Banks, a report of any
changes to Schedule 1.1(C) including changes arising under Section
2.11 (Designation of Subsidiaries and Release of Guarantors).
7.3.3.2 Borrowing Base Certificate.
As soon as available, but not later than fifty-
five (55) days after the end of each month, a Borrowing Base
Certificate as of the end of such month, appropriately completed,
executed and delivered by an Authorized Officer, together with a
certificate of the Borrower signed by the Chief Executive Officer,
President, Treasurer or Chief Financial Officer or principal
accounting officer of the Borrower, in the form of Exhibit
7.3.3.2, to the effect that, except as described pursuant to
Section 7.3.4 (Notice of Default), no Event of Default or
Potential Default exists and is continuing on the date of such
Borrowing Base Certificate.
7.3.4. Notice of Default.
Promptly after any officer of any Loan Party has
learned of the occurrence of an Event of Default or Potential
Default, a certificate signed by the Chief Executive Officer,
President or Chief Financial Officer or principal accounting
officer of such Loan Party setting forth the details of such Event
of Default or Potential Default and the action which such Loan
Party proposes to take with respect thereto.
7.3.5. Notice of Litigation.
Promptly after the commencement thereof, notice
of all actions, suits, proceedings or investigations before or by
any Official Body or any other Person against any Loan Party that
involve a claim or series of claims in excess of $1,000,000 or
which could reasonably be expected to constitute a Material
Adverse Change.
7.3.6. Notice of Change in Debt Rating.
Within two (2) Business Days after Standard &
Poor's or Moody's announces a change in Hovnanian's Debt Rating,
notice of such change. Hovnanian will deliver together with such
notice a copy of any written notification which Hovnanian received
from the applicable rating agency regarding such change of Debt
Rating.
7.3.7. Budgets, Forecasts, Other Reports and
Information.
Promptly upon their becoming available to any
Loan Party:
(i) any reports, notices or proxy
statements generally distributed by Hovnanian to its stockholders,
(ii) regular or periodic reports,
including Forms 10-K, 10-Q and 8-K, registration statements and
prospectuses, filed by Hovnanian with the SEC, and
(iii) such other reports and
information as any of the Banks may from time to time reasonably
request. The Loan Parties shall also notify the Banks promptly of
the enactment or adoption of any Law which could reasonably be
expected to constitute a Material Adverse Change.
7.3.8. Notices Regarding Plans and Benefit
Arrangements.
7.3.8.1 Certain Events.
Promptly after learning of the occurrence
thereof, notice (including the nature of the event and, when
known, any action taken or threatened by the Internal Revenue
Service or the PBGC with respect thereto) of any of the following
events, or services of such events, if, individually or in the
aggregate, any liabilities or penalties resulting from such
event(s) could reasonably be expected to result in a Material
Adverse Change:
(i) any Reportable Event with
respect to any Plan,
(ii) any Prohibited Transaction
which could subject any Loan Party or any other member of the
ERISA Group to a civil penalty assessed pursuant to Section 502(i)
of ERISA or a tax imposed by Section 4975 of the Internal Revenue
Code in connection with any Plan, any Benefit Arrangement or any
trust created thereunder,
(iii) any withdrawal from a
Multiemployer Plan by the Borrower or any other member of the
ERISA Group under Title IV of ERISA or assertion by a
Multiemployer Plan that such a withdrawal has occurred
(iv) any cessation of operations
(by any Loan Party or any other member of the ERISA Group) at a
facility in the circumstances described in Section 4062(e) of
ERISA,
(v) withdrawal by any Loan Party
or any other member of the ERISA Group from a Plan in the
circumstances described in Section 4063 of ERISA or the
termination of such Plan in the circumstances described in Section
4064 of ERISA,
(vi) a failure to make any required
contribution to a Plan or the creation of any Lien in favor of the
PBGC or a Plan,
(vii) the adoption of an amendment
to a Plan requiring the provision of security to such Plan
pursuant to Section 307 of ERISA, or
(viii) the distress termination
of a Plan, under Title IV of ERISA, which has insufficient assets
to pay all liabilities.
7.3.8.2 Notices of Involuntary
Termination and Annual Reports.
Promptly after receipt thereof, copies of (a)all
notices received by any Loan Party or any other member of the
ERISA Group of the PBGC's intent to terminate any Plan
administered or maintained by the Borrower or any member of the
ERISA Group, or to have a trustee appointed to administer any such
Plan; and (b)at the request of the Agent or any Bank each annual
report (IRS Form 5500 series) and all accompanying schedules, the
most recent actuarial reports, the most recent financial
information concerning the financial status of each Plan
administered or maintained by any Loan Party or any other member
of the ERISA Group, and schedules showing the amounts contributed
to each such Plan by or on behalf of the Borrower or any other
member of the ERISA Group in which any of their personnel
participate or from which such personnel may derive a benefit, and
each Schedule B (Actuarial Information) to the annual report filed
by any Loan Party or any other member of the ERISA Group with the
Internal Revenue Service with respect to each such Plan.
7.3.8.3 Notice of Voluntary
Termination.
Where a termination of any Plan would result in a
Material Adverse Change, promptly upon the filing thereof, copies
of any Form 5310, or any successor or equivalent form to Form
5310, filed with the PBGC in connection with the termination of
any Plan.
..
8. DEFAULT
8.1 Events of Default.
An Event of Default shall mean the occurrence or
existence of any one or more of the following events or conditions
(whatever the reason therefor and whether voluntary, involuntary
or effected by operation of Law):
8.1.1. Payments Under Loan Documents.
The Borrower shall fail to pay (i)any principal
of any Loan (including scheduled installments, mandatory
prepayments or the payment due at maturity), Reimbursement
Obligation or Letter of Credit Borrowing when such principal is
due hereunder or (ii)any interest on any Loan, Reimbursement
Obligation or Letter of Credit Borrowing or any other amount owing
hereunder or under the other Loan Documents within three (3)
Business Days after such interest or other amount becomes due in
accordance with the terms hereof or thereof;
8.1.2. Breach of Warranty.
Any representation or warranty made at any time
by any of the Loan Parties herein or by any of the Loan Parties in
any other Loan Document, or in any certificate, other instrument
or statement furnished pursuant to the provisions hereof or
thereof, shall prove to have been false or misleading in any
material respect as of the time it was made or furnished;
8.1.3. Breach of Certain Negative Covenants.
Any of the Loan Parties shall default in the
observance or performance of any covenant contained in Sections
7.2.10 (Borrower Base), 7.2.11 (Minimum ATNW), 7.2.12 (Leverage
Ratio) or 7.2.13 (Inventory and Land Purchase Limits);
8.1.4. Breach of Other Covenants.
Any of the Loan Parties shall default in the
observance or performance of any other covenant, condition or
provision hereof or of any other Loan Document and such default
shall continue unremedied for a period of thirty (30) Business
Days after notice to the Borrower from the Agent;
8.1.5. Defaults in Other Agreements or
Indebtedness.
A default or event of default shall occur at any
time under the terms of any other agreement involving borrowed
money or the extension of credit or any other Indebtedness under
which any Loan Party may be obligated as a borrower or guarantor
in excess of $1,000,000 in the aggregate, and such breach, default
or event of default consists of the failure to pay (beyond any
period of grace permitted with respect thereto, whether waived or
not) any Indebtedness when due (whether at stated maturity, by
acceleration or otherwise) or if such breach or default permits or
causes the acceleration of any Indebtedness (whether or not such
right shall have been waived) or the termination of any commitment
to lend;
8.1.6. Final Judgments or Orders.
Any final judgments or orders for the payment of
money in excess of $1,000,000 in the aggregate shall be entered
against any Loan Party by a court having jurisdiction, which
judgment is not discharged, vacated, bonded or stayed pending
appeal within a period of thirty (30) days from the date of entry;
8.1.7. Loan Document Unenforceable.
Any of the Loan Documents shall cease to be
legal, valid and binding agreements enforceable against the party
executing the same or such party's successors and assigns (as
permitted under the Loan Documents) in accordance with the
respective terms thereof or shall in any way be terminated (except
in accordance with its terms or as permitted under the Loan
Documents) or become or be declared ineffective or inoperative or
shall in any way be challenged or contested or cease to give or
provide the respective Liens, security interests, rights, titles,
interests, remedies, powers or privileges intended to be created
thereby;
8.1.8. Uninsured Losses; Proceedings Against
Assets.
Any of the Loan Parties' assets are attached,
seized, levied upon or subjected to a writ or distress warrant; or
such come within the possession of any receiver, trustee,
custodian or assignee for the benefit of creditors and the same is
not cured within thirty (30) days thereafter and any of the
foregoing could reasonably be expected to constitute a Material
Adverse Change;
8.1.9. Notice of Lien or Assessment.
A notice of Lien or assessment in excess of
$1,000,000 which is not a Permitted Lien is filed of record with
respect to all or any part of any of the Loan Parties' assets by
the United States, or any department, agency or instrumentality
thereof, or by any state, county, municipal or other governmental
agency, including the PBGC, or any taxes or debts owing at any
time or times hereafter to any one of these becomes payable and
the same is not paid within thirty (30) days after the same
becomes payable;
8.1.10. Insolvency.
Any of (i) Hovnanian, (ii) the Borrower or (iii)
Restricted Subsidiaries owning as of the date of any event
described in this Section 8.1.10 three percent (3%) or more of the
Dollar value of all of the assets of all of the Subsidiaries of
Hovnanian taken as a whole ceases to be solvent or admits in
writing its inability to pay its debts as they mature;
8.1.11. Events Relating to Plans and Benefit
Arrangements.
Any of the following occurs: (i)any Reportable
Event with respect to a Plan, which the Agent reasonably
determines in good faith constitutes grounds for the termination
of any Plan by the PBGC or the appointment of a trustee to
administer or liquidate any Plan, shall have occurred and be
continuing; (ii)proceedings shall have been instituted or other
action taken to terminate any Plan, or a termination notice shall
have been filed with respect to any Plan; (iii)a trustee shall be
appointed to administer or liquidate any Plan; (iv)the PBGC shall
give notice of its intent to institute proceedings to terminate
any Plan or Plans or to appoint a trustee to administer or
liquidate any Plan; and, in the case of the occurrence of (i),
(ii), (iii) or (iv) above, the Agent reasonably determines in good
faith that the amount of any Loan Party's liability is likely to
exceed 10% of its Consolidated Tangible Net Worth; (v)any
"accumulated funding deficiency" (as defined in Section 302 of
ERISA) shall exist with respect to any Plan, or any Lien in favor
of the PBGC or a Plan shall arise on the assets of the Borrower or
any other member of the ERISA Group, (vi)any Loan Party or any
other member of the ERISA Group shall make any amendment to a Plan
with respect to which security is required under Section 307 of
ERISA; (vii)any Loan Party or any other member of the ERISA Group
shall incur any liability in connection with a withdrawal from a
Multiemployer Plan; (viii)any Loan Party or any other member of
the ERISA Group shall withdraw under Section 4063 of ERISA (or
shall be deemed under Section 4062(e) of ERISA to withdraw) from a
Plan; or (ix)any applicable Law is adopted, changed or interpreted
by any Official Body with respect to or otherwise affecting one or
more Plans, Multiemployer Plans or Benefit Arrangements and, with
respect to any of the events specified in (v), (vi), (vii), (viii)
or (ix), the Agent reasonably determines in good faith that any
such occurrence, together with all other such events, would be
reasonably likely to result in a Material Adverse Change;
8.1.12. Cessation of Business.
Any Loan Party ceases to conduct its business as
contemplated, except as expressly permitted under Section 7.2.4
(Liquidations, Mergers, Consolidations, Acquisitions) or Section
7.2.5 (Dispositions of Assets or Subsidiaries; Sale and
Leaseback), or any Loan Party is enjoined, restrained or in any
way prevented by court order from conducting all or any material
part of its business and such injunction, restraint or other
preventive order is not dismissed within thirty (30) days after
the entry thereof and any of the foregoing could reasonably be
expected to constitute a Material Adverse Change;
8.1.13. Change of Control.
(i) Any person or group of persons
(within the meaning of Sections 13(d) or 14(a) of the Securities
Exchange Act of 1934, as amended) shall have acquired beneficial
ownership of (within the meaning of Rule 13d-3 promulgated by the
SEC under said Act) 40% or more of the voting capital stock of
Hovnanian; or (ii)within a period of twelve (12) consecutive
calendar months, individuals who were directors of the Borrower on
the first day of such period, or who were nominated by a majority
of such directors, shall cease to constitute a majority of the
board of directors of the Borrower;
8.1.14. Involuntary Proceedings.
A proceeding shall have been instituted in a
court having jurisdiction seeking a decree or order for relief in
respect of any of (i) Hovnanian, (ii) the Borrower or (iii)
Restricted Subsidiaries owning as of the date of any event
described in this Section 8.1.14 three percent (3%) or more of the
Dollar value of all of the assets of all of the Subsidiaries of
Hovnanian taken as a whole in an involuntary case under any
applicable bankruptcy, insolvency, reorganization or other similar
law now or hereafter in effect, or for the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator,
conservator (or similar official) of any Loan Party for any
substantial part of its property, or for the winding-up or
liquidation of its affairs, and such proceeding shall remain
undismissed or unstayed and in effect for a period of sixty (60)
consecutive days or such court shall enter a decree or order
granting any of the relief sought in such proceeding; or
8.1.15. Voluntary Proceedings.
Any of (i) Hovnanian, (ii) the Borrower or (iii)
Restricted Subsidiaries owning as of the date of any event
described in this Section 8.1.15 three percent (3%) or more of the
Dollar value of all of the assets of all of the Subsidiaries of
Hovnanian taken as a whole shall commence a voluntary case under
any applicable bankruptcy, insolvency, reorganization or other
similar law now or hereafter in effect, shall consent to the entry
of an order for relief in an involuntary case under any such law,
or shall consent to the appointment or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator,
conservator (or other similar official) of itself or for any
substantial part of its property or shall make a general
assignment for the benefit of creditors, or shall fail generally
to pay its debts as they become due, or shall take any action in
furtherance of any of the foregoing.
8.2 Consequences of Event of Default.
8.2.1. Events of Default Other Than Bankruptcy,
Insolvency or Reorganization Proceedings.
If an Event of Default specified under Sections
8.1.1 (Payments Under Loan Documents) through 8.1.13 (Change of
Control) shall occur and be continuing, the Banks and the Agent
shall be under no further obligation to make Loans or issue
Letters of Credit, as the case may be, and the Agent may, and upon
the request of the Required Banks, shall (i)by written notice to
the Borrower, declare the unpaid principal amount of the Loan then
outstanding and all interest accrued thereon, any unpaid fees and
all other Indebtedness of the Borrower to the Banks hereunder and
thereunder to be forthwith due and payable, and the same shall
thereupon become and be immediately due and payable to the Agent
for the benefit of each Bank without presentment, demand, protest
or any other notice of any kind, all of which are hereby expressly
waived, and (ii)require the Borrower to, and the Borrower shall
thereupon, deposit in an interest-bearing account with the Agent,
as cash collateral for its Obligations under the Loan Documents,
an amount equal to the maximum amount currently or at any time
thereafter available to be drawn on all outstanding Letters of
Credit, and the Borrower hereby pledges to the Agent and the
Banks, and grants to the Agent and the Banks a security interest
in, all such cash as security for such Obligations. Upon the
curing of all existing Events of Default, the Agent shall return
such cash collateral to the Borrower; and
8.2.2. Bankruptcy, Insolvency or Reorganization
Proceedings.
If an Event of Default specified under Section
8.1.14 (Involuntary Proceedings) or 8.1.15 (Voluntary Proceedings)
shall occur, the Banks shall be under no further obligations to
make Loans or issue Letters of Credit hereunder and the unpaid
principal amount of the Loans then outstanding and all interest
accrued thereon, any unpaid fees and all other Indebtedness of the
Borrower to the Banks hereunder and thereunder shall be
immediately due and payable, without presentment, demand, protest
or notice of any kind, all of which are hereby expressly waived;
and
8.2.3. Set-off.
If an Event of Default shall occur and be
continuing, any Bank to whom any Obligation is owed by any Loan
Party hereunder or under any other Loan Document or any
participant of such Bank which has agreed in writing to be bound
by the provisions of Section 9.13 (Equalization of Banks) and any
branch, Subsidiary or Affiliate of such Bank or participant
anywhere in the world shall have the right, in addition to all
other rights and remedies available to it, without notice to such
Loan Party, to set-off against and apply to the then unpaid
balance of all past-due Loans and all other past-due Obligations
of the Borrower and the other Loan Parties hereunder or under any
other Loan Document any debt owing to, and any other funds held in
any manner for the account of, the Borrower or such other Loan
Party by such Bank or participant or by such branch, Subsidiary or
Affiliate, including all funds in all deposit accounts (whether
time or demand, general or special, provisionally credited or
finally credited, or otherwise) now or hereafter maintained by the
Borrower or such other Loan Party for its own account (but not
including funds held in custodian or trust accounts) with such
Bank or participant or such branch, Subsidiary or Affiliate; and
8.2.4. Suits, Actions, Proceedings.
If an Event of Default shall occur and be
continuing, and whether or not the Agent shall have accelerated
the maturity of Loans pursuant to any of the foregoing provisions
of this Section 8.2 (Consequences of Event of Default), the Agent
or any Bank, if owed any amount with respect to the Loans, may
proceed to protect and enforce its rights by suit in equity,
action at law and/or other appropriate proceeding, whether for the
specific performance of any covenant or agreement contained in
this Agreement or the other Loan Documents, including as permitted
by applicable Law the obtaining of the ex parte appointment of a
receiver, and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof
or any other legal or equitable right of the Agent or such Bank;
and
8.2.5. Application of Proceeds.
From and after the date on which the Agent has
taken any action pursuant to this Section 8.2 (Consequences of
Event of Default) and until all Obligations of the Loan Parties
have been paid in full, any and all proceeds received by the Agent
from the exercise of any remedy by the Agent, shall be applied as
follows:
(i) first, to reimburse the Agent
and the Banks for out-of-pocket costs, expenses and disbursements,
including reasonable attorneys' and paralegals' fees and legal
expenses, incurred by the Agent or the Banks in connection with
collection of any Obligations of any of the Loan Parties under any
of the Loan Documents;
(ii) second, to the repayment of
all Indebtedness then due and unpaid of the Loan Parties to the
Banks incurred under this Agreement or any of the other Loan
Documents, whether of principal, interest, fees, expenses or
otherwise, in such manner as the Agent may determine in its
discretion; and
(iii) the balance, if any, as
required by Law.
8.2.6. Other Rights and Remedies.
In addition to all of the rights and remedies
contained in this Agreement or in any of the other Loan Documents,
the Agent shall have all of the rights and remedies under
applicable Law, all of which rights and remedies shall be
cumulative and non-exclusive, to the extent permitted by Law. The
Agent may, and upon the request of the Required Banks shall,
exercise all post-default rights granted to the Agent and the
Banks under the Loan Documents or applicable Law.
9. THE AGENT
9.1 Appointment.
Each Bank hereby irrevocably designates, appoints and
authorizes PNC Bank to act as Agent for such Bank under this
Agreement and to execute and deliver or accept on behalf of each
of the Banks the other Loan Documents. Each Bank hereby
irrevocably authorizes the Agent to take such action on its behalf
under the provisions of this Agreement and the other Loan
Documents and any other instruments and agreements referred to
herein, and to exercise such powers and to perform such duties
hereunder as are specifically delegated to or required of the
Agent by the terms hereof, together with such powers as are
reasonably incidental thereto. PNC Bank agrees to act as the
Agent on behalf of the Banks to the extent provided in this
Agreement.
9.2 Delegation of Duties.
The Agent may perform any of its duties hereunder by
or through agents or employees (provided such delegation does not
constitute a relinquishment of its duties as Agent) and, subject
to Sections 9.5 (Reimbursement and Indemnification of Agent by the
Borrower) and 9.6 (Exculpatory Provisions; Limitation of
Liability), shall be entitled to engage and pay for the advice or
services of any attorneys, accountants or other experts concerning
all matters pertaining to its duties hereunder and to rely upon
any advice so obtained.
9.3 Nature of Duties; Independent Credit Investigation.
The Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and no implied
covenants, functions, responsibilities, duties, obligations, or
liabilities shall be read into this Agreement or otherwise exist.
The duties of the Agent shall be mechanical and administrative in
nature; the Agent shall not have by reason of this Agreement a
fiduciary or trust relationship in respect of any Bank; and
nothing in this Agreement, expressed or implied, is intended to or
shall be so construed as to impose upon the Agent any obligations
in respect of this Agreement except as expressly set forth herein.
Without limiting the generality of the foregoing, the use of the
term "agent" in this Agreement with reference to the Agent is not
intended to connote any fiduciary or other implied (or express)
obligations arising under agency doctrine of any applicable Law.
Instead, such term is used merely as a matter of market custom,
and is intended to create or reflect only an administrative
relationship between independent contracting parties. Each Bank
expressly acknowledges (i)that the Agent has not made any
representations or warranties to it and that no act by the Agent
hereafter taken, including any review of the affairs of any of the
Loan Parties, shall be deemed to constitute any representation or
warranty by the Agent to any Bank; (ii)that it has made and will
continue to make, without reliance upon the Agent, its own
independent investigation of the financial condition and affairs
and its own appraisal of the creditworthiness of each of the Loan
Parties in connection with this Agreement and the making and
continuance of the Loans hereunder; and (iii)except as expressly
provided herein, that the Agent shall have no duty or
responsibility, either initially or on a continuing basis, to
provide any Bank with any credit or other information with respect
thereto, whether coming into its possession before the making of
any Loan or at any time or times thereafter.
9.4 Actions in Discretion of Agent; Instructions From the
Banks.
The Agent agrees, upon the written request of the
Required Banks, to take or refrain from taking any action of the
type specified as being within the Agent's rights, powers or
discretion herein, provided that the Agent shall not be required
to take any action which exposes the Agent to personal liability
or which is contrary to this Agreement or any other Loan Document
or applicable Law. In the absence of a request by the Required
Banks, the Agent shall have authority, in its sole discretion, to
take or not to take any such action, unless this Agreement
specifically requires the consent of the Required Banks or all of
the Banks. Any action taken or failure to act pursuant to such
instructions or discretion shall be binding on the Banks, subject
to Section 9.6 (Exculpatory Provisions; Limitation of Liability).
Subject to the provisions of Section 9.6 (Exculpatory Provisions;
Limitation of Liability), no Bank shall have any right of action
whatsoever against the Agent as a result of the Agent acting or
refraining from acting hereunder in accordance with the
instructions of the Required Banks, or in the absence of such
instructions, in the absolute discretion of the Agent.
9.5 Reimbursement and Indemnification of Agent by the
Borrower.
The Borrower unconditionally agrees to pay or
reimburse the Agent and hold the Agent harmless against
(a)liability for the payment of all reasonable out-of-pocket
costs, expenses and disbursements, including fees and expenses of
counsel (including the allocated costs of staff counsel), incurred
by the Agent (i)in connection with the development, negotiation,
preparation, printing, execution, administration, syndication,
interpretation and performance of this Agreement and the other
Loan Documents, (ii)relating to any requested amendments, waivers
or consents pursuant to the provisions hereof, (iii)in connection
with the enforcement of this Agreement or any other Loan Document
or collection of amounts due hereunder or thereunder or the proof
and allowability of any claim arising under this Agreement or any
other Loan Document, whether in bankruptcy or receivership
proceedings or otherwise, and (iv)in any workout or restructuring
or in connection with the protection, preservation, exercise or
enforcement of any of the terms hereof or of any rights hereunder
or under any other Loan Document or in connection with any
foreclosure, collection or bankruptcy proceedings, and (b)all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted
against the Agent, in its capacity as such, in any way relating to
or arising out of this Agreement or any other Loan Documents or
any action taken or omitted by the Agent hereunder or thereunder,
provided that the Borrower shall not be liable for any portion of
such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements if the
same results from the Agent's gross negligence or willful
misconduct, or if the Borrower was not given notice of the subject
claim and the opportunity to participate in the defense thereof,
at its expense (except that the Borrower shall remain liable to
the extent such failure to give notice does not result in a loss
to the Borrower), or if the same results from a compromise or
settlement agreement entered into without the consent of the
Borrower, which shall not be unreasonably withheld. In addition,
after the occurrence and during the continuance of an Event of
Default, the Borrower agrees to reimburse and pay all reasonable
out-of-pocket expenses of the Agent's regular employees and agents
engaged periodically to perform audits of the Loan Parties' books,
records and business properties.
9.6 Exculpatory Provisions; Limitation of Liability.
Neither the Agent nor any of its directors, officers,
employees, agents, attorneys or Affiliates shall (a)be liable to
any Bank for any action taken or omitted to be taken by it or them
hereunder, or in connection herewith including pursuant to any
Loan Document, unless caused by its or their own gross negligence
or willful misconduct, (b)be responsible in any manner to any of
the Banks for the effectiveness, enforceability, genuineness,
validity or the due execution of this Agreement or any other Loan
Documents or for any recital, representation, warranty, document,
certificate, report or statement herein or made or furnished under
or in connection with this Agreement or any other Loan Documents,
or (c)be under any obligation to any of the Banks to ascertain or
to inquire as to the performance or observance of any of the
terms, covenants or conditions hereof or thereof on the part of
the Loan Parties, or the financial condition of the Loan Parties,
or the existence or possible existence of any Event of Default or
Potential Default. No claim may be made by any of the Loan
Parties, any Bank, the Agent or any of their respective
Subsidiaries against the Agent, any Bank or any of their
respective directors, officers, employees, agents, attorneys or
Affiliates, or any of them, for any special, indirect or
consequential damages or, to the fullest extent permitted by Law,
for any punitive damages in respect of any claim or cause of
action (whether based on contract, tort, statutory liability, or
any other ground) based on, arising out of or related to any Loan
Document or the transactions contemplated hereby or any act,
omission or event occurring in connection therewith, including the
negotiation, documentation, administration or collection of the
Loans, and each of the Loan Parties (for itself and on behalf of
each of its Subsidiaries), the Agent and each Bank hereby waive,
release and agree never to sue upon any claim for any such
damages, whether such claim now exists or hereafter arises and
whether or not it is now known or suspected to exist in its favor.
Each Bank agrees that, except for notices, reports and other
documents expressly required to be furnished to the Banks by the
Agent hereunder or given to the Agent for the account of or with
copies for the Banks, the Agent and each of its directors,
officers, employees, agents, attorneys or Affiliates shall not
have any duty or responsibility to provide any Bank with credit or
other information concerning the business, operations, property,
condition (financial or otherwise), prospects or creditworthiness
of the Loan Parties which may come into the possession of the
Agent or any of its directors, officers, employees, agents,
attorneys or Affiliates.
9.7 Reimbursement and Indemnification of Agent by Banks.
Each Bank agrees to reimburse and indemnify the Agent
(to the extent not reimbursed by the Borrower and without limiting
the obligation of the Borrower to do so) in proportion to its
Ratable Share from and against all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements, including attorneys' fees and
disbursements (including the allocated costs of staff counsel),
and costs of appraisers and environmental consultants, of any kind
or nature whatsoever which may be imposed on, incurred by or
asserted against the Agent, in its capacity as such, in any way
relating to or arising out of this Agreement or any other Loan
Documents or any action taken or omitted by the Agent hereunder or
thereunder, provided that no Bank shall be liable for any portion
of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements (a)if
the same results from the Agent's gross negligence or willful
misconduct, or (b)if such Bank was not given notice of the subject
claim and the opportunity to participate in the defense thereof,
at its expense (except that such Bank shall remain liable to the
extent such failure to give notice does not result in a loss to
the Bank), or (c)if the same results from a compromise and
settlement agreement entered into without the consent of such
Bank, which shall not be unreasonably withheld. In addition, each
Bank agrees promptly upon demand to reimburse the Agent (to the
extent not reimbursed by the Borrower and without limiting the
obligation of the Borrower to do so) in proportion to its Ratable
Share for all amounts due and payable by the Borrower to the Agent
in connection with the Agent's periodic audit of the Loan Parties'
books, records and business properties.
9.8 Reliance by Agent.
The Agent shall be entitled to rely upon any writing,
telegram, telex or teletype message, electronic mail, resolution,
notice, consent, certificate, letter, cablegram, statement, order
or other document or conversation by telephone or otherwise
believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons, and upon the advice
and opinions of counsel and other professional advisers selected
by the Agent. The Agent shall be fully justified in failing or
refusing to take any action hereunder unless it shall first be
indemnified to its satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of
taking or continuing to take any such action.
9.9 Notice of Default.
The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Potential Default or Event of
Default unless the Agent has received written notice from a Bank
or the Borrower referring to this Agreement, describing such
Potential Default or Event of Default and stating that such notice
is a "notice of default."
9.10 Notices.
The Agent shall promptly send to each Bank a copy of
all notices received from the Borrower pursuant to the provisions
of this Agreement or the other Loan Documents promptly upon
receipt thereof. The Agent shall promptly notify the Borrower and
the other Banks of each change in the Base Rate and the effective
date thereof.
9.11 Banks in Their Individual Capacities; Agents in its
Individual Capacity.
With respect to its Revolving Credit Commitment, the
Revolving Credit Loans made by it and any other rights and powers
given to it as a Bank hereunder or under any of the other Loan
Documents, the Agent shall have the same rights and powers
hereunder as any other Bank and may exercise the same as though it
were not the Agent, and the term "Bank" and "Banks" shall, unless
the context otherwise indicates, include the Agent in its
individual capacity. PNC Bank and its Affiliates and each of the
Banks and their respective Affiliates may, without liability to
account, except as prohibited herein, make loans to, issue letters
of credit for the account of, acquire equity interests in, accept
deposits from, discount drafts for, act as trustee under
indentures of, and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with, the Loan
Parties and their Affiliates, in the case of the Agent, as though
it were not acting as Agent hereunder and in the case of each
Bank, as though such Bank were not a Bank hereunder, in each case
without notice to or consent of the other Banks. The Banks
acknowledge that, pursuant to such activities, the Agent or its
Affiliates may (i)receive information regarding the Loan Parties
or any of their Subsidiaries or Affiliates (including information
that may be subject to confidentiality obligations in favor of the
Loan Parties or such Subsidiary or Affiliate) and acknowledge that
the Agent shall be under no obligation to provide such information
to them, and (ii)accept fees and other consideration from the Loan
Parties for services in connection with this Agreement and
otherwise without having to account for the same to the Banks.
9.12 Holders of Notes.
The Agent may deem and treat any payee of any Note as
the owner thereof for all purposes hereof unless and until written
notice of the assignment or transfer thereof shall have been filed
with the Agent. Any request, authority or consent of any Person
who at the time of making such request or giving such authority or
consent is the holder of any Note shall be conclusive and binding
on any subsequent holder, transferee or assignee of such Note or
of any Note or Notes issued in exchange therefor.
9.13 Equalization of Banks.
The Banks and the holders of any participations in any
Commitments or Loans or other rights or obligations of a Bank
hereunder agree among themselves that, with respect to all amounts
received by any Bank or any such holder for application on any
Obligation hereunder or under any such participation, whether
received by voluntary payment, by realization upon security, by
the exercise of the right of set-off or banker's lien, by
counterclaim or by any other non-pro rata source, equitable
adjustment will be made in the manner stated in the following
sentence so that, in effect, all such excess amounts will be
shared ratably among the Banks and such holders in proportion to
their interests in payments on the Loans, except as otherwise
provided in Section 3.4.3 (Agent's and Bank's Rights), 4.4.2
(Replacement of a Bank) or 4.6 (Additional Compensation in Certain
Circumstances). The Banks or any such holder receiving any such
amount shall purchase for cash from each of the other Banks an
interest in such Bank's Loans in such amount as shall result in a
ratable participation by the Banks and each such holder in the
aggregate unpaid amount of the Loans, provided that if all or any
portion of such excess amount is thereafter recovered from the
Bank or the holder making such purchase, such purchase shall be
rescinded and the purchase price restored to the extent of such
recovery, together with interest or other amounts, if any,
required by law (including court order) to be paid by the Bank or
the holder making such purchase.
9.14 Successor Agent.
The Agent (i)may resign as Agent or (ii)shall resign
if such resignation is requested by the Required Banks (if the
Agent is a Bank, the Agent's Loans and its Commitment shall be
considered in determining whether the Required Banks have
requested such resignation) or required by Section 4.4.2
(Replacement of a Bank), in either case of (i) or (ii) by giving
not less than thirty (30) days' prior written notice to the
Borrower. If the Agent shall resign under this Agreement, then
either (a)the Required Banks shall appoint from among the Banks a
successor agent for the Banks, subject to the consent of the
Borrower, such consent not to be unreasonably withheld, or (b)if a
successor agent shall not be so appointed and approved within the
thirty (30) day period following the Agent's notice to the Banks
of its resignation, then the Agent shall appoint from among the
Banks, with the consent of the Borrower, such consent not to be
unreasonably withheld, a successor agent who shall serve as Agent
until such time as the Required Banks appoint and the Borrower
consents to the appointment of a successor agent. Upon its
appointment pursuant to either clause (a) or (b) above, such
successor agent shall succeed to the rights, powers and duties of
the Agent, and the term "Agent" shall mean such successor agent,
effective upon its appointment, and the former Agent's rights,
powers and duties as Agent shall be terminated without any other
or further act or deed on the part of such former Agent or any of
the parties to this Agreement. After the resignation of any Agent
hereunder, the provisions of this Section 9 shall inure to the
benefit of such former Agent and such former Agent shall not by
reason of such resignation be deemed to be released from liability
for any actions taken or not taken by it while it was an Agent
under this Agreement.
9.15 Agent's Fee.
The Borrower shall pay to the Agent a nonrefundable
fee (the "Agent's Fee") under the terms of a letter (the "Agent's
Letter") between the Borrower and Agent, as amended from time to
time.
9.16 Availability of Funds.
The Agent may assume that each Bank has made or will
make the proceeds of a Loan available to the Agent unless the
Agent shall have been notified by such Bank on or before the later
of (1)the close of Business on the Business Day preceding the
Borrowing Date with respect to such Loan or two (2) hours before
the time on which the Agent actually funds the proceeds of such
Loan to the Borrower (whether using its own funds pursuant to this
Section 9.16 or using proceeds deposited with the Agent by the
Banks and whether such funding occurs before or after the time on
which Banks are required to deposit the proceeds of such Loan with
the Agent). The Agent may, in reliance upon such assumption (but
shall not be required to), make available to the Borrower a
corresponding amount. If such corresponding amount is not in fact
made available to the Agent by such Bank, the Agent shall be
entitled to recover such amount on demand from such Bank (or, if
such Bank fails to pay such amount forthwith upon such demand from
the Borrower) together with interest thereon, in respect of each
day during the period commencing on the date such amount was made
available to the Borrower and ending on the date the Agent
recovers such amount, at a rate per annum equal to (i) the Federal
Funds Effective Rate during the first three (3) days after such
interest shall begin to accrue and (ii) the applicable interest
rate in respect of such Loan after the end of such three-day
period.
9.17 Calculations.
In the absence of gross negligence or willful
misconduct, the Agent shall not be liable for any error in
computing the amount payable to any Bank whether in respect of the
Loans, fees or any other amounts due to the Banks under this
Agreement. In the event an error in computing any amount payable
to any Bank is made, the Agent, the Borrower and each affected
Bank shall, forthwith upon discovery of such error, make such
adjustments as shall be required to correct such error, and any
compensation therefor will be calculated at the Federal Funds
Effective Rate.
9.18 Beneficiaries.
Except as expressly provided herein, the provisions of
this Section 9 [The Agent] are solely for the benefit of the Agent
and the Banks, and the Loan Parties shall not have any rights to
rely on or enforce any of the provisions hereof. In performing
its functions and duties under this Agreement, the Agent shall act
solely as agent of the Banks and does not assume and shall not be
deemed to have assumed any obligation toward or relationship of
agency or trust with or for any of the Loan Parties.
10. MISCELLANEOUS
10.1 Modifications, Amendments or Waivers.
With the written consent of the Required Banks, the
Agent, acting on behalf of all the Banks, and the Borrower, on
behalf of the Loan Parties, may from time to time enter into
written agreements amending or changing any provision of this
Agreement or any other Loan Document or the rights of the Banks or
the Loan Parties hereunder or thereunder, or may grant written
waivers or consents to a departure from the due performance of the
Obligations of the Loan Parties hereunder or thereunder. Any such
agreement, waiver or consent made with such written consent shall
be effective to bind all the Banks and the Loan Parties; provided,
that, without the written consent of all the Banks, no such
agreement, waiver or consent may be made which will:
10.1.1. Increase of Commitment.
Increase the amount of the aggregate Revolving
Credit Commitments;
10.1.2. Extension of Payment; Reduction of Principal,
Interest or Fees; Modification of Terms of
Payment.
Subject to Section 2.10 (Extension by Banks of
the Expiration Date), but whether or not any Loans are
outstanding, extend the time for payment of principal or interest
of any Loan (excluding the due date of any mandatory prepayment of
a Loan or any mandatory Commitment reduction in connection with
such a mandatory prepayment hereunder except for mandatory
reductions of the Commitments on the Expiration Date), the
Commitment Fee or any other fee payable to any Bank, or reduce the
principal amount of or the rate of interest borne by any Loan or
reduce the Commitment Fee or any other fee payable to any Bank, or
otherwise directly affect the terms of payment of the principal of
or interest of any Loan, the Commitment Fee or any other fee
payable to any Bank;
10.1.3. Miscellaneous
Amend Section 4.2 (Pro Rata Treatment of Banks),
9.6 (Exculpatory Provisions; Limitation of Liability), 9.13
(Equalization of Banks) or this Section 10.1 (Modifications,
Amendments or Waivers) change the pro rata treatment of the Banks,
change the definition of Required Banks, or change any requirement
providing for the Banks or the Required Banks to authorize the
taking of any action hereunder;
provided, that no agreement, waiver or consent which would modify
the interests, rights or obligations of the Agent in its capacity
as Agent shall be effective without the written consent of the
Agent and provided further, that no provision of Sections 2.1.2
(Swing Loan Commitment), 2.4.2 (Swing Loan Requests), 2.5.2
(Making Swing Loans), 2.6 (Swing Loan Note), 2.8 (Borrowings to
Repay Swing Loans) and 4.8 (Settlement Date Procedures) may be
amended or modified without the consent of PNC Bank.
10.2 No Implied Waivers; Cumulative Remedies; Writing
Required.
No course of dealing and no delay or failure of the
Agent or any Bank in exercising any right, power, remedy or
privilege under this Agreement or any other Loan Document shall
affect any other or future exercise thereof or operate as a waiver
thereof, nor shall any single or partial exercise thereof or any
abandonment or discontinuance of steps to enforce such a right,
power, remedy or privilege preclude any further exercise thereof
or of any other right, power, remedy or privilege. The rights and
remedies of the Agent and the Banks under this Agreement and any
other Loan Documents are cumulative and not exclusive of any
rights or remedies which they would otherwise have. Any waiver,
permit, consent or approval of any kind or character on the part
of any Bank of any breach or default under this Agreement or any
such waiver of any provision or condition of this Agreement must
be in writing and shall be effective only to the extent
specifically set forth in such writing.
10.3 Reimbursement and Indemnification of Banks by the
Borrower; Taxes.
The Borrower agrees unconditionally upon demand to pay
or reimburse to each Bank (other than the Agent, as to which the
Borrower's Obligations are set forth in Section 9.5 (Reimbursement
and Indemnification of Agent by the Borrower)) and to save such
Bank harmless against (i)liability for the payment of all
reasonable out-of-pocket costs, expenses and disbursements
(including fees and expenses of counsel (including allocated costs
of staff counsel) for the Agent except with respect to (a) and (b)
below), incurred by the Agent (a)in connection with the
administration and interpretation of this Agreement, and other
instruments and documents to be delivered hereunder, (b)relating
to any amendments, waivers or consents pursuant to the provisions
hereof, (c)in connection with the enforcement of this Agreement or
any other Loan Document, or collection of amounts due hereunder or
thereunder or the proof and allowability of any claim arising
under this Agreement or any other Loan Document, whether in
bankruptcy or receivership proceedings or otherwise, and (d)in any
workout or restructuring or in connection with the protection,
preservation, exercise or enforcement of any of the terms hereof
or of any rights hereunder or under any other Loan Document or in
connection with any foreclosure, collection or bankruptcy
proceedings, or (ii)all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against the Agent, in its
capacity as such, in any way relating to or arising out of this
Agreement or any other Loan Documents or any action taken or
omitted by the Agent hereunder or thereunder, provided that the
Borrower shall not be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements (A)if the same results
from the Agent's gross negligence or willful misconduct, or (B)if
the Borrower was not given notice of the subject claim and the
opportunity to participate in the defense thereof, at its expense
(except that the Borrower shall remain liable to the extent such
failure to give notice does not result in a loss to the Borrower),
or (C)if the same results from a compromise or settlement
agreement entered into without the consent of the Borrower, which
shall not be unreasonably withheld. The Borrower agrees
unconditionally to pay all stamp, document, transfer, recording or
filing taxes or fees and similar impositions now or hereafter
determined by the Agent to be payable in connection with this
Agreement or any other Loan Document, and the Borrower agrees
unconditionally to save the Agent and the Banks harmless from and
against any and all present or future claims, liabilities or
losses with respect to or resulting from any omission to pay or
delay in paying any such taxes, fees or impositions.
10.4 Holidays.
Whenever payment of a Loan to be made or taken
hereunder shall be due on a day which is not a Business Day such
payment shall be due on the next Business Day (except as provided
in Section 3.2 (Interest Periods) with respect to Interest Periods
under the LIBO-Rate Option) and such extension of time shall be
included in computing interest and fees, except that the Loans
shall be due on the Business Day preceding the Expiration Date if
the Expiration Date is not a Business Day. Whenever any payment
or action to be made or taken hereunder (other than payment of the
Loans) shall be stated to be due on a day which is not a Business
Day, such payment or action shall be made or taken on the next
following Business Day, and such extension of time shall not be
included in computing interest or fees, if any, in connection with
such payment or action.
10.5 Funding by Branch, Subsidiary or Affiliate.
10.5.1. Notional Funding.
Each Bank shall have the right from time to
time, without notice to the Borrower, to deem any branch,
Subsidiary or Affiliate (which for the purposes of this Section
10.5 shall mean any corporation or association which is directly
or indirectly controlled by or is under direct or indirect common
control with any corporation or association which directly or
indirectly controls such Bank) of such Bank to have made,
maintained or funded any Loan to which the LIBO-Rate Option
applies at any time, provided that immediately following (on the
assumption that a payment were then due from the Borrower to such
other office), and as a result of such change, the Borrower would
not be under any greater financial obligation (including pursuant
to Section 4.6 (Additional Compensation in Certain Circumstances))
than it would have been in the absence of such change. Notional
funding offices may be selected by each Bank without regard to
such Bank's actual methods of making, maintaining or funding the
Loans or any sources of funding actually used by or available to
such Bank.
10.5.2. Actual Funding.
Each Bank shall have the right from time to time
to make or maintain any Loan by arranging for a branch, Subsidiary
or Affiliate of such Bank to make or maintain such Loan subject to
the last sentence of this Section 10.5.2. If any Bank causes a
branch, Subsidiary or Affiliate to make or maintain any part of
the Loans hereunder, all terms and conditions of this Agreement
shall, except where the context clearly requires otherwise, be
applicable to such part of the Loans to the same extent as if such
Loans were made or maintained by such Bank, but in no event shall
any Bank's use of such a branch, Subsidiary or Affiliate to make
or maintain any part of the Loans hereunder cause such Bank or
such branch, Subsidiary or Affiliate to incur any cost or expenses
payable by the Borrower hereunder or require the Borrower to pay
any other compensation to any Bank (including any expenses
incurred or payable pursuant to Section 4.6 (Additional
Compensation in Certain Circumstances)) which would otherwise not
be incurred.
10.6 Notices.
Any notice, request, demand, direction or other
communication (for purposes of this Section 10.6 only, a "Notice")
to be given to or made upon any party hereto under any provision
of this Agreement shall be given or made by telephone or in
writing (which includes means of electronic transmission (i.e.,
"e-mail") or facsimile transmission or by setting forth such
Notice on a site on the World Wide Web (a "Website Posting") if
Notice of such Website Posting (including the information
necessary to access such site) has previously been delivered to
the applicable parties hereto by another means set forth in this
Section 10.6 in accordance with this Section 10.6. Any such
Notice must be delivered to the applicable parties hereto at the
addresses and numbers set forth under their respective names on
Schedule 1.1(B) hereof or in accordance with any subsequent
unrevoked Notice from any such party that is given in accordance
with this Section 10.6. Any Notice shall be effective:
(i) In the case of hand-delivery,
when delivered;
(ii) If given by mail, four (4)
days after such Notice is deposited with the United States Postal
Service, with first-class postage prepaid, return receipt
requested;
(iii) In the case of a telephonic
Notice, when a party is contacted by telephone, if delivery of
such telephonic Notice is confirmed no later than the next
Business Day by hand delivery, a facsimile or electronic
transmission, a Website Posting or overnight courier delivery of a
confirmatory notice (received at or before noon on such next
Business Day);
(iv) In the case of a facsimile
transmission, when sent to the applicable party's facsimile
machine's telephone number if the party sending such Notice
receives confirmation of the delivery thereof from its own
facsimile machine;
(v) In the case of electronic
transmission, when actually received;
(vi) In the case of a Website
Posting, upon delivery of a Notice of such posting (including the
information necessary to access such web site) by another means
set forth in this Section 10.6; and
(vii) If given by any other means
(including by overnight courier), when actually received.
Any Bank giving a Notice to a Loan Party shall concurrently send a
copy thereof to the Agent, and the Agent shall promptly notify the
other Banks of its receipt of such Notice.
10.7 Severability.
The provisions of this Agreement are intended to be
severable. If any provision of this Agreement shall be held
invalid or unenforceable in whole or in part in any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to
the extent of such invalidity or unenforceability without in any
manner affecting the validity or enforceability thereof in any
other jurisdiction or the remaining provisions hereof in any
jurisdiction.
10.8 Governing Law.
Each Letter of Credit and Section 2.10 (Letter of
Credit Subfacility) shall be subject to the Uniform Customs and
Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500, as the same may be
revised or amended from time to time, and to the extent not
inconsistent therewith, the internal laws of the State of New
Jersey without regard to its conflict of laws principles, and the
balance of this Agreement shall be deemed to be a contract under
the Laws of the State of New Jersey and for all purposes shall be
governed by and construed and enforced in accordance with the
internal laws of the State of New Jersey without regard to its
conflict of laws principles.
10.9 Prior Understanding.
This Agreement and the other Loan Documents supersede
all prior understandings and agreements, whether written or oral,
between the parties hereto and thereto relating to the
transactions provided for herein and therein, including any prior
confidentiality agreements and commitments.
10.10 Duration; Survival.
All representations and warranties of the Borrower and
Hovnanian contained herein or made in connection herewith shall
survive the making of Loans and issuance of Letters of Credit and
shall not be waived by the execution and delivery of this
Agreement, any investigation by the Agent or the Banks, the making
of Loans, issuance of Letters of Credit, or payment in full of the
Loans. All covenants and agreements of the Borrower and Hovnanian
contained in Sections 7.1 (Affirmative Covenants), 7.2 (Negative
Covenants) and 7.3 (Reporting Requirements) herein shall continue
in full force and effect from and after the date hereof so long as
the Borrower may borrow or request Letters of Credit hereunder and
until termination of the Commitments and payment in full of the
Loans and expiration or termination of all Letters of Credit. All
covenants and agreements of the Borrower contained herein relating
to the payment of principal, interest, premiums, additional
compensation or expenses and indemnification, including those set
forth in Section 4 (Payments) and Sections 9.5 (Reimbursement and
Indemnification of Agent by the Borrower), 9.7 (Reimbursement and
Indemnification of Agent by Banks) and 10.3 (Reimbursement and
Indemnification of Banks by Borrower; Taxes), shall survive
payment in full of the Loans, expiration or termination of the
Letters of Credit and termination of the Commitments.
10.11 Successors and Assigns.
(a) (i) This Agreement shall be
binding upon and shall inure to the benefit of the Banks, the
Agent, the Loan Parties a party hereto and their respective
successors and assigns, except that none of the Loan Parties a
party hereto may assign or transfer any of its rights and
obligations hereunder or any interest herein. Each Bank may, at
its own cost, make assignments of or sell participations in all or
any part of its Commitments and the Loans made by it to one or
more banks or other entities, subject to the consent of the
Borrower and the Agent with respect to any assignee, such consent
not to be unreasonably withheld provided that (1)no consent of the
Borrower shall be required (A) if an Event of Default exists and
is continuing, (B) in the case of an assignment by a Bank to an
Affiliate of such Bank, or (C) in respect of the sale of a
participation and (2)any assignment by a Bank to a Person other
than an Affiliate of such Bank may not be made in amounts less
than the lesser of $10,000,000 or the amount of the assigning
Bank's Commitment. In the case of an assignment, upon receipt by
the Agent of the Assignment and Assumption Agreement, the assignee
shall have, to the extent of such assignment (unless otherwise
provided therein), the same rights, benefits and obligations as it
would have if it had been a signatory Bank hereunder, the
Commitments shall be adjusted accordingly, and upon surrender of
any Note subject to such assignment, the Borrower shall execute
and deliver a new Note to the assignee, if such assignee requests
such a Note in an amount equal to the amount of the Revolving
Credit Commitment assumed by it and a new Revolving Credit Note to
the assigning Bank, if the assigning Bank requests such a Note, in
an amount equal to the Revolving Credit Commitment or retained by
it hereunder. Any Bank which assigns any or all of its Commitment
or Loans to a Person other than an Affiliate of such Bank shall
pay to the Agent a service fee in the amount of $3,500 for each
assignment. In the case of a participation, the participant shall
only have the rights specified in Section 8.2.3 (Set-off) (the
participant's rights against such Bank in respect of such
participation to be those set forth in the agreement executed by
such Bank in favor of the participant relating thereto and not to
include any voting rights except with respect to changes of the
type referenced in Sections 10.1.1 (Increase of Commitment,
Extension of Expiration Date), or 10.1.2 (Extension of Payment;
Reduction of Principal, Interest or Fees; Modification of Terms of
Payment)), all of such Bank's obligations under this Agreement or
any other Loan Document shall remain unchanged, and all amounts
payable by any Loan Party hereunder or thereunder shall be
determined as if such Bank had not sold such participation.
(ii) Each Bank or assignee or
participant of a Bank that is not incorporated under the laws of
the United States of America or a state thereof (and, upon the
written request of the Agent, each other Bank or assignee or
participant of a Bank) shall deliver to the Borrower and the Agent
a Withholding Certificate as described in Section 10.17 (Tax
Withholding Clause) relating to federal income tax withholding.
Each Bank may furnish any publicly available information
concerning Hovnanian or any Loan Party and any other information
concerning Hovnanian or any Loan Party in the possession of such
Bank from time to time to assignees and participants (including
prospective assignees or participants), provided that such
assignees and participants agree to be bound by the provisions of
Section 10.12 (Confidentiality).
(iii) Notwithstanding any other
provision in this Agreement, any Bank may at any time pledge or
grant a security interest in all or any portion of its rights
under this Agreement, its Note (if any) and the other Loan
Documents to any Federal Reserve Bank in accordance with
Regulation A of the FRB or U.S. Treasury Regulation 31 CFR Section
203.14 without notice to or consent of the Borrower or the Agent.
No such pledge or grant of a security interest shall release the
transferor Bank of its obligations hereunder or under any other
Loan Document.
(b) Additional Bank. A lender which is
to become a party to this Agreement pursuant to Section 2.1.3
(Increase in Commitments After Closing Date) hereof or otherwise
(each an "Additional Bank") shall execute and deliver to the Agent
a Bank Joinder to this Agreement in substantially the form
attached hereto as Exhibit 1.1(B)(1). Upon execution and delivery
of a Bank Joinder, such Additional Bank shall be a party hereto
and a "Bank" under each of the Loan Documents for all purposes,
except that such Additional Bank shall not participate in any
Revolving Credit Loans to which the LIBO-Rate Option applies which
are outstanding on the effective date of such Bank Joinder. If
Borrower should renew after the effective date of such Bank
Joinder the LIBO-Rate Option with respect to Revolving Credit
Loans existing on such date, Borrower shall be deemed to repay the
applicable Revolving Credit Loans on the renewal date and then
reborrow a similar amount on such date so that the Additional Bank
shall participate in such Revolving Credit Loans after such
renewal date. Schedule 1.1(B) shall be amended and restated on the
date of such Bank Joinder to read as set forth on the attachment
to such Bank Joinder. Simultaneously with the execution and
delivery of such Bank Joinder, the Borrower shall execute, if
requested, a Revolving Credit Note and deliver it to such
Additional Bank together with copies of such other documents
described in Section 7.1 (Affirmative Covenants) hereof as such
Additional Bank may reasonably require.
10.12 Confidentiality.
10.12.1. General.
The Agent and the Banks each agree to keep
confidential all information obtained from any Loan Party or its
Subsidiaries which is nonpublic and confidential or proprietary in
nature (including any information the Borrower specifically
designates as confidential), except as provided below, and to use
such information only in connection with their respective
capacities under this Agreement and for the purposes contemplated
hereby. The Agent and the Banks shall be permitted to disclose
such information (i)to outside legal counsel, accountants and
other professional advisors who need to know such information in
connection with the administration and enforcement of this
Agreement, subject to agreement of such Persons to maintain the
confidentiality, (ii) to Moody's, Standard & Poor's and similar
rating agencies, (iii)to assignees and participants as
contemplated by Section 10.11 (Successors and Assigns), and
prospective assignees and participants subject to an agreement of
such Persons to maintain the confidentiality, (iv)to the extent
requested by any bank regulatory authority or, with notice to the
Borrower, as otherwise required by applicable Law or by any
subpoena or similar legal process, or in connection with any
investigation or proceeding arising out of the transactions
contemplated by this Agreement, (v)if it becomes publicly
available other than as a result of a breach of this Agreement or
becomes available from a source not known to be subject to
confidentiality restrictions, or (vi)if the Borrower shall have
consented to such disclosure.
10.12.2. Sharing Information With Affiliates of the
Banks.
Each Loan Party a party hereto acknowledges
that from time to time financial advisory, investment banking and
other services may be offered or provided to the Borrower or one
or more of its Affiliates (in connection with this Agreement or
otherwise) by any Bank or by one or more Subsidiaries or
Affiliates of such Bank and each of the Loan Parties a party
hereto hereby authorizes each Bank to share any information
delivered to such Bank by such Loan Party and its Subsidiaries
pursuant to this Agreement, or in connection with the decision of
such Bank to enter into this Agreement, to any such Subsidiary or
Affiliate of such Bank, it being understood that any such
Subsidiary or Affiliate of any Bank receiving such information
shall be bound by the provisions of Section 10.12
[Confidentiality] as if it were a Bank hereunder. Such
Authorization shall survive the repayment of the Loans and other
Obligations and the termination of the Commitments.
10.13 Counterparts.
This Agreement may be executed by different parties
hereto on any number of separate counterparts, each of which, when
so executed and delivered, shall be an original, and all such
counterparts shall together constitute one and the same
instrument.
10.14 Agent's or Bank's Consent.
Whenever the Agent's or any Bank's consent is required
to be obtained under this Agreement or any of the other Loan
Documents as a condition to any action, inaction, condition or
event, unless specifically otherwise provided herein, the Agent
and each Bank shall be authorized to give or withhold such consent
in its sole and absolute discretion and to condition its consent
upon the giving of additional collateral, the payment of money or
any other matter.
10.15 Exceptions.
The representations, warranties and covenants
contained herein shall be independent of each other, and no
exception to any representation, warranty or covenant shall be
deemed to be an exception to any other representation, warranty or
covenant contained herein unless expressly provided, nor shall any
such exceptions be deemed to permit any action or omission that
would be in contravention of applicable Law.
10.16 CONSENT TO FORUM; WAIVER OF JURY TRIAL.
EACH LOAN PARTY A PARTY HERETO HEREBY IRREVOCABLY
CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF THE SUPERIOR COURT OF
NEW JERSEY, LAW DIVISION, MIDDLESEX COUNTY AND THE UNITED STATES
DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY AND WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL
DIRECTED TO SUCH LOAN PARTY AT THE ADDRESSES PROVIDED FOR IN
SECTION 10.6 (NOTICES) AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED UPON ACTUAL RECEIPT THEREOF. EACH LOAN PARTY A PARTY
HERETO WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY
ACTION INSTITUTED AGAINST IT AS PROVIDED HEREIN AND AGREES NOT TO
ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE. EACH
LOAN PARTY A PARTY HERETO, THE AGENT AND THE BANKS HEREBY WAIVE
TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF
ANY KIND ARISING OUT OF OR RELATED TO THIS AGREEMENT, ANY OTHER
LOAN DOCUMENT OR ANY COLLATERAL TO THE FULL EXTENT PERMITTED BY
LAW.
10.17 Tax Withholding Clause.
Each Bank or assignee or participant of a Bank that is
not incorporated under the Laws of the United States of America or
a state thereof (and, upon the written request of the Agent, each
other Bank or assignee or participant of a Bank) agrees that it
will deliver to each of the Borrower and the Agent two (2) duly
completed appropriate valid Withholding Certificates (as defined
under S1.1441-1(c)(16) of the Income Tax Regulations
("Regulations")) certifying its status (i.e., U.S. or foreign
person) and, if appropriate, making a claim of reduced, or
exemption from, U.S. withholding tax on the basis of an income tax
treaty or an exemption provided by the Internal Revenue Code. Such
delivery may be made by electronic transmission as described in
S1.1441-1(e)(4)(iv) of the Regulations if the Agent establishes an
electronic delivery system. The term "Withholding Certificate"
means a Form W-9; a Form W-8BEN; a Form W-8ECI; a Form W-8IMY and
the related statements and certifications as required under
S1.1441-1(e)(3) of the Regulations; a statement described in
S1.871-14(c)(2)(v) of the Regulations; or any other certificates
under the Code or Regulations that certify or establish the status
of a payee or beneficial owner as a U.S. or foreign person. Each
Bank, assignee or participant required to deliver to the Borrower
and the Agent a valid Withholding Certificate pursuant to the
preceding sentence shall deliver such valid Withholding
Certificate as follows: (A) each Bank which is a party hereto on
the Closing Date shall deliver such valid Withholding Certificate
at least five (5) Business Days prior to the first date on which
any interest or fees are payable by the Borrower hereunder for the
account of such Bank; (B) each assignee or participant shall
deliver such valid Withholding Certificate at least five (5)
Business Days before the effective date of such assignment or
participation (unless the Agent in its sole discretion shall
permit such assignee or participant to deliver such Withholding
Certificate less than five (5) Business Days before such date in
which case it shall be due on the date specified by the Agent).
Each Bank, assignee or participant which so delivers a valid
Withholding Certificate further undertakes to deliver to each of
the Borrower and the Agent two (2) additional copies of such
Withholding Certificate (or a successor form) on or before the
date that such Withholding Certificate expires or becomes obsolete
or after the occurrence of any event requiring a change in the
most recent Withholding Certificate so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be
reasonably requested by the Borrower or the Agent. Notwithstanding
the submission of a Withholding Certificate claiming a reduced
rate of, or exemption from, United States withholding tax, the
Agent shall be entitled to withhold United States federal income
taxes at the full 30% withholding rate if in its reasonable
judgment it is required to do so under the due diligence
requirements imposed upon a withholding agent under S1.1441-7(b)
of the Regulations. Further, the Agent is indemnified under
S1.1461-1(e) of the Regulations against any claims and demands of
any Bank or assignee or participant of a Bank for the amount of
any tax it deducts and withholds in accordance with regulations
under S1441 of the Internal Revenue Code.
10.18 Joinder of Guarantors.
Any Subsidiary of Hovnanian which is required to join
the Guaranty Agreement as a Guarantor pursuant to Section 7.2.7
(Subsidiaries, Partnerships and Joint Ventures) or which is to
become, a Restricted Subsidiary shall execute and deliver to the
Agent (i)a Guarantor Joinder pursuant to which it shall join as a
Guarantor the Guaranty Agreement; and (ii) at the request of the
Agent, documents in the forms described in Section 6.1 (First
Loans and Letters of Credit) modified as appropriate to relate to
such new Guarantor. Hovnanian and Borrower shall deliver such
Guarantor Joinder and any related documents that the Agent may
reasonably request to the Agent after the formation thereof and
its designation as a Restricted Subsidiary; such Subsidiary shall
not be a Restricted Subsidiary until the delivery and
effectiveness of the items required herein.
10.19 Concerning Agent Terms.
Notwithstanding anything contained herein which may be
construed to the contrary, none of the Syndication Agent, the
Documentation Agent and the Joint Lead Arrangers and Joint Book
Runners shall exercise any of the rights or have any of the
responsibilities of the Agent hereunder, or any other rights or
responsibilities other than their respective rights and
responsibilities (if any) as Banks hereunder.
10.20 Ratification of Notes and Loan Documents and Existing
Obligations.
All of the terms, conditions, provisions and covenants
in the Original Credit Agreement, the Notes and other Loan
Documents delivered in connection therewith, and all other
documents delivered to the Agent and the Banks in connection with
any of the foregoing documents and obligations evidenced or
secured thereby shall remain unaltered and in full force and
effect and are hereby ratified and confirmed in all respects,
except as specifically modified herein. Without limiting the
foregoing, each of the Notes under the Original Credit Agreement
shall be, and hereby are, amended to bear an Expiration Date of
July 30, 2005. This Agreement amends and restates, and supersedes,
the Original Credit Agreement and is in no way intended to
constitute a novation of the "Obligations" under the Original
Credit Agreement. On the date this Agreement becomes effective,
and subject to the satisfaction (or waiver by Agent in its sole
discretion) of all applicable conditions to advances hereunder,
all sums owning under the Original Credit Agreement and the Loan
Documents thereunder shall be deemed to be outstanding and owing
under, evidenced by, and governed by the terms of this Agreement,
the existing Notes, and the other existing Loan documents.
(SIGNATURES CONTINUED ON NEXT PAGE)
IN WITNESS WHEREOF, the undersigned have executed this Agreement
on the date first written.
K. HOVNANIAN ENTERPRISES, INC.
By:
Title:
PNC BANK, NATIONAL ASSOCIATION
as Agent and as a Bank
By:
Title:
BANK OF AMERICA, N.A.
By:
Title:
FLEET NATIONAL BANK
By:
Title:
FIRST UNION NATIONAL BANK
By:
Title:
GUARANTY BANK
By:
Title:
KEYBANK, NATIONAL ASSOCIATION
By:
Title:
BANK ONE, NA
By:
Title:
AMSOUTH BANK
By:
Title:
COMERICA BANK
By:
Title:
SUNTRUST BANK
By:
Title:
NATIONAL CITY BANK OF
PENNSYLVANIA
By:
Title:
WASHINGTON MUTUAL BANK, FA
By:
Title:
ACCEPTED AND AGREED:
HOVNANIAN ENTERPRISES, INC.
as a Guarantor
By:
Title:
SCHEDULE 1.1(A)
K. HOVNANIAN ENTERPRISES, INC.
PRICING GRID
(expressed in basis points)
Level Debt Rating Libor Margin Base Rate Margin
Commitment Fee LOC Fee
I ?BB+/Ba1 145 0 30.0 117.5
II BB/Ba2 165 15 32.5 137.5
III BB-/Ba3 185 40 37.5 157.5
IV B+/B1 205 60 42.5 177.5
V ?B/B2 225 80 47.5 197.5
The Applicable Margins will only be as shown above if Hovnanian
holds both noted Debt Ratings from S&P and Moody's, respectively.
In the event of inconsistent Debt Ratings, the Applicable Margin
will be the midpoint of the margin(s) between the two levels. In
the absence of ratings, pricing will be at Level V. As of the
Closing Date, pricing shall be a Level III.
Any change in the Applicable Margin; the Applicable Commitment Fee
Rate or the Applicable Letter of Credit Fee Rate shall become
effective five Business Days after any public announcement of the
change in the Debt Rating requiring such change.
Bank
Amount of Commitment for Revolving Credit Loans
Ratable Share
Bank Name (also Agent):
PNC Bank, National Association
Address for Notices:
Two Tower Center, 18th Fl
E. Brunswick, NJ 08816
Attention: Douglas G. Paul
Telephone: (732) 220-3566
Telecopy: (732) 220-3744
Address of Lending Office:
One PNC Plaza
MS: P1-POPP-22-1
249 Fifth Avenue
Pittsburgh, PA 15222-2707
Attention: Rini Davis
Telephone: (412) 762-7638
Telecopy: (412) 762-8672
$60,000,000
13.793%
Bank Name:
Bank of America, N.A.
Address for Notices:
231 S. LaSalle Street
Mail Code IL 1-231-12-18
Chicago, IL 60697
Attention: Kelley Prentiss
Telephone: (312) 828-7363
Telecopy: (312) 974-4970
Address of Lending Office:
231 S. LaSalle Street
Mail Code IL 1-231-12-18
Chicago, IL 60697
Attention: Marilyn Elizalde
Telephone: (312) 828-6388
Telecopy: (312) 828-3950
$60,000,000
13.793%
Bank
Amount of Commitment for Revolving Credit Loans
Ratable Share
Bank Name:
Fleet National Bank
Address for Notices:
115 Perimeter Center Place NE
Suite 500
Atlanta, GA 30346
Attention: Jeff Aycock
Telephone: (770) 390-6583
Telecopy: (770) 390-8434
Address of Lending Office:
115 Perimeter Center Place NE
Suite 500
Atlanta, GA 30346
Attention: Sandy Wheeler
Telephone: (770) 390-6571
Telecopy: (770) 390-8434
$50,000,000
11.494%
Bank Name:
First Union National Bank
Address for Notices:
Commercial Real Estate Group
3rd Floor
2840 Morris Avenue
Union, NJ 07083
Attention: Richard M. Quinn
Telephone: (908) 624-2808
Telecopy: (908) 624-2817
Address of Lending Office:
Commercial Real Estate Group
3rd Floor
2840 Morris Avenue
Union, NJ 07083
Attention: Richard M. Quinn
Telephone: (908) 624-2808
Telecopy: (908) 624-2817
$45,000,000
10.345%
Bank Amount of Commitment for Revolving Credit Loans
Ratable Share
Bank Name:
Guaranty Bank
Address for Notices:
8333 Douglas Avenue
Dallas, TX 75225
Attention: Randy Reid
Telephone: (214) 360-2735
Telecopy: (214) 360-1661
Address of Lending Office:
8333 Douglas Avenue
Dallas, TX 75225
Attention: Jill Fallows
Telephone: (214) 360-1681
Telecopy: (214) 360-1661
$40,000,000
9.195%
Bank Name:
KeyBank, National Association
Address for Notices:
Law Group
127 Public Square
Mail Stop: OH-01-27-0200
Cleveland, OH 44114
Attention: Robert Bowes, Esquire
Telephone: (216) 689-5089
Telecopy: (216) 689-5681
With a copy to:
Key Commercial Real Estate
575 5th Avenue, 38th Floor
New York, NY 10017
Attention: Timothy J. Mertens, V.P.
Telephone: (917) 368-2390
Telecopy: (917) 368-2370
Bank
Amount of Commitment for Revolving Credit Loans
Ratable Share
Address of Lending Office:
Institutional C.R.E. Client Services
66 South Pearl StreetMail Stop: NY-31-66-0567
Albany, NY 12207
Attention: Rebecca Christner, A.V.P.
Telephone: (518) 257-8566
Telecopy: (518) 257-8572 $30,000,000 6.897%
Bank Name:
Bank One, NA
Address for Notices:
One Bank One Plaza
Suite IL 1-0315
Chicago, IL 60670
Attention: Mark Kramer
Telephone: (312) 336-2212
Telecopy: (312) 732-5939
Address of Lending Office:
One Bank One Plaza
Suite IL 1-0315
Chicago, IL 60670
Attention: Bob Rodzon
Telephone: (312) 732-5097
Telecopy: (312) 732-1582
$30,000,000
6.897%
Bank Name:
AmSouth Bank
Address for Notices:
1900 5th Avenue; AST-9
Birmingham, AL 35288
Attention: Ronny Hudspeth
Telephone: (205) 307-4227
Telecopy: (205) 801-0138
Bank Amount of Commitment for Revolving Credit Loans
Ratable Share
Address of Lending Office:
1900 5th Avenue; AST-9
Birmingham, AL 35288
Attention: Wanda Pate
Telephone: (205) 326-4615
Telecopy: (205) 801-0138
$25,000,000
5.747%
Bank Name:
Comerica Bank
Address for Notices:
500 Woodward Avenue
MC 3256
Detroit, MI 48226
Attention: Charles Weddell
Telephone: (313) 222-3323
Telecopy: (313) 222-9295
Address of Lending Office:
500 Woodward Avenue
MC 3256
Detroit, MI 48226
Attention: Betsy Branson
Telephone: (313) 222-5878
Telecopy: (313) 222-3697
$25,000,000
5.747%
Bank Amount of Commitment for Revolving Credit Loans
Ratable Share
Bank Name:
SunTrust Bank
Address for Notices:
303 Peachtree Street NE
3rd Floor, MC 1931
P.O. Box 4418
Atlanta, GA 30302-4418
Attention: Donald Gaudette
Telephone: (404) 658-4925
Telecopy: (404) 588-8505
Address of Lending Office:
303 Peachtree Street NE
3rd Floor, MC 1931
P.O. Box 4418
Atlanta, GA 30302-4418
Attention: Lawanda Griffeth
Telephone: (404) 588-8375
Telecopy: (404) 575-2730
$25,000,000
5.747%
Bank Name:
National City Bank of Pennsylvania
Address for Notices:
One South Broad Street
13th Floor
Philadelphia, PA 19107
Attention: John Gaghan
Telephone: (267) 256-4056
Telecopy: (267) 256-4001
Address of Lending Office:
20 Stanwix Street, 25-143
Pittsburgh, PA 15222-4802
Attention: Janet R. Sabatasso
Telephone: (412) 644-7745
Telecopy: (412) 644-6095
$20,000,000
4.598%
Bank
Amount of Commitment for Revolving Credit Loans
Ratable Share
Bank Name:
Washington Mutual Bank, FA
Address for Notices:
Kris W. Klinger Vice President
Washington Mutual Bank, FA
5950 La Place Court, Suite 205
Carlsbad, CA 92008
Telephone: (972) 705-0821
Telecopy: (972) 705-1481
Address of Lending Office:
3200 Southwest Freeway
Houston, TX 77027
Attention: Monica Rampp
Telephone: (713) 543-3323
Telecopy: (713) 543-7813
$25,000,000
5.747%
Total
$435,000,000
100%
AGENT
Name: Douglas G. Paul, Senior Vice President
Address: PNC Bank, National Association
Two Tower Center, 18th Floor
East Brunswick, New Jersey 08816
Telephone: (732) 220-3566
Telecopy: (732) 220-3744
BORROWER:
Name: K. HOVNANIAN ENTERPRISES, INC.
Address: 10 Route 35, P.O. Box 500
Red Bank, NJ 07701
Attention: Kevin C. Hake
Telephone: (732) 747-7800
Telecopy: (732) 747-6835
GUARANTORS:
Name: (name of Guarantor)
Address: c/o K. Hovnanian Enterprises, Inc.
10 Route 35, P.O. Box 500
Red Bank, NJ 07701
Attention: Kevin C. Hake
Telephone: (732) 747-7800
Telecopy: (732) 747-6835
SCHEDULE 1.1(B) - 8