<Page>
As filed with the Securities and Exchange Commission on June 6, 2002
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
K. HOVNANIAN HOVNANIAN
ENTERPRISES, INC. ENTERPRISES, INC.
(Exact Name of Registrant as Specified in Its Charter)
NEW JERSEY DELAWARE
(State or Other Jurisdiction of Incorporation or Organization)
22-2423583 22-1851059
(I.R.S. Employer Identification Number)
10 HIGHWAY 35 10 HIGHWAY 35
P.O. BOX 500 P.O. BOX 500
RED BANK, NEW JERSEY 07701 RED BANK, NEW JERSEY 07701
(732) 747-7800 (732) 747-7800
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
SEE TABLE OF ADDITIONAL REGISTRANTS
---------------------
J. LARRY SORSBY
HOVNANIAN ENTERPRISES, INC.
10 HIGHWAY 35
P.O. BOX 500
RED BANK, NEW JERSEY 07701
(732) 747-7800
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
---------------------
COPIES TO:
VINCENT PAGANO, JR., ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017-3954
(212) 455-2000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|____________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|_______________
---------------------
<Page>
<Table>
<Caption>
CALCULATION OF REGISTRATION FEE
===================================================================================================================
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE AGGREGATE REGISTRATION
PER UNIT OFFERING PRICE FEE
- -------------------------------------------------------------------------------------------------------------------
8.000% Senior Notes due 2012....................... $100,000,000 99.161%(1) $ 99,161,000(1) $9,123(2)
- -------------------------------------------------------------------------------------------------------------------
Guarantees of 8.000% Senior Notes due 2012......... (3) (3) (3) None(3)
- -------------------------------------------------------------------------------------------------------------------
8.875% Senior Subordinated Notes due 2012.......... $150,000,000 100%(1) $150,000,000(1) $13,800(2)
- -------------------------------------------------------------------------------------------------------------------
Guarantees of 8.875% Senior Subordinated Notes
due 2012......................................... (3) (3) (3) None(3)
- -------------------------------------------------------------------------------------------------------------------
Total.............................................. $250,000,000 $249,161,000(1) $22,923(2)
===================================================================================================================
</Table>
(1) Estimated solely for the purpose of calculating the registration fee under
Rule 457 of the Securities Act of 1933.
(2) The registration fee for the securities offered hereby has been calculated
under Rule 457(f)(2) of the Securities Act of 1933 and reflects the book
value of the securities as of May 31, 2002. The Proposed Maximum Aggregate
Offering Price is estimated solely for the purpose of calculating the
registration fee.
(3) No consideration will be received for the Guarantees.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<Page>
<Table>
<Caption>
TABLE OF ADDITIONAL REGISTRANTS
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
All Seasons, Inc. MD 52-0855385 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
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Arrow Properties, Inc. NJ 22-1945442 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Ballantrae Development Corp. FL 22-3366681 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Ballantrae Home Sales, Inc. FL 22-3312524 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Condominium Community (Bowie MD 52-2002262 10 Highway 35
New Town), Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Condominium Community (Largo MD 52-2002261 10 Highway 35
Town), Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Condominium Community (Park MD 52-2002264 10 Highway 35
Place), Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Condominium Community (Quail MD 52-2002265 10 Highway 35
Run), Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Condominium Community (Truman MD 52-2002263 10 Highway 35
Drive), Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Consultants Corporation MD 52-0856601 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Designed Contracts, Inc. MD 52-0854124 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
1
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
EXC, Inc. DE 22-3178077 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Fortis Homes, Inc. NC 56-1477716 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Housing-Home Sales, Inc. MD 52-0846210 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Hovnanian at Tarpon Lakes I, Inc. FL 22-2436504 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Hovnanian Developments of FL 22-2416624 10 Highway 35
Florida, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Hovnanian Pennsylvania, Inc. PA 22-1097670 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hov A, Inc. NJ 22-2627859 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hov International, Inc. NJ 22-3188610 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Acquisitions, Inc. NJ 22-3406671 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Ashburn Village, VA 22-3178078 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Atlantic City, NJ 22-1945458 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Ballantrae FL 22-3409425 10 Highway 35
Estates, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
2
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Barrington, Inc. VA 22-3583846 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Bedminster II, NJ 22-3331038 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Bedminster, Inc. NJ 22-1945452 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Belmont, Inc. VA 22-3253529 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Bernards IV, Inc. NJ 22-3292171 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Branchburg III, NJ 22-2961099 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Bridgeport, Inc. CA 22-3547807 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Bridgewater IV, NJ 22-4049666 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Bridgewater V, NJ 22-2713924 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Bridgewater VI, NJ 22-3243298 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Bull Run, Inc. VA 22-3192910 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Burlington III, NJ 22-3412130 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
3
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Burlington, Inc. NJ 22-2949611 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Calabria, Inc. CA 22-3324654 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Cameron Chase, VA 22-3459993 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Carmel Del Mar, CA 22-3320550 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Carolina Country FL 22-3188607 10 Highway 35
Club I, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Carolina Country FL 22-3247085 10 Highway 35
Club II, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Carolina Country FL 22-3273706 10 Highway 35
Club III, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Castile, Inc. CA 22-3356308 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Cedar Grove I, NJ 22-2892342 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Cedar Grove II, NJ 22-2892341 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Chaparral, Inc. CA 22-3565730 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Clarkstown, Inc. NY 22-2618176 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
4
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Coconut Creek, FL 22-3275859 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Crestline, Inc. CA 22-3493450 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Crystal Springs, NJ 22-3406656 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Dominguez, Inc. CA 22-3602177 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Dominion Ridge, VA 22-3433318 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at East Brunswick VI, NJ 22-2892496 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at East Brunswick NJ 22-2776654 10 Highway 35
VIII, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at East Whiteland I, PA 22-3483220 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Exeter Hills, VA 22-3331043 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Fair Lakes Glen, VA 22-3261224 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Fair Lakes, VA 22-3249049 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Freehold NJ 22-2348977 10 Highway 35
Township, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
5
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Freehold Township NJ 22-2459186 10 Highway 35
I, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Ft. Myers I, Inc. FL 22-2652958 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Ft. Myers II, Inc. FL 22-2636393 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Great Notch, Inc. NJ 22-3330582 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Hackettstown, Inc. NJ 22-2765936 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Half Moon Bay, FL 22-2915380 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Hampton Oaks, VA 22-3583845 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Hanover, Inc. NJ 22-3133218 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Hershey's Mill, PA 22-3445102 10 Highway 35
Inc. (a PA Corp) P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Highland CA 22-3309241 10 Highway 35
Vineyards, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Holly Crest, Inc. VA 22-3214275 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Hopewell IV, Inc. NJ 22-3345622 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
6
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Hopewell V, Inc. NJ 22-3464499 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Hopewell VI, Inc. NJ 22-3465709 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Howell Township, NJ 22-2859308 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Hunter Estates, VA 22-3321100 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Jacksonville II, FL 22-2914590 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Jefferson, Inc. NJ 22-3427233 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Jersey City III, NJ 22-3016528 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Kings Grant I, NJ 22-2601064 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Klockner Farms, NJ 22-2572443 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at La Terraza, Inc. CA 22-3303807 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at La Trovata, Inc. CA 22-3369099 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Lakewood, Inc. NJ 22-2618178 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
7
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Lawrence V, Inc. NJ 22-3638073 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Lower Saucon II, PA 22-3602924 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Lower Saucon, PA 22-2961090 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Mahwah II, Inc. NJ 22-2859315 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Mahwah IV, Inc. NJ 22-3015286 10 Highway 35
(Whalepond) P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Mahwah IX, Inc. NJ 22-3337896 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Mahwah V, Inc. NJ 22-2868663 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Mahwah VI, Inc. NJ 22-3188612 10 Highway 35
(Norfolk) P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Mahwah VII, Inc. NJ 22-2592139 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Mahwah VIII, Inc. NJ 22-2246316 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Manalapan, Inc. NJ 22-2442998 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Manalapan III, NJ 22-3337896 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
8
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Marlboro II, Inc. NJ 22-2748659 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Marlboro NJ 22-3467252 10 Highway 35
Township IV, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Marlboro NJ 22-3791976 10 Highway 35
Township VI, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Marlboro NJ 22-3791977 10 Highway 35
Township VII, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Marlboro NJ 22-2847845 10 Highway 35
Township, III P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Medford I, Inc. NJ 22-3188613 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Merrimack, Inc. NH 22-2821914 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian of Metro DC South, VA 22-3583847 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Montclair NJ, NJ 22-2759221 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Montclair, Inc. VA 22-3188614 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Montgomery I, Inc. PA 22-3165601 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Newark Urban NJ 22-2885748 10 Highway 35
Renewal Corporation I, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
9
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Newark Urban NJ 22-3027957 10 Highway 35
Renewal Corporation IV, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Newark Urban NJ 22-3027960 10 Highway 35
Renewal Corporation V, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at North Bergen, NJ 22-2935352 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at North Brunswick NJ 22-3036037 10 Highway 35
IV, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Northern NY 22-2814372 10 Highway 35
Westchester, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Northlake, Inc. CA 22-3336696 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Ocean Walk, Inc. CA 22-3565732 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at P.C. Properties, VA 22-3583840 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Park Ridge, Inc. VA 22-3253530 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Pasco I, Inc. FL 22-2636392 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Pasco II, Inc. FL 22-2790300 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Peekskill, Inc. NY 22-2718071 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
10
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Pembroke Shores, FL 22-3273708 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Perkiomen I, Inc. PA 22-3094743 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Perkiomen II, Inc. PA 22-3301197 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Plainsboro III, NJ 22-3027955 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Polo Trace, Inc. FL 22-3284165 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Port Imperial NJ 22-3450185 10 Highway 35
North, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Princeton, Inc. NJ 22-3322125 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Rancho CA 22-3369102 10 Highway 35
Christianitos, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Raritan I, Inc. NJ 22-3326386 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Readington II, NJ 22-3085521 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Reservoir Ridge, NJ 22-2510587 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at River Oaks, Inc. VA 22-3199603 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
11
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at San Sevaine, Inc. CA 22-3493454 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Saratoga, Inc. CA 22-3547806 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Scotch Plains II, NJ 22-3464496 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Scotch Plains, NJ 22-2380821 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Seneca Crossing, MD 22-3331047 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Smithville, Inc. NJ 22-3418731 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Smithville III, NJ 22-2776387 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Somers Point, NJ 22-2765935 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at South Brunswick NJ 22-2458485 10 Highway 35
II, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at South Brunswick NJ 22-2652530 10 Highway 35
III, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at South Brunswick NJ 22-2859309 10 Highway 35
IV, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at South Brunswick NJ 22-2937570 10 Highway 35
V, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
12
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Spring Ridge, NJ 22-3192909 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Stone Canyon, CA 22-3512641 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Stonegate, Inc. CA 22-3582033 10 Highway 35
(a CA Corporation) P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Stonegate, Inc. VA 22-3481223 10 Highway 35
(a VA Corporation) P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Stony Point, Inc. NJ 22-2758195 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Stuart Road, Inc. VA 22-3312918 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Sully Station, VA 22-3188746 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Summerwood, Inc. VA 22-3583842 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Sycamore, Inc. CA 22-3493456 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Tannery Hill, NJ 22-3396608 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at The Bluff, Inc. NJ 22-1841019 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at The Cedars, Inc. NJ 22-3406664 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
13
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at The Glen, Inc. VA 22-3618411 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at the Reserve at NJ 22-2934223 10 Highway 35
Medford, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Thornbury, Inc. PA 22-3462983 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Tierrasanta, Inc. CA 22-3351875 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Tuxedo, Inc. NY 22-3516266 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Union Township I, NJ 22-3027952 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Upper Freehold NJ 22-3415873 10 Highway 35
Township I, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Upper Makefield PA 22-3302321 10 Highway 35
I, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Upper Merion, PA 22-3188608 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Vail Ranch, Inc. CA 22-3320537 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Valleybrook II, NJ 22-3252533 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Valleybrook, Inc. NJ 22-3057022 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
14
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Wall Township VI, NJ 22-2859303 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Wall Township NJ 22-3434643 10 Highway 35
VIII, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Washingtonville, NY 22-2717887 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Wayne III, Inc. NJ 22-2607669 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Wayne V, Inc. NJ 22-2790299 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Wayne VI, Inc. NJ 22-3367624 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Wayne VII, Inc. NJ 22-3464498 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Wildrose, Inc. CA 22-3312525 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Winston Trails, FL 22-3219184 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Woodmont, Inc. VA 52-1785667 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Companies Northeast, NJ 22-2445216 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Companies of CA 22-3301757 10 Highway 35
California, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
15
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Companies of FL 22-2349530 10 Highway 35
Florida, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Companies of MD 22-3331050 10 Highway 35
Maryland, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Companies of Metro VA 22-3169584 10 Highway 35
Washington, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Companies of New NY 22-2618171 10 Highway 35
York, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Companies of North NC 22-2765939 10 Highway 35
Carolina, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Companies of PA 22-2390174 10 Highway 35
Pennsylvania, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Companies of CA 22-3493449 10 Highway 35
Southern California, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Construction NJ 22-3406668 10 Highway 35
Management, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian's Design Gallery, CA 22-3301757 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Developments of CA 22-3303806 10 Highway 35
California, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Developments of MD 22-3331045 10 Highway 35
Maryland, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Developments of VA 22-3188615 10 Highway 35
Metro Washington, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
16
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Developments of NJ 22-2664563 10 Highway 35
New Jersey, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Developments of NY 22-2626492 10 Highway 35
New York, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Developments of SC 58-2659968 10 Highway 35
South Carolina, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Developments of TX 22-3685786 10 Highway 35
Texas, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Equities, Inc. NJ 21-0735206 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Florida Division, FL 22-318616 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Forecast CA 95-4892009 10 Highway 35
Acquisition, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Forecast Homes, Inc. CA 95-4892007 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Investment NJ 22-2541361 10 Highway 35
Properties of New Jersey, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Marine, Inc. NJ 22-3196910 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Port Imperial NJ 22-3027956 10 Highway 35
Urban Renewal, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Properties of East NJ 22-2593811 10 Highway 35
Brunswick II, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
17
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Properties of NB NJ 22-3406661 10 Highway 35
Theatre, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Properties of NJ 22-3017267 10 Highway 35
Newark Urban Renewal P.O. Box 500
Corporation, Inc. Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Properties of NJ 22-3002434 10 Highway 35
North Brunswick II, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Properties of NJ 22-2057907 10 Highway 35
North Brunswick V, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Properties of NJ 22-2859305 10 Highway 35
Piscataway, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Properties of Red NJ 22-3092532 10 Highway 35
Bank, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Properties of NJ 22-3244134 10 Highway 35
Wall, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Real Estate NJ 22-1945444 10 Highway 35
Investment, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Real Estate of FL 65-0215569 10 Highway 35
Florida, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Southeast Florida, FL 22-3331675 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Southeast Region, FL 22-3331674 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian's Four Seasons of FL 22-3618584 10 Highway 35
the Palm Beaches, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
18
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
KHC Acquisition, Inc. CA 22-3303802 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Kings Grant Evesham Corp. NJ 22-2445215 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Landarama, Inc. NJ 22-1978612 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Matzel & Mumford of Delaware, DE 22-3386728 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M & M at Long Branch, Inc. NJ 22-3359254 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
New K. Hovnanian Developments FL 58-2003324 10 Highway 35
of Florida, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Parthenon Group, Inc. NJ 22-2748658 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Pine Brook Co., Inc. NJ 22-1762833 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Que Corporation MD 52-1723878 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Reflections of You Interiors, TX 75-1967894 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Stonebrook Homes, Inc. CA 33-0553884 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
The Matzel & Mumford NJ 22-3670677 10 Highway 35
Organization, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
19
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
The New Fortis Corporation NC 56-1458833 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
The Southampton Corporation MD 52-0881406 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Tropical Service Builders, Inc. FL 59-1426699 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Washington Homes of Delaware, DE Inactive 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Washington Homes of West WV 54-1860514 10 Highway 35
Virginia, Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Washington Homes, Inc. DE 22-3774737 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Washington Homes, Inc. of VA 52-0898765 10 Highway 35
Virginia P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Westminster Homes (Charlotte), NC 52-1970973 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Westminster Homes of Tennessee, TN 52-1973363 10 Highway 35
Inc. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Westminster Homes, Inc. NC 52-1874680 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
WH Land I, Inc. MD 52-2073468 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
WH Land II, Inc. MD 52-1887626 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
20
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
WH Properties, Inc. MD 52-1955560 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Arbor West, L.L.C. MD 52-19555560 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at St. Margarets, MD 22-3688864 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Arbor Heights, CA 33-0890775 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Ashburn Village, MD 22-3681031 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Barnegat I, NJ 22-3804316 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Berkeley, NJ 22-3644632 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Bernards V, NJ 22-3618587 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Blooms Crossing, MD 22-3688865 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Blue Heron NJ 22-3630449 10 Highway 35
Pines, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Brenbrooke, L.L.C. VA 22-3683842 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Camden I, L.L.C. NJ 22-3845575 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
21
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Carmel Village, CA 52-2147831 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Cedar Grove III, NJ 22-3818491 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Chester I, L.L.C. NJ 22-3618347 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Clifton, L.L.C. NJ 22-3655976 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Columbia Town MD 22-3757772 10 Highway 35
Center, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Cranbury, L.L.C. NJ 22-3814347 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Curries Woods, NJ 22-3776466 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Denville, L.L.C. NJ Applied For 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Encinitas Ranch, CA 33-0890770 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Forecast, L.L.C. CA Applied For 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at 4S Ranch, L.L.C. CA 73-1638455 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Guttenberg, L.L.C. NJ 22-3653007 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
22
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Hamburg, L.L.C. NJ 22-3795544 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Hamburg NJ 22-3814175 10 Highway 35
Contractors, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Jackson, L.L.C. NJ 22-3630450 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Jersey City IV, NJ 22-3655974 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Kent Island, MD 22-3668315 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Kincaid, L.L.C. MD 22-3664456 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at King Farm, MD 22-3647924 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at LaFayette NJ 22-3658926 10 Highway 35
Estates, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Lake Ridge VA 22-3778537 10 Highway 35
Crossing, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Lake Terrapin, VA 22-3647920 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Lawrence V, NJ 22-3638073 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Linwood, L.L.C. NJ 22-3663731 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
23
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Little Egg NJ 22-3795535 10 Highway 35
Harbor, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Little Egg NJ 22-3832077 10 Highway 35
Harbor Contractors, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Lower Moreland I, PA 22-3785544 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Lower Moreland PA 22-3785539 10 Highway 35
II, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Lower Saucon II, PA 22-3602924 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Manalapan II, NJ Applied For 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Mansfield I, LLC NJ 22-3556345 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Mansfield II, NJ 22-3556346 10 Highway 35
LLC P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Mansfield III, NJ 22-3683839 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Marlboro NJ 22-3802594 10 Highway 35
Township VIII, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Marlboro VI, NJ 22-3791976 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Marlboro VII, NJ 22-3791977 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
24
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Menifee, L.L.C. CA 52-2147832 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Middletown, NJ 22-3630452 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Mt. Olive NJ 22-3813043 10 Highway 35
Township, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at North NJ 22-3627814 10 Highway 35
Brunswick VI, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at North Haledon, NJ 22-3770598 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Northampton, NJ 22-3785527 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Northfield, NJ 22-3665826 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Pacific Bluffs, TX 33-0890774 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Paramus, L.L.C. NJ 22-3687884 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Park Lane, L.L.C. CA 33-0896285 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Rancho Santa CA 33-0890773 10 Highway 35
Margarita, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Riverbend, CA 33-0890777 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
25
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Roderuck, L.L.C. MD 22-3756336 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Rowland Heights, CA 22-2147833 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Sayreville, NJ 22-3663105 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at South Amboy, NJ 22-3655682 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at South Bank, MD 22-3688868 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at South NJ 01-0618098 10 Highway 35
Brunswick, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Spring Hill MD 22-3688864 10 Highway 35
Road, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at St. Margarets, MD 33-0890768 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Sunsets, L.L.C. CA 33-0890769 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at the Gables, NC 22-3655975 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Upper Freehold NJ 22-3655975 10 Highway 35
Township II, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Upper Freehold NJ 22-3666680 10 Highway 35
Township III, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
26
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Wanaque, L.L.C. NJ 22-3743403 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Washington, NJ 22-3618348 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Wayne VIII, NJ 22-3618242 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Wayne IX, L.L.C. NJ 22-3828775 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at West Milford, NJ 22-3709105 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at West Windsor, NJ 52-2147836 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Willow Brook, MD 22-3556343 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Winchester, CA 52-2147836 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Woodhill NJ 01-0550781 10 Highway 35
Estates, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian at Woolwich, L.L.C. NJ 22-3828777 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Central DE 22-3556343 10 Highway 35
Acquisitions, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Companies of MD 22-3683159 10 Highway 35
Metro D.C. North, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
27
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Eastern PA 04-3630089 10 Highway 35
Pennsylvania, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Forecast, L.L.C. CA Applied For 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Four Seasons VA 22-3647925 10 Highway 35
@ Historic Virginia, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian North Central DE 22-3554986 10 Highway 35
Acquisitions, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian North Jersey DE 22-3556344 10 Highway 35
Acquisitions, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Shore DE 22-3556342 10 Highway 35
Acquisitions, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian South Jersey DE 22-3556341 10 Highway 35
Acquisition, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian Southern New NJ 01-0648280 10 Highway 35
Jersey, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian's Four Seasons, CA 52-2147837 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
K. Hovnanian's Private Home NJ 22-3766856 10 Highway 35
Portfolio, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Kings Court at Montgomery, NJ 22-3825046 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M&M at Apple Ridge, L.L.C. NJ 22-3824654 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
28
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
M&M at Brookhill, L.L.C. NJ 22-3824652 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M&M at Heritage Woods, L.L.C. NJ 22-3824650 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M&M at the Highlands, L.L.C. NJ 22-3824649 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M&M at East Mill, L.L.C. NJ 80-0036068 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M&M at Morristown, L.L.C. NJ 22-3834775 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M&M at Roosevelt, L.L.C. NJ Applied For 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M&M at Sheridan, L.L.C. NJ 22-3825357 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M&M at Sparta, L.L.C. NJ 22-3825057 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M&M at Spinnaker Pointe, L.L.C. NJ 22-3825041 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M&M at Spruce Hollow, L.L.C. NJ 22-3825064 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M&M at Spruce Meadows, L.L.C. NJ 22-3825036 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M&M at Spruce Run, L.L.C. NJ 22-3825037 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
29
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
Matzel & Mumford at Cranbury NJ 22-3569945 10 Highway 35
Knoll, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Matzel & Mumford at Freehold, NJ 22-3468991 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Matzel & Mumford at Heritage NJ 22-3575932 10 Highway 35
Landing, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Matzel & Mumford at Montgomery, NJ 22-3500542 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Matzel & Mumford at NJ 22-3619267 10 Highway 35
Phillipsburg, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Matzel & Mumford at South NJ 22-345834 10 Highway 35
Brunswick, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Matzel & Mumford at Woodland NJ 22-3575934 10 Highway 35
Crest, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Section 14 of the Hills, L.L.C. NJ 22-3330375 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
The Landings at Spinnaker NJ 22-3825041 10 Highway 35
Pointe, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Westminster Homes of Alabama, MD 63-1222540 10 Highway 35
L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Westminster Homes of MD 64-0907820 10 Highway 35
Mississippi, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Westminster Homes of South SC 58-2690293 10 Highway 35
Carolina, L.L.C. P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
30
<Page>
<Caption>
- ------------------------------------------------------------------------------------------------------------
ADDRESS INCLUDING ZIP CODE,
STATE OR OTHER AND TELEPHONE NUMBER
JURISDICTION OF INCLUDING AREA CODE,
EXACT NAME OF REGISTRANT INCORPORATION OR IRS EMPLOYER OF REGISTRANT'S PRINCIPAL
AS SPECIFIED IN ITS CHARTER ORGANIZATION IDENTIFICATION NUMBER EXECUTIVE OFFICES
- ------------------------------------------------------------------------------------------------------------
Goodman Family Builders, L.P. TX 75-2653675 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
M&M Investments, L.P. NJ 22-3685183 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
Washabama, L.P. AL 63-1231207 10 Highway 35
P.O. Box 500
Red Bank, New Jersey 07701
732-747-7800
- ------------------------------------------------------------------------------------------------------------
</Table>
31
<Page>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such state.
SUBJECT TO COMPLETION, DATED JUNE 6, 2002
PROSPECTUS
-------------------------------------
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-------------------------------------
$250,000,000
K. HOVNANIAN ENTERPRISES, INC.
OFFER TO EXCHANGE ALL OUTSTANDING
8.000% SENIOR NOTES DUE 2012
($100,000,000 AGGREGATE PRINCIPAL AMOUNT OUTSTANDING)
FOR 8.000% SENIOR NOTES DUE 2012
8.875% SENIOR SUBORDINATED NOTES DUE 2012
($150,000,000 AGGREGATE PRINCIPAL AMOUNT OUTSTANDING)
FOR 8.875% SENIOR SUBORDINATED NOTES DUE 2012
EACH REGISTERED UNDER THE SECURITIES ACT OF 1933
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON,
__________________ , 2002, UNLESS EXTENDED
----------------
The Exchange Offer The Exchange Notes
- - We will exchange all outstanding - The exchange notes are being
notes that are validly tendered offered in order to satisfy some
and not validly withdrawn for an of our obligations under
equal principal amount of registration rights agreements
exchange notes that are freely entered into in connection
tradeable. withthe placement of the
outstanding notes.
- - You may withdraw tenders of
outstanding notes at any time - The terms of the exchange
prior to the expiration date of notes to be issued in the
the exchange offer. exchange offer are
substantially identical to the
- - The exchange offer expires at outstanding notes, except that
5:00 p.m., New York City time, on the exchange notes will be
______, 2002, unless extended. freely tradeable.
We do not currently intend to
extend the expiration date. Resales of Exchange Notes
- - The exchange of outstanding - The exchange notes may be sold
notes for exchange notes in the in the over-the counter market,
exchange offer will not be a in negotiated transactions or
taxable event for U.S. federal through a combination of such
income tax purposes. methods. The exchange notes
will be eligible for trading in
- - We will not receive any proceeds The Portal (SM) Market.
from the exchange offer.
YOU SHOULD CONSIDER CAREFULLY THE "RISK FACTORS" BEGINNING ON PAGE 9 OF
THIS PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER.
Each broker-dealer that receives exchange notes for its own account in the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of those exchange notes. The letter of transmittal states that,
by so acknowledging and delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act.
<Page>
This prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of exchange notes
received in exchange for outstanding notes where the outstanding notes were
acquired by the broker-dealer as a result of market-making activities or other
trading activities.
We have agreed that, for a period of one year after the consummation of
this exchange offer, we will make this prospectus available to any broker-dealer
for use in connection with the resale of exchange notes. See "Plan of
Distribution".
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE EXCHANGE NOTES TO BE DISTRIBUTED
IN THE EXCHANGE OFFER OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This prospectus is dated , 2002.
<Page>
TABLE OF CONTENTS
<Table>
<Caption>
PAGE
PROSPECTUS SUMMARY.............................................................1
THE COMPANY....................................................................8
USE OF PROCEEDS................................................................8
RISK FACTORS...................................................................9
RATIO OF EARNINGS TO FIXED CHARGES............................................14
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION........................15
THE EXCHANGE OFFER............................................................18
DESCRIPTION OF THE EXCHANGE NOTES.............................................29
BOOK ENTRY; DELIVERY AND FORM.................................................88
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS......................92
PLAN OF DISTRIBUTION..........................................................92
FORWARD-LOOKING STATEMENTS....................................................92
LEGAL MATTERS.................................................................93
EXPERTS.......................................................................93
WHERE YOU CAN FIND MORE INFORMATION...........................................93
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...............................93
</Table>
------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
ANY INFORMATION THAT IS DIFFERENT. THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS
DOCUMENT IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION OF AN OFFER IN SUCH JURISDICTION.
THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE AS OF THE DATE OF THIS
DOCUMENT.
------------------------
i
<Page>
PROSPECTUS SUMMARY
THIS BRIEF SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THE PROSPECTUS. IT
MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. YOU SHOULD
CAREFULLY READ AND REVIEW THIS ENTIRE PROSPECTUS AND THE OTHER DOCUMENTS TO
WHICH WE REFER YOU. IN THIS PROSPECTUS, EXCEPT AS THE CONTEXT OTHERWISE
REQUIRES, REFERENCES TO "HOVNANIAN", "US", "WE", "OUR" OR THE "COMPANY" MEAN
HOVNANIAN ENTERPRISES, INC., A DELAWARE CORPORATION, TOGETHER WITH ITS
CONSOLIDATED SUBSIDIARIES, INCLUDING K. HOVNANIAN ENTERPRISES, INC., WHICH WE
REFER TO AS THE "ISSUER" OR "K. HOVNANIAN", A NEW JERSEY CORPORATION.
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
General....................... On March 26, 2002, K. Hovnanian completed a
private offering of the outstanding notes,
comprised of $100,000,000 aggregate principal
amount of its 8.000% Senior Notes due 2012 and
$150,000,000 aggregate principal amount of its
8.875% Senior Subordinated Notes due 2012. In
connection with the private offering, we
entered into registration rights agreements
with the initial purchasers in the private
offerings in which we agreed, among other
things, to deliver this prospectus to you and
to complete an exchange offer for the
outstanding notes.
Outstanding Notes............. $100,000,000 aggregate principal amount of
8.000% Senior Notes due 2012 and $150,000,000
aggregate principal amount of 8.875% Senior
Subordinated Notes due 2012, each of which
were issued on March 26, 2002.
Exchange Notes................ $100,000,000 aggregate principal amount of
8.000% Senior Notes due 2012 and $150,000,000
aggregate principal amount of 8.875% Senior
Subordinated Notes due 2012, each of which we
are offering in this exchange offer.
The Exchange Offer............ We are offering to exchange up to $100,000,000
aggregate principal amount of our 8.000%
Senior Notes due 2012, which have been
registered under the Securities Act, and up to
$150,000,000 aggregate principal amount of our
8.875% Senior Subordinated Notes due 2012,
which have been registered under the
Securities Act, in each case for a like
aggregate principal amount of the outstanding
notes. You may only exchange outstanding
notes in integral multiples of $1,000.
The terms of the exchange notes are identical
in all material respects to the terms of the
outstanding notes, except that the
registration rights, related liquidated
damages provisions and the transfer
restrictions, applicable to the outstanding
notes are not applicable to the exchange notes.
Subject to the satisfaction or waiver of
specified conditions, we will exchange the
applicable exchange notes for all outstanding
notes that are validly tendered and not
validly withdrawn prior to the expiration of
the exchange offer. We will cause the
exchange to be effected promptly after the
expiration of the exchange offer.
Upon completion of the exchange offer, there
may be no market for the outstanding notes and
you may have difficulty selling them.
Resales....................... Based on interpretations by the Securities and
Exchange Commission set forth in no-action
letters issued to third parties, we believe
that you may resell or otherwise transfer
exchange notes issued in the exchange offer
without complying with the registration and
prospectus delivery requirements of the
Securities Act, if:
1
<Page>
(1) you are not an affiliate of K. Hovnanian
within the meaning of Rule 405 under the
Securities Act;
(2) you are not engaged in, and do not intend
to engage in, a distribution of the exchange
notes;
(3) you do not have an arrangement or
understanding with any person to participate in
a distribution of the exchange notes; and
(4) you are acquiring the exchange notes in the
ordinary course of your business.
If you are an affiliate of K. Hovnanian, or are
engaging in, or intend to engage in, or have
any arrangement or understanding with any
person to participate in a distribution of the
exchange notes, or are not acquiring the
exchange notes in the ordinary course of your
business:
(1) you cannot rely on the position of the
Securities and Exchange Commission enunciated
in BROWN & WOOD LLP (available February 7,
1997), MORGAN STANLEY & CO. INCORPORATED
(available June 5, 1991), EXXON CAPITAL
HOLDINGS CORPORATION (available May 13, 1988),
as interpreted in the Securities and Exchange
Commission's letter to SHEARMAN & STERLING
dated July 2, 1993, or similar no-action
letters; and
(2) in the absence of an exception from the
position of the Securities and Exchange
Commission stated in (1) above, you must comply
with the registration and prospectus delivery
requirements of the Securities Act in
connection with any resale of the exchange
notes.
If you are a broker-dealer and receive exchange
notes for your own account in exchange for
outstanding notes that you acquired as a result
of market-making or other trading activities,
you must acknowledge that you will deliver this
prospectus in connection with any resale or
other transfer of the exchange notes that you
receive in the exchange offer.
Expiration Date............... The exchange offer will expire at 5:00 p.m.,
New York City time, on , 2002
unless extended by us. We do not currently
intend to extend the expiration date.
Withdrawal.................... You may withdraw the tender of your
outstanding notes at any time prior to the
expiration of the exchange offer. We will
return to you any of your outstanding notes
that are not accepted for any reason for
exchange, without expense to you, promptly
after the expiration or termination of the
exchange offer.
Interest on the Exchange Notes
and the Outstanding Notes..... Each exchange note will bear interest at the
applicable rate per annum set forth on the
cover page of this prospectus from the most
recent date to which interest has been paid on
the outstanding notes or, if no interest has
been paid on the outstanding notes, from
March 26, 2002. The applicable interest will
be payable semi-annually on each April 1 and
October 1, beginning October 1, 2002. No
interest will be paid on outstanding notes
following their acceptance for exchange.
Conditions to the Exchange
Offer........................... The exchange offer is subject to customary
conditions, which we may assert or waive. See
"The Exchange Offer--Conditions to the Exchange
Offer".
2
<Page>
Procedures for Tendering
Outstanding Notes............. If you wish to accept the exchange offer, you
must complete, sign and date the accompanying
letter of transmittal, or a facsimile of the
letter of transmittal, according to the
instructions contained in this prospectus and
the letter of transmittal. You must then mail
or otherwise deliver the letter of
transmittal, or a facsimile of the letter of
transmittal, together with the outstanding
notes and any other required documents, to the
exchange agent at the address set forth on the
cover page of the letter of transmittal. If
you hold outstanding notes through The
Depository Trust Company and wish to
participate in the exchange offer, you must
comply with the Automated Tender Offer Program
procedures of DTC, by which you will agree to
be bound by the letter of transmittal. By
signing, or agreeing to be bound by, the
letter of transmittal, you will represent to
us that, among other things:
(1) you are not an affiliate of K. Hovnanian
within the meaning of Rule 405 under the
Securities Act;
(2) you are not engaged in, and do not intend
to engage in, a distribution of the exchange
notes;
(3) you do not have an arrangement or
understanding with any person to participate in
a distribution of the exchange notes; and
(4) you are not acquiring the exchange notes in
the ordinary course of your business.
If you are an affiliate of K. Hovnanian, or are
engaging in, or intend to engage in, or have
any arrangement or understanding with any
person to participate in a distribution of the
exchange notes, or are not acquiring the
exchange notes in the ordinary course of your
business, you cannot rely on the applicable
interpretations of the Securities and Exchange
Commission and you must comply with the
registration and prospectus delivery
requirements of the Securities Act in
connection with any resale of the exchange
notes.
Special Procedures for If you are a beneficial owner of outstanding
Beneficial Owners............. notes that are registered in the name of a
broker, dealer, commercial bank, trust company
or other nominee, and you wish to tender those
outstanding notes in the exchange offer, you
should contact the registered holder promptly
and instruct the registered holder to tender
those outstanding notes on your behalf. If you
wish to tender on your own behalf, you must,
prior to completing and executing the letter of
transmittal and delivering your outstanding
notes, either make appropriate arrangements to
register ownership of the outstanding notes in
your name or obtain a properly completed bond
power from the registered holder. The transfer
of registered ownership may take considerable
time and may not be able to be completed prior
to the expiration date.
Guaranteed Delivery Procedures If you wish to tender your outstanding notes
and your outstanding notes are not immediately
available or you cannot deliver your
outstanding notes, the letter of transmittal
and any other required documents or you cannot
comply with the DTC procedures for book-entry
transfer prior to the expiration date, you
must tender your outstanding notes according
to the guaranteed delivery procedures set
forth in this prospectus under "The Exchange
Offer--Guaranteed Delivery Procedures".
3
<Page>
Effect on Holders of In connection with the sale of the outstanding
Outstanding Notes............. notes, we entered into registration rights
agreements with the initial purchasers of the
outstanding notes that grant the Holders of
outstanding notes registration rights. By
making this exchange offer, we will have
fulfilled most of our obligations under each of
the registration rights agreements.
Accordingly, we will not be obligated to pay
liquidated damages as described in each of the
registration rights agreements. If you do not
tender your outstanding notes in the exchange
offer, you will continue to be entitled to all
the rights and limitations applicable to the
outstanding notes as set forth in the
applicable indenture, except we will not have
any further obligation to you to provide for
the registration of the outstanding notes under
the applicable registration rights agreement.
To the extent that outstanding notes are
tendered and accepted in the exchange offer,
the trading market for outstanding securities
could be adversely affected.
Consequences of Failure to All untendered outstanding notes will continue
Exchange...................... to be subject to the restrictions on transfer
set forth in the outstanding notes and in the
indenture. In general, the outstanding notes
may not be offered or sold, unless registered
under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject
to, the Securities Act and applicable state
securities laws. Other than in connection with
this exchange offer, we do not currently
anticipate that we will register the
outstanding notes under the Securities Act.
Use of Proceeds............... We will not receive any cash proceeds from the
issuance of exchange notes in the exchange
offer.
Exchange Agent................ Wachovia Bank, N.A. (formerly known as First
Union National Bank) whose address and
telephone number is set forth in the section
captioned "The Exchange Offer--Exchange Agent"
of this prospectus, is the exchange agent for
the exchange offer.
4
<Page>
SUMMARY OF THE TERMS OF THE EXCHANGE NOTES
The terms of the exchange notes are identical in all material respects to
the terms of the outstanding notes, except that the registration rights, related
liquidated damages provisions and the transfer restrictions applicable to the
outstanding notes are not applicable to the exchange notes. The exchange notes
will evidence the same debt as the outstanding notes. The exchange 8.000% Senior
Notes due 2012 will be governed by the indenture under which the outstanding
8.000% Senior Notes due 2012 were issued. The exchange 8.875% Senior
Subordinated Notes due 2012 will be governed by the indenture under which the
outstanding 8.875% Senior Subordinated Notes due 2012 were issued. Except where
the context requires otherwise, references in this prospectus to "notes" or
"securities" are references to both outstanding notes and exchange notes.
THE EXCHANGE NOTES
8.000% SENIOR NOTES DUE 2012
Issuer........................ K. Hovnanian Enterprises, Inc.
Notes Offered................. We are offering $100,000,000 aggregate
principal amount of 8.000% Senior Notes due
2012.
Maturity Date................. April 1, 2012.
Interest Payment Dates........ Each April 1 and October 1, beginning October
1, 2002.
Optional Redemption........... We may redeem any or all of the notes at any
time on or after April 1, 2007 at the
redemption prices described in this
prospectus, plus accrued and unpaid interest.
See "Description of the Exchange Notes -
8.000% Senior Notes due 2012" under the
heading "--Redemption".
Change of Control............. Upon a change of control as described in the
section "Description of the Exchange Notes -
8.000% Senior Notes due 2012", you will have
the right to require us to purchase some or
all of your notes at 101% of the principal
amount, plus accrued and unpaid interest to
the date of purchase. We can give no assurance
that, upon such an event, we will have
sufficient funds to purchase any of your notes.
Guarantees ................... The guarantors are Hovnanian Enterprises,
Inc., the parent corporation of the Issuer,
and most of the parent's existing and future
restricted subsidiaries. If the Issuer cannot
make payments on the notes when they are due,
the guarantors must make them instead.
Ranking ...................... These notes are our general obligations and
will not be secured by any collateral. Your
right to payment under these notes will be:
o junior to the rights of our secured
creditors to the extent of their security
in our assets;
o equal with the rights of creditors under our
other unsecured senior debt, including our
Revolving Credit Facility and Term Loan
Facility; and
o senior to the rights of creditors under debt
that is expressly subordinated to these
notes.
The guarantee of the notes of each of the
guarantors will also not be secured by any
collateral. Your right to payment under any
guarantee will be:
5
<Page>
o junior to the rights of secured creditors
to the extent of their security in the
guarantors' assets;
o equal with the rights of creditors under
the guarantors' other unsecured senior
debt; and
o senior to the rights of creditors under the
guarantors' debt that is expressly
subordinated to the guarantee.
8.875% Senior Subordinated Notes due 2012
Issuer........................ K. Hovnanian Enterprises, Inc.
Notes Offered ................ We are offering $150,000,000 aggregate
principal amount of 8.875% Senior Subordinated
Notes due 2012.
Maturity Date................. April 1, 2012.
Interest Payment Dates........ Each April 1 and October 1, beginning October
1, 2002.
Optional Redemption........... We may redeem any or all of the notes at any
time on or after April 1, 2007 at the
redemption prices described in this
prospectus, plus accrued and unpaid interest.
See "Description of the Exchange Notes -
8.875% Senior Subordinated Notes due 2012"
under the heading "Redemption".
Change of Control............. Upon a change of control as described in the
section "Description of the Exchange Notes -
8.875% Senior Subordinated Notes due 2012",
you will have the right to require us to
purchase some or all of your notes at 101% of
the principal amount, plus accrued and unpaid
interest to the date of purchase. We can give
no assurance that, upon such an event, we will
have sufficient funds to purchase any of your
notes.
Guarantees.................... The guarantors are Hovnanian Enterprises,
Inc., the parent corporation of the Issuer,
and most of the parent's existing and future
restricted subsidiaries. If the Issuer can not
make payments on the notes when they are due,
the guarantors must make the payments instead.
Ranking....................... These notes are our general obligations and
will not be secured by any collateral. Your
right to payment under these notes will be:
o junior to the rights of our secured
creditors to the extent of their security
in our assets;
o junior in right of payment to all our
existing and future senior debt, including
the 8.000% Senior Notes due 2012;
o equal with the rights of creditors under
our other unsecured senior subordinated
debt; and
o senior to the rights of creditors under the
debt expressly subordinated to these notes.
The guarantee of the notes of each of the
guarantors will also not be secured by any
collateral. Your right to payment under any
guarantee will be:
o junior to the rights of secured creditors
to the extent of their security in the
guarantors' assets;
o junior to the rights of creditors under the
guarantors' unsecured senior debt;
o equal with the rights of creditors under
the guarantors' other unsecured senior
subordinated debt; and
6
<Page>
o senior to the rights of creditors under the
guarantors' debt that is expressly
subordinated to the guarantee.
See the section "Description of the Exchange
Notes - 8.875% Senior Subordinated Notes due
2012" under the headings "--Ranking" and
"--Subordination."
THE NOTES GENERALLY
Certain Covenants............. The indentures governing the notes will, among
other things, restrict our ability and the
ability of the guarantors to:
o borrow money;
o pay dividends on our common stock;
o repurchase our common stock;
o make investments in subsidiaries that
are not restricted;
o sell certain assets;
o incur certain liens;
o merge with or into other companies; and
o enter into certain transactions with our
affiliates.
For more details, see the section "Description
of the Exchange Notes - 8.000% Senior Notes due
2012" and "Description of the Exchange Notes -
8.875% Senior Subordinated Notes due 2012",
each under the heading "--Certain Covenants".
Use of Proceeds............... K. Hovnanian will not receive any proCeeds
from the exchange offer. For a description of
the use of proceeds from the private offering
of outstanding securities, see "Use of
Proceeds".
7
<Page>
THE COMPANY
Hovnanian was originally incorporated in New Jersey in 1967 as successor
to a business founded in 1959 by Kevork S. Hovnanian and became a Delaware
corporation in August 1983. K. Hovnanian was incorporated under the laws of the
State of New Jersey on November 1, 1982, as an indirect wholly-owned
consolidated subsidiary of Hovnanian. K. Hovnanian functions as a management
company for the operating subsidiaries of Hovnanian and borrows funds which it
lends to such subsidiaries. K. Hovnanian has essentially no independent
operations and generates no operating revenues. Both Hovnanian's executive
offices and K. Hovnanian's principal executive offices are located at 10 Highway
35, P.O. Box 500, Red Bank, New Jersey 07701, and their telephone number is
(732) 747-7800.
We design, construct and market high quality single-family detached homes
and attached condominium apartments and townhouses in planned residential
developments in the Northeast, primarily in New Jersey, southern New York state
and eastern Pennsylvania, North Carolina, Metro D.C., which includes northern
Virginia and Maryland, California, Texas, Tennessee, Alabama and Mississippi and
provide mortgage banking and title insurance activities to our homebuilding
customers. We market our homes to first-time buyers, first-time and second-time
move-up buyers, luxury buyers, active adult buyers and empty nesters. We offer a
variety of homestyles in the United States at prices ranging from $43,000 to
$950,000 with an average sales price in fiscal 2001 of $255,000. We are
currently offering homes for sale in 172 communities. Since the incorporation of
our predecessor company in 1959, we have delivered in excess of 106,000 homes,
including 6,791 homes in fiscal 2001.
Over the past few years, our strategies have included several initiatives
to fundamentally transform our traditional practices used to design, build and
sell homes and focus on "building better." We believe that the adoption and
implementation of processes and systems successfully used in other manufacturing
industries, such as rapid cycle times, vendor consolidation, vendor partnering
and just-in-time material procurement, will dramatically improve our business
and give us a clear advantage over our competitors. Our concentration in
selected markets is a key factor that enables us to achieve powers and economies
of scale and differentiate ourselves from most of our competitors. These
performance enhancing strategies are designed to achieve operational excellence
through the implementation of standardized and streamlined "best practice
processes."
USE OF PROCEEDS
The exchange offer is intended to satisfy our obligations under the
registration rights agreements that we entered into in connection with the
private offering of the outstanding notes. We will not receive any cash proceeds
from the issuance of the exchange notes in the exchange offer. As consideration
for issuing the exchange notes as contemplated in this prospectus, we will
receive in exchange a like principal amount of outstanding notes, the terms of
which are identical in all material respects to the exchange notes. The
outstanding notes that are surrendered in exchange for the exchange notes will
be retired and cancelled and cannot be reissued. As a result, the issuance of
the exchange notes will not result in any increase or decrease in our
capitalization.
We used the net proceeds from the private offering of the outstanding
notes to refund all of our outstanding debt under our 9 3/4% Subordinated Notes
due 2005, repay a portion of our Term Loan Facility and repay the currently
outstanding indebtedness under our Revolving Credit Facility, and the remainder
for general corporate purposes.
8
<Page>
RISK FACTORS
In addition to the other matters described in this prospectus, you should
carefully consider the following risk factors.
IF YOU DO NOT PARTICIPATE IN THE EXCHANGE OFFER, YOU WILL CONTINUE TO BE SUBJECT
TO TRANSFER RESTRICTIONS.
If you do not exchange your outstanding notes in the exchange offer, you
will continue to be subject to restrictions on transfer of your outstanding
notes. We did not register the outstanding notes under the federal or any state
securities laws and we do not intend to register them following the exchange
offer. As a result, you generally may not offer or sell the outstanding notes
except under an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. In addition, to the extent
outstanding notes are tendered and accepted in the exchange offer, the trading
market, if any, for the outstanding notes would be adversely affected. As a
result, after the exchange offer, you may have difficulty selling your
outstanding notes.
YOU MUST FOLLOW THE EXCHANGE OFFER PROCEDURES CAREFULLY IN ORDER TO RECEIVE THE
EXCHANGE NOTES.
If you do not follow the procedures described herein, you will not receive
exchange notes. The exchange notes will be issued to you in exchange for your
outstanding notes only after timely receipt by the exchange agent of:
o your outstanding notes and either:
o a properly completed and executed letter of transmittal and
all other required documents; or
o a book-entry delivery by electronic transmittal of an agent's
message through DTC.
If you want to tender your outstanding notes in exchange for exchange
notes, you should allow sufficient time to ensure timely delivery. No one is
under any obligation to give you notification of defects or irregularities with
respect to tenders of outstanding notes for exchange. For additional
information, please refer to the sections captioned "The Exchange Offer" and
"Plan of Distribution" in this prospectus.
LEVERAGE PLACES BURDENS ON OUR ABILITY TO COMPLY WITH THE TERMS OF OUR
INDEBTEDNESS, MAY RESTRICT OUR ABILITY TO OPERATE AND MAY PREVENT US FROM
FULFILLING OUR OBLIGATIONS UNDER THESE NOTES.
We have a significant amount of debt. As of January 31, 2002, our
consolidated debt was $676.3 million. The private offerings did not reduce, and
in the short-term increased, our debt. The amount of our debt could have
important consequences to you. For example, it could:
o limit our ability to obtain future financing for working capital,
capital expenditures, acquisitions, debt service requirements or
other requirements;
o require us to dedicate a substantial portion of our cash flow from
operations to the payment on our debt and reduce our ability to use
our cash flow for other purposes;
o limit our flexibility in planning for, or reacting to, changes in
our business;
o place us at a competitive disadvantage because we have more debt
than some of our competitors; and
o make us more vulnerable in the event of a downturn in our business
or in general economic conditions.
Our ability to meet our debt service and other obligations will depend
upon our future performance. We are engaged in businesses that are substantially
affected by changes in economic cycles. Our revenues and earnings vary with the
level of general economic activity in the markets we serve. Our businesses are
also affected by financial, political, business and other factors, many of which
are beyond our control. The factors that affect our ability to generate cash can
also affect our ability to raise additional funds for these purposes through the
sale of equity securities, the refinancing of debt, or the sale of assets.
Changes in prevailing interest rates may affect our ability to meet our debt
service obligations, because borrowings under our revolving credit facilities
bear interest at floating rates. A higher interest rate on our debt service
obligations could result in lower earnings.
Our business may not generate sufficient cash flow from operations and
borrowings may not be available to us under our revolving credit facilities in
an amount sufficient to enable us to pay our indebtedness, including these
9
<Page>
notes, or to fund our other liquidity needs. We may need to refinance all or a
portion of our debt, including these notes, on or before maturity, which we may
not be able to do on favorable terms or at all.
The indentures governing these notes and our other outstanding debt, our
Term Loan and our revolving credit facilities impose restrictions on our
operations and activities. The most significant restrictions relate to debt
incurrence, sales of assets and cash distributions by us and require us to
comply with certain financial covenants listed in those debt, Term Loan and
revolving credit facilities. If we fail to comply with any of these restrictions
or covenants, the trustees or the banks, as appropriate, could cause our debt to
become due and payable prior to maturity.
THE HOMEBUILDING INDUSTRY IS SIGNIFICANTLY AFFECTED BY CHANGES IN GENERAL AND
LOCAL ECONOMIC CONDITIONS, REAL ESTATE MARKETS AND WEATHER CONDITIONS, WHICH
COULD AFFECT OUR ABILITY TO BUILD HOMES AT PRICES OUR CUSTOMERS ARE WILLING OR
ABLE TO PAY, COULD REDUCE PROFITS THAT MAY NOT BE RECAPTURED AND COULD RESULT IN
CANCELLATION OF SALES CONTRACTS.
The homebuilding industry is cyclical, has from time to time experienced
significant difficulties and is significantly affected by changes in general and
local economic conditions, such as:
o employment levels and job growth;
o availability of financing for home buyers;
o interest rates;
o consumer confidence; and
o housing demand.
An oversupply of alternatives to new homes, such as rental properties and
used homes, could depress prices and reduce margins for the sale of new homes.
Weather conditions and natural disasters such as hurricanes, tornadoes,
earthquakes, floods and fires, can harm the local homebuilding business.
The difficulties described above could cause us to take longer and incur
more costs to build our homes. We may not be able to recapture increased costs
by raising prices in many cases because we fix our prices up to twelve months in
advance of delivery by signing home sales contracts. In addition, some home
buyers may cancel or not honor their home sales contracts altogether.
OUR SUCCESS DEPENDS ON THE AVAILABILITY OF SUITABLE UNDEVELOPED LAND AND
IMPROVED LOTS AT ACCEPTABLE PRICES.
Our success in developing land and in building and selling homes depends
in part upon the continued availability of suitable undeveloped land and
improved lots at acceptable prices. The availability of undeveloped land and
improved lots for purchase at favorable prices depends on a number of factors
outside of our control, including the risk of competitive over-bidding on land
on lots and restrictive governmental regulation. Should suitable land
opportunities become less available, the number of homes we may be able to build
and sell would be reduced, which would reduce revenue and profits.
CHANGES IN ECONOMIC AND MARKET CONDITIONS COULD RESULT IN THE SALE OF HOMES AT A
LOSS OR HOLDING LAND IN INVENTORY LONGER THAN PLANNED, THE COST OF WHICH CAN BE
SIGNIFICANT.
Land inventory risk can be substantial for homebuilders. We must
continuously seek and make acquisitions of land for expansion into new markets
and for replacement and expansion of land inventory within our current markets.
The market value of undeveloped land, buildable lots and housing inventories can
fluctuate significantly as a result of changing economic and market conditions.
In the event of significant changes in economic or market conditions, we may
have to sell homes at a loss or hold land in inventory longer than planned.
Inventory carrying costs can be significant and can result in losses in a poorly
performing project or market.
HOME PRICES AND SALES ACTIVITY IN THE NORTHEAST AND MID-ATLANTIC MARKETS HAVE A
LARGE IMPACT ON OUR PROFITABILITY BECAUSE WE CONDUCT A SIGNIFICANT PORTION OF
OUR BUSINESS IN THESE MARKETS.
We presently conduct a significant portion of our business in the
Northeast and mid-Atlantic markets. Home prices and sales activity in the
Northeast and mid-Atlantic, including in some of the markets in which we
operate, have declined from time to time, particularly as a result of slow
economic growth. If home prices and sales
10
<Page>
activity decline in one or more of the markets in which we operate, our costs
may not decline at all or at the same rate and profits may be reduced.
BECAUSE ALMOST ALL OF OUR CUSTOMERS REQUIRE MORTGAGE FINANCING, INCREASES IN
INTEREST RATES COULD IMPAIR THE AFFORDABILITY OF OUR HOMES, LOWER DEMAND FOR OUR
PRODUCTS, LIMIT OUR MARKETING EFFECTIVENESS, AND LIMIT OUR ABILITY TO FULLY
REALIZE OUR BACKLOG.
Virtually all our customers finance their acquisitions through lenders
providing mortgage financing. Increases in interest rates or decreases in
availability of mortgage financing could lower demand for new homes because of
the increased monthly mortgage costs to potential home buyers. Even if potential
customers do not need financing, changes in interest rates and mortgage
availability could make it harder for them to sell their existing homes to
potential buyers who need financing. This could prevent or limit our ability to
attract new customers as well as our ability to fully realize our backlog
because our sales contracts generally include a financing contingency. Financing
contingencies permit the customer to cancel his obligation in the event mortgage
financing at prevailing interest rates, including financing arranged or provided
by us, is unobtainable within the period specified in the contract. This
contingency period is typically four to eight weeks following the date of
execution.
In addition, we believe that the availability of FNMA, FHLMC, FHA and VA
mortgage financing is an important factor in marketing many of our homes. Any
limitations or restrictions on the availability of those types of financing
could reduce our sales.
HOMEBUILDERS ARE SUBJECT TO A NUMBER OF FEDERAL, LOCAL, STATE AND FOREIGN LAWS
AND REGULATIONS CONCERNING THE DEVELOPMENT OF LAND, THE HOMEBUILDING PROCESS AND
PROTECTION OF THE ENVIRONMENT, WHICH CAN CAUSE US TO INCUR DELAYS, COSTS
ASSOCIATED WITH COMPLIANCE AND PROHIBIT OR RESTRICT ACTIVITY IN SOME REGIONS OR
AREAS.
We are subject to extensive and complex regulations that affect the
development and homebuilding process, including zoning, density and building
standards. These regulations often provide broad discretion to the administering
governmental authorities. This can delay or increase the cost of development or
homebuilding.
We also are subject to a variety of local, state, federal and foreign laws
and regulations concerning protection of health and the environment. The
particular environmental laws which apply to any given community vary greatly
according to the community site, the site's environmental conditions and the
present and former uses of the site. These environmental laws may result in
delays, may cause us to incur substantial compliance, remediation, and/or other
costs, and can prohibit or severely restrict development and homebuilding
activity in certain environmentally sensitive regions or areas.
It can be anticipated that increasingly stringent requirements will be
imposed on developers and homebuilders in the future. Although we cannot predict
the effect of these requirements, they could result in time-consuming and
expensive compliance programs and in substantial expenditures, which could cause
delays and increase our cost of operations. In addition, the continued
effectiveness of permits already granted or approvals already obtained is
dependent upon many factors, some of which are beyond our control, such as
changes in policies, rules and regulations and their interpretation and
application.
WE COMPETE ON SEVERAL LEVELS WITH HOMEBUILDERS THAT MAY HAVE GREATER SALES AND
FINANCIAL RESOURCES, WHICH COULD HURT FUTURE EARNINGS.
We compete not only for home buyers, but also for desirable properties,
financing, raw materials and skilled labor often within larger subdivisions
designed, planned and developed by other homebuilders. Our competitors include
other local regional and national homebuilders, some of which have greater sales
and financial resources.
The competitive conditions in the homebuilding industry could result in:
o difficulty in acquiring suitable land at acceptable prices;
o increased selling incentives;
o lower sales; or
o delays in construction.
Any of these problems could increase costs and/or lower profit margins.
11
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WE MAY HAVE DIFFICULTY IN OBTAINING THE ADDITIONAL FINANCING REQUIRED TO OPERATE
AND DEVELOP OUR BUSINESS.
Our operations require significant amounts of cash, and we will be
required to seek additional capital, whether from sales of equity or borrowing
more money, for the future growth and development of our business. The terms or
availability of additional capital is uncertain. Moreover, the indentures for
our outstanding debt, including these notes, contain provisions that may
restrict the debt we may incur in the future. If we are not successful in
obtaining sufficient capital, it could reduce our sales and may hinder our
future growth and results of operations.
OUR FUTURE GROWTH MAY INCLUDE ADDITIONAL ACQUISITIONS THAT MAY NOT BE
SUCCESSFULLY INTEGRATED AND MAY NOT ACHIEVE EXPECTED BENEFITS.
Although we have not recently announced any acquisitions or mergers, other
than the Forecast acquisition, which closed on January 10, 2002, in the future
we may acquire other businesses. As a result of these acquisitions, we may need
to integrate product lines, dispersed operations and distinct corporate
cultures. These integration efforts may not succeed or may distract our
management from operating our existing business. Additionally, we may not be
able to enhance our earnings as a result of acquisitions. Our failure to
successfully manage future acquisitions could harm our operating results.
EXERCISE OF CHANGE OF CONTROL RIGHTS--WE MAY NOT HAVE THE ABILITY TO RAISE FUNDS
NECESSARY TO FINANCE ANY CHANGE OF CONTROL OFFER REQUIRED BY THE INDENTURES.
If a change of control occurs as described in the sections "Description of
the Exchange Notes - 8.000% Senior Notes due 2012" and "Description of the
Exchange Notes - 8.875% Senior Subordinated Notes 2012", each under the heading
"Certain Covenants", we would be required to offer to purchase your Senior Notes
or Senior Subordinated Notes at 101% of their principal amount together with all
accrued and unpaid interest and liquidated damages, if any. If a purchase offer
obligation arises under the indenture governing your series of notes, a change
of control will have also occurred under one or more of the other indentures
governing our debt. If a purchase offer were required under the indentures for
our debt, we may not have sufficient funds to pay the purchase price for all
debt that we are required to repurchase or repay. After giving effect to these
offerings, we would not have sufficient funds available to purchase all of such
outstanding debt.
AN ACTIVE TRADING MARKET MAY NOT DEVELOP FOR THE EXCHANGE NOTES.
The exchange notes are a new issue of securities. There is no active
public trading market for the exchange notes. We do not intend to apply for
listing of the exchange notes on a security exchange. The liquidity of the
trading market in the exchange notes, and the market prices quoted for the
exchange notes, may be adversely affected by changes in the overall market for
these types of securities and by changes in our financial performance or
prospects or in the prospects for companies in our industry generally. As a
consequence, an active trading market may not develop for your exchange notes,
you may not be able to sell your exchange notes, or, even if you can sell your
exchange notes, you may not be able to sell them at an acceptable price.
FEDERAL AND STATE LAWS ALLOW COURTS, UNDER SPECIFIC CIRCUMSTANCES, TO VOID
GUARANTEES AND TO REQUIRE YOU TO RETURN PAYMENTS RECEIVED FROM GUARANTORS.
Although you will be direct creditors of the guarantors by virtue of the
guarantees, existing or future creditors of any guarantor could avoid or
subordinate such guarantor's guarantee under the fraudulent conveyance laws if
they were successful in establishing that:
o the guarantee was incurred with fraudulent intent; or
o the guarantor did not receive fair consideration or reasonably
equivalent value for issuing its guarantee and
1) was insolvent at the time of the guarantee;
2) was rendered insolvent by reason of the guarantee;
3) was engaged in a business or transaction for which its assets
constituted unreasonably small capital to carry on its
business; or
4) intended to incur, or believed that it would incur, debt
beyond its ability to pay such debt as it matured.
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The measures of insolvency for purposes of determining whether a
fraudulent conveyance occurred vary depending upon the laws of the relevant
jurisdiction and upon the valuation assumptions and methodology applied by the
court. Generally, however, a company would be considered insolvent for purposes
of the foregoing if:
o the sum of the company's debts, including contingent, unliquidated
and unmatured liabilities, is greater than all of such company's
property at a fair valuation; or
o if the present fair saleable value of the company's assets is less
than the amount that will be required to pay the probable liability
on its existing debts as they become absolute and matured.
13
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RATIO OF EARNINGS TO FIXED CHARGES
For purposes of computing the ratio of earnings to fixed charges, earnings
consist of earnings (loss) from continuing operations before income taxes,
minority interest, extraordinary items and cumulative effect of accounting
changes, plus fixed charges less interest capitalized. Fixed charges consist
of all interests incurred plus the amortization of debt issuance costs and bond
discount.
The following table sets forth the ratio of earnings to fixed charges for
Hovnanian for each of the periods indicated.
<Table>
<Caption>
THREE MONTHS
ENDED JANUARY 31, YEAR ENDED OCTOBER 31,
2002 --------------------------------
----------------- 2001 2000 1999 1998 1997
Ratio of earnings to fixed charges.... 3.5 3.1 2.2 3.0 2.5 (a)
</Table>
(a) No ratio is presented for the year ended October 31, 1997 as the earnings
for such period were insufficient to cover fixed charges by $9,197,000.
14
<Page>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following selected historical consolidated financial information for
the years ended October 31, 2001, 2000, 1999, 1998 and 1997 have been derived
from the audited consolidated financial statements of Hovnanian Enterprises,
Inc. The financial data for the three month periods ended January 31, 2002 and
2001 have been derived from unaudited financial statements. The unaudited
financial statements include all adjustments, consisting of normal recurring
accruals, which Hovnanian Enterprises, Inc. considers necessary for a fair
presentation of the financial position and the results of operations for these
periods. Operating results for the three months ended January 31, 2002 are not
necessarily indicative of the results that may be expected for the entire year
ending October 31, 2002. The data should be read in conjunction with the
consolidated financial statements, related notes, and other financial
information incorporated by reference herein.
<Table>
<Caption>
THREE MONTHS YEAR ENDED OCTOBER 31,
ENDED JANUARY 31, ----------------------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
---------- ---------- ---------- ----------- ----------- ----------- ---------
(unaudited)
($ in thousands, except average selling prices)
Income Statement Data
------------------------------------------------------------------------------------------
Total revenues $ 454,252 $ 293,188 $ 1,741,9 $ 1,135,5 $ 948,287 $ 941,947 $ 784,136
==========================================================================================
Home and land sale revenues (1) $ 443,519 $ 286,571 $ 1,705,0 $ 1,112,0 $ 920,324 $ 904,280 $ 754,662
Cost of Sales 351,673 225,735 1,355,354 880,463 729,719 748,941 634,317
Inventory impairment loss (2) 905 174 4,368 1,791 2,091 3,994 14,019
------------------------------------------------------------------------------------------
Homebuilding gross margin 90,941 60,662 345,351 229,761 188,514 151,345 106,326
Selling, general and
administrative expenses 37,649 28,225 140,126 104,771 81,396 67,519 62,475
Corporate general and
administrative expenses 10,876 9,878 44,278 33,309 28,652 21,048 15,088
Home and land interest expense 13,702 9,505 51,446 34,956 29,175 32,151 30,467
Income (loss) from financial
services 3,628 1,758 9,985 (426) 1,059 2,099 (69)
Income (loss) from investment
properties -- -- -- -- (1,373) 4,406 (11,906)
Other (loss) income (net of other
operations) (2,545) (3,252) (13,132) (4,481) 1,640 4,160 1,555
------------------------------------------------------------------------------------------
Income (loss) before income taxes and
extraordinary loss 29,797 11,560 106,354 51,818 50,617 41,292 (12,124)
State and federal income taxes
(benefit) 11,636 4,637 42,668 18,655 19,674 15,141 (5,154)
------------------------------------------------------------------------------------------
Income (loss) before extraordinary
loss 18,161 6,923 63,686 33,163 30,943 26,151 (6,970)
Extraordinary loss from
extinguishment of debt net of taxes -- -- -- -- (868) (748) --
------------------------------------------------------------------------------------------
Net Income (loss) $ 18,161 $ 6,923 $ 63,686 $ 33,163 $ 30,075 $ 25,403 $ (6,970)
==========================================================================================
Selected Operating Data
New homes delivered:
Northeast Region 421 427 1,860 1,939 2,063 2,530 2,128
Metro D.C 263 162 1,294 263 198 152 70
Texas 237 177 1,003 914 66 -- --
North Carolina 298 180 1,449 653 756 687 695
California 440 106 760 480 514 457 365
15
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<Caption>
THREE MONTHS YEAR ENDED OCTOBER 31,
ENDED JANUARY 31, ----------------------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
---------- ---------- ---------- ----------- ----------- ----------- ---------
(unaudited)
($ in thousands, except average selling prices)
Mid South 85 22 290 -- -- -- --
Florida 1 17 44 74 159 241 418
Other 5 31 91 44 12 71 41
------------------------------------------------------------------------------------------
Total 1,750 1,122 6,791 4,367 3,768 4,138 3,717
==========================================================================================
Net sales contracts:
New homes delivered:
Northeast Region 393 479 1,871 1,963 1,885 2,375 2,438
Metro D.C 263 130 1,253 329 232 170 73
Texas 193 175 984 935 25 -- --
North Carolina 286 233 1,466 661 728 690 694
California 301 182 781 502 524 439 456
Mid South 71 29 313 -- -- -- --
Florida 1 -- -- 82 123 164 351
Other 2 22 54 70 18 39 61
------------------------------------------------------------------------------------------
Total 1,510 1,250 6,722 4,542 3,535 3,877 4,073
==========================================================================================
Backlog at period end:
Number of homes 3,328 3,230 3,033 2,096 1,921 1,681 1,872
Dollar value using base prices $ 853,036 $ 795,229 $ 773,074 $ 538,546 $ 460,660 $ 381,816 $ 374,314
Average selling price for delivered
homes $ 253,199 $ 252,589 $ 249,406 $ 253,141 $ 241,123 $ 216,444 $ 196,881
Other data:
Gross Margin percentage (3) 20.7% 21.4% 20.6% 20.7% 21.0% 17.3% 15.6%
EBITDA (4) $ 46,698 $ 24,103 $ 175,072 $ 98,172 $ 91,277 $ 90,268 $ 59,312
Ratio of EBITDA to interest
incurred (5) 4.1x 2.1x 3.7x 2.5x 3.7x 3.1x 1.7x
Ratio of total debt to EBITDA N/A N/A 2.3x 4.3x 3.6x 2.5x 5.5x
Balance sheet data:
Housing inventories $ 939,830 $ 765,112 $ 740,114 $ 614,983 $ 527,121 $ 375,733 $ 410,393
Total assets 1,330,316 1,040,565 1,064,258 873,541 712,861 589,102 637,082
Total debt (6) 612,464 536,224 410,034 418,150 330,194 229,065 328,696
Stockholders equity 439,741 318,991 375,646 263,359 236,426 201,392 178,762
</Table>
(1) Land sales for the periods presented were $421,000 for the three months
ended January 31, 2002, $3,166,000 for the three months ended January 31, 2001,
$11,356,000, $6,549,000, $12,077,000, $8,636,000 and $22,855,000 for the years
ended October 31, 2001, 2000, 1999, 1998 and 1997.
(2) In accordance with the provisions of Financial Accounting Standards No. 144
("FAS 144"), we record impairment losses on inventories related to communities
under development or inventories and long-lived assets held for sale. Under FAS
144, communities under development are impaired if the undiscounted cash flows
estimated to be generated from
16
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sales is less than the community's carrying amounts. Inventories and long-lived
assets held for sale are impaired if the carrying amount exceeds its fair value
less selling costs. Along with write-offs of options not exercised (including
related approval engineering and capitalized interest costs), such impairment
losses for housing operations are reported as "Inventory impairment loss."
(3) Before inventory impairment loss and land sales.
(4) EBITDA means earnings (loss) before (a) income taxes, (b) interest expense,
(c) amortization of capitalized interest, (d) depreciation and amortization, (e)
a nonrecurring noncash charge relating to real estate inventory of $905,000 for
the three months ended January 31, 2002, $174,000 for the three months ended
January 31, 2001, $4,368,000, $1,791,000, $2,091,000, $5,032,000 and $28,465,000
for the years ended October 31, 2001, 2000, 1999, 1998 and 1997, respectively,
and (f) extraordinary loss from early extinguishment of debt. EBITDA is a widely
accepted financial indicator of a company's availability to service debt.
However, EBITDA should not be considered as an alternative to operating income
or to cash flows from operating activities (as determined in accordance with
generally accepted accounting principles) and should not be construed as an
indication of our operating performance or as a measure of liquidity. In
addition, our method of computation may not be comparable to other similarly
titled measures of other companies.
(5) Interest incurred consists of all cash interest and accrued interest costs,
whether expensed or capitalized, excluding interest under our mortgage warehouse
line and bonds collateralized by mortgages receivable.
(6) Total debt excludes debt under our mortgage warehouse line and bonds
collateralized by mortgages receivable.
17
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THE EXCHANGE OFFER
INTRODUCTION
K. Hovnanian hereby offers to exchange a like principal amount of exchange
notes for any or all outstanding notes in each case on the terms and subject to
the conditions set forth in this prospectus and accompanying letter of
transmittal. We refer to this offer as the "exchange offer." You may tender some
or all of your outstanding notes pursuant to the exchange offer.
As of the date of this prospectus, $100,000,000 aggregate principal amount
of the 8.000% Senior Notes due 2012 and $150,000,000 aggregate principal amount
of the 8.875% Senior Subordinated Notes due 2012 are outstanding. This
prospectus, together with the letter of transmittal, is first being sent to
Holders of outstanding notes on or about , 2002.
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
We have entered into registration rights agreements with the initial
purchasers of the outstanding notes in which we agreed, under certain
circumstances, to file a registration statement relating to an offer to exchange
the outstanding notes for exchange notes. We also agreed to use our best efforts
to cause such offer to be consummated on the earliest practicable date after the
exchange offer registration statement has become effective but in no event no
later than 40 days thereafter. The exchange notes will have terms identical in
all material respects to the outstanding notes except that the exchange notes
will not contain terms with respect to transfer restrictions, registration
rights and liquidated damages for failure to observe certain obligations in the
applicable registration rights agreement. The outstanding notes were issued on
March 26, 2002.
Under the circumstances set forth below, we will use our reasonable best
efforts to cause the Securities and Exchange Commission to declare effective a
shelf registration statement with respect to the resale of the outstanding notes
and keep the statement effective for up to two years after the effective date of
the shelf registration statement. These circumstances include:
o if applicable law does not permit the exchange offer after we have
sought a no-action letter or other favorable decision from the
Securities and Exchange Commission and we have taken all such other
actions as may be requested by the Securities and Exchange
Commission or otherwise required in connection with such decision;
and
o if any holder of the outstanding notes notifies us within 20
business days following the consummation deadline of the exchange
offer that:
o the holder was prohibited by law or Securities and Exchange
Commission policy from participating in the exchange offer;
o the holder may not resell the exchange notes acquired by it in
the exchange offer to the public without delivering a
prospectus and this prospectus is not appropriate or available
for any resale by that holder; or
o the holder is a broker-dealer and holds outstanding notes
acquired directly from us or our affiliates.
If we fail to comply with certain obligations under each of the
registration rights agreements, we will be required to pay liquidated damages to
Holders of the outstanding notes. Please read the sections "Description of the
Exchange Notes - 8.000% Senior Notes due 2012" and "Description of the Exchange
Notes - 8.875% Senior Subordinated Notes due 2012", each under the heading
"--Registered Exchange Offer; Registration Rights; Liquidated Damages" for more
details regarding each registration rights agreement.
Each holder of outstanding notes that wishes to exchange their outstanding
notes for exchange notes in the exchange offer will be required to make the
following written representations:
o such holder is not an affiliate of K. Hovnanian within the meaning
of Rule 405 of the Securities Act;
18
<Page>
o such holder is not engaged in, and does not intend to engage in, and
has no arrangement or understanding with any person to participate
in, a distribution of the exchange notes; and
o such holder is acquiring the exchange notes in the ordinary course
of its business.
Each broker-dealer that receives exchange notes for its own account in
exchange for outstanding notes, where the broker-dealer acquired the outstanding
notes as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such exchange notes. Please see "Plan of Distribution".
RESALE OF EXCHANGE NOTES
Based on interpretations by the Securities and Exchange Commission set
forth in no-action letters issued to third parties, we believe that you may
resell or otherwise transfer exchange notes issued in the exchange offer without
complying with the registration and prospectus delivery provisions of the
Securities Act, if:
o you are not an affiliate of K. Hovnanian within the meaning of Rule
405 under the Securities Act;
o you are not engaged in, and do not intend to engage in, a
distribution of the exchange notes;
o you do not have an arrangement or understanding with any person to
participate in a distribution of the exchange notes; and
o you are acquiring the exchange notes in your ordinary course of
business.
If you are an affiliate of K. Hovnanian, or are engaging in, or intend to
engage in, or have any arrangement or understanding with any person to
participate in a distribution of the exchange notes, or are not acquiring the
exchange notes in the ordinary course of your business:
o you cannot rely on the position of the Securities and Exchange
Commission set forth in BROWN & WOOD LLP (available February 7,
1997), MORGAN STANLEY & CO. INCORPORATED (available June 5, 1991),
EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), as
interpreted in the Securities and Exchange Commission's letter to
SHEARMAN & STERLING dated July 2, 1993, or similar no-action
letters; and
o in the absence of an exception from the position stated immediately
above, you must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale of
the exchange notes.
This prospectus may be used for an offer to resell, resale or other
transfer of exchange notes only as specifically set forth in this prospectus.
With regard to broker-dealers, only broker-dealers that acquired the outstanding
notes as a result of market-making activities or other trading activities may
participate in the exchange offer. Each broker-dealer that receives exchange
notes for its own account in exchange for outstanding notes, where such
outstanding notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of the exchange notes.
Please read "Plan of Distribution" for more details regarding the transfer of
exchange notes.
TERMS OF THE EXCHANGE OFFER
On the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal, we will accept for exchange in
the exchange offer outstanding notes that are validly tendered and not validly
withdrawn prior to the expiration date. Outstanding notes may only be tendered
in multiples of $1,000. We will issue $1,000 principal amount of exchange notes
in exchange for each $1,000 principal amount of outstanding notes surrendered in
the exchange offer.
The form and terms of the exchange notes will be substantially identical
to the form and terms of the outstanding notes except the exchange notes will be
registered under the Securities Act, will not bear legends restricting their
transfer and will not provide for any liquidated damages upon our failure to
fulfill our obligations
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under the registration rights agreements to file, and cause to be effective, a
registration statement. The exchange notes will evidence the same debt as the
outstanding notes. The exchange 8.000% Senior Notes due 2012 will be issued
under and entitled to the benefits of the same indenture that authorized the
issuance of the outstanding 8.000% Senior Notes due 2012. The exchange 8.875%
Senior Subordinated Notes due 2012 will be issued under and entitled to the
benefits of the same indenture that authorized the issuance of the outstanding
8.875% Senior Subordinated Notes due 2012. Consequently, both series of Senior
Notes will be treated as a single class of debt securities and both series of
Senior Subordinated Notes will be treated as a single class of debt securities
each under the applicable indenture. For a description of each indenture, see
"Description of the Exchange Notes - 8.000% Senior Notes due 2012" and
"Description of Exchange Notes - 8.875% Senior Subordinated Notes due 2012".
The exchange offer is not conditioned upon any minimum aggregate principal
amount of outstanding notes being tendered for exchange.
As of the date of this prospectus, $100,000,000 aggregate principal amount
of the outstanding 8.000% Senior Notes due 2012 and $150,000,000 aggregate
principal amount of the outstanding 8.875% Senior Subordinated Notes due 2012
are outstanding. This prospectus and the letter of transmittal are being sent to
all registered holders of outstanding notes. There will be no fixed record date
for determining registered holders of outstanding notes entitled to participate
in the exchange offer.
We intend to conduct the exchange offer in accordance with the provisions
of both registration rights agreements, the applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations of the SEC.
Outstanding notes that are not tendered for exchange in the exchange offer will
remain outstanding and continue to accrue interest and will be entitled to the
rights and benefits such holders have under the indentures relating to such
holders' series of outstanding notes and the applicable registration rights
agreement except we will not have any further obligation to you to provide for
the registration of the outstanding notes under the applicable registration
rights agreement.
We will be deemed to have accepted for exchange properly tendered
outstanding notes when we have given oral or written notice of the acceptance to
the exchange agent. The exchange agent will act as agent for the tendering
holders for the purposes of receiving the exchange notes from us and delivering
exchange notes to holders. Subject to the terms of the applicable registration
rights agreement, we expressly reserve the right to amend or terminate the
exchange offer and to refuse to accept the occurrence of any of the conditions
specified below under "--Conditions to the Exchange Offer".
Holders who tender outstanding notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
outstanding notes. We will pay all charges and expenses, other than certain
applicable taxes described below in connection with the exchange offer. It is
important that you read "--Fees and Expenses" below for more details regarding
fees and expenses incurred in the exchange offer.
EXPIRATION DATE; EXTENSIONS, AMENDMENTS
As used in this prospectus, the term "expiration date" means 5:00 p.m.,
New York City time, on , 2002. However, if we, in our sole discretion,
extend the period of time for which the exchange offer is open, the term
"expiration date" will mean the latest time and date to which we shall have
extended the expiration of the exchange offer.
To extend the period of time during which the exchange offer is open, we
will notify the exchange agent of any extension by oral or written notice,
followed by notification to the registered holders of the outstanding notes no
later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date.
We reserve the right, in our sole discretion:
o to delay accepting for exchange any outstanding notes;
o to extend the exchange offer or to terminate the exchange offer and
to refuse to accept outstanding notes not previously accepted if any
of the conditions set forth below under "--Conditions to the
Exchange Offer" have not been satisfied, by giving oral or written
notice of such delay, extension or termination to the exchange
agent; and
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o subject to the terms of the applicable registration rights
agreement, to amend the terms of the exchange offer in any manner.
Any delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice to the registered
holders of the outstanding notes. If we amend the exchange offer in a manner
that we determine to constitute a material change, we will promptly disclose the
amendment in a manner reasonable calculated to inform the holders of outstanding
notes of that amendment.
CONDITIONS TO THE EXCHANGE OFFER
Despite any other term of the exchange offer, we will not be required to
accept for exchange, or to issue exchange notes in exchange for, any outstanding
notes and we may terminate or amend the exchange offer as provided in this
prospectus before accepting any outstanding notes for exchange if in our
reasonable judgment:
o the exchange notes to be received will not be tradeable by the
holder, without restriction under the Securities Act or the Exchange
Act and without material restrictions under the blue sky or
securities laws of substantially all of the states of the United
States;
o the exchange offer or the making of any exchange by a holder
violates any applicable law or interpretation of the Securities and
Exchange Commission; or
o any action or proceeding has been instituted or threatened in any
court or by or before any governmental agency with respect to the
exchange offer that, in our judgment, would reasonably be expected
to impair our ability to proceed with the exchange offer.
In addition, we will not be obligated to accept for exchange the
outstanding notes of any holder that has not made to us
o the representations described under "--Procedures for Tendering" and
"Plan of Distribution" or
o any other representations as may be reasonably necessary under
applicable Securities and Exchange Commission rules, regulations, or
interpretations to make available to us an appropriate form for
registration of the exchange notes under the Securities Act.
We expressly reserve the right at any time or at various times to extend
the period of time during which the exchange offer is open. Consequently, we may
delay acceptance of any outstanding notes by giving oral or written notice of
such extension to their holders. During any such extensions, all outstanding
notes previously tendered will remain subject to the exchange offer and we may
accept them for exchange. We will return any outstanding notes that we do not
accept for exchange for any reason without expense to their tendering holder as
promptly as practicable after the expiration or termination of the exchange
offer.
We expressly reserve the right to amend or terminate the exchange offer
and to reject for exchange any outstanding notes not previously accepted for
exchange, upon the occurrence of any of the conditions of the exchange offer
specified above. We will give oral or written notice of any extension,
amendment, non-acceptance or termination to the holders of the outstanding notes
as promptly as practicable. In the case of any extension, such notice will be
issued no later than 9:00 a.m. New York City time, on the next business day
after the previously scheduled expiration date.
These conditions are for our sole benefit and we may assert them
regardless of the circumstances that may give rise to them or waive them in
whole or in part at any or at various times in our sole discretion. If we fail
at any time to exercise any of the foregoing rights, this failure will not
constitute a waiver of such right. Each such right will be deemed an ongoing
right that we may assert at any time or at various times.
In addition, we will not accept for exchange any outstanding notes
tendered, and will not issue exchange notes in exchange for any such outstanding
notes, if at such time any stop order is threatened or in effect with respect to
the registration statement of which this prospectus constitutes a part or the
qualification of the indentures under the Trust Indenture Act of 1939.
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PROCEDURES FOR TENDERING
Only a holder of outstanding notes may tender their outstanding notes in
the exchange offer. To tender in the exchange offer, a holder must comply with
either of the following:
o complete, sign and date the letter of transmittal, or a facsimile of
the letter of transmittal, have the signature on the letter of
transmittal guaranteed if required by the letter of transmittal and
mail or deliver such letter of transmittal or facsimile to the
exchange agent prior to the expiration date; or
o comply with DTC's Automated Tender Offer Program procedures
described below.
In addition, either:
o the exchange agent must receive outstanding notes along with the
letter of transmittal; or
o prior to the expiration date, the exchange agent must receive a
timely confirmation of book-entry transfer of outstanding notes into
the exchange agent's account at DTC according to the procedure for
book-entry transfer described below or a properly transmitted
agent's message; or
o the holder must comply with the guaranteed delivery procedures
described below.
To be tendered effectively, the exchange agent must receive any physical
delivery of the letter of transmittal and other required documents at the
address set forth below under "--Exchange Agent" prior to the expiration date.
A tender to us that is not withdrawn prior to the expiration date
constitutes an agreement between us and you upon the terms and subject to the
conditions described in this prospectus and in the letter of transmittal.
The method of delivery of outstanding notes, letters of transmittal, and
all other required documents to the exchange agent is at your election and risk.
Rather than mail these items, we recommend that you use an overnight or hand
delivery service. In all cases, you should allow sufficient time to assure
timely delivery to the exchange agent before the expiration date. You should not
send letters of transmittal or certificates representing outstanding notes to
us. You may request that your broker, dealer, commercial bank, trust company or
nominee effect the above transactions for you.
If you are a beneficial owner whose outstanding notes are registered in
the name of a broker, dealer, commercial bank, trust company, or other nominee
who wishes to participate in the exchange offer, you should promptly contact the
registered holder and instruct the registered holder to tender outstanding notes
on your behalf. If you are a beneficial owner and you wish to tender the
outstanding notes yourself, you must, prior to completing and executing the
letter of transmittal and delivering your outstanding notes either:
o make appropriate arrangements to register ownership of the
outstanding notes in your name; or
o obtain a properly completed bond power from the registered holder of
outstanding notes.
Your must make these arrangements or follow these procedures before
completing and executing the letter of transmittal and delivering the
outstanding notes. The transfer of record ownership may take considerable time
and may not be able to be completed prior to the expiration date.
Signatures on the letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or another "eligible institution" within the meaning of Rule
17A(d)-15 under the Exchange Act unless the outstanding notes surrendered for
exchange are tendered:
o by a registered holder of the outstanding notes who has not
completed the box entitled "Special Registration Instructions" or
"Special Delivery Instructions" on the letter of transmittal; or
o for the account of an eligible institution.
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If the letter of transmittal is signed by a person other than the
registered holder of any outstanding notes listed on the outstanding notes, such
outstanding notes must be endorsed or accompanied by a properly completed bond
power. The bond power must be signed by the registered holder as the registered
holder's name appears on the outstanding notes and an eligible institution must
guarantee the signature on the bond power.
If the letter of transmittal or any certificates representing outstanding
notes, or bond powers are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations, or others acting in a
fiduciary or representative capacity, those persons should also indicate when
signing and, unless waived by us, they should also submit evidence satisfactory
to us of their authority to so act.
BOOK-ENTRY DELIVERY PROCEDURES
Promptly after the date of this prospectus, the exchange agent will
establish accounts with respect to the outstanding notes at DTC for purposes of
the exchange offer. Any financial institution that is a participant in DTC's
systems may make book-entry delivery of the outstanding notes by causing DTC to
transfer those outstanding notes into the exchange agent's account at DTC in
accordance with DTC's procedures for such transfer. To be timely, book-entry
delivery of outstanding notes requires receipt of a confirmation of a book-entry
transfer, a "book-entry confirmation", prior to the expiration date. In
addition, although delivery of outstanding notes may be effected through
book-entry transfer into the exchange agent's account at DTC, the letter of
transmittal or a manually signed facsimile thereof, together with any required
signature guarantees and any other required documents, or an "agent's message",
as defined below, in connection with a book-entry transfer, must, in any case,
be delivered or transmitted to and received by the exchange agent at its address
set forth on the cover page of the letter of transmittal prior to the expiration
date to receive exchange notes for tendered outstanding notes, or the guaranteed
delivery procedure described below must be complied with. Tender will not be
deemed made until such documents are received by the exchange agent. Delivery of
documents to DTC does not constitute delivery to the exchange agent.
TENDER OF OUTSTANDING NOTES HELD THROUGH THE DEPOSITORY TRUST COMPANY
The exchange agent and DTC have confirmed that any financial institution
that is a participant in DTC's system may use DTC's Automated Tender Offer
Program to tender. Participants in the program may, instead of physically
completing and signing the letter of transmittal and delivering it to the
exchange, electronically transmit their acceptance of the exchange by causing
DTC to transfer the outstanding notes to the exchange agent in accordance with
DTC's Automated Tender Offer Program procedures for transfer. DTC will then send
an agent's message to the exchange agent. The term "agent's message" means a
message transmitted by DTC, received by the exchange agent and forming part of
the book-entry confirmation, which states that:
o DTC has received an express acknowledgment from a participant in its
Automated Tender Offer Program that is tendering outstanding notes
that are the subject of the book-entry confirmation;
o the participant has received and agrees to be bound by the terms of
the letter of transmittal, or in the case of an agent's message
relating to guaranteed delivery, that such participant has received
and agrees to be bound by the applicable notice of guaranteed
delivery; and
o we may enforce that agreement against such participant.
In all cases, we will issue exchange notes for outstanding notes that we
have accepted for exchange under the exchange offer only after the exchange
agent timely receives:
o outstanding notes or a timely book-entry confirmation of such
outstanding notes into the exchange agent's account at DTC; and
o a properly completed and duly executed letter of transmittal and all
other required documents or a properly transmitted agent's message.
By tendering outstanding notes pursuant to the exchange offer, each holder
will represent to us that, among other things:
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(1) the holder is not an affiliate of K. Hovnanian within the meaning of
Rule 405 under the Securities Act;
(2) the holder is not engaged in, and does not intend to engage in, a
distribution of the exchange notes;
(3) the holder does not have an arrangement or understanding with any
person to participate in a distribution of the exchange notes; and
(4) the holder is not acquiring the exchange notes in the ordinary
course of its business.
If the holder is an affiliate of K. Hovnanian, or is engaging in, or
intends to engage in, or has any arrangement or understanding with any person to
participate in a distribution of the exchange notes, or is not acquiring the
exchange notes in the ordinary course of its business:
(1) the holder cannot rely on the position of the Securities and
Exchange Commission enunciated in BROWN & WOOD LLP (available
February 7, 1997), MORGAN STANLEY & CO. INCORPORATED (available
June 5, 1991), EXXON CAPITAL HOLDINGS CORPORATION (available May 13,
1988), as interpreted in the SEC's letter to SHEARMAN & STERLING
dated July 2, 1993, or similar no-action letters; and
(2) in the absence of an exception from the position stated in (1) above
the holder must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale of
the exchange notes.
In addition, each broker-dealer that is to receive exchange notes for its
own account in exchange for outstanding notes must represent that such
outstanding notes were acquired by that broker-dealer as a result of
market-making activities or other trading activities and must acknowledge that
it will deliver a prospectus that meets the requirements of the Securities Act
in connection with any resale of the exchange notes. The letter of transmittal
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. See "Plan of Distribution."
We will interpret the terms and conditions of the exchange offer,
including the letter of transmittal and the instructions to the letter of
transmittal, and will resolve all questions as to the validity, form,
eligibility, including time of receipt, and acceptance of outstanding notes
tendered for exchange. Our determinations in this regard will be final and
binding on all parties. We reserve the absolute right to reject any and all
tenders of any particular outstanding notes not properly tendered or to not
accept any particular outstanding notes if the acceptance might, in our or our
counsel's judgment, be unlawful. We also reserve the absolute right to waive any
defects or irregularities or conditions of the exchange offer as to any
particular outstanding notes either before or after the expiration date,
including the right to waive the ineligibility of any holder who seeks to tender
outstanding notes in the exchange offer.
Unless waived, any defects or irregularities in connection with tenders of
outstanding notes for exchange must be cured within such reasonable period of
time as we determine. Neither we, the exchange agent, nor any other person will
be under any duty to give notification of any defect or irregularity with
respect to any tender of outstanding notes for exchange, nor will any of them
incur any liability for any failure to give notification. Any outstanding notes
received by the exchange agent that are not properly tendered and as to which
the irregularities have not been cured or waived will be returned by the
exchange agent to the tendering holder, unless otherwise provided in the letter
of transmittal, promptly after the expiration date.
GUARANTEED DELIVERY PROCEDURES
Holders wishing to tender their outstanding notes but whose outstanding
notes are not immediately available or who cannot deliver their outstanding
notes, the letter of transmittal or any other required documents to the exchange
agent or comply with the applicable procedures under DTC's Automatic Tender
Offer Program prior to the expiration date may still tender if:
o the tender is made through an eligible institution;
o prior to the expiration date, the exchange agent receives from such
eligible institution either a properly completed and duly executed
notice of guaranteed delivery, by facsimile transmission, mail, or
hand delivery or a properly transmitted agent's message and notice
of guaranteed delivery:
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o setting forth the name and address of the holder, the registered
number(s) of such outstanding notes and the principal amount of
outstanding notes tendered;
o stating that the tender is being made thereby;
o guaranteeing that, within three New York Stock Exchange trading days
after the expiration date, the letter of transmittal, or facsimile
thereof, together with the outstanding notes or a book-entry
confirmation, and any other documents required by the letter of
transmittal, will be deposited by the eligible institution with the
exchange agent; and
o the exchange agent receives the properly completed and executed
letter of transmittal or facsimile thereof, as well as
certificate(s) representing all tendered outstanding notes in proper
form for transfer or a book-entry confirmation of transfer of the
outstanding notes into the exchange agent's account at DTC, and all
other documents required by the letter of transmittal within three
New York Stock Exchange trading days after the expiration date.
WITHDRAWAL RIGHTS
Except as otherwise provided in this prospectus, you may withdraw your
tender of outstanding notes at any time prior to 5:00 p.m., New York City time,
on the expiration date.
For a withdrawal to be effective:
o the exchange agent must receive a written notice, which may be by
telegram, telex, facsimile or letter, of withdrawal at one of the
addresses set forth below under "--Exchange Agent"; or
o holders must comply with the appropriate procedures of DTC's
Automated Tender Offer Program system.
Any notice of withdrawal must:
o specify the name of the person who tendered the outstanding notes to
be withdrawn;
o identify the outstanding notes to be withdrawn, including the
principal amount of the outstanding notes; and
o where certificates for outstanding notes have been transmitted,
specify the name in which such outstanding notes were registered, if
different from that of the withdrawing holder.
If certificates for outstanding notes have been delivered or otherwise
identified to the exchange agent, then, prior to the release of such
certificates, the withdrawing holder must also submit:
o the serial numbers of the particular certificates to be withdrawn;
and
o a signed notice of withdrawal with signatures guaranteed by an
eligible institution unless such holder is an eligible institution.
If outstanding notes have been tendered pursuant to the procedures for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at DTC to be credited with the withdrawn
outstanding notes and otherwise comply with the procedures of the facility. We
will determine all questions as to the validity, form, and eligibility,
including time of receipt of notices of withdrawal and our determination will be
final and binding on all parties. Any outstanding notes so withdrawn will be
deemed not to have been validly tendered for exchange for purposes of the
exchange offer. Any outstanding notes that have been tendered for exchange but
that are not exchanged for any reason will be returned to their holder without
cost to the holder, or, in account at DTC according to the procedures described
above, such outstanding notes will be credited to an account maintained with DTC
for outstanding notes, as soon as practicable after withdrawal, rejection of
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tender or termination of the exchange offer. Properly withdrawn outstanding
notes may be retendered by following the procedures described under
"--Procedures for Tendering" above at any time on or prior to the expiration
date.
EXCHANGE AGENT
Wachovia Bank, National Association, formerly known as First Union
National Bank, has been appointed as the exchange agent for the exchange offer.
Wachovia Bank, National Association also acts as trustee under each of the
indentures governing the notes. You should direct all executed letters of
transmittal and all questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal, and
requests for notices of guaranteed delivery to the exchange agent addressed as
follows:
Delivery to: Wachovia Bank, National Association, Exchange Agent
<Table>
<Caption>
By Mail: By Overnight Courier Delivery: By Hand:
Wachovia Bank, N.A. Wachovia Bank, N.A. Wachovia Bank, N.A.
Attn: Marcia Rice Attn: Marcia Rice Attn: Marcia Rice
Corporate Trust Operations Corporate Trust Corporate Trust
Reorg. Operations Reorg Operations Reorg
1525 West W.T. Harris Blvd. 1525 West W.T. Harris Blvd. 1525 West W.T. Harris Blvd.
Charlotte NC 28288-1153 Charlotte NC 28262 Charlotte NC 28288-1153
</Table>
By Facsimile Transmissions:
(704) 590-7628
Confirm By Telephone:
(704) 590-7413
For Information:
(704) 590-7413
If you deliver the letter of transmittal to an address other than as set
forth above or transmit instructions via facsimile other than as set forth
above, that delivery or those instructions will not be effective.
FEES AND EXPENSES
We will bear the expenses of soliciting tenders. The principal
solicitation is being made by mail by the exchange agent. We may make additional
solicitation by facsimile, telephone or in person by our officers and regular
employees and our affiliates.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payment to broker-dealers or others for soliciting
acceptances of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and reimburse it for its related,
reasonable out-of-pocket expenses.
We will pay the estimated cash expenses to be incurred in connection with
the exchange offer. The expenses are estimated in the aggregate to be
approximately $115,000. They include:
o Securities and Exchange Commission registration fees;
o fees and expenses of the exchange agent and trustee;
o accounting and legal fees and printing costs; and
o related fees and expenses.
ACCOUNTING TREATMENT
We will record the exchange notes in our accounting records at the same
carrying value as the outstanding notes, which is the aggregate principal amount
as reflected in our accounting records on the date of exchange. Accordingly, we
will not recognize any gain or loss for accounting purposes upon the
consummation of the exchange offer. We will record the expenses of the exchange
offer as incurred.
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TRANSFER TAXES
We will pay all transfer taxes, if any, applicable to the exchange of
outstanding notes under the exchange offer. The tendering holder, however, will
be required to pay any transfer taxes, whether imposed on the registered holder
or any other person, if:
o certificates representing outstanding notes for principal amounts
not tendered or accepted for exchange are to be delivered to, or are
to be issued in the name of, any person other than the registered
holder of outstanding notes tendered; or
o tendered outstanding notes are registered in the name of any person
other than the person signing the letter of transmittal; or
o a transfer tax is imposed for any reason other than the exchange of
outstanding notes under the exchange offer.
If satisfactory evidence of payment of such taxes is not submitted with
the letter of transmittal, the amount of such transfer taxes will be billed to
that tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of outstanding notes who do not exchange their outstanding notes
for exchange notes under the exchange offer will remain subject to the
restrictions on transfer of such outstanding notes:
o as set forth in the legend printed on the notes as a consequence of
the issuance of the outstanding notes pursuant to the exemptions
from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities
laws; and
o otherwise set forth in the offering memorandum distributed in
connection with the private offering of the outstanding notes.
In general, you may not offer or sell the outstanding notes unless they
are registered under the Securities Act or if the offer or sale is exempt from
registration under the Securities Act and applicable state securities laws.
Except as required by the applicable registration rights agreement, we do not
intend to register resales of the outstanding notes under the Securities Act.
Based on interpretations of the Securities and Exchange Commission, exchange
notes issued pursuant to the exchange offer may be offered for resale, resold or
otherwise transferred by their holders, other than any holder that is our
"affiliate" within the meaning of Rule 405 under the Securities Act, without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that:
o the holder is not an affiliate of K. Hovnanian within the meaning of
Rule 405 under the Securities Act;
o the holder is not engaged in, and does not intend to engage in, a
distribution of the exchange notes;
o the holder does not have an arrangement or understanding with any
person to participate in a distribution of the exchange notes; and
o the holder is not acquiring the exchange notes in the ordinary
course of its business.
Any holder who tenders in the exchange offer for the purpose of
participating in a distribution of the exchange notes:
o cannot rely on the position of the Securities and Exchange
Commission enunciated in BROWN & WOOD LLP (available February 7,
1997), MORGAN STANLEY & CO. INCORPORATED (available June 5, 1991),
EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), as
interpreted in the SEC's letter to SHEARMAN & STERLING dated July 2,
1993, or similar no-action letters; and
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o in the absence of an exception from the position stated immediately
above, must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale of
exchange notes.
OTHER
Participating in the exchange offer is voluntary and you should carefully
consider whether to accept. You are urged to consult your financial and tax
advisors in making your own decision on what action to take.
We may in the future seek to acquire untendered outstanding notes in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. We have no present plans to acquire any outstanding notes that are
not tendered in the exchange offer or to file a registration statement to permit
resales of any untendered outstanding notes.
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DESCRIPTION OF THE EXCHANGE NOTES
IN THIS SECTION, REFERENCES TO THE "COMPANY" MEANS HOVNANIAN
ENTERPRISES, INC., A DELAWARE CORPORATION, AND DOES NOT INCLUDE ANY OF ITS
SUBSIDIARIES OR K. HOVNANIAN ENTERPRISES, INC., AND REFERENCES TO THE
"ISSUER", "US," "WE" OR "OUR" MEANS K. HOVNANIAN ENTERPRISES, INC., A NEW
JERSEY CORPORATION. REFERENCES TO "SENIOR NOTES" IN THIS SECTION ARE
REFERENCES TO THE 8.000% SENIOR NOTES DUE 2012, REFERENCES TO THE "SENIOR
SUBORDINATED NOTES" IN THIS SECTION ARE REFERENCES TO THE 8.875% SENIOR
SUBORDINATED NOTES DUE 2012 AND REFERENCES TO "SENIOR NOTES" OR SENIOR
SUBORDINATED NOTES" IN THIS SECTION ARE REFERENCES TO BOTH OUTSTANDING NOTES
AND EXCHANGE NOTES OF THE SENIOR NOTES OR SENIOR SUBORDINATED NOTES, AS
APPLICABLE, UNLESS OTHERWISE SPECIFIED.
We are offering to exchange the outstanding Senior Notes for $100,000,000
aggregate principal amount of 8.000% Senior Notes due 2012 and the outstanding
Senior Subordinated Notes for $150,000,000 aggregate principal amount of 8.875%
Senior Subordinated Notes due 2012.
The form and terms of the exchange notes and the outstanding notes are
identical in all material respects except that the registration rights, related
liquidated damages provisions and the transfer restrictions applicable to the
outstanding notes do no apply to the exchange notes.
8.000% SENIOR NOTES DUE 2012
GENERAL
The outstanding Senior Notes were issued under an indenture, which we
refer to as the "Senior Indenture", dated as of March 26, 2002, among us, the
Guarantors and Wachovia Bank, National Association, formerly known as First
Union National Bank, as trustee, which we refer to as the "Senior Trustee". The
terms of the Senior Notes include those stated in the Senior Indenture and those
made part of the Senior Indenture by reference to the Trust Indenture Act of
1939, as amended. The exchange Senior Notes will be issued under the same Senior
Indenture.
This description of the exchange Senior Notes contains definitions of
terms, including those defined under the caption "--Definitions of Certain Terms
Used in the Senior Indenture". The following discussion includes a summary
description of certain material terms of the Senior Indenture, the Senior
Registration Rights Agreement, and the exchange Senior Notes. Because this is a
summary, it does not include all of the information that is included in the
Senior Indenture, the Senior Registration Rights Agreement, or the exchange
Senior Notes.
You should read the Senior Indenture and the Senior Registration Rights
Agreement carefully and in their entirety because they, and not this
description, define your rights as Holders of the notes. You may request copies
of these documents at our address set forth under "Where You Can Find More
Information".
The outstanding Senior Notes and the exchange Senior Notes constitute a
single series of debt securities under the Senior Indenture. If the exchange
offer is consummated, Holders of Senior Notes who do not exchange their Senior
Notes in the exchange offer will vote together with the Holders of the
registered Senior Notes for all relevant purposes under the Senior Indenture.
Accordingly, when determining whether the required Holders have given notice,
consent or waiver or taken any other action permitted under the Senior
Indenture, any outstanding Senior Notes that remain outstanding after the
exchange offer will be aggregated with the registered Senior Notes. All
references herein to specified percentages in aggregate principal amount of
Senior Notes outstanding shall be deemed to mean, at any time after the exchange
offer is consummated, percentages in aggregate principal amount of Senior Notes
and registered Senior Notes outstanding. Capitalized terms used in this Section
but not otherwise defined have the meanings given to them in the Senior
Indenture.
The exchange Senior Notes will bear interest at the rate PER ANNUM shown
on the cover page of this prospectus from the most recent date to which interest
has been paid on the outstanding Senior Notes or, if no interest has been paid
on the outstanding Senior Notes, from March 26, 2002. The applicable interest
will be payable semi-annually on each April 1 and October 1 beginning October 1,
2002, to Holders of record at the close of business on March 15 or September 15,
as the case may be, immediately preceding each such interest payment date. No
interest will be paid on outstanding Senior Notes following their acceptance for
exchange. The exchange Senior Notes will mature on April 1, 2012, and will be
issued in denominations of $1,000 and integral multiples thereof.
The exchange Senior Notes are limited to an aggregate principal amount of
$200.0 million. The exchange Senior Notes are guaranteed by the Company and each
of the other Guarantors pursuant to the guarantees, which we refer to
collectively as the "--Senior Guarantees", described below.
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The exchange Senior Notes will be our general unsecured obligations and
will rank senior in right of payment to all our future Indebtedness that is, by
its terms, expressly subordinated in right of payment to the exchange Senior
Notes and PARI PASSU in right of payment with all our existing and future
unsecured Indebtedness that is not so subordinated. The Senior Guarantees are
general unsecured obligations of the Guarantors and will rank senior in right of
payment to all future Indebtedness of the Guarantors that is, by its terms,
expressly subordinated in right of payment to the Senior Guarantees and rank
PARI PASSU in right of payment with all existing and future unsecured
Indebtedness of the Guarantors that is not so subordinated.
Secured creditors of the Company, the Issuer and the other Guarantors have
a claim on the assets which secure the obligations of the Company and the
Guarantors to such creditors prior to claims of Holders of the exchange Senior
Notes against those assets. At January 31, 2002, as adjusted to give effect to
the transactions described under "Use of Proceeds" and the acquisition of The
Forecast Group(R), L.P. on January 10, 2002, the Company, the Issuer and the
other Guarantors would have had approximately $676.3 million, including the
Senior Notes, of Indebtedness outstanding, of which $15.2 million would have
been secured by assets of the Company and the other Guarantors $150.0 million of
which would have been subordinated to the Senior Notes.
EXECUTION, AUTHENTICATION AND DELIVERY
The Senior Notes will be executed by facsimile or manual signature in the
name and on behalf of the Issuer, by an Officer. If an Officer whose signature
is on a Senior Note no longer holds that office at the time the Senior Note is
authenticated, the Senior Note will still be valid.
A Senior Note will not be valid until the Senior Trustee manually signs
the certificate of authentication on the Senior Note. The signature will be
conclusive evidence that the Senior Note has been authenticated under the Senior
Indenture. Unless limited by the terms of its appointment, an authenticating
agent may authenticate the Senior Notes whenever the Senior Trustee may do so.
The Senior Notes will be issuable in denominations of $1,000 and multiples
thereof.
REDEMPTION
Except as set forth below, the Senior Notes will not be redeemable prior
to April 1, 2007. Thereafter, the Issuer may redeem the Senior Notes, at its
option, in whole at any time or in part from time to time. Redemption will be at
the following redemption prices plus accrued and unpaid interest and liquidated
damages, if any, to the redemption date, subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date, if redeemed during the 12-month period commencing on
April 1 of the years set forth below:
<Table>
<Caption>
REDEMPTION
YEAR PRICE
---- ----------
2007...................................... 104.000%
2008...................................... 102.667%
2009...................................... 101.333%
2010 and thereafter....................... 100.000%
</Table>
Selection of the Senior Notes or portions thereof for redemption pursuant
to the foregoing shall be made by the Senior Trustee only on a PRO RATA basis or
on as nearly a PRO RATA basis as is practicable, subject to the procedures of
The Depository Trust Company, unless such method is otherwise prohibited. Notice
of redemption will be mailed at least 30 days but not more than 60 days before
the redemption date to each Holder whose Senior Notes are to be redeemed at the
registered address of such Holder. On and after the redemption date, interest
ceases to accrue on the Senior Notes or portions thereof called for redemption.
There is no sinking fund for the Senior Notes.
THE SENIOR GUARANTEES
Each of the Guarantors will, so long, in the case of a Restricted
Subsidiary, as it remains a Restricted Subsidiary, unconditionally guarantee on
a joint and several basis all of our obligations under the Senior Notes,
including our obligations to pay principal, premium, if any, and interest with
respect to the Senior Notes. The obligations of each Guarantor other than the
Company are limited to the maximum amount which, after giving effect
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to all other contingent and fixed liabilities of such Guarantor and after giving
effect to any collections from or payments made by or on behalf of any other
Guarantor in respect of the obligations of such other Guarantor under its Senior
Guarantee or pursuant to its contribution obligations under the Senior
Indenture, will result in the obligations of such Guarantor under its Senior
Guarantee not constituting a fraudulent conveyance or fraudulent transfer under
federal or state law. Each Guarantor other than the Company that makes a payment
or distribution under a Senior Guarantee shall be entitled to a contribution
from each other Guarantor in an amount PRO RATA, based on the net assets of each
Guarantor, determined in accordance with GAAP. Except as provided in "--Certain
Covenants" below, the Company is not restricted from selling or otherwise
disposing of any of the Guarantors.
The Senior Indenture requires that each existing and future Restricted
Subsidiary, other than KHL, Inc. and K. Hovnanian Poland, sp z.o.o., be a
Guarantor. The Company is permitted to cause any Unrestricted Subsidiary to
be a Guarantor.
The Senior Indenture provides that if all or substantially all of the
assets of any Guarantor other than the Company or all of the Capital Stock of
any Guarantor other than the Company is sold, including by consolidation,
merger, issuance or otherwise, or disposed of, including by liquidation,
dissolution or otherwise, by the Company or any of its Subsidiaries, or, unless
the Company elects otherwise, if any Guarantor other than the Company is
designated an Unrestricted Subsidiary in accordance with the terms of the Senior
Indenture, then such Guarantor, in the event of a sale or other disposition of
all of the Capital Stock of such Guarantor or a designation as an Unrestricted
Subsidiary, or the Person acquiring such assets, in the event of a sale or other
disposition of all or substantially all of the assets of such Guarantor, shall
be deemed automatically and unconditionally released and discharged from any of
its obligations under the Subordinated Indenture without any further action on
the part of the Subordinated Trustee or any Holder of the Senior Notes.
An Unrestricted Subsidiary that is a Guarantor shall be deemed
automatically and unconditionally released and discharged from all obligations
under its Senior Guarantee upon notice from the Company to the Senior Trustee to
such effect, without any further action required on the part of the Senior
Trustee or any Holder.
A sale of assets or Capital Stock of a Guarantor may constitute an Asset
Disposition subject to the "Limitations on Dispositions of Assets" covenant.
CERTAIN COVENANTS
The following is a summary of certain covenants that are contained in the
Senior Indenture. Such covenants are applicable, unless waived or amended as
permitted by the Senior Indenture, so long as any of the Senior Notes are
outstanding or until the Senior Notes are defeased or discharged pursuant to
provisions described under "--Defeasance of Senior Indenture" or "--Discharge of
Senior Indenture".
REPURCHASE OF SENIOR NOTES UPON CHANGE OF CONTROL. In the event that there
shall occur a Change of Control, each Holder of Senior Notes shall have the
right, at such Holder's option, to require the Issuer to purchase all or any
part of such Holder's Senior Notes on a date (the "Repurchase Date") that is no
later than 90 days after notice of the Change of Control, at 101% of the
principal amount thereof plus accrued and unpaid interest and liquidated
damages, if any, to the Repurchase Date.
On or before the thirtieth day after any Change of Control, the Issuer is
obligated to mail or cause to be mailed, to all Holders of record of Senior
Notes a notice regarding the Change of Control and the repurchase right. The
notice shall state the Repurchase Date, the date by which the repurchase right
must be exercised, the price for the Senior Notes and the procedure which the
Holder must follow to exercise such right. Substantially simultaneously with
mailing of the notice, the Issuer shall cause a copy of such notice to be
published in a newspaper of general circulation in the Borough of Manhattan, The
City of New York. To exercise such right, the Holder of such Senior Note must
deliver, at least ten days prior to the Repurchase Date, written notice to the
Issuer (or an agent designated by the Issuer for such purpose) of the Holder's
exercise of such right, together with the Senior Note with respect to which the
right is being exercised, duly endorsed for transfer; PROVIDED, HOWEVER, that if
mandated by applicable law, a Holder may be permitted to deliver such written
notice nearer to the Repurchase Date than may be specified by the Issuer.
The Issuer will comply with applicable law, including Section 14(e) of the
Securities Exchange Act of 1934 (the "Exchange Act") and Rule 14e-1 thereunder,
if applicable, if the Issuer is required to give a notice of a right of
repurchase as a result of a Change of Control.
With respect to any disposition of assets, the phrase "all or
substantially all" as used in the Senior Indenture (including as set forth under
"Limitations on Mergers, Consolidations and Sales of Assets" below) varies
according
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to the facts and circumstances of the subject transaction, has no clearly
established meaning under New York law (which governs the Senior Indenture) and
is subject to judicial interpretation. Accordingly, in certain circumstances
there may be a degree of uncertainty in ascertaining whether a particular
transaction would involve a disposition of "all or substantially all" of the
assets of the Company, and therefore it may be unclear as to whether a Change of
Control has occurred and whether the Holders have the right to require the
Issuer to repurchase Senior Notes.
None of the provisions relating to a repurchase upon a Change of Control
is waivable by the Board of Directors of the Issuer or the Company. The Company
could, in the future, enter into certain transactions, including certain
recapitalizations of the Company, that would not result in a Change of Control,
but would increase the amount of Indebtedness outstanding at such time.
The Senior Indenture requires the payment of money for Senior Notes or
portions thereof validly tendered to and accepted for payment by the Issuer
pursuant to a Change of Control offer. In the event that a Change of Control has
occurred under the Senior Indenture, a change of control will also have occurred
under the Subordinated Indenture (as defined under "Description of The Exchange
Notes -- 8.875% Senior Subordinated Notes due 2012" below) and under indentures
governing the Issuer's 10 1/2% Senior Notes due 2007, 9?% Senior Notes due 2009
and under the Revolving Credit Facility and the Term Loan Facility. If a Change
of Control were to occur, there can be no assurance that the Issuer would have
sufficient funds to pay the purchase price for all Senior Notes and amounts due
under other Indebtedness that the Company may be required to repurchase or repay
or that the Company or the other Guarantors would be able to make such payments.
In the event that the Issuer were required to purchase outstanding Senior Notes
pursuant to a Change of Control offer, the Company expects that it would need to
seek third-party financing to the extent it does not have available funds to
enable the Issuer to meet its purchase obligations. However, there can be no
assurance that the Company would be able to obtain such financing.
Failure by the Issuer to purchase the Senior Notes when required upon a
Change of Control will result in an Event of Default with respect to the Senior
Notes.
These provisions could have the effect of deterring hostile or friendly
acquisitions of the Company where the Person attempting the acquisition views
itself as unable to finance the purchase of the principal amount of Senior Notes
which may be tendered to the Company upon the occurrence of a Change of Control.
LIMITATIONS ON INDEBTEDNESS. The Senior Indenture provides that the
Company and the Issuer will not, and will not cause or permit any Restricted
Subsidiary, directly or indirectly, to create, incur, assume, become liable for
or guarantee the payment of (which we refer to collectively as an "INCURRENCE")
any Indebtedness, including Acquired Indebtedness, unless, after giving effect
thereto and the application of the proceeds therefrom, the Consolidated Fixed
Charge Coverage Ratio on the date thereof would be at least 2.0 to 1.0.
Notwithstanding the foregoing, the provisions of the Senior Indenture will
not prevent the incurrence of:
(1) Permitted Indebtedness,
(2) Refinancing Indebtedness,
(3) Non-Recourse Indebtedness,
(4) any Senior Guarantee of Indebtedness represented by the Senior
Notes, and
(5) any guarantee of Indebtedness incurred under Credit Facilities in
compliance with the Senior Indenture.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness may be incurred through the first paragraph of this
covenant or by meeting the criteria of one or more of the types of Indebtedness
described in the second paragraph of this covenant (or the definitions of the
terms used therein) the Company, in its sole discretion,
(1) may classify such item of Indebtedness under and comply with either
of such paragraphs, or any of such definitions, as applicable,
(2) may classify and divide such item of Indebtedness into more than one
of such paragraphs, or definitions, as applicable, and
(3) may elect to comply with such paragraphs, or definitions, as
applicable, in any order.
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The Company and the Issuer will not, and will not cause or permit any
Guarantor to, directly or indirectly, in any event incur any Indebtedness that
purports to be by its terms (or by the terms of any agreement governing such
Indebtedness) subordinated to any other Indebtedness of the Company or of such
Guarantor, as the case may be, unless such Indebtedness is also by its terms (or
by the terms of any agreement governing such Indebtedness) made expressly
subordinated to the Senior Notes or the Senior Guarantee of such Guarantor, as
the case may be, to the same extent and in the same manner as such Indebtedness
is subordinated to such other Indebtedness of the Company or such Guarantor, as
the case may be.
LIMITATIONS ON RESTRICTED PAYMENTS. The Senior Indenture provides that the
Company and the Issuer will not, and will not cause or permit any Restricted
Subsidiary to, directly or indirectly, make any Restricted Payment unless:
(1) no Default or Event of Default shall have occurred and be continuing
at the time of or immediately after giving effect to such Restricted
Payment;
(2) immediately after giving effect to such Restricted Payment, the
Company could incur at least $1.00 of Indebtedness pursuant to the
first paragraph of the "Limitations on Indebtedness" covenant; and
(3) immediately after giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments (including the Fair
Market Value of any non-cash Restricted Payment) declared or made
after May 4, 1999 does not exceed the sum of:
(a) 50% of the Consolidated Net Income of the Company on a
cumulative basis during the period (taken as one accounting
period) from and including February 1, 1999 and ending on the
last day of the Company's fiscal quarter immediately preceding
the date of such Restricted Payment (or in the event such
Consolidated Net Income shall be a deficit, MINUS 100% of such
deficit), PLUS
(b) 100% of the aggregate net cash proceeds of and the Fair Market
Value of Property received by the Company from (1) any capital
contribution to the Company after February 1, 1999 or any
issue or sale after February 1, 1999 of Qualified Stock (other
than to any Subsidiary of the Company) and (2) the issue or
sale after February 1, 1999 of any Indebtedness or other
securities of the Company convertible into or exercisable for
Qualified Stock of the Company that have been so converted or
exercised, as the case may be, PLUS
(c) in the case of the disposition or repayment of any Investment
constituting a Restricted Payment made after May 4, 1999, an
amount (to the extent not included in the calculation of
Consolidated Net Income referred to in (a)) equal to the
lesser of (x) the return of capital with respect to such
Investment (including by dividend, distribution or sale of
Capital Stock) and (y) the amount of such Investment that was
treated as a Restricted Payment, in either case, less the cost
of the disposition or repayment of such Investment (to the
extent not included in the calculation of Consolidated Net
Income referred to in (a)), PLUS
(d) with respect to any Unrestricted Subsidiary that is
redesignated as a Restricted Subsidiary after May 4, 1999, in
accordance with the definition of Unrestricted Subsidiary (so
long as the designation of such Subsidiary as an Unrestricted
Subsidiary was treated as a Restricted Payment made after the
Issue Date, and only to the extent not included in the
calculation of Consolidated Net Income referred to in (a)), an
amount equal to the lesser of (x) the proportionate interest
of the Company or a Restricted Subsidiary in an amount equal
to the excess of (I) the total assets of such Subsidiary,
valued on an aggregate basis at the lesser of book value and
Fair Market Value thereof, over (II) the total liabilities of
such Subsidiary, determined in accordance with GAAP, and (y)
the Designation Amount at the time of such Subsidiary's
designation as an Unrestricted Subsidiary, PLUS
(e) $17 million, MINUS
(f) the aggregate amount of all Restricted Payments (other than
Restricted Payments referred to in clause (C) of the
immediately succeeding paragraph) made after February 1, 1999
through May 4, 1999.
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The foregoing clauses (2) and (3) will not prohibit:
(A) the payment of any dividend within 60 days of its declaration
if such dividend could have been made on the date of its
declaration without violation of the provisions of the Senior
Indenture;
(B) the repurchase, redemption or retirement of any shares of
Capital Stock of the Company in exchange for, or out of the
net proceeds of the substantially concurrent sale (other than
to a Subsidiary of the Company) of, other shares of Qualified
Stock; and
(C) the purchase, redemption or other acquisition, cancellation or
retirement for value of Capital Stock, or options, warrants,
equity appreciation rights or other rights to purchase or
acquire Capital Stock, of the Company or any Subsidiary held
by officers or employees or former officers or employees of
the Company or any Subsidiary (or their estates or
beneficiaries under their estates) not to exceed $10 million
in the aggregate since May 4, 1999;
PROVIDED, HOWEVER that each Restricted Payment described in clauses (A) and (B)
of this sentence shall be taken into account for purposes of computing the
aggregate amount of all Restricted Payments pursuant to clause (3) of the
immediately preceding paragraph.
For purposes of determining the aggregate and permitted amounts of
Restricted Payments made, the amount of any guarantee of any Investment in any
Person that was initially treated as a Restricted Payment and which was
subsequently terminated or expired, net of any amounts paid by the Company or
any Restricted Subsidiary in respect of such guarantee, shall be deducted.
In determining the "Fair Market Value of Property" for purposes of clause
(3) of the first paragraph of this covenant, Property other than cash, Cash
Equivalents and Marketable Securities shall be deemed to be equal in value to
the "equity value" of the Capital Stock or other securities issued in exchange
therefor. The equity value of such Capital Stock or other securities shall be
equal to (i) the number of shares of Common Equity issued in the transaction (or
issuable upon conversion or exercise of the Capital Stock or other securities
issued in the transaction) multiplied by the closing sale price of the Common
Equity on its principal market on the date of the transaction (less, in the case
of Capital Stock or other securities which require the payment of consideration
at the time of conversion or exercise, the aggregate consideration payable
thereupon) or (ii) if the Common Equity is not then traded on the New York Stock
Exchange, American Stock Exchange or Nasdaq National Market, or if the Capital
Stock or other securities issued in the transaction do not consist of Common
Equity (or Capital Stock or other securities convertible into or exercisable for
Common Equity), the value (if more than $10 million) of such Capital Stock or
other securities as determined by a nationally recognized investment banking
firm retained by the Board of Directors of the Company.
LIMITATIONS ON TRANSACTIONS WITH AFFILIATES. The Senior Indenture provides
that the Company and the Issuer will not, and will not cause or permit any
Restricted Subsidiary to, make any loan, advance, guarantee or capital
contribution to, or for the benefit of, or sell, lease, transfer or otherwise
dispose of any property or assets to or for the benefit of, or purchase or lease
any property or assets from, or enter into or amend any contract, agreement or
understanding with, or for the benefit of, any Affiliate of the Company or any
Affiliate of any of the Company's Subsidiaries or any holder of 10% or more of
the Common Equity of the Company (including any Affiliates of such holders), in
a single transaction or series of related transactions (each, an "Affiliate
Transaction"), except for any Affiliate Transaction the terms of which are at
least as favorable as the terms which could be obtained by the Company, the
Issuer or such Restricted Subsidiary, as the case may be, in a comparable
transaction made on an arm's length basis with Persons who are not such a
holder, an Affiliate of such a holder or an Affiliate of the Company or any of
the Company's Subsidiaries.
In addition, the Company and the Issuer will not, and will not cause or
permit any Restricted Subsidiary to, enter into an Affiliate Transaction unless:
(1) with respect to any such Affiliate Transaction involving or having a
value of more than $1 million, the Company shall have (x) obtained
the approval of a majority of the Board of Directors of the Company
and (y) either obtained the approval of a majority of the Company's
disinterested directors or obtained an opinion of a qualified
independent financial advisor to the effect that such Affiliate
Transaction is fair to the Company, the Issuer or such Restricted
Subsidiary, as the case may be, from a financial point of view, and
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(2) with respect to any such Affiliate Transaction involving or having a
value of more than $10 million, the Company shall have (x) obtained
the approval of a majority of the Board of Directors of the Company
and (y) delivered to the Trustee an opinion of a qualified
independent financial advisor to the effect that such Affiliate
Transaction is fair to the Company, the Issuer or such Restricted
Subsidiary, as the case may be, from a financial point of view.
The Senior Indenture also provides that notwithstanding the foregoing, an
Affiliate Transaction will not include:
(1) any contract, agreement or understanding with, or for the benefit
of, or plan for the benefit of, employees of the Company or its
Subsidiaries generally (in their capacities as such) that has been
approved by the Board of Directors of the Company,
(2) Capital Stock issuances to directors, officers and employees of the
Company or its Subsidiaries pursuant to plans approved by the
stockholders of the Company,
(3) any Restricted Payment otherwise permitted under the "Limitations on
Restricted Payments" covenant,
(4) any transaction between or among the Company and one or more
Restricted Subsidiaries or between or among Restricted Subsidiaries
(provided, HOWEVER, no such transaction shall involve any other
Affiliate of the Company (other than an Unrestricted Subsidiary to
the extent the applicable amount constitutes a Restricted Payment
permitted by the Senior Indenture)),
(5) any transaction between one or more Restricted Subsidiaries and one
or more Unrestricted Subsidiaries where all of the payments to, or
other benefits conferred upon, such Unrestricted Subsidiaries are
substantially contemporaneously dividended, or otherwise distributed
or transferred without charge, to the Company or a Restricted
Subsidiary,
(6) issuances, sales or other transfers or dispositions of mortgages and
collateralized mortgage obligations in the ordinary course of
business between Restricted Subsidiaries and Unrestricted
Subsidiaries of the Company, and
(7) the payment of reasonable and customary fees to, and indemnity
provided on behalf of, officers, directors, employees or consultants
of the Company, the Issuer or any Restricted Subsidiary.
LIMITATIONS ON DISPOSITIONS OF ASSETS. The Senior Indenture provides that
the Company and the Issuer will not, and will not cause or permit any Restricted
Subsidiary to, make any Asset Disposition unless:
(A) the Company (or such Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Disposition at
least equal to the Fair Market Value thereof, and
(B) not less than 70% of the consideration received by the Company (or
such Restricted Subsidiary, as the case may be) is in the form of
cash, Cash Equivalents and Marketable Securities.
The amount of (1) any Indebtedness (other than any Indebtedness
subordinated to the Senior Notes) of the Company or any Restricted Subsidiary
that is actually assumed by the transferee in such Asset Disposition and (2) the
fair market value (as determined in good faith by the Board of Directors of the
Company) of any property or assets received that are used or useful in a Real
Estate Business, shall be deemed to be consideration required by clause (B)
above for purposes of determining the percentage of such consideration received
by the Company or the Restricted Subsidiaries.
The Net Cash Proceeds of an Asset Disposition shall, within one year, at
the Company's election, (a) be used by the Company or a Restricted Subsidiary in
the business of the construction and sale of homes conducted by the Company and
the Restricted Subsidiaries or any other business of the Company or a Restricted
Subsidiary existing at the time of such Asset Disposition or (b) to the extent
not so used, be applied to make a Net Cash Proceeds offer for the Senior Notes
and, if the Company or a Restricted Subsidiary elects or is required to do so
repay, purchase or redeem any other unsubordinated Indebtedness (on a PRO RATA
basis if the amount available for such repayment, purchase or redemption is less
than the aggregate amount of (1) the principal amount of the Senior Notes
tendered in such Net Cash Proceeds Offer and (2) the lesser of the principal
amount, or accreted value, of such other unsubordinated Indebtedness, plus, in
each case accrued interest to the date of repayment, purchase or
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redemption) at 100% of the principal amount or accreted value thereof, as the
case may be, plus accrued and unpaid interest and liquidated damages, if any, to
the date of repurchase or repayment.
Notwithstanding the foregoing, (A) the Company will not be required to
apply such Net Cash Proceeds to the repurchase of Senior Notes in accordance
with clause (b) of the preceding sentence except to the extent that such Net
Cash Proceeds, together with the aggregate Net Cash Proceeds of prior Asset
Dispositions (other than those so used) which have not been applied in
accordance with this provision and as to which no prior Net Cash Proceeds offer
shall have been made, exceed 5% of Consolidated Tangible Assets and (B) in
connection with an Asset Disposition, the Company and the Restricted
Subsidiaries will not be required to comply with the requirements of clause (B)
of the first sentence of the first paragraph of this covenant to the extent that
the non-cash consideration received in connection with such Asset Disposition,
together with the sum of all non-cash consideration received in connection with
all prior Asset Dispositions that has not yet been converted into cash, does not
exceed 5% of Consolidated Tangible Assets; PROVIDED, HOWEVER, that when any
non-cash consideration is converted into cash, such cash shall constitute Net
Cash Proceeds and be subject to the preceding sentence.
LIMITATIONS ON LIENS. The Senior Indenture provides that the Company and
the Issuer will not, and will not cause or permit any Restricted Subsidiary to,
create, incur, assume or suffer to exist any Liens, other than Permitted Liens,
on any of its Property, or on any shares of Capital Stock or Indebtedness of any
Restricted Subsidiary, unless contemporaneously therewith or prior thereto all
payments due under the Senior Indenture and the Senior Notes are secured on an
equal and ratable basis with the obligation or liability so secured until such
time as such obligation or liability is no longer secured by a Lien.
LIMITATIONS ON RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES. The Senior
Indenture provides that the Company and the Issuer will not, and will not cause
or permit any Restricted Subsidiary to, create, assume or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction
(other than encumbrances or restrictions imposed by law or by judicial or
regulatory action or by provisions of agreements that restrict the assignability
thereof) on the ability of any Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its Capital Stock
or any other interest or participation in, or measured by, its
profits, owned by the Company or any other Restricted Subsidiary, or
pay interest on or principal of any Indebtedness owed to the Company
or any other Restricted Subsidiary,
(2) make loans or advances to the Company or any other Restricted
Subsidiary, or
(3) transfer any of its property or assets to the Company or any other
Restricted Subsidiary,
except for
(a) encumbrances or restrictions existing under or by reason of
applicable law,
(b) contractual encumbrances or restrictions in effect on the
Issue Date and any amendments, modifications, restatements,
renewals, supplements, refundings, replacements or
refinancings thereof, provided that such amendments,
modifications, restatements, renewals, supplements,
refundings, replacements or refinancings are no more
restrictive, taken as a whole, with respect to such dividend
and other payment restrictions than those contained in such
contractual encumbrances or restrictions, as in effect on May
4, 1999,
(c) any restrictions or encumbrances arising under Acquired
Indebtedness; provided, that such encumbrance or restriction
applies only to either the assets that were subject to the
restriction or encumbrance at the time of the acquisition or
the obligor on such Indebtedness and its Subsidiaries prior to
such acquisition,
(d) any restrictions or encumbrances arising in connection with
Refinancing Indebtedness; PROVIDED, HOWEVER, that any
restrictions and encumbrances of the type described in this
clause (d) that arise under such Refinancing Indebtedness
shall not be materially more restrictive or apply to
additional assets than those under the agreement creating or
evidencing the Indebtedness being refunded, refinanced,
replaced or extended,
(e) any Permitted Lien, or any other agreement restricting the
sale or other disposition of property, securing Indebtedness
permitted by the Senior Indenture if such Permitted Lien or
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agreement does not expressly restrict the ability of a
Subsidiary of the Company to pay dividends or make or repay
loans or advances prior to default thereunder,
(f) reasonable and customary borrowing base covenants set forth in
agreements evidencing Indebtedness otherwise permitted by the
Senior Indenture,
(g) customary non-assignment provisions in leases, licenses,
encumbrances, contracts or similar assets entered into or
acquired in the ordinary course of business,
(h) any restriction with respect to a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all of the Capital Stock
or assets of such Restricted Subsidiary pending the closing of
such sale or disposition,
(i) encumbrances or restrictions existing under or by reason of
the Senior Indenture or the Senior Notes,
(j) purchase money obligations that impose restrictions on the
property so acquired of the nature described in clause (3) of
the preceding paragraph,
(k) Liens permitted under the Senior Indenture securing
Indebtedness that limit the right of the debtor to dispose of
the assets subject to such Lien,
(l) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements, assets sale
agreements, stock sale agreements and other similar
agreements,
(m) customary provisions of any franchise, distribution or similar
agreements,
(n) restrictions on cash or other deposits or net worth imposed by
contracts entered into in the ordinary course of business, and
(o) any encumbrance or restrictions of the type referred to in
clauses (1), (2) or (3) of the first paragraph of this section
imposed by any amendments, modifications, restatements,
renewals, supplements, refinancings, replacements or
refinancings of the contracts, instruments or obligations
referred to in clauses (a) through (n) of this paragraph,
provided that such amendments, modifications, restatements,
renewals, supplements, refundings, replacements or
refinancings are, in the good faith judgment of the Company's
Board of Directors, no more restrictive with respect to such
dividend and other payment restrictions than those contained
in the dividend or other payment restrictions prior to such
amendment, modification, restatement, renewal, supplement,
refunding, replacement or refinancing.
LIMITATIONS ON MERGERS, CONSOLIDATIONS AND SALES OF ASSETS. The Senior
Indenture provides that neither the Issuer nor any Guarantor will consolidate or
merge with or into, or sell, lease, convey or otherwise dispose of all or
substantially all of its assets (including, without limitation, by way of
liquidation or dissolution), or assign any of its obligations under the Senior
Notes, the Senior Guarantees or the Senior Indenture (as an entirety or
substantially as an entirety in one transaction or in a series of related
transactions), to any Person (in each case other than in a transaction in which
the Company, the Issuer or a Restricted Subsidiary is the survivor of a
consolidation or merger, or the transferee in a sale, lease, conveyance or other
disposition) unless:
(1) the Person formed by or surviving such consolidation or merger (if
other than the Company, the Issuer or the Guarantor, as the case may
be), or to which such sale, lease, conveyance or other disposition
or assignment will be made (collectively, the "Successor"), is a
corporation or other legal entity organized and existing under the
laws of the United States or any state thereof or the District of
Columbia, and the Successor assumes by supplemental indenture in a
form reasonably satisfactory to the Trustee all of the obligations
of the Company, the Issuer or the Guarantor, as the case may be,
under the Senior Notes or a Senior Guarantee, as the case may be,
and the Senior Indenture,
(2) immediately after giving effect to such transaction, no Default or
Event of Default has occurred and is continuing, and
(3) immediately after giving effect to such transaction, the Company (or
its Successor) could incur at least $1.00 of Indebtedness pursuant
to the first paragraph of the "Limitation on Indebtedness" covenant.
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The foregoing provisions shall not apply to:
o a transaction involving the sale or disposition of Capital
Stock of a Guarantor, or the consolidation or merger of a
Guarantor, or the sale, lease, conveyance or other disposition
of all or substantially all of the assets of a Guarantor, that
in any such case results in such Guarantor being released from
its Senior Guarantee as provided under "--The Senior
Guarantees" above, or
o a transaction the purpose of which is to change the state of
incorporation of the Company, the Issuer or any Guarantor.
REPORTS TO HOLDERS OF SENIOR NOTES. The Company shall file with the
Commission the annual reports and the information, documents and other reports
required to be filed pursuant to Section 13 or 15(d) of the Exchange Act. The
Company shall file with the Trustee and mail to each Holder of record of Senior
Notes such reports, information and documents within 15 days after it files them
with the Commission. In the event that the Company is no longer subject to these
periodic requirements of the Exchange Act, it will nonetheless continue to file
reports with the Commission and the Trustee and mail such reports to each Holder
of Senior Notes as if it were subject to such reporting requirements. Regardless
of whether the Company is required to furnish such reports to its stockholders
pursuant to the Exchange Act, the Company will cause its consolidated financial
statements and a "Management's Discussion and Analysis of Results of Operations
and Financial Condition" written report, similar to those that would have been
required to appear in annual or quarterly reports, to be delivered to Holders of
Senior Notes.
EVENTS OF DEFAULT
The following are Events of Default under the Senior Indenture:
(1) the failure by the Company, the Issuer and the Guarantors to pay
interest on, or liquidated damages with respect to, any Senior Note
when the same becomes due and payable and the continuance of any
such failure for a period of 30 days;
(2) the failure by the Company, the Issuer and the Guarantors to pay the
principal or premium of any Senior Note when the same becomes due
and payable at maturity, upon acceleration or otherwise;
(3) the failure by the Company, the Issuer or any Restricted Subsidiary
to comply with any of its agreements or covenants in, or provisions
of, the Senior Notes, the Senior Guarantees or the Senior Indenture
and such failure continues for the period and after the notice
specified below (except in the case of a default under covenants
described under "Certain Covenants--Repurchase of Senior Notes upon
Change of Control" and "Limitations on Mergers, Consolidations and
Sales of Assets," which will constitute Events of Default with
notice but without passage of time);
(4) the acceleration of any Indebtedness (other than Non-Recourse
Indebtedness) of the Company, the Issuer or any Restricted
Subsidiary that has an outstanding principal amount of $10 million
or more, individually or in the aggregate, and such acceleration
does not cease to exist, or such Indebtedness is not satisfied, in
either case within 30 days after such acceleration;
(5) the failure by the Company, the Issuer or any Restricted Subsidiary
to make any principal or interest payment in an amount of $10
million or more, individually or in the aggregate, in respect of
Indebtedness (other than Non-Recourse Indebtedness) of the Company
or any Restricted Subsidiary within 30 days of such principal or
interest becoming due and payable (after giving effect to any
applicable grace period set forth in the documents governing such
Indebtedness);
(6) a final judgment or judgments that exceed $10 million or more,
individually or in the aggregate, for the payment of money having
been entered by a court or courts of competent jurisdiction against
the Company, the Issuer or any of its Restricted Subsidiaries and
such judgment or judgments is not satisfied, stayed, annulled or
rescinded within 60 days of being entered;
(7) the Company or any Restricted Subsidiary that is a Significant
Subsidiary pursuant to or within the meaning of any Bankruptcy Law:
(a) commences a voluntary case,
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(b) consents to the entry of an order for relief against it in an
involuntary case,
(c) consents to the appointment of a Custodian of it or for all or
substantially all of its property, or
(d) makes a general assignment for the benefit of its creditors;
(8) the company or any Restricted Subsidiary that is a Significant
Subsidiary pursuant to or within the meaning of any Bankruptcy Law:
(a) is for relief against the Company or any Restricted Subsidiary
that is a Significant Subsidiary as debtor in an involuntary
case,
(b) appoints a Custodian of the Company or any Restricted
Subsidiary that is a Significant Subsidiary or a Custodian for
all or substantially all of the property of the Company or any
Restricted Subsidiary that is a Significant Subsidiary, or
(c) orders the liquidation of the Company or any Restricted
Subsidiary that is a Significant Subsidiary,
and the order or decree remains unstayed and in effect for 60 days,
or
(9) any Senior Guarantee of a Guarantor which is a Significant
Subsidiary ceases to be in full force and effect (other than in
accordance with the terms of such Senior Guarantee and the Senior
Indenture) or is declared null and void and unenforceable or found
to be invalid or any Guarantor denies its liability under its Senior
Guarantee (other than by reason of release of a Guarantor from its
Senior Guarantee in accordance with the terms of the Senior
Indenture and the Senior Guarantee).
A Default as described in subclause (3) above will not be deemed an Event
of Default until the Senior Trustee notifies the Company, or the Holders of at
least 25 percent in principal amount of the then outstanding Senior Notes notify
the Company and the Senior Trustee, of the Default and (except in the case of a
default with respect to covenants described under "Certain Covenants--Repurchase
of Senior Notes upon Change of Control" and "Limitations on Mergers,
Consolidations and Sales of Assets") the Company does not cure the Default
within 60 days after receipt of the notice. The notice must specify the Default,
demand that it be remedied and state that the notice is a "Notice of Default."
If such a Default is cured within such time period, it ceases.
If an Event of Default (other than an Event of Default with respect to the
Company resulting from subclauses (7) or (8) above), shall have occurred and be
continuing under the Senior Indenture, the Senior Trustee by notice to the
Company, or the Holders of at least 25 percent in principal amount of the Senior
Notes then outstanding by notice to the Company and the Senior Trustee, may
declare all Senior Notes to be due and payable immediately. Upon such
declaration of acceleration, the amounts due and payable on the Senior Notes
will be due and payable immediately. If an Event of Default with respect to the
Company specified in subclauses (7) or (8) above occurs, such an amount will
IPSO FACTO become and be immediately due and payable without any declaration,
notice or other act on the part of the Trustee and the Company or any Holder.
The Holders of a majority in principal amount of the Senior Notes then
outstanding by written notice to the Senior Trustee and the Company may waive
any Default or Event of Default (other than any Default or Event of Default in
payment of principal or interest) on the Senior Notes under the Senior
Indenture. Holders of a majority in principal amount of the then outstanding
Senior Notes may rescind an acceleration and its consequence (except an
acceleration due to nonpayment of principal or interest on the Senior Notes) if
the rescission would not conflict with any judgment or decree and if all
existing Events of Default (other than the non-payment of accelerated principal)
have been cured or waived.
The Holders may not enforce the provisions of the Senior Indenture, the
Senior Notes or the Senior Guarantees except as provided in the Senior
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the Senior Notes then outstanding may direct the Senior Trustee in its
exercise of any trust or power, PROVIDED, HOWEVER, that such direction does not
conflict with the terms of the Senior Indenture. The Trustee may withhold from
the Holders notice of any continuing Default or Event of Default (except any
Default or Event of Default in payment of principal or interest on the Senior
Notes or that resulted from the failure to comply with the covenant entitled
"Repurchase of Notes upon Change of Control") if the Senior Trustee determines
that withholding such notice is in the Holders' interest.
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The Company is required to deliver to the Senior Trustee an annual
statement regarding compliance with the Senior Indenture, and include in such
statement, if any officer of the Company is aware of any Default or Event of
Default, a statement specifying such Default or Event of Default and what action
the Company is taking or proposes to take with respect thereto. In addition, the
Company is required to deliver to the Senior Trustee prompt written notice of
the occurrence of any Default or Event of Default.
DEFEASANCE OF SENIOR INDENTURE
The Senior Indenture permits the Issuer, the Company and the other
Guarantors to terminate all of their respective obligations under the Senior
Indenture with respect to the Senior Notes and the Senior Guarantees, other than
the obligation to pay interest on and the principal of the Senior Notes and
certain other obligations, at any time by
o depositing in trust with the Senior Trustee, under an irrevocable
trust agreement, money or U.S. government obligations in an amount
sufficient to pay principal of and interest and liquidated damages,
if any, on the Senior Notes to their maturity, and
o complying with certain other conditions, including delivery to the
Senior Trustee of an opinion of counsel or a ruling received from
the Internal Revenue Service to the effect that Holders will not
recognize income, gain or loss for federal income tax purposes as a
result of the Company's exercise of such right and will be subject
to federal income tax on the same amount and in the same manner and
at the same times as would have been the case otherwise.
In addition, the Senior Indenture permits the Company, the Issuer and the
Guarantors to terminate all of their obligations under the Senior Indenture with
respect to the Senior Notes and the Senior Guarantees (including the obligations
to pay interest on and the principal of the Senior Notes and certain other
obligations), at any time by
o depositing in trust with the Senior Trustee, under an irrevocable
trust agreement, money or U.S. government obligations in an amount
sufficient to pay principal of and interest and liquidated damages,
if any, on the Senior Notes to their maturity, and
o complying with certain other conditions, including delivery to the
Senior Trustee of an opinion of counsel or a ruling, received from
the Internal Revenue Service, to the effect that Holders will not
recognize income, gain or loss for federal income tax purposes as a
result of the Company's exercise of such right and will be subject
to federal income tax on the same amount and in the same manner and
at the same times as would have been the case otherwise, which
opinion of counsel is based upon a change in the applicable federal
tax law since the date of the Senior Indenture.
DISCHARGE OF SENIOR INDENTURE
The Issuer, the Company and the other Guarantors may terminate all of
their respective obligations under the Senior Indenture with respect to the
Senior Notes, the Senior Indenture and the Senior Guarantees, other than the
obligation to pay interest on and the principal of the Senior Notes and certain
other obligations to the Senior Trustee, if:
o all Senior Notes previously authenticated and delivered, other than
those destroyed, lost, replaced or stolen, those previously paid in
accordance with the Senior Indenture or those for whose payment
money or U.S. Government Obligations have been held in trust, have
been delivered to the Senior Trustee for cancellation and the Issuer
had paid all sums payable by it under the Senior Indenture; or
o the Senior Notes mature within one year, or all of them are called
for redemption within one year under arrangements satisfactory to
the Senior Trustee for giving notice of redemption; the Issuer
deposits in trust with the Senior Trustee, under an irrevocable
trust agreement, money or U.S. government obligations in an amount
sufficient to pay principal of and interest and liquidated damages,
if any, on the Senior Notes to their maturity or redemption, as the
case may be; no Default has occurred and is continuing on the date
of the deposit and the deposit will not result in a breach or
violation of, or constitute a default under the Senior Indenture or
any other agreement binding the Issuer; and the Issuer delivers to
the Senior Trustee an Officer's Certificate and an Opinion of
Counsel,
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in each case, stating that all the conditions precedent provided in
the Senior Indenture for satisfaction and discharge of the Senior
Indenture have been complied with.
In either case, the Senior Trustee, upon request, and at the expense of
the Issuer, will provide written acknowledgement of the discharge of the
Issuer's obligations under the Senior Notes and the Senior Indenture, except for
certain surviving obligations.
TRANSFER AND EXCHANGE
A Holder may transfer or Senior Notes only in accordance with the
provisions of the Senior Indenture. The Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents, and to
pay any taxes and fees required by law or permitted by the Senior Indenture.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Senior Indenture, the Senior Notes or
the Senior Guarantees may be amended or supplemented with the consent (which may
include consents obtained in connection with a tender offer or exchange offer
for Senior Notes) of the Holders of at least a majority in principal amount of
the Senior Notes then outstanding, and any existing Default under, or compliance
with any provision of the Senior Indenture may be waived (other than any
continuing Default or Event of Default in the payment of interest on or the
principal of the Senior Notes) with the consent (which may include consents
obtained in connection with a tender offer or exchange offer for Senior Notes)
of the Holders of a majority in principal amount of the Senior Notes then
outstanding. Without the consent of any Holder, the Company, the Issuer, the
Guarantors and the Senior Trustee may amend or supplement the Senior Indenture,
the Senior Notes or the Senior Guarantees to cure any ambiguity, defect or
inconsistency; to comply with the "Limitations on Mergers, Consolidations and
Sales of Assets" covenant set forth in the Senior Indenture; to provide for
uncertificated Senior Notes in addition to or in place of Certificated Senior
Notes; to make any change that does not adversely affect the legal rights of any
Holder; to add a Guarantor; or to delete a Guarantor which, in accordance with
the terms of the Senior Indenture, ceases to be liable on its Senior Guarantee.
Without the consent of each Holder affected, the Company, the Issuer,
the Guarantors and the Senior Trustee may not
(1) reduce the amount of Senior Notes whose Holders must consent to an
amendment, supplement or waiver,
(2) reduce the rate of or change the time for payment of interest,
including default interest, on any Senior Note,
(3) reduce the principal of or change the fixed maturity of any Senior
Note or alter the provisions (including related definitions) with
respect to redemptions described under "Optional Redemption" or with
respect to mandatory offers to repurchase Senior Notes described
under "Limitations on Dispositions of Assets" or "Repurchase of
Senior Notes upon Change of Control",
(4) make any Senior Note payable in money other than that stated in the
Senior Note,
(5) make any change in the "Waiver of Past Defaults and Compliance with
Indenture Provisions," "Rights of Holders to Receive Payment" or the
"With Consent of Holders" sections set forth in the Senior
Indenture,
(6) modify the ranking or priority of the Senior Notes or any Senior
Guarantee,
(7) release any Guarantor from any of its obligations under its Senior
Guarantee or the Senior Indenture otherwise than in accordance with
the Senior Indenture, or
(8) waive a continuing Default or Event of Default in the payment of
principal of or interest on the Senior Notes.
The right of any Holder to participate in any consent required or sought
pursuant to any provision of the Senior Indenture (and our obligation to obtain
any such consent otherwise required from such Holder) may be subject to the
requirement that such Holder shall have been the Holder of record of any Senior
Notes with respect to which such consent is required or sought as of a date
identified by the Trustee in a notice furnished to Holders in accordance with
the terms of the Senior Indenture.
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STATEMENT AS TO COMPLIANCE
The Company must deliver to the Senior Trustee, within 120 days after the
end of each fiscal year, a written statement by the Company's independent public
accountants stating (A) that their audit examination has included a review of
the terms of the Senior Indenture and the Senior Notes as they relate to
accounting matters, and (B) whether, in connection with their audit examination,
any Default has come to their attention and, if a Default has come to their
attention, specifying the nature and period of the existence thereof.
The Company must also deliver to the Senior Trustee, on or prior to each
Interest Payment Date, an Officer's Certificate setting forth the amount of
Liquidated Damages, if any, the Issuer is required to pay on that Interest
Payment Date. If no Liquidated Damages are required to be paid on a given
Interest Payment Date, no Officer's Certificate is required to be delivered to
the Senior Trustee for that Interest Payment Date.
GOVERNING LAW
The Senior Indenture, the Senior Notes and the Senior Guarantees are
governed by the laws of the State of New York.
DEFINITIONS OF CERTAIN TERMS USED IN THE SENIOR INDENTURE
Set forth below is a summary of certain of the defined terms used in the
Senior Indenture. Reference is made to the Senior Indenture for the full
definition of all terms used in the Senior Indenture.
"ACQUIRED INDEBTEDNESS" means (1) with respect to any Person that becomes
a Restricted Subsidiary (or is merged into the Company, the Issuer or any
Restricted Subsidiary) after the Issue Date, Indebtedness of such Person or any
of its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary (or is merged into the Company, the Issuer or any Restricted
Subsidiary) that was not incurred in connection with, or in contemplation of,
such Person becoming a Restricted Subsidiary (or being merged into the Company,
the Issuer or any Restricted Subsidiary) and (2) with respect to the Company,
the Issuer or any Restricted Subsidiary, any Indebtedness expressly assumed by
the Company, the Issuer or any Restricted Subsidiary in connection with the
acquisition of any assets from another Person (other than the Company, the
Issuer or any Restricted Subsidiary), which Indebtedness was not incurred by
such other Person in connection with or in contemplation of such acquisition.
Indebtedness incurred in connection with or in contemplation of any transaction
described in clause (1) or (2) of the preceding sentence shall be deemed to have
been incurred by the Company or a Restricted Subsidiary, as the case may be, at
the time such Person becomes a Restricted Subsidiary (or is merged into the
Company, the Issuer or any Restricted Subsidiary) in the case of clause (1) or
at the time of the acquisition of such assets in the case of clause (2), but
shall not be deemed Acquired Indebtedness.
"AFFILIATE" means, when used with reference to a specified Person any
Person direct or indirectly controlling, or controlled by or under direct or
indirect common control with the Person specified.
"ASSET ACQUISITION" means (1) an Investment by the Company, the Issuer or
any Restricted Subsidiary in any other Person if, as a result of such
Investment, such Person shall become a Restricted Subsidiary or shall be
consolidated or merged with or into the Company, the Issuer or any Restricted
Subsidiary or (2) the acquisition by the Company, the Issuer or any Restricted
Subsidiary of the assets of any Person, which constitute all or substantially
all of the assets or of an operating unit or line of business of such Person or
which is otherwise outside the ordinary course of business.
"ASSET DISPOSITION" means any sale, transfer, conveyance, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback or sale of shares of Capital Stock in any Subsidiary) (each,
a "TRANSACTION") by the Company, the Issuer or any Restricted Subsidiary to any
Person of any Property having a Fair Market Value in any transaction or series
of related transactions of at least $5 million. The term "ASSET DISPOSITION"
shall not include:
(1) a transaction between the Company, the Issuer and any Restricted
Subsidiary or a transaction between Restricted Subsidiaries,
(2) a transaction in the ordinary course of business, including, without
limitation, sales (directly or indirectly), dedications and other
donations to governmental authorities, leases and sales and
leasebacks of (A) homes, improved land and unimproved land and (B)
real estate (including related amenities and improvements),
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(3) a transaction involving the sale of Capital Stock of, or the
disposition of assets in, an Unrestricted Subsidiary,
(4) any exchange or swap of assets of the Company, the Issuer or any
Restricted Subsidiary for assets that (A) are to be used by the
Company, the Issuer or any Restricted Subsidiary in the ordinary
course of its Real Estate Business and (B) have a Fair Market Value
not less than the Fair Market Value of the assets exchanged or
swapped,
(5) any sale, transfer, conveyance, lease or other disposition of assets
and properties that is governed by the provisions relating to
"Limitations on Mergers, Consolidation and Sales of Assets", or
(6) dispositions of mortgage loans and related assets and
mortgage-backed securities in the ordinary course of a mortgage
lending business.
"ATTRIBUTABLE DEBT" means, with respect to any Capitalized Lease
Obligations, the capitalized amount thereof determined in accordance with GAAP.
"BANKRUPTCY LAW" means title 11 of the United States Code, as amended, or
any similar federal or state law for the relief of debtors.
"CAPITAL STOCK" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of or in
such Person's capital stock or other equity interests, and options, rights or
warrants to purchase such capital stock or other equity interests, whether now
outstanding or issued after the Issue Date, including, without limitation, all
Disqualified Stock and Preferred Stock.
"CAPITALIZED LEASE OBLIGATIONS" of any Person means the obligations of
such Person to pay rent or other amounts under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such obligations will be the capitalized amount thereof determined in
accordance with GAAP.
"CASH EQUIVALENTS" means
(1) U.S. dollars;
(2) securities issued or directly and fully guaranteed or insured by the
U.S. government or any agency or instrumentality thereof having
maturities of one year or less from the date of acquisition;
(3) certificates of deposit and eurodollar time deposits with maturities
of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight
bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500 million;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3)
entered into with any financial institution meeting the
qualifications specified in clause (3) above;
(5) commercial paper rated P-1, A-1 or the equivalent thereof by Moody's
or S&P, respectively, and in each case maturing within six months
after the date of acquisition; and
(6) investments in money market funds substantially all of the assets of
which consist of securities described in the foregoing clauses (1)
through (5).
"CHANGE OF CONTROL" means
(1) any sale, lease or other transfer (in one transaction or a series of
transactions) of all or substantially all of the consolidated assets
of the Company and its Restricted Subsidiaries to any Person (other
than a Restricted Subsidiary); PROVIDED, HOWEVER, that a transaction
where the Holders of all classes of Common Equity of the Company
immediately prior to such transaction own, directly or indirectly,
more than 50% of all classes of Common Equity of such Person
immediately after such transaction shall not be a Change of Control;
(2) a "person" or "group" (within the meaning of Section 13(d) of the
Exchange Act (other than (x) the Company or (y) the Permitted
Hovnanian Holders) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act) of Common Equity of the Company
representing more than 50% of the voting power of the Common Equity
of the Company;
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(3) Continuing Directors cease to constitute at least a majority of the
Board of Directors of the Company;
(4) the stockholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company; PROVIDED, HOWEVER, that a
liquidation or dissolution of the Company which is part of a
transaction that does not constitute a Change of Control under the
proviso contained in clause (1) above shall not constitute a Change
of Control; or
(5) a change of control shall occur as defined in the instrument
governing any publicly traded debt securities of the Company or the
Issuer which requires the Company or the Issuer to repay or
repurchase such debt securities.
"COMMON EQUITY" of any Person means Capital Stock of such Person that is
generally entitled to (1) vote in the election of directors of such Person or
(2) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control
the management or policies of such Person.
"CONSOLIDATED ADJUSTED TANGIBLE ASSETS" of the Company as of any date
means the Consolidated Tangible Assets of the Company, the Issuer and the
Restricted Subsidiaries at the end of the fiscal quarter immediately preceding
the date less any assets securing any Non-Recourse Indebtedness, as determined
in accordance with GAAP.
"CONSOLIDATED CASH FLOW AVAILABLE FOR FIXED CHARGES" means, for any period
Consolidated Net Income for such period plus (each to the extent deducted in
calculating such Consolidated Net Income and determined in accordance with GAAP)
the sum for such period, without duplication, of:
(1) income taxes,
(2) Consolidated Interest Expense,
(3) depreciation and amortization expenses and other non-cash charges to
earnings, and
(4) interest and financing fees and expenses which were previously
capitalized and which are amortized to cost of sales, MINUS
all other non-cash items (other than the receipt of notes receivable) increasing
such Consolidated Net Income.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to any
determination date, the ratio of (x) Consolidated Cash Flow Available for Fixed
Charges for the prior four full fiscal quarters (the "FOUR QUARTER PERIOD") for
which financial results have been reported immediately preceding the
determination date (the "TRANSACTION DATE"), to (y) the aggregate Consolidated
Interest Incurred for the Four Quarter Period. For purposes of this definition,
"CONSOLIDATED CASH FLOW AVAILABLE FOR FIXED CHARGES" and "CONSOLIDATED INTEREST
INCURRED" shall be calculated after giving effect on a PRO FORMA basis for the
period of such calculation to
(1) the incurrence or the repayment, repurchase, defeasance or other
discharge or the assumption by another Person that is not an
Affiliate (collectively, "REPAYMENT") of any Indebtedness of the
Company, the Issuer or any Restricted Subsidiary (and the
application of the proceeds thereof) giving rise to the need to make
such calculation, and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof), at any
time on or after the first day of the Four Quarter Period and on or
prior to the Transaction Date, as if such incurrence or repayment,
as the case may be (and the application of the proceeds thereof),
occurred on the first day of the Four Quarter Period, except that
Indebtedness under revolving credit facilities shall be deemed to be
the average daily balance of such Indebtedness during the Four
Quarter Period (as reduced on such PRO FORMA basis by the
application of any proceeds of the incurrence of Indebtedness giving
rise to the need to make such calculation);
(2) any Asset Disposition or Asset Acquisition (including, without
limitation, any Asset Acquisition giving rise to the need to make
such calculation as a result of the Company, the Issuer or any
Restricted Subsidiary (including any Person that becomes a
Restricted Subsidiary as a result of any such Asset Acquisition)
incurring Acquired Indebtedness at any time on or after the first
day of the Four Quarter Period and on or prior to the Transaction
Date), as if such Asset Disposition or Asset Acquisition (including
the incurrence or repayment of any such Indebtedness) and the
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inclusion, notwithstanding clause (2) of the definition of
"Consolidated Net Income," of any Consolidated Cash Flow Available
for Fixed Charges associated with such Asset Acquisition as if it
occurred on the first day of the Four Quarter Period; PROVIDED,
HOWEVER, that the Consolidated Cash Flow Available for Fixed Charges
associated with any Asset Acquisition shall not be included to the
extent the net income so associated would be excluded pursuant to
the definition of "Consolidated Net Income," other than clause (2)
thereof, as if it applied to the Person or assets involved before
they were acquired, and
(3) the Consolidated Cash Flow Available for Fixed Charges and the
Consolidated Interest Incurred attributable to discontinued
operations, as determined in accordance with GAAP, shall be
excluded.
Furthermore, in calculating "Consolidated Cash Flow Available for Fixed
Charges" for purposes of determining the denominator (but not the numerator) of
this "Consolidated Fixed Charge Coverage Ratio,"
(a) interest on Indebtedness in respect of which a PRO FORMA
calculation is required that is determined on a fluctuating
basis as of the Transaction Date (including Indebtedness
actually incurred on the Transaction Date) and which will
continue to be so determined thereafter shall be deemed to
have accrued at a fixed rate PER ANNUM equal to the rate of
interest on such Indebtedness in effect on the Transaction
Date, and
(b) notwithstanding clause (a) above, interest on such
Indebtedness determined on a fluctuating basis, to the extent
such interest is covered by agreements relating to Interest
Protection Agreements, shall be deemed to accrue at the rate
PER ANNUM resulting after giving effect to the operation of
such agreements.
"CONSOLIDATED INTEREST EXPENSE" of the Company for any period means the
Interest Expense of the Company, the Issuer and the Restricted Subsidiaries for
such period, determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED INTEREST INCURRED" for any period means the Interest
Incurred of the Company, the Issuer and the Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" for any period means the aggregate net income
(or loss) of the Company and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP; PROVIDED that there will be excluded
from such net income (loss) (to the extent otherwise included therein), without
duplication:
(1) the net income (or loss) of (x) any Unrestricted Subsidiary (other
than a Mortgage Subsidiary) or (y) any Person (other than a
Restricted Subsidiary or a Mortgage Subsidiary) in which any Person
other than the Company, the Issuer or any Restricted Subsidiary has
an ownership interest, except, in each case, to the extent that any
such income has actually been received by the Company, the Issuer or
any Restricted Subsidiary in the form of cash dividends or similar
cash distributions during such period, which dividends or
distributions are not in excess of the Company's, the Issuer's or
such Restricted Subsidiary's (as applicable) PRO RATA share of such
Unrestricted Subsidiary's or such other Person's net income earned
during such period,
(2) except to the extent includable in Consolidated Net Income pursuant
to the foregoing clause (1), the net income (or loss) of any Person
that accrued prior to the date that (a) such Person becomes a
Restricted Subsidiary or is merged with or into or consolidated with
the Company, the Issuer or any of its Restricted Subsidiaries
(except, in the case of an Unrestricted Subsidiary that is
redesignated a Restricted Subsidiary during such period, to the
extent of its retained earnings from the beginning of such period to
the date of such redesignation) or (b) the assets of such Person are
acquired by the Company or any Restricted Subsidiary,
(3) the net income of any Restricted Subsidiary to the extent that (but
only so long as) the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of that income is not
permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary during such
period,
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(4) the gains or losses, together with any related provision for taxes,
realized during such period by the Company, the Issuer or any
Restricted Subsidiary resulting from (a) the acquisition of
securities, or extinguishment of Indebtedness, of the Company or any
Restricted Subsidiary or (b) any Asset Disposition by the Company or
any Restricted Subsidiary,
(5) any extraordinary gain or loss together with any related provision
for taxes, realized by the Company, the Issuer or any Restricted
Subsidiary, and
(6) any non-recurring expense recorded by the Company, the Issuer or any
Restricted Subsidiary in connection with a merger accounted for as a
"pooling-of-interests" transaction;
PROVIDED, FURTHER, that for purposes of calculating Consolidated Net Income
solely as it relates to clause (3) of the first paragraph of the "Limitations on
Restricted Payments" covenant, clause (4)(b) above shall not be applicable.
"CONSOLIDATED NET WORTH" of any Person as of any date means the
stockholders' equity (including any Preferred Stock that is classified as equity
under GAAP, other than Disqualified Stock) of such Person and its Restricted
Subsidiaries on a consolidated basis at the end of the fiscal quarter
immediately preceding such date, as determined in accordance with GAAP, less any
amount attributable to Unrestricted Subsidiaries.
"CONSOLIDATED TANGIBLE ASSETS" of the Company as of any date means the
total amount of assets of the Company, the Issuer and the Restricted
Subsidiaries (less applicable reserves) on a consolidated basis at the end of
the fiscal quarter immediately preceding such date, as determined in accordance
with GAAP, less (1) Intangible Assets and (2) appropriate adjustments on account
of minority interests of other Persons holding equity investments in Restricted
Subsidiaries.
"CONTINUING DIRECTOR" means a director who either was a member of the
Board of Directors of the Company on the date of the Senior Indenture or who
became a director of the Company subsequent to such date and whose election or
nomination for election by the Company's stockholders, was duly approved by a
majority of the Continuing Directors on the Board of Directors of the Company at
the time of such approval, either by a specific vote or by approval of the proxy
statement issued by the Company on behalf of the entire Board of Directors of
the Company in which such individual is named as nominee for director.
"control" when used with respect to any Person, means the power to direct
the management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing.
"CREDIT FACILITIES" means, collectively, each of the credit facilities and
lines of credit of the Company or one or more Restricted Subsidiaries in
existence on the Issue Date and one or more other facilities and lines of credit
among or between the Company or one or more Restricted Subsidiaries and one or
more lenders pursuant to which the Company or one or more Restricted
Subsidiaries may incur indebtedness for working capital and general corporate
purposes (including acquisitions), as any such facility or line of credit may be
amended, restated, supplemented or otherwise modified from time to time, and
includes any agreement extending the maturity of, increasing the amount of, or
restructuring, all or any portion of the Indebtedness under such facility or
line of credit or any successor facilities or lines of credit and includes any
facility or line of credit with one or more lenders refinancing or replacing all
or any portion of the Indebtedness under such facility or line of credit or any
successor facility or line of credit.
"CURRENCY AGREEMENT" of any Person means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect such Person or any of its Subsidiaries against fluctuations in currency
values.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
"DEFAULT" means any event, act or condition that is, or after notice or
the passage of time or both would be, an Event of Default.
"DESIGNATION AMOUNT" has the meaning provided in the definition of
Unrestricted Subsidiary.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, (1) matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
final maturity date of the Senior Notes or (2) is convertible into or
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exchangeable or exercisable for (whether at the option of the issuer or the
holder thereof) (a) debt securities or (b) any Capital Stock referred to in (1)
above, in each case, at any time prior to the final maturity date of the Senior
Notes; PROVIDED, HOWEVER, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof (or the
holders of any security into or for which such Capital Stock is convertible,
exchangeable or exercisable) the right to require the Company to repurchase or
redeem such Capital Stock upon the occurrence of a change in control occurring
prior to the final maturity date of the Senior Notes shall not constitute
Disqualified Stock if the change in control provision applicable to such Capital
Stock are no more favorable to such holders than the provisions described under
the caption "Certain Covenants--Repurchase of Senior Notes upon Change of
Control" and such Capital Stock specifically provides that the Company will not
repurchase or redeem any such Capital Stock pursuant to such provisions prior to
the Company's repurchase of the Senior Notes as are required pursuant to the
provisions described under the caption "Certain Covenants--Repurchase of Senior
Notes upon Change of Control".
"EVENT OF DEFAULT" has the meaning set forth in "Events of Default".
"FAIR MARKET VALUE" means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) that would be
negotiated in an arm's-length transaction for cash between a willing seller and
a willing and able buyer, neither of which is under any compulsion to complete
the transaction, as such price is determined in good faith by the Board of
Directors of the Company or a duly authorized committee thereof, as evidenced by
a resolution of such Board or committee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, as in effect on May 4, 1999.
"GUARANTORS" means (i) initially, each of the Company's Subsidiaries,
other than the Issuer, certain subsidiaries formerly engaged in the issuance of
collateralized mortgage obligations, the Company's mortgage lending and title
subsidiaries and a subsidiary holding and licensing the Hovnanian trade name and
(ii) each of the Company's Subsidiaries which becomes a Guarantor of the Senior
Notes pursuant to the provisions of the Senior Indenture.
"HOLDER" means the Person in whose name a Senior Note is registered in the
books of the Registrar for the Senior Notes.
"INDEBTEDNESS" of any Person means, without duplication,
(1) any liability of such Person (a) for borrowed money or under any
reimbursement obligation relating to a letter of credit or other
similar instruments (other than standby letters of credit or similar
instrument issued for the benefit of or surety, performance,
completion or payment bonds, earnest money notes or similar purpose
undertakings or indemnifications issued by, such Person in the
ordinary course of business), (b) evidenced by a bond, note,
debenture or similar instrument (including a purchase money
obligation) given in connection with the acquisition of any
businesses, properties or assets of any kind or with services
incurred in connection with capital expenditures (other than any
obligation to pay a contingent purchase price which, as of the date
of incurrence thereof is not required to be recorded as a liability
in accordance with GAAP), or (c) in respect of Capitalized Lease
Obligations (to the extent of the Attributable Debt in respect
thereof),
(2) any Indebtedness of others that such Person has guaranteed to the
extent of the guarantee; PROVIDED, HOWEVER, that Indebtedness of the
Company and its Restricted Subsidiaries will not include the
obligations of the Company or a Restricted Subsidiary under
warehouse lines of credit of Mortgage Subsidiaries to repurchase
mortgages at prices no greater than 98% of the principal amount
thereof, and upon any such purchase the excess, if any, of the
purchase price thereof over the Fair Market Value of the mortgages
acquired, will constitute Restricted Payments subject to the
"Limitations on Restricted Payments" covenant,
(3) to the extent not otherwise included, the obligations of such Person
under Currency Agreements or Interest Protection Agreements to the
extent recorded as liabilities not constituting Interest
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Incurred, net of amounts recorded as assets in respect of such
agreements, in accordance with GAAP, and
(4) all Indebtedness of others secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person;
PROVIDED, that Indebtedness shall not include accounts payable, liabilities to
trade creditors of such Person or other accrued expenses arising in the ordinary
course of business. The amount of Indebtedness of any Person at any date shall
be (a) the outstanding balance at such date of all unconditional obligations as
described above, net of any unamortized discount to be accounted for as Interest
Expense, in accordance with GAAP, (b) the maximum liability of such Person for
any contingent obligations under clause (1) above at such date, net of an
unamortized discount to be accounted for as Interest Expense in accordance with
GAAP, and (c) in the case of clause (4) above, the lesser of (x) the fair market
value of any asset subject to a Lien securing the Indebtedness of others on the
date that the Lien attaches and (y) the amount of the Indebtedness secured.
"INTANGIBLE ASSETS" of the Company means all unamortized debt discount and
expense, unamortized deferred charges, goodwill, patents, trademarks, service
marks, trade names, copyrights, write-ups of assets over their prior carrying
value (other than write-ups which occurred prior to the Issue Date and other
than, in connection with the acquisition of an asset, the write-up of the value
of such asset (within one year of its acquisition) to its fair market value in
accordance with GAAP) and all other items which would be treated as intangible
on the consolidated balance sheet of the Company, the Issuer and the Restricted
Subsidiaries prepared in accordance with GAAP.
"INTEREST EXPENSE" of any Person for any period means, without
duplication, the aggregate amount of (i) interest which, in conformity with
GAAP, would be set opposite the caption "interest expense" or any like caption
on an income statement for such Person (including, without limitation, imputed
interest included in Capitalized Lease Obligations, all commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing, the net costs (but reduced by net gains) associated with
Currency Agreements and Interest Protection Agreements, amortization of other
financing fees and expenses, the interest portion of any deferred payment
obligation, amortization of discount or premium, if any, and all other noncash
interest expense (other than interest and other charges amortized to cost of
sales), and (ii) all interest actually paid by the Company or a Restricted
Subsidiary under any guarantee of Indebtedness (including, without limitation, a
guarantee of principal, interest or any combination thereof) of any Person other
than the Company, the Issuer or any Restricted Subsidiary during such period;
PROVIDED, that Interest Expense shall exclude any expense associated with the
complete write-off of financing fees and expenses in connection with the
repayment of any Indebtedness.
"INTEREST INCURRED" of any Person for any period means, without
duplication, the aggregate amount of (1) Interest Expense and (2) all
capitalized interest and amortized debt issuance costs.
"INTEREST PROTECTION AGREEMENT" of any Person means any interest rate swap
agreement, interest rate collar agreement, option or futures contract or other
similar agreement or arrangement designed to protect such Person or any of its
Subsidiaries against fluctuations in interest rates with respect to Debt
permitted to be incurred under the Senior Indenture.
"INVESTMENTS" of any Person means (i) all investments by such Person in
any other Person in the form of loans, advances or capital contributions, (ii)
all Senior Guarantees of Indebtedness or other obligations of any other Person
by such Person, (iii) all purchases (or other acquisitions for consideration) by
such Person of Indebtedness, Capital Stock or other securities of any other
Person and (iv) all other items that would be classified as investments in any
other Person (including, without limitation, purchases of assets outside the
ordinary course of business) on a balance sheet of such Person prepared in
accordance with GAAP.
"ISSUE DATE" means the date on which the Senior Notes are originally
issued under the Senior Indenture.
"LIEN" means, with respect to any Property, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this definition, a Person shall be deemed to own,
subject to a Lien, any Property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such Property.
"MARKETABLE SECURITIES" means (a) equity securities that are listed on the
New York Stock Exchange, the American Stock Exchange or The Nasdaq National
Market and (b) debt securities that are rated by a nationally
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recognized rating agency, listed on the New York Stock Exchange or the American
Stock Exchange or covered by at least two reputable market makers.
"MOODY'S" means Moody's Investors Service, Inc. or any successor to its
debt rating business.
"MORTGAGE SUBSIDIARY" means any Subsidiary of the Company substantially
all of whose operations consist of the mortgage lending business.
"NET CASH PROCEEDS" means with respect to an Asset Disposition, cash
payments received (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise
(including any cash received upon sale or disposition of such note or
receivable), but only as and when received), excluding any other consideration
received in the form of assumption by the acquiring Person of Indebtedness or
other obligations relating to the Property disposed of in such Asset Disposition
or received in any other non-cash form unless and until such non-cash
consideration is converted into cash therefrom, in each case, net of all legal,
title and recording tax expenses, commissions and other fees and expenses
incurred, and all federal, state and local taxes required to be accrued as a
liability under GAAP as a consequence of such Asset Disposition, and in each
case net of a reasonable reserve for the after-tax cost of any indemnification
or other payments (fixed and contingent) attributable to the seller's
indemnities or other obligations to the purchaser undertaken by the Company, the
Issuer or any of its Restricted Subsidiaries in connection with such Asset
Disposition, and net of all payments made on any Indebtedness which is secured
by or relates to such Property, in accordance with the terms of any Lien or
agreement upon or with respect to such Property or which must by its terms or by
applicable law be repaid out of the proceeds from such Asset Disposition, and
net of all contractually required distributions and payments made to minority
interest holders in Restricted Subsidiaries or joint ventures as a result of
such Asset Disposition.
"NON-RECOURSE INDEBTEDNESS" with respect to any Person means Indebtedness
of such Person for which (1) the sole legal recourse for collection of principal
and interest on such Indebtedness is against the specific property identified in
the instruments evidencing or securing such Indebtedness and such property was
acquired with the proceeds of such Indebtedness or such Indebtedness was
incurred within 90 days after the acquisition of such property and (2) no other
assets of such Person may be realized upon in collection of principal or
interest on such Indebtedness. Indebtedness which is otherwise Non-Recourse
Indebtedness will not lose its character as Non-Recourse Indebtedness because
there is recourse to the borrower, any guarantor or any other Person for (a)
environmental warranties and indemnities, or (b) indemnities for and liabilities
arising from fraud, misrepresentation, misapplication or non-payment of rents,
profits, insurance and condemnation proceeds and other sums actually received by
the borrower from secured assets to be paid to the lender, waste and mechanics'
liens.
"PERMITTED HOVNANIAN HOLDERS" means, collectively, Kevork S. Hovnanian,
Ara K. Hovnanian, the members of their immediate families, the respective
estates, spouses, heirs, ancestors, lineal descendants, legatees and legal
representatives of any of the foregoing and the trustee of any bona fide trust
of which one or more of the foregoing are the sole beneficiaries or the grantors
thereof, or any entity of which any of the foregoing, individually or
collectively, beneficially own more than 50% of the Common Equity.
"PERMITTED INDEBTEDNESS" means
(1) Indebtedness under Credit Facilities which does not exceed $440
million principal amount outstanding at any one time;
(2) Indebtedness in respect of obligations of the Company and its
Subsidiaries to the trustees under indentures for debt securities;
(3) intercompany debt obligations of (i) the Company to the Issuer, (ii)
the Issuer to the Company, (iii) the Company or the Issuer to any
Restricted Subsidiary and (iv) any Restricted Subsidiary to the
Company or the Issuer or any other Restricted Subsidiary; provided,
HOWEVER, that any Indebtedness of any Restricted Subsidiary or the
Issuer or the Company owed to any Restricted Subsidiary or the
Issuer that ceases to be a Restricted Subsidiary shall be deemed to
be incurred and shall be treated as an incurrence for purposes of
the first paragraph of the covenant described under "Limitations on
Indebtedness" at the time the Restricted Subsidiary in question
ceases to be a Restricted Subsidiary;
(4) Indebtedness of the Company or the Issuer or any Restricted
Subsidiary under any Currency Agreements or Interest Protection
Agreements in a notional amount no greater than the payments
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due (at the time the related Currency Agreement or Interest
Protection Agreement is entered into) with respect to the
Indebtedness or currency being hedged;
(5) Purchase Money Indebtedness,
(6) Capitalized Lease Obligations;
(7) obligations for, pledge of assets in respect of, and guaranties of,
bond financings of political subdivisions or enterprises thereof in
the ordinary course of business;
(8) Indebtedness secured only by office buildings owned or occupied by
the Company or any Restricted Subsidiary, which Indebtedness does
not exceed $10 million aggregate principal amount outstanding at any
one time;
(9) Indebtedness under warehouse lines of credit, repurchase agreements
and Indebtedness secured by mortgage loans and related assets of
mortgage lending Subsidiaries in the ordinary course of a mortgage
lending business; and
(10) Indebtedness of the Company or any Restricted Subsidiary which,
together with all other Indebtedness under this clause (10), does
not exceed $30 million aggregate principal amount outstanding at any
one time.
"PERMITTED INVESTMENT" means
(1) Cash Equivalents;
(2) any Investment in the Company, the Issuer or any Restricted
Subsidiary or any Person that becomes a Restricted Subsidiary as a
result of such Investment or that is consolidated or merged with or
into, or transfers all or substantially all of the assets of it or
an operating unit or line of business to, the Company or a
Restricted Subsidiary;
(3) any receivables, loans or other consideration taken by the Company,
the Issuer or any Restricted Subsidiary in connection with any asset
sale otherwise permitted by the Senior Indenture;
(4) Investments received in connection with any bankruptcy or
reorganization proceeding, or as a result of foreclosure, perfection
or enforcement of any Lien or any judgment or settlement of any
Person in exchange for or satisfaction of Indebtedness or other
obligations or other property received from such Person, or for
other liabilities or obligations of such Person created, in
accordance with the terms of the Senior Indenture;
(5) Investments in Currency Agreements or Interest Protection Agreements
described in the definition of Permitted Indebtedness;
(6) any loan or advance to an executive officer, director or employee of
the Company or any Restricted Subsidiary made in the ordinary course
of business or in accordance with past practice; PROVIDED, HOWEVER,
that any such loan or advance exceeding $1 million shall have been
approved by the Board of Directors of the Company or a committee
thereof consisting of disinterested members;
(7) Investments in joint ventures in a Real Estate Business with
unaffiliated third parties in an aggregate amount at any time
outstanding not to exceed 10% of Consolidated Tangible Assets at
such time;
(8) Investments in interests in issuances of collateralized mortgage
obligations, mortgages, mortgage loan servicing, or other mortgage
related assets;
(9) obligations of the Company or a Restricted Subsidiary under
warehouse lines of credit of Mortgage Subsidiaries to repurchase
mortgages; and
(10) Investments in an aggregate amount outstanding not to exceed $10
million.
"PERMITTED LIENS" means
(1) Liens for taxes, assessments or governmental or quasi-government
charges or claims that (a) are not yet delinquent, (b) are being
contested in good faith by appropriate proceedings and as to
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which appropriate reserves have been established or other provisions
have been made in accordance with GAAP, if required, or (c) encumber
solely property abandoned or in the process of being abandoned,
(2) statutory Liens of landlords and carriers', warehousemen's,
mechanics', suppliers', materialmen's, repairmen's or other Liens
imposed by law and arising in the ordinary course of business and
with respect to amounts that, to the extent applicable, either (a)
are not yet delinquent or (b) are being contested in good faith by
appropriate proceedings and as to which appropriate reserves have
been established or other provisions have been made in accordance
with GAAP, if required,
(3) Liens (other than any Lien imposed by the Employer Retirement Income
Security Act of 1974, as amended) incurred or deposits made in the
ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social
security,
(4) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal
bonds, development obligations, progress payments, government
contacts, utility services, developer's or other obligations to make
on-site or off-site improvements and other obligations of like
nature (exclusive of obligations for the payment of borrowed money
but including the items referred to in the parenthetical in clause
(1)(a) of the definition of "INDEBTEDNESS"), in each case incurred
in the ordinary course of business of the Company, the Issuer and
the Restricted Subsidiaries,
(5) attachment or judgment Liens not giving rise to a Default or an
Event of Default,
(6) easements, dedications, assessment district or similar Liens in
connection with municipal or special district financing,
rights-of-way, restrictions, reservations and other similar charges,
burdens, and other similar charges or encumbrances not materially
interfering with the ordinary course of business of the Company, the
Issuer and the Restricted Subsidiaries,
(7) zoning restrictions, licenses, restrictions on the use of real
property or minor irregularities in title thereto, which do not
materially impair the use of such real property in the ordinary
course of business of the Company, the Issuer and the Restricted
Subsidiaries,
(8) Liens securing Indebtedness incurred pursuant to clause (8) or (9)
of the definition of Permitted Indebtedness,
(9) Liens securing Indebtedness of the Company, the Issuer or any
Restricted Subsidiary permitted to be incurred under the Senior
Indenture; provided, that the aggregate amount of all consolidated
Indebtedness of the Company, the Issuer and the Restricted
Subsidiaries (including, with respect to Capitalized Lease
Obligations, the Attributable Debt in respect thereof) secured by
Liens (other than Non-Recourse Indebtedness and Indebtedness
incurred pursuant to clause (9) of the definition of Permitted
Indebtedness) shall not exceed 40% of Consolidated Adjusted Tangible
Assets at any one time outstanding (after giving effect to the
incurrence of such Indebtedness and the use of the proceeds
thereof),
(10) Liens securing Non-Recourse Indebtedness of the Company, the Issuer
or any Restricted Subsidiary; provided, that such Liens apply only
to the property financed out of the net proceeds of such
Non-Recourse Indebtedness within 90 days after the incurrence of
such Non-Recourse Indebtedness,
(11) Liens securing Purchase Money Indebtedness; provided that such Liens
apply only to the property acquired, constructed or improved with
the proceeds of such Purchase Money Indebtedness within 90 days
after the incurrence of such Purchase Money Indebtedness,
(12) Liens on property or assets of the Company, the Issuer or any
Restricted Subsidiary securing Indebtedness of the Company, the
Issuer or any Restricted Subsidiary owing to the Company, the Issuer
or one or more Restricted Subsidiaries,
(13) leases or subleases granted to others not materially interfering
with the ordinary course of business of the Company and the
Restricted Subsidiaries,
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(14) purchase money security interests (including, without limitation,
Capitalized Lease Obligations); provided, that such Liens apply only
to the Property acquired and the related Indebtedness is incurred
within 90 days after the acquisition of such Property,
(15) any right of first refusal, right of first offer, option, contract
or other agreement to sell an asset; provided that such sale is not
otherwise prohibited under the Senior Indenture,
(16) any right of a lender or lenders to which the Company, the Issuer or
a Restricted Subsidiary may be indebted to offset against, or
appropriate and apply to the payment of such, Indebtedness any and
all balances, credits, deposits, accounts or money of the Company,
the Issuer or a Restricted Subsidiary with or held by such lender or
lenders or its Affiliates,
(17) any pledge or deposit of cash or property in conjunction with
obtaining surety, performance, completion or payment bonds and
letters of credit or other similar instruments or providing earnest
money obligations, escrows or similar purpose undertakings or
indemnifications in the ordinary course of business of the Company,
the Issuer and the Restricted Subsidiaries,
(18) Liens for homeowner and property owner association developments and
assessments,
(19) Liens securing Refinancing Indebtedness; provided, that such Liens
extend only to the assets securing the Indebtedness being
refinanced,
(20) Liens incurred in the ordinary course of business as security for
the obligations of the Company, the Issuer and the Restricted
Subsidiaries with respect to indemnification in respect of title
insurance providers,
(21) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any
Subsidiary of the Company or becomes a Subsidiary of the Company;
provided that such Liens were in existence prior to the
contemplation of such merger or consolidation or acquisition and do
not extend to any assets other than those of the Person merged into
or consolidated with the Company or the Subsidiary or acquired by
the Company or its Subsidiaries,
(22) Liens on property existing at the time of acquisition thereof by the
Company or any Subsidiary of the Company, provided that such Liens
were in existence prior to the contemplation of such acquisition,
(23) Liens existing on the Issue Date and any extensions, renewals or
replacements thereof, and
(24) Liens on specific items of inventory or other goods and proceeds of
any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to
facilitate the purchase, shipment or storage of such inventory or
other goods.
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, incorporated or unincorporated association, joint stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"PREFERRED STOCK" of any Person means all Capital Stock of such Person
which has a preference in liquidation or with respect to the payment of
dividends.
"PROPERTY" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person, whether or not included in
the most recent consolidated balance sheet of such Person and its Subsidiaries
under GAAP.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness of the Company, the
Issuer or any Restricted Subsidiary incurred for the purpose of financing all or
any part of the purchase price, or the cost of construction or improvement, of
any property to be used in the ordinary course of business by the Company, the
Issuer and the Restricted Subsidiaries; PROVIDED, HOWEVER, that (1) the
aggregate principal amount of such Indebtedness shall not exceed such purchase
price or cost and (2) such Indebtedness shall be incurred no later than 90 days
after the acquisition of such property or completion of such construction or
improvement.
"QUALIFIED STOCK" means Capital Stock of the Company other than
Disqualified Stock.
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"REAL ESTATE BUSINESS" means homebuilding, housing construction, real
estate development or construction and related real estate activities, including
the provision of mortgage financing or title insurance.
"REFINANCING INDEBTEDNESS" means Indebtedness (to the extent not Permitted
Indebtedness) that refunds, refinances or extends any Indebtedness of the
Company, the Issuer or any Restricted Subsidiary (to the extent not Permitted
Indebtedness) outstanding on the Issue Date or other Indebtedness (to the extent
not Permitted Indebtedness) permitted to be incurred by the Company, the Issuer
or any Restricted Subsidiary pursuant to the terms of the Senior Indenture, but
only to the extent that
(1) the Refinancing Indebtedness is subordinated, if at all, to the
Senior Notes or the Senior Guarantees, as the case may be, to the
same extent as the Indebtedness being refunded, refinanced or
extended,
(2) the Refinancing Indebtedness is scheduled to mature either (a) no
earlier than the Indebtedness being refunded, refinanced or extended
or (b) after the maturity date of the Senior Notes,
(3) the portion, if any, of the Refinancing Indebtedness that is
scheduled to mature on or prior to the maturity date of the Senior
Notes has a Weighted Average Life to Maturity at the time such
Refinancing Indebtedness is incurred that is equal to or greater
than the Weighted Average Life to Maturity of the portion of the
Indebtedness being refunded, refinanced or extended that is
scheduled to mature on or prior to the maturity date of the Senior
Notes, and
(4) such Refinancing Indebtedness is in an aggregate principal amount
that is equal to or less than the aggregate principal amount then
outstanding under the Indebtedness being refunded, refinanced or
extended.
"RESTRICTED PAYMENT" means any of the following:
(1) the declaration or payment of any dividend or any other distribution
on Capital Stock of the Company, the Issuer or any Restricted
Subsidiary or any payment made to the direct or indirect holders (in
their capacities as such) of Capital Stock of the Company, the
Issuer or any Restricted Subsidiary (other than (a) dividends or
distributions payable solely in Qualified Stock and (b) in the case
of the Issuer or Restricted Subsidiaries, dividends or distributions
payable to the Company, the Issuer or a Restricted Subsidiary);
(2) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company, the Issuer or any
Restricted Subsidiary (other than a payment made to the Company, the
Issuer or any Restricted Subsidiary); and
(3) any Investment (other than any Permitted investment), including any
Investment in an Unrestricted Subsidiary (including by the
designation of a Subsidiary of the Company as an Unrestricted
Subsidiary) and any amounts paid in accordance with clause (2) of
the definition of Indebtedness.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company which is not
an Unrestricted Subsidiary.
"S&P" means Standard and Poor's Ratings Group or any successor to its debt
rating business. "Senior Guarantee" means the guarantee of the Senior Notes by
the Company and each other Guarantor under the Senior Indenture.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary of the Company which would
constitute a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X
under the Securities Act and the Exchange Act as in effect on the Issue Date.
"SUBSIDIARY" of any Person means any corporation or other entity of which
a majority of the Capital Stock having ordinary voting power to elect a majority
of the Board of Directors or other persons performing similar functions is at
the time directly or indirectly owned or controlled by such Person.
"TRUSTEE" means the party named as such above until a successor replaces
such party in accordance with the applicable provisions of the Senior Indenture
and thereafter means the successor serving hereunder.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company so
designated by a resolution adopted by the Board of Directors of the Company
or a duly authorized committee thereof as provided below; PROVIDED that (a)
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the holders of Indebtedness thereof do not have direct or indirect recourse
against the Company, the Issuer or any Restricted Subsidiary, and neither the
Company, the Issuer nor any Restricted Subsidiary otherwise has liability for,
any payment obligations in respect of such Indebtedness (including any
undertaking, agreement or instrument evidencing such Indebtedness), except, in
each case, to the extent that the amount thereof constitutes a Restricted
Payment permitted by the Senior Indenture, in the case of Non-Recourse
Indebtedness, to the extent such recourse or liability is for the matters
discussed in the last sentence of the definition of "Non-Recourse Indebtedness,"
or to the extent such Indebtedness is a guarantee by such Subsidiary of
Indebtedness of the Company, the Issuer or a Restricted Subsidiary and (b) no
holder of any Indebtedness of such Subsidiary shall have a right to declare a
default on such Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity as a result of a default on any
Indebtedness of the Company, the Issuer or any Restricted Subsidiary. The
Unrestricted Subsidiaries will be the following: Eastern National Title
Insurance Agency, Inc., Eastern Title Agency, Inc., Founders Title Agency, Inc.,
Governor's Abstract Co., Inc., Hexter Fair Land Title Company I, Inc.,
Homebuyer's Mortgage, Inc., Hovnanian Financial Services I, Inc., Hovnanian
Financial Services 11, Inc., Hovnanian Financial Services III, Inc., Hovnanian
Financial Services IV, Inc., K. Hovnanian Investment Properties, Inc., K.
Hovnanian Mortgage, Inc., Preston Grande Homes, Inc., Heritage Pines, L.L.C.,
Kings Crossing at Montgomery, L.L.C., Knox Creek, L.L.C., McKinley Court,
L.L.C., Monticello Woods, L.L.C., New Homebuyers Title Co. (Virginia) L.L.C.,
New Homebuyers Title Company, L.L.C., Shadow Creek, L.L.C., Section 13 of the
Hills, L.L.C., Title Group II, L.L.C., Town Homes at Montgomery, L.L.C.,
Westwood Hills, L.L.C., WH/PR Land Co., L.L.C., Athena Portfolio Investors,
L.P., Beacon Manor Associates, L.P., Galleria Mortgage, L.P., Goodman Mortgage
Investors, L.P., Parkway Development, Sovereign Group, L.P., and K. Hovnanian
Venture I, L.L.C.
Subject to the foregoing, the Board of Directors of the Company or a duly
authorized committee thereof may designate any Subsidiary in addition to those
named above to be an Unrestricted Subsidiary; PROVIDED, HOWEVER, that (1) the
net amount (the "DESIGNATION AMOUNT") then outstanding of all previous
Investments by the Company and the Restricted Subsidiaries in such Subsidiary
will be deemed to be a Restricted Payment at the time of such designation and
will reduce the amount available for Restricted Payments under the "Limitations
on Restricted Payments" covenant set forth in the Senior Indenture, to the
extent provided therein, (2) the Company must be permitted under the
"Limitations on Restricted Payments" covenant set forth in the Senior Indenture
to make the Restricted Payment deemed to have been made pursuant to clause (1),
and (3) after giving effect to such designation, no Default or Event of Default
shall have occurred or be continuing. In accordance with the foregoing, and not
in limitation thereof, Investments made by any Person in any Subsidiary of such
Person prior to such Person's merger with the Company or any Restricted
Subsidiary (but not in contemplation or anticipation of such merger) shall not
be counted as an Investment by the Company or such Restricted Subsidiary if such
Subsidiary of such Person is designated as an Unrestricted Subsidiary.
The Board of Directors of the Company or a duly authorized committee
thereof may also redesignate an Unrestricted Subsidiary to be a Restricted
Subsidiary PROVIDED, HOWEVER, that (1) the Indebtedness of such Unrestricted
Subsidiary as of the date of such redesignation could then be incurred under the
"Limitations on Indebtedness" covenant and (2) immediately after giving effect
to such redesignation and the incurrence of any such additional Indebtedness,
the Company and the Restricted Subsidiaries could incur $1.00 of additional
Indebtedness under the first paragraph of the "Limitations on Indebtedness"
covenant. Any such designation or redesignation by the Board of Directors of the
Company or a committee thereof will be evidenced to the Trustee by the filing
with the Trustee of a certified copy of the resolution of the Board of Directors
of the Company or a committee thereof giving effect to such designation or
redesignation and an Officers' Certificate certifying that such designation or
redesignation complied with the foregoing conditions and setting forth the
underlying calculations of such Officers' Certificate. The designation of any
Person as an Unrestricted Subsidiary shall be deemed to include a designation of
all Subsidiaries of such Person as Unrestricted Subsidiaries; PROVIDED, HOWEVER,
that the ownership of the general partnership interest (or a similar member's
interest in a limited liability company) by an Unrestricted Subsidiary shall not
cause a Subsidiary of the Company of which more than 95% of the equity interest
is held by the Company or one or more Restricted Subsidiaries to be deemed an
Unrestricted Subsidiary.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness or portion thereof at any date, the number of years obtained by
dividing (i) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other required
payment of principal, including, without limitation, payment at final maturity,
in respect thereof, by (b) the number of years (calculated
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to the nearest one-twelfth) that will elapse between such date and the making of
such payment by (ii) the sum of all such payments described in clause (i)(a)
above.
CONCERNING THE SENIOR TRUSTEE
The Senior Indenture contains certain limitations on the rights of the
Senior Trustee, should it become a creditor of the Company, to obtain payment of
claims in certain cases, or to realize on certain property received in respect
of any such claim as security or otherwise. The Senior Trustee will be permitted
to engage in other transactions; however, if it acquires any conflicting
interest, as defined in the Senior Indenture, it must eliminate that conflict
within 90 days, apply to the Securities and Exchange Commission for permission
to continue or resign. The Senior Trustee is also trustee with respect to the
Senior Subordinated Notes and the Issuer's 10 1/2% Senior Notes due 2007 and its
9 ?% Senior Notes due 2009.
The Holders of a majority in principal amount of the outstanding Senior
Notes will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Senior Trustee, subject to
certain exceptions. The Senior Indenture provides that in case an Event of
Default shall occur (which shall not be cured), the Senior Trustee will be
required, in the exercise of its power, to use the degree of care of a prudent
man in the conduct of his own affairs. Subject to such provisions, the Senior
Trustee will be under no obligation to exercise any of its rights or powers
under the Senior Indenture at the request of any holder of Senior Notes, unless
that holder shall have offered to the Senior Trustee security and indemnity
satisfactory to it against any loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this prospectus may obtain a copy of the Senior
Indenture and Senior Registration Rights Agreement without charge by writing to
Hovnanian at 10 Highway 35, Red Bank, NJ 07701, Attention: Corporate Controller.
REGISTERED EXCHANGE OFFER; REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company, the Issuer, the other Guarantors and the initial purchasers
of the outstanding Senior Notes entered into a registration rights agreement on
March 26, 2002, which we refer to as the "Senior Registration Rights Agreement".
Pursuant to the Senior Registration Rights Agreement, the Company, the Issuer
and the Guarantors agreed to file with the Securities and Exchange Commission
the Exchange Offer Registration Statement on the appropriate form under the
Securities Act with respect to the Senior Notes. Upon the effectiveness of the
Exchange Offer Registration Statement, the Issuer will offer to the Holders of
Transfer Restricted Securities pursuant to the Exchange Offer who are able to
make certain representations the opportunity to exchange their Transfer
Restricted Securities for exchange Senior Notes. Capitalized terms used in this
section but not otherwise defined have the meanings given to them in the Senior
Registration Rights Agreement.
Under the Senior Registration Rights Agreement:
(1) the Company, the Issuer and the other Guarantors agreed to file an
Exchange Offer Registration Statement with the Securities and
Exchange Commission on or prior to 90 days after the Closing Date;
(2) the Company, the Issuer and the other Guarantors agreed to use their
reasonable best efforts to have the Exchange Offer Registration
Statement declared effective by the Securities and Exchange
Commission on or prior to 150 days after the Closing Date;
(3) unless the exchange offer would not be permitted by applicable law
or Securities and Exchange Commission policy, the Company, the
Issuer and the other Guarantors agreed to commence the exchange
offer, keep the exchange offer open for a period of not less than 20
business days and use their reasonable best efforts to issue, on or
prior to 30 business days after the date on which the exchange offer
Registration Statement was declared effective by the Securities and
Exchange Commission, exchange Senior Notes in exchange for all
outstanding Senior Notes tendered prior thereto in the exchange
offer; and
(4) if obligated to file the Shelf Registration Statement, the Company,
the Issuer and the other Guarantors will file the Shelf Registration
Statement with the Securities and Exchange Commission on or prior to
30 days after that filing obligation arises and use their reasonable
best
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efforts to cause the Shelf Registration to be declared effective by the
Securities and Exchange Commission on or prior to 90 days after that
obligation arises.
In the event that:
(1) the Issuer is not required to file the Exchange Offer Registration
Statement or permitted to consummate the Exchange Offer because
the Exchange Offer is not permitted by applicable law or
Securities and Exchange Commission policy; or
(2) any holder of Transfer Restricted Securities notifies the Issuer
in writing prior to the 20th business day following consummation
of the exchange offer that:
(a) based on an opinion of counsel, it is prohibited by law or
Securities and Exchange Commission policy from
participating in the exchange offer; or
(b) it is a broker-dealer and owns Senior Notes acquired
directly from the Issuer,
the Company, the Issuer and the other Guarantors have agreed to file with the
Securities and Exchange Commission a Shelf Registration Statement to cover
resales of the Senior Notes by the Holders thereof who satisfy certain
conditions relating to the provisions of information in connection with the
Shelf Registration Statement.
The Company, the Issuer and the other Guarantors have agreed to use their
reasonable best efforts to cause the applicable registration statement to be
declared effective as promptly as possible by the Securities and Exchange
Commission.
For purposes of the preceding, "Transfer Restricted Securities" means
each:
(1) Senior Note, until the earliest to occur of:
(a) the date on which that Senior Note is exchanged in the
exchange offer for a New Senior Note which is entitled to
be resold to the public by the holder thereof without
complying with the prospectus delivery requirements of the
Securities Act;
(b) the date on which that Senior Note has been disposed of in
accordance with a Shelf Registration Statement (and
purchasers thereof have been issued New Senior Notes); or
(c) the date on which that Senior Note is distributed to the
public pursuant to Rule 144 under the Securities Act; and
(2) New Senior Note issued to a broker-dealer until the date on which
that New Senior Note is disposed of by that broker-dealer pursuant
to the "Plan of Distribution" contemplated by the Exchange Offer
Registration Statement (including the delivery of the prospectus
contained therein).
The Company, the Issuer and the other Guarantors have agreed to pay
liquidated damages to each holder of Senior Notes upon the occurrence of any of
the following:
(1) the Company, the Issuer and the other Guarantors fail to file any
of the Registration Statements required by the Senior Registration
Rights Agreement on or before the date specified for that filing;
(2) any of such Registration Statement is not declared effective by
the Securities and Exchange Commission on or prior to the date
specified for that effectiveness, which we refer to as the
"EFFECTIVENESS TARGET DATE";
(3) the Issuer fails to consummate the exchange offer within 40
business days of the Effectiveness Target Date with respect to the
Exchange Offer Registration Statement; or
(4) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but thereafter ceases
to be effective or usable in connection with resales of Transfer
Restricted Securities during the periods specified in the
registration rights agreement.
We refer to each event referred to in clauses (1) through (4) above as a
"REGISTRATION DEFAULT".
Such liquidated damages shall be:
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(1) with respect to the first 90-day period immediately following the
occurrence of the first Registration Default, an amount equal to
$.05 per week per $1,000 principal amount of Senior Notes held by
that holder; and
(2) an additional $.05 per week per $1,000 principal amount of Senior
Notes with respect to each subsequent 90-day period until all
Registration Defaults have been cured, up to a maximum amount of
liquidated damages for all Registration Defaults of $.25 per week
per $1,000 principal amount of Senior Notes.
All accrued liquidated damages will be paid on each Damages Payment Date
to the Global Senior Note holder by wire transfer of immediately available funds
or by federal funds check and to Holders of Certificated Securities by wire
transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. Following the cure
of all Registration Defaults, the accrual of liquidated damages will cease.
Holders of Senior Notes will be required to make certain representations
to the Company, the Issuer and the other Guarantors, as described in the Senior
Registration Rights Agreement, in order to participate in the Exchange Offer and
will be required to deliver certain information to be used in connection with
the Shelf Registration Statement and to provide comments on the Shelf
Registration Statement within the time periods set forth in the registration
rights agreement in order to have their Senior Notes included in the Shelf
Registration Statement and benefit from the provisions regarding liquidated
damages set forth above with respect to the Shelf Registration Statement.
8.875% SENIOR SUBORDINATED NOTES DUE 2012
GENERAL
The outstanding Senior Subordinated Notes were issued under an indenture,
which we refer to as the "Subordinated Indenture," dated as of March 26, 2002,
among us, the Guarantors and Wachovia Bank, National Association, formerly known
as First Union National Bank, as trustee, which we refer to as the "Subordinated
Trustee." The terms of the Senior Subordinated Notes include those stated in the
Subordinated Indenture and those made part of the Subordinated Indenture by
reference to the Trust Indenture Act of 1939, as amended. The exchange Senior
Subordinated Notes will be issued under the same Subordinated Indenture.
This description of the exchange Senior Subordinated Notes contains
definitions of terms, including those defined under the caption "--Definitions
of Certain Terms Used in the Subordinated Indenture". The following discussion
includes a summary description of certain material terms of the Subordinated
Indenture, the Subordinated Registration Rights Agreement, and the exchange
Senior Subordinated Notes. Because this is a summary, it does not include all of
the information that is included in the Subordinated Indenture, the Subordinated
Registration Rights Agreement, or the exchange Senior Subordinated Notes.
You should read the Subordinated Indenture and the Subordinated
Registration Rights Agreement carefully and in their entirety because they, and
not this description, define your rights as Holders of the Senior Subordinated
Notes. You may request copies of these documents at our address set forth under
"Where You Can Find More Information".
The outstanding Senior Subordinated Notes and the exchange Senior
Subordinated Notes constitute a single series of debt securities under the
Subordinated Indenture. If the exchange offer is consummated, Holders of Senior
Subordinated Notes who do not exchange their Senior Subordinated Notes in the
exchange offer will vote together with the Holders of the registered Senior
Subordinated Notes for all relevant purposes under the Subordinated Indenture.
Accordingly, when determining whether the required Holders have given notice,
consent or waiver or taken any other action permitted under the Subordinated
Indenture, any outstanding Senior Subordinated Notes that remain outstanding
after the exchange offer will be aggregated with the registered Senior
Subordinated Notes. All references herein to specified percentages in aggregate
principal amount of Senior Subordinated Notes outstanding shall be deemed to
mean, at any time after the Exchange Offer is consummated, percentages in
aggregate principal amount of Senior Subordinated Notes and registered Senior
Subordinated Notes outstanding. Capitalized terms used in this section but not
otherwise defined have the meanings given to them in the Subordinated Indenture.
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The exchange Senior Subordinated Notes will bear interest at the rate PER
ANNUM shown on the cover page of this prospectus from the most recent date to
which interest has been paid on the outstanding Senior Subordinated Notes or, if
no interest has been paid on the outstanding Senior Subordinated Notes, from
March 26, 2002. The applicable interest will be payable semi-annually on each
April 1 and October 1, beginning October 1, 2002, to Holders of record at the
close of business on March 15 or September 15, as the case may be, immediately
preceding each such interest payment date. No interest will be paid on
outstanding Senior Subordinated Notes following their acceptance for exchange.
The exchange Senior Subordinated Notes will mature on April 1, 2012, and will be
issued in denominations of $1,000 and integral multiples thereof.
The exchange Senior Subordinated Notes are limited to an aggregate
principal amount of $200.0 million. The exchange Senior Subordinated Notes are
guaranteed by the Company and each of the other Guarantors pursuant to the
guarantees, which we refer to collectively as the "--Subordinated Guarantees",
described below.
RANKING
The Senior Subordinated Notes will be our general unsecured senior
subordinated obligations. This means that the payment of principal, premium and
interest on, and all other amounts owing with respect to, the Senior
Subordinated Notes is subordinated as set forth in the Subordinated Indenture to
the prior payment in full in cash or cash equivalents of all existing and future
Senior Indebtedness of the Issuer.
The Subordinated Guarantees will be general unsecured senior subordinated
obligations. The Subordinated Guarantees will be subordinated on the same basis
to Senior Indebtedness of the Guarantors as the Senior Subordinated Notes are
subordinated to Senior Indebtedness of the Issuer.
At January 31, 2002, as adjusted to give effect to the transactions
described under "Use of Proceeds" and the acquisition of The Forecast Group(R),
L.P. on January 10, 2002, the Company, the Issuer and the other Guarantors would
have had approximately $676.3 million, including the Senior Notes, of
Indebtedness outstanding, of which $15.2 million would have been secured by
certain real estate assets of the Company and the other Guarantors and $526.3
million of which would have been Senior Indebtedness.
EXECUTION AUTHENTICATION AND DELIVERY
The Senior Subordinated Notes will be executed by facsimile or manual
signature in the name and on behalf of the Issuer, by an Officer. If an Officer
whose signature is on a Senior Subordinated Note no longer holds that office at
the time the Senior Note is authenticated, the Senior Subordinated Note will
still be valid.
A Senior Subordinated Note will not be valid until the Subordinated
Trustee manually signs the certificate of authentication on the Senior
Subordinated Note. The signature will be conclusive evidence that the Senior
Subordinated Note has been authenticated under the Subordinated Indenture.
Unless limited by the terms of its appointment, an authenticating agent may
authenticate the Senior Subordinated Notes whenever the Subordinated Trustee may
do so. The Senior Subordinated Notes will be issuable in denominations of $1,000
and multiples thereof.
SUBORDINATION
The Indebtedness evidenced by the Senior Subordinated Notes and the
Subordinated Guarantees will be subordinate to the prior payment when due of the
principal of and interest on all Senior Indebtedness of the Issuer and the
Guarantors, respectively. Upon maturity of any Senior Indebtedness of the Issuer
or any Guarantor, including by reason of acceleration, payment in full must be
made on such Senior Indebtedness before any payment is made on or in respect of
the Senior Subordinated Notes or the Subordinated Guarantee of such Guarantor.
During the continuation of payment default with respect to any Senior
Indebtedness of the Issuer or a Guarantor and upon written notice thereof to the
Issuer and the Subordinated Trustee or upon acceleration of such senior
Indebtedness, no direct or indirect payment may be made by the Issuer or such
Guarantor with respect to the principal of or interest on the Senior
Subordinated Notes or such Subordinated Guarantee or to repurchase or redeem any
of the Senior Subordinated Notes. During the continuation of any non-payment
default with respect to any Senior Indebtedness of the Issuer or a Guarantor
pursuant to which the maturity thereof may be accelerated, no payment or
distribution of any kind or character (excluding certain permitted equity or
subordinated securities) may be made by the Issuer or such Guarantor on account
of the principal of or premium, if any, or interest on, the Senior Subordinated
Notes or such Subordinated Guarantee or the purchase, redemption or other
acquisition of, any Senior Subordinated Notes for the period specified below
(the "PAYMENT BLOCKAGE
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PERIOD"). The Payment Blockage Period will commence upon the receipt of notice
of the default by the Subordinated Trustee from the holders of Senior
Indebtedness of the Issuer or a Guarantor or any representative of a holder of
such Senior Indebtedness and shall end on the earlier of (i) 120 days
thereafter, (ii) the date on which such default is cured, waived or ceases to
exist or on which such Senior Indebtedness is discharged or (iii) the date on
which such Payment Blockage Period shall have been terminated by written notice
to the Issuer or to the Subordinated Trustee from the holders of such Senior
Indebtedness or any representative of the holders of such Senior Indebtedness
initiating such Payment Blockage Period, after which the Issuer or the
Guarantor, as the case may be, shall promptly resume making any and all required
payments in respect of the Senior Subordinated Notes or the applicable
Subordinated Guarantee, including any missed payments. In no event will a
Payment Blockage period extend beyond 120 days from the date of receipt by the
Subordinated Trustee of the notice initiating such Payment Blockage period (the
"INITIAL PERIOD"). Any number of additional Payment Blockage Periods may be
commenced during the Initial Period; PROVIDED that no such additional period
shall extend beyond the Initial Period. After the expiration of the Initial
Period, no Payment Blockage Period with respect to any Subordinated Notes may be
commenced on the basis of a non-payment default on the Senior Indebtedness which
was the basis of a Payment Blockage Period commenced during the Initial Period
until 270 consecutive days have elapsed after the end of the Initial Period. No
non-payment event of default with respect to Senior Indebtedness of the Issuer
or a Guarantor that existed or was continuing on the date of the commencement of
any Payment Blockage Period with respect to the Senior Indebtedness of the
Issuer or a Guarantor initiating such Payment Blockage Period and of which such
Senior Indebtedness holder(s) are aware will be, or can be, made the basis for
the commencement of a second Payment Blockage Period whether or not within the
specified period, unless such event of default has been cured or waived for a
period of not less than 90 consecutive days. If the Issuer fails to make any
payment on any Senior Subordinated Notes when due or within any applicable grace
period, whether or not on account of the payment blockage provisions referred to
above, such failure would constitute an event of default under the Subordinated
Indenture and would enable the Holders of such Senior Subordinated Notes to
accelerate the maturity thereof. If any Guarantor fails to make any payment on
any Subordinated Guarantee when due or within any applicable grace period,
whether or not on account of the payment blockage provisions referred to above,
such failure would constitute an event of default under the Subordinated
Indenture and would enable the Holders of the Senior Subordinated Notes to
accelerate the maturity thereof.
Upon any distribution of assets of the Issuer or any Guarantor in any
dissolution winding up, liquidation or reorganization of the Issuer or such
Guarantor, payment of the principal of and premium, if any, and interest on
Senior Subordinated Notes or the applicable Subordinated Guarantee will be
subordinated to the extent and in the manner set forth in the Subordinated
Indenture to the prior payment in full of all Senior Indebtedness of the Issuer
or such Guarantor. Because of these subordination provisions, unless holders of
Senior Indebtedness of the Issuer or such Guarantor are paid in full, holders of
Senior Indebtedness of the Issuer or such Guarantor, including general creditors
(other than certain trade creditors) of the Issuer will recover more, ratably,
than Holders of the Senior Subordinated Notes.
"SENIOR INDEBTEDNESS" of any Person means (i) all Indebtedness of such
Person, (ii) lease obligations of such Person, (iii) all Indebtedness, secured
or unsecured, in connection with the acquisition of any business by such Person,
(iv) all Indebtedness secured by an mortgage, lien, pledge, charge or
encumbrance upon property owned by such Person and all Indebtedness secured in
the manner specified in this clause (iv) even if such Person has not assumed or
become liable for the payment thereof, (v) all customer deposits held in escrow
accounts by such Person pending closing of the related sales, (vi) all
indebtedness of such Person created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such Person
or otherwise representing the deferred and unpaid balance of the purchase price
of any such property, including all indebtedness created or arising in the
manner specified in this clause (vi) even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to the
rights and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property, (vii) guarantees
by such Person, direct or indirect, of any indebtedness of another Person of the
types referred to in clauses (i) through (vi) and (viii) contingent obligations
of such Person in respect of, or to purchase or otherwise acquire or be
responsible or liable for through the purchase of products or services,
irrespective of whether such products are delivered or such services are
rendered, any such indebtedness referred to in clauses (i) through (vi); which
indebtedness, lease obligation, deposit, guarantee or contingent obligation such
Person has directly or indirectly created, incurred, assumed, guaranteed or
otherwise become liable or responsible for, whether currently outstanding or
hereafter created. All references to indebtedness include any renewals,
extension, refundings, amendments and modifications of such indebtedness issued
in exchange for such indebtedness PROVIDED, HOWEVER, THAT, with respect to the
Issuer and the
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Guarantors, "Senior Indebtedness" does not include, without limitation: (a) the
Senior Subordinated Notes and the Subordinated Guarantees, (b) the 9 3/4%
Subordinated Notes due 2005 of the Issuer and the guarantee thereof by the
Guarantors, (c) accounts payable or any other indebtedness to trade creditors
created or assumed by the Issuer or a Guarantor in the ordinary course of
business in connection with the obtaining of materials or services, (d) any
liability for federal, state, local to other taxes owned or owing by the Issuer
or a Guarantor, and (e) any Indebtedness as to which, in the instrument creating
or evidencing the same or pursuant to which the same is outstanding, it is
provided that such indebtedness is on a parity with or otherwise not superior in
right of payment to the Senior Subordinated Notes or the Subordinated
Guarantees, as applicable.
REDEMPTION
Except as set forth below, the Senior Subordinated Notes will not be
redeemable prior to April 1, 2007. Thereafter, the Issuer may redeem the Senior
Notes, at its option, in whole at any time or in part from time to time.
Redemption will be at the following redemption prices plus accrued and unpaid
interest and liquidated damages, if any, to the redemption date, subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date, if redeemed during the 12-month period
commencing on April 1 of the years set forth below:
REDEMPTION
YEAR PRICE
----
2007............................... 104.000%
2008............................... 102.667%
2009............................... 101.333%
2010 and thereafter................ 100.000%
Selection of the Senior Subordinated Notes or portions thereof for
redemption pursuant to the foregoing shall be made by the Subordinated Trustee
only on a PRO RATA basis or on as nearly a PRO RATA basis as is practicable,
subject to the procedures of The Depository Trust Company, unless such method is
otherwise prohibited. Notice of redemption will be mailed at least 30 days but
not more than 60 days before the redemption date to each Holder whose Senior
Subordinated Notes are to be redeemed at the registered address of such Holder.
On and after the redemption date, interest ceases to accrue on the Senior
Subordinated Notes or portions thereof called for redemption.
There is no sinking fund for the Senior Subordinated Notes.
THE SUBORDINATED GUARANTEES
Each of the Guarantors will, so long, in the case of a Restricted
Subsidiary, as it remains a Restricted Subsidiary, unconditionally guarantee on
a joint and several basis all of our obligations under the Senior Notes,
including our obligations to pay principal, premium, if any, and interest with
respect to the Senior Subordinated Notes. The obligations of each Guarantor
other than the Company are limited to the maximum amount which, after giving
effect to all other contingent and fixed liabilities of such Guarantor and after
giving effect to any collections from or payments made by or on behalf of any
other Guarantor in respect of the obligations of such other Guarantor under its
Subordinated Guarantee or pursuant to its contribution obligations under the
Subordinated Indenture, will result in the obligations of such Guarantor under
its Subordinated Guarantee not constituting a fraudulent conveyance or
fraudulent transfer under federal or state law. Each Guarantor other than the
Company that makes a payment or distribution under a Subordinated Guarantee
shall be entitled to a contribution from each other Guarantor in an amount PRO
RATA, based on the net assets of each Guarantor, determined in accordance with
GAAP. Except as provided in "--Certain Covenants" below, the Company is not
restricted from selling or otherwise disposing of any of the Guarantors.
The Subordinated Indenture requires that each existing and future
Restricted Subsidiary, other than KHL, Inc. and K. Hovnanian Poland, sp z.o.o.,
be a Guarantor. The Company is permitted to cause any Unrestricted Subsidiary to
be a Guarantor.
The Subordinated Indenture provides that if all or substantially all of
the assets of any Guarantor other than the Company or all of the Capital Stock
of any Guarantor other than the Company is sold, including by consolidation,
merger, issuance or otherwise, or disposed of, including by liquidation,
dissolution or otherwise, by
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the Company or any of its Subsidiaries, or, unless the Company elects otherwise,
if any Guarantor other than the Company is designated an Unrestricted Subsidiary
in accordance with the terms of the Subordinated Indenture, then such Guarantor,
in the event of a sale or other disposition of all of the Capital Stock of such
Guarantor or a designation as an Unrestricted Subsidiary, or the Person
acquiring such assets, in the event of a sale or other disposition of all or
substantially all of the assets of such Guarantor, shall be deemed automatically
and unconditionally released and discharged from any of its obligations under
the Subordinated Indenture without any further action on the part of the
Subordinated Trustee or any Holder of the Senior Subordinated Notes.
An Unrestricted Subsidiary that is a Guarantor shall be deemed
automatically and unconditionally released and discharged from all obligations
under its Subordinated Guarantee upon notice from the Company to the
Subordinated Trustee to such effect, without any further action required on the
part of the Subordinated Trustee or any holder.
A sale of assets or Capital Stock of a Guarantor may constitute an Asset
Disposition subject to the "Limitations on Dispositions of Assets" covenant.
CERTAIN COVENANTS
The following is a summary of certain covenants that are contained in the
Subordinated Indenture. Such covenants are applicable, unless waived or amended
as permitted by the Subordinated Indenture, so long as any of the Senior
Subordinated Notes are outstanding or until the Senior Subordinated Notes are
defeased or discharged pursuant to provisions described under "--Defeasance of
Subordinated Indenture" or "--Discharge of Subordinated Indenture".
REPURCHASE OF SENIOR SUBORDINATED NOTES UPON CHANGE OF CONTROL. In the
event that there shall occur a Change of Control, each Holder of Senior
Subordinated Notes shall have the right, at such holder's option, to require the
Issuer to purchase all or any part of such Holder's Senior Subordinated Notes on
a date, (the "REPURCHASE DATE") that is no later than 90 days after notice of
the Change of Control, at 101% of the principal amount thereof plus accrued and
unpaid interest and liquidated damages, if any, to the Repurchase Date.
On or before the thirtieth day after any Change of Control, the Issuer is
obligated to mail or cause to be mailed, to all Holders of record of Senior
Subordinated Notes a notice regarding the Change of Control and the repurchase
right. The notice shall state the Repurchase Date, the date by which the
repurchase right must be exercised, the price for the Senior Subordinated Notes
and the procedure which the Holder must follow to exercise such right.
Substantially simultaneously with mailing of the notice, the Issuer shall cause
a copy of such notice to be published in a newspaper of general circulation in
the Borough of Manhattan, The City of New York. To exercise such right, the
Holder of such Subordinated Note must deliver at least ten days prior to the
Repurchase Date written notice to the Issuer (or an agent designated by the
Issuer for such purpose) of the Holder's exercise of such right, together with
the Subordinated Note with respect to which the right is being exercised, duly
endorsed for transfer; PROVIDED, HOWEVER, that if mandated by applicable law, a
Holder may be permitted to deliver such written notice nearer to the Repurchase
Date than may be specified by the Issuer.
The Issuer will comply with applicable law, including Section 14(e) of
the Securities Exchange Act of 1934 (the "EXCHANGE ACT") and Rule 14e-1
thereunder, if applicable, if the Issuer is required to give a notice of a right
of repurchase as a result of a Change of Control.
With respect to any disposition of assets, the phrase "all or
substantially all" as used in the Subordinated Indenture (including as set forth
under "Limitations on Mergers, Consolidations and Sales of Assets" below) varies
according to the facts and circumstances of the subject transaction, has no
clearly established meaning under New York law (which governs the Subordinated
Indenture) and is subject to judicial interpretation. Accordingly, in certain
circumstances there may be a degree of uncertainty in ascertaining whether a
particular transaction would involve a disposition of "all or substantially all"
of the assets of the Company, and therefore it may be unclear as to whether a
Change of Control has occurred and whether the Holders have the right to require
the Issuer to repurchase Senior Subordinated Notes.
None of the provisions relating to a repurchase upon a Change of Control
is waivable by the Board of Directors of the Issuer or the Company. The Company
could, in the future, enter into certain transactions, including certain
recapitalizations of the Company, that would not result in a Change of Control,
but would increase the amount of Indebtedness outstanding at such time.
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The Subordinated Indenture requires the payment of money for Senior
Subordinated Notes or portions thereof validly tendered to and accepted for
payment by the Issuer pursuant to a Change of Control offer. In the event that a
Change of Control has occurred under the Subordinated Indenture, a change of
control will also have occurred under the Senior Indenture (as defined under
"Description of the Exchange Notes -- 8.000% Senior Notes due 2012" above) and
under the indentures governing the Issuer's 10 1/2% Senior Notes due 2007, 9?%
Senior Notes due 2009 and under the Revolving Credit Facility and the Term Loan
Facility. If a Change of Control were to occur, there can be no assurance that
the Issuer would have sufficient funds to pay the purchase price for all Senior
Subordinated Notes and amounts due under other Indebtedness that the Company may
be required to repurchase or repay or that the Company or the other Guarantors
would be able to make such payments. In the event that the Issuer were required
to purchase outstanding Senior Subordinated Notes pursuant to a Change of
Control offer, the Company expects that it would need to seek third-party
financing to the extent it does not have available funds to enable the Issuer to
meet its purchase obligations. However, there can be no assurance that the
Company would be able to obtain such financing.
Failure by the Issuer to purchase the Senior Subordinated Notes when
required upon a Change of Control will result in an Event of Default with
respect to the Senior Subordinated Notes.
These provisions could have the effect of deterring hostile or friendly
acquisitions of the Company where the Person attempting the acquisition views
itself as unable to finance the purchase of the principal amount of Senior
Subordinated Notes which may be tendered to the Company upon the occurrence of a
Change of Control.
LIMITATIONS ON INDEBTEDNESS. The Subordinated Indenture provides that the
Company and the Issuer will not, and will not cause or permit any Restricted
Subsidiary, directly or indirectly, to create, incur, assume, become liable for
or guarantee the payment of (which we refer to collectively as an "INCURRENCE")
any Indebtedness (including Acquired Indebtedness) unless, after giving effect
thereto and the application of the proceeds therefrom, the Consolidated Fixed
Charge Coverage Ratio on the date thereof would be at least 2.0 to 1.0.
Notwithstanding the foregoing, the provisions of the Subordinated
Indenture will not prevent the incurrence of:
(1) Permitted Indebtedness,
(2) Refinancing Indebtedness,
(3) Non-Recourse Indebtedness,
(4) any Subordinated Guarantee of Indebtedness represented by the
Senior Subordinated Notes, and
(5) any guarantee of Indebtedness incurred under Credit Facilities in
compliance with the Subordinated Indenture.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness may be incurred through the first paragraph of this
covenant or by meeting the criteria of one or more of the types of Indebtedness
described in the second paragraph of this covenant (or the definitions of the
terms used therein) the Company, in its sole discretion,
(1) may classify such item of Indebtedness under and comply with
either of such paragraphs, or any of such definitions, as
applicable,
(2) may classify and divide such item of Indebtedness into more than
one of such paragraphs, or definitions, as applicable, and
(3) may elect to comply with such paragraphs (or definitions), as
applicable, in any order.
The Company and the Issuer will not, and will not cause or permit any
Guarantor to, directly or indirectly, in any event incur any Indebtedness that
purports to be by its terms (or by the terms of any agreement governing such
Indebtedness) subordinated to any other Indebtedness of the Company or of such
Guarantor, as the case may be, unless such Indebtedness is also by its terms (or
by the terms of any agreement governing such Indebtedness) made expressly
subordinated to the Senior Subordinated Notes or the Subordinated Guarantee of
such Guarantor, as the case may be, to the same extent and in the same manner as
such Indebtedness is subordinated to such other Indebtedness of the Company or
such Guarantor, as the case may be.
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LIMITATIONS ON RESTRICTED PAYMENTS. The Subordinated Indenture provides
that the Company and the Issuer will not, and will not cause or permit any
Restricted Subsidiary to, directly or indirectly, make any Restricted Payment
unless:
(1) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to
such Restricted Payment;
(2) immediately after giving effect to such Restricted Payment, the
Company could incur at least $1.00 of Indebtedness pursuant to the
first paragraph of the "Limitations on Indebtedness" covenant; and
(3) immediately after giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments (including the Fair
Market Value of any non-cash Restricted Payment) declared or made
after May 4, 1999 does not exceed the sum of:
(a) 50% of the Consolidated Net Income of the Company on a
cumulative basis during the period taken as one accounting
period) from and including February 1, 1999 and ending on
the last day of the Company's fiscal quarter immediately
preceding the date of such Restricted Payment (or in the
event such Consolidated Net Income shall be a deficit,
MINUS 100% of such deficit), PLUS
(b) 100% of the aggregate net cash proceeds of and the Fair
Market Value of Property received by the Company from (1)
any capital contribution to the Company after February 1,
1999 or any issue or sale after February 1, 1999 of
Qualified Stock (other than to any Subsidiary of the
Company) and (2) the issue or sale after February 1, 1999
of any Indebtedness or other securities of the Company
convertible into or exercisable for Qualified Stock of the
Company that have been so converted or exercised, as the
case may be, PLUS
(c) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made after May
4, 1999, an amount (to the extent not included in the
calculation of Consolidated Net Income referred to in (a))
equal to the lesser of (x) the return of capital with
respect to such Investment (including by dividend,
distribution or sale of Capital Stock) and (y) the amount
of such Investment that was treated as a Restricted
Payment, in either case, less the cost of the disposition
or repayment of such Investment (to the extent not included
in the calculation of Consolidated Net Income referred to
in (a)), PLUS
(d) with respect to any Unrestricted Subsidiary that is
redesignated as a Restricted Subsidiary after May 4, 1999,
in accordance with the definition of Unrestricted
Subsidiary (so long as the designation of such Subsidiary
as an Unrestricted Subsidiary was treated as a Restricted
Payment made after the Issue Date, and only to the extent
not included in the calculation of Consolidated Net Income
referred to in (a)), an amount equal to the lesser of (x)
the proportionate interest of the Company or a Restricted
Subsidiary in an amount equal to the excess of (I) the
total assets of such Subsidiary, valued on an aggregate
basis at the lesser of book value and Fair Market Value
thereof, over (II) the total liabilities of such
Subsidiary, determined in accordance with GAAP, and (y) the
Designation Amount at the time of such Subsidiary's
designation as an Unrestricted Subsidiary, PLUS
(e) $17 million, MINUS
(f) the aggregate amount of all Restricted Payments (other than
Restricted Payments referred to in clause (C) of the
immediately succeeding paragraph) made after February 1,
1999 through May 4, 1999.
The foregoing clauses (2) and (3) will not prohibit:
(A) the payment of any dividend within 60 days of its declaration if
such dividend could have been made on the date of its declaration
without violation of the provisions of the Subordinated Indenture;
(B) the repurchase, redemption or retirement of any shares of Capital
Stock of the Company in exchange for, or out of the net proceeds
of the substantially concurrent sale (other than to a Subsidiary
of the Company) of, other shares of Qualified Stock; and
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(C) the purchase, redemption or other acquisition, cancellation or
retirement for value of Capital Stock, or options, warrants,
equity appreciation rights or other rights to purchase or acquire
Capital Stock, of the Company or any Subsidiary held by officers
or employees or former officers or employees of the Company or any
Subsidiary (or their estates or beneficiaries under their estates)
not to exceed $10 million in the aggregate since May 4, 1999;
PROVIDED, HOWEVER, that each Restricted Payment described in clauses (A) and (B)
of this sentence shall be taken into account for purposes of computing the
aggregate amount of all Restricted Payments pursuant to clause (3) of the
immediately preceding paragraph.
For purposes of determining the aggregate and permitted amounts of
Restricted Payments made, the amount of any guarantee of any Investment in any
Person that was initially treated as a Restricted Payment and which was
subsequently terminated or expired, net of any amounts paid by the Company or
any Restricted Subsidiary in respect of such guarantee, shall be deducted.
In determining the "Fair Market Value of Property" for purposes of clause
(3) of the first paragraph of this covenant, Property other than cash, Cash
Equivalents and Marketable Securities shall be deemed to be equal in value to
the "equity value" of the Capital Stock or other securities issued in exchange
therefor. The equity value of such Capital Stock or other securities shall be
equal to (i) the number of shares of Common Equity issued in the transaction (or
issuable upon conversion or exercise of the Capital Stock or other securities
issued in the transaction) multiplied by the closing sale price of the Common
Equity on its principal market on the date of the transaction (less, in the case
of Capital Stock or other securities which require the payment of consideration
at the time of conversion or exercise, the aggregate consideration payable
thereupon) or (ii) if the Common Equity is not then traded on the New York Stock
Exchange, American Stock Exchange or Nasdaq National Market, or if the Capital
Stock or other securities issued in the transaction do not consist of Common
Equity (or Capital Stock or other securities convertible into or exercisable for
Common Equity), the value (if more than $10 million) of such Capital Stock or
other securities as determined by a nationally recognized investment banking
firm retained by the Board of Directors of the Company.
LIMITATIONS ON TRANSACTIONS WITH AFFILIATES. The Subordinated Indenture
provides that the Company and the Issuer will not, and will not cause or permit
any Restricted Subsidiary to, make any loan, advance, guarantee or capital
contribution to, or for the benefit of, or sell, lease, transfer or otherwise
dispose of any property or assets to or for the benefit of, or purchase or lease
any property or assets from, or enter into or amend any contract, agreement or
understanding with, or for the benefit of, any Affiliate of the Company or any
Affiliate of any of the Company's Subsidiaries or any holder of 10% or more of
the Common Equity of the Company (including any Affiliates of such holders), in
a single transaction or series of related transactions (each, an "AFFILIATE
TRANSACTION"), except for any Affiliate Transaction the terms of which are at
least as favorable as the terms which could be obtained by the Company, the
Issuer or such Restricted Subsidiary, as the case may be, in a comparable
transaction made on an arm's length basis with Persons who are not such a
holder, an Affiliate of such a holder or an Affiliate of the Company or any of
the Company's Subsidiaries.
In addition, the Company and the Issuer will not, and will not cause or
permit any Restricted Subsidiary to, enter into an Affiliate Transaction unless:
(1) with respect to any such Affiliate Transaction involving or having
a value of more than $1 million, the Company shall have (x)
obtained the approval of a majority of the Board of Directors of
the Company and (y) either obtained the approval of a majority of
the Company's disinterested directors or obtained an opinion of a
qualified independent financial advisor to the effect that such
Affiliate Transaction is fair to the Company, the Issuer or such
Restricted Subsidiary, as the case may be, from a financial point
of view, and
(2) with respect to any such Affiliate Transaction involving or having
a value of more than $10 million, the Company shall have (x)
obtained the approval of a majority of the Board of Directors of
the Company and (y) delivered to the Trustee an opinion of a
qualified independent financial advisor to the effect that such
Affiliate Transaction is fair to the Company, the Issuer or such
Restricted Subsidiary, as the case may be, from a financial point
of view.
The Subordinated Indenture also provides that notwithstanding the
foregoing, an Affiliate Transaction will not include:
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(1) any contract, agreement or understanding with, or for the benefit
of, or plan for the benefit of, employees of the Company or its
Subsidiaries generally (in their capacities as such) that has been
approved by the Board of Directors of the Company,
(2) Capital Stock issuances to directors, officers and employees of
the Company or its Subsidiaries pursuant to plans approved by the
stockholders of the Company,
(3) any Restricted Payment otherwise permitted under the "Limitations
on Restricted Payments" covenant,
(4) any transaction between or among the Company and one or more
Restricted Subsidiaries or between or among Restricted
Subsidiaries (PROVIDED, HOWEVER, no such transaction shall involve
any other Affiliate of the Company (other than an Unrestricted
Subsidiary to the extent the applicable amount constitutes a
Restricted Payment permitted by the Subordinated Indenture)),
(5) any transaction between one or more Restricted Subsidiaries and
one or more Unrestricted Subsidiaries where all of the payments
to, or other benefits conferred upon, such Unrestricted
Subsidiaries are substantially contemporaneously dividended, or
otherwise distributed or transferred without charge, to the
Company or a Restricted Subsidiary,
(6) issuances, sales or other transfers or dispositions of mortgages
and collateralized mortgage obligations in the ordinary course of
business between Restricted Subsidiaries and Unrestricted
Subsidiaries of the Company, and
(7) the payment of reasonable and customary fees to, and indemnity
provided on behalf of, officers, directors, employees or
consultants of the Company, the Issuer or any Restricted
Subsidiary.
LIMITATIONS ON DISPOSITIONS OF ASSETS. The Subordinated Indenture
provides that the Company and the Issuer will not, and will not cause or permit
any Restricted Subsidiary to, make any Asset Disposition unless:
(A) the Company (or such Restricted Subsidiary, as the case may
be) receives consideration at the time of such Asset
Disposition at least equal to the Fair Market Value
thereof, and
(B) not less than 70% of the consideration received by the
Company (or such Restricted Subsidiary, as the case may be)
is in the form of cash, Cash Equivalents and Marketable
Securities.
The amount of (1) any Indebtedness (other than any Indebtedness
subordinated to the Senior Subordinated Notes) of the Company or any Restricted
Subsidiary that is actually assumed by the transferee in such Asset Disposition
and (2) the fair market value (as determined in good faith by the Board of
Directors of the Company) of any property or assets received that are used or
useful in a Real Estate Business, shall be deemed to be consideration required
by clause (B) above for purposes of determining the percentage of such
consideration received by the Company or the Restricted Subsidiaries.
The Net Cash Proceeds of an Asset Disposition shall, within one year, at
the Company's election, (a) be used by the Company or a Restricted Subsidiary in
the business of the construction and sale of homes conducted by the Company and
the Restricted Subsidiaries or any other business of the Company or a Restricted
Subsidiary existing at the time of such Asset Disposition, (b) be used to repay
Senior Indebtedness of the Issuer or any Guarantor or (c) to the extent not so
used, be applied to make a Net Cash Proceeds offer for the Senior Subordinated
Notes and, if the Company or a Restricted Subsidiary elects or is required to do
so repay, purchase or redeem any other unsubordinated Indebtedness (on a PRO
RATA basis if the amount available for such repayment, purchase or redemption is
less than the aggregate amount of (1) the principal amount of the Senior
Subordinated Notes tendered in such Net Cash Proceeds Offer and (2) the lesser
of the principal amount, or accreted value, of such other unsubordinated
Indebtedness, plus, in each case accrued interest to the date of repayment,
purchase or redemption) at 100% of the principal amount or accreted value
thereof, as the case may be, plus accrued and unpaid interest and liquidated
damages, if any, to the date of repurchase or repayment.
Notwithstanding the foregoing, (A) the Company will not be required to
apply such Net Cash Proceeds to the repurchase of Senior Subordinated Notes in
accordance with clause (c) of the preceding sentence except to the extent that
such Net Cash Proceeds, together with the aggregate Net Cash Proceeds of prior
Asset Dispositions (other than those so used) which have not been applied in
accordance with this provision and as to which no prior
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Net Cash Proceeds offer shall have been made, exceed 5% of Consolidated Tangible
Assets and (B) in connection with an Asset Disposition, the Company and the
Restricted Subsidiaries will not be required to comply with the requirements of
clause (B) of the first sentence of the first paragraph of this covenant to the
extent that the non-cash consideration received in connection with such Asset
Disposition, together with the sum of all non-cash consideration received in
connection with all prior Asset Dispositions that has not yet been converted
into cash, does not exceed 5% of Consolidated Tangible Assets; PROVIDED,
HOWEVER, that when any non-cash consideration is converted into cash, such cash
shall constitute Net Cash Proceeds and be subject to the preceding sentence.
LIMITATIONS ON LIENS. The Subordinated Indenture provides that the
Company and the Issuer will not, and will not cause or permit any Restricted
Subsidiary to, create, incur, assume or suffer to exist any Liens, other than
Permitted Liens, on any of its Property, or on any shares of Capital Stock or
Indebtedness of any Restricted Subsidiary, which secures indebtedness other than
Senior Indebtedness unless contemporaneously therewith or prior thereto all
payments due under the Subordinated Indenture and the Senior Subordinated Notes
are secured on an equal and ratable basis with the obligation or liability so
secured until such time as such indebtedness is no longer secured by a Lien.
LIMITATION ON SENIOR SUBORDINATED INDEBTEDNESS. The Company and the
Issuer will not, and will not cause or permit any Guarantor to, incur any
Indebtedness that is subordinate in right of payment to any Senior Indebtedness
unless such Indebtedness is PARI PASSU with, or subordinated in right of payment
to, the Subordinated Notes or any Subordinated Note Guarantee; PROVIDED that the
foregoing limitation shall not apply to distinctions between categories of
Senior Indebtedness that exist by reason of any Liens or guarantees arising or
created in respect of some but not all such Senior Indebtedness or priorities of
paydown, from proceeds of collateral or otherwise, among classes or tranches of
any issue of Senior Indebtedness.
LIMITATIONS ON RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES. The
Subordinated Indenture provides that the Company and the Issuer will not, and
will not cause or permit any Restricted Subsidiary to, create, assume or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction (other than encumbrances or restrictions imposed by
law or by judicial or regulatory action or by provisions of agreements that
restrict the assignability thereof) on the ability of any Restricted Subsidiary
to:
(1) pay dividends or make any other distributions on its Capital Stock
or any other interest or participation in, or measured by, its
profits, owned by the Company or any other Restricted Subsidiary,
or pay interest on or principal of any Indebtedness owed to the
Company or any other Restricted Subsidiary,
(2) make loans or advances to the Company or any other Restricted
Subsidiary, or
(3) transfer any of its property or assets to the Company or any other
Restricted Subsidiary, except for:
(a) encumbrances or restrictions existing under or by reason of
applicable law,
(b) contractual encumbrances or restrictions in effect on the
Issue Date and any amendments, modifications, restatements,
renewals, supplements, refundings, replacements or
refinancings thereof, provided that such amendments,
modifications, restatements, renewals, supplements,
refundings, replacements or refinancings are no more
restrictive, taken as a whole, with respect to such
dividend and other payment restrictions than those
contained in such contractual encumbrances or restrictions,
as in effect on May 4, 1999,
(c) any restrictions or encumbrances arising under Acquired
Indebtedness; provided, that such encumbrance or
restriction applies only to either the assets that were
subject to the restriction or encumbrance at the time of
the acquisition or the obligor on such Indebtedness and its
Subsidiaries prior to such acquisition,
(d) any restrictions or encumbrances arising in connection with
Refinancing Indebtedness; PROVIDED, HOWEVER, that any
restrictions and encumbrances of the type described in this
clause (d) that arise under such Refinancing Indebtedness
shall not be materially more restrictive or apply to
additional assets than those under the agreement creating
or evidencing the Indebtedness being refunded, refinanced,
replaced or extended,
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(e) any Permitted Lien, or any other agreement restricting the
sale or other disposition of property, securing
Indebtedness permitted by the Subordinated Indenture if
such Permitted Lien or agreement does not expressly
restrict the ability of a Subsidiary of the Company to pay
dividends or make or repay loans or advances prior to
default thereunder,
(f) reasonable and customary borrowing base covenants set forth
in agreements evidencing Indebtedness otherwise permitted
by the Subordinated Indenture,
(g) customary non-assignment provisions in leases, licenses,
encumbrances, contracts or similar assets entered into or
acquired in the ordinary course of business,
(h) any restriction with respect to a Restricted Subsidiary
imposed pursuant to an agreement entered into for the sale
or disposition of all or substantially all of the Capital
Stock or assets of such Restricted Subsidiary pending the
closing of such sale or disposition,
(i) encumbrances or restrictions existing under or by reason of
the Subordinated Indenture or the Senior Subordinated
Notes,
(j) purchase money obligations that impose restrictions on the
property so acquired of the nature described in clause (3)
of the preceding paragraph,
(k) Liens permitted under the Subordinated Indenture securing
Indebtedness that limit the right of the debtor to dispose
of the assets subject to such Lien,
(l) provisions with respect to the disposition or distribution
of assets or property in joint venture agreements, assets
sale agreements, stock sale agreements and other similar
agreements,
(m) customary provisions of any franchise, distribution or
similar agreements,
(n) restrictions on cash or other deposits or net worth imposed
by contracts entered into in the ordinary course of
business, and
(o) any encumbrance or restrictions of the type referred to in
clauses (1), (2) or (3) of the first paragraph of this
section imposed by any amendments, modifications,
restatements, renewals, supplements, refinancings,
replacements or refinancings of the contracts, instruments
or obligations referred to in clauses (a) through (n) of
this paragraph, provided that such amendments,
modifications, restatements, renewals, supplements,
refundings, replacements or refinancings are, in the good
faith judgment of the Company's Board of Directors, no more
restrictive with respect to such dividend and other payment
restrictions than those contained in the dividend or other
payment restrictions prior to such amendment, modification,
restatement, renewal, supplement, refunding, replacement or
refinancing.
LIMITATIONS ON MERGERS, CONSOLIDATIONS AND SALES OF ASSETS. The
Subordinated Indenture provides that neither the Issuer nor any Guarantor will
consolidate or merge with or into, or sell, lease, convey or otherwise dispose
of all or substantially all of its assets (including, without limitation, by way
of liquidation or dissolution), or assign any of its obligations under the
Senior Subordinated Notes, the Subordinated Guarantees or the Subordinated
Indenture (as an entirety or substantially as an entirety in one transaction or
in a series of related transactions), to any Person (in each case other than in
a transaction in which the Company, the Issuer or a Restricted Subsidiary is the
survivor of a consolidation or merger, or the transferee in a sale, lease,
conveyance or other disposition) unless:
(1) the Person formed by or surviving such consolidation or merger (if
other than the Company, the Issuer or the Guarantor, as the case
may be), or to which such sale, lease, conveyance or other
disposition or assignment will be made (collectively, the
"SUCCESSOR"), is a corporation or other legal entity organized and
existing under the laws of the United States or any state thereof
or the District of Columbia, and the Successor assumes by
supplemental indenture in a form reasonably satisfactory to the
Trustee all of the obligations of the Company, the Issuer or the
Guarantor, as the case may be, under the Senior Subordinated Notes
or a Subordinated Guarantee, as the case may be, and the
Subordinated Indenture,
(2) immediately after giving effect to such transaction, no Default or
Event of Default has occurred and is continuing, and
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(3) immediately after giving effect to such transaction, the Company
(or its Successor) could incur at least $1.00 of Indebtedness
pursuant to the first paragraph of the "Limitation on
Indebtedness" covenant.
The foregoing provisions shall not apply to:
o a transaction involving the sale or disposition of Capital
Stock of a Guarantor, or the consolidation or merger of a
Guarantor, or the sale, lease, conveyance or other
disposition of all or substantially all of the assets of a
Guarantor, that in any such case results in such Guarantor
being released from its Subordinated Guarantee as provided
under "--The Subordinated Guarantees" above, or
o a transaction the purpose of which is to change the state
of incorporation of the Company, the Issuer or any
Guarantor.
REPORTS TO HOLDERS OF SENIOR SUBORDINATED NOTES. The Company shall file
with the Commission the annual reports and the information, documents and other
reports required to be filed pursuant to Section 13 or 15(d) of the Exchange
Act. The Company shall file with the Trustee and mail to each holder of record
of Senior Subordinated Notes such reports, information and documents within 15
days after it files them with the Commission. In the event that the Company is
no longer subject to these periodic requirements of the Exchange Act, it will
nonetheless continue to file reports with the Commission and the Subordinated
Trustee and mail such reports to each holder of Senior Subordinated Notes as if
it were subject to such reporting requirements. Regardless of whether the
Company is required to furnish such reports to its stockholders pursuant to the
Exchange Act, the Company will cause its consolidated financial statements and a
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" written report, similar to those that would have been required to
appear in annual or quarterly reports, to be delivered to Holders of Senior
Subordinated Notes.
EVENTS OF DEFAULT
The following are Events of Default under the Subordinated Indenture:
(1) the failure by the Company, the Issuer and the Guarantors to pay
interest on, or liquidated damages with respect to, any Note when
the same becomes due and payable and the continuance of any such
failure for a period of 30 days;
(2) the failure by the Company, the Issuer and the Guarantors to pay
the principal or premium of any Subordinated Note when the same
becomes due and payable at maturity, upon acceleration or
otherwise;
(3) the failure by the Company, the Issuer or any Restricted
Subsidiary to comply with any of its agreements or covenants in,
or provisions of, the Senior Subordinated Notes, the Subordinated
Guarantees or the Subordinated Indenture and such failure
continues for the period and after the notice specified below
(except in the case of a default under covenants described under
"Certain Covenants--Repurchase of Senior Subordinated Notes upon
Change of Control" and "Limitations on Mergers, Consolidations and
Sales of Assets," which will constitute Events of Default with
notice but without passage of time);
(4) the acceleration of any Indebtedness (other than Non-Recourse
Indebtedness) of the Company, the Issuer or any Restricted
Subsidiary that has an outstanding principal amount of $10 million
or more, individually or in the aggregate, and such acceleration
does not cease to exist, or such Indebtedness is not satisfied, in
either case within 30 days after such acceleration;
(5) the failure by the Company, the Issuer or any Restricted
Subsidiary to make any principal or interest payment in an amount
of $10 million or more, individually or in the aggregate, in
respect of Indebtedness (other than Non-Recourse Indebtedness) of
the Company or any Restricted Subsidiary within 30 days of such
principal or interest becoming due and payable (after giving
effect to any applicable grace period set forth in the documents
governing such Indebtedness);
(6) a final judgment or judgments that exceed $10 million or more,
individually or in the aggregate, for the payment of money having
been entered by a court or courts of competent jurisdiction
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against the Company, the Issuer or any of its Restricted
Subsidiaries and such judgment or judgments is not satisfied,
stayed, annulled or rescinded within 60 days of being entered;
(7) the Company or any Restricted Subsidiary that is a Significant
Subsidiary pursuant to or within the meaning of any Bankruptcy
Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in
an involuntary case,
(c) consents to the appointment of a Custodian of it or for all
or substantially all of its property, or
(d) makes a general assignment for the benefit of creditors.
(8) A court of competent jurisdiction enters an order or decree under
any Bankruptcy law that:
(a) is for relief against the Company or any Restricted
Subsidiary that is a Significant Subsidiary as debtor in an
involuntary case,
(b) appoints a Custodian of the Company or any Restricted
Subsidiary that is a Significant Subsidiary or a Custodian
for all or substantially all of the property of the Company
or any Restricted Subsidiary that is a Significant
Subsidiary, or
(c) orders the liquidation of the Company or any Restricted
Subsidiary that is a Significant Subsidiary,
and the order remains unstayed and in effect for 60 days or
(9) any Subordinated Guarantee of a Guarantor which is a Significant
Subsidiary ceases to be in full force and effect (other than in
accordance with the terms of such Subordinated Guarantee and the
Subordinated Indenture) or is declared null and void and
unenforceable or found to be invalid or any Guarantor denies its
liability under its Subordinated Guarantee (other than by reason
of release of a Guarantor from its Subordinated Guarantee in
accordance with the terms of the Subordinated Indenture and the
Subordinated Guarantee).
A Default as described in subclause (3) above will not be deemed an Event
of Default until the Subordinated Trustee notifies the Company, or the Holders
of at least 25 percent in principal amount of the then outstanding Senior
Subordinated Notes notify the Company and the Trustee, of the Default and
(except in the case of a default with respect to covenants described under
"Certain Covenants--Repurchase of Senior Subordinated Notes upon Change of
Control" and "Limitations on Mergers, Consolidations and Sales of Assets") the
Company does not cure the Default within 60 days after receipt of the notice.
The notice must specify the Default, demand that it be remedied and state that
the notice is a "Notice of Default." If such a Default is cured within such time
period, it ceases.
If an Event of Default (other than an Event of Default with respect to
the Company resulting from subclauses (7) or (8) above), shall have occurred and
be continuing under the Subordinated Indenture, the Subordinated Trustee by
notice to the Company, or the Holders of at least 25 percent in principal amount
of the Senior Subordinated Notes then outstanding by notice to the Company and
the Subordinated Trustee, may declare all Senior Subordinated Notes to be due
and payable immediately. Upon such declaration of acceleration, the amounts due
and payable on the Senior Subordinated Notes will be due and payable
immediately. If an Event of Default with respect to the Company specified in
subclauses (7) or (8) above occurs, such an amount will IPSO FACTO become and be
immediately due and payable without any declaration, notice or other act on the
part of the Trustee and the Company or any Holder.
The Holders of a majority in principal amount of the Senior Subordinated
Notes then outstanding by written notice to the Subordinated Trustee and the
Company may waive any Default or Event of Default (other than any Default or
Event of Default in payment of principal or interest) on the Senior Subordinated
Notes under the Subordinated Indenture. Holders of a majority in principal
amount of the then outstanding Senior Subordinated Notes may rescind an
acceleration and its consequence (except an acceleration due to nonpayment of
principal or interest on the Senior Subordinated Notes) if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
(other than the non-payment of accelerated principal) have been cured or waived.
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The Holders may not enforce the provisions of the Subordinated Indenture,
the Senior Subordinated Notes or the Subordinated Guarantees except as provided
in the Subordinated Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the Senior Subordinated Notes then outstanding
may direct the Subordinated Trustee in its exercise of any trust or power,
PROVIDED, HOWEVER, that such direction does not conflict with the terms of the
Subordinated Indenture. The Subordinated Trustee may withhold from the Holders
notice of any continuing Default or Event of Default (except any Default or
Event of Default in payment of principal or interest on the Subordinated Notes
or that resulted from the failure to comply with the covenant entitled
"Repurchase of Notes upon Change of Control") if the Subordinated Trustee
determines that withholding such notice is in the Holders' interest.
The Company is required to deliver to the Subordinated Trustee an annual
statement regarding compliance with the Subordinated Indenture, and include in
such statement, if any officer of the Company is aware of any Default or Event
of Default, a statement specifying such Default or Event of Default and what
action the Company is taking or proposes to take with respect thereto. In
addition, the Company is required to deliver to the Subordinated Trustee prompt
written notice of the occurrence of any Default or Event of Default.
DEFEASANCE OF SUBORDINATED INDENTURE
The Subordinated Indenture permits the Issuer, the Company and the other
Guarantors to terminate all of their respective obligations under the
Subordinated Indenture with respect to the Senior Subordinated Notes and the
Subordinated Guarantees, other than the obligation to pay interest on and the
principal of the Senior Subordinated Notes and certain other obligations, at any
time by
o depositing in trust with the Subordinated Trustee, under an
irrevocable trust agreement, money or U.S. government obligations
in an amount sufficient to pay principal of and interest and
liquidated damages, if any, on the Senior Subordinated Notes to
their maturity, and
o complying with certain other conditions, including delivery to the
Subordinated Trustee of an opinion of counsel or a ruling received
from the Internal Revenue Service to the effect that Holders will
not recognize income, gain or loss for federal income tax purposes
as a result of the Company's exercise of such right and will be
subject to federal income tax on the same amount and in the same
manner and at the same times as would have been the case
otherwise.
In addition, the Subordinated Indenture permits the Company, the Issuer
and the Guarantors to terminate all of their obligations under the Subordinated
Indenture with respect to the Senior Subordinated Notes and the Subordinated
Guarantees (including the obligations to pay interest on and the principal of
the Subordinated Notes and certain other obligations), at any time by
o depositing in trust with the Subordinated Trustee, under an
irrevocable trust agreement, money or U.S. government obligations
in an amount sufficient to pay principal of and interest and
liquidated damages, if any, on the Senior Subordinated Notes to
their maturity, and
o complying with certain other conditions, including delivery to the
Subordinated Trustee of an opinion of counsel or a ruling,
received from the Internal Revenue Service, to the effect that
Holders will not recognize income, gain or loss for federal income
tax purposes as a result of the Company's exercise of such right
and will be subject to federal income tax on the same amount and
in the same manner and at the same times as would have been the
case otherwise, which opinion of counsel is based upon a change in
the applicable federal tax law since the date of the Subordinated
Indenture.
DISCHARGE OF SUBORDINATED INDENTURE
The Issuer, the Company and the other Guarantors may terminate all of
their respective obligations under the Subordinated Indenture with respect to
the Senior Subordinated Notes, the Subordinated Indenture and the Subordinated
Guarantees, other than the obligation to pay interest on and the principal of
the Senior Subordinated Notes and certain other obligations to the Subordinated
Trustee, if:
o all Senior Subordinated Notes previously authenticated and
delivered, other than those destroyed, lost, replaced or stolen,
those previously paid in accordance with the Subordinated
Indenture or those for whose payment money or U.S. Government
Obligations have been held in trust, have been delivered to
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the Subordinated Trustee for cancellation and the Issuer had paid
all sums payable by it under the Subordinated Indenture; or
o the Senior Subordinated Notes mature within one year, or all of
them are called for redemption within one year under arrangements
satisfactory to the Subordinated Trustee for giving notice of
redemption; the Issuer deposits in trust with the Subordinated
Trustee, under an irrevocable trust agreement, money or U.S.
government obligations in an amount sufficient to pay principal of
and interest and liquidated damages, if any, on the Senior
Subordinated Notes to their maturity or redemption, as the case
may be; no Default has occurred and is continuing on the date of
the deposit and the deposit will not result in a breach or
violation of, or constitute a default under the Subordinated
Indenture or any other agreement binding the Issuer; and the
Issuer delivers to the Subordinated Trustee an Officer's
Certificate and an Opinion of Counsel, in each case, stating that
all the conditions precedent provided in the Subordinated
Indenture for satisfaction and discharge of the Subordinated
Indenture have been complied with.
In either case, the Subordinated Trustee, upon request, and at the
expense of the Issuer, will provide written acknowledgement of the discharge of
the Issuer's obligations under the Senior Subordinated Notes and the
Subordinated Indenture, except for certain surviving obligations.
TRANSFER AND EXCHANGE
A Holder may transfer or Senior Subordinated Notes only in accordance
with the provisions of the Subordinated Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents, and to pay any taxes and fees required by law or permitted by the
Subordinated Indenture.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Subordinated Indenture, the Senior
Subordinated Notes or the Subordinated Guarantees may be amended or supplemented
with the consent (which may include consents obtained in connection with a
tender offer or exchange offer for Senior Subordinated Notes) of the Holders of
at least a majority in principal amount of the Senior Subordinated Notes then
outstanding, and any existing Default under, or compliance with any provision of
the Subordinated Indenture may be waived (other than any continuing Default or
Event of Default in the payment of interest on or the principal of the
Subordinated Notes) with the consent (which may include consents obtained in
connection with a tender offer or exchange offer for Subordinated Notes) of the
Holders of a majority in principal amount of the Senior Subordinated Notes then
outstanding. Without the consent of any Holder, the Company, the Issuer, the
Guarantors and the Subordinated Trustee may amend or supplement the Subordinated
Indenture, the Senior Subordinated Notes or the Subordinated Guarantees to cure
any ambiguity, defect or inconsistency; to comply with the "Limitations on
Mergers, Consolidations and Sales of Assets" covenant set forth in the
Subordinated Indenture; to provide for uncertificated Senior Subordinated Notes
in addition to or in place of certificated Senior Subordinated Notes; to make
any change that does not adversely affect the legal rights of any Holder; to add
a Guarantor; or to delete a Guarantor which, in accordance with the terms of the
Subordinated Indenture, ceases to be liable on its Subordinated Guarantee.
Without the consent of each Holder affected, the Company, the Issuer, the
Guarantors and the Subordinated Trustee may not:
(1) reduce the amount of Senior Subordinated Notes whose Holders must
consent to an amendment, supplement or waiver,
(2) reduce the rate of or change the time for payment of interest,
including default interest, on any Subordinated Note,
(3) reduce the principal of or change the fixed maturity of any
Subordinated Note or alter the provisions (including related
definitions) with respect to redemptions described under "Optional
Redemption" or with respect to mandatory offers to repurchase
Senior Subordinated Notes described under "Limitations on
Dispositions of Assets" or "Repurchase of Senior Subordinated
Notes upon Change of Control",
(4) make any Subordinated Note payable in money other than that stated
in the Subordinated Note,
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(5) make any change in the "Waiver of Past Defaults and Compliance
with Indenture Provisions," "Rights of Holders to Receive Payment"
or the "With Consent of Holders" sections set forth in the
Subordinated Indenture,
(6) modify the ranking or priority of the Senior Subordinated Notes or
any Subordinated Guarantee,
(7) release any Guarantor from any of its obligations under its
Subordinated Guarantee or the Subordinated Indenture otherwise
than in accordance with the Subordinated Indenture, or
(8) waive a continuing Default or Event of Default in the payment of
principal of or interest on the Senior Subordinated Notes.
The right of any Holder to participate in any consent required or sought
pursuant to any provision of the Subordinated Indenture (and our obligation to
obtain any such consent otherwise required from such Holder) may be subject to
the requirement that such Holder shall have been the Holder of record of any
Notes with respect to which such consent is required or sought as of a date
identified by the Trustee in a notice furnished to Holders in accordance with
the terms of the Subordinated Indenture.
STATEMENT AS TO COMPLIANCE
The Company must deliver to the Subordinated Trustee, within 120 days
after the end of each fiscal year, a written statement by the Company's
independent public accountants stating (A) that their audit examination has
included a review of the terms of the Subordinated Indenture and the Senior
Subordinated Notes as they relate to accounting matters, and (B) whether, in
connection with their audit examination, any Default has come to their attention
and, if a Default has come to their attention, specifying the nature and period
of the existence thereof.
The Company must also deliver to the Subordinated Trustee, on or prior to
each Interest Payment Date, an Officer's Certificate setting forth the amount of
Liquidated Damages, if any, the Issuer is required to pay on that Interest
Payment Date. If no Liquidated Damages are required to be paid on a given
Interest Payment Date, no Officer's Certificate is required to be delivered to
the Subordinated Trustee for that Interest Payment Date.
GOVERNING LAW
The Subordinated Indenture, the Senior Subordinated Notes and the
Subordinated Guarantees are governed by the laws of the State of New York.
DEFINITIONS OF CERTAIN TERMS USED IN THE SUBORDINATED INDENTURE
Set forth below is a summary of certain of the defined terms used in the
Subordinated Indenture. Reference is made to the Subordinated Indenture for the
full definition of all terms used in the Subordinated Indenture.
"ACQUIRED INDEBTEDNESS" means (1) with respect to any Person that becomes
a Restricted Subsidiary (or is merged into the Company, the Issuer or any
Restricted Subsidiary) after the Issue Date, Indebtedness of such Person or any
of its Subsidiaries existing at the time such Person becomes a Restricted
Subsidiary (or is merged into the Company, the Issuer or any Restricted
Subsidiary) that was not incurred in connection with, or in contemplation of,
such Person becoming a Restricted Subsidiary (or being merged into the Company,
the Issuer or any Restricted Subsidiary) and (2) with respect to the Company,
the Issuer or any Restricted Subsidiary, any Indebtedness expressly assumed by
the Company, the Issuer or any Restricted Subsidiary in connection with the
acquisition of any assets from another Person (other than the Company, the
Issuer or any Restricted Subsidiary), which Indebtedness was not incurred by
such other Person in connection with or in contemplation of such acquisition.
Indebtedness incurred in connection with or in contemplation of any transaction
described in clause (1) or (2) of the preceding sentence shall be deemed to have
been incurred by the Company or a Restricted Subsidiary, as the case may be, at
the time such Person becomes a Restricted Subsidiary (or is merged into the
Company, the Issuer or any Restricted Subsidiary) in the case of clause (1) or
at the time of the acquisition of such assets in the case of clause (2), but
shall not be deemed Acquired Indebtedness.
"AFFILIATE" means, when used with reference to a specified Person any
Person direct or indirectly controlling, or controlled by or under direct or
indirect common control with the Person specified.
"ASSET ACQUISITION" means (1) an Investment by the Company, the Issuer or
any Restricted Subsidiary in any other Person if, as a result of such
Investment, such Person shall become a Restricted Subsidiary or shall be
consolidated or merged with or into the Company, the Issuer or any Restricted
Subsidiary or (2) the acquisition by the Company, the Issuer or any Restricted
Subsidiary of the assets of any Person, which constitute all or
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substantially all of the assets or of an operating unit or line of business of
such Person or which is otherwise outside the ordinary course of business.
"ASSET DISPOSITION" means any sale, transfer, conveyance, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback or sale of shares of Capital Stock in any Subsidiary) (each,
a "TRANSACTION") by the Company, the Issuer or any Restricted Subsidiary to any
Person of any Property having a Fair Market Value in any transaction or series
of related transactions of at least $5 million. The term "ASSET DISPOSITION"
shall not include:
(1) a transaction between the Company, the Issuer and any Restricted
Subsidiary or a transaction between Restricted Subsidiaries,
(2) a transaction in the ordinary course of business, including,
without limitation, sales (directly or indirectly), dedications
and other donations to governmental authorities, leases and sales
and leasebacks of (A) homes, improved land and unimproved land and
(B) real estate (including related amenities and improvements),
(3) a transaction involving the sale of Capital Stock of, or the
disposition of assets in, an Unrestricted Subsidiary,
(4) any exchange or swap of assets of the Company, the Issuer or any
Restricted Subsidiary for assets that (A) are to be used by the
Company, the Issuer or any Restricted Subsidiary in the ordinary
course of its Real Estate Business and (B) have a Fair Market
Value not less than the Fair Market Value of the assets exchanged
or swapped,
(5) any sale, transfer, conveyance, lease or other disposition of
assets and properties that is governed by the provisions relating
to "Limitations on Mergers, Consolidation and Sales of Assets", or
(6) dispositions of mortgage loans and related assets and
mortgage-backed securities in the ordinary course of a mortgage
lending business.
"ATTRIBUTABLE DEBT" means, with respect to any Capitalized Lease
Obligations, the capitalized amount thereof determined in accordance with GAAP.
"BANKRUPTCY LAW" means title 11 of the United States Code, as amended, or
any similar federal or state law for the relief of debtors.
"CAPITAL STOCK" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of or in
such Person's capital stock or other equity interests, and options, rights or
warrants to purchase such capital stock or other equity interests, whether now
outstanding or issued after the Issue Date, including, without limitation, all
Disqualified Stock and Preferred Stock.
"CAPITALIZED LEASE OBLIGATIONS" of any Person means the obligations of
such Person to pay rent or other amounts under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such obligations will be the capitalized amount thereof determined in
accordance with GAAP.
"CASH EQUIVALENTS" means
(1) U.S. dollars;
(2) securities issued or directly and fully guaranteed or insured by
the U.S. government or any agency or instrumentality thereof
having maturities of one year or less from the date of
acquisition;
(3) certificates of deposit and eurodollar time deposits with
maturities of one year or less from the date of acquisition,
bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial
bank having capital and surplus in excess of $500 million;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and
(3) entered into with any financial institution meeting the
qualifications specified in clause (3) above;
(5) commercial paper rated P-1, A-1 or the equivalent thereof by
Moody's or S&P, respectively, and in each case maturing within six
months after the date of acquisition; and
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(6) investments in money market funds substantially all of the assets
of which consist of securities described in the foregoing clauses
(1) through (5).
"CHANGE OF CONTROL" means
(1) any sale, lease or other transfer (in one transaction or a series
of transactions) of all or substantially all of the consolidated
assets of the Company and its Restricted Subsidiaries to any
Person (other than a Restricted Subsidiary); PROVIDED, HOWEVER,
that a transaction where the holders of all classes of Common
Equity of the Company immediately prior to such transaction own,
directly or indirectly, more than 50% of all classes of Common
Equity of such Person immediately after such transaction shall not
be a Change of Control;
(2) a "person" or "group" (within the meaning of Section 13(d) of the
Exchange Act (other than (x) the Company or (y) the Permitted
Hovnanian Holders) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act) of Common Equity of the Company
representing more than 50% of the voting power of the Common
Equity of the Company;
(3) Continuing Directors cease to constitute at least a majority of
the Board of Directors of the Company;
(4) the stockholders of the Company approve any plan or proposal for
the liquidation or dissolution of the Company; PROVIDED, HOWEVER,
that a liquidation or dissolution of the Company which is part of
a transaction that does not constitute a Change of Control under
the proviso contained in clause (1) above shall not constitute a
Change of Control; or
(5) a change of control shall occur as defined in the instrument
governing any publicly traded debt securities of the Company or
the Issuer which requires the Company or the Issuer to repay or
repurchase such debt securities.
"COMMON EQUITY" of any Person means Capital Stock of such Person that is
generally entitled to (1) vote in the election of directors of such Person or
(2) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control
the management or policies of such Person.
"CONSOLIDATED ADJUSTED TANGIBLE ASSETS" of the Company as of any date
means the Consolidated Tangible Assets of the Company, the Issuer and the
Restricted Subsidiaries at the end of the fiscal quarter immediately preceding
the date less any assets securing any Non-Recourse Indebtedness, as determined
in accordance with GAAP.
"CONSOLIDATED CASH FLOW AVAILABLE FOR FIXED CHARGES" means, for any
period Consolidated Net Income for such period plus (each to the extent deducted
in calculating such Consolidated Net Income and determined in accordance with
GAAP) the sum for such period, without duplication, of:
(1) income taxes,
(2) Consolidated Interest Expense,
(3) depreciation and amortization expenses and other non-cash charges
to earnings and
(4) interest and financing fees and expenses which were previously
capitalized and which are amortized to cost of sales, MINUS
all other non-cash items (other than the receipt of notes receivable) increasing
such Consolidated Net Income.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to any
determination date, the ratio of (x) Consolidated Cash Flow Available for Fixed
Charges for the prior four full fiscal quarters (the "FOUR QUARTER PERIOD") for
which financial results have been reported immediately preceding the
determination date (the "TRANSACTION DATE"), to (y) the aggregate Consolidated
Interest Incurred for the Four Quarter Period. For purposes of this definition,
"CONSOLIDATED CASH FLOW AVAILABLE FOR FIXED CHARGES" and "CONSOLIDATED INTEREST
INCURRED" shall be calculated after giving effect on a PRO FORMA basis for the
period of such calculation to
(1) the incurrence or the repayment, repurchase, defeasance or other
discharge or the assumption by another Person that is not an
Affiliate (collectively, "REPAYMENT") of any Indebtedness of the
Company, the Issuer or any Restricted Subsidiary (and the
application of the proceeds thereof)
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giving rise to the need to make such calculation, and any
incurrence or repayment of other Indebtedness (and the application
of the proceeds thereof), at any time on or after the first day of
the Four Quarter Period and on or prior to the Transaction Date,
as if such incurrence or repayment, as the case may be (and the
application of the proceeds thereof), occurred on the first day of
the Four Quarter Period, except that Indebtedness under revolving
credit facilities shall be deemed to be the average daily balance
of such Indebtedness during the Four Quarter Period (as reduced on
such PRO FORMA basis by the application of any proceeds of the
incurrence of Indebtedness giving rise to the need to make such
calculation);
(2) any Asset Disposition or Asset Acquisition (including, without
limitation, any Asset Acquisition giving rise to the need to make
such calculation as a result of the Company, the Issuer or any
Restricted Subsidiary (including any Person that becomes a
Restricted Subsidiary as a result of any such Asset Acquisition)
incurring Acquired Indebtedness at any time on or after the first
day of the Four Quarter Period and on or prior to the Transaction
Date), as if such Asset Disposition or Asset Acquisition
(including the incurrence or repayment of any such Indebtedness)
and the inclusion, notwithstanding clause (2) of the definition of
"Consolidated Net Income," of any Consolidated Cash Flow Available
for Fixed Charges associated with such Asset Acquisition as if it
occurred on the first day of the Four Quarter Period; PROVIDED,
HOWEVER, that the Consolidated Cash Flow Available for Fixed
Charges associated with any Asset Acquisition shall not be
included to the extent the net income so associated would be
excluded pursuant to the definition of "Consolidated Net Income,"
other than clause (2) thereof, as if it applied to the Person or
assets involved before they were acquired, and
(3) the Consolidated Cash Flow Available for Fixed Charges and the
Consolidated Interest Incurred attributable to discontinued
operations, as determined in accordance with GAAP, shall be
excluded.
Furthermore, in calculating "Consolidated Cash Flow Available for Fixed
Charges" for purposes of determining the denominator (but not the numerator) of
this "Consolidated Fixed Charge Coverage Ratio",
(a) interest on Indebtedness in respect of which a PRO FORMA
calculation is required that is determined on a fluctuating
basis as of the Transaction Date (including Indebtedness
actually incurred on the Transaction Date) and which will
continue to be so determined thereafter shall be deemed to
have accrued at a fixed rate PER ANNUM equal to the rate of
interest on such Indebtedness in effect on the Transaction
Date, and
(b) notwithstanding clause (a) above, interest on such
Indebtedness determined on a fluctuating basis, to the
extent such interest is covered by agreements relating to
Interest Protection Agreements, shall be deemed to accrue
at the rate PER ANNUM resulting after giving effect to the
operation of such agreements.
"CONSOLIDATED INTEREST EXPENSE" of the Company for any period means the
Interest Expense of the Company, the Issuer and the Restricted Subsidiaries for
such period, determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED INTEREST INCURRED" for any period means the Interest
Incurred of the Company, the Issuer and the Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" for any period means the aggregate net income
(or loss) of the Company and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP; PROVIDED that there will be excluded
from such net income (loss) (to the extent otherwise included therein), without
duplication:
(1) the net income (or loss) of (x) any Unrestricted Subsidiary (other
than a Mortgage Subsidiary) or (y) any Person (other than a
Restricted Subsidiary or a Mortgage Subsidiary) in which any
Person other than the Company, the Issuer or any Restricted
Subsidiary has an ownership interest, except, in each case, to the
extent that any such income has actually been received by the
Company, the Issuer or any Restricted Subsidiary in the form of
cash dividends or similar cash distributions during such period,
which dividends or distributions are not in excess of the
Company's, the Issuer's or such Restricted Subsidiary's (as
applicable) PRO RATA share of such Unrestricted Subsidiary's or
such other Person's net income earned during such period,
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(2) except to the extent includable in Consolidated Net Income
pursuant to the foregoing clause (1), the net income (or loss) of
any Person that accrued prior to the date that (a) such Person
becomes a Restricted Subsidiary or is merged with or into or
consolidated with the Company, the Issuer or any of its Restricted
Subsidiaries (except, in the case of an Unrestricted Subsidiary
that is redesignated a Restricted Subsidiary during such period,
to the extent of its retained earnings from the beginning of such
period to the date of such redesignation) or (b) the assets of
such Person are acquired by the Company or any Restricted
Subsidiary,
(3) the net income of any Restricted Subsidiary to the extent that
(but only so long as) the declaration or payment of dividends or
similar distributions by such Restricted Subsidiary of that income
is not permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary
during such period,
(4) the gains or losses, together with any related provision for
taxes, realized during such period by the Company, the Issuer or
any Restricted Subsidiary resulting from (a) the acquisition of
securities, or extinguishment of Indebtedness, of the Company or
any Restricted Subsidiary or (b) any Asset Disposition by the
Company or any Restricted Subsidiary,
(5) any extraordinary gain or loss together with any related provision
for taxes, realized by the Company, the Issuer or any Restricted
Subsidiary, and
(6) any non-recurring expense recorded by the Company, the Issuer or
any Restricted Subsidiary in connection with a merger accounted
for as a "pooling-of-interests" transaction;
PROVIDED, FURTHER, that for purposes of calculating Consolidated Net Income
solely as it relates to clause (3) of the first paragraph of the "Limitations on
Restricted Payments" covenant, clause (4)(b) above shall not be applicable.
"CONSOLIDATED NET WORTH" of any Person as of any date means the
stockholders' equity (including any Preferred Stock that is classified as equity
under GAAP, other than Disqualified Stock) of such Person and its Restricted
Subsidiaries on a consolidated basis at the end of the fiscal quarter
immediately preceding such date, as determined in accordance with GAAP, less any
amount attributable to Unrestricted Subsidiaries.
"CONSOLIDATED TANGIBLE ASSETS" of the Company as of any date means the
total amount of assets of the Company, the Issuer and the Restricted
Subsidiaries (less applicable reserves) on a consolidated basis at the end of
the fiscal quarter immediately preceding such date, as determined in accordance
with GAAP, less (1) Intangible Assets and (2) appropriate adjustments on account
of minority interests of other Persons holding equity investments in Restricted
Subsidiaries.
"CONTINUING DIRECTOR" means a director who either was a member of the
Board of Directors of the Company on the date of the Subordinated Indenture or
who became a director of the Company subsequent to such date and whose election
or nomination for election by the Company's stockholders, was duly approved by a
majority of the Continuing Directors on the Board of Directors of the Company at
the time of such approval, either by a specific vote or by approval of the proxy
statement issued by the Company on behalf of the entire Board of Directors of
the Company in which such individual is named as nominee for director.
"control" when used with respect to any Person, means the power to direct
the management and policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing.
"CREDIT FACILITIES" means, collectively, each of the credit facilities
and lines of credit of the Company or one or more Restricted Subsidiaries in
existence on the Issue Date and one or more other facilities and lines of credit
among or between the Company or one or more Restricted Subsidiaries and one or
more lenders pursuant to which the Company or one or more Restricted
Subsidiaries may incur indebtedness for working capital and general corporate
purposes (including acquisitions), as any such facility or line of credit may be
amended, restated, supplemented or otherwise modified from time to time, and
includes any agreement extending the maturity of, increasing the amount of, or
restructuring, all or any portion of the Indebtedness under such facility or
line of credit or any successor facilities or lines of credit and includes any
facility or line of credit with one or more lenders refinancing or replacing all
or any portion of the Indebtedness under such facility or line of credit or any
successor facility or line of credit.
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"CURRENCY AGREEMENT" of any Person means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect such Person or any of its Subsidiaries against fluctuations in currency
values.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law.
"DEFAULT" means any event, act or condition that is, or after notice or
the passage of time or both would be, an Event of Default.
"DESIGNATION AMOUNT" has the meaning provided in the definition of
Unrestricted Subsidiary.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, (1) matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
final maturity date of the Senior Subordinated Notes or (2) is convertible into
or exchangeable or exercisable for (whether at the option of the issuer or the
holder thereof) (a) debt securities or (b) any Capital Stock referred to in (1)
above, in each case, at any time prior to the final maturity date of the Senior
Subordinated Notes; PROVIDED, HOWEVER, that any Capital Stock that would not
constitute Disqualified Stock but for provisions thereof giving holders thereof
(or the holders of any security into or for which such Capital Stock is
convertible, exchangeable or exercisable) the right to require the Company to
repurchase or redeem such Capital Stock upon the occurrence of a change in
control occurring prior to the final maturity date of the Senior Subordinated
Notes shall not constitute Disqualified Stock if the change in control provision
applicable to such Capital Stock are no more favorable to such holders than the
provisions described under the caption "Certain Covenants--Repurchase of Notes
upon Change of Control" and such Capital Stock specifically provides that the
Company will not repurchase or redeem any such Capital Stock pursuant to such
provisions prior to the Company's repurchase of the Senior Subordinated Notes as
are required pursuant to the provisions described under the caption "Certain
Covenants--Repurchase of Senior Subordinated Notes upon Change of Control".
"EVENT OF DEFAULT" has the meaning set forth in "Events of Default".
"FAIR MARKET VALUE" means, with respect to any asset, the price (after
taking into account any liabilities relating to such assets) that would be
negotiated in an arm's-length transaction for cash between a willing seller and
a willing and able buyer, neither of which is under any compulsion to complete
the transaction, as such price is determined in good faith by the Board of
Directors of the Company or a duly authorized committee thereof, as evidenced by
a resolution of such Board or committee.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession of the United States, as in effect on May 4, 1999.
"GUARANTORS" means (i) initially, each of the Company's Subsidiaries,
other than the Issuer, certain subsidiaries formerly engaged in the issuance of
collateralized mortgage obligations, the Company's mortgage lending and title
subsidiaries and a subsidiary holding and licensing the Hovnanian trade name and
(ii) each of the Company's Subsidiaries which becomes a Guarantor of the Senior
Subordinated Notes pursuant to the provisions of the Subordinated Indenture.
"HOLDER" means the Person in whose name a Note is registered in the books
of the Registrar for the Subordinated Notes.
"INDEBTEDNESS" of any Person means, without duplication,
(1) any liability of such Person (a) for borrowed money or under any
reimbursement obligation relating to a letter of credit or other
similar instruments (other than standby letters of credit or
similar instrument issued for the benefit of or surety,
performance, completion or payment bonds, earnest money notes or
similar purpose undertakings or indemnifications issued by, such
Person in the ordinary course of business), (b) evidenced by a
bond, note, debenture or similar instrument (including a purchase
money obligation) given in connection with the acquisition of any
businesses, properties or assets of any kind or with services
incurred in connection with capital expenditures (other than any
obligation to pay a contingent purchase price which, as of the
date of
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incurrence thereof is not required to be recorded as a liability
in accordance with GAAP), or (c) in respect of Capitalized Lease
Obligations (to the extent of the Attributable Debt in respect
thereof),
(2) any Indebtedness of others that such Person has guaranteed to the
extent of the guarantee; PROVIDED, HOWEVER, that Indebtedness of
the Company and its Restricted Subsidiaries will not include the
obligations of the Company or a Restricted Subsidiary under
warehouse lines of credit of Mortgage Subsidiaries to repurchase
mortgages at prices no greater than 98% of the principal amount
thereof, and upon any such purchase the excess, if any, of the
purchase price thereof over the Fair Market Value of the mortgages
acquired, will constitute Restricted Payments subject to the
"Limitations on Restricted Payments" covenant,
(3) to the extent not otherwise included, the obligations of such
Person under Currency Agreements or Interest Protection Agreements
to the extent recorded as liabilities not constituting Interest
Incurred, net of amounts recorded as assets in respect of such
agreements, in accordance with GAAP, and
(4) all Indebtedness of others secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such
Person;
PROVIDED, that Indebtedness shall not include accounts payable, liabilities to
trade creditors of such Person or other accrued expenses arising in the ordinary
course of business. The amount of Indebtedness of any Person at any date shall
be (a) the outstanding balance at such date of all unconditional obligations as
described above, net of any unamortized discount to be accounted for as Interest
Expense, in accordance with GAAP, (b) the maximum liability of such Person for
any contingent obligations under clause (1) above at such date, net of an
unamortized discount to be accounted for as Interest Expense in accordance with
GAAP, and (c) in the case of clause (4) above, the lesser of (x) the fair market
value of any asset subject to a Lien securing the Indebtedness of others on the
date that the Lien attaches and (y) the amount of the Indebtedness secured.
"INTANGIBLE ASSETS" of the Company means all unamortized debt discount
and expense, unamortized deferred charges, goodwill, patents, trademarks,
service marks, trade names, copyrights, write-ups of assets over their prior
carrying value (other than write-ups which occurred prior to the Issue Date and
other than, in connection with the acquisition of an asset, the write-up of the
value of such asset (within one year of its acquisition) to its fair market
value in accordance with GAAP) and all other items which would be treated as
intangible on the consolidated balance sheet of the Company, the Issuer and the
Restricted Subsidiaries prepared in accordance with GAAP.
"INTEREST EXPENSE" of any Person for any period means, without
duplication, the aggregate amount of (i) interest which, in conformity with
GAAP, would be set opposite the caption "interest expense" or any like caption
on an income statement for such Person (including, without limitation, imputed
interest included in Capitalized Lease Obligations, all commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing, the net costs (but reduced by net gains) associated with
Currency Agreements and Interest Protection Agreements, amortization of other
financing fees and expenses, the interest portion of any deferred payment
obligation, amortization of discount or premium, if any, and all other noncash
interest expense (other than interest and other charges amortized to cost of
sales), and (ii) all interest actually paid by the Company or a Restricted
Subsidiary under any guarantee of Indebtedness (including, without limitation, a
guarantee of principal, interest or any combination thereof) of any Person other
than the Company, the Issuer or any Restricted Subsidiary during such period;
PROVIDED, that Interest Expense shall exclude any expense associated with the
complete write-off of financing fees and expenses in connection with the
repayment of any Indebtedness.
"INTEREST INCURRED" of any Person for any period means, without
duplication, the aggregate amount of (1) Interest Expense and (2) all
capitalized interest and amortized debt issuance costs.
"INTEREST PROTECTION AGREEMENT" of any Person means any interest rate
swap agreement, interest rate collar agreement, option or futures contract or
other similar agreement or arrangement designed to protect such Person or any of
its Subsidiaries against fluctuations in interest rates with respect to Debt
permitted to be incurred under the Subordinated Indenture.
"INVESTMENTS" of any Person means (i) all investments by such Person in
any other Person in the form of loans, advances or capital contributions, (ii)
all guarantees of Indebtedness or other obligations of any other Person by such
Person, (iii) all purchases (or other acquisitions for consideration) by such
Person of Indebtedness, Capital
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Stock or other securities of any other Person and (iv) all other items that
would be classified as investments in any other Person (including, without
limitation, purchases of assets outside the ordinary course of business) on a
balance sheet of such Person prepared in accordance with GAAP.
"ISSUE DATE" means the date on which the Senior Subordinated Notes are
originally issued under the Subordinated Indenture.
"LIEN" means, with respect to any Property, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this definition, a Person shall be deemed to own,
subject to a Lien, any Property which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such Property.
"MARKETABLE SECURITIES" means (a) equity securities that are listed on
the New York Stock Exchange, the American Stock Exchange or The Nasdaq National
Market and (b) debt securities that are rated by a nationally recognized rating
agency, listed on the New York Stock Exchange or the American Stock Exchange or
covered by at least two reputable market makers.
"MOODY'S" means Moody's Investors Service, Inc. or any successor to its
debt rating business. "Mortgage Subsidiary" means any Subsidiary of the Company
substantially all of whose operations consist of the mortgage lending business.
"NET CASH PROCEEDS" means with respect to an Asset Disposition, cash
payments received (including any cash payments received by way of deferred
payment of principal pursuant to a note or installment receivable or otherwise
(including any cash received upon sale or disposition of such note or
receivable), but only as and when received), excluding any other consideration
received in the form of assumption by the acquiring Person of Indebtedness or
other obligations relating to the Property disposed of in such Asset Disposition
or received in any other non-cash form unless and until such non-cash
consideration is converted into cash therefrom, in each case, net of all legal,
title and recording tax expenses, commissions and other fees and expenses
incurred, and all federal, state and local taxes required to be accrued as a
liability under GAAP as a consequence of such Asset Disposition, and in each
case net of a reasonable reserve for the after-tax cost of any indemnification
or other payments (fixed and contingent) attributable to the seller's
indemnities or other obligations to the purchaser undertaken by the Company, the
Issuer or any of its Restricted Subsidiaries in connection with such Asset
Disposition, and net of all payments made on any Indebtedness which is secured
by or relates to such Property, in accordance with the terms of any Lien or
agreement upon or with respect to such Property or which must by its terms or by
applicable law be repaid out of the proceeds from such Asset Disposition, and
net of all contractually required distributions and payments made to minority
interest holders in Restricted Subsidiaries or joint ventures as a result of
such Asset Disposition.
"NON-RECOURSE INDEBTEDNESS" with respect to any Person means Indebtedness
of such Person for which (1) the sole legal recourse for collection of principal
and interest on such Indebtedness is against the specific property identified in
the instruments evidencing or securing such Indebtedness and such property was
acquired with the proceeds of such Indebtedness or such Indebtedness was
incurred within 90 days after the acquisition of such property and (2) no other
assets of such Person may be realized upon in collection of principal or
interest on such Indebtedness. Indebtedness which is otherwise Non-Recourse
Indebtedness will not lose its character as Non-Recourse Indebtedness because
there is recourse to the borrower, any guarantor or any other Person for (a)
environmental warranties and indemnities, or (b) indemnities for and liabilities
arising from fraud, misrepresentation, misapplication or non-payment of rents,
profits, insurance and condemnation proceeds and other sums actually received by
the borrower from secured assets to be paid to the lender, waste and mechanics'
liens.
"PERMITTED HOVNANIAN HOLDERS" means, collectively, Kevork S. Hovnanian,
Ara K. Hovnanian, the members of their immediate families, the respective
estates, spouses, heirs, ancestors, lineal descendants, legatees and legal
representatives of any of the foregoing and the trustee of any BONA FIDE trust
of which one or more of the foregoing are the sole beneficiaries or the grantors
thereof, or any entity of which any of the foregoing, individually or
collectively, beneficially own more than 50% of the Common Equity.
"PERMITTED INDEBTEDNESS" means
(1) Indebtedness under Credit Facilities which does not exceed $440
million principal amount outstanding at any one time;
(2) Indebtedness in respect of obligations of the Company and its
Subsidiaries to the trustees under indentures for debt securities;
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(3) intercompany debt obligations of (i) the Company to the Issuer,
(ii) the Issuer to the Company, (iii) the Company or the Issuer to
any Restricted Subsidiary and (iv) any Restricted Subsidiary to
the Company or the Issuer or any other Restricted Subsidiary;
PROVIDED, HOWEVER, that any Indebtedness of any Restricted
Subsidiary or the Issuer or the Company owed to any Restricted
Subsidiary or the Issuer that ceases to be a Restricted Subsidiary
shall be deemed to be incurred and shall be treated as an
incurrence for purposes of the first paragraph of the covenant
described under "Limitations on Indebtedness" at the time the
Restricted Subsidiary in question ceases to be a Restricted
Subsidiary;
(4) Indebtedness of the Company or the Issuer or any Restricted
Subsidiary under any Currency Agreements or Interest Protection
Agreements in a notional amount no greater than the payments due
(at the time the related Currency Agreement or Interest Protection
Agreement is entered into) with respect to the Indebtedness or
currency being hedged;
(5) Purchase Money Indebtedness;
(6) Capitalized Lease Obligations;
(7) obligations for, pledge of assets in respect of, and guaranties
of, bond financings of political subdivisions or enterprises
thereof in the ordinary course of business;
(8) Indebtedness secured only by office buildings owned or occupied by
the Company or any Restricted Subsidiary, which Indebtedness does
not exceed $10 million aggregate principal amount outstanding at
any one time;
(9) Indebtedness under warehouse lines of credit, repurchase
agreements and Indebtedness secured by mortgage loans and related
assets of mortgage lending Subsidiaries in the ordinary course of
a mortgage lending business; and
(10) Indebtedness of the Company or any Restricted Subsidiary which,
together with all other Indebtedness under this clause (10), does
not exceed $30 million aggregate principal amount outstanding at
any one time.
"PERMITTED INVESTMENT" means
(1) Cash Equivalents;
(2) any Investment in the Company, the Issuer or any Restricted
Subsidiary or any Person that becomes a Restricted Subsidiary as a
result of such Investment or that is consolidated or merged with
or into, or transfers all or substantially all of the assets of it
or an operating unit or line of business to, the Company or a
Restricted Subsidiary;
(3) any receivables, loans or other consideration taken by the
Company, the Issuer or any Restricted Subsidiary in connection
with any asset sale otherwise permitted by the Subordinated
Indenture;
(4) Investments received in connection with any bankruptcy or
reorganization proceeding, or as a result of foreclosure,
perfection or enforcement of any Lien or any judgment or
settlement of any Person in exchange for or satisfaction of
Indebtedness or other obligations or other property received from
such Person, or for other liabilities or obligations of such
Person created, in accordance with the terms of the Subordinated
Indenture;
(5) Investments in Currency Agreements or Interest Protection
Agreements described in the definition of Permitted Indebtedness;
(6) any loan or advance to an executive officer, director or employee
of the Company or any Restricted Subsidiary made in the ordinary
course of business or in accordance with past practice; PROVIDED,
HOWEVER, that any such loan or advance exceeding $1 million shall
have been approved by the Board of Directors of the Company or a
committee thereof consisting of disinterested members;
(7) Investments in joint ventures in a Real Estate Business with
unaffiliated third parties in an aggregate amount at any time
outstanding not to exceed 10% of Consolidated Tangible Assets at
such time;
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(8) Investments in interests in issuances of collateralized mortgage
obligations, mortgages, mortgage loan servicing, or other mortgage
related assets;
(9) obligations of the Company or a Restricted Subsidiary under
warehouse lines of credit of Mortgage Subsidiaries to repurchase
mortgages; and
(10) Investments in an aggregate amount outstanding not to exceed $10
million.
"PERMITTED LIENS" means
(1) Liens for taxes, assessments or governmental or quasi-government
charges or claims that (a) are not yet delinquent, (b) are being
contested in good faith by appropriate proceedings and as to which
appropriate reserves have been established or other provisions
have been made in accordance with GAAP, if required, or (c)
encumber solely property abandoned or in the process of being
abandoned,
(2) statutory Liens of landlords and carriers', warehousemen's,
mechanics', suppliers', materialmen's, repairmen's or other Liens
imposed by law and arising in the ordinary course of business and
with respect to amounts that, to the extent applicable, either (a)
are not yet delinquent or (b) are being contested in good faith by
appropriate proceedings and as to which appropriate reserves have
been established or other provisions have been made in accordance
with GAAP, if required,
(3) Liens (other than any Lien imposed by the Employer Retirement
Income Security Act of 1974, as amended) incurred or deposits made
in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social
security,
(4) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal
bonds, development obligations, progress payments, government
contacts, utility services, developer's or other obligations to
make on-site or off-site improvements and other obligations of
like nature (exclusive of obligations for the payment of borrowed
money but including the items referred to in the parenthetical in
clause (1)(a) of the definition of "INDEBTEDNESS"), in each case
incurred in the ordinary course of business of the Company, the
Issuer and the Restricted Subsidiaries,
(5) attachment or judgment Liens not giving rise to a Default or an
Event of Default,
(6) easements, dedications, assessment district or similar Liens in
connection with municipal or special district financing,
rights-of-way, restrictions, reservations and other similar
charges, burdens, and other similar charges or encumbrances not
materially interfering with the ordinary course of business of the
Company, the Issuer and the Restricted Subsidiaries,
(7) zoning restrictions, licenses, restrictions on the use of real
property or minor irregularities in title thereto, which do not
materially impair the use of such real property in the ordinary
course of business of the Company, the Issuer and the Restricted
Subsidiaries,
(8) Liens securing Indebtedness incurred pursuant to clause (8) or (9)
of the definition of Permitted Indebtedness,
(9) Liens securing Indebtedness of the Company, the Issuer or any
Restricted Subsidiary permitted to be incurred under the
Subordinated Indenture; provided, that the aggregate amount of all
consolidated Indebtedness of the Company, the Issuer and the
Restricted Subsidiaries (including, with respect to Capitalized
Lease Obligations, the Attributable Debt in respect thereof)
secured by Liens (other than Non-Recourse Indebtedness and
Indebtedness incurred pursuant to clause (9) of the definition of
Permitted Indebtedness) shall not exceed 40% of Consolidated
Adjusted Tangible Assets at any one time outstanding (after giving
effect to the incurrence of such Indebtedness and the use of the
proceeds thereof),
(10) Liens securing Non-Recourse Indebtedness of the Company, the
Issuer or any Restricted Subsidiary; provided, that such Liens
apply only to the property financed out of the net proceeds of
such Non-Recourse Indebtedness within 90 days after the incurrence
of such Non-Recourse Indebtedness,
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(11) Liens securing Purchase Money Indebtedness; provided that such
Liens apply only to the property acquired, constructed or improved
with the proceeds of such Purchase Money Indebtedness within 90
days after the incurrence of such Purchase Money Indebtedness,
(12) Liens on property or assets of the Company, the Issuer or any
Restricted Subsidiary securing Indebtedness of the Company, the
Issuer or any Restricted Subsidiary owing to the Company, the
Issuer or one or more Restricted Subsidiaries,
(13) leases or subleases granted to others not materially interfering
with the ordinary course of business of the Company and the
Restricted Subsidiaries,
(14) purchase money security interests (including, without limitation,
Capitalized Lease Obligations); provided, that such Liens apply
only to the Property acquired and the related Indebtedness is
incurred within 90 days after the acquisition of such Property,
(15) any right of first refusal, right of first offer, option, contract
or other agreement to sell an asset; provided that such sale is
not otherwise prohibited under the Subordinated Indenture,
(16) any right of a lender or lenders to which the Company, the Issuer
or a Restricted Subsidiary may be indebted to offset against, or
appropriate and apply to the payment of such, Indebtedness any and
all balances, credits, deposits, accounts or money of the Company,
the Issuer or a Restricted Subsidiary with or held by such lender
or lenders or its Affiliates,
(17) any pledge or deposit of cash or property in conjunction with
obtaining surety, performance, completion or payment bonds and
letters of credit or other similar instruments or providing
earnest money obligations, escrows or similar purpose undertakings
or indemnifications in the ordinary course of business of the
Company, the Issuer and the Restricted Subsidiaries,
(18) Liens for homeowner and property owner association developments
and assessments,
(19) Liens securing Refinancing Indebtedness; provided, that such Liens
extend only to the assets securing the Indebtedness being
refinanced,
(20) Liens incurred in the ordinary course of business as security for
the obligations of the Company, the Issuer and the Restricted
Subsidiaries with respect to indemnification in respect of title
insurance providers,
(21) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any
Subsidiary of the Company or becomes a Subsidiary of the Company;
provided that such Liens were in existence prior to the
contemplation of such merger or consolidation or acquisition and
do not extend to any assets other than those of the Person merged
into or consolidated with the Company or the Subsidiary or
acquired by the Company or its Subsidiaries,
(22) Liens on property existing at the time of acquisition thereof by
the Company or any Subsidiary of the Company, provided that such
Liens were in existence prior to the contemplation of such
acquisition,
(23) Liens existing on the Issue Date and any extensions, renewals or
replacements thereof, and
(24) Liens on specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of
bankers' acceptances issued or created for the account of such
Person to facilitate the purchase, shipment or storage of such
inventory or other goods.
"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, incorporated or unincorporated association,
joint stock company, trust, unincorporated organization or government or any
agency or political subdivision thereof.
"PREFERRED STOCK" of any Person means all Capital Stock of such Person
which has a preference in liquidation or with respect to the payment of
dividends.
"PROPERTY" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person, whether or not included in
the most recent consolidated balance sheet of such Person and its Subsidiaries
under GAAP.
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"PURCHASE MONEY INDEBTEDNESS" means Indebtedness of the Company, the
Issuer or any Restricted Subsidiary incurred for the purpose of financing all or
any part of the purchase price, or the cost of construction or improvement, of
any property to be used in the ordinary course of business by the Company, the
Issuer and the Restricted Subsidiaries; PROVIDED, HOWEVER, that (1) the
aggregate principal amount of such Indebtedness shall not exceed such purchase
price or cost and (2) such Indebtedness shall be incurred no later than 90 days
after the acquisition of such property or completion of such construction or
improvement.
"QUALIFIED STOCK" means Capital Stock of the Company other than
Disqualified Stock.
"REAL ESTATE BUSINESS" means homebuilding, housing construction, real
estate development or construction and related real estate activities, including
the provision of mortgage financing or title insurance.
"REFINANCING INDEBTEDNESS" means Indebtedness (to the extent not
Permitted Indebtedness) that refunds, refinances or extends any Indebtedness of
the Company, the Issuer or any Restricted Subsidiary (to the extent not
Permitted Indebtedness) outstanding on the Issue Date or other Indebtedness (to
the extent not Permitted Indebtedness) permitted to be incurred by the Company,
the Issuer or any Restricted Subsidiary pursuant to the terms of the
Subordinated Indenture, but only to the extent that
(1) the Refinancing Indebtedness is subordinated, if at all, to the
Senior Subordinated Notes or the Subordinated Guarantees, as the
case may be, to the same extent as the Indebtedness being
refunded, refinanced or extended,
(2) the Refinancing Indebtedness is scheduled to mature either (a) no
earlier than the Indebtedness being refunded, refinanced or
extended or (b) after the maturity date of the Senior Subordinated
Notes,
(3) the portion, if any, of the Refinancing Indebtedness that is
scheduled to mature on or prior to the maturity date of the Senior
Subordinated Notes has a Weighted Average Life to Maturity at the
time such Refinancing Indebtedness is incurred that is equal to or
greater than the Weighted Average Life to Maturity of the portion
of the Indebtedness being refunded, refinanced or extended that is
scheduled to mature on or prior to the maturity date of the Senior
Subordinated Notes, and
(4) such Refinancing Indebtedness is in an aggregate principal amount
that is equal to or less than the aggregate principal amount then
outstanding under the Indebtedness being refunded, refinanced or
extended.
"RESTRICTED PAYMENT" means any of the following:
(1) the declaration or payment of any dividend or any other
distribution on Capital Stock of the Company, the Issuer or any
Restricted Subsidiary or any payment made to the direct or
indirect holders (in their capacities as such) of Capital Stock of
the Company, the Issuer or any Restricted Subsidiary (other than
(a) dividends or distributions payable solely in Qualified Stock
and (b) in the case of the Issuer or Restricted Subsidiaries,
dividends or distributions payable to the Company, the Issuer or a
Restricted Subsidiary);
(2) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of the Company, the Issuer or any
Restricted Subsidiary (other than a payment made to the Company,
the Issuer or any Restricted Subsidiary); and
(3) any Investment (other than any Permitted Investment), including
any Investment in an Unrestricted Subsidiary (including by the
designation of a Subsidiary of the Company as an Unrestricted
Subsidiary) and any amounts paid in accordance with clause (2) of
the definition of Indebtedness.
"RESTRICTED SUBSIDIARY" means any Subsidiary of the Company which is not
an Unrestricted Subsidiary.
"S&P" means Standard and Poor's Ratings Group or any successor to its
debt rating business.
"SUBORDINATED GUARANTEE" means the guarantee of the Senior Subordinated
Notes by the Company and each other Guarantor under the Subordinated Indenture.
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"SIGNIFICANT SUBSIDIARY" means any Subsidiary of the Company which would
constitute a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X
under the Securities Act and the Exchange Act as in effect on the Issue Date.
"SUBSIDIARY" of any Person means any corporation or other entity of which
a majority of the Capital Stock having ordinary voting power to elect a majority
of the Board of Directors or other persons performing similar functions is at
the time directly or indirectly owned or controlled by such Person.
"TRUSTEE" means the party named as such above until a successor replaces
such party in accordance with the applicable provisions of the Subordinated
Indenture and thereafter means the successor serving hereunder.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company so
designated by a resolution adopted by the Board of Directors of the Company or a
duly authorized committee thereof as provided below; PROVIDED that (a) the
holders of Indebtedness thereof do not have direct or indirect recourse against
the Company, the Issuer or any Restricted Subsidiary, and neither the Company,
the Issuer nor any Restricted Subsidiary otherwise has liability for, any
payment obligations in respect of such Indebtedness (including any undertaking,
agreement or instrument evidencing such Indebtedness), except, in each case, to
the extent that the amount thereof constitutes a Restricted Payment permitted by
the Subordinated Indenture, in the case of Non-Recourse Indebtedness, to the
extent such recourse or liability is for the matters discussed in the last
sentence of the definition of "Non-Recourse Indebtedness," or to the extent such
Indebtedness is a guarantee by such Subsidiary of Indebtedness of the Company,
the Issuer or a Restricted Subsidiary and (b) no holder of any Indebtedness of
such Subsidiary shall have a right to declare a default on such Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity as a result of a default on any Indebtedness of the Company, the Issuer
or any Restricted Subsidiary. The Unrestricted Subsidiaries will be the
following: Eastern National Title Insurance Agency, Inc., Eastern Title Agency,
Inc., Founders Title Agency, Inc., Governor's Abstract Co., Inc., Hexter Fair
Land Title Company I, Inc., Homebuyer's Mortgage, Inc., Hovnanian Financial
Services I, Inc., Hovnanian Financial Services 11, Inc., Hovnanian Financial
Services III, Inc., Hovnanian Financial Services IV, Inc., K. Hovnanian
Investment Properties, Inc., K Hovnanian Mortgage, Inc., Preston Grande Homes,
Inc., Heritage Pines, L.L.C., Kings Crossing at Montgomery, L.L.C., Knox Creek,
L.L.C., McKinley Court, L.L.C., Monticello Woods, L.L.C., New Homebuyers Title
Co. (Virginia) L.L.C., New Homebuyers Title Company, L.L.C., Shadow Creek,
L.L.C., Section 13 of the Hills, L.L.C., Title Group II, L.L.C., Town Homes at
Montgomery, L.L.C., Westwood Hills, L.L.C., WH/PR Land Co., L.L.C., Athena
Portfolio Investors, L.P., Beacon Manor Associates, L.P., Galleria Mortgage,
L.P., Goodman Mortgage Investors, L.P., Parkway Development, Sovereign Group,
L.P., K. Hovnanian Venture I, L.L.C.
Subject to the foregoing, the Board of Directors of the Company or a duly
authorized committee thereof may designate any Subsidiary in addition to those
named above to be an Unrestricted Subsidiary; PROVIDED, HOWEVER, that (1) the
net amount (the "DESIGNATION AMOUNT") then outstanding of all previous
Investments by the Company and the Restricted Subsidiaries in such Subsidiary
will be deemed to be a Restricted Payment at the time of such designation and
will reduce the amount available for Restricted Payments under the "Limitations
on Restricted Payments" covenant set forth in the Subordinated Indenture, to the
extent provided therein, (2) the Company must be permitted under the
"Limitations on Restricted Payments" covenant set forth in the Subordinated
Indenture to make the Restricted Payment deemed to have been made pursuant to
clause (1), and (3) after giving effect to such designation, no Default or Event
of Default shall have occurred or be continuing. In accordance with the
foregoing, and not in limitation thereof, Investments made by any Person in any
Subsidiary of such Person prior to such Person's merger with the Company or any
Restricted Subsidiary (but not in contemplation or anticipation of such merger)
shall not be counted as an Investment by the Company or such Restricted
Subsidiary if such Subsidiary of such Person is designated as an Unrestricted
Subsidiary.
The Board of Directors of the Company or a duly authorized committee
thereof may also redesignate an Unrestricted Subsidiary to be a Restricted
Subsidiary PROVIDED, HOWEVER, that (1) the Indebtedness of such Unrestricted
Subsidiary as of the date of such redesignation could then be incurred under the
"Limitations on Indebtedness" covenant and (2) immediately after giving effect
to such redesignation and the incurrence of any such additional Indebtedness,
the Company and the Restricted Subsidiaries could incur $1.00 of additional
Indebtedness under the first paragraph of the "Limitations on Indebtedness"
covenant. Any such designation or redesignation by the Board of Directors of the
Company or a committee thereof will be evidenced to the Trustee by the filing
with the Trustee of a certified copy of the resolution of the Board of Directors
of the Company or a committee thereof giving effect to such designation or
redesignation and an Officers' Certificate certifying that such designation or
redesignation complied with the foregoing conditions and setting forth the
underlying calculations of such Officers'
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Certificate. The designation of any Person as an Unrestricted Subsidiary shall
be deemed to include a designation of all Subsidiaries of such Person as
Unrestricted Subsidiaries; PROVIDED, HOWEVER, that the ownership of the general
partnership interest (or a similar member's interest in a limited liability
company) by an Unrestricted Subsidiary shall not cause a Subsidiary of the
Company of which more than 95% of the equity interest is held by the Company or
one or more Restricted Subsidiaries to be deemed an Unrestricted Subsidiary.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness or portion thereof at any date, the number of years obtained by
dividing (i) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other required
payment of principal, including, without limitation, payment at final maturity,
in respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such payment
by (ii) the sum of all such payments described in clause (i)(a) above.
CONCERNING THE SUBORDINATED TRUSTEE
The Subordinated Indenture contains certain limitations on the rights of
the Subordinated Trustee, should it become a creditor of the Company, to obtain
payment of claims in certain cases, or to realize on certain property received
in respect of any such claim as security or otherwise. The Subordinated Trustee
will be permitted to engage in other transactions; however, if within 90 days,
apply to the Securities and Exchange Commission for permission to continue
acquires any conflicting interest, as defined in the Subordinated Indenture, it
must eliminate that conflict within 90 days, apply to the Securities and
Exchange Commission for permission to continue or resign. The Subordinated
Trustee is also trustee with respect to the Senior Notes and the Issuer's 10
1/2% Senior Notes due 2007 and its 9 ?% Senior Notes due 2009.
ADDITIONAL INFORMATION
Anyone who receives this prospectus may obtain a copy of the Subordinated
Indenture and Subordinated Registration Rights Agreement without charge by
writing to Hovnanian at 10 Highway 35, Red Bank, NJ 07701, Attention: Corporate
Controller.
REGISTERED EXCHANGE OFFER; REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Company, the Issuer, the other Guarantors and the initial purchasers
of the outstanding Senior Subordinated Notes entered into a registration rights
agreement on March 26, 2002, which we refer to as the "Subordinated Registration
Rights Agreement". Pursuant to the Subordinated Registration Rights Agreement,
the Company, the Issuer and the Guarantors agreed to file with the Securities
and Exchange Commission the Exchange Offer Registration Statement on the
appropriate form under the Securities Act with respect to the Senior
Subordinated Notes. Upon the effectiveness of the Exchange Offer Registration
Statement, the Issuer will offer to the holders of Transfer Restricted
Securities pursuant to the exchange offer who are able to make certain
representations the opportunity to exchange their Transfer Restricted Securities
for exchange Senior Subordinated Notes. Capitalized terms used in this section
but not otherwise defined have the meanings given to them in the Subordinated
Registration Rights Agreement.
Under the Subordinated Registration Rights Agreement:
(1) the Company, the Issuer and the other Guarantors agreed to file an
Exchange Offer Registration Statement with the Securities and
Exchange Commission on or prior to 90 days after the Closing Date;
(2) the Company, the Issuer and the Guarantors agreed to use their
reasonable best efforts to have the Exchange Offer Registration
Statement declared effective by the Securities and Exchange
Commission on or prior to 150 days after the Closing Date;
(3) unless the exchange offer would not be permitted by applicable law
or Securities and Exchange Commission policy, the Company, the
Issuer and the other Guarantors agreed to commence the exchange
offer, keep the exchange offer open for a period of not less than
20 business days and use their reasonable best efforts to issue,
on or prior to 30 business days after the date on which the
Exchange Offer Registration Statement was declared effective by
the Securities and Exchange Commission, exchange Senior
Subordinated Notes in exchange for all outstanding Senior
Subordinated Notes tendered prior thereto in the exchange offer;
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(4) if obligated to file the Shelf Registration Statement, the
Company, the Issuer and the other Guarantors will file the Shelf
Registration Statement with the Securities and Exchange Commission
on or prior to 30 days after that filing obligation arises and use
their reasonable best efforts to cause the Shelf Registration to
be declared effective by the Securities and Exchange Commission on
or prior to 90 days after that obligation arises;
(5) the Issuer is not required to file the Exchange Offer Registration
Statement or permitted to consummate the exchange offer because
the exchange offer is not permitted by applicable law or
Securities and Exchange Commission policy; or
(6) any holder of Transfer Restricted Securities notifies the Issuer
in writing prior to the 20th business day following consummation
of the exchange offer that:
(a) based on an opinion of counsel, it is prohibited by law or
Securities and Exchange Commission policy from
participating in the exchange offer; or
(b) it is a broker-dealer and owns Senior Subordinated Notes
acquired directly from the Issuer,
the Company, the Issuer and the Guarantors have agreed to file with the
Securities and Exchange Commission a Shelf Registration Statement to cover
resales of the Senior Subordinated Notes by the Holders thereof who satisfy
certain conditions relating to the provisions of information in connection with
the Shelf Registration Statement.
The Company, the Issuer and the other Guarantors have agreed to use their
reasonable best efforts to cause the applicable registration statement to be
declared effective as promptly as possible by the Securities and Exchange
Commission.
For purposes of the preceding, "Transfer Restricted Securities" means
each:
(1) Senior Subordinated Note, until the earliest to occur of:
(a) the date on which that Senior Subordinated Note is
exchanged in the Exchange Offer for a New Senior
Subordinated Note which is entitled to be resold to the
public by the holder thereof without complying with the
prospectus delivery requirements of the Securities Act;
(b) the date on which that Senior Subordinated Note has been
disposed of in accordance with a Shelf Registration
Statement (and purchasers thereof have been issued New
Senior Subordinated Notes); or
(c) the date on which that Senior Subordinated Note is
distributed to the public pursuant to Rule 144 under the
Securities Act; and
(2) New Senior Subordinated Note issued to a broker-dealer until the
date on which that New Senior Subordinated Note is disposed of by
that broker-dealer pursuant to the "Plan of Distribution"
contemplated by the Exchange Offer Registration Statement
(including the delivery of the prospectus contained therein).
The Company, the Issuer and the other Guarantors have agreed to pay
liquidated damages to each holder of Senior Subordinated Notes upon the
occurrence of any of the following:
(1) the Company, the Issuer and the other Guarantors fail to file any
of the Registration Statements required by the Subordinated
Registration Rights Agreement on or before the date specified for
that filing;
(2) any of such Registration Statements is not declared effective by
the Securities and Exchange Commission on or prior to the date
specified for that effectiveness, which we refer to as the
"EFFECTIVENESS TARGET DATE";
(3) the Issuer fails to consummate the Exchange Offer within 40
business days of the Effectiveness Target Date with respect to the
Exchange Offer Registration Statement; or
(4) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but thereafter ceases
to be effective or usable in connection with resales of Transfer
Restricted Securities during the periods specified in the
Subordinated Registration Rights Agreement
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We refer to each event referred to in clauses (1) through (4) above as a
"REGISTRATION DEFAULT".
Such liquidated damages shall be:
(1) with respect to the first 90-day period immediately following the
occurrence of the first Registration Default, an amount equal to
$.05 per week per $1,000 principal amount of Senior Subordinated
Notes held by that holder; and
(2) an additional $.05 per week per $1,000 principal amount of Senior
Subordinated Notes with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum
amount of liquidated damages for all Registration Defaults of $.25
per week per $1,000 principal amount of Senior Subordinated Notes.
All accrued liquidated damages will be paid on each Damages Payment Date
to the Global Senior Subordinated Note holder by wire transfer of immediately
available funds or by federal funds check and to holders of Certificated
Securities by wire transfer to the accounts specified by them or by mailing
checks to their registered addresses if no such accounts have been specified.
Following the cure of all Registration Defaults, the accrual of liquidated
damages will cease.
Holders of Senior Subordinated Notes will be required to make certain
representations to the Company, the Issuer and the other Guarantors, as
described in the Subordinated Registration Rights Agreement, in order to
participate in the Exchange Offer and will be required to deliver certain
information to be used in connection with the Shelf Registration Statement and
to provide comments on the Shelf Registration Statement within the time periods
set forth in the registration rights agreement in order to have their Senior
Subordinated Notes included in the Shelf Registration Statement and benefit from
the provisions regarding liquidated damages set forth above with respect to the
Shelf Registration Statement.
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BOOK ENTRY; DELIVERY AND FORM
BOOK-ENTRY PROCEDURES FOR THE GLOBAL NOTES
The exchange notes will initially be represented in the form of one or
more global notes in fully-registered book-entry form, without interest coupons
that will be deposited with or on behalf of The Depository Trust Company, or
DTC, and registered in the name of DTC or its participants.
Except as set forth below, the global notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the global notes may not be exchanged for notes
in certificated form except in the limited circumstances described below.
The descriptions of the operations and procedures of DTC set forth below
are provided solely as a matter of convenience. These operations and procedures
are solely within the control of the settlement system of DTC and are subject to
change by DTC from time to time. We take no responsibility for these operations
or procedures, and investors are urged to contact DTC or its participants
directly to discuss these matters.
DTC has advised us that it is:
o a limited-purpose trust company organized under the laws of the
State of New York;
o a "banking organization" within the meaning of the New York
Banking Law;
o a member of the Federal Reserve System;
o a "clearing corporation" within the meaning of the Uniform
Commercial Code, as amended; and
o a "clearing agency" registered under Section 17A of the Securities
Exchange Act of 1934.
DTC was created to hold securities for its participants, organizations,
which we refer to as "participants", and to and facilitate the clearance and
settlement of securities transactions between participants through electronic
book-entry changes to the accounts of participants, which eliminates the need
for physical transfer and delivery of certificates. DTC's participants include
securities brokers and dealers; banks and trust companies; clearing corporations
and specified other organizations. Indirect access to DTC's system is also
available to other entities such as banks, brokers, dealers, and trust
companies; these indirect participants clear through or maintain a custodial
relationship with a participant, either directly or indirectly. Investors who
are not participants may beneficially own securities held by or on behalf of DTC
only through participants or indirect participants.
We expect that under the procedures established by DTC:
o upon deposit of each global note, DTC will credit the accounts of
participants in DTC with an interest in the global note; and
o ownership of the notes will be shown on, and the transfer of
ownership of the notes will be effected only through, records
maintained by DTC, with respect to the interests of participants
in DTC, and the records of participants and indirect participants,
with respect to the interests of persons other than participants
in DTC.
The laws of some jurisdictions may require that some purchasers of
securities take physical delivery of the securities in definitive form.
Accordingly, the ability to transfer interests in the new notes represented by a
global note to these persons may be limited. In addition, because DTC can act
only on behalf of its participants, who in turn act on behalf of persons who
hold interests through participants, the ability of a person having an interest
in the new notes represented by a global note to pledge or transfer that
interest to persons or entities that do not participate in DTC's system, or to
otherwise take actions in respect of that interest, may be affected by the lack
of a physical definitive security in respect of the interest.
So long as DTC or its nominee is the registered owner of a global note,
DTC or the nominee, as the case may be, will be considered the sole owner or
holder of the notes represented by the global note for all purposes
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under each of the Senior Indenture and the Subordinated Indenture. Except as
provided below, owners of beneficial interests in a global note:
o will not be entitled to have notes represented by the global notes
registered in their names;
o will not receive or be entitled to receive physical delivery of
certificated notes; and
o will not be considered the owners or Holders of the notes under
the Senior Indenture and the Subordinated Indenture, as
applicable, for any purpose, including with respect to the giving
of any direction, instruction or approval to the trustee under the
Senior Indenture and the Subordinated Indenture, respectively.
Accordingly, each holder owning a beneficial interest in a global note
must rely on the procedure of DTC and, if the holder is not a participant or an
indirect participant in DTC, on the procedures of the participant through which
the holder owns its interest, to exercise any rights of a holder of notes under
the Senior Indenture and the Subordinated Indenture, as applicable, or the
global note. We understand that under existing industry practice, if we request
any action of Holders of notes or a holder that is an owner of a beneficial
interest in a global note desires to take any action that DTC, as the holder of
the global note, is entitled to take, then DTC would authorize the participants
to take the action and the participants would authorize Holders owning through
participants to take the action or would otherwise act upon the instruction of
the holders. Neither we nor the Senior Trustee or the Subordinated Trustee will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of notes by DTC, or for maintaining, supervising or
reviewing any records of DTC relating to the notes.
Payment with respect to the principal of premium, if any, liquidated
damages, if any, and interest on any notes represented by a global note
registered in the name of DTC or its nominee on the applicable record date will
be payable by the Senior Trustee or Subordinated Trustee, as applicable, to or
at the direction of DTC or its nominee, in its capacity as the registered holder
of the global note representing the notes under the Senior Indenture and the
Subordinated Indenture, as applicable. Under the terms of the Senior Indenture
and the Subordinated Indenture, as applicable, we and the Senior Trustee or
Subordinated Trustee may treat the persons in whose names the notes, including
the global notes, are registered as the owners of the notes for the purpose of
receiving payment on the notes and for any and all other purposes whatsoever.
Accordingly, neither we nor the Senior Trustee or Subordinated Trustee has or
will have any responsibility or liability for the payment of amounts to owners
of beneficial interests in a global note, including principal, premium, if any,
liquidated damages, if any, and interest. Payments by the participants and the
indirect participants in DTC to the owners of beneficial interests in a global
note will be governed by standing instructions and customary industry practice
and will be the responsibility of the participants or the indirect participants
and DTC.
Transfers between participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear or Clearstream will be effected in the ordinary way
according to their respective rules and operating procedures.
Cross-market transfers between the participants in DTC, on the one hand,
and Euroclear or Clearstream participants, on the other hand, will be effected
through DTC in accordance with DTC's rules on behalf of Euroclear or
Clearstream, as the case may be, by its respective depositary. These
cross-market transactions, however, will require delivery of instructions to
Euroclear or Clearstream, as the case may be, by the counterparty in that system
in accordance with the rules and procedures and within the established
deadlines, Brussels time, of that system. If the transaction meets its
settlement requirements, Euroclear or Clearstream, as the case may be, will
deliver instructions to its respective depositary to take action to effect final
settlement on its behalf by delivering or receiving interests in the relevant
global notes in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Euroclear
participants and Clearstream participants may not deliver instructions directly
to the depositaries for Euroclear or Clearstream.
Because of time zone differences, the securities account of a Euroclear
or Clearstream participant purchasing an interest in a global note from a
participant in DTC will be credited, and any crediting will be reported to the
relevant Euroclear or Clearstream participant, during the securities settlement
processing day, which must be a business day for Euroclear and Clearstream,
immediately following the settlement date of DTC. Cash received in Euroclear or
Clearstream as a result of sales of interest in a global note by or through a
Euroclear or Clearstream
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participant to a participant in DTC will be received with value on the
settlement date of DTC but will be available in the relevant Euroclear or
Clearstream cash account only as of the business day for Euroclear or
Clearstream following DTC's settlement date.
Although DTC, Euroclear and Clearstream have agreed to the above
procedures to facilitate transfers of interests in the global notes among its
participants in DTC, Euroclear and Clearstream, they are under no obligation to
perform or to continue to perform the procedures, and the procedures may be
discontinued at any time. Neither we nor the Senior Trustee or Subordinated
Trustee will have any responsibility for the performance by DTC, Euroclear or
Clearstream or its respective participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
CERTIFICATED NOTES
A global note is exchangeable for certificated notes if:
o DTC (a) notifies the Issuer that it is unwilling or unable to
continue as depositary for the global note and the Issuer fails to
appoint a successor depositary or (b) has ceased to be a clearing
agency registered under the Exchange Act;
o the Issuer, at its option, notifies the Senior Trustee or
Subordinated Trustee in writing that it elects to cause the
issuance of the notes in certificated form; or
o there shall have occurred and be continuing to occur a Default or
an Event of Default with respect to the notes.
In addition, beneficial interest in a global note may be exchanged for
certificated notes upon request but only upon at least 20 days' prior written
notice given to the Senior Trustee or Subordinated Trustee, as applicable, by or
on behalf of DTC in accordance with customary procedures. In all cases,
certificated notes delivered in exchange for any global note or beneficial
interest therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary, according to its
customary procedures.
Subject to certain conditions, any person having a beneficial interest in
the global notes may, upon request to the Senior Trustee or Subordinated
Trustee, as applicable, exchange their beneficial interest for notes in the form
of certificated notes. Upon any such issuance, the Senior Trustee or
Subordinated Trustee, is required to register the certificated notes in the name
of, and deliver to such person or persons, or the nominee of any thereof. In
addition, if:
o we notify the Senior Trustee or Subordinated Trustee in writing
that DTC is no longer willing or able to act as a depository or
DTC ceases to be registered as a clearing agency under the
Securities Exchange Act of 1934 and a successor depository is not
appointed within 90 days of the notice or cessation; or
o we, at our option, notify the Senior Trustee or Subordinated
Trustee in writing that we elect to cause the issuance of notes in
definitive form under the applicable indenture;
then, upon surrender of the global notes, certificated notes will be issued to
each person that DTC identifies as the beneficial owner of the notes represented
by the global notes. Upon the issuance of certificated notes, the Senior Trustee
or Subordinated Trustee is required to register certificated notes in the name
of that person or persons, or their nominee, and cause the certified notes to be
delivered to those persons.
Neither we nor the trustee will be liable for any delay by DTC or any
participant or indirect participant in identifying the beneficial owners of the
related notes and each of those persons may conclusively rely on, and will be
protected in relying on, instructions from DTC for all purposes, including with
respect to the registration and delivery, and the respective principal amounts,
of the notes to be issued.
SAME DAY SETTLEMENT AND PAYMENT
Each of the Senior Indenture and the Subordinated Indenture requires that
payments in respect of the notes represented by the global note, including
principal, premium, if any, interest and liquidated damages, if any, be
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made by wire transfer of immediately available next day funds to the accounts
specified by the global note holder. With respect to certificated notes, we will
make all payments of principal, premium, if any, interest and liquidated
damages, if any, by wire transfer of immediately available funds to the accounts
specified by the Holders thereof or, if no such account is specified, by mailing
a check to each such holder's registered address. We expect that secondary
trading in the certificated notes will also be settled in immediately available
funds.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
EXCHANGE OF NOTES
The exchange of outstanding notes for exchange notes in the exchange
offer will not constitute a taxable event to holders for United States federal
income tax purposes. Consequently, no gain or loss will be recognized by a
holder upon receipt of an exchange note, the holding period of the exchange note
will include the holding period of the outstanding note and the basis of the
exchange note will be the same as the basis of the outstanding note immediately
before the exchange.
In any event, persons considering the exchange of outstanding notes for
exchange notes should consult their own tax advisors concerning the United
States federal income tax consequences in light of their particular situations
as well as any consequences arising under the laws of any other taxing
jurisdiction.
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account as a
result of market-making activities and other trading activities, other than
outstanding notes acquired directly from us or any of our affiliates, in the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of exchange notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of exchange notes received in exchange for outstanding notes where
outstanding notes were acquired as a result of market-making activities or other
trading activities. We have agreed that, for a period of one year after the
consummation of the exchange offer or such shorter period as will terminate when
all outstanding notes covered by the registration statement have been sold, we
will make this prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any resale.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
in the exchange offer may be sold from time to time in one or more transactions
in the over-the-counter market, in negotiated transactions, through the writing
of options on the exchange notes, or through a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices, or at negotiated prices. Any resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any broker-dealer or
the purchasers of any exchange notes. Any broker-dealer that resells exchange
notes that were received by it for its own account in the exchange offer and any
broker or dealer that participates in a distribution of exchange notes may be
deemed to be an "underwriter" within the meaning of the Securities Act, and any
profit on any resale of exchange notes and any commission or concessions
received by any of those persons may be deemed to be underwriting compensation
under the Securities Act. The letter of transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is in an "underwriter" within
the meaning of the Securities Act.
We have agreed, for a period of one year after the consummation of the
exchange offer or such shorter period as will terminate when all transfer
restricted securities covered by the registration statement have been sold, to
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests those documents
in the letter of transmittal. We have also agreed to pay all expenses incident
to the exchange offer, including the expenses of one counsel for the holders of
the outstanding notes directly from us, and will indemnify the holders of the
notes, including any broker-dealers, against certain liabilities, including
liabilities caused by any omission or alleged omission to state a material fact
required to be stated in the registration statement or prospectus or necessary
to make the statements in the registration statement or prospectus not
misleading. This indemnification obligation does not extend to statements or
omissions in the registration statement or prospectus made in reliance upon and
in conformity with written information pertaining to the holder that is
furnished in writing to us by or on behalf of any holder.
FORWARD-LOOKING STATEMENTS
This prospectus includes "forward-looking statements" including, in
particular, the statements about our plans, strategies and prospects under the
heading "Prospectus Summary," and in the Unaudited Pro Forma Combined Financial
Data and the related notes thereto. Although we believe that our plans,
intentions and
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expectations reflected in, or suggested by such forward-looking statements are
reasonable, we can give no assurance that such plans, intentions or expectations
will be achieved. The forward-looking statements we make in the prospectus are
subject to risks, uncertainties, and assumptions, including, among other things,
factors discussed under the heading "Risk Factors". All forward-looking
statements attributable to Hovnanian or the Issuer or persons acting on our
behalf are expressly qualified in their entirety by the cautionary statements
and risk factors contained throughout this prospectus.
LEGAL MATTERS
Certain legal matters related to the exchange notes offered hereby will
be passed upon for us by Simpson Thacher & Bartlett, New York, New York.
EXPERTS
The consolidated financial statements of Hovnanian Enterprises, Inc.,
appearing in Hovnanian Enterprises, Inc.'s Annual Report (Form 10-K) for the
year ended October 31, 2001, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report included therein and incorporated herein
by reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, and file reports, proxy statements and other information
with the Commission. You may read and copy any reports, proxy statements and
other information at the Commission's public reference room at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at its
regional office located at 500 West Madison Street, 14th Floor, Chicago,
Illinois 60661. Copies of such material also can be obtained by mail from the
Public Reference Section of the Commission, at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, at the prescribed rates. The
Commission also maintains a website that contains reports, proxy and information
statements and other information. The website address is: http://www.sec.gov.
Hovnanian's Class A common stock is listed on the New York Stock Exchange, and
reports, proxy statements and other information also can be inspected at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Hovnanian has filed the following documents with the Commission and these
documents are incorporated herein by reference:
o Annual Report on Form 10-K for the fiscal year ended October 31,
2001, Registration File No. 1-8551;
o Quarterly Report on Form 10-Q for the quarter ended January 31,
2002, Registration File No. 1-8551; and
o Current Reports on Form 8-K filed on January 24, 2002, as amended
by Current Report on Form 8-K/A filed February 19, 2002,
Registration File Nos. 1-8551 and on March 21, 2002, Registration
File No. 1-8551.
This prospectus is part of a registration statement filed with the SEC.
The Securities and Exchange Commission allows us to "incorporate by reference"
selected documents we file with it, which means that we can disclose important
information to you by referring you to those documents. The information in the
documents incorporated by reference is considered to be part of this prospectus,
and information in documents that we file later with the Securities and Exchange
Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below filed under Section 13(a),
13(c), 14 or 15(d) of the Exchange Act.
All documents filed by Hovnanian pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this prospectus and prior to
the termination of the offerings made by this prospectus are to
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be incorporated herein by reference. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is incorporated or deemed to be incorporated by reference herein modifies
or supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
prospectus.
Hovnanian will provide without charge to each person, including any
beneficial owner, to whom a copy of this prospectus is delivered, upon the
written or oral request of such person, a copy of any or all of the information
incorporated by reference in this prospectus, other than exhibits to such
information (unless such exhibits are specifically incorporated by reference
into the information that this prospectus incorporates). Requests for such
copies should be directed to Paul W. Buchanan, Senior Vice President--Corporate
Controller, Hovnanian Enterprises, Inc., 10 Highway 35, P.O. Box 500, Red Bank,
New Jersey 07701 (telephone: (732) 747-7800).
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Hovnanian is a Delaware corporation. Section 145 of the General
Corporation Law of the State of Delaware grants each corporation organized
thereunder the power to indemnify any person who is or was a director, officer,
employee or agent of a corporation or enterprise, against expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, other than an action by or in the right of the corporation, by
reason of being or having been in any such capacity, if he acted in good faith
in a manner reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Section 102(b)(7) of the
General Corporation Law of the State of Delaware enables a corporation in its
certificate of incorporation or an amendment thereto validly approved by
stockholders to limit or eliminate the personal liability of the members of its
board of directors for violations of the directors' fiduciary duty of care.
Article EIGHTH of Hovnanian's Restated Certificate of Incorporation
contains the following provisions with respect to indemnification:
No director of the Company shall be personally liable to the Company or
its stockholders for monetary damages for breach of fiduciary duty as a
director; provided, however, that this Article shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit. This Article shall
not eliminate or limit the liability of a director for any act or omission
occurring prior to the date on which this Article becomes effective. Any repeal
or modification of this Article Eighth shall not adversely affect any right or
protection of a director of the Company existing hereunder with respect to any
act or omission occurring prior to the time of such repeal or modification.
Hovnanian maintains a liability insurance policy providing coverage for
its directors and officers in an amount up to an aggregate limit of $10,000,000
for any single occurrence.
K. Hovnanian is a New Jersey corporation. Subsection 2 of Title 14A,
Section 3-5 of the New Jersey Statutes grants any corporation organized for any
purpose under any general or special law of New Jersey the power to indemnify a
corporate agent against his expenses and liabilities in connection with any
proceeding involving the corporate agent by reason of his being or having been
such a corporate agent, other than a proceeding by or in the right of the
corporation, if (a) such corporate agent acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation; and (b) with respect to any criminal proceeding, such corporate
agent had no reasonable cause to believe his conduct was unlawful. The
termination of any proceeding by judgment, order, settlement, conviction or upon
a plea of nolo contendere or its equivalent does not by itself create a
presumption that the corporate agent did not meet such applicable standards of
conduct. Section 3 of Title 14A, Section 3-5 of the New Jersey Statutes grants
any corporation organized under any general or special law of New Jersey the
power to indemnify a director, officer, employee or agent of a corporation
against his expenses in connection with any proceeding by or in the right of the
corporation, which involves him by reason of his having been a corporate agent,
if he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation. However, no indemnification
shall be provided in respect of any claim, issue or matter in which the
corporate agent shall be adjudged to be liable to the corporation, unless and
only to the extent that the Superior Court or the court in which the proceeding
was brought determines, upon application, that despite the adjudication of
liability, but in view of all circumstances of the case, the corporate agent is
fairly and reasonably entitled to indemnity for expenses deemed proper by the
Superior Court or such other court. Corporations organized for any purpose under
any general or special law of New Jersey shall indemnify a corporate agent
against expenses to the extent that such corporate agent has been successful on
the merits or otherwise in any proceeding referred to in subsections 2 and 3 of
Title 14A, Section 3-5.
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Subsection 4 provides that any indemnification under these subsections,
unless ordered by a court under subsection 3, may be made by the corporation
only as authorized in a specific case upon a determination that indemnification
is proper in the circumstances because the corporate agent met the applicable
standard of (a) good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and (b) with respect to any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful. Subsection 5 provides that unless provided for in the certificate of
incorporation or bylaws, such determination shall be made (a) by the board of
directors or a committee thereof, acting by a majority vote of a quorum
consisting of directors who were not parties to or otherwise involved in the
proceeding; or (b) if such quorum is not obtainable, or even if obtainable and
such quorum directs, by written opinion of independent legal counsel designated
by the board of directors; or (c) by the shareholders if the certificate of
incorporation or bylaws or a resolution of the board of directors or of the
shareholders so directs. Subsection 7 provides that if a corporation on
application by a corporate agent fails or refuses to provide indemnification as
required or permitted by this section, a corporate agent may apply to a court
for an award of indemnification by the corporation. This section does not
exclude any other rights to which a corporate agent may be entitled under a
certificate of incorporation, bylaw, agreement, vote of shareholders, or
otherwise; provided that no indemnification is made if a final adjudication
adverse to the corporate agent establishes that his acts or omissions (a) were
in breach of his duty of loyalty to the corporation or its shareholders, as
defined under New Jersey law, (b) were not in good faith or involved a knowing
violation of law or (c) resulted in receipt by the corporate agent of an
improper personal benefit.
Except as required by subsection 4, no indemnification shall be made or
expenses advanced by a corporation or shall be ordered by a court if such action
would be inconsistent with a provision of the certificate of incorporation, a
bylaw, a resolution of the board of directors or of the shareholders, an
agreement or other proper corporate action in effect at the time of the accrual
of the alleged cause of action asserted in the proceeding, which prohibits,
limits or otherwise conditions the exercise of indemnification powers by the
corporation or the rights to which a corporate agent may be entitled.
Neither K. Hovnanian's Certificate of Incorporation nor its bylaws
contain any provisions relating to indemnity.
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ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
4.1 Indenture, dated as of March 26, 2002 among K. Hovnanian Enterprises,
Inc., the Guarantors party named therein, and Wachovia Bank, National
Association, formerly known as First Union National Bank, as trustee
(filed herewith).
4.2 Indenture, dated as of March 26, 2002 among K. Hovnanian Enterprises,
Inc., the Guarantors party named therein, and Wachovia Bank, National
Association, formerly known as First Union National Bank, as trustee
(filed herewith).
4.3 Registration Rights Agreement, dated as of March 26, 2002 among K.
Hovnanian Enterprises, Inc., Hovnanian Enterprises, Inc., certain of its
Subsidiaries, Salomon Smith Barney, Inc., Banc of America Securities LLC,
Credit Suisse First Boston Corporation and PNC Capital Markets, Inc.
(filed herewith).
4.4 Registration Rights Agreement, dated as of March 26, 2002 among K.
Hovnanian Enterprises, Inc., Hovnanian Enterprises, Inc., certain of its
Subsidiaries, Salomon Smith Barney, Inc., Banc of America Securities LLC
and Credit Suisse First Boston Corporation (filed herewith).
5.1 Opinion of Simpson Thacher & Bartlett (filed herewith).
12.1 Statement re: Computation of Ratio of Earnings to Fixed Charges (filed
herewith).
23.1 Consent of Simpson Thacher & Bartlett (contained in Exhibit 5.1 filed
herewith).
23.2 Consent of Ernst & Young LLP (filed herewith).
24.1 Powers of Attorney of the Board of Directors of Hovnanian Enterprises,
Inc. (included on signature page).
24.2 Powers of Attorney of the Board of Directors of K. Hovnanian Enterprises,
Inc. (included on signature page).
24.3 Powers of Attorney of the Board of Directors of Subsidiary Registrants
(included on signature page).
25.1 Statement of Eligibility of Trustee under both the Indenture filed as
Exhibit 4.1 hereto and under the Indenture filed as Exhibit 4.2 hereto
(filed herewith).
99.1 Form of Letter of Transmittal.*
99.2 Form of Letter to Securities Dealers, Commercial Banks, Trust Companies
and Other Nominees.*
99.3 Form of Letter to Clients.*
99.4 Form of Notice of Guaranteed Delivery.*
* To be filed by amendment.
ITEM 22. UNDERTAKINGS.
1. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the registrant's annual report pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in
the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial BONA FIDE
offering thereof.
2. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, or controlling
persons of the registrant pursuant to the foregoing provisions, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of it counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
3. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11, or 13 of this form, within one business
day of
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receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
4. The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
5. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1993;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such information
in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial BONA FIDE offering thereof.
(3) To reprove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Hovnanian
Enterprises, Inc. has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Red
Bank, state of New Jersey, on June 6, 2002.
HOVNANIAN ENTERPRISES, INC.
By: /s/ J. Larry Sorsby
----------------------------------
J. Larry Sorsby
Executive Vice-President and
Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
J. Larry Sorsby and Paul W. Buchanan and each of them, the true and lawful
attorneys-in-fact and agents of the undersigned, with full power of substitution
and resubstitution, for and in the name, place and stead of undersigned, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, including any filings pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with all exhibits thereto, and all other documents in connection therewith, with
the Securities and Exchange Commission, and hereby grants to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and anything necessary to be done, as fully to
all intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute, or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on June 6, 2002.
<Table>
<Caption>
Signature Title
--------- -----
/s/ Kevork S. Hovnanian Chairman of the Board
- ------------------------------------
Kevork S. Hovnanian
/s/ Ara K. Hovnanian President, Chief Executive Officer and
- ------------------------------------ Director
Ara K. Hovnanian
/s/ Paul W. Buchanan Senior Vice-President, Corporate
- ------------------------------------ Controller and Director
Paul W. Buchanan
/s/ Geaton A. Decesaris, Jr. President of Homebuilding Operations
- ------------------------------------ and Chief Operating Officer and Director
Geaton A. DeCesaris, Jr.
/s/ Arthur M. Greenbaum Director
- ------------------------------------
Arthur M. Greenbaum
/s/ Desmond P. McDonald Director
- ------------------------------------
Desmond P. McDonald
/s/ Peter S. Reinhart Senior Vice-President, General
- ------------------------------------ Counsel/Secretary and Director
Peter S. Reinhart
/s/ John J. Robbins Director
- ------------------------------------
John J. Robbins
II-5
<Page>
/s/ J. Larry Sorsby Executive Vice-President, Chief
- ------------------------------------ Financial Officer and Director
J. Larry Sorsby
/s/ Stephen D. Weinroth Director
- ------------------------------------
Stephen D. Weinroth
</Table>
II-6
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, K. Hovnanian
Enterprises, Inc. has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Red
Bank, state of New Jersey, June 6, 2002.
K. HOVNANIAN ENTERPRISES, INC.
By: /s/ J. Larry Sorsby
-----------------------------
J. Larry Sorsby
Executive Vice-President
Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
J. Larry Sorsby and Paul W. Buchanan and each of them, the true and lawful
attorneys-in-fact and agents of the undersigned, with full power of substitution
and resubstitution, for and in the name, place and stead of undersigned, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, including any filings pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with all exhibits thereto, and all other documents in connection therewith, with
the Securities and Exchange Commission, and hereby grants to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and anything necessary to be done, as fully to
all intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute, or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on June 6, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ Kevork S. Hovnanian Chairman of the Board
- ------------------------------------
Kevork S. Hovnanian
/s/ Ara K. Hovnanian President, Chief Executive Officer
- ------------------------------------ and Director
Ara K. Hovnanian
/s/ Paul W. Buchanan Senior Vice-President, Corporate
- ------------------------------------ Controller and Director
Paul W. Buchanan
/s/ Geaton A. Decesaris, Jr. President of Homebuilding
- ------------------------------------ Operations and Chief Operating
Geaton A. DeCesaris, Jr. Officer and Director
/s/ Peter S. Reinhart Senior Vice-President, General
- ------------------------------------ Counsel/Secretary and Director
Peter S. Reinhart
/s/ J. Larry Sorsby Executive Vice-President, Chief
- ------------------------------------ Financial Officer and Director
J. Larry Sorsby
</Table>
II-7
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, each of the
Registrants, as listed on the attached Schedule of Subsidiary Registrants has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Red Bank, state of New
Jersey, on June 6, 2002.
Registrants (as listed on the attached Schedule
of Subsidiary Registrants)
By: /s/ J. Larry Sorsby
----------------------
J. Larry Sorsby
Executive Vice-President
Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
J. Larry Sorsby and Paul W. Buchanan and each of them, the true and lawful
attorneys-in-fact and agents of the undersigned, with full power of substitution
and resubstitution, for and in the name, place and stead of undersigned, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, including any filings pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with all exhibits thereto, and all other documents in connection therewith, with
the Securities and Exchange Commission, and hereby grants to such
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and anything necessary to be done, as fully to
all intents and purposes as the undersigned might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitute, or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on June 6, 2002.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
/s/ Kevork S. Hovnanian Chairman of the Board and Director
- ------------------------------------
Kevork S. Hovnanian
/s/ Ara K. Hovnanian Vice Chairman of the Board
- ------------------------------------
Ara K. Hovnanian
/s/ Paul W. Buchanan Senior Vice-President, Corporate
- ------------------------------------ Controller and Director
Paul W. Buchanan
/s/ Geaton A. Decesaris, Jr. President of Homebuilding Operations
- ------------------------------------ and Chief Operating Officer and
Geaton A. DeCesaris, Jr. Director
/s/ Peter S. Reinhart Senior Vice-President, General
- ------------------------------------ Counsel/Secretary and Director
Peter S. Reinhart
/s/ J. Larry Sorsby Executive Vice-President, Chief
- ------------------------------------ Financial Officer and Director
J. Larry Sorsby
</Table>
II-8
<Page>
SCHEDULE OF SUBSIDIARY REGISTRANTS
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
All Seasons, Inc.
Arrow Properties, Inc.
Ballantrae Development Corp.
Ballantrae Home Sales, Inc.
Condominium Community (Bowie New Town), Inc.
Condominium Community (Largo Town), Inc.
Condominium Community (Park Place), Inc.
Condominium Community (Quail Run), Inc.
Condominium Community (Truman Drive), Inc.
Consultants Corporation
Designed Contracts, Inc.
EXC, Inc.
Fortis Homes, Inc.
Housing-Home Sales, Inc.
Hovnanian at Tarpon Lakes I, Inc.
Hovnanian Developments of Florida, Inc.
Hovnanian Pennsylvania, Inc.
K. Hov A, Inc.
K. Hov International, Inc.
K. Hovnanian Acquisitions, Inc.
K. Hovnanian at Ashburn Village, Inc.
K. Hovnanian at Atlantic City, Inc.
K. Hovnanian at Ballantrae Estates, Inc.
K. Hovnanian at Barrington, Inc.
K. Hovnanian at Bedminster II, Inc.
K. Hovnanian at Bedminster, Inc.
K. Hovnanian at Belmont, Inc.
K. Hovnanian at Bernards IV, Inc.
K. Hovnanian at Branchburg III, Inc.
K. Hovnanian at Bridgeport, Inc.
K. Hovnanian at Bridgewater IV, Inc.
K. Hovnanian at Bridgewater V, Inc.
K. Hovnanian at Bridgewater VI, Inc.
K. Hovnanian at Bull Run, Inc.
K. Hovnanian at Burlington III, Inc.
K. Hovnanian at Burlington, Inc.
II-9
<Page>
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
K. Hovnanian at Calabria, Inc.
K. Hovnanian at Cameron Chase, Inc.
K. Hovnanian at Carmel Del Mar, Inc.
K. Hovnanian at Carolina Country Club I, Inc.
K. Hovnanian at Carolina Country Club II, Inc.
K. Hovnanian at Carolina Country Club III, Inc.
K. Hovnanian at Castile, Inc.
K. Hovnanian at Cedar Grove I, Inc.
K. Hovnanian at Cedar Grove II, Inc.
K. Hovnanian at Chaparral, Inc.
K. Hovnanian at Clarkstown, Inc.
K. Hovnanian at Coconut Creek, Inc.
K. Hovnanian at Crestline, Inc.
K. Hovnanian at Crystal Springs, Inc.
K. Hovnanian at Dominguez, Inc.
K. Hovnanian at Dominion Ridge, Inc.
K. Hovnanian at East Brunswick VI, Inc.
K. Hovnanian at East Brunswick VIII, Inc.
K. Hovnanian at East Whiteland I, Inc.
K. Hovnanian at Exeter Hills, Inc.
K. Hovnanian at Fair Lakes Glen, Inc.
K. Hovnanian at Fair Lakes, Inc.
K. Hovnanian at Freehold Township, Inc.
K. Hovnanian at Freehold Township I, Inc.
K. Hovnanian at Ft. Myers I, Inc.
K. Hovnanian at Ft. Myers II, Inc.
K. Hovnanian at Great Notch, Inc.
K. Hovnanian at Hackettstown, Inc.
K. Hovnanian at Half Moon Bay, Inc.
K. Hovnanian at Hampton Oaks, Inc.
K. Hovnanian at Hanover, Inc.
K. Hovnanian at Hershey's Mill, Inc. (a PA Corp)
K. Hovnanian at Highland Vineyards, Inc.
K. Hovnanian at Holly Crest, Inc.
K. Hovnanian at Hopewell IV, Inc.
K. Hovnanian at Hopewell V, Inc.
K. Hovnanian at Hopewell VI, Inc.
K. Hovnanian at Howell Township, Inc.
K. Hovnanian at Hunter Estates, Inc.
II-10
<Page>
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
K. Hovnanian at Jacksonville II, Inc.
K. Hovnanian at Jefferson, Inc.
K. Hovnanian at Jersey City III, Inc.
K. Hovnanian at Kings Grant I, Inc.
K. Hovnanian at Klockner Farms, Inc.
K. Hovnanian at La Terraza, Inc.
K. Hovnanian at La Trovata, Inc.
K. Hovnanian at Lakewood, Inc.
K. Hovnanian at Lawrence V, Inc.
K. Hovnanian at Lower Saucon II, Inc.
K. Hovnanian at Lower Saucon, Inc.
K. Hovnanian at Mahwah II, Inc.
K. Hovnanian at Mahwah IV, Inc. (Whalepond)
K. Hovnanian at Mahwah IX, Inc.
K. Hovnanian at Mahwah V, Inc.
K. Hovnanian at Mahwah VI, Inc. (Norfolk)
K. Hovnanian at Mahwah VII, Inc.
K. Hovnanian at Mahwah VIII, Inc.
K. Hovnanian at Manalapan, Inc.
K. Hovnanian at Manalapan III, Inc.
K. Hovnanian at Marlboro II, Inc.
K. Hovnanian at Marlboro Township IV, Inc.
K. Hovnanian at Marlboro Township VI, Inc.
K. Hovnanian at Marlboro Township VII, Inc.
K. Hovnanian at Marlboro Township, III
K. Hovnanian at Medford I, Inc.
K. Hovnanian at Merrimack, Inc.
K. Hovnanian of Metro DC South, Inc.
K. Hovnanian at Montclair NJ, Inc.
K. Hovnanian at Montclair, Inc.
K. Hovnanian at Montgomery I, Inc.
K. Hovnanian at Newark Urban Renewal Corporation I, Inc.
K. Hovnanian at Newark Urban Renewal Corporation IV, Inc.
K. Hovnanian at Newark Urban Renewal Corporation V, Inc.
K. Hovnanian at North Bergen, Inc.
K. Hovnanian at North Brunswick IV, Inc.
K. Hovnanian at Northern Westchester, Inc.
K. Hovnanian at Northlake, Inc.
K. Hovnanian at Ocean Walk, Inc.
II-11
<Page>
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
K. Hovnanian at P.C. Properties, Inc.
K. Hovnanian at Park Ridge, Inc.
K. Hovnanian at Pasco I, Inc.
K. Hovnanian at Pasco II, Inc.
K. Hovnanian at Peekskill, Inc.
K. Hovnanian at Pembroke Shores, Inc.
K. Hovnanian at Perkiomen I, Inc.
K. Hovnanian at Perkiomen II, Inc.
K. Hovnanian at Plainsboro III, Inc.
K. Hovnanian at Polo Trace, Inc.
K. Hovnanian at Port Imperial North, Inc.
K. Hovnanian at Princeton, Inc.
K. Hovnanian at Rancho Christianitos, Inc.
K. Hovnanian at Raritan I, Inc.
K. Hovnanian at Readington II, Inc.
K. Hovnanian at Reservoir Ridge, Inc.
K. Hovnanian at River Oaks, Inc.
K. Hovnanian at San Sevaine, Inc.
K. Hovnanian at Saratoga, Inc.
K. Hovnanian at Scotch Plains II, Inc.
K. Hovnanian at Scotch Plains, Inc.
K. Hovnanian at Seneca Crossing, Inc.
K. Hovnanian at Smithville, Inc.
K. Hovnanian at Smithville III, Inc.
K. Hovnanian at Somers Point, Inc.
K. Hovnanian at South Brunswick II, Inc.
K. Hovnanian at South Brunswick III, Inc.
K. Hovnanian at South Brunswick IV, Inc.
K. Hovnanian at South Brunswick V, Inc.
K. Hovnanian at Spring Ridge, Inc.
K. Hovnanian at Stone Canyon, Inc.
K. Hovnanian at Stonegate, Inc. (a CA Corporation)
K. Hovnanian at Stonegate, Inc. (a VA Corporation)
K. Hovnanian at Stony Point, Inc.
K. Hovnanian at Stuart Road, Inc.
K. Hovnanian at Sully Station, Inc.
K. Hovnanian at Summerwood, Inc.
K. Hovnanian at Sycamore, Inc.
K. Hovnanian at Tannery Hill, Inc.
II-12
<Page>
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
K. Hovnanian at The Bluff, Inc.
K. Hovnanian at The Cedars, Inc.
K. Hovnanian at The Glen, Inc.
K. Hovnanian at the Reserve at Medford, Inc.
K. Hovnanian at Thornbury, Inc.
K. Hovnanian at Tierrasanta, Inc.
K. Hovnanian at Tuxedo, Inc.
K. Hovnanian at Union Township I, Inc.
K. Hovnanian at Upper Freehold Township I, Inc.
K. Hovnanian at Upper Makefield I, Inc.
K. Hovnanian at Upper Merion, Inc.
K. Hovnanian at Vail Ranch, Inc.
K. Hovnanian at Valleybrook II, Inc.
K. Hovnanian at Valleybrook, Inc.
K. Hovnanian at Wall Township VI, Inc.
K. Hovnanian at Wall Township VIII, Inc.
K. Hovnanian at Washingtonville, Inc.
K. Hovnanian at Wayne III, Inc.
K. Hovnanian at Wayne V, Inc.
K. Hovnanian at Wayne VI, Inc.
K. Hovnanian at Wayne VII, Inc.
K. Hovnanian at Wildrose, Inc.
K. Hovnanian at Winston Trails, Inc.
K. Hovnanian at Woodmont, Inc.
K. Hovnanian Companies Northeast, Inc.
K. Hovnanian Companies of California, Inc.
K. Hovnanian Companies of Florida, Inc.
K. Hovnanian Companies of Maryland, Inc.
K. Hovnanian Companies of Metro Washington, Inc.
K. Hovnanian Companies of New York, Inc.
K. Hovnanian Companies of North Carolina, Inc.
K. Hovnanian Companies of Pennsylvania, Inc.
K. Hovnanian Companies of Southern California, Inc.
K. Hovnanian Construction Management, Inc.
K. Hovnanian's Design Gallery, Inc.
K. Hovnanian Developments of California, Inc.
K. Hovnanian Developments of Maryland, Inc.
K. Hovnanian Developments of Metro Washington, Inc.
K. Hovnanian Developments of New Jersey, Inc.
II-13
<Page>
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
K. Hovnanian Developments of New York, Inc.
K. Hovnanian Developments of South Carolina, Inc.
K. Hovnanian Developments of Texas, Inc.
K. Hovnanian Equities, Inc.
K. Hovnanian Florida Division, Inc.
K. Hovnanian Forecast Acquisition, Inc.
K. Hovnanian Forecast Homes, Inc.
K. Hovnanian Investment Properties of New Jersey, Inc.
K. Hovnanian Marine, Inc.
K. Hovnanian Port Imperial Urban Renewal, Inc.
K. Hovnanian Properties of East Brunswick II, Inc.
K. Hovnanian Properties of NB Theatre, Inc.
K. Hovnanian Properties of Newark Urban Renewal Corporation, Inc.
K. Hovnanian Properties of North Brunswick II, Inc.
K. Hovnanian Properties of North Brunswick V, Inc.
K. Hovnanian Properties of Piscataway, Inc.
K. Hovnanian Properties of Red Bank, Inc.
K. Hovnanian Properties of Wall, Inc.
K. Hovnanian Real Estate Investment, Inc.
K. Hovnanian Real Estate of Florida, Inc.
K. Hovnanian Southeast Florida, Inc.
K. Hovnanian Southeast Region, Inc.
K. Hovnanian's Four Seasons of the Palm Beaches, Inc.
KHC Acquisition, Inc.
Kings Grant Evesham Corp.
Landarama, Inc.
Matzel & Mumford of Delaware, Inc.
M & M at Long Branch, Inc.
New K. Hovnanian Developments of Florida, Inc.
Parthenon Group, Inc.
Pine Brook Co., Inc.
Que Corporation
Reflections of You Interiors, Inc.
Stonebrook Homes, Inc.
The Matzel & Mumford Organization, Inc.
The New Fortis Corporation
The Southampton Corporation
Tropical Service Builders, Inc.
Washington Homes of Delaware, Inc.
II-14
<Page>
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
Washington Homes of West Virginia, Inc.
Washington Homes, Inc.
Washington Homes, Inc. of Virginia
Westminster Homes (Charlotte), Inc.
Westminster Homes of Tennessee, Inc.
Westminster Homes, Inc.
WH Land I, Inc.
WH Land II, Inc.
WH Properties, Inc.
Arbor West, L.L.C.
K. Hovnanian at St. Margarets, L.L.C.
K. Hovnanian at Arbor Heights, L.L.C.
K. Hovnanian at Ashburn Village, L.L.C.
K. Hovnanian at Barnegat I, L.L.C.
K. Hovnanian at Berkeley, L.L.C.
K. Hovnanian at Bernards V, L.L.C.
K. Hovnanian at Blooms Crossing, L.L.C.
K. Hovnanian at Blue Heron Pines, L.L.C.
K. Hovnanian at Brenbrooke, L.L.C.
K. Hovnanian at Camden I, L.L.C.
K. Hovnanian at Carmel Village, L.L.C.
K. Hovnanian at Cedar Grove III, L.L.C.
K. Hovnanian at Chester I, L.L.C.
K. Hovnanian at Clifton, L.L.C.
K. Hovnanian at Columbia Town Center, L.L.C.
K. Hovnanian at Cranbury, L.L.C.
K. Hovnanian at Curries Woods, L.L.C.
K. Hovnanian at Denville, L.L.C.
K. Hovnanian at Encinitas Ranch, L.L.C.
K. Hovnanian at Forecast, L.L.C.
K. Hovnanian at 4S Ranch, L.L.C.
K. Hovnanian at Guttenberg, L.L.C.
K. Hovnanian at Hamburg, L.L.C.
K. Hovnanian at Hamburg Contractors, L.L.C.
K. Hovnanian at Jackson, L.L.C.
K. Hovnanian at Jersey City IV, L.L.C.
K. Hovnanian at Kent Island, L.L.C.
K. Hovnanian at Kincaid, L.L.C.
K. Hovnanian at King Farm, L.L.C.
II-15
<Page>
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
K. Hovnanian at LaFayette Estates, L.L.C.
K. Hovnanian at Lake Ridge Crossing, L.L.C.
K. Hovnanian at Lake Terrapin, L.L.C.
K. Hovnanian at Lawrence V, L.L.C.
K. Hovnanian at Linwood, L.L.C.
K. Hovnanian at Little Egg Harbor, L.L.C.
K. Hovnanian at Little Egg Harbor Contractors, L.L.C.
K. Hovnanian at Lower Moreland I, L.L.C.
K. Hovnanian at Lower Moreland II, L.L.C.
K. Hovnanian at Lower Saucon II, L.L.C.
K. Hovnanian at Manalapan II, L.L.C.
K. Hovnanian at Mansfield I, LLC
K. Hovnanian at Mansfield II, LLC
K. Hovnanian at Mansfield III, L.L.C.
K. Hovnanian at Marlboro Township VIII, L.L.C.
K. Hovnanian at Marlboro VI, L.L.C.
K. Hovnanian at Marlboro VII, L.L.C.
K. Hovnanian at Menifee, L.L.C.
K. Hovnanian at Middletown, L.L.C.
K. Hovnanian at Mt. Olive Township, L.L.C.
K. Hovnanian at North Brunswick VI, L.L.C.
K. Hovnanian at North Haledon, L.L.C.
K. Hovnanian at Northampton, L.L.C.
K. Hovnanian at Northfield, L.L.C.
K. Hovnanian at Pacific Bluffs, L.L.C.
K. Hovnanian at Paramus, L.L.C.
K. Hovnanian at Park Lane, L.L.C.
K. Hovnanian at Rancho Santa Margarita, L.L.C.
K. Hovnanian at Riverbend, L.L.C.
K. Hovnanian at Roderuck, L.L.C.
K. Hovnanian at Rowland Heights, L.L.C.
K. Hovnanian at Sayreville, L.L.C.
K. Hovnanian at South Amboy, L.L.C.
K. Hovnanian at South Bank, L.L.C.
K. Hovnanian at South Brunswick, L.L.C.
K. Hovnanian at Spring Hill Road, L.L.C.
K. Hovnanian at St. Margarets, L.L.C.
K. Hovnanian at Sunsets, L.L.C.
K. Hovnanian at the Gables, L.L.C.
II-16
<Page>
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
K. Hovnanian at Upper Freehold Township II, L.L.C.
K. Hovnanian at Upper Freehold Township III, L.L.C.
K. Hovnanian at Wanaque, L.L.C.
K. Hovnanian at Washington, L.L.C.
K. Hovnanian at Wayne VIII, L.L.C.
K. Hovnanian at Wayne IX, L.L.C.
K. Hovnanian at West Milford, L.L.C.
K. Hovnanian at West Windsor, L.L.C.
K. Hovnanian at Willow Brook, L.L.C.
K. Hovnanian at Winchester, L.L.C.
K. Hovnanian at Woodhill Estates, L.L.C.
K. Hovnanian at Woolwich, L.L.C.
K. Hovnanian Central Acquisitions, L.L.C.
K. Hovnanian Companies of Metro D.C. North, L.L.C.
K. Hovnanian Eastern Pennsylvania, L.L.C.
K. Hovnanian Forecast, L.L.C.
K. Hovnanian Four Seasons @ Historic Virginia, L.L.C.
K. Hovnanian North Central Acquisitions, L.L.C.
K. Hovnanian North Jersey Acquisitions, L.L.C.
K. Hovnanian Shore Acquisitions, L.L.C.
K. Hovnanian South Jersey Acquisition, L.L.C.
K. Hovnanian Southern New Jersey, L.L.C.
K. Hovnanian's Four Seasons, L.L.C.
K. Hovnanian's Private Home Portfolio, L.L.C.
Kings Court at Montgomery, L.L.C.
M&M at Apple Ridge, L.L.C.
M&M at Brookhill, L.L.C.
M&M at Heritage Woods, L.L.C.
M&M at the Highlands, L.L.C.
M&M at East Mill, L.L.C.
M&M at Morristown, L.L.C.
M&M at Roosevelt, L.L.C.
M&M at Sheridan, L.L.C.
M&M at Sparta, L.L.C.
M&M at Spinnaker Pointe, L.L.C.
M&M at Spruce Hollow, L.L.C.
M&M at Spruce Meadows, L.L.C.
M&M at Spruce Run, L.L.C.
Matzel & Mumford at Cranbury Knoll, L.L.C.
II-17
<Page>
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
Matzel & Mumford at Freehold, L.L.C.
Matzel & Mumford at Heritage Landing, L.L.C.
Matzel & Mumford at Montgomery, L.L.C.
Matzel & Mumford at Phillipsburg, L.L.C.
Matzel & Mumford at South Brunswick, L.L.C.
Matzel & Mumford at Woodland Crest, L.L.C.
Section 14 of the Hills, L.L.C.
The Landings at Spinnaker Pointe, L.L.C.
Westminster Homes of Alabama, L.L.C.
Westminster Homes of Mississippi, L.L.C.
Westminster Homes of South Carolina, L.L.C.
Goodman Family Builders, L.P.
M&M Investments, L.P.
Washabama, L.P.
II-18