Exhibit 10.1

 

$1,200,000,000 REVOLVING CREDIT FACILITY
FIFTH AMENDED AND RESTATED CREDIT AGREEMENT

 

by and among

 

K. HOVNANIAN ENTERPRISES, INC.
(as the Borrower)

 

HOVNANIAN ENTERPRISES, INC.
(as a Guarantor)

 

and

 

THE LENDERS PARTY HERETO

 

and

 

PNC BANK, NATIONAL ASSOCIATION, as Administrative Agent

 

Bank of America, N.A.

 

Wachovia Bank, National Association,

 

as

 

Syndication Agents

 

and

 

JP Morgan Chase Bank, N.A.

 

The Royal Bank of Scotland plc

 

KeyBank National Association

 

as

 

Documentation Agents

 

PNC Capital Markets, LLC,

 

Wachovia Securities, Inc., and

 

Banc of America Securities LLC

 

as

 

Joint Lead Arrangers and Joint Book Runners

 

Guaranty Bank

 

SunTrust Bank

 

US Bank National association

 

BNP Paribas

 

Calyon New York Branch

 

--------------------------------------------------------------------------------

 

Comerica Bank

 

Emigrant Savings Bank

 

Citigroup North America, Inc.

 

as

 

Co-Managing Agents

 

Washington Mutual Bank FA

 

National City Bank

 

as

 

Co-Agents

 

Amended and Restated June 14, 2005

 

ii

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS

 

SECTION

 

 

 

 

 

 

1.

CERTAIN DEFINITIONS

 

1.1

Certain Definitions.

 

1.2 [a05-11086_1ex10d1.htm#a1_2_160645]

Construction. [a05-11086_1ex10d1.htm#a1_2_160645]

 

 

1.2.1. [a05-11086_1ex10d1.htm#a1_2_1_160648]

Number; Inclusion. [a05-11086_1ex10d1.htm#a1_2_1_160648]

 

 

1.2.2. [a05-11086_1ex10d1.htm#a1_2_2_160652]

Determination. [a05-11086_1ex10d1.htm#a1_2_2_160652]

 

 

1.2.3. [a05-11086_1ex10d1.htm#a1_2_3_160654]

Agent’s Discretion and Consent. [a05-11086_1ex10d1.htm#a1_2_3_160654]

 

 

1.2.4. [a05-11086_1ex10d1.htm#a1_2_4_160656]

Documents Taken as a Whole. [a05-11086_1ex10d1.htm#a1_2_4_160656]

 

 

1.2.5. [a05-11086_1ex10d1.htm#a1_2_5_160658]

Headings. [a05-11086_1ex10d1.htm#a1_2_5_160658]

 

 

1.2.6. [a05-11086_1ex10d1.htm#a1_2_6_160700]

Implied References to this Agreement. [a05-11086_1ex10d1.htm#a1_2_6_160700]

 

 

1.2.7. [a05-11086_1ex10d1.htm#a1_2_7_160702]

Persons. [a05-11086_1ex10d1.htm#a1_2_7_160702]

 

 

1.2.8. [a05-11086_1ex10d1.htm#a1_2_8_160704]

Modifications to Documents. [a05-11086_1ex10d1.htm#a1_2_8_160704]

 

 

1.2.9. [a05-11086_1ex10d1.htm#a1_2_9_160707]

From, To and Through. [a05-11086_1ex10d1.htm#a1_2_9_160707]

 

 

1.2.10. [a05-11086_1ex10d1.htm#a1_2_10_160711]

Shall; Will. [a05-11086_1ex10d1.htm#a1_2_10_160711]

 

1.3 [a05-11086_1ex10d1.htm#a1_3_160714]

Accounting Principles. [a05-11086_1ex10d1.htm#a1_3_160714]

 

 

 

 

2. [a05-11086_1ex10d1.htm#a2_160719]

REVOLVING CREDIT AND SWING LOAN FACILITIES [a05-11086_1ex10d1.htm#a2_160719]

 

2.1 [a05-11086_1ex10d1.htm#a2_1_160722]

Revolving Credit Commitments. [a05-11086_1ex10d1.htm#a2_1_160722]

 

 

2.1.1. [a05-11086_1ex10d1.htm#a2_1_1_160725]

Revolving Credit Loans. [a05-11086_1ex10d1.htm#a2_1_1_160725]

 

 

2.1.2. [a05-11086_1ex10d1.htm#a2_1_2_160731]

Swing Loan Commitment. [a05-11086_1ex10d1.htm#a2_1_2_160731]

 

 

2.1.3 [a05-11086_1ex10d1.htm#a2_1_3_160734]

Voluntary Reduction of Commitment [a05-11086_1ex10d1.htm#a2_1_3_160734]

 

2.2 [a05-11086_1ex10d1.htm#a2_2_160737]

Nature of Lenders’ Obligations with Respect to Revolving Credit Loans.
[a05-11086_1ex10d1.htm#a2_2_160737]

 

2.3 [a05-11086_1ex10d1.htm#a2_3_160740]

Commitment Fees. [a05-11086_1ex10d1.htm#a2_3_160740]

 

2.4 [a05-11086_1ex10d1.htm#a2_4_160742]

Revolving Credit Loan Requests; Swing Loan Requests.
[a05-11086_1ex10d1.htm#a2_4_160742]

 

 

2.4.1. [a05-11086_1ex10d1.htm#a2_4_1_160745]

Revolving Credit Loan Requests. [a05-11086_1ex10d1.htm#a2_4_1_160745]

 

 

2.4.2. [a05-11086_1ex10d1.htm#a2_4_2_160750]

Swing Loan Requests. [a05-11086_1ex10d1.htm#a2_4_2_160750]

 

2.5 [a05-11086_1ex10d1.htm#a2_5_160753]

Making Revolving Credit Loans and Swing Loans.
[a05-11086_1ex10d1.htm#a2_5_160753]

 

 

2.5.1. [a05-11086_1ex10d1.htm#a2_5_1_160756]

Generally. [a05-11086_1ex10d1.htm#a2_5_1_160756]

 

 

2.5.2. [a05-11086_1ex10d1.htm#a2_5_2_160759]

Making Swing Loans. [a05-11086_1ex10d1.htm#a2_5_2_160759]

 

2.6 [a05-11086_1ex10d1.htm#a2_6_160802]

Swing Loan Note. [a05-11086_1ex10d1.htm#a2_6_160802]

 

2.7 [a05-11086_1ex10d1.htm#a2_7_160820]

Use of Proceeds. [a05-11086_1ex10d1.htm#a2_7_160820]

 

2.8 [a05-11086_1ex10d1.htm#a2_8_160823]

Borrowings to Repay Swing Loans. [a05-11086_1ex10d1.htm#a2_8_160823]

 

2.9 [a05-11086_1ex10d1.htm#a2_9_160826]

Letter of Credit Subfacility. [a05-11086_1ex10d1.htm#a2_9_160826]

 

 

2.9.1. [a05-11086_1ex10d1.htm#a2_9_1_160829]

Issuance of Letters of Credit. [a05-11086_1ex10d1.htm#a2_9_1_160829]

 

 

2.9.2. [a05-11086_1ex10d1.htm#a2_9_2_160831]

Letter of Credit Fees. [a05-11086_1ex10d1.htm#a2_9_2_160831]

 

 

2.9.3. [a05-11086_1ex10d1.htm#a2_9_3_160833]

Disbursements, Reimbursement. [a05-11086_1ex10d1.htm#a2_9_3_160833]

 

 

2.9.4. [a05-11086_1ex10d1.htm#a2_9_4_160837]

Repayment of Participation Advances. [a05-11086_1ex10d1.htm#a2_9_4_160837]

 

 

2.9.5. [a05-11086_1ex10d1.htm#a2_9_5_160840]

Documentation. [a05-11086_1ex10d1.htm#a2_9_5_160840]

 

 

2.9.6. [a05-11086_1ex10d1.htm#a2_9_6_160843]

Determinations to Honor Drawing Requests. [a05-11086_1ex10d1.htm#a2_9_6_160843]

 

 

2.9.7. [a05-11086_1ex10d1.htm#a2_9_7_160844]

Nature of Participation and Reimbursement Obligations.
[a05-11086_1ex10d1.htm#a2_9_7_160844]

 

 

2.9.8. [a05-11086_1ex10d1.htm#a2_9_8_160847]

Indemnity. [a05-11086_1ex10d1.htm#a2_9_8_160847]

 

 

2.9.9. [a05-11086_1ex10d1.htm#a2_9_9_160851]

Liability for Acts and Omissions. [a05-11086_1ex10d1.htm#a2_9_9_160851]

 

 

2.9.10. [a05-11086_1ex10d1.htm#a2_9_10_160853]

Sharing Letter of Credit Documentation. [a05-11086_1ex10d1.htm#a2_9_10_160853]

 

 

i

--------------------------------------------------------------------------------

 

2.10 [a05-11086_1ex10d1.htm#a2_10_160901]

Extension by Lenders of the Expiration Date.
[a05-11086_1ex10d1.htm#a2_10_160901]

 

 

2.10.1. [a05-11086_1ex10d1.htm#a2_10_1_160903]

Requests; Approval by All Lenders. [a05-11086_1ex10d1.htm#a2_10_1_160903]

 

 

2.10.2. [a05-11086_1ex10d1.htm#a2_10_2_160907]

Approval by 80% Lenders. [a05-11086_1ex10d1.htm#a2_10_2_160907]

 

2.11 [a05-11086_1ex10d1.htm#a2_11_160913]

Designation of Subsidiaries and Release of Guarantors.
[a05-11086_1ex10d1.htm#a2_11_160913]

 

 

2.11.1. [a05-11086_1ex10d1.htm#a2_11_1_160916]

Release of Guarantors. [a05-11086_1ex10d1.htm#a2_11_1_160916]

 

 

2.11.2. [a05-11086_1ex10d1.htm#a2_11_2_160919]

Designation of Non-Restricted Person. [a05-11086_1ex10d1.htm#a2_11_2_160919]

 

 

2.11.3. [a05-11086_1ex10d1.htm#a2_11_3_160922]

Automatic Designation of Non-Restricted Person.
[a05-11086_1ex10d1.htm#a2_11_3_160922]

 

 

2.11.4. [a05-11086_1ex10d1.htm#a2_11_4_160924]

Designation of Restricted Subsidiary. [a05-11086_1ex10d1.htm#a2_11_4_160924]

 

2.12 [a05-11086_1ex10d1.htm#a2_12_160928]

Increase in Commitments. [a05-11086_1ex10d1.htm#a2_12_160928]

 

 

2.12.1 [a05-11086_1ex10d1.htm#a2_12_1_160931]

Increasing Lenders and New Lenders. [a05-11086_1ex10d1.htm#a2_12_1_160931]

 

 

2.12.2 [a05-11086_1ex10d1.htm#a2_12_2_160935]

Treatment of Outstanding Loans and Letters of Credit.
[a05-11086_1ex10d1.htm#a2_12_2_160935]

 

 

 

 

 

3. [a05-11086_1ex10d1.htm#a3__160954]

INTEREST RATES [a05-11086_1ex10d1.htm#a3__160954]

 

3.1 [a05-11086_1ex10d1.htm#a3_1_160958]

Interest Rate Options. [a05-11086_1ex10d1.htm#a3_1_160958]

 

 

3.1.1. [a05-11086_1ex10d1.htm#a3_1_1_161003]

Revolving Credit Interest Rate Options. [a05-11086_1ex10d1.htm#a3_1_1_161003]

 

 

3.1.2. [a05-11086_1ex10d1.htm#a3_1_2_161006]

Rate Quotations. [a05-11086_1ex10d1.htm#a3_1_2_161006]

 

3.2 [a05-11086_1ex10d1.htm#a3_2_161001]

Interest Periods. [a05-11086_1ex10d1.htm#a3_2_161001]

 

3.3 [a05-11086_1ex10d1.htm#a3_3_161009]

Interest After Default. [a05-11086_1ex10d1.htm#a3_3_161009]

 

 

3.3.1. [a05-11086_1ex10d1.htm#a3_3_1_161012]

Default Rate. [a05-11086_1ex10d1.htm#a3_3_1_161012]

 

 

3.3.2. [a05-11086_1ex10d1.htm#a3_3_2_161014]

Acknowledgment. [a05-11086_1ex10d1.htm#a3_3_2_161014]

 

3.4 [a05-11086_1ex10d1.htm#a3_4_161018]

LIBO-Rate Unascertainable; Illegality; Increased Costs; Deposits Not Available.
[a05-11086_1ex10d1.htm#a3_4_161018]

 

 

3.4.1. [a05-11086_1ex10d1.htm#a3_4_1_161021]

Unascertainable. [a05-11086_1ex10d1.htm#a3_4_1_161021]

 

 

3.4.2. [a05-11086_1ex10d1.htm#a3_4_2_161024]

Illegality; Increased Costs; Deposits Not Available.
[a05-11086_1ex10d1.htm#a3_4_2_161024]

 

 

3.4.3. [a05-11086_1ex10d1.htm#a3_4_3_161027]

Agent’s and Lender’s Rights. [a05-11086_1ex10d1.htm#a3_4_3_161027]

 

3.5 [a05-11086_1ex10d1.htm#a3_5_161030]

Selection of Interest Rate Options. [a05-11086_1ex10d1.htm#a3_5_161030]

 

 

 

 

4. [a05-11086_1ex10d1.htm#a4_161032]

PAYMENTS [a05-11086_1ex10d1.htm#a4_161032]

 

4.1 [a05-11086_1ex10d1.htm#a4_1_161040]

Payments. [a05-11086_1ex10d1.htm#a4_1_161040]

 

4.2 [a05-11086_1ex10d1.htm#a4_2_161044]

Pro Rata Treatment of Lenders. [a05-11086_1ex10d1.htm#a4_2_161044]

 

4.3 [a05-11086_1ex10d1.htm#a4_3_161047]

Interest Payment Dates. [a05-11086_1ex10d1.htm#a4_3_161047]

 

4.4 [a05-11086_1ex10d1.htm#a4_4_161049]

Voluntary Prepayments. [a05-11086_1ex10d1.htm#a4_4_161049]

 

 

4.4.1. [a05-11086_1ex10d1.htm#a4_4_1_161052]

Right to Prepay. [a05-11086_1ex10d1.htm#a4_4_1_161052]

 

 

4.4.2. [a05-11086_1ex10d1.htm#a4_4_2_161056]

Replacement of a Lender. [a05-11086_1ex10d1.htm#a4_4_2_161056]

 

 

4.4.3. [a05-11086_1ex10d1.htm#a4_4_3_161059]

Change of Lending Office. [a05-11086_1ex10d1.htm#a4_4_3_161059]

 

4.5 [a05-11086_1ex10d1.htm#a4_5_161102]

Mandatory Payments. [a05-11086_1ex10d1.htm#a4_5_161102]

 

4.6 [a05-11086_1ex10d1.htm#a4_6_161105]

Additional Compensation in Certain Circumstances.
[a05-11086_1ex10d1.htm#a4_6_161105]

 

 

4.6.1. [a05-11086_1ex10d1.htm#a4_6_1_161107]

Increased Costs or Reduced Return Resulting from Taxes, Reserves, Capital
Adequacy Requirements, Expenses, Etc. [a05-11086_1ex10d1.htm#a4_6_1_161107]

 

 

4.6.2. [a05-11086_1ex10d1.htm#a4_6_2_161110]

Indemnity. [a05-11086_1ex10d1.htm#a4_6_2_161110]

 

4.7 [a05-11086_1ex10d1.htm#a4_7_161113]

Notes. [a05-11086_1ex10d1.htm#a4_7_161113]

 

4.8 [a05-11086_1ex10d1.htm#a4_8_161115]

Settlement Date Procedures. [a05-11086_1ex10d1.htm#a4_8_161115]

 

 

 

 

5. [a05-11086_1ex10d1.htm#a5_161117]

REPRESENTATIONS AND WARRANTIES [a05-11086_1ex10d1.htm#a5_161117]

 

5.1 [a05-11086_1ex10d1.htm#a5_1_161120]

Representations and Warranties. [a05-11086_1ex10d1.htm#a5_1_161120]

 

 

5.1.1. [a05-11086_1ex10d1.htm#a5_1_1_161122]

Organization and Qualification. [a05-11086_1ex10d1.htm#a5_1_1_161122]

 

 

ii

--------------------------------------------------------------------------------

 

 

5.1.2. [a05-11086_1ex10d1.htm#a5_1_2_161131]

Subsidiaries. [a05-11086_1ex10d1.htm#a5_1_2_161131]

 

 

5.1.3. [a05-11086_1ex10d1.htm#a5_1_3_161133]

Power and Authority. [a05-11086_1ex10d1.htm#a5_1_3_161133]

 

 

5.1.4. [a05-11086_1ex10d1.htm#a5_1_4_161135]

Validity and Binding Effect. [a05-11086_1ex10d1.htm#a5_1_4_161135]

 

 

5.1.5. [a05-11086_1ex10d1.htm#a5_1_5_161138]

No Conflict. [a05-11086_1ex10d1.htm#a5_1_5_161138]

 

 

5.1.6. [a05-11086_1ex10d1.htm#a5_1_6_161140]

Litigation. [a05-11086_1ex10d1.htm#a5_1_6_161140]

 

 

5.1.7. [a05-11086_1ex10d1.htm#a5_1_7_161142]

Title to Properties. [a05-11086_1ex10d1.htm#a5_1_7_161142]

 

 

5.1.8. [a05-11086_1ex10d1.htm#a5_1_8_161144]

Financial Statements. [a05-11086_1ex10d1.htm#a5_1_8_161144]

 

 

5.1.9. [a05-11086_1ex10d1.htm#a5_1_9_161146]

Use of Proceeds; Margin Stock. [a05-11086_1ex10d1.htm#a5_1_9_161146]

 

 

5.1.10. [a05-11086_1ex10d1.htm#a5_1_10_161148]

Full Disclosure. [a05-11086_1ex10d1.htm#a5_1_10_161148]

 

 

5.1.11. [a05-11086_1ex10d1.htm#a5_1_11_161150]

Taxes. [a05-11086_1ex10d1.htm#a5_1_11_161150]

 

 

5.1.12. [a05-11086_1ex10d1.htm#a5_1_12_161152]

Consents and Approvals. [a05-11086_1ex10d1.htm#a5_1_12_161152]

 

 

5.1.13. [a05-11086_1ex10d1.htm#a5_1_13_161200]

No Event of Default; Compliance with Instruments.
[a05-11086_1ex10d1.htm#a5_1_13_161200]

 

 

5.1.14. [a05-11086_1ex10d1.htm#a5_1_14_161202]

Patents, Trademarks, Copyrights, Licenses, Etc.
[a05-11086_1ex10d1.htm#a5_1_14_161202]

 

 

5.1.15. [a05-11086_1ex10d1.htm#a5_1_15_161204]

Insurance. [a05-11086_1ex10d1.htm#a5_1_15_161204]

 

 

5.1.16. [a05-11086_1ex10d1.htm#a5_1_16_161206]

Compliance with Laws. [a05-11086_1ex10d1.htm#a5_1_16_161206]

 

 

5.1.17. [a05-11086_1ex10d1.htm#a5_1_17_161208]

Burdensome Restrictions. [a05-11086_1ex10d1.htm#a5_1_17_161208]

 

 

5.1.18. [a05-11086_1ex10d1.htm#a5_1_18_161210]

Investment Companies; Regulated Entities. [a05-11086_1ex10d1.htm#a5_1_18_161210]

 

 

5.1.19. [a05-11086_1ex10d1.htm#a5_1_19_161212]

Plans and Benefit Arrangements. [a05-11086_1ex10d1.htm#a5_1_19_161212]

 

 

5.1.20. [a05-11086_1ex10d1.htm#a5_1_20_161214]

Employment Matters. [a05-11086_1ex10d1.htm#a5_1_20_161214]

 

 

5.1.21. [a05-11086_1ex10d1.htm#a5_1_21_161216]

Environmental Matters. [a05-11086_1ex10d1.htm#a5_1_21_161216]

 

 

5.1.22. [a05-11086_1ex10d1.htm#a5_1_22_161223]

Senior Debt Status. [a05-11086_1ex10d1.htm#a5_1_22_161223]

 

5.2 [a05-11086_1ex10d1.htm#a5_2_161233]

Continuation of Representations. [a05-11086_1ex10d1.htm#a5_2_161233]

 

 

 

 

6. [a05-11086_1ex10d1.htm#a6_161238]

CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT
[a05-11086_1ex10d1.htm#a6_161238]

 

6.1 [a05-11086_1ex10d1.htm#a6_1_161240]

First Loans and Letters of Credit. [a05-11086_1ex10d1.htm#a6_1_161240]

 

 

6.1.1. [a05-11086_1ex10d1.htm#a6_1_1_161243]

Officer’s Certificate. [a05-11086_1ex10d1.htm#a6_1_1_161243]

 

 

6.1.2. [a05-11086_1ex10d1.htm#a6_1_2_161245]

Incumbency Certificate. [a05-11086_1ex10d1.htm#a6_1_2_161245]

 

 

6.1.3. [a05-11086_1ex10d1.htm#a6_1_3_161247]

Delivery of Loan Documents. [a05-11086_1ex10d1.htm#a6_1_3_161247]

 

 

6.1.4. [a05-11086_1ex10d1.htm#a6_1_4_161249]

Opinion of Counsel. [a05-11086_1ex10d1.htm#a6_1_4_161249]

 

 

6.1.5. [a05-11086_1ex10d1.htm#a6_1_5_161251]

Legal Details. [a05-11086_1ex10d1.htm#a6_1_5_161251]

 

 

6.1.6. [a05-11086_1ex10d1.htm#a6_1_6_161253]

Payment of Fees. [a05-11086_1ex10d1.htm#a6_1_6_161253]

 

 

6.1.7. [a05-11086_1ex10d1.htm#a6_1_7_161255]

Consents. [a05-11086_1ex10d1.htm#a6_1_7_161255]

 

 

6.1.8. [a05-11086_1ex10d1.htm#a6_1_8_161257]

Officer’s Certificate Regarding MACs. [a05-11086_1ex10d1.htm#a6_1_8_161257]

 

 

6.1.9. [a05-11086_1ex10d1.htm#a6_1_9_161300]

No Actions or Proceedings. [a05-11086_1ex10d1.htm#a6_1_9_161300]

 

 

6.1.10 [a05-11086_1ex10d1.htm#a6_1_10_161302]

Lien Search. [a05-11086_1ex10d1.htm#a6_1_10_161302]

 

6.2 [a05-11086_1ex10d1.htm#a6_2_161305]

Each Additional Loan or Letter of Credit. [a05-11086_1ex10d1.htm#a6_2_161305]

 

 

 

 

7. [a05-11086_1ex10d1.htm#a7_161308]

COVENANTS [a05-11086_1ex10d1.htm#a7_161308]

 

7.1 [a05-11086_1ex10d1.htm#a7_1_161310]

Affirmative Covenants. [a05-11086_1ex10d1.htm#a7_1_161310]

 

 

7.1.1. [a05-11086_1ex10d1.htm#a7_1_1_161313]

Preservation of Existence, Etc. [a05-11086_1ex10d1.htm#a7_1_1_161313]

 

 

7.1.2. [a05-11086_1ex10d1.htm#a7_1_2_161315]

Payment of Liabilities, Including Taxes, Etc.
[a05-11086_1ex10d1.htm#a7_1_2_161315]

 

 

7.1.3. [a05-11086_1ex10d1.htm#a7_1_3_161317]

Maintenance of Insurance. [a05-11086_1ex10d1.htm#a7_1_3_161317]

 

 

7.1.4. [a05-11086_1ex10d1.htm#a7_1_4_161320]

Maintenance of Properties and Leases. [a05-11086_1ex10d1.htm#a7_1_4_161320]

 

 

7.1.5. [a05-11086_1ex10d1.htm#a7_1_5_161322]

Maintenance of Patents, Trademarks, Etc. [a05-11086_1ex10d1.htm#a7_1_5_161322]

 

 

7.1.6. [a05-11086_1ex10d1.htm#a7_1_6_161324]

Visitation Rights. [a05-11086_1ex10d1.htm#a7_1_6_161324]

 

 

7.1.7. [a05-11086_1ex10d1.htm#a7_1_7_161325]

Keeping of Records and Books of Account. [a05-11086_1ex10d1.htm#a7_1_7_161325]

 

 

iii

--------------------------------------------------------------------------------

 

 

7.1.8. [a05-11086_1ex10d1.htm#a7_1_8_161327]

Compliance with Laws. [a05-11086_1ex10d1.htm#a7_1_8_161327]

 

 

7.1.9. [a05-11086_1ex10d1.htm#a7_1_9_161330]

Use of Proceeds. [a05-11086_1ex10d1.htm#a7_1_9_161330]

 

7.2 [a05-11086_1ex10d1.htm#a7_2_161336]

Negative Covenants. [a05-11086_1ex10d1.htm#a7_2_161336]

 

 

7.2.1. [a05-11086_1ex10d1.htm#a7_2_1_161338]

Indebtedness. [a05-11086_1ex10d1.htm#a7_2_1_161338]

 

 

7.2.2. [a05-11086_1ex10d1.htm#a7_2_2_161342]

Liens. [a05-11086_1ex10d1.htm#a7_2_2_161342]

 

 

7.2.3. [a05-11086_1ex10d1.htm#a7_2_3_161345]

Loans and Investments. [a05-11086_1ex10d1.htm#a7_2_3_161345]

 

 

7.2.4. [a05-11086_1ex10d1.htm#a7_2_4_161347]

Liquidations, Mergers, Consolidations, Acquisitions.
[a05-11086_1ex10d1.htm#a7_2_4_161347]

 

 

7.2.5. [a05-11086_1ex10d1.htm#a7_2_5_161351]

Dispositions of Assets or Subsidiaries. [a05-11086_1ex10d1.htm#a7_2_5_161351]

 

 

7.2.6. [a05-11086_1ex10d1.htm#a7_2_6_161353]

Restricted Payments; Restricted Investments; Investments in Related Businesses.
[a05-11086_1ex10d1.htm#a7_2_6_161353]

 

 

7.2.7. [a05-11086_1ex10d1.htm#a7_2_7_161355]

Subsidiaries, Partnerships and Joint Ventures.
[a05-11086_1ex10d1.htm#a7_2_7_161355]

 

 

7.2.8. [a05-11086_1ex10d1.htm#a7_2_8_161357]

Continuation of or Change in Business. [a05-11086_1ex10d1.htm#a7_2_8_161357]

 

 

7.2.9. [a05-11086_1ex10d1.htm#a7_2_9_161359]

Plans and Benefit Arrangements. [a05-11086_1ex10d1.htm#a7_2_9_161359]

 

 

7.2.10. [a05-11086_1ex10d1.htm#a7_2_10_161403]

Borrowing Base. [a05-11086_1ex10d1.htm#a7_2_10_161403]

 

 

7.2.11. [a05-11086_1ex10d1.htm#a7_2_11_161405]

Minimum ATNW. [a05-11086_1ex10d1.htm#a7_2_11_161405]

 

 

7.2.12. [a05-11086_1ex10d1.htm#a7_2_12_161407]

Leverage Ratio. [a05-11086_1ex10d1.htm#a7_2_12_161407]

 

 

7.2.13. [a05-11086_1ex10d1.htm#a7_2_13_161409]

Fixed Charge Coverage Ratio. [a05-11086_1ex10d1.htm#a7_2_13_161409]

 

 

7.2.14. [a05-11086_1ex10d1.htm#a7_2_14_161411]

Inventory Limits. [a05-11086_1ex10d1.htm#a7_2_14_161411]

 

 

7.2.15. [a05-11086_1ex10d1.htm#a7_2_15_161413]

Fiscal Year. [a05-11086_1ex10d1.htm#a7_2_15_161413]

 

 

7.2.16. [a05-11086_1ex10d1.htm#a7_2_16_161415]

Changes in Subordinated Debt Documents. [a05-11086_1ex10d1.htm#a7_2_16_161415]

 

7.3 [a05-11086_1ex10d1.htm#a7_3_161418]

Reporting Requirements. [a05-11086_1ex10d1.htm#a7_3_161418]

 

 

7.3.1. [a05-11086_1ex10d1.htm#a7_3_1_161422]

Quarterly Financial Statements. [a05-11086_1ex10d1.htm#a7_3_1_161422]

 

 

7.3.2. [a05-11086_1ex10d1.htm#a7_3_2_161429]

Annual Financial Statements. [a05-11086_1ex10d1.htm#a7_3_2_161429]

 

 

7.3.3. [a05-11086_1ex10d1.htm#a7_3_3_161432]

Certificates of the Borrower. [a05-11086_1ex10d1.htm#a7_3_3_161432]

 

 

7.3.4. [a05-11086_1ex10d1.htm#a7_3_4_161435]

Notice of Default. [a05-11086_1ex10d1.htm#a7_3_4_161435]

 

 

7.3.5. [a05-11086_1ex10d1.htm#a7_3_5_161437]

Notice of Litigation. [a05-11086_1ex10d1.htm#a7_3_5_161437]

 

 

7.3.6. [a05-11086_1ex10d1.htm#a7_3_6_161439]

Notice of Change in Debt Rating. [a05-11086_1ex10d1.htm#a7_3_6_161439]

 

 

7.3.7. [a05-11086_1ex10d1.htm#a7_3_7_161442]

Budgets, Forecasts, Other Reports and Information.
[a05-11086_1ex10d1.htm#a7_3_7_161442]

 

 

7.3.8. [a05-11086_1ex10d1.htm#a7_3_8_161444]

Notices Regarding Plans and Benefit Arrangements.
[a05-11086_1ex10d1.htm#a7_3_8_161444]

 

 

 

 

 

8. [a05-11086_1ex10d1.htm#a8_161453]

DEFAULT [a05-11086_1ex10d1.htm#a8_161453]

 

8.1 [a05-11086_1ex10d1.htm#a8_1_161456]

Events of Default. [a05-11086_1ex10d1.htm#a8_1_161456]

 

 

8.1.1. [a05-11086_1ex10d1.htm#a8_1_1_161458]

Payments Under Loan Documents. [a05-11086_1ex10d1.htm#a8_1_1_161458]

 

 

8.1.2. [a05-11086_1ex10d1.htm#a8_1_2_161500]

Breach of Warranty. [a05-11086_1ex10d1.htm#a8_1_2_161500]

 

 

8.1.3. [a05-11086_1ex10d1.htm#a8_1_3_161502]

Breach of Certain Negative Covenants. [a05-11086_1ex10d1.htm#a8_1_3_161502]

 

 

8.1.4. [a05-11086_1ex10d1.htm#a8_1_4_161522]

Breach of Other Covenants. [a05-11086_1ex10d1.htm#a8_1_4_161522]

 

 

8.1.5. [a05-11086_1ex10d1.htm#a8_1_5_161524]

Defaults in Other Agreements or Indebtedness.
[a05-11086_1ex10d1.htm#a8_1_5_161524]

 

 

8.1.6. [a05-11086_1ex10d1.htm#a8_1_6_161527]

Final Judgments or Orders. [a05-11086_1ex10d1.htm#a8_1_6_161527]

 

 

8.1.7. [a05-11086_1ex10d1.htm#a8_1_7_161529]

Loan Document Unenforceable. [a05-11086_1ex10d1.htm#a8_1_7_161529]

 

 

8.1.10. [a05-11086_1ex10d1.htm#a8_1_10_161535]

Insolvency. [a05-11086_1ex10d1.htm#a8_1_10_161535]

 

 

8.1.11. [a05-11086_1ex10d1.htm#a8_1_11_161537]

Events Relating to Plans and Benefit Arrangements.
[a05-11086_1ex10d1.htm#a8_1_11_161537]

 

 

8.1.12 [a05-11086_1ex10d1.htm#a8_1_12_CessationOfBusiness__213240]

Cessation of Business.
[a05-11086_1ex10d1.htm#a8_1_12_CessationOfBusiness__213240]

 

 

8.1.13. [a05-11086_1ex10d1.htm#a8_1_13_161539]

Change of Control. [a05-11086_1ex10d1.htm#a8_1_13_161539]

 

 

8.1.14. [a05-11086_1ex10d1.htm#a8_1_14_161541]

Involuntary Proceedings. [a05-11086_1ex10d1.htm#a8_1_14_161541]

 

 

8.1.15. [a05-11086_1ex10d1.htm#a8_1_15_161543]

Voluntary Proceedings. [a05-11086_1ex10d1.htm#a8_1_15_161543]

 

8.2 [a05-11086_1ex10d1.htm#a8_2_161545]

Consequences of Event of Default. [a05-11086_1ex10d1.htm#a8_2_161545]

 

 

8.2.1. [a05-11086_1ex10d1.htm#a8_2_1_161548]

Events of Default Other Than Bankruptcy, Insolvency or Reorganization
Proceedings. [a05-11086_1ex10d1.htm#a8_2_1_161548]

 

 

iv

--------------------------------------------------------------------------------

 

 

 

 

 

 

8.2.2. [a05-11086_1ex10d1.htm#a8_2_2_161552]

Bankruptcy, Insolvency or Reorganization Proceedings.
[a05-11086_1ex10d1.htm#a8_2_2_161552]

 

 

8.2.3. [a05-11086_1ex10d1.htm#a8_2_3_161554]

Set-off. [a05-11086_1ex10d1.htm#a8_2_3_161554]

 

 

8.2.4. [a05-11086_1ex10d1.htm#a8_2_4_161556]

Suits, Actions, Proceedings. [a05-11086_1ex10d1.htm#a8_2_4_161556]

 

 

8.2.5. [a05-11086_1ex10d1.htm#a8_2_5_161558]

Application of Proceeds. [a05-11086_1ex10d1.htm#a8_2_5_161558]

 

 

8.2.6. [a05-11086_1ex10d1.htm#a8_2_6_161600]

Other Rights and Remedies. [a05-11086_1ex10d1.htm#a8_2_6_161600]

 

 

 

 

 

9. [a05-11086_1ex10d1.htm#a9_161604]

THE AGENT [a05-11086_1ex10d1.htm#a9_161604]

 

9.1 [a05-11086_1ex10d1.htm#a9_1_161608]

Appointment. [a05-11086_1ex10d1.htm#a9_1_161608]

 

9.2 [a05-11086_1ex10d1.htm#a9_2_161610]

Delegation of Duties. [a05-11086_1ex10d1.htm#a9_2_161610]

 

9.3 [a05-11086_1ex10d1.htm#a9_3_161612]

Nature of Duties; Independent Credit Investigation.
[a05-11086_1ex10d1.htm#a9_3_161612]

 

9.4 [a05-11086_1ex10d1.htm#a9_4_161615]

Actions in Discretion of Agent; Instructions From the Lenders.
[a05-11086_1ex10d1.htm#a9_4_161615]

 

9.5 [a05-11086_1ex10d1.htm#a9_5_161616]

Reimbursement and Indemnification of Agent by the Borrower.
[a05-11086_1ex10d1.htm#a9_5_161616]

 

9.6 [a05-11086_1ex10d1.htm#a9_6_161618]

Exculpatory Provisions; Limitation of Liability.
[a05-11086_1ex10d1.htm#a9_6_161618]

 

9.7 [a05-11086_1ex10d1.htm#a9_7_161620]

Reimbursement and Indemnification of Agent by Lenders.
[a05-11086_1ex10d1.htm#a9_7_161620]

 

9.8 [a05-11086_1ex10d1.htm#a9_8_161622]

Reliance by Agent. [a05-11086_1ex10d1.htm#a9_8_161622]

 

9.9 [a05-11086_1ex10d1.htm#a9_9_161624]

Notice of Default. [a05-11086_1ex10d1.htm#a9_9_161624]

 

9.10 [a05-11086_1ex10d1.htm#a9_10_161626]

Notices. [a05-11086_1ex10d1.htm#a9_10_161626]

 

9.11 [a05-11086_1ex10d1.htm#a9_11_161628]

Lenders in Their Individual Capacities; Agents in its Individual Capacity.
[a05-11086_1ex10d1.htm#a9_11_161628]

 

9.12 [a05-11086_1ex10d1.htm#a9_12_161630]

Holders of Notes. [a05-11086_1ex10d1.htm#a9_12_161630]

 

9.13 [a05-11086_1ex10d1.htm#a9_13_161632]

Equalization of Lenders. [a05-11086_1ex10d1.htm#a9_13_161632]

 

9.14 [a05-11086_1ex10d1.htm#a9_14_161634]

Successor Agent. [a05-11086_1ex10d1.htm#a9_14_161634]

 

9.15 [a05-11086_1ex10d1.htm#a9_15_161636]

Agent’s Fees. [a05-11086_1ex10d1.htm#a9_15_161636]

 

9.16 [a05-11086_1ex10d1.htm#a9_16_161638]

Availability of Funds. [a05-11086_1ex10d1.htm#a9_16_161638]

 

9.17 [a05-11086_1ex10d1.htm#a9_17_161640]

Calculations. [a05-11086_1ex10d1.htm#a9_17_161640]

 

9.18 [a05-11086_1ex10d1.htm#a9_18_161643]

Beneficiaries. [a05-11086_1ex10d1.htm#a9_18_161643]

 

 

 

 

10. [a05-11086_1ex10d1.htm#a10_161646]

MISCELLANEOUS [a05-11086_1ex10d1.htm#a10_161646]

 

10.1 [a05-11086_1ex10d1.htm#a10_1_161651]

Modifications, Amendments or Waivers. [a05-11086_1ex10d1.htm#a10_1_161651]

 

 

10.1.1. [a05-11086_1ex10d1.htm#a10_1_1_161658]

Increase of Commitment. [a05-11086_1ex10d1.htm#a10_1_1_161658]

 

 

10.1.2. [a05-11086_1ex10d1.htm#a10_1_2_161700]

Extension of Payment; Reduction of Principal, Interest or Fees; Modification of
Terms of Payment. [a05-11086_1ex10d1.htm#a10_1_2_161700]

 

 

10.1.3. [a05-11086_1ex10d1.htm#a10_1_3_161702]

Miscellaneous [a05-11086_1ex10d1.htm#a10_1_3_161702]

 

10.2 [a05-11086_1ex10d1.htm#a10_2_161745]

No Implied Waivers; Cumulative Remedies; Writing Required.
[a05-11086_1ex10d1.htm#a10_2_161745]

 

10.3 [a05-11086_1ex10d1.htm#a10_3_161750]

Reimbursement and Indemnification of Lenders by the Borrower; Taxes.
[a05-11086_1ex10d1.htm#a10_3_161750]

 

10.4 [a05-11086_1ex10d1.htm#a10_4_161752]

Holidays. [a05-11086_1ex10d1.htm#a10_4_161752]

 

10.5 [a05-11086_1ex10d1.htm#a10_5_161753]

Funding by Branch, Subsidiary or Affiliate. [a05-11086_1ex10d1.htm#a10_5_161753]

 

 

10.5.1. [a05-11086_1ex10d1.htm#a10_5_1__161757]

Notional Funding. [a05-11086_1ex10d1.htm#a10_5_1__161757]

 

 

10.5.2. [a05-11086_1ex10d1.htm#a10_5_2__161801]

Actual Funding. [a05-11086_1ex10d1.htm#a10_5_2__161801]

 

10.6 [a05-11086_1ex10d1.htm#a10_6_161803]

Notices. [a05-11086_1ex10d1.htm#a10_6_161803]

 

10.7 [a05-11086_1ex10d1.htm#a10_7_161807]

Severability. [a05-11086_1ex10d1.htm#a10_7_161807]

 

10.8 [a05-11086_1ex10d1.htm#a10_8_161808]

Governing Law. [a05-11086_1ex10d1.htm#a10_8_161808]

 

10.9 [a05-11086_1ex10d1.htm#a10_9_161810]

Prior Understanding. [a05-11086_1ex10d1.htm#a10_9_161810]

 

10.10 [a05-11086_1ex10d1.htm#a10_10_161811]

Duration; Survival. [a05-11086_1ex10d1.htm#a10_10_161811]

 

10.11 [a05-11086_1ex10d1.htm#a10_11_161826]

Successors and Assigns. [a05-11086_1ex10d1.htm#a10_11_161826]

 

10.12 [a05-11086_1ex10d1.htm#a10_12_161841]

Confidentiality. [a05-11086_1ex10d1.htm#a10_12_161841]

 

 

v

--------------------------------------------------------------------------------

 

 

10.12.1. [a05-11086_1ex10d1.htm#a10_12_1_161846]

General. [a05-11086_1ex10d1.htm#a10_12_1_161846]

 

 

10.12.2. [a05-11086_1ex10d1.htm#a10_12_2__161849]

Sharing Information With Affiliates of the Lenders.
[a05-11086_1ex10d1.htm#a10_12_2__161849]

 

10.13 [a05-11086_1ex10d1.htm#a10_13_161857]

Counterparts. [a05-11086_1ex10d1.htm#a10_13_161857]

 

10.14 [a05-11086_1ex10d1.htm#a10_14_161858]

Agent’s or Lender’s Consent. [a05-11086_1ex10d1.htm#a10_14_161858]

 

10.15 [a05-11086_1ex10d1.htm#a10_15_161859]

Exceptions. [a05-11086_1ex10d1.htm#a10_15_161859]

 

10.16 [a05-11086_1ex10d1.htm#a10_16_161901]

CONSENT TO FORUM; WAIVER OF JURY TRIAL. [a05-11086_1ex10d1.htm#a10_16_161901]

 

10.17 [a05-11086_1ex10d1.htm#a10_17_161904]

Certifications From Lenders and Participants.
[a05-11086_1ex10d1.htm#a10_17_161904]

 

 

10.17.1 [a05-11086_1ex10d1.htm#a10_17_1_161906]

Tax Withholding Clause. [a05-11086_1ex10d1.htm#a10_17_1_161906]

 

10.18 [a05-11086_1ex10d1.htm#a10_18_161912]

Joinder of Guarantors. [a05-11086_1ex10d1.htm#a10_18_161912]

 

10.19 [a05-11086_1ex10d1.htm#a10_19_161914]

Concerning Agent Terms. [a05-11086_1ex10d1.htm#a10_19_161914]

 

10.20 [a05-11086_1ex10d1.htm#a10_20_161916]

Ratification of Notes and Loan Documents and Existing Obligations.
[a05-11086_1ex10d1.htm#a10_20_161916]

 

10.21 [a05-11086_1ex10d1.htm#a10_21_161918]

No Reliance on Agent’s Customer Identification Program.
[a05-11086_1ex10d1.htm#a10_21_161918]

 

 

LIST OF SCHEDULES AND EXHIBITS

 

 

 

SCHEDULES

 

 

 

 

 

SCHEDULE 1.1(A)(1) [a05-11086_1ex10d1.htm#Schedule1_1a1_162047]

- [a05-11086_1ex10d1.htm#Schedule1_1a1_162047]

APPLICABLE MARGIN [a05-11086_1ex10d1.htm#Schedule1_1a1_162047]

SCHEDULE 1.1(A)(2) [a05-11086_1ex10d1.htm#Schedule1_1a2_162050]

- [a05-11086_1ex10d1.htm#Schedule1_1a2_162050]

AUTHORIZED OFFICERS AS OF THE CLOSING DATE
[a05-11086_1ex10d1.htm#Schedule1_1a2_162050]

SCHEDULE 1.1(B) [a05-11086_1ex10d1.htm#Schedule1_1b_162052]

- [a05-11086_1ex10d1.htm#Schedule1_1b_162052]

COMMITMENTS OF LENDERS AND ADDRESSES FOR NOTICES
[a05-11086_1ex10d1.htm#Schedule1_1b_162052]

SCHEDULE 1.1(C) [a05-11086_1ex10d1.htm#Schedule1_1c_162105]

- [a05-11086_1ex10d1.htm#Schedule1_1c_162105]

LISTING OF RESTRICTED SUBSIDIARIES, JOINT VENTURES, MORTGAGE SUBSIDIARIES AND
NON-RESTRICTED PERSONS AND CORPORATE OFFICE SUBSIDIARIES
[a05-11086_1ex10d1.htm#Schedule1_1c_162105]

SCHEDULE 1.1(E) [a05-11086_1ex10d1.htm#Schedule1_1e_162107]

- [a05-11086_1ex10d1.htm#Schedule1_1e_162107]

INCOME PRODUCING PROPERTIES [a05-11086_1ex10d1.htm#Schedule1_1e_162107]

SCHEDULE 1.1(P) [a05-11086_1ex10d1.htm#Schedule1_1p_162108]

- [a05-11086_1ex10d1.htm#Schedule1_1p_162108]

PERMITTED LIENS [a05-11086_1ex10d1.htm#Schedule1_1p_162108]

SCHEDULE 2.9.1

-

EXISTING LETTERS OF CREDIT

SCHEDULE 5.1.2

-

SUBSIDIARIES

SCHEDULE 5.1.8 [a05-11086_1ex10d1.htm#Schedule5_1_8_162115]

- [a05-11086_1ex10d1.htm#Schedule5_1_8_162115]

MATERIAL EVENTS SINCE OCTOBER 31, 2004
[a05-11086_1ex10d1.htm#Schedule5_1_8_162115]

SCHEDULE 5.1.12 [a05-11086_1ex10d1.htm#Schedule5_1_12_162136]

- [a05-11086_1ex10d1.htm#Schedule5_1_12_162136]

CONSENTS AND APPROVALS [a05-11086_1ex10d1.htm#Schedule5_1_12_162136]

 

 

 

EXHIBITS

 

 

 

 

 

EXHIBIT 1.1(A)

-

ASSIGNMENT AND ASSUMPTION AGREEMENT

EXHIBIT 1.1(G)(1)

-

GUARANTY AGREEMENT

EXHIBIT 1.1(G)(2)

-

GUARANTOR JOINDER

EXHIBIT 1.1(R)

-

REVOLVING CREDIT NOTE

EXHIBIT 1.1(S)

-

SWING LOAN NOTE

EXHIBIT 2.4.1

-

LOAN REQUEST

EXHIBIT 2.4.2

-

SWING LOAN REQUEST

EXHIBIT 2.12.1-1

-

REVOLVING CREDIT COMMITMENT INCREASE AGREEMENT

EXHIBIT 2.12.1-2

-

LENDER JOINDER AND ASSUMPTION AGREEMENT

EXHIBIT 7.3.3.1

-

QUARTERLY COMPLIANCE CERTIFICATE

EXHIBIT 7.3.3.2

-

BORROWING BASE CERTIFICATE

 

vi

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FIFTH AMENDED AND RESTATED CREDIT AGREEMENT

 

THIS FIFTH AMENDED AND RESTATED CREDIT AGREEMENT is dated June 14, 2005 and is
made by and among K. HOVNANIAN ENTERPRISES, INC., a California corporation (the
“Borrower”), HOVNANIAN ENTERPRISES, INC., a Delaware corporation (“Hovnanian”
and a “Guarantor”), the LENDERS (as hereinafter defined), and PNC BANK, NATIONAL
ASSOCIATION, in its capacity as administrative agent for the Lenders under this
Agreement (hereinafter referred to in such capacity as the “Agent”).

 

WITNESSETH:

 

WHEREAS, the Lenders provided a $900,000,000 revolving credit facility to the
Borrower pursuant to an Amended and Restated Credit Agreement dated June 18,
2004 among the parties hereto  (the “Prior Credit Agreement”);

 

WHEREAS, the Borrower and the Lenders have agreed that the Prior Credit
Agreement be amended and restated as provided herein;

 

WHEREAS, the revolving credit provided hereunder shall be used to refinance
existing indebtedness, provide for letters of credit and provide working capital
and funds for general corporate purposes;

 

NOW, THEREFORE, the parties hereto, in consideration of their mutual covenants
and agreements hereinafter set forth and intending to be legally bound hereby,
covenant and agree as follows:

 

1.             CERTAIN DEFINITIONS

 

1.1                                 CERTAIN DEFINITIONS.

 

In addition to words and terms defined elsewhere in this Agreement, the
following words and terms shall have the following meanings, respectively,
unless the context hereof clearly requires otherwise:

 

Adjusted Operating Income shall mean for any period the sum of (i) consolidated
net income of Hovnanian for such period, (ii) to the extent deducted in arriving
at such net income, consolidated income taxes, consolidated interest expense,
Letter of Credit Fees, depreciation, amortization, non-cash valuation charges or
adjustments and (iii) cash distributions received by any Loan Party from
Non-Restricted Persons during such period.  Adjusted Operating Income shall
exclude net income or loss of Non-Restricted Persons.

 

Adjusted Tangible Net Worth (or ATNW) shall mean as of any date (i) consolidated
shareholders equity (including Qualified Preferred Equity) of Hovnanian as of
such date minus, without duplication (ii) (A) Intangibles, (B) the Dollar amount
of Restricted Investments (C) equity (comprising “cost” according to GAAP minus
the amount of debt secured by applicable mortgages) in residential inventory
properties purchased with the proceeds of, and secured by, Purchase Money
Mortgages as of such date, all as calculated and consolidated in accordance with
GAAP.

 

--------------------------------------------------------------------------------

 

Affiliate as to any Person shall mean any other Person (i) which directly or
indirectly controls, is controlled by, or is under common control with such
Person, (ii) which beneficially owns or holds 10% or more of any class of the
voting or other equity interests of such Person, or (iii) 10% or more of any
class of voting interests or other equity interests of which is beneficially
owned or held, directly or indirectly, by such Person.  Control, as used in this
definition, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise, including
the power to elect a majority of the directors or trustees of a corporation or
trust, as the case may be.

 

Agent shall mean PNC Bank, National Association, and its successors and assigns.

 

Agent’s Fees shall have the meaning assigned to that term in Section 9.15
[Agent’s Fees].

 

Agent’s Letters shall have the meaning assigned to that term in Section 9.15
[Agent’s Fees].

 

Agreement shall mean this Credit Agreement, as the same may be supplemented or
amended from time to time, including all schedules and exhibits.

 

Annual Statements shall have the meaning assigned to that term in
Section 5.1.8((i) [Historical Statements]).

 

Anti-Terrorism Laws shall mean any Laws relating to terrorism or money
laundering, including Executive Order No. 13224, the USA Patriot Act, the Laws
comprising or implementing the Bank Secrecy Act, and the Laws administered by
the United States Treasury Department’s Office of Foreign Asset Control (as any
of the foregoing Laws may from time to time be amended, renewed, extended, or
replaced).

 

Applicable Commitment Fee Rate shall mean the percentage rate per annum based on
the Leverage Ratio then in effect according to the pricing grid on
Schedule 1.1(A)(1) below the heading “Commitment Fee.”  The Applicable
Commitment Fee Rate shall be computed in accordance with the parameters set
forth on Schedule 1.1(A)(1).

 

Applicable Letter of Credit Fee Rate shall mean the Applicable Margin under the
LIBO-Rate Option less 12.5 basis points.

 

Applicable Margin shall mean, as applicable:

 

(A)          the percentage spread to be added to Base Rate under the Base Rate
Option based on the Leverage Ratio and level of Debt Rating then in effect
according to the pricing grid on Schedule 1.1(A)(1) below the heading “Base Rate
Margin,” and

 

(B)           the percentage spread to be added to LIBO-Rate under the LIBO-Rate
Option based on the Leverage Ratio and level of Debt Rating then in effect
according to the pricing grid on Schedule 1.1(A)(1) below the heading “Libor
Margin”.

 

2

--------------------------------------------------------------------------------

 

The Applicable Margin shall be computed in accordance with the parameters set
forth on Schedule 1.1(A)(1).

 

Assignee Lender shall have the meaning assigned to such term in Section 2.10.2
[Approval by 80% Lenders].

 

Assignment and Assumption Agreement shall mean an Assignment and Assumption
Agreement by and among a Purchasing Lender, a Transferor Lender and the Agent,
as Agent and on behalf of the remaining Lenders, substantially in the form of
Exhibit 1.1(A).

 

Authorized Officer shall mean those individuals listed on Schedule 1.1(A)(2) or
otherwise designated by written notice to the Agent from the Borrower,
authorized to execute notices, reports and other documents on behalf of the Loan
Parties required hereunder.  The Borrower may amend such list of individuals
from time to time by giving written notice of such amendment to the Agent.

 

Average Daily Usage Percentage for any period shall mean the average daily ratio
(expressed as a percentage) of the following for such period: (i) the Revolving
Facility Usage to (ii) the Revolving Credit Commitments.

 

Base Rate shall mean the greater of (i) the interest rate per annum announced
from time to time by the Agent at its Principal Office as its then prime rate,
which rate may not be the lowest rate then being charged commercial borrowers by
the Agent, or (ii) the Federal Funds Open Rate plus 1/2% per annum.

 

Base Rate Option shall mean the option of the Borrower to have Revolving Credit
Loans bear interest at the rate and under the terms and conditions set forth in
Section 3.1.1((i)) [Revolving Credit Base Rate Option].

 

Benefit Arrangement shall mean at any time an “employee benefit plan,” within
the meaning of Section 3(3) of ERISA, which is neither a Plan nor a
Multiemployer Plan and which is maintained, sponsored or otherwise contributed
to by the Borrower.

 

Blocked Person shall have the meaning assigned to such term in Section 5.1.23.

 

Borrower shall mean K. Hovnanian Enterprises, Inc., a corporation organized and
existing under the laws of the State of California and wholly-owned by
Hovnanian.

 

Borrowing Base shall mean at any time, the Dollar amount equal to the sum of the
following items, each owned free and clear of all Liens (except Permitted Liens
of the type described in items (i), (ii), (iii), (iv), (v), (vi) and (xii) of
the definition of “Permitted Liens”) by the Borrower, Hovnanian or a Restricted
Subsidiary:

 

3

--------------------------------------------------------------------------------

 

(I)            100% OF EXCESS CASH;

 

(II)           95% OF SOLD HOMES;

 

(III)          70% OF UNSOLD HOMES; AND

 

(IV)                              55% OF FINISHED LOTS AND LAND UNDER
DEVELOPMENT;

 

provided however that the Borrowing Base shall exclude in all events the Dollar
amount of

 

(i)                                     property located outside of the United
States of America;

 

(ii)                                  Unentitled Land;

 

(iii)                               any residential or commercial property owned
by Hovnanian or any Subsidiary which is leased or held for purposes of leasing
primarily to unaffiliated third parties; and

 

(iv)                              properties subject to any Purchase Money
Mortgage.

 

The determination of the Agent in respect of the Borrowing Base shall be
conclusive absent manifest error.

 

Borrowing Base Certificate shall mean the Borrowing Base Certificate in the form
of Exhibit 7.3.3.2 duly completed and delivered by the Borrower pursuant to
Section 7.3.3.2 [Borrowing Base Certificate].

 

Borrowing Date shall mean, with respect to any Loan, the date for the making
thereof or the renewal or conversion thereof at or to the same or a different
Interest Rate Option, which shall be a Business Day.

 

Borrowing Tranche shall mean specified portions of Loans outstanding as
follows:  (i) any Loans to which a LIBO-Rate Option applies which become subject
to the same Interest Rate Option under the same Loan Request by the Borrower and
which have the same Interest Period shall constitute one Borrowing Tranche, and
(ii) all Loans to which a Base Rate Option applies shall constitute one
Borrowing Tranche.

 

Business Day shall mean any day other than a Saturday or Sunday or a legal
holiday on which commercial banks are authorized or required to be closed for
business at the Principal Office or in New York, New York and if the applicable
Business Day relates to any Loan to which the LIBO-Rate Option applies, such day
must also be a day on which dealings are carried on in the London interbank
market.

 

4

--------------------------------------------------------------------------------

 

Capital Stock Retirement shall mean any repurchase, redemption, acquisition or
retirement of any capital stock or other ownership interest of Hovnanian or of
any warrants, options or other rights to purchase such capital stock or other
ownership interest; provided that “Capital Stock Retirement” shall not include
the conversion or exchange of any of the foregoing into shares of capital stock
of Hovnanian.

 

Closing Date shall mean June 14, 2005, which shall be the date hereof.

 

Commitment shall mean as to any Lender its Revolving Credit Commitment and, in
the case of the Agent, its Revolving Credit Commitment and its Swing Loan
Commitment; and Commitments shall mean the aggregate of the Revolving Credit
Commitments of all of the Lenders, including the Swing Loan Commitment of the
Agent.

 

Commitment Fee shall have the meaning assigned to that term in Section 2.3
[Commitment Fees].

 

Compliance Certificate shall have the meaning assigned to such term in
Section 7.3.3 [Certificates of the Borrower].

 

Contamination shall mean the presence or release or threat of release of
Regulated Substances in, on, under or emanating to or from any of the Property,
which pursuant to Environmental Laws requires notification or reporting to an
Official Body, or which pursuant to Environmental Laws requires the
investigation, cleanup, removal, remediation, containment, abatement of or other
response action or which otherwise constitutes a violation of Environmental
Laws.

 

Corporate Office Subsidiary shall mean any Subsidiary that owns, as its primary
asset, an office building which is occupied, in whole or in part, by Hovnanian
or one or more of its Subsidiaries.  Any such Corporate Office Subsidiary may be
a Restricted Subsidiary or Non-Restricted Person in accordance with the terms of
this Agreement.  The Corporate Office Subsidiaries as of the date hereof are
identified as such on Exhibit 1.1(C).

 

Debt Rating shall mean the rating of Hovnanian’s senior unsecured long-term debt
by each of Standard & Poor’s, Moody’s and Fitch.

 

Default Rate shall have the meaning assigned to that term in Section 3.3.l
[Default Rate].

 

Dividends shall mean any dividend or distribution by a Person in respect of its
capital stock or ownership interests, whether in cash, property or securities.

 

Dollar, Dollars, U.S. Dollars and the symbol $ shall mean lawful money of the
United States of America.

 

Drawing Date shall mean each date that an amount is paid by the Letter of Credit
Lender under any Letter of Credit.

 

5

--------------------------------------------------------------------------------

 

Dwelling Unit shall mean a residential housing unit held for sale by a Loan
Party.

 

Environmental Complaint shall mean any written complaint by any Person or
Official Body setting forth a cause of action for personal injury or property
damage, natural resource damage, contribution or indemnity for response costs,
civil or administrative penalties, criminal fines or penalties, or declaratory
or equitable relief arising under any Environmental Laws or under any order,
notice of violation, citation, subpoena, request for information or other
written notice or demand of any type issued by an Official Body pursuant to any
Environmental Laws.

 

Environmental Laws shall mean all federal, state, local and foreign Laws and any
consent decrees, settlement agreements, judgments, orders, directives, policies
or programs issued by or entered into with an Official Body pertaining or
relating to: (i) pollution or pollution control; (ii) protection of human health
or the environment; (iii) employee safety in the workplace; (iv) the presence,
use, management, generation, manufacture, processing, extraction, treatment,
recycling, refining, reclamation, labeling, transport, storage, collection,
distribution, disposal or release or threat of release of Regulated Substances;
(v) the presence of Contamination; (vi) the protection of endangered or
threatened species; and (vii) the protection of Environmentally Sensitive Areas.

 

Environmentally Sensitive Area shall mean (i) any wetland as defined by
applicable Environmental Laws; (ii) any area designated as a coastal zone
pursuant to applicable Laws, including Environmental Laws; (iii) any area of
historic or archeological significance or scenic area as defined or designated
by applicable Laws, including Environmental Laws; (iv) habitats of endangered
species or threatened species as designated by applicable Laws, including
Environmental Laws; or (v) a floodplain or other flood hazard area as defined
pursuant to any applicable Laws.

 

ERISA shall mean the Employee Retirement Income Security Act of 1974, as the
same may be amended or supplemented from time to time, and any successor statute
of similar import, and the rules and regulations thereunder, as from time to
time in effect.

 

ERISA Group shall mean, at any time, the Borrower and any entity (whether or not
incorporated) that is under common control with the Borrower within the meaning
of Section 4001 of ERISA, or the Borrower and all other entities which, together
with the Borrower, are treated as a single employer under Sections 414 (b) or
(c) of the Internal Revenue Code.

 

Event of Default shall mean any of the events described in Section 8.1 [Events
of Default] and referred to therein as an “Event of Default.”

 

Excess Cash shall mean cash that would appear on a consolidated balance sheet of
Hovnanian (to the extent not pledged or encumbered in any way (other than in
connection with a Permitted Lien of the type described in item (xii) of the
definition of Permitted Liens, but only to the extent that no outstanding
Indebtedness or other

 

6

--------------------------------------------------------------------------------

 

liabilities are owed to the applicable institution or such institution is a
Lender)) in excess of $10,000,000.

 

Executive Order No. 13224 shall mean the Executive Order No. 13224 on Terrorist
Financing,  effective September 24, 2001, as the same has been, or shall
hereafter be, renewed, extended, amended or replaced.

 

Existing Lenders shall have the meaning assigned to such term in Section 2.12
[Increases in Revolving Credit Commitments.]

 

Expiration Date shall mean, with respect to the Revolving Credit Commitments,
July 30, 2009 as such may be extended pursuant to Section 2.10 [Extension by
Lenders of the Expiration Date].

 

Extending Lender shall have the meaning assigned to such term in Section 2.10.2
[Approval by 80% Lender].

 

Federal Funds Effective Rate for any day shall mean the rate per annum (based on
a year of 360 days and actual days elapsed and rounded upward to the nearest
1/100 of 1%) announced by the Federal Reserve Bank of New York (or any
successor) on such day as being the weighted average of the rates on overnight
federal funds transactions arranged by federal funds brokers on the previous
trading day, as computed and announced by such Federal Reserve Bank (or any
successor) in substantially the same manner as such Federal Reserve Bank
computes and announces the weighted average it refers to as the “Federal Funds
Effective Rate” as of the date of this Agreement; provided, if such Federal
Reserve Bank (or its successor) does not announce such rate on any day, the
“Federal Funds Effective Rate” for such day shall be the Federal Funds Effective
Rate for the last day on which such rate was announced.

 

Federal Funds Open Rate  shall mean the rate per annum determined by the Agent
in accordance with its usual procedures (which determination shall be conclusive
absent manifest error) to be the “open” rate for federal funds transactions as
of the opening of business for federal funds transactions among members of the
Federal Reserve System arranged by federal funds brokers on such day, as quoted
by Garvin Guybutler, any successor entity thereto, or any other broker selected
by the Agent, as set forth on the applicable Telerate display page; provided,
however; that if such day is not a Business Day, the Federal Funds Open Rate for
such day shall be the “open rate” on the immediately preceding Business Day, or
if no such rate shall be quoted by a Federal funds broker at such time, such
other rate as determined by the Agent in accordance with its usual procedures.

 

Financial Projections shall have the meaning assigned to that term in
Section 5.1.8((ii)) [Financial Projections].

 

Finished Lots and Land Under Development shall mean the Dollar amount of the
lower of (i) actual cost (including land costs and capitalized expenses relating
thereto) or (ii) the market value (determined in accordance with GAAP) of any
land owned by a Loan Party that has been granted Preliminary Approvals until a
time which is the earlier of when (x) it is “Unsold Homes” and (y) it is “Sold
Homes”.

 

7

--------------------------------------------------------------------------------

 

Fitch shall mean Fitch IBCA, Duff & Phelps, a division of Fitch, Inc., and its
successors.

 

Fixed Charge Coverage Ratio shall mean the ratio, as of any date of
determination, of (i) Adjusted Operating Income for the prior twelve (12) months
to (ii) four (4) multiplied by Fixed Charges for the most-recently ended fiscal
quarter.

 

Fixed Charges shall mean as of the last day of any fiscal quarter the sum,
without duplication, of (i) interest cost incurred on all Senior Homebuilding
Indebtedness over the past fiscal quarter; (ii) interest cost incurred on the
Subordinated Debt over the past fiscal quarter; (iii) 50% of the interest cost
incurred on all Purchase Money Mortgages over the past fiscal quarter;
(iv) Letter of Credit Fees accrued over the past fiscal quarter; and (v) the
interest component of capitalized leases over the past fiscal quarter.

 

GAAP shall mean generally accepted accounting principles as are in effect from
time to time, subject to the provisions of Section 1.3 [Accounting Principles],
and applied on a consistent basis both as to classification of items and
amounts.

 

Governmental Acts shall have the meaning assigned to that term in Section 2.9.8
[Indemnity].

 

Guarantor shall mean each of the parties to the Guaranty Agreement (and
designated as a “Guarantor” on Schedule 1.1(C)) and each other Person which
joins the Guaranty Agreement as a Guarantor after the date hereof pursuant to
Section 10.18 [Joinder of Guarantors].  As of the Closing Date, Hovnanian shall
be a Guarantor and all Restricted Subsidiaries other than the Borrower shall be
Guarantors.

 

Guarantor Joinder shall mean a joinder by a Person as a Guarantor under the
Guaranty Agreement in the form of Exhibit 1.1(G)(2).

 

Guaranty of any Person shall mean any obligation of such Person guaranteeing or
in effect guaranteeing any Indebtedness of any other Person in any manner,
whether directly or indirectly.

 

Guaranty Agreement shall mean the Amended and Restated Guaranty and Suretyship
Agreement dated the Closing Date in the form attached as
Exhibit 1.1(G)(1) hereto and executed and delivered by each of the Guarantors to
the Agent for the benefit of the Lenders, as supplemented by joinders delivered
from time to time in respect of new Guarantors.

 

Hedge Agreement shall mean, as to any Person, any swap, cap, collar or similar
arrangement entered into by such Person providing for protection against
fluctuations in interest rates or currency exchange rates or the exchange of
nominal interest obligations, either generally or under specific contingencies.

 

Hedge Agreement Termination Value shall mean, in respect of any one or more
Hedge Agreements, after taking into account the effect of any legally

 

8

--------------------------------------------------------------------------------

 

enforceable netting agreement relating to such Hedge Agreements, (a) for any
date on or after the date such Hedge Agreements have been closed out at
termination value(s) determined in accordance therewith, such termination
value(s), and (b) for any date prior to the date referenced in clause (a), the
amount(s) determined as the mark-to-market or other readily available quotations
provided by any recognized dealer in such Hedge Agreements (which may include a
Lender or any Affiliate of a Lender).

 

High Leverage Period shall mean any fiscal quarter for which the Leverage Ratio
as of the end date of such quarter exceeds 2.10 to 1.00.

 

Historical Statements shall have the meaning assigned to that term in
Section 5.1.8((i)) [Historical Statements].

 

Homebuilding Indebtedness shall mean as of any date the sum of (i) Senior
Homebuilding Indebtedness as of such date and (ii) Subordinated Debt as of such
date.

 

Hovnanian shall mean Hovnanian Enterprises, Inc., a Delaware corporation, shares
of whose Class A Common Stock are registered pursuant to the Securities Exchange
Act of 1934.

 

Indebtedness shall mean, as to any Person at any time, any and all indebtedness,
obligations or liabilities (whether matured or unmatured, liquidated or
unliquidated, direct or indirect, absolute or contingent, or joint or several)
of such Person for or in respect of:  (i) borrowed money, (ii) amounts raised
under or liabilities in respect of any note purchase or acceptance credit
facility, (iii) reimbursement obligations (contingent or otherwise) under any
letter of credit, (iv) all net obligations under any Hedge Agreement (measured
as the Hedge Agreement Termination Value thereof) (v) any other transaction
(including forward sale or purchase agreements, capitalized leases and
conditional sales agreements) having the commercial effect of a borrowing of
money entered into by such Person to finance its operations or capital
requirements (but not including trade payables and accrued expenses incurred in
the ordinary course of business which are not more than ninety (90) days past
due or that are being contested in good faith by appropriate proceedings), if
and to the extent any of the foregoing in this item (v) would appear as a
liability on the balance sheet of such Person prepared on a consolidated basis
in accordance with GAAP, or (vi) any Guaranty of Indebtedness for borrowed
money.  Indebtedness shall not include Qualified Preferred Equity.

 

Insolvency Proceeding  shall mean, with respect to any Person, (a) a case,
action or proceeding with respect to such Person (i) before any court or any
other Official Body under any bankruptcy, insolvency, reorganization or other
similar Law now or hereafter in effect, or (ii) for the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator
(or similar official) of any Loan Party or otherwise relating to the
liquidation, dissolution, winding-up or relief of such Person, or (b) any
general assignment for the benefit of creditors, composition, marshaling of
assets for creditors, or other, similar arrangement in respect of such Person’s
creditors generally or any substantial portion of its creditors undertaken under
any Law.

 

9

--------------------------------------------------------------------------------

 

Intangibles shall mean all patents, patent applications, copyrights, trademarks,
tradenames, goodwill, organization expenses and other like items of Hovnanian
and its Subsidiaries which are treated as intangibles under GAAP.

 

Interest Period shall mean the period of time selected by the Borrower in
connection with (and to apply to) any election permitted hereunder by the
Borrower to have Revolving Credit Loans bear interest under the LIBO-Rate
Option.  Subject to the last sentence of this definition, such period shall be
one, two, three or six Months if Borrower selects the LIBO-Rate Option.  Such
Interest Period shall commence on the effective date of such Interest Rate
Option, which shall be (i) the Borrowing Date if the Borrower is requesting new
Loans, or (ii) the date of renewal of or conversion to the LIBO-Rate Option if
the Borrower is renewing or converting to the LIBO-Rate Option applicable to
outstanding Loans.  Notwithstanding the second sentence hereof: (A) any Interest
Period which would otherwise end on a date which is not a Business Day shall be
extended to the next succeeding Business Day unless such Business Day falls in
the next calendar month, in which case such Interest Period shall end on the
next preceding Business Day, and (B) the Borrower shall not select, convert to
or renew an Interest Period for any portion of the Loans that would end after
the Expiration Date.

 

Interest Rate Option shall mean any LIBO-Rate Option or Base Rate Option.

 

Internal Revenue Code shall mean the Internal Revenue Code of 1986, as the same
may be amended or supplemented from time to time, and any successor statute of
similar import, and the rules and regulations thereunder, as from time to time
in effect.

 

Investment shall mean any loan or advance to or on behalf of, or purchase,
acquisition or ownership of any stock, bonds, notes or securities of, or any
partnership interest (whether general or limited) or limited liability company
interest in, or any other similar investment or interest in, or any capital
contribution made to, any other Person, or any agreement to become or remain
liable to do any of the foregoing.

 

Investment Grade Level shall mean, with respect to the rating of Hovnanian’s
senior unsecured long-term debt by any of Standard & Poor’s, Moody’s or Fitch, a
rating at or above the following level by such rating agency:

 

Rating Agency

 

Minimum Level for
“Investment Grade” Rating

 

 

 

Standard & Poor’s

 

BBB-

 

 

 

Moody’s

 

Baa3

 

 

 

Fitch

 

BBB-

 

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Investment Grade Period shall mean the period commencing on the date on which
the Borrower delivers to the Agent evidence satisfactory to the Agent that
Hovnanian’s senior unsecured long-term debt is rated at or above the Investment
Grade Level by at least two of any of the three rating agencies listed below and
shall terminate on the date on which Hovnanian’s senior unsecured long-term debt
ceases to be rated at the Investment Grade Level or higher by at least two of
such rating agencies: (i) Moody’s, (ii) Standard & Poor’s and (iii) Fitch.

 

Investment in Related Businesses shall have the meaning assigned to such term in
Section 7.2.6.

 

Joint Ventures shall mean any Person in whom a Loan Party has an ownership
interest and which is not a “Subsidiary” as defined in this Agreement.  Each of
the Joint Ventures as of the Closing Date is listed on Schedule 1.1(C).

 

Labor Contracts shall mean all employment agreements, employment contracts,
collective bargaining agreements and other agreements among any Loan Party or
Subsidiary of a Loan Party and its employees.

 

Law shall mean any law (including common law), constitution, statute, treaty,
regulation, rule, ordinance, opinion, release, ruling, order, injunction, writ,
decree, bond, judgment, authorization or approval, lien or award of or
settlement agreement with any Official Body.

 

Letter of Credit shall have the meaning assigned to that term in Section 2.9.1
[Issuance of Letters of Credit].

 

Letter of Credit Lender shall have the meaning assigned to that term in
Section 2.9.1 [Issuance of Letters of Credit].

 

Letter of Credit Borrowing shall have the meaning assigned to such term in
Section 2.9.3.4 [Disbursements, Reimbursement].

 

Letter of Credit Fee shall have the meaning assigned to that term in
Section 2.9.2 [Letter of Credit Fees].

 

Letter of Credit Outstandings shall mean at any time the sum of (i) the
aggregate undrawn face amount of outstanding Letters of Credit and (ii) the
aggregate amount of all unpaid and outstanding Reimbursement Obligations and
Letter of Credit Borrowings.

 

Leverage Ratio shall mean the ratio of  (x)(i) Homebuilding Indebtedness minus
(ii) Excess Cash to (y) Adjusted Tangible Net Worth.

 

LIBO-Rate shall mean, with respect to the Loans comprising any Borrowing Tranche
to which the LIBO-Rate Option applies for any Interest Period, the interest rate
per annum determined by the Agent by dividing (the resulting quotient rounded
upwards, if necessary, to the nearest 1/100th of 1% per annum) (i) the rate of
interest

 

11

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determined by the Agent in accordance with its usual procedures (which
determination shall be conclusive absent manifest error) to be the average of
the London interbank offered rates for U.S. Dollars quoted by the British
Bankers’ Association as set forth on Moneyline Telerate (or appropriate
successor or, if the British Bankers’ Association or its successor ceases to
provide such quotes, a comparable replacement determined by the Agent) display
page 3750 (or such other display page on the Moneyline Telerate service as may
replace display page 3750) two (2) Business Days prior to the first day of such
Interest Period for an amount comparable to such Borrowing Tranche and having a
borrowing date and a maturity comparable to such Interest Period by (ii) a
number equal to 1.00 minus the LIBO-Rate Reserve Percentage.  The LIBO-Rate may
also be expressed by the following formula:

 

LIBO-Rate =

 

Average of London interbank offered rates quoted

 

 

by BBA or appropriate successor as shown on

 

 

Moneyline Telerate Service display page 3750

 

 

1.00 - LIBO-Rate Reserve Percentage

 

The LIBO-Rate shall be adjusted with respect to any Loan to which the LIBO-Rate
Option applies that is outstanding on the effective date of any change in the
LIBO-Rate Reserve Percentage as of such effective date.  The Agent shall give
prompt notice to the Borrower of the LIBO-Rate as determined or adjusted in
accordance herewith, which determination shall be conclusive absent manifest
error.

 

LIBO-Rate Option shall mean the option of the Borrower to have Revolving Credit
Loans bear interest at the rate and under the terms and conditions set forth in
Section 3.1.1(ii) [Revolving Credit LIBO-Rate Option].

 

LIBO-Rate Reserve Percentage shall mean as of any day the maximum percentage in
effect on such day, as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the reserve requirements
(including supplemental, marginal and emergency reserve requirements) with
respect to eurocurrency funding (currently referred to as “Eurocurrency
Liabilities”).

 

Lien shall mean any mortgage, deed of trust, pledge, lien, security interest,
charge or other encumbrance or security arrangement of any nature whatsoever,
whether voluntarily or involuntarily given, including any conditional sale or
title retention arrangement, and any assignment, deposit arrangement or lease
intended as, or having the effect of, security.

 

LLC Interests shall have the meaning assigned to such term in Section 5.1.2
[Subsidiaries ].

 

Loan Documents shall mean this Agreement, the Agent’s Letters, the Notes, the
Guaranty Agreement, and any other instruments, certificates or documents
delivered or contemplated to be delivered hereunder or thereunder or in
connection herewith or therewith, as the same may be supplemented or amended
from time to time in accordance herewith or therewith, and Loan Document shall
mean any of the Loan Documents.  Each of the Loan Documents under the Prior
Credit Agreement shall be Loan Documents hereunder.

 

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Loan Parties shall mean the Borrower and the Guarantors.

 

Loan Request  shall have the meaning assigned to that term in Section 2.5
[Revolving Credit Loan Requests; Swing Loan Requests].

 

Loans shall mean collectively all Revolving Credit Loans and Swing Loans and
Loan shall mean separately, any Revolving Credit Loan or Swing Loan.

 

Material Adverse Change shall mean any set of circumstances or events which
(a) has or could reasonably be expected to have any material adverse effect
whatsoever upon the validity or enforceability of this Agreement or any other
Loan Document, (b) is or could reasonably be expected to be material and adverse
to the business, properties, assets, financial condition, results of operations
or business prospects of the Loan Parties taken as a whole, (c) impairs
materially or could reasonably be expected to impair materially the ability of
the Loan Parties taken as a whole to duly and punctually pay or perform their
material Indebtedness for borrowed money, or (d) impairs materially or could
reasonably be expected to impair materially the ability of the Agent or any of
the Lenders, to the extent permitted, to enforce their legal remedies pursuant
to this Agreement, the Notes or the Guaranty Agreement.

 

Month, with respect to an Interest Period under the LIBO-Rate Option, shall mean
the interval between the days in consecutive calendar months numerically
corresponding to the first day of such Interest Period.  If any LIBO-Rate
Interest Period begins on a day of a calendar month for which there is no
numerically corresponding day in the month in which such Interest Period is to
end, the final month of such Interest Period shall be deemed to end on the last
Business Day of such final month.

 

Moody’s shall mean Moody’s Investors Service, Inc. and its successors.

 

Mortgage Subsidiary shall mean each Subsidiary which is in the business of
making residential mortgage loans. Each of the Mortgage Subsidiaries as of the
Closing Date is listed on Schedule 1.1(C).

 

Multiemployer Plan shall mean any employee benefit plan which is a
“multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA.

 

New Lender shall have the meaning assigned to such term in Section 2.12
[Increases in Revolving Credit Commitments.]

 

Non-approving Lender shall have the meaning assigned to such term in
Section 2.10.2 [Approval by 80% Lenders].

 

Non-Restricted Person shall mean any (i) Joint Venture and (ii) Subsidiary of
Hovnanian which is not a Restricted Subsidiary.  Each of the Non-Restricted
Persons as of the Closing Date is listed on Schedule 1.1(C).

 

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Notes shall mean the Revolving Credit Notes and the Swing Note.

 

Notices shall have the meaning assigned to that term in Section 10.6 [Notices].

 

Obligation shall mean any obligation or liability of any of the Loan Parties to
the Agent or any of the Lenders, howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent, now or hereafter existing,
or due or to become due, under or in connection with this Agreement, any Notes,
the Letters of Credit, the Agent’s Letters or any other Loan Document.

 

Official Body shall mean any national, federal, state, local or other government
or political subdivision or any agency, authority, board, bureau, central bank,
commission, department or instrumentality of either, or any court, tribunal,
grand jury or arbitrator, in each case whether foreign or domestic.

 

Participation Advance shall mean, with respect to any Lender, such Lender’s
payment in respect of its participation in a Letter of Credit Borrowing
according to its Ratable Share pursuant to Section 2.9.4 [Repayment of
Participation Advances].

 

Partnership Interests shall have the meaning assigned to such term in
5.1.2. [Subsidiaries ].

 

PBGC shall mean the Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA or any successor.

 

Permitted Acquisitions  shall have the meaning assigned to such term in
Section 7.2.4 [Liquidations, Mergers, Consolidations, Acquisitions].

 

Permitted Investments shall mean a Loan Party’s Investment in:

 

(a)           (i)            cash, marketable direct obligations of the United
States of America or any agency thereof, and certificates of deposit, demand
deposits, time deposits, or repurchase agreements issued by any Lender or any
bank with a capital and surplus of at least $25,000,000 organized under the laws
of the United States of America or any state thereof, state or municipal
securities with a rating of A-1 or better by Standard & Poor’s or P-1 by Moody’s
or F-1 by Fitch, provided that such obligations, certificates of deposit, demand
deposits, time deposits, and repurchase agreements have a maturity of less than
one year from the date of purchase;

 

(ii)           investment grade commercial paper or debt or commercial paper
issued by a Lender or a bank holding company of a Lender having a maturity date
of one year or less from the date of purchase; and

 

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(iii)          funds holding assets primarily consisting of those described in
clause (i) and (ii) hereof;

 

(b)           loans or advances to employees of a Loan Party in the ordinary
course of business;

 

(c)                                  any Person that is or concurrently becomes
a Loan Party;

 

(d)           purchase money notes not exceeding $25,000,000 principal amount in
the aggregate received incident to sales of property by a Restricted Subsidiary;

 

(e)           trade credit extended on usual and customary terms in the ordinary
course of business;

 

(f)            loans to officers and directors to the extent permitted by
Section 7.2.6.2 [Restricted Payments; Restricted Investments; Investments in
Related Businesses];

 

(g)           marketable securities costing at the time of purchase no more than
$3,000,000 in the aggregate of any one or more residential real estate
developers and which are registered under the Securities Exchange Act of 1934;

 

(h)           investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts or disputes with or
judgments against, contractors, suppliers or customers, in each case in the
ordinary course of business; and

 

(i)            other Investments not in excess of $25,000,000 in the aggregate.

 

Permitted Liens shall mean:

 

(i)            Liens for taxes, assessments or other governmental charges not
yet payable or being contested in good faith and as to which adequate reserves
shall have been established in accordance with GAAP;

 

(ii)           Pledges or deposits made in the ordinary course of business to
secure payment of workers’ compensation, or to participate in any fund in
connection with workers’ compensation, unemployment insurance, old-age pensions
or other social security programs;

 

(iii)          Mechanics’, materialmen’s, warehousemen’s, carriers’ or other
like liens arising in the ordinary course of business securing obligations which
are not overdue for a period longer than 30 days or which are being contested in
good faith by appropriate proceedings;

 

(iv)          Pledges or deposits made in the ordinary course of business to
secure performance of bids, tenders, contracts (other than for the repayment of

 

15

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borrowed money) or leases, not in excess of the aggregate amount due thereunder,
or to secure statutory obligations, or surety, appeal, indemnity, performance or
other similar bonds required in the ordinary course of business;

 

(v)           Encumbrances consisting of zoning restrictions, easements or other
restrictions on the use of real property, none of which materially impairs the
use of such property or the value thereof, and none of which is violated in any
material respect by existing or proposed structures or land use;

 

(vi)          Liens, security interests and mortgages in favor of the Agent for
the benefit of the Lenders;

 

(vii)         Liens on property leased by any Loan Party or Subsidiary of a Loan
Party under capital and operating leases not prohibited by this Agreement
securing obligations of such Loan Party or Subsidiary to the lessor under such
leases;

 

(viii)        Any Lien existing on the date of this Agreement and described on
Schedule 1.1(P), provided that the principal amount secured thereby is not
hereafter increased, and no additional assets become subject to such Lien;

 

(ix)           Purchase Money Mortgages and Purchase Money Security Interests
and Liens on the real property owned by Hovnanian or a Corporate Office
Subsidiary and occupied primarily by employees of Hovnanian or its subsidiaries,
including Liens on the real property which serves as Hovnanian’s headquarters in
Red Bank, New Jersey securing Indebtedness not to exceed in aggregate
$25,000,000 principal amount; and

 

(x)            The following, (A) if the validity or amount thereof is being
contested in good faith by appropriate and lawful proceedings diligently
conducted so long as levy and execution thereon have been stayed and continue to
be stayed or (B) if a final judgment is entered and such judgment is discharged
within thirty (30) days of entry, and they do not in the aggregate materially
impair the ability of any Loan Party to perform its Obligations hereunder or
under the other Loan Documents:

 

(1)           Claims or Liens for taxes, assessments or charges due and payable
and subject to interest or penalty, provided that the applicable Loan Party
maintains such reserves or other appropriate provisions as shall be required by
GAAP and pays all such taxes, assessments or charges forthwith upon the
commencement of proceedings to foreclose any such Lien;

 

(2)           Claims, Liens or encumbrances upon, and defects of title to, real
or personal property, including any attachment of personal or real property or
other legal process prior to adjudication of a dispute on the merits (except to
the extent such attachment constitutes an Event of Default under Section 8.1.8);

 

(3)           Claims or Liens of mechanics, materialmen, warehousemen, carriers,
or other statutory nonconsensual Liens;

 

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(4)           Liens resulting from final judgments or orders described in
Section 8.1.6 [Final Judgments or Orders] (to the extent that judgments or
orders and related Liens do not constitute Events of Default under such
Section 8.1.6);

 

(xi)           Liens, security interests, mortgages, or deeds of trust on real
estate in conjunction with purchase contracts for the purchase of the land
comprising such real estate, which secure future payments due to the land
sellers at the time of the sale of the homes on such land and which are
contingent on the sale price of such homes, including (a) adjustments to the
land purchase price, (b) profit participations, (c) community marketing fees and
community enhancement fees, and (d) reimbursable costs paid by the land
developer;

 

(xii)          Liens arising under applicable Law (as opposed to consensual
Liens granted by contract), or confirmations or acknowledgments thereof, created
in the ordinary course of business in favor of banks or other financial
institutions over credit balances in any bank account at such bank or financial
institution; and

 

(xiii)         Other Liens securing obligations not in excess of $5,000,000 in
the aggregate, and.

 

Person shall mean any individual, corporation, partnership, limited liability
company, association, joint-stock company, trust, unincorporated organization,
joint venture, government or political subdivision or agency thereof, or any
other entity.

 

Plan shall mean at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or is subject to the
minimum funding standards under Section 412 of the Internal Revenue Code in
respect of which the Borrower or any member of the ERISA Group is an “employer”
as defined in Section 3(5) of ERISA.

 

PNC Bank shall mean PNC Bank, National Association, its successors and assigns.

 

Potential Default shall mean any event or condition which with notice, passage
of time or a determination by the Agent or the Required Lenders, or any
combination of the foregoing, would constitute an Event of Default.

 

Preliminary Approvals shall mean the following:  (i) in New Jersey, as defined
in the Municipal Land Use Law (N.J.S.A. 40:55D-1 et seq.) and (ii) for states
other than New Jersey, a point in time equivalent thereto.

 

Principal Office shall mean the main banking office of the Agent in Pittsburgh,
Pennsylvania or such other location so designated by the Agent.

 

Prior Credit Agreement shall have the meaning assigned to such term in the
preamble to this Agreement.

 

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Prohibited Transaction shall mean any prohibited transaction as defined in
Section 4975 of the Internal Revenue Code or Section 406 of ERISA for which
neither an individual nor a class exemption has been issued by the United States
Department of Labor.

 

Property shall mean all real property, both owned and leased, of any Loan Party
or Subsidiary of a Loan Party.

 

Purchase Money Mortgage shall mean any non-recourse mortgages granted to secure
Indebtedness of any Loan Party.

 

Purchase Money Security Interest shall mean Liens upon tangible personal
property securing loans to any Loan Party or deferred payments by such Loan
Party or Subsidiary for the purchase of such tangible personal property and
excluding Purchase Money Mortgages.

 

Purchasing Lender shall mean a Lender which becomes a party to this Agreement by
executing an Assignment and Assumption Agreement.

 

Qualified Preferred Equity shall mean preferred equity issued by Hovnanian or
any wholly-owned subsidiary thereof provided that each of the following
conditions is met: (1) the total book value thereof shall not at any time exceed
$250,000,000, (2) the term thereof shall be perpetual and such Qualified
Preferred Equity shall not contain any mandatory redemption provisions, put
rights in favor of the holders thereof, or any provisions that may obligate the
issuer to repurchase any or all of such Qualified Preferred Equity at any time,
(3) such Qualified Preferred Equity shall not provide the holders with
cumulative dividends rights, and (4) the Borrower shall have disclosed to the
Agent the terms of such Qualified Preferred Equity prior to the issuance
thereof.

 

Ratable Share shall mean so long as any Commitments are outstanding the
proportion that a Lender’s Commitment (excluding the Swing Loan Commitment)
bears to the Commitments (excluding the Swing Loan Commitment) of all of the
Lenders and after all Commitments have been terminated, the proportion that a
Lender’s Revolving Credit Loans outstanding bears to all Revolving Credit Loans
outstanding of all of the Lenders.

 

Regulated Substances shall mean any substance, material or waste defined under
Environmental Laws as a “hazardous substance,” “pollutant,” “pollution,”
“contaminant,” “hazardous or toxic substance,” “extremely hazardous substance,”
“toxic chemical,” “toxic substance,” “toxic waste,” “hazardous waste,” “special
handling waste,” “industrial waste,” “residual waste,” “solid waste,” “municipal
waste,” “mixed waste,” “infectious waste,” “chemotherapeutic waste,” “medical
waste,” or “regulated substance” or any other material, substance or waste which
otherwise is regulated by Environmental Laws.

 

Regulation U shall mean Regulation U, T or X as promulgated by the Board of
Governors of the Federal Reserve System, as amended from time to time.

 

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Reimbursement Obligation shall mean the obligation of the Borrower to reimburse
a Letter of Credit Lender for draws under a Letter of Credit issued by such
Lender under this Agreement, except to the extent such obligation is represented
by a Revolving Credit Loan.

 

Related Businesses shall mean business activities incidental, complementary, or
related to the homebuilding business.

 

Reportable Event shall mean a reportable event described in Section 4043 of
ERISA and regulations thereunder with respect to a Plan other than those events
as to which the 30-day notice is waived under the PBGC regulations.

 

Required Lenders shall mean

 

(i)            if there are no Loans, Reimbursement Obligations or Letter of
Credit Borrowings outstanding, Lenders whose Commitments (excluding the Swing
Loan Commitments) aggregate at least 66 2/3% of the Revolving Credit Commitments
of all of the Lenders, or

 

(ii)           if there are Loans, Reimbursement Obligations, or Letter of
Credit Borrowings outstanding, any Lender or group of Lenders if the sum of the
Loans (excluding the Swing Loans), Reimbursement Obligations and Letter of
Credit Borrowings of such Lenders then outstanding aggregates at least 66 2/3%
of the total principal amount of all of the Loans (excluding the Swing Loans),
Reimbursement Obligations and Letter of Credit Borrowings then outstanding.

 

Reimbursement Obligations and Letter of Credit Borrowings shall be deemed, for
purposes of this definition, to be in favor of the Agent and not a participating
Lender if such Lender has not made its Participation Advance in respect thereof
and shall be deemed to be in favor of such Lender to the extent of its
Participation Advance if it has made its Participation Advance in respect
thereof.

 

Required Environmental Permits shall mean all permits, licenses, bonds,
consents, programs, approvals or authorizations required under Environmental
Laws to own, occupy or maintain the Property or which otherwise are required by
Environmental Law for the operations and business activities of the Loan
Parties.

 

Required Share shall have the meaning assigned to such term in Section 4.8
[Settlement Date Procedures].

 

Restricted Investment shall mean a Loan Party’s Investment that constitutes a
Subsidiary Investment in any Non-Restricted Person.

 

Restricted Payments shall mean

 

(i)            Dividends and Capital Stock Retirement payments after January 31,
2001 by Hovnanian or otherwise to the shareholders of Hovnanian; and

 

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(ii)           Payments (whether in the form of principal payments, note
repurchases or similar items) to the holder of Subordinated Debt made on or
after January 31, 2001; provided, however, with respect to this item (ii), a
refinancing of the Subordinated Debt to the extent consisting of the repayment
of the Subordinated Debt and the incurring of new “Subordinated Debt” within 60
days of such repayment shall not constitute a “Restricted Payment”; and

 

(iii)          Any payments by Hovnanian or its Subsidiaries in respect of
Qualified Preferred Equity.

 

Restricted Subsidiaries shall mean any Subsidiary that has not been designated a
Non-Restricted Person as of the Closing Date or in accordance with Section 2.11
[Designation of Subsidiaries and Release of Guarantors].  Each of the Restricted
Subsidiaries as of the Closing Date is listed on Schedule 1.1(C).

 

Revolving Credit Commitment shall mean, as to any Lender at any time, the amount
set forth opposite its name on Schedule 1.1(B) in the column labeled “Amount of
Commitment for Revolving Credit Loans” or on Schedule I to the Assignment and
Assumption Agreement pursuant to which such Lender became a party hereto, and
Revolving Credit Commitments shall mean the aggregate Revolving Credit
Commitments of all of the Lenders.

 

Revolving Credit Commitment Increase Date shall have the meaning assigned to
such term in Section 2.12 [Increases in Revolving Credit Commitments.]

 

Revolving Credit Loans shall mean collectively and Revolving Credit Loan shall
mean separately all Revolving Credit Loans or any Revolving Credit Loan made by
the Lenders or one of the Lenders to the Borrower pursuant to Section 2.1
[Revolving Credit Commitments] or 2.9.3 [Disbursements, Reimbursement].

 

Revolving Credit Note shall mean any Revolving Credit Note of the Borrower in
the form of Exhibit 1.1(R), issued by the Borrower payable to the order of each
Lender (unless a Lender requests that the Borrower not issue a Note to such
Lender) in a face amount equal to such Lender’s Revolving Credit Commitment
pursuant to Section 4.7 [Notes] evidencing the Revolving Credit Loans to such
Lender, together with all amendments, extensions, renewals, replacements,
refinancings or refundings thereof in whole or in part.

 

Revolving Facility Usage shall mean at any time the sum of the Revolving Credit
Loans outstanding, Swing Loans outstanding and the Letter of Credit
Outstandings.

 

SEC shall mean the Securities and Exchange Commission or any governmental
agencies substituted therefor.

 

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Senior Homebuilding Indebtedness shall mean the sum (without duplication) of
(a) outstanding principal amount of the Obligations, (b) letters of credit
(whether or not issued under this Agreement), (c) Guaranties by any Loan Party
of any obligation of any Person which is not a Restricted Subsidiary or
Hovnanian, (d) Senior Notes, (e) surety bonds (or similar products) issued by
bonding companies in lieu of cash payments or cash deposits on contracts for any
Loan Party to acquire land inventory in respect of which a Loan Party is
obligated and (f) other Indebtedness of Hovnanian or a Restricted Subsidiary
which is permitted under this Agreement; provided however, that “Senior
Homebuilding Indebtedness” shall not include (i) debt secured by Purchase Money
Security Interests and Purchase Money Mortgages and (ii) Subordinated Debt.

 

Senior Notes shall mean the (i) $150,000,000 principal amount 10 1/2% Senior
Notes of the Borrower and guaranteed by Hovnanian due October 2007;
(ii) $100,000,000 principal amount 8.0% Senior Notes of the Borrower due
April 2012 and guaranteed by Hovnanian;  (iii) $215,000,000 principal amount
6.50% Senior Notes of the Borrower due January 2014 and guaranteed by Hovnanian;
(iv) $150,000,000 principal amount 6.375% Senior Notes of the Borrower due 2014
and guaranteed by Hovnanian; and (v) other notes sold or guaranteed by Hovnanian
or the Borrower from time to time after the Closing Date on terms not materially
less favorable to the Lenders (as determined by the Agent) as those described in
clauses (i) and (ii) above.

 

Settlement Date shall mean the date selected from time to time by the Agent
(after consulting the Borrower) on which the Agent elects to effect settlement
pursuant to Section 4.8 [Settlement Date Procedures].

 

Sold Homes shall mean the Dollar amount of the capitalized construction costs of
any Dwelling Unit upon which a third party purchaser has paid a cash deposit
pursuant to an enforceable agreement of sale.  Such cost shall include the
proportional costs of the land under the Dwelling Unit, site improvements and
soft costs incurred to date.

 

Standard & Poor’s shall mean Standard & Poor’s Ratings Services, a division of
The McGraw-Hill Companies, Inc., and its successors.

 

Subordinated Debt shall mean (i) the  $150,000,000 principal amount 8.875%
Senior Subordinated Notes due in April 2012; (ii) the $150,000,000 principal
amount 7.75% Senior Subordinated Notes due in 2013; and (iii) any other
unsecured indebtedness of the Borrower, Hovnanian, or any other Loan Party which
is subordinated by its terms to the prior payment in full of the Obligations
evidenced by this Agreement, the Notes and the Letters of Credit, as may be
outstanding from time to time, in a manner no less favorable to the Lenders in
any material respect than the terms of the Subordinated Debt described in clause
(i) above and which contain covenants that are not materially less favorable to
Hovnanian, the Borrower or any other Loan Party than those contained in the
Subordinated Debt described in clause (i) above.

 

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Subsidiary of any Person at any time, shall mean a corporation, partnership,
limited liability company or other entity (i) whose assets and liabilities are
consolidated with Hovnanian in accordance with GAAP (except for joint ventures
or similar arrangements which would not be considered “Subsidiaries” of a Loan
Party but for the application of FASB Interpretation No. 46 regarding
consolidation issued by the Financial Accounting Standards Board (FASB) in
January, 2003) and (ii) of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such corporation,
partnership or other entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more intermediaries,
or both, by such Person.  Unless otherwise qualified, all references to a
“Subsidiary” or to “Subsidiaries” in this Agreement shall refer to a Subsidiary
or Subsidiaries of Hovnanian.

 

Subsidiary Investment shall mean with respect to any Subsidiary or Joint Venture
the sum of (x) loans to such Person by Hovnanian or a Restricted Subsidiary and
(y) Hovnanian’s or a Restricted Subsidiary’s share of equity in such Person.

 

Subsidiary Shares shall have the meaning assigned to that term in Section 5.1.2
[Subsidiaries].

 

Swing Loan Commitment shall mean PNC Bank’s commitment to make Swing Loans to
the Borrower pursuant to Section 2.1.2 [Swing Loan Commitment] hereof in an
aggregate principal amount of up to $30,000,000.

 

Swing Loan Note shall mean the Swing Loan Note of the Borrower in the form of
Exhibit 1.1(S) evidencing the Swing Loans, together with all amendments,
extensions, renewals, replacements, refinancings or refundings thereof in whole
or in part.

 

Swing Loan Request shall mean a request for Swing Loans made in accordance with
Section 2.4.2 [ Swing Loan Requests] hereof.

 

Swing Loans shall mean collectively and Swing Loan shall mean separately all
Swing Loans or any Swing Loan made by PNC Bank to the Borrower pursuant to
Section 2.1.2 [Swing Loan Commitment] hereof.

 

Transferor Lender shall mean the selling Lender pursuant to an Assignment and
Assumption Agreement.

 

Unentitled Land shall mean the Dollar value of land owned by a Loan Party which
has not been granted Preliminary Approvals, calculated at the lower of (i) the
actual cost (including land costs and capital expenses relating thereto) or
(ii) the market value (as determined in accordance with GAAP) thereof.

 

Unsold Dwelling Units shall mean the number of Dwelling Units owned by a Loan
Party comprising from time to time “Unsold Homes”.

 

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Unsold Homes shall mean the Dollar amount of capitalized construction costs of
any Dwelling Unit being built by a Loan Party for which the construction of slab
(or foundation) has been completed and upon which no cash deposit has been paid
pursuant to an enforceable agreement of sale. Such Dollar amount shall include
the proportional costs of the land under the Dwelling Unit, site improvements
and soft costs actually incurred to date.

 

USA Patriot Act shall mean the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001,
Public Law 107-56, as the same has been, or shall hereafter be, renewed,
extended, amended or replaced.

 

1.2                                 CONSTRUCTION.

 

Unless the context of this Agreement otherwise clearly requires, the following
rules of construction shall apply to this Agreement and each of the other Loan
Documents:

 

1.2.1.                     NUMBER; INCLUSION.

 

references to the plural include the singular, the plural, the part and the
whole; “or” has the inclusive meaning represented by the phrase “and/or,” and
“including” has the meaning represented by the phrase “including without
limitation”;

 

1.2.2.                     DETERMINATION.

 

references to “determination” of or by the Agent or the Lenders shall be deemed
to include good-faith estimates by the Agent or the Lenders (in the case of
quantitative determinations) and good-faith beliefs by the Agent or the Lenders
(in the case of qualitative determinations) and such determination shall be
conclusive absent manifest error;

 

1.2.3.                     AGENT’S DISCRETION AND CONSENT.

 

whenever the Agent or the Lenders are granted the right herein to act in its or
their sole discretion or to grant or withhold consent such right shall be
exercised in good faith;

 

1.2.4.                     DOCUMENTS TAKEN AS A WHOLE.

 

the words “hereof,” “herein,” “hereunder,” “hereto” and similar terms in this
Agreement or any other Loan Document refer to this Agreement or such other Loan
Document as a whole and not to any particular provision of this Agreement or
such other Loan Document;

 

1.2.5.                     HEADINGS.

 

the section and other headings contained in this Agreement or such other Loan
Document and the Table of Contents (if any) preceding this Agreement or such
other Loan Document are for reference purposes only and shall not control or
affect the

 

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construction of this Agreement or such other Loan Document or the interpretation
thereof in any respect;

 

1.2.6.                     IMPLIED REFERENCES TO THIS AGREEMENT.

 

article, section, subsection, clause, schedule and exhibit references are to
this Agreement or other Loan Document, as the case may be, unless otherwise
specified;

 

1.2.7.                     PERSONS.

 

reference to any Person includes such Person’s successors and assigns but, if
applicable, only if such successors and assigns are permitted by this Agreement
or such other Loan Document, as the case may be, and reference to a Person in a
particular capacity excludes such Person in any other capacity;

 

1.2.8.                     MODIFICATIONS TO DOCUMENTS.

 

reference to any agreement (including this Agreement and any other Loan Document
together with the schedules and exhibits hereto or thereto), document or
instrument means such agreement, document or instrument as amended, modified,
replaced, substituted for, superseded or restated;

 

1.2.9.                     FROM, TO AND THROUGH.

 

relative to the determination of any period of time, “from” means “from and
including,” “to” means “to but excluding,” and “through” means “through and
including”; and

 

1.2.10. SHALL; WILL.

 

references to “shall” and “will” are intended to have the same meaning.

 

1.3                                 ACCOUNTING PRINCIPLES.

 

Except as otherwise provided in this Agreement, all computations and
determinations as to accounting or financial matters and all financial
statements to be delivered pursuant to this Agreement shall be made and prepared
in accordance with GAAP (including principles of consolidation where
appropriate), and all accounting or financial terms shall have the meanings
ascribed to such terms by GAAP; provided, however, that all accounting terms
used in Section 7.2 [Negative Covenants] (and all defined terms used in the
definition of any accounting term used in Section 7.2 [Negative Covenants] shall
have the meaning given to such terms (and defined terms) under GAAP as in effect
on the date hereof applied on a basis consistent with those used in preparing
the Annual Statements referred to in Section 5.1.8((i)) [Historical
Statements].  In the event of any change after the date hereof in GAAP, and if
such change would result in the inability to determine compliance with the
financial covenants set forth in Section 7.2 [Negative Covenants] based upon the
Loan Parties’ regularly prepared

 

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financial statements by reason of the preceding sentence, then the parties
hereto agree to endeavor, in good faith, to agree upon an amendment to this
Agreement that would adjust such financial covenants in a manner that would not
affect the substance thereof, but would allow compliance therewith to be
determined in accordance with the Loan Parties’ financial statements at that
time.

 

2.                                       REVOLVING CREDIT AND SWING LOAN
FACILITIES

 

2.1                                 REVOLVING CREDIT COMMITMENTS.

 

2.1.1.                     REVOLVING CREDIT LOANS.

 

Subject to the terms and conditions hereof and relying upon the representations
and warranties herein set forth, each Lender severally agrees to make Revolving
Credit Loans to the Borrower at any time or from time to time on or after the
date hereof to the Expiration Date provided that after giving effect to such
Loan (a) the aggregate amount of Revolving Credit Loans from such Lender shall
not exceed such Lender’s Revolving Credit Commitment minus such Lender’s Ratable
Share of the Letter of Credit Outstandings and its Ratable Share of the
outstanding Swing Loans and (b) the Borrower shall be in compliance with the
covenant contained in the first sentence of Section 7.2.10 [Borrowing Base]
(provided that the requirements of such Section 7.2.10 shall apply only if the
Investment Grade Period is not in effect).  Within such limits of time and
amount and subject to the other provisions of this Agreement, the Borrower may
borrow, repay and reborrow pursuant to this Section 2.1.

 

The Borrower promises to repay the aggregate outstanding principal amount of the
Revolving Credit Loans in full on the Expiration Date and to discharge and
fulfill when required all other of the Obligations.

 

2.1.2.                     SWING LOAN COMMITMENT.

 

Subject to the terms and conditions hereof and relying upon the representations
and warranties herein set forth, PNC Bank shall make swing loans (the “Swing
Loans”) to the Borrower at any time or from time to time after the date hereof
to, but not including, the Expiration Date, in an aggregate principal amount up
to but not in excess of the Swing Loan Commitment.  The Swing Loan Commitment is
a sublimit of the Revolving Credit Commitments and the Revolving Facility Usage
shall not exceed the Revolving Credit Commitments of all the Lenders.  Within
such limits of time and amount and subject to the other provisions of this
Agreement, the Borrower may borrow, repay and reborrow pursuant to this
Section 2.1.2.  Swing Loans shall, at the option of PNC Bank after consultation
with the Borrower, be repaid by the proceeds of a Revolving Credit Loan deemed
to have been made for such purpose pursuant to Section 2.8 [Borrowings to Repay
Swing Loans] and shall be subject to the provisions of Section 4.8 [Settlement
Date Procedures].

 

2.1.3                        VOLUNTARY REDUCTION OF COMMITMENT

 

The Borrower shall have the right at any time after the Closing Date (i) upon
five (5) days’ prior written notice to the Agent to permanently reduce (ratably
among the

 

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Lenders in proportion to their Ratable Shares) the Revolving Credit Commitments,
in a minimum amount of $500,000 and whole multiples of $100,000 (provided that
in no event shall the aggregate Revolving Credit Commitments be reduced to an
amount less than $550,000,000) or (ii) at any time upon prepayment in full of
the Obligations, terminate completely the Commitments, without penalty or
premium except as hereinafter set forth, provided that any such reduction or
termination shall be accompanied by prepayment of the Notes, together with
outstanding Commitment Fees, and the full amount of interest accrued on the
principal sum to be prepaid (and all amounts referred to in Section 4.6.2
[Indemnity] hereof), to the extent that the aggregate amount thereof then
outstanding exceeds the Commitments as so reduced or terminated.  Any notice to
reduce the Revolving Credit Commitments under this Section 2.1. shall be
irrevocable.

 

2.2                                 NATURE OF LENDERS’ OBLIGATIONS WITH RESPECT
TO REVOLVING CREDIT LOANS.

 

Each Lender shall be obligated to participate in each request for Revolving
Credit Loans pursuant to Section 2.4 [Revolving Credit Loan Requests; Swing Loan
Requests] in accordance with its Ratable Share.  The aggregate of each Lender’s
Revolving Credit Loans outstanding hereunder to the Borrower at any time shall
never exceed its Revolving Credit Commitment minus its Ratable Share of the
Letter of Credit Outstandings minus its Ratable Share of Swing Loans
outstanding.  The obligations of each Lender hereunder are several.  The failure
of any Lender to perform its obligations hereunder shall not affect the
Obligations of the Borrower to any other party nor shall any other party be
liable for the failure of such Lender to perform its obligations hereunder.  The
Lenders shall have no obligation to make Revolving Credit Loans hereunder on or
after the Expiration Date.

 

2.3                                 COMMITMENT FEES.

 

Accruing from the date hereof until the Expiration Date, the Borrower agrees to
pay to the Agent for the account of each Lender, as consideration for such
Lender’s Revolving Credit Commitment hereunder, a nonrefundable commitment fee
(the “Commitment Fee”) equal to the Applicable Commitment Fee Rate (computed on
the basis of a year of 365 or 366 days, as the case may be, and actual days
elapsed) on the average daily difference between the amount of (i) such Lender’s
Revolving Credit Commitment as the same may be constituted from time to time and
the (ii) the sum of such Lender’s Revolving Credit Loans outstanding (plus, in
the case of PNC Bank, its Swing Loans outstanding) plus its Ratable Share of
Letter of Credit Outstandings.  All Commitment Fees shall be payable quarterly
in arrears on the fifteenth (15) day of each calendar quarter (for the calendar
quarter most recently ended) after the date hereof and on the Expiration Date or
upon acceleration of the Obligations.

 

2.4                                 REVOLVING CREDIT LOAN REQUESTS; SWING LOAN
REQUESTS.

 

2.4.1.                     REVOLVING CREDIT LOAN REQUESTS.

 

Except as otherwise provided herein, the Borrower may from time to time prior to
the Expiration Date request that the Lenders make Revolving Credit Loans, or
renew or convert the Interest Rate Option applicable to existing Revolving
Credit Loans or pursuant to Section 3.2 [Interest Periods], by delivering to the
Agent, not later than

 

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11:00 a.m., Eastern time, (i) three (3) Business Days prior to the proposed
Borrowing Date with respect to the making of Revolving Credit Loans to which the
LIBO-Rate Option applies or the conversion to or the renewal of the LIBO-Rate
Option for any Loans; and (ii) on the day of either the proposed Borrowing Date
with respect to the making of a Revolving Credit Loan to which the Base Rate
Option applies or the last day of the preceding Interest Period with respect to
the conversion to the Base Rate Option for any Loan, of a duly completed request
therefor substantially in the form of Exhibit 2.4.1 or a request by telephone
promptly confirmed in writing by letter or facsimile in such form (each, a “Loan
Request”), it being understood that the Agent may rely on the authority of any
individual making such a telephonic request without the necessity of receipt of
such written confirmation.  Each Loan Request shall be irrevocable and shall
specify (i) the proposed Borrowing Date; (ii) the aggregate amount of the
proposed Loans comprising each Borrowing Tranche, which shall be in integral
multiples of $500,000 and not less than $2,500,000 for each Borrowing Tranche to
which the LIBO-Rate Option applies and which shall be in integral multiples of
$100,000 and not less than $500,000 for Borrowing Tranches to which the Base
Rate Option applies; (iii) whether the LIBO-Rate Option or Base Rate Option
shall apply to the proposed Loans comprising the applicable Borrowing Tranche;
and (iv) in the case of a Borrowing Tranche to which the LIBO-Rate Option
applies, an appropriate Interest Period for the Loans comprising such Borrowing
Tranche.

 

2.4.2.                     SWING LOAN REQUESTS.

 

Except as otherwise provided herein, the Borrower may from time to time prior to
the Expiration Date request that PNC Bank make Swing Loans by delivery to PNC
Bank not later than 2:00 p.m. Eastern time on the proposed Borrowing Date of a
duly completed request therefor substantially in the form of Exhibit 2.4.2
hereto or a request by telephone promptly confirmed in writing by letter or
facsimile (each, a “Swing Loan Request”), it being understood that the Agent may
rely on the authority of any individual making such a telephonic request without
the necessity of receipt of such written confirmation.  Each Swing Loan Request
shall be irrevocable and shall specify the proposed Borrowing Date and the
principal amount of such Swing Loan, which shall be not less than $100,000.

 

2.5                                 MAKING REVOLVING CREDIT LOANS AND SWING
LOANS.

 

2.5.1. GENERALLY.

 

The Agent shall, promptly after receipt by it of a Loan Request pursuant to
Section 2.4.1 [Revolving Credit Loan Requests], but not later than 12:00 noon,
Eastern time, notify the Lenders of its receipt of such Loan Request
specifying:  (i) the proposed Borrowing Date and the time and method of
disbursement of the Revolving Credit Loans requested thereby; (ii) the amount
and type of each such Revolving Credit Loan and the applicable Interest Period
(if any); and (iii) the apportionment among the Lenders of such Revolving Credit
Loans as determined by the Agent in accordance with Section 2.2 [Nature of
Lenders’ Obligations with Respect to Revolving Credit Loans].  Each Lender shall
remit the principal amount of each Revolving Credit Loan to the Agent such that
the Agent is able to, and the Agent shall, to the extent the Lenders have made
funds available to it for such purpose and subject to Section 6.2 [Each
Additional Loan or Letter of Credit], fund such Revolving Credit Loans to the
Borrower in U.S. Dollars and immediately available funds at the Principal Office

 

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prior to 2:30 p.m., Eastern time, on the applicable Borrowing Date, provided
that if any Lender fails to remit such funds to the Agent in a timely manner,
the Agent may elect in its sole discretion to fund with its own funds the
Revolving Credit Loans of such Lender on such Borrowing Date, and such Lender
shall be subject to the repayment obligation in Section 9.16 [Availability of
Funds].

 

2.5.2.                     MAKING SWING LOANS.

 

Subject to the other provisions of this Agreement, PNC Bank shall, after receipt
by it of a Swing Loan Request pursuant to Section 2.4.2 [Swing Loan Requests],
fund such Swing Loan to the Borrower in Dollars and immediately available funds
at the Principal Office as soon as reasonably practicable after receipt by PNC
Bank of said Swing Loan Request but in any event by the close of business on the
same Business Day.

 

2.6                                 SWING LOAN NOTE.

 

The obligation of the Borrower to repay the unpaid principal amount of the Swing
Loans made to it by PNC Bank together with interest thereon shall, if requested
by PNC Bank, be evidenced by the Swing Loan Note dated the Closing Date payable
to the order of PNC Bank in a face amount equal to the Swing Loan Commitment.

 

2.7                                 USE OF PROCEEDS.

 

The proceeds of the Revolving Credit Loans shall be used to refinance existing
indebtedness and provide for Letters of Credit and provide working capital and
funds for general corporate purpose for the Borrower, Hovnanian and the
Restricted Subsidiaries, all in accordance with Section 7.1.10 [Use of
Proceeds].

 

2.8                                 BORROWINGS TO REPAY SWING LOANS.

 

PNC Bank may, at its option, and upon consultation with the Borrower,
exercisable at any time for any reason whatsoever, demand that each Lender shall
make a Revolving Credit Loan in an amount equal to such Lender’s Ratable Share
of the aggregate principal amount of the outstanding Swing Loans made in
accordance with Section 2.5.2 [Making Swing Loans], plus, if PNC Bank so
requests, accrued interest thereon, provided that no Lender shall be obligated
in any event to make Revolving Credit Loans in excess of its Revolving Credit
Commitment minus its Ratable Share of Letters of Credit Outstanding minus its
Ratable Share of Swing Loans outstanding.  Revolving Credit Loans made pursuant
to the preceding sentence shall bear interest at the Base Rate Option and shall
be deemed to have been properly requested in accordance with Section 2.4.1
[Revolving Credit Loan Requests] without regard to any of the requirements of
that provision.  PNC Bank shall provide notice to the Lenders (which may be
telephonic or written notice by letter, facsimile or telex) that such Revolving
Credit Loans are to be made under this Section 2.8 and of the apportionment
among the Lenders, and the Lenders shall be unconditionally obligated to fund
such Revolving Credit Loans (whether or not the conditions specified in
Section 2.4.1 [Revolving Credit Loan Requests] or Section 6.2 [Each Additional
Loan or Letter of Credit] are then satisfied) by the

 

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time PNC Bank so requests, which shall not be earlier than three o’clock
(3:00) p.m. Eastern time on the Business Day next after the date the Lenders
receive such notice from PNC Bank.

 

2.9                                 LETTER OF CREDIT SUBFACILITY.

 

2.9.1.                     ISSUANCE OF LETTERS OF CREDIT.

 

The Borrower may request the issuance of a letter of credit (each a “Letter of
Credit”) on behalf of itself or another Loan Party by the Agent or any Lender
which issues a Letter of Credit hereunder (such Lender, with respect to the
issuance of the Letter of Credit so requested by the Borrower, being a “Letter
of Credit Lender”) by delivering to the Agent and the Letter of Credit Lender a
completed application and agreement for letters of credit in such form as the
Letter of Credit Lender and the Agent may specify from time to time by no later
than 10:00 a.m., Eastern time, at least three (3) Business Days, or such shorter
period as may be agreed to by the Letter of Credit Lender, in advance of the
proposed date of issuance.  Each letter of credit issued by any Lender and
described on Schedule 2.9.1 shall be deemed to be a “Letter of Credit” hereunder
as of the Closing Date. Subject to the terms and conditions hereof and in
reliance on the agreements of the other Lenders set forth in this Section 2.9,
the Letter of Credit Lender will issue a Letter of Credit.  Each Letter of
Credit shall have a maximum stated maturity of no later than one (1) Business
Day prior to the Expiration Date.  For purposes of this subsection, “stated
maturity” is the expiration date of the Letter of Credit without giving effect
to any future extension thereof under an automatic renewal provision, provided
that such automatic renewal provision permits the Letter of Credit Lender to
elect not to extend by giving written notice of cancellation to the
beneficiary.  In no event shall Letter of Credit Outstandings exceed, at any one
time, $500,000,000.

 

2.9.2.                     LETTER OF CREDIT FEES.

 

The Borrower shall pay (i) to the Agent for the ratable account of the Lenders a
fee (the “Letter of Credit Fee”) equal to the Applicable Letter of Credit Fee
Rate (computed on the daily average Letter of Credit Outstandings) and (ii) to
the Agent on behalf of each respective Letter of Credit Lender for its own
account a fronting fee for Letters of Credit issued by such Letter of Credit
Lender equal to .125% per annum  (computed on the basis of a year of 365 or 366
days, as the case may be, and actual days elapsed) and shall be payable
quarterly in arrears commencing with the fifteenth (15) day of each calendar
quarter following issuance of each Letter of Credit and on the Expiration Date. 
The Borrower shall also pay to the Letter of Credit Lender for the Letter of
Credit Lender’s sole account the Letter of Credit Lender’s then in effect
customary fees and administrative expenses payable with respect to the Letters
of Credit as the Letter of Credit Lender may generally charge or incur from time
to time in connection with the issuance, maintenance, modification (if any),
assignment or transfer (if any), negotiation, and administration of Letters of
Credit.

 

2.9.3.                     DISBURSEMENTS, REIMBURSEMENT.

 

2.9.3.1               IMMEDIATELY UPON THE ISSUANCE OF EACH LETTER OF CREDIT,
EACH LENDER SHALL BE DEEMED TO, AND HEREBY IRREVOCABLY AND UNCONDITIONALLY
AGREES TO,

 

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purchase from the Letter of Credit Lender a participation in such Letter of
Credit and each drawing thereunder in an amount equal to such Lender’s Ratable
Share of the maximum amount available to be drawn under such Letter of Credit
and the amount of such drawing, respectively.

 

2.9.3.2               IN THE EVENT OF ANY REQUEST FOR A DRAWING ON OR BEFORE
11:00 A.M. UNDER A LETTER OF CREDIT BY THE BENEFICIARY OR TRANSFEREE THEREOF,
THE LETTER OF CREDIT LENDER SHALL PROMPTLY NOTIFY THE AGENT UPON SUCH REQUEST. 
PROVIDED THAT IT SHALL HAVE RECEIVED SUCH NOTICE, THE AGENT WILL PROMPTLY NOTIFY
THE BORROWER AND EACH LENDER THEREOF, AND THE BORROWER SHALL BE DEEMED TO HAVE
REQUESTED THAT REVOLVING CREDIT LOANS BE MADE BY THE LENDERS IN AN AMOUNT EQUAL
TO THE AMOUNT SO PAID BY THE LETTER OF CREDIT LENDER UNDER THE BASE RATE OPTION
TO BE DISBURSED ON THE DRAWING DATE UNDER SUCH LETTER OF CREDIT, SUBJECT TO THE
AMOUNT OF THE UNUTILIZED PORTION OF THE REVOLVING CREDIT COMMITMENT AND NOT
SUBJECT TO THE CONDITIONS SET FORTH IN SECTION 6.2 [EACH ADDITIONAL LOAN OR
LETTER OF CREDIT].  ANY NOTICE GIVEN BY THE LETTER OF CREDIT LENDER OR THE AGENT
PURSUANT TO THIS SECTION 2.9.3.2 MAY BE ORAL IF IMMEDIATELY CONFIRMED IN
WRITING; PROVIDED THAT THE LACK OF SUCH AN IMMEDIATE CONFIRMATION SHALL NOT
AFFECT THE CONCLUSIVENESS OR BINDING EFFECT OF SUCH NOTICE.

 

2.9.3.3               EACH LENDER SHALL UPON ANY NOTICE PURSUANT TO
SECTION 2.9.3.2 [DISBURSEMENTS, REIMBURSEMENT] MAKE AVAILABLE TO THE AGENT ON
BEHALF OF THE LETTER OF CREDIT LENDER AN AMOUNT IN IMMEDIATELY AVAILABLE FUNDS
EQUAL TO ITS RATABLE SHARE OF THE AMOUNT OF THE DRAWING, WHEREUPON THE
PARTICIPATING LENDERS SHALL (SUBJECT TO SECTION 2.9.3.4 [DISBURSEMENTS,
REIMBURSEMENT]) EACH BE DEEMED TO HAVE MADE A REVOLVING CREDIT LOAN UNDER THE
BASE RATE OPTION TO THE BORROWER IN THAT AMOUNT.  IF ANY LENDER SO NOTIFIED
FAILS TO MAKE AVAILABLE TO THE AGENT FOR THE ACCOUNT OF THE AGENT ON BEHALF OF
THE LETTER OF CREDIT LENDER THE AMOUNT OF SUCH LENDER’S RATABLE SHARE OF SUCH
AMOUNT BY NO LATER THAN TWO O’CLOCK (2:00) P.M., EASTERN TIME ON THE DRAWING
DATE, THEN INTEREST SHALL ACCRUE ON SUCH LENDER’S OBLIGATION TO MAKE SUCH
PAYMENT FROM THE DRAWING DATE TO THE DATE ON WHICH SUCH LENDER MAKES SUCH
PAYMENT (I) AT A RATE PER ANNUM EQUAL TO THE FEDERAL FUNDS EFFECTIVE RATE DURING
THE FIRST THREE DAYS FOLLOWING THE DRAWING DATE AND (II) AT A RATE PER ANNUM
EQUAL TO THE RATE APPLICABLE TO LOANS UNDER THE BASE RATE OPTION ON AND AFTER
THE FOURTH DAY FOLLOWING THE DRAWING DATE.  THE AGENT WILL PROMPTLY GIVE NOTICE
OF THE OCCURRENCE OF THE DRAWING DATE, BUT FAILURE OF THE AGENT TO GIVE ANY SUCH
NOTICE ON THE DRAWING DATE OR IN SUFFICIENT TIME TO ENABLE ANY LENDER TO EFFECT
SUCH PAYMENT ON SUCH DATE SHALL NOT RELIEVE SUCH LENDER FROM ITS OBLIGATION
UNDER THIS SECTION 2.9.3.3.

 

2.9.3.4               WITH RESPECT TO ANY UNREIMBURSED DRAWING THAT IS NOT
CONVERTED INTO REVOLVING CREDIT LOANS UNDER THE BASE RATE OPTION TO THE BORROWER
IN WHOLE OR IN PART AS CONTEMPLATED BY SECTION 2.9.3.2 [DISBURSEMENTS,
REIMBURSEMENT], THE BORROWER SHALL BE DEEMED TO HAVE INCURRED FROM THE AGENT A
BORROWING (EACH A “LETTER OF CREDIT BORROWING”) IN THE AMOUNT OF SUCH DRAWING. 
SUCH LETTER OF CREDIT BORROWING SHALL BE DUE AND PAYABLE ON DEMAND (TOGETHER
WITH INTEREST) AND SHALL BEAR INTEREST AT THE RATE PER ANNUM APPLICABLE TO THE
REVOLVING CREDIT LOANS UNDER THE BASE RATE OPTION.  EACH LENDER’S PAYMENT TO THE
AGENT PURSUANT TO SECTION 2.9.3.3 [DISBURSEMENTS, REIMBURSEMENT] SHALL BE DEEMED
TO BE A PAYMENT IN RESPECT OF ITS PARTICIPATION IN SUCH LETTER OF CREDIT
BORROWING AND SHALL CONSTITUTE A “PARTICIPATION ADVANCE” FROM SUCH LENDER IN
SATISFACTION OF ITS PARTICIPATION OBLIGATION UNDER SECTION 2.9.3 [DISBURSEMENTS,
REIMBURSEMENT].

 

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2.9.4.                     REPAYMENT OF PARTICIPATION ADVANCES.

 

2.9.4.1               UPON (AND ONLY UPON) RECEIPT BY THE AGENT ON BEHALF OF THE
LETTER OF CREDIT LENDER OF IMMEDIATELY AVAILABLE FUNDS FROM THE BORROWER (I) IN
REIMBURSEMENT OF ANY PAYMENT MADE BY THE ON BEHALF OF THE LETTER OF CREDIT
LENDER UNDER THE LETTER OF CREDIT WITH RESPECT TO WHICH ANY LENDER HAS MADE A
PARTICIPATION ADVANCE TO THE AGENT ON BEHALF OF THE LETTER OF CREDIT LENDER OR
(II) IN PAYMENT OF INTEREST ON SUCH A PAYMENT MADE BY THE AGENT UNDER SUCH A
LETTER OF CREDIT, THE AGENT WILL PAY TO EACH LENDER, IN THE SAME FUNDS AS THOSE
RECEIVED BY THE AGENT, THE AMOUNT OF SUCH LENDER’S RATABLE SHARE OF SUCH FUNDS,
EXCEPT THE AGENT SHALL RETAIN THE AMOUNT OF THE RATABLE SHARE OF SUCH FUNDS OF
ANY LENDER THAT DID NOT MAKE A PARTICIPATION ADVANCE IN RESPECT OF SUCH PAYMENT
BY AGENT.  IF THE LETTER OF CREDIT LENDER RECEIVES ANY SUCH PAYMENT PRIOR TO
1:00 P.M. ON A BUSINESS DAY AND DOES NOT MAKE PAYMENT TO ANY SUCH LENDER WHICH
HAS MADE SUCH A PARTICIPATION ADVANCE ON THE SAME BUSINESS DAY, THEN SUCH LENDER
SHALL BE ENTITLED TO RECEIVE SUCH LETTER OF CREDIT LENDER INTEREST AT THE
FEDERAL FUNDS EFFECTIVE RATE FOR EACH DAY UNTIL SUCH PAYMENT IS MADE TO SUCH
LENDER.

 

2.9.4.2               IF THE AGENT OR THE LETTER OF CREDIT LENDER IS REQUIRED AT
ANY TIME TO RETURN TO ANY LOAN PARTY, OR TO A TRUSTEE, RECEIVER, LIQUIDATOR,
CUSTODIAN, OR ANY OFFICIAL IN ANY INSOLVENCY PROCEEDING, ANY PORTION OF THE
PAYMENTS MADE BY ANY LOAN PARTY PURSUANT TO SECTION 2.9.4.1 [REPAYMENT OF
PARTICIPATION ADVANCES] IN REIMBURSEMENT OF A PAYMENT MADE UNDER THE LETTER OF
CREDIT OR INTEREST OR FEE THEREON, EACH LENDER SHALL, ON DEMAND OF THE AGENT ON
BEHALF OF THE LETTER OF CREDIT LENDER, FORTHWITH RETURN TO THE AGENT THE AMOUNT
OF ITS RATABLE SHARE OF ANY AMOUNTS SO RETURNED BY THE AGENT OR SUCH LETTER OF
CREDIT LENDER PLUS INTEREST THEREON FROM THE DATE SUCH DEMAND IS MADE TO THE
DATE SUCH AMOUNTS ARE RETURNED BY SUCH LENDER TO THE AGENT, AT A RATE PER ANNUM
EQUAL TO THE FEDERAL FUNDS EFFECTIVE RATE IN EFFECT FROM TIME TO TIME.

 

2.9.5.                     DOCUMENTATION.

 

Each Loan Party agrees to be bound by the terms of the Letter of Credit Lender’s
application and agreement for letters of credit and the Letter of Credit
Lender’s written regulations and customary practices relating to letters of
credit, though such interpretation may be different from such Loan Party’s own. 
In the event of a conflict between such application or agreement and this
Agreement, this Agreement shall govern.  It is understood and agreed that,
except in the case of gross negligence or willful misconduct, the Letter of
Credit Lender shall not be liable for any error, negligence and/or mistakes,
whether of omission or commission, in following any Loan Party’s instructions or
those contained in the Letters of Credit or any modifications, amendments or
supplements thereto.

 

2.9.6.                     DETERMINATIONS TO HONOR DRAWING REQUESTS.

 

In determining whether to honor any request for drawing under any Letter of
Credit by the beneficiary thereof, the Letter of Credit Lender shall be
responsible only to determine that the documents and certificates required to be
delivered under such Letter of Credit have been delivered and that they comply
on their face with the requirements of such Letter of Credit.

 

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2.9.7.                     NATURE OF PARTICIPATION AND REIMBURSEMENT
OBLIGATIONS.

 

Each Lender’s obligation in accordance with this Agreement to make the Revolving
Credit Loans or Participation Advances, as contemplated by Section 2.9.3
[Disbursements, Reimbursement], as a result of a drawing under a Letter of
Credit, and the obligations of the Borrower to reimburse the Agent upon a draw
under a Letter of Credit, shall be absolute, unconditional and irrevocable, and
shall be performed strictly in accordance with the terms of this Section 2.9
[Letter of Credit Subfacility] under all circumstances, including the following
circumstances:

 

(I)                                     ANY SET-OFF, COUNTERCLAIM, RECOUPMENT,
DEFENSE OR OTHER RIGHT WHICH SUCH LENDER MAY HAVE AGAINST THE AGENT, ANY LOAN
PARTY OR ANY OTHER PERSON FOR ANY REASON WHATSOEVER;

 

(II)                                  THE FAILURE OF ANY LOAN PARTY OR ANY OTHER
PERSON TO COMPLY, IN CONNECTION WITH A LETTER OF CREDIT BORROWING, WITH THE
CONDITIONS SET FORTH IN SECTION 2.1 [REVOLVING CREDIT COMMITMENTS], 2.4
[REVOLVING CREDIT LOAN REQUESTS; SWING LOAN REQUESTS], 2.4.2 [SWING LOAN
REQUESTS] OR 6.2 [EACH ADDITIONAL LOAN OR LETTER OF CREDIT], IF APPLICABLE, OR
AS OTHERWISE SET FORTH IN THIS AGREEMENT FOR THE MAKING OF A REVOLVING CREDIT
LOAN, IT BEING ACKNOWLEDGED THAT SUCH CONDITIONS ARE NOT REQUIRED FOR THE MAKING
OF A LETTER OF CREDIT BORROWING AND THE OBLIGATION OF THE LENDERS TO MAKE
PARTICIPATION ADVANCES UNDER SECTION 2.9.3 [DISBURSEMENTS, REIMBURSEMENT];

 

(III)                               ANY LACK OF VALIDITY OR ENFORCEABILITY OF
ANY LETTER OF CREDIT;

 

(IV)                              THE EXISTENCE OF ANY CLAIM, SET-OFF, DEFENSE
OR OTHER RIGHT WHICH ANY LOAN PARTY OR ANY LENDER MAY HAVE AT ANY TIME AGAINST A
BENEFICIARY OR ANY TRANSFEREE OF ANY LETTER OF CREDIT (OR ANY PERSONS FOR WHOM
ANY SUCH TRANSFEREE MAY BE ACTING), THE AGENT, THE LETTER OF CREDIT LENDER OR
ANY LENDER OR ANY OTHER PERSON OR, WHETHER IN CONNECTION WITH THIS AGREEMENT,
THE TRANSACTIONS CONTEMPLATED HEREIN OR ANY UNRELATED TRANSACTION (INCLUDING ANY
UNDERLYING TRANSACTION BETWEEN ANY LOAN PARTY OR SUBSIDIARIES OF A LOAN PARTY
AND THE BENEFICIARY FOR WHICH ANY LETTER OF CREDIT WAS PROCURED);

 

(V)                                 ANY DRAFT, DEMAND, CERTIFICATE OR OTHER
DOCUMENT PRESENTED UNDER ANY LETTER OF CREDIT PROVING TO BE FORGED, FRAUDULENT,
INVALID OR INSUFFICIENT IN ANY RESPECT OR ANY STATEMENT THEREIN BEING UNTRUE OR
INACCURATE IN ANY RESPECT EVEN IF THE LETTER OF CREDIT LENDER HAS BEEN NOTIFIED
THEREOF;

 

(VI)                              PAYMENT BY THE LETTER OF CREDIT LENDER UNDER
ANY LETTER OF CREDIT AGAINST PRESENTATION OF A DEMAND, DRAFT OR CERTIFICATE OR
OTHER DOCUMENT WHICH DOES NOT COMPLY WITH THE TERMS OF SUCH LETTER OF CREDIT;

 

(VII)                           ANY ADVERSE CHANGE IN THE BUSINESS, OPERATIONS,
PROPERTIES, ASSETS, CONDITION (FINANCIAL OR OTHERWISE) OR PROSPECTS OF ANY LOAN
PARTY OR SUBSIDIARIES OF A LOAN PARTY;

 

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(VIII)                        ANY BREACH OF THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT BY ANY PARTY THERETO;

 

(IX)                                THE OCCURRENCE OR CONTINUANCE OF AN
INSOLVENCY PROCEEDING WITH RESPECT TO ANY LOAN PARTY;

 

(X)                                   THE FACT THAT AN EVENT OF DEFAULT OR A
POTENTIAL DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING;

 

(XI)                                THE FACT THAT THE EXPIRATION DATE SHALL HAVE
PASSED OR THIS AGREEMENT OR THE COMMITMENTS HEREUNDER SHALL HAVE BEEN
TERMINATED; AND

 

(XII)                             ANY OTHER CIRCUMSTANCE OR HAPPENING
WHATSOEVER, WHETHER OR NOT SIMILAR TO ANY OF THE FOREGOING.

 

2.9.8.                     INDEMNITY.

 

In addition to amounts payable as provided in Section 9.5 [Reimbursement and
Indemnification of Agent by the Borrower], the Borrower hereby agrees to
protect, indemnify, pay and save harmless the Agent and any Letter of Credit
Lender from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable fees, expenses and
disbursements of counsel and allocated costs of internal counsel) which the
Agent or any Letter of Credit Lender may incur or be subject to as a
consequence, direct or indirect, of the issuance of any Letter of Credit, other
than as a result of (A) the gross negligence or willful misconduct of the Agent
or any Letter of Credit Lender as determined by a final judgment of a court of
competent jurisdiction or (B) the wrongful dishonor by the Letter of Credit
Lender of a proper demand for payment made under any Letter of Credit, except if
such dishonor resulted from any act or omission, whether rightful or wrongful,
of any present or future de jure or de facto government or governmental
authority (all such acts or omissions herein called “Governmental Acts”).

 

2.9.9.                     LIABILITY FOR ACTS AND OMISSIONS.

 

As between any Loan Party and the Agent or any Letter of Credit Lender, such
Loan Party assumes all risks of the acts and omissions of, or misuse of the
Letters of Credit by, the respective beneficiaries of such Letters of Credit. 
In furtherance and not in limitation of the foregoing, neither the Agent nor any
Letter of Credit Lender shall be responsible for:  (i) the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document submitted by
any party in connection with the application for an issuance of any such Letter
of Credit, even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged (even if the Agent or any Letter
of Credit Lender shall have been notified thereof); (ii) the validity or
sufficiency of any instrument transferring or assigning or purporting to
transfer or assign any such Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason; (iii) the failure of the beneficiary of
any such Letter of Credit, or any other party to which such Letter of Credit may
be transferred, to comply fully with any conditions required in order to draw
upon such Letter of Credit or any other claim of any Loan Party against any
beneficiary of

 

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such Letter of Credit, or any such transferee, or any dispute between or among
any Loan Party and any beneficiary of any Letter of Credit or any such
transferee; (iv) errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether
or not they be in cipher; (v) errors in interpretation of technical terms;
(vi) any loss or delay in the transmission or otherwise of any document required
in order to make a drawing under any such Letter of Credit or of the proceeds
thereof; (vii) the misapplication by the beneficiary of any such Letter of
Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any
consequences arising from causes beyond the control of the Agent or Letter of
Credit Lender, including any Governmental Acts, and none of the above shall
affect or impair, or prevent the vesting of, any of the Agent’s or any Letter of
Credit Lender’s rights or powers hereunder.  Nothing in the preceding sentence
shall relieve the Agent or any Letter of Credit Lender from liability for the
Agent’s or any Letter of Credit Lender’s gross negligence or willful misconduct
in connection with actions or omissions described in such clauses (i) through
(viii) of such sentence.

 

In furtherance and extension and not in limitation of the specific provisions
set forth above, any action taken or omitted by the Agent or any Letter of
Credit Lender under or in connection with the Letters of Credit issued by it or
any documents and certificates delivered thereunder, if taken or omitted in good
faith, shall not put the Agent or any Letter of Credit Lender under any
resulting liability to any Loan Party or any Lender.

 

2.9.10.               SHARING LETTER OF CREDIT DOCUMENTATION.

 

Each Letter of Credit Lender shall furnish to the Agent copies of any letter of
credit application and related documentation to which such Letter of Credit
Lender and a Loan Party are parties and promptly after issuance, a copy of any
Letter of Credit or amendment to any Letter of Credit issued by such Lender.

 

2.10                           EXTENSION BY LENDERS OF THE EXPIRATION DATE.

 

2.10.1.               REQUESTS; APPROVAL BY ALL LENDERS.

 

After delivery by the Borrower of the annual financial statements to be provided
under Section 7.3.2 [Annual Financial Statements] for the fiscal year ending
October 31, 2005 or any subsequent fiscal year, the Borrower may request either
a one-year or two-year extension (provided that any such extension may not cause
the remaining term of this Agreement to exceed 4 years) of the Expiration Date,
by written notice to the Lenders made by May 30 of the year in which such
financial statements are due, and the Lenders agree to respond to the Borrower’s
request for an extension no later than thirty (30) days following receipt of the
request; provided, however, that the failure of any Lender to respond within
such time period shall not in any manner constitute an agreement by such Lender
to extend the Expiration Date.  If all Lenders elect to extend, the Expiration
Date shall be extended for a period of one year or two years, as requested by
the Borrower.  If one or more Lenders decline to extend or do not respond to
Borrower’s request, the provisions of Section 2.10.2 [Approval by 80% Lenders]
shall apply.

 

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2.10.2.               APPROVAL BY 80% LENDERS.

 

In the event that one or more Lenders do not agree to extend the Expiration Date
or do not respond to Borrower’s request for an extension within the time
required under Section 2.10.1 [Requests; Approval by All Lenders] (each a
“Non-approving Lender”), but 80% of the Lenders (measured by their Ratable
Shares and not per capita) agree to such extension within such time (each such
agreeing Lender being an “Extending Lender”), then the Borrower may, at the
Borrower’s option, on or before July 31 of the year in which the Borrower made
its request for an extension, notify the Agent and the Lenders that the Borrower
intends to employ one or more of the following three (3) options:  (i) cause the
Commitment of each Non-approving Lender to be terminated (after which time such
Non-approving Lender shall cease to be a “Lender” hereunder) and cause the
aggregate Commitments to be reduced by the amount of such terminated
Commitments, or (ii) require the Non-approving Lenders to sell, and allow (upon
prior notice to the Agent) the Extending Lenders which have agreed to such
extension within the time required under Section 2.10.1 [Requests; Approval by
All Lenders] or any financial institution approved by the Agent and (absent an
Event of Default) the Borrower (each such Person referred to in this clause
(ii) being an “Assignee Lender”) to purchase all of the outstanding Loans if
any, of the Non-approving Lenders and succeed to and assume the Commitments and
all other rights, interests and obligations of the Non-approving Lenders under
this Agreement and the other Loan Documents, or (iii) require the Non-approving
Lender to remain a Lender and require it to maintain its Commitment and retain
for such Non-approving Lender’s Commitment the “Expiration Date” established
prior to the extension referred to in this Section 2.10.2, all subject to the
other provisions of this Agreement.  Any such purchase and assumption pursuant
to clause (ii) above shall be (1) pursuant to an Assignment and Assumption
Agreement and (2) subject to and in accordance with Section 10.11 [Successors
and Assigns].  The Borrower shall pay all amounts due and payable to the
Non-approving Lender on the effective date of such Assignment and Assumption
Agreement.  In the event that the Agent shall become a Non-approving Lender, the
provisions of this Section 2.10 [Extension by Lenders of the Expiration Date]
shall be subject to Section 9.14 [Successor Agent].  In the event that the
Borrower has selected the option described in clause (ii) above and if the Loans
and Commitments of a Non-approving Lender are, nevertheless, not fully assigned
and assumed pursuant to this Section 2.10.2, or terminated or retained pursuant
to clause (i) or clause (iii) above, as applicable, on or before August 31 of
the year in which the Borrower made its request for an extension, then the
Expiration Date shall not be extended for any Lender.  Nothing in this
Section 2.10.2 shall expand the options provided in Section 4.4.2 [Replacement
of a Lender].

 

2.11                           DESIGNATION OF SUBSIDIARIES AND RELEASE OF
GUARANTORS.

 

2.11.1.               RELEASE OF GUARANTORS.

 

At any time when the Borrower wishes to cause the Lenders to release a Guarantor
from its obligations under the Guaranty Agreement (whether directly or in
connection with the designation of a Restricted Subsidiary as a Non-Restricted
Person), the consent of the Lenders shall be required as described below and
shall be subject to the other provisions of this Section 2.11.

 

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(a)                                  For the release of (i) any Guarantor whose
assets are principally comprised of residential or commercial property which is
leased or held for the purposes of leasing to unaffiliated third parties or
(ii) any Guarantor in which any Loan Party (or Loan Parties in the aggregate)
has, at the time of such release, a Subsidiary Investment less than $1,000,000,
(iii) Corporate Office Subsidiary incident to it becoming a Non-Restricted
Person, or (iv) any Guarantor at the time that such Guarantor enters into a
newly-formed Joint Venture with a person which is not an Affiliate of the Loan
Parties and transfers all or a substantial portion of its assets to such Joint
Venture provided that such Guarantor is a Non-Restricted Person (or
simultaneously with the Borrower’s request for such release the Borrower has
designated such Guarantor as a “Non-Restricted Person” in compliance with
Section 2.11.2), no consent of the Lenders shall be required and such request of
the Borrower shall be granted absent an Event of Default or Potential Default,
effective on the date specified by the Borrower which shall not be earlier than
five (5) Business Days after the receipt by the Agent of such request;

 

(b)                                 For the release of any Guarantor (not
described in item (a)(i) hereof) in which any Loan Party (or Loan Parties in the
aggregate) has, at the time of such release,  a Subsidiary Investment greater
than or equal to $1,000,000 and less than $5,000,000 (except Corporate Office
Subsidiary, if otherwise applicable), the consent of Required Lenders shall be
required;

 

(c)                                  For the release of Hovnanian or any
Guarantor (not described in item (a)(i) hereof) in which any Loan Party (or Loan
Parties in the aggregate) has, at the time of such release, a Subsidiary
Investment greater than or equal to $5,000,000 (except Corporate Office
Subsidiary, if otherwise applicable), the consent of 100% of the Lenders shall
be required; and

 

(d)                                 The designation of a Person as a
Non-Restricted Person for any reason shall not itself constitute a release of
any Guarantor and any such release of such Person from its Guaranty shall be in
accordance with this Section 2.11.

 

2.11.2.               DESIGNATION OF NON-RESTRICTED PERSON.

 

The Borrower may, by written notice delivered to the Agent, designate as a
Non-Restricted Person a Subsidiary formerly designated a Restricted Subsidiary
or a newly formed or acquired Subsidiary, subject to:  (i) the provisions of
subsection 2.11.1 hereof in relation to Guaranties, (ii) the requirements of
Section 7 [Covenants] and in particular Section 7.2.10 [Borrowing Base]
(provided that the requirements of such Section 7.2.10 shall apply only if the
Investment Grade Period is not in effect); and (iii) the requirement that such
designation not cause an Event of Default or Potential Default.  Such
designation shall be effective on the date specified by the Borrower which shall
not be earlier than five (5) Business Days after the receipt by the Agent of
such notice.

 

2.11.3.               AUTOMATIC DESIGNATION OF NON-RESTRICTED PERSON.

 

Upon the occurrence of any event described in Section 8.1.10 [Insolvency],
Section 8.1.14 [Involuntary Proceedings], Section 8.1.15 [Voluntary
Proceedings], or the winding-up or termination of business, with respect to any
Restricted Subsidiary, such

 

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Subsidiary shall automatically become a Non-Restricted Person.  Such designation
as a Non-Restricted Person shall, with respect such Person’s obligations under
the Guaranty Agreement, if any, be subject to the requirements of Section 2.11.1
[Release of Guarantors] and such Subsidiary shall continue to be a Guarantor
until such time as it is released from the Guaranty Agreement pursuant to such
Section.  The release of any Subsidiary which is a Guarantor from its
obligations under the Guaranty Agreement pursuant to Section 2.11.1 [Release of
Guarantors] shall automatically cause such Subsidiary to be a Non-Restricted
Person.

 

2.11.4.               DESIGNATION OF RESTRICTED SUBSIDIARY.

 

The Borrower may by written notice delivered to the Agent designate as a
Restricted Subsidiary a Subsidiary formerly designated a Non-Restricted Person
or a newly formed or acquired Subsidiary.  Such designation is subject to
(i) compliance with Section 10.18 [Joinder of Guarantors]; (ii) the requirements
of Section 7 [Covenants] and in particular Section 7.2.10 [Borrowing Base]
(provided that the requirements of such Section 7.2.10 shall apply only if the
Investment Grade Period is not in effect); and (iii) the requirement that such
designation not cause an Event of Default or Potential Default. Such designation
shall be effective on the date specified by the Borrower which shall not be
earlier than five (5) Business Days after the receipt by the Agent of such
notice.

 

2.12                           INCREASE IN COMMITMENTS.

 

2.12.1                  INCREASING LENDERS AND NEW LENDERS.

 

The Borrower may, at any time prior to the second anniversary of the Closing
Date, request that (1) the current Lenders (the “Existing Lenders”) increase
their Revolving Credit Commitments (any Existing Lender which elects to increase
its Revolving Credit Commitment shall be referred to as an “Increasing Lender”)
or (2) one or more new banks (each a “New Lender”) join this Agreement and
provide a Revolving Credit Commitment hereunder, subject to the following terms
and conditions:

 

(I)                                     NO OBLIGATION TO INCREASE.  NO EXISTING
LENDER SHALL BE OBLIGATED TO INCREASE ITS REVOLVING CREDIT COMMITMENT AND ANY
INCREASE IN THE REVOLVING CREDIT COMMITMENT BY ANY EXISTING LENDER SHALL BE IN
THE SOLE DISCRETION OF SUCH EXISTING LENDER.

 

(II)                                  DEFAULTS.  THERE SHALL EXIST NO EVENTS OF
DEFAULT OR POTENTIAL DEFAULT ON THE EFFECTIVE DATE OF SUCH INCREASE (THE
“REVOLVING CREDIT COMMITMENT INCREASE DATE”) AFTER GIVING EFFECT TO SUCH
INCREASE.

 

(III)                               AGGREGATE REVOLVING CREDIT COMMITMENTS. 
AFTER GIVING EFFECT TO SUCH INCREASE, THE TOTAL REVOLVING CREDIT COMMITMENTS
SHALL NOT EXCEED $1,300,000,000.

 

(IV)                              MINIMUM REVOLVING CREDIT COMMITMENTS.  AFTER
GIVING EFFECT TO SUCH INCREASE, THE AMOUNT OF THE REVOLVING CREDIT COMMITMENTS
PROVIDED BY EACH OF THE NEW LENDERS AND EACH OF THE INCREASING LENDERS SHALL BE
AT LEAST $20,000,000; AND

 

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(V)                                 RESOLUTIONS; OPINION.  THE LOAN PARTIES
SHALL DELIVER TO THE AGENT ON OR BEFORE THE REVOLVING CREDIT COMMITMENT INCREASE
DATE THE FOLLOWING DOCUMENTS IN A FORM REASONABLY ACCEPTABLE TO THE AGENT:
(1) CERTIFICATIONS OF THEIR CORPORATE SECRETARIES WITH ATTACHED RESOLUTIONS
CERTIFYING THAT THE INCREASE IN THE REVOLVING CREDIT COMMITMENT HAS BEEN
APPROVED BY SUCH LOAN PARTIES, AND (2) AN OPINION OF COUNSEL ADDRESSED TO THE
AGENT AND THE LENDERS ADDRESSING THE AUTHORIZATION AND EXECUTION OF THE LOAN
DOCUMENTS BY, AND ENFORCEABILITY OF THE LOAN DOCUMENTS AGAINST, THE LOAN
PARTIES.

 

(VI)                              NOTES.  THE BORROWER SHALL EXECUTE AND DELIVER
(1) TO EACH INCREASING LENDER A REPLACEMENT NOTE (EXCEPT IF SUCH INCREASING
LENDER REQUESTS THAT IT NOT RECEIVE A NOTE) REFLECTING THE NEW AMOUNT OF SUCH
INCREASING LENDER’S REVOLVING CREDIT COMMITMENT AFTER GIVING EFFECT TO THE
INCREASE (AND THE PRIOR NOTE ISSUED TO SUCH INCREASING LENDER SHALL BE DEEMED TO
BE TERMINATED) AND (2) TO EACH NEW LENDER A NOTE (EXCEPT IF SUCH NEW LENDER
REQUESTS THAT IT NOT RECEIVE A NOTE) REFLECTING THE AMOUNT OF SUCH NEW LENDERS’
REVOLVING CREDIT COMMITMENT.

 

(VII)                           APPROVAL.  THE AGENT SHALL HAVE APPROVED OF SUCH
INCREASE (SUCH APPROVAL NOT TO BE UNREASONABLY WITHHELD) AND THE INCREASING
LENDER OR NEW LENDER, AS THE CASE MAY BE, THAT IS PROVIDING SUCH INCREASE.

 

(VIII)                        INCREASING LENDERS.  IF ANY PORTION OF THE
INCREASE IN REVOLVING CREDIT COMMITMENTS IS BEING PROVIDED BY ONE OR MORE
INCREASING LENDERS, THEN SUCH INCREASING LENDERS SHALL CONFIRM THEIR AGREEMENT
TO INCREASE THEIR REVOLVING CREDIT COMMITMENT PURSUANT TO A REVOLVING CREDIT
COMMITMENT INCREASE AGREEMENT IN SUBSTANTIALLY THE FORM OF EXHIBIT 2.12.1-1
ATTACHED HERETO SIGNED BY THEM AND THE LOAN PARTIES AND DELIVERED TO THE AGENT
AT LEAST FIVE (5) BUSINESS DAYS BEFORE THE REVOLVING CREDIT COMMITMENT INCREASE
DATE.

 

(ix)                                New Lenders—Joinder.  If the Borrower
desires that one or more New Lenders provide all or a portion of such increase
in Revolving Credit Commitments, then each New Lender, the Loan Parties and the
Agent shall execute a Lender Joinder and Assumption Agreement in substantially
the form of Exhibit 2.12.1-2 hereto, pursuant to which the New Lender shall join
and become a party to this Agreement and the other Credit Documents effective on
the Revolving Credit Commitment Increase Date with a Revolving Credit Commitment
in the amount set forth in Schedule I to such Lender Joinder and Assumption
Agreement.

 

2.12.2                  TREATMENT OF OUTSTANDING LOANS AND LETTERS OF CREDIT.

 

2.12.2.1                                                         REPAYMENT OF
OUTSTANDING LOANS; BORROWING OF NEW LOANS.

 

On the Revolving Credit Commitment Increase Date, the Borrower shall repay all
Loans outstanding on the Revolving Credit Commitment Increase Date, subject to
the Borrower’s indemnity obligations under Section 4.6.2 [Indemnity] provided
that it may borrow new Loans with a Borrowing Date on the Revolving Credit
Commitment Increase Date. Each of the Lenders shall participate in any new Loans
made on or after the Revolving

 

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Credit Commitment Increase Date in accordance with their respective Ratable
Shares after giving effect to the increase in Revolving Credit Commitments
contemplated by this Section 2.12.

 

2.12.2.2                                                         OUTSTANDING
LETTERS OF CREDIT.

 

On the Commitment Increase Date, each Increasing Lender and each New Lender
(a) will be deemed to have purchased a participation in each then outstanding
Letter of Credit equal to its Ratable Share of each such Letter of Credit and
the participation of each other Lender in each such Letter of Credit shall be
adjusted accordingly and (b) will acquire, (and will pay to the Agent, for the
account of each Lender, in immediately available funds, an amount equal to) its
Ratable Share of all outstanding Participation Advances.

 

3.                                       INTEREST RATES

 

3.1                                 INTEREST RATE OPTIONS.

 

The Borrower shall pay interest in respect of the outstanding unpaid principal
amount of the Loans as selected by it from the Base Rate Option or LIBO-Rate
Option set forth below applicable to the Loans, it being understood that,
subject to the provisions of this Agreement, the Borrower may select different
Interest Rate Options and different Interest Periods to apply simultaneously to
the Loans comprising different Borrowing Tranches and may convert to or renew
one or more Interest Rate Options with respect to all or any portion of the
Loans comprising any Borrowing Tranche, provided that there shall not be at any
one time outstanding more than ten (10) Borrowing Tranches in the aggregate
among all of the Loans, and provided further that only the Base Rate Option
shall apply to the Swing Loans.  If at any time the designated rate applicable
to any Loan made by any Lender exceeds such Lender’s highest lawful rate, the
rate of interest on such Lender’s Loan shall be limited to such Lender’s highest
lawful rate.

 

3.1.1.                     REVOLVING CREDIT INTEREST RATE OPTIONS.

 

The Borrower shall have the right to select from the following Interest Rate
Options applicable to the Revolving Credit Loans (subject to the provisions
above regarding Swing Loans):

 

(I)                                     REVOLVING CREDIT BASE RATE OPTION:  A
FLUCTUATING RATE PER ANNUM (COMPUTED ON THE BASIS OF A YEAR OF 365 OR 366 DAYS,
AS THE CASE MAY BE, AND ACTUAL DAYS ELAPSED) EQUAL TO THE BASE RATE PLUS THE
APPLICABLE MARGIN, SUCH INTEREST RATE TO CHANGE AUTOMATICALLY FROM TIME TO TIME
EFFECTIVE AS OF THE EFFECTIVE DATE OF EACH CHANGE IN THE BASE RATE; OR

 

(II)                                  REVOLVING CREDIT LIBO-RATE OPTION:  A RATE
PER ANNUM (COMPUTED ON THE BASIS OF A YEAR OF 360 DAYS AND ACTUAL DAYS ELAPSED)
EQUAL TO THE LIBO-RATE PLUS THE APPLICABLE MARGIN.

 

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3.1.2.                     RATE QUOTATIONS.

 

The Borrower may call the Agent on or before the date on which a Loan Request is
to be delivered to receive an indication of the rates then in effect, but it is
acknowledged that such projection shall not be binding on the Agent or the
Lenders nor affect the rate of interest which thereafter is actually in effect
when the election is made.

 

3.2                                 INTEREST PERIODS.

 

At any time when the Borrower shall select, convert to or renew a LIBO-Rate
Option, the Borrower shall notify the Agent thereof at least three (3) Business
Days prior to the effective date of such LIBO-Rate Option by delivering a Loan
Request.  The notice shall specify an Interest Period during which such Interest
Rate Option shall apply.  Notwithstanding the preceding sentence, in the case of
the renewal of a LIBO-Rate Option at the end of an Interest Period, the first
day of the new Interest Period shall be the last day of the preceding Interest
Period, without duplication in payment of interest for such day.

 

3.3                                 INTEREST AFTER DEFAULT.

 

3.3.1.                     DEFAULT RATE.

 

To the extent permitted by Law, upon the occurrence of an Event of Default under
Section 8.1.1 [Payment Under Loan Documents], Section 8.1.10 [Insolvency],
Section 8.1.14 [Involuntary Proceedings], Section 8.1.15 [Voluntary Proceedings]
or the Obligations are accelerated under this Agreement and until such time such
Event of Default shall have been cured or waived, all past due principal and all
past due accrued interest thereon and fees and expenses and each other past due
Obligation payable hereunder shall bear interest at a rate per annum equal to
the sum of the rate of interest applicable under the Base Rate Option plus an
additional 3.0% per annum from the time such Obligation becomes due and payable
and until it is paid in full (the “Default Rate”).

 

3.3.2.                     ACKNOWLEDGMENT.

 

The Borrower acknowledges that the increase in rate referred to in Section 3.3.1
[Default Rate] reflects, among other things, the fact that such Loans or other
amounts have become a substantially greater risk given their default status and
that the Lenders are entitled to additional compensation for such risk; and all
such interest shall be payable by Borrower upon demand by Agent.

 

3.4                                 LIBO-RATE UNASCERTAINABLE; ILLEGALITY;
INCREASED COSTS; DEPOSITS NOT AVAILABLE.

 

3.4.1.                     UNASCERTAINABLE.

 

If on any date on which a LIBO-Rate would otherwise be determined, the Agent
shall have determined that:

 

(I)                                     ADEQUATE AND REASONABLE MEANS DO NOT
EXIST FOR ASCERTAINING SUCH LIBO-RATE, OR

 

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(II)                                  A CONTINGENCY HAS OCCURRED WHICH
MATERIALLY AND ADVERSELY AFFECTS THE LONDON INTERBANK EURODOLLAR MARKET RELATING
TO THE LIBO-RATE, THE AGENT SHALL HAVE THE RIGHTS SPECIFIED IN SECTION 3.4.3
[AGENT’S AND LENDER’S RIGHTS].

 

3.4.2.                     ILLEGALITY; INCREASED COSTS; DEPOSITS NOT AVAILABLE.

 

If at any time any Lender shall have determined that:

 

(I)                                     THE MAKING, MAINTENANCE OR FUNDING OF
ANY LOAN TO WHICH A LIBO-RATE OPTION APPLIES HAS BEEN MADE IMPRACTICABLE OR
UNLAWFUL BY COMPLIANCE BY SUCH LENDER IN GOOD FAITH WITH ANY LAW OR ANY
INTERPRETATION OR APPLICATION THEREOF BY ANY OFFICIAL BODY OR WITH ANY REQUEST
OR DIRECTIVE OF ANY SUCH OFFICIAL BODY (WHETHER OR NOT HAVING THE FORCE OF LAW),
OR

 

(II)                                  SUCH LIBO-RATE OPTION WILL NOT ADEQUATELY
AND FAIRLY REFLECT THE COST TO SUCH LENDER OF THE ESTABLISHMENT OR MAINTENANCE
OF ANY SUCH LOAN, OR

 

(III)                               AFTER MAKING ALL REASONABLE EFFORTS,
DEPOSITS OF THE RELEVANT AMOUNT IN DOLLARS FOR THE RELEVANT INTEREST PERIOD FOR
A LOAN, OR TO BANKS GENERALLY, TO WHICH A LIBO-RATE OPTION APPLIES,
RESPECTIVELY, ARE NOT AVAILABLE TO SUCH LENDER WITH RESPECT TO SUCH LOAN, OR TO
BANKS GENERALLY, IN THE INTERBANK EURODOLLAR MARKET,

 

then the Agent and such Lender shall have the rights specified in Section 3.4.3
[Agent’s and Lender’s Rights].

 

3.4.3.                     AGENT’S AND LENDER’S RIGHTS.

 

In the case of any event specified in Section 3.4.1 [Unascertainable] above, the
Agent shall promptly so notify the Lenders and the Borrower thereof, and in the
case of an event specified in Section 3.4.2 [Illegality; Increased Costs;
Deposits Not Available] above, such Lender shall promptly so notify the Agent
and endorse a certificate to such notice as to the specific circumstances of
such notice, and the Agent shall promptly send copies of such notice and
certificate to the other Lenders and the Borrower.  Upon such date as shall be
specified in such notice (which shall not be earlier than the date such notice
is given), the obligation of (A) the Lenders, in the case of such notice given
by the Agent, or (B) such Lender, in the case of such notice given by such
Lender, to allow the Borrower to select, convert to or renew a LIBO-Rate Option
shall be suspended until the Agent shall have later notified the Borrower, or
such Lender shall have later notified the Agent, of the Agent’s or such
Lender’s, as the case may be, determination that the circumstances giving rise
to such previous determination no longer exist.  If at any time the Agent makes
a determination under Section 3.4.1 [Unascertainable] and the Borrower has
previously notified the Agent of its selection of, conversion to or renewal of a
LIBO-Rate Option and such Interest Rate Option has not yet gone into effect,
such notification shall be deemed to provide for selection of, conversion to or
renewal of the Base Rate Option otherwise available with respect to such Loans. 
If any Lender notifies the Agent of a determination under Section 3.4.2
[Illegality; Increased Costs; Deposits Not Available], the Borrower shall,
subject to the Borrower’s indemnification Obligations under Section 4.6.2
[Indemnity], as to any Loan of the Lender to which a LIBO-Rate

 

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Option applies, on the date specified in such notice either convert such Loan to
the Base Rate Option otherwise available with respect to such Loan or prepay
such Loan in accordance with Section 4.4 [Voluntary Prepayments].  Absent due
notice from the Borrower of conversion or prepayment, such Loan shall
automatically be converted to the Base Rate Option otherwise available with
respect to such Loan upon such specified date.

 

3.5                                 SELECTION OF INTEREST RATE OPTIONS.

 

If the Borrower fails to select a new Interest Period to apply to any Borrowing
Tranche of Loans under the LIBO-Rate Option at the expiration of an existing
Interest Period applicable to such Borrowing Tranche in accordance with the
provisions of Section 3.2 [Interest Periods], the Borrower shall be deemed to
have converted such Borrowing Tranche to the Base Rate Option, commencing upon
the last day of the existing Interest Period.

 

4.                                       PAYMENTS

 

4.1                                 PAYMENTS.

 

All payments and prepayments to be made in respect of principal, interest,
Commitment Fees, Letter of Credit Fees, Agent’s Fees or other fees or amounts
due from the Borrower hereunder shall be payable prior to eleven o’clock
(11:00) a.m., Eastern time, on the date when due without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived by the
Borrower, and without set-off, counterclaim or other deduction of any nature,
and an action therefor shall immediately accrue.  Such payments shall be made to
the Agent at the Principal Office for the account of PNC Bank with respect to
the Swing Loans and for the ratable accounts of the Lenders with respect to the
Revolving Credit Loans in Dollars and in immediately available funds, and the
Agent shall promptly distribute such amounts to the Lenders in immediately
available funds, provided that in the event payments are received by eleven
o’clock (11:00) a.m., Eastern time, by the Agent with respect to the Loans and
such payments are not distributed to the Lenders on the same day received by the
Agent, the Agent shall pay the Lenders the Federal Funds Effective Rate with
respect to the amount of such payments for each day held by the Agent and not
distributed to the Lenders.  The Agent’s and each Lender’s statement of account,
ledger or other relevant record shall, in the absence of manifest error, be
conclusive as the statement of the amount of principal of and interest on the
Loans and other amounts owing under this Agreement and shall be deemed an
“account stated.”

 

4.2                                 PRO RATA TREATMENT OF LENDERS.

 

Each borrowing shall be allocated to each Lender according to its Ratable Share,
and each selection of, conversion to or renewal of any Interest Rate Option and
each payment or prepayment by the Borrower with respect to principal, interest,
Commitment Fees, Letter of Credit Fees, or other fees (except for the Agent’s
Fees) or amounts due from the Borrower hereunder to the Lenders with respect to
the Loans, shall (except as provided in Section 3.4.3 [Agent’s and Lender’s
Rights] in the case of an event specified in Sections 3.4 [LIBO-Rate
Unascertainable; Illegality, Increased Costs, Deposits Not Available], 4.4.2
[Replacement of a Lender] or 4.6 [Additional Compensation in Certain
Circumstances]) be made in proportion to the applicable Loans outstanding from
each Lender and, if no such Loans are then outstanding,

 

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in proportion to the Ratable Share of each Lender.  Notwithstanding any of the
foregoing, each borrowing or payment or prepayment by the Borrower of principal,
interest, fees or other amounts from the Borrower with respect to Swing Loans
shall be made by or to PNC Bank according to Section 2 [Revolving Credit and
Swing Loan Facilities].

 

4.3                                 INTEREST PAYMENT DATES.

 

Interest on Loans to which the Base Rate Option applies shall be due and payable
in arrears on the first Business Day of each calendar month after the date
hereof and on the Expiration Date or upon acceleration of the Loan.  Interest on
Loans to which the LIBO-Rate Option applies shall be due and payable on the last
day of each Interest Period for those Loans and, if such Interest Period is
longer than three (3) Months, also on the 90th day of such Interest Period. 
Interest on mandatory prepayments of principal under Section 4.5 [Mandatory
Payments] shall be due on the date such mandatory prepayment is due.  Interest
on the principal amount of each Loan or other monetary Obligation shall be due
and payable on demand after such principal amount or other monetary Obligation
becomes due and payable (whether on the stated maturity date, upon acceleration
or otherwise).

 

4.4                                 VOLUNTARY PREPAYMENTS.

 

4.4.1.                     RIGHT TO PREPAY.

 

The Borrower shall have the right at its option at any time and from time to
time to prepay the Loans in whole or part without premium or penalty (except as
provided in Section 4.4.2 [Replacement of a Lender] below or in Section 4.6
[Additional Compensation in Certain Circumstances]).

 

Whenever the Borrower desires to prepay any part of the Loans, it shall provide
a prepayment notice to the Agent no later than (A) 11:00 a.m., Eastern time, at
least two (2) Business Days prior to the date of prepayment of the Revolving
Credit Loans to which the LIBO-Rate Option applies, (B) 11:00 a.m., Eastern
time, on the date of prepayment of Revolving Credit Loans to which the Base Rate
Option applies or (C) 2:00 p.m., Eastern time, on the date of prepayment of
Swing Loans, setting forth the following information:

 

(x)                                   the date, which shall be a Business Day,
on which the proposed prepayment is to be made;

 

(y)                                 a statement indicating the application of
the prepayment between the Swing Loans and the Revolving Credit Loans; and

 

(z)                                   the total principal amount of such
prepayment, which shall not be less than (i) $100,000 and in increments of
$100,000 for any Swing Loans, (ii) $500,000 and in increments of $100,000 for
any Revolving Credit Loan to which the Base Rate Option applies or
(iii) $2,500,000 and in increments of $500,000 for any Revolving Credit Loan to
which the LIBO-Rate Option applies.

 

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All prepayment notices shall be irrevocable.  The principal amount of the Loans
for which a prepayment notice is given, together with interest on such principal
amount except with respect to Loans to which the Base Rate Option applies, shall
be due and payable on the date specified in such prepayment notice as the date
on which the proposed prepayment is to be made.  Except as provided in
Section 3.4.3 [Agent’s and Lender’s Rights], if the Borrower prepays a Loan but
fails to specify the applicable Borrowing Tranche which the Borrower is
prepaying, the prepayment shall be applied first to Swing Loans, then to Loans
to which the Base Rate Option applies, and then to Loans to which the LIBO-Rate
Option applies.  Any prepayment hereunder shall be subject to the Borrower’s
Obligation to indemnify the Lenders under Section 4.6.2 [Indemnity].

 

4.4.2.                     REPLACEMENT OF A LENDER.

 

In the event any Lender (i) gives notice under Section 3.4 [LIBO-Rate
Unascertainable; Illegality; Increased Costs; Deposits Not Available] or
Section 4.6.1 [Increased Costs or Reduced Return Resulting from Taxes, Reserves,
Capital Adequacy Requirements, Expenses, Etc.], (ii) does not fund Revolving
Credit Loans because the making of such Loans would contravene any Law
applicable to such Lender, or (iii) becomes subject to the control of an
Official Body (other than normal and customary supervision), then the Borrower
shall have the right at its option, with the consent of the Agent, which shall
not be unreasonably withheld, to prepay the Loans of such Lender in whole,
together with all interest accrued thereon and all other Obligations owing to
such Lender, and terminate such Lender’s Commitment within ninety (90) days
after (x) receipt of such Lender’s notice under Section 3.4 [LIBO-Rate
Unascertainable; Illegality; Increased Costs; Deposits Not Available] or 4.6.1
[Increased Costs or Reduced Return Resulting from Taxes, Reserves, Capital
Adequacy Requirements, Expenses, Etc.], (y) the date such Lender has failed to
fund Revolving Credit Loans because the making of such Loans would contravene
Law applicable to such Lender, or (z) the date such Lender became subject to the
control of an Official Body, as applicable; provided that the Borrower shall
also pay to such Lender at the time of such prepayment any amounts required
under Section 4.6 [Additional Compensation in Certain Circumstances] and any
accrued interest due on such amount and any related fees; provided, further, the
remaining Lenders shall have no obligation hereunder to increase their
Commitments.  Notwithstanding the foregoing, the Agent may only be replaced
subject to the requirements of Section 9.14 [Successor Agent].

 

4.4.3.                     CHANGE OF LENDING OFFICE.

 

Each Lender agrees that upon the occurrence of any event giving rise to
increased costs or other special payments under Section 3.4.2 [Illegality;
Increased Costs; Deposits Not Available] or 4.6.1 [Increased Costs or Reduced
Return Resulting from Taxes, Reserves, Capital Adequacy Requirements, Expenses,
Etc.] with respect to such Lender, it will if requested by the Borrower, use
reasonable efforts (subject to overall policy considerations of such Lender) to
designate another lending office for any Loans or Letters of Credit affected by
such event, provided that such designation is made on such terms that such
Lender and its lending office suffer no economic, legal or regulatory
disadvantage, with the object of avoiding the consequence of the event giving
rise to the operation of such Section.  Nothing in this Section 4.4.3 [Change of
Lending Office] shall affect or postpone any of the

 

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Obligations of the Borrower or any other Loan Party or the rights of the Agent
or any Lender provided in this Agreement.

 

4.5                                 MANDATORY PAYMENTS.

 

The Borrower shall make mandatory payments of principal (together with accrued
interest thereon) to the Agent to the extent by which Revolving Facility Usage
exceeds at any time the Commitments (as they may be reduced pursuant to
Section 2.1. [Voluntary Reduction of Commitment], Section 2.10.2 [Approval by
80% Lenders] or otherwise) within three (3) Business Days after such excess is
calculated.

 

4.6                                 ADDITIONAL COMPENSATION IN CERTAIN
CIRCUMSTANCES.

 

4.6.1.                     INCREASED COSTS OR REDUCED RETURN RESULTING FROM
TAXES, RESERVES, CAPITAL ADEQUACY REQUIREMENTS, EXPENSES, ETC.

 

If any Law, guideline or interpretation or any change in any Law, guideline or
interpretation or application thereof by any Official Body charged with the
interpretation or administration thereof or compliance with any request or
directive (whether or not having the force of Law) of any central bank or other
Official Body:

 

(I)                                     SUBJECTS ANY LENDER TO ANY TAX OR
CHANGES THE BASIS OF TAXATION (INCLUDING IN BOTH CASES WITHHOLDING TAXES) WITH
RESPECT TO THIS AGREEMENT, THE NOTES, THE LOANS OR PAYMENTS BY THE BORROWER OF
PRINCIPAL, INTEREST, COMMITMENT FEES, OR OTHER AMOUNTS DUE FROM THE BORROWER
HEREUNDER (EXCEPT FOR TAXES ON THE OVERALL NET INCOME OF SUCH LENDER, FRANCHISE
TAXES, ANY BRANCH PROFITS TAXES, ANY U.S. WITHHOLDING TAXES IMPOSED ON A FOREIGN
LENDER AT THE TIME SUCH LENDER BECOMES A PARTY TO THIS AGREEMENT, AND ANY TAXES
ATTRIBUTABLE TO A FAILURE OF SUCH LENDER TO COMPLY WITH THE REQUIREMENTS OF
SECTION 10.17.1 OF THIS AGREEMENT),

 

(II)                                  IMPOSES, MODIFIES OR DEEMS APPLICABLE ANY
RESERVE, SPECIAL DEPOSIT OR SIMILAR REQUIREMENT AGAINST CREDITS OR COMMITMENTS
TO EXTEND CREDIT EXTENDED BY, OR ASSETS (FUNDED OR CONTINGENT) OF, DEPOSITS WITH
OR FOR THE ACCOUNT OF, OR OTHER ACQUISITIONS OF FUNDS BY, ANY LENDER, OR

 

(III)                               IMPOSES, MODIFIES OR DEEMS APPLICABLE ANY
CAPITAL ADEQUACY OR SIMILAR REQUIREMENT (A) AGAINST ASSETS (FUNDED OR
CONTINGENT) OF, OR LETTERS OF CREDIT, OTHER CREDITS OR COMMITMENTS TO EXTEND
CREDIT EXTENDED BY, ANY LENDER, OR (B) OTHERWISE APPLICABLE TO THE OBLIGATIONS
OF ANY LENDER UNDER THIS AGREEMENT,

 

and the result of any of the foregoing is to increase the cost to, reduce the
income receivable by, or impose any expense upon any Lender with respect to this
Agreement, or the making, maintenance or funding of any part of the Loans (or,
in the case of any capital adequacy or similar requirement, to have the effect
of reducing the rate of return on any Lender’s capital, taking into
consideration such Lender’s customary policies with respect to capital adequacy)
by an amount which such Lender in its sole discretion deems to be material, such
Lender shall from time to time notify the Borrower and the Agent of the amount
determined in good faith (using

 

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any averaging and attribution methods employed in good faith) by such Lender to
be necessary to compensate such Lender for such increase in cost, reduction of
income, additional expense or reduced rate of return.  Such notice shall set
forth in reasonable detail the basis for such determination, provided however,
that any such determination shall be conclusive and binding absent manifest
error.  Such amount shall be due and payable by the Borrower to such Lender ten
(10) Business Days after such notice is given.

 

If any Lender receives a refund in respect of any amounts paid by the Borrower
pursuant to this Section 4.6.1, which refund in the good faith judgment of such
Lender is allocable to such payment, it shall notify the Borrower of such refund
and repay such refund to the Borrower net of all out-of-pocket expenses of such
Lender; provided, however, that the Borrower, upon the request of such Lender,
agrees to repay the amount paid over to the Borrower to such Lender in the event
such Lender is required to repay such refund.

 

4.6.2.                     INDEMNITY.

 

In addition to the compensation required by Section 4.6.1 [Increased Costs or
Reduced Return Resulting from Taxes, Reserves, Capital Adequacy Requirements,
Expenses, Etc.], the Borrower shall indemnify each Lender against all
liabilities, losses or expenses (including actual loss of margin, any loss or
expense incurred in liquidating or employing deposits from third parties and any
loss or expense incurred in connection with funds acquired by a Lender to fund
or maintain Loans subject to a LIBO-Rate Option) which such Lender sustains or
incurs as a consequence of any:

 

(I)                                     PAYMENT, PREPAYMENT, CONVERSION OR
RENEWAL OF ANY LOAN TO WHICH A LIBO-RATE OPTION APPLIES ON A DAY OTHER THAN THE
LAST DAY OF THE CORRESPONDING INTEREST PERIOD (WHETHER OR NOT SUCH PAYMENT OR
PREPAYMENT IS MANDATORY, VOLUNTARY OR AUTOMATIC AND WHETHER OR NOT SUCH PAYMENT
OR PREPAYMENT IS THEN DUE),

 

(II)                                  ATTEMPT BY THE BORROWER TO REVOKE
(EXPRESSLY, BY LATER INCONSISTENT NOTICES OR OTHERWISE) IN WHOLE OR PART ANY
LOAN REQUESTS UNDER SECTION 2.4 [REVOLVING CREDIT LOAN REQUESTS; SWING LOAN
REQUESTS] OR SECTION 3.2 [INTEREST PERIODS] OR NOTICE RELATING TO PREPAYMENTS
UNDER SECTION 4.4 [VOLUNTARY PREPAYMENTS], OR

 

(III)                               DEFAULT BY THE BORROWER IN THE PERFORMANCE
OR OBSERVANCE OF ANY COVENANT OR CONDITION CONTAINED IN THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, INCLUDING ANY FAILURE OF THE BORROWER TO PAY WHEN DUE (BY
ACCELERATION OR OTHERWISE) ANY PRINCIPAL, INTEREST, COMMITMENT FEE, LETTER OF
CREDIT FEES, OR ANY OTHER AMOUNT DUE HEREUNDER.

 

If any Lender sustains or incurs any such loss or expense, it shall from time to
time notify the Borrower of the amount determined in good faith by such Lender
(which determination may include such assumptions, allocations of costs and
expenses and averaging or attribution methods as such Lender shall deem
reasonable) to be necessary to indemnify such Lender for such loss or expense. 
Such notice shall set forth in reasonable detail the basis for such
determination.  Such amount shall be due and payable by the Borrower to such
Lender ten (10) Business Days after such notice is given.

 

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4.7                                 NOTES.

 

The Revolving Credit Loans made by each Lender shall (unless a Lender requests
that the Borrower not issue a Note to such Lender) be evidenced by a Revolving
Credit Note.

 

4.8                                 SETTLEMENT DATE PROCEDURES.

 

The Borrower may borrow, repay and reborrow Swing Loans and PNC Bank may make
Swing Loans as provided in Section 2.1.2 [Swing Loan Commitment] hereof.  On any
Business Day, the Agent may notify each Lender of its Ratable Share of the total
of the Revolving Credit Loans and the Swing Loans (each a “Required Share”). 
Prior to 2:30 p.m., Eastern time, on the date following the date of such notice,
each Lender shall pay to the Agent the amount equal to the difference between
its Required Share and its Revolving Credit Loans, and the Agent shall pay to
each Lender its Ratable Share of all payments made by the Borrower to the Agent
with respect to the Revolving Credit Loans.  The Agent shall also effect
settlement in accordance with the foregoing sentence on the proposed Borrowing
Dates for Revolving Credit Loans and on any date when payments of principal of
any Loan is required to be paid by any Loan Party hereunder and may at its
option, and in consultation with the Borrower, effect settlement on any other
Business Day.  These settlement procedures are established solely as a matter of
administrative convenience, and nothing contained in this Section 4.8 shall
relieve the Lenders of their obligations to fund Revolving Credit Loans on dates
other than a Settlement Date pursuant to Section 2.8 [Borrowings to Repay Swing
Loans].  The Agent may at any time at its option for any reason whatsoever
require each Lender to pay immediately to the Agent such Lender’s Ratable Share
of the outstanding Revolving Credit Loans and each Lender may at any time
require the Agent to pay immediately to such Lender its Ratable Share of all
payments made by the Borrower to the Agent with respect to the Revolving Credit
Loans.

 

5.                                       REPRESENTATIONS AND WARRANTIES

 

5.1                                 REPRESENTATIONS AND WARRANTIES.

 

The Borrower and Hovnanian, jointly and severally, represent and warrant to the
Agent and to each of the Lenders as follows:

 

5.1.1.                     ORGANIZATION AND QUALIFICATION.

 

Each of the Borrower and Hovnanian is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization
and each other Loan Party is a corporation, partnership or limited liability
company duly organized, validly existing and in good standing under the laws of
its jurisdiction of organization except to the extent the failure to do so could
not, individually or in the aggregate, reasonably be expected to cause a
Material Adverse Change.  Each Loan Party has the lawful power to own or lease
its properties and to engage in the business it presently conducts or proposes
to conduct.  Each Loan Party is duly licensed or qualified and in good standing
in each jurisdiction where the failure to obtain them could, individually or in
the aggregate, reasonably be expected to cause a Material Adverse Change.

 

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5.1.2.                     SUBSIDIARIES.

 

As of the Closing Date, Schedule 5.1.2 states the name of each of Hovnanian’s
Subsidiaries and its jurisdiction of incorporation. Hovnanian and each Loan
Party has good and marketable title to all of the Subsidiary Shares, Partnership
Interests and LLC Interests it purports to own, free and clear in each case of
any Lien.  All Subsidiary Shares, Partnership Interests and LLC Interests have
been validly issued, and all Subsidiary Shares are fully paid and
nonassessable.  All capital contributions and other consideration required to be
made or paid in connection with the issuance of the Partnership Interests and
LLC Interests have been made or paid, as the case may be.  Schedule 5.1.2 also
sets forth, as to each of Hovnanian’s Subsidiaries, the percentage ownership of
each owner of:  the issued and outstanding shares (referred to herein as the
“Subsidiary Shares”) if such Subsidiary is a corporation, its outstanding
partnership interests (the “Partnership Interests”) if such Subsidiary is a
partnership and its outstanding limited liability company interests (the “LLC
Interests”) if such Subsidiary is a limited liability company. Schedule 5.1.2
also footnotes the controlling interests of each Subsidiary if such controlling
interest is held by a Person other than Hovnanian or a Subsidiary of Hovnanian.

 

5.1.3.                     POWER AND AUTHORITY.

 

Each Loan Party has full power to enter into, execute, deliver and carry out
this Agreement and the other Loan Documents to which it is a party, to incur the
Indebtedness contemplated by the Loan Documents and to perform its Obligations
under the Loan Documents to which it is a party, and all such actions have been
duly authorized by all necessary proceedings on its part.

 

5.1.4.                     VALIDITY AND BINDING EFFECT.

 

This Agreement has been duly and validly executed and delivered by each Loan
Party, and each other Loan Document which any Loan Party is required to execute
and deliver on or after the date hereof will have been duly executed and
delivered by such Loan Party on the required date of delivery of such Loan
Document.  This Agreement and each other Loan Document constitutes, or will
constitute, legal, valid and binding obligations of each Loan Party which is or
will be a party thereto on and after its date of delivery thereof, enforceable
against such Loan Party in accordance with its terms, except to the extent that
enforceability of any of such Loan Document may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforceability of creditors’ rights generally or limiting the right of specific
performance.

 

5.1.5.                     NO CONFLICT.

 

Neither the execution and delivery of this Agreement or the other Loan Documents
by any Loan Party nor the consummation of the transactions herein or therein
contemplated or compliance with the terms and provisions hereof or thereof by
any of them will conflict with, constitute a default under or result in any
breach of (i) the terms and conditions of the certificate of incorporation,
bylaws, certificate of limited partnership, partnership agreement, certificate
of formation, limited liability company agreement or other

 

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organizational documents of any Loan Party or (ii) any Law or any material
agreement or instrument or order, writ, judgment, injunction or decree to which
any Loan Party is a party or by which it is bound or to which it is subject, or
result in the creation or enforcement of any Lien, charge or encumbrance
whatsoever upon any property (now or hereafter acquired) of any Loan Party
(other than Liens granted under the Loan Documents) which could, individually or
in the aggregate, reasonably be expected to cause a Material Adverse Change.

 

5.1.6.                     LITIGATION.

 

There are no actions, suits, proceedings or investigations pending or, to the
knowledge of any Loan Party, threatened against such Loan Party at law or equity
before any Official Body which individually or in the aggregate may result in
any Material Adverse Change.  None of the Loan Parties is in violation of any
order, writ, injunction or any decree of any Official Body which may result in
any Material Adverse Change.

 

5.1.7.                     TITLE TO PROPERTIES.

 

Each Loan Party has good and marketable title to or a valid leasehold interest
in all properties, assets and other rights which it purports to own or lease or
which are reflected as owned or leased on its books and records, free and clear
of all Liens and encumbrances, except Permitted Liens, and subject to the terms
and conditions of the applicable leases.  All leases of property are in full
force and effect without the necessity for any consent which has not previously
been obtained upon consummation of the transactions contemplated hereby.

 

5.1.8.                     FINANCIAL STATEMENTS.

 

(I)                                     HISTORICAL STATEMENTS.  THE BORROWER HAS
DELIVERED TO THE AGENT COPIES OF HOVNANIAN’S AUDITED CONSOLIDATED YEAR-END
FINANCIAL STATEMENTS FOR AND AS OF THE END OF THE FISCAL YEAR ENDED OCTOBER 31,
2004(THE “ANNUAL STATEMENTS”) AND UNAUDITED CONSOLIDATED QUARTER-END FINANCIAL
STATEMENTS FOR AND AS OF THE END OF THE FISCAL QUARTER ENDED JANUARY 31, 2005. 
(THE ANNUAL STATEMENTS ARE ALSO SOMETIMES REFERRED TO AS THE “HISTORICAL
STATEMENTS”).  THE HISTORICAL STATEMENTS WERE COMPILED FROM THE BOOKS AND
RECORDS MAINTAINED BY HOVNANIAN’S MANAGEMENT, ARE CORRECT AND COMPLETE IN ALL
MATERIAL RESPECTS AND FAIRLY REPRESENT IN ALL MATERIAL RESPECTS THE CONSOLIDATED
FINANCIAL CONDITION OF HOVNANIAN AND ITS SUBSIDIARIES AS OF THEIR DATES AND THE
RESULTS OF OPERATIONS FOR THE FISCAL PERIODS THEN ENDED AND HAVE BEEN PREPARED
IN ACCORDANCE WITH GAAP CONSISTENTLY APPLIED.  THE HISTORICAL STATEMENTS
ACCURATELY REFLECT THE LIABILITIES IN ALL MATERIAL RESPECTS OF HOVNANIAN AND ITS
SUBSIDIARIES.

 

(II)                                  FINANCIAL PROJECTIONS.  THE BORROWER HAS
DELIVERED TO THE AGENT AND THE LENDERS FINANCIAL PROJECTIONS OF HOVNANIAN AND
ITS SUBSIDIARIES FOR THE PERIOD ENDING OCTOBER 31, 2009 DERIVED FROM VARIOUS
ASSUMPTIONS OF HOVNANIAN’S MANAGEMENT (THE “FINANCIAL PROJECTIONS”).  THE
FINANCIAL PROJECTIONS REPRESENT A REASONABLE RANGE OF POSSIBLE RESULTS IN LIGHT
OF THE HISTORY OF THE BUSINESS, PRESENT AND FORESEEABLE CONDITIONS AND THE
INTENTIONS OF HOVNANIAN’S MANAGEMENT (IT BEING UNDERSTOOD THAT ACTUAL RESULTS
MAY VARY MATERIALLY FROM THE FINANCIAL PROJECTIONS).

 

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(III)                               ACCURACY OF FINANCIAL STATEMENTS.  AS OF THE
CLOSING DATE, NEITHER HOVNANIAN NOR ANY SUBSIDIARY OF HOVNANIAN HAS ANY
LIABILITIES, CONTINGENT OR OTHERWISE, OR FORWARD OR LONG-TERM COMMITMENTS THAT
ARE REQUIRED BY GAAP TO BE, BUT ARE NOT, DISCLOSED IN THE HISTORICAL STATEMENTS
OR IN THE NOTES THERETO, AND EXCEPT AS DISCLOSED THEREIN THERE ARE NO UNREALIZED
OR ANTICIPATED LOSSES FROM ANY COMMITMENTS OF HOVNANIAN OR ANY SUBSIDIARY OF
HOVNANIAN WHICH MAY CAUSE A MATERIAL ADVERSE CHANGE.  EXCEPT AS DISCLOSED ON
SCHEDULE 5.1.8, SINCE OCTOBER 31, 2004, NO MATERIAL ADVERSE CHANGE HAS OCCURRED.

 

5.1.9.                     USE OF PROCEEDS; MARGIN STOCK.

 

5.1.9.1               GENERAL.

 

The Loan Parties intend to use the proceeds of the Loans in accordance with
Sections 2.7 [Use of Proceeds] and 7.1.10 [Use of Proceeds].

 

5.1.9.2               MARGIN STOCK.

 

None of the Loan Parties engages or intends to engage principally, or as one of
its important activities, in the business of extending credit for the purpose,
immediately, incidentally or ultimately, of purchasing or carrying margin stock
(within the meaning of Regulation U).  No part of the proceeds of any Loan has
been or will be used, immediately, incidentally or ultimately, to purchase or
carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock or to refund Indebtedness originally
incurred for such purpose, or for any purpose which entails a violation of or
which is inconsistent with the provisions of the regulations of the Board of
Governors of the Federal Reserve System.  None of the Loan Parties holds or
intends to hold margin stock in such amounts that more than 25% of the
reasonable value of the assets of such Loan Party are or will be represented by
margin stock.

 

5.1.10.               FULL DISCLOSURE.

 

Neither this Agreement nor any other Loan Document, nor any certificate,
statement, agreement or other documents furnished to the Agent or any Lender in
connection herewith or therewith, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein and therein, in light of the circumstances under which they
were made, not misleading in any material respect.  There is no fact known to
any Loan Party which materially adversely affects the business, property,
assets, financial condition, results of operations or business prospects of the
Loan Parties taken as a whole which has not been set forth in this Agreement or
in the certificates, statements, agreements or other documents furnished in
writing to the Agent and the Lenders prior to or at the date hereof in
connection with the transactions contemplated hereby.

 

5.1.11.               TAXES.

 

All federal, state, local and other tax returns required to have been filed with
respect to the Loan Parties have been filed, and payment or adequate provision
has been made for the payment of all taxes, fees, assessments and other
governmental

 

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charges which have or may become due pursuant to said returns or to assessments
received, except to the extent that such taxes, fees, assessments and other
charges are not material or are being contested in good faith by appropriate
proceedings diligently conducted and for which such reserves or other
appropriate provisions, if any, as shall be required by GAAP shall have been
made.  There are no agreements or waivers extending the statutory period of
limitations applicable to any federal income tax return of any Loan Party for
any period.

 

5.1.12.               CONSENTS AND APPROVALS.

 

No consent, approval, exemption, order or authorization of, or a registration or
filing with, any Official Body or any other Person is required by any Law or any
agreement in connection with the execution, delivery and carrying out of this
Agreement and the other Loan Documents by any Loan Party, except as listed on
Schedule 5.1.12, all of which shall have been obtained or made on or prior to
the Closing Date except as otherwise indicated on Schedule 5.1.12.

 

5.1.13.               NO EVENT OF DEFAULT; COMPLIANCE WITH INSTRUMENTS.

 

No event has occurred and is continuing and no condition exists or will exist
after giving effect to the borrowings or other extensions of credit to be made
on the Closing Date under or pursuant to the Loan Documents which constitutes an
Event of Default or Potential Default.  None of the Loan Parties is in violation
of (i) any term of its certificate of incorporation, bylaws, certificate of
limited partnership, partnership agreement, certificate of formation, limited
liability company agreement or other organizational documents or (ii) any
material agreement or instrument to which it is a party or by which it or any of
its properties may be subject or bound where such violation would constitute a
Material Adverse Change.

 

5.1.14.               PATENTS, TRADEMARKS, COPYRIGHTS, LICENSES, ETC.

 

Each Loan Party owns or possesses all the material patents, trademarks, service
marks, trade names, copyrights, licenses, registrations, franchises, permits and
rights necessary to own and operate its properties and to carry on its business
as presently conducted and planned to be conducted by such Loan Party, without
known possible, alleged or actual material conflict with the rights of others.

 

5.1.15.               INSURANCE.

 

No notice has been given or claim made and no grounds exist to cancel or avoid
any of insurance policies of the type described in Section 7.1.3 [Maintenance of
Insurance] or to reduce the coverage provided thereby.

 

5.1.16.               COMPLIANCE WITH LAWS.

 

The Loan Parties are in compliance in all material respects with all applicable
Laws (other than Environmental Laws which are specifically addressed in
Section 5.1.21 [Environmental Matters]) in all jurisdictions in which any Loan
Party is presently

 

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or will be doing business except where the failure to do so would not constitute
a Material Adverse Change.

 

5.1.17.               BURDENSOME RESTRICTIONS.

 

None of the Loan Parties is bound by any contractual obligation, or subject to
any restriction in any organization document, or any requirement of Law which
could reasonably be expected to constitute a Material Adverse Change.

 

5.1.18.               INVESTMENT COMPANIES; REGULATED ENTITIES.

 

None of the Loan Parties is an “investment company” registered or required to be
registered under the Investment Company Act of 1940 or under the “control” of an
“investment company” as such terms are defined in the Investment Company Act of
1940 and shall not become such an “investment company” or under such “control.” 
None of the Loan Parties is subject to any other Federal or state statute or
regulation limiting its ability to incur Indebtedness for borrowed money (other
than Regulation X of the Board of Governors of the Federal Reserve System).

 

5.1.19.               PLANS AND BENEFIT ARRANGEMENTS.

 

(I)                                     EXCEPT WHERE THE LIABILITY THAT COULD
REASONABLY BE EXPECTED TO RESULT THEREFROM WOULD NOT, INDIVIDUALLY OR IN THE
AGGREGATE, RESULT IN A MATERIAL ADVERSE CHANGE, (A) THE LOAN PARTIES AND EACH
OTHER MEMBER OF THE ERISA GROUP ARE IN COMPLIANCE IN ALL MATERIAL RESPECTS WITH
ANY APPLICABLE PROVISIONS OF ERISA WITH RESPECT TO ALL PLANS AND, AS TO THE
BORROWER, BENEFIT ARRANGEMENTS; (B) THERE HAS BEEN NO PROHIBITED TRANSACTION
WITH RESPECT TO ANY SUCH BENEFIT ARRANGEMENT OR ANY PLAN WHICH COULD RESULT IN
ANY MATERIAL LIABILITY OF THE LOAN PARTIES OR ANY OTHER MEMBER OF THE ERISA
GROUP; (C) THE LOAN PARTIES AND ALL OTHER MEMBERS OF THE ERISA GROUP HAVE MADE
WHEN DUE ANY AND ALL PAYMENTS REQUIRED TO BE MADE UNDER ANY AGREEMENT RELATING
TO A MULTIEMPLOYER PLAN OR ANY LAW PERTAINING THERETO; (D) WITH RESPECT TO EACH
PLAN THE LOAN PARTIES AND EACH OTHER MEMBER OF THE ERISA GROUP (I) HAVE
FULFILLED IN ALL RESPECTS THEIR OBLIGATIONS UNDER THE MINIMUM FUNDING STANDARDS
OF ERISA, (II) HAVE NOT INCURRED ANY LIABILITY TO THE PBGC, EXCEPT FOR PREMIUMS
IN THE ORDINARY COURSE WHICH ARE NOT OVERDUE AND (III) HAVE NOT HAD ASSERTED
AGAINST THEM ANY PENALTY FOR FAILURE TO FULFILL THE MINIMUM FUNDING REQUIREMENTS
OF SECTION 302 OF ERISA; AND (E) ALL PLANS AND BENEFIT ARRANGEMENTS HAVE BEEN
ADMINISTERED IN MATERIAL COMPLIANCE WITH THEIR TERMS AND APPLICABLE LAW.

 

(II)                                  EXCEPT WHERE THE LIABILITY THAT COULD
REASONABLY BE EXPECTED TO RESULT THEREFROM WOULD NOT, INDIVIDUALLY OR IN THE
AGGREGATE, RESULT IN A MATERIAL ADVERSE CHANGE, NO EVENT REQUIRING NOTICE TO THE
PBGC UNDER SECTION 302(F)(4)(A) OF ERISA HAS OCCURRED OR IS REASONABLY EXPECTED
TO OCCUR WITH RESPECT TO ANY PLAN, AND NO AMENDMENT WITH RESPECT TO WHICH
SECURITY IS REQUIRED UNDER SECTION 307 OF ERISA HAS BEEN MADE OR IS REASONABLY
EXPECTED TO BE MADE TO ANY PLAN.

 

(III)                               EXCEPT WHERE THE LIABILITY THAT COULD
REASONABLY BE EXPECTED TO RESULT THEREFROM WOULD NOT, INDIVIDUALLY OR IN THE
AGGREGATE, RESULT IN A MATERIAL

 

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Adverse Change, neither the Loan Parties nor any other member of the ERISA Group
has incurred or reasonably expects to incur any material withdrawal liability
under Section 4201 of ERISA to any Multiemployer Plan or under Section 4063 or
4064 of ERISA to any Plan;.  Neither the Loan Parties nor any other member of
the ERISA Group has been notified by any Multiemployer Plan or Plan that such
Multiemployer Plan or Plan has been terminated within the meaning of Sections
4041 A or 4064, respectively,  of ERISA and, to the best knowledge of the
Borrower, no Multiemployer Plan is reasonably expected to be reorganized or
terminated, within the meaning of Title IV of ERISA.

 

(IV)                              TO THE BEST KNOWLEDGE OF BORROWER, NEITHER THE
BORROWER NOR ANY OTHER MEMBER OF THE ERISA GROUP HAS, WITHIN THE PRECEDING FIVE
YEARS, ENTERED INTO A TRANSACTION TO WHICH EITHER SECTION 4069 OR
SECTION 4212(C) OF ERISA COULD APPLY SO AS TO SUBJECT BORROWER OR OTHER MEMBER
OF THE ERISA GROUP TO A LIABILITY, EXCEPT WHERE THE LIABILITY THAT COULD
REASONABLY BE EXPECTED TO RESULT THEREFROM WOULD NOT RESULT IN A MATERIAL
ADVERSE CHANGE.

 

5.1.20.               EMPLOYMENT MATTERS.

 

Each of the Loan Parties is in compliance with the Labor Contracts and all
applicable Federal, state and local labor and employment Laws including those
related to equal employment opportunity and affirmative action, labor relations,
minimum wage, overtime, child labor, medical insurance continuation, worker
adjustment and relocation notices, immigration controls and worker and
unemployment compensation, where such failure to comply would constitute a
Material Adverse Change.  There are no outstanding grievances, arbitration
awards or appeals therefrom arising out of the Labor Contracts or current or
threatened strikes, picketing, handbilling or other work stoppages or slowdowns
at facilities of any of the Loan Parties which in any case would constitute a
Material Adverse Change.

 

5.1.21.               ENVIRONMENTAL MATTERS.

 

None of the Loan Parties has received any Environmental Complaint, including but
not limited to those from any Official Body or private Person alleging that such
Loan Party or any prior owner, operator or occupant of any of the Property is a
potentially responsible party under the Comprehensive Environmental Response,
Cleanup and Liability Act, 42 U.S.C. § 9601, et seq., the Resource Conservation
and Recovery Act, 42 U.S.C. § 6901, et seq. or any analogous state or local Law,
which could reasonably be expected to constitute a Material Adverse Change and
none of the Loan Parties has any reason to believe that such an Environmental
Complaint might be received.  There are no pending or, to any Loan Party’s
knowledge, threatened Environmental Complaints relating to any Loan Party or, to
any Loan Party’s knowledge, any prior owner, operator or occupant of any of the
Properties pertaining to, or arising out of, any Contamination or violations of
Environmental Laws or Required Environmental Permits which could reasonably be
expected to constitute a Material Adverse Change.

 

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5.1.22.               SENIOR DEBT STATUS.

 

The Obligations of each Loan Party under this Agreement, the Guaranty Agreement
and each of the other Loan Documents to which it is a party do rank and will
rank at least pari passu in priority of payment with all other Indebtedness of
such Loan Party except Indebtedness of such Loan Party to the extent secured by
Permitted Liens.  There is no Lien upon or with respect to any of the properties
or income of any Loan Party which secures Indebtedness or other obligations of
any Person except for Permitted Liens.

 

5.1.23                  ANTI-TERRORISM LAWS.

 

None of the Loan Parties nor or any Affiliate of any Loan Party,  is in
violation of any Anti-Terrorism Law or engages in or conspires to engage in any
transaction that evades or avoids, or has the purpose of evading or avoiding, or
attempts to violate, any of the prohibitions set forth in any Anti-Terrorism
Law.

 

5.1.23.1                                                     Executive Order
No. 13224.

 

None of the Loan Parties, nor or any Affiliate of any Loan Party,  or their
respective agents acting or benefiting in any capacity in connection with the
Loans, Letters of Credit or other transactions hereunder, is any of the
following (each a “Blocked Person”):

 

(i)            a Person that is listed in the annex to, or is otherwise subject
to the provisions of, the Executive Order No. 13224;

 

(ii)           a Person owned or controlled by, or acting for or on behalf of,
any Person that is listed in the annex to, or is otherwise subject to the
provisions of, the Executive Order No. 13224;

 

(iii)          a Person or entity with which any Lender is prohibited from
dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;

 

(iv)          a Person or entity that commits, threatens or conspires to commit
or supports “terrorism” as defined in the Executive Order No. 13224;

 

(v)           a Person or entity that is named as a “specially designated
national” on the most current list published by the U.S. Treasury Department
Office of Foreign Asset Control at its official website or any replacement
website or other replacement official publication of such list, or

 

(vi)          a Person or entity who is affiliated or associated with a person
or entity listed above.

 

No Loan Party or to the knowledge of any Loan Party, any of its agents acting in
any capacity in connection with the Loans, Letters of Credit or other
transactions hereunder (i) conducts any business or engages in making or
receiving any contribution of funds, goods or services to or for the benefit of
any Blocked Person, or (ii) deals in, or otherwise engages in any transaction

 

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relating to, any property or interests in property blocked pursuant to the
Executive Order No. 13224.

 

5.2                                 CONTINUATION OF REPRESENTATIONS.

 

The Borrower and Hovnanian make the representations and warranties in this
Section 5 on the date hereof and on the Closing Date and each date thereafter on
which a Loan is made or a Letter of Credit is issued as provided in and subject
to Sections 6.1 [First Loans and Letters of Credit] and 6.2 [Each Additional
Loan or Letter of Credit].

 

6.             CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT

 

The obligation of each Lender to make Loans and of the Agent and the Letter of
Credit Lenders to issue Letters of Credit hereunder is subject to the
performance by each of the Loan Parties of its Obligations to be performed
hereunder at or prior to the making of any such Loans or issuance of such
Letters of Credit and to the satisfaction of the following further conditions:

 

6.1                                 FIRST LOANS AND LETTERS OF CREDIT.

 

On the Closing Date:

 

6.1.1.                     OFFICER’S CERTIFICATE.

 

The representations and warranties of each of the Loan Parties contained in
Section 5 [Representation and Warranties] and in each of the other Loan
Documents shall be true and correct on and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
such date (except representations and warranties which relate solely to an
earlier date or time, which representations and warranties shall be true and
correct on and as of the specific dates or times referred to therein), and each
of the Loan Parties shall have performed and complied with all covenants and
conditions hereof and thereof, no Event of Default or Potential Default shall
have occurred and be continuing or shall exist; and there shall be delivered to
the Agent for the benefit of each Lender a certificate of each of Hovnanian and
the Borrower, dated the Closing Date and signed by the Chief Executive Officer,
President or Chief Financial Officer of each of the Loan Parties, to each such
effect.

 

6.1.2.                     INCUMBENCY CERTIFICATE.

 

There shall be delivered to the Agent for the benefit of each Lender a
certificate dated the Closing Date and signed by the Secretary or an Assistant
Secretary or the managing member (or equivalent), as the case may be, of each of
the Loan Parties, certifying as appropriate as to:

 

(I)            ALL ACTION TAKEN BY EACH LOAN PARTY IN CONNECTION WITH THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS;

 

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(II)           THE NAMES OF THE OFFICER OR OFFICERS AUTHORIZED TO SIGN THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE TRUE SIGNATURES OF SUCH OFFICER
OR OFFICERS AND SPECIFYING THE AUTHORIZED OFFICERS PERMITTED TO ACT ON BEHALF OF
EACH LOAN PARTY FOR PURPOSES OF THIS AGREEMENT AND THE TRUE SIGNATURES OF SUCH
OFFICERS, ON WHICH THE AGENT AND EACH LENDER MAY CONCLUSIVELY RELY; AND

 

(III)          AS TO HOVNANIAN AND THE BORROWER ONLY, COPIES OF ITS
ORGANIZATIONAL DOCUMENTS, INCLUDING ITS CERTIFICATE OF INCORPORATION, BYLAWS,
CERTIFICATE OF LIMITED PARTNERSHIP, PARTNERSHIP AGREEMENT, CERTIFICATE OF
FORMATION, AND LIMITED LIABILITY COMPANY AGREEMENT AS IN EFFECT ON THE CLOSING
DATE CERTIFIED BY THE APPROPRIATE STATE OFFICIAL WHERE SUCH DOCUMENTS ARE FILED
IN A STATE OFFICE TOGETHER WITH CERTIFICATES FROM THE APPROPRIATE STATE
OFFICIALS AS TO THE CONTINUED EXISTENCE AND GOOD STANDING OF SUCH LOAN PARTY IN
EACH STATE WHERE ORGANIZED.

 

6.1.3.                     DELIVERY OF LOAN DOCUMENTS.

 

The Notes, the Guaranty Agreement and the other Loan Documents shall have been
duly executed and delivered by Hovnanian to the Agent on or before the date
hereof for the benefit of the Lenders.

 

6.1.4.                     OPINION OF COUNSEL.

 

There shall be delivered to the Agent for the benefit of each Lender a written
opinion of Peter Reinhart, Esquire, in-house counsel for the Loan Parties, dated
the Closing Date and in form and substance reasonably satisfactory to the Agent
and its counsel.

 

6.1.5.                     LEGAL DETAILS.

 

All legal details and proceedings in connection with the transactions
contemplated by this Agreement and the other Loan Documents shall be in form and
substance reasonably satisfactory to the Agent and counsel for the Agent, and
the Agent shall have received all such other counterpart originals or certified
or other copies of such documents and proceedings in connection with such
transactions, in form and substance reasonably satisfactory to the Agent and
said counsel, as the Agent or said counsel may reasonably request.

 

6.1.6.                     PAYMENT OF FEES.

 

The Borrower shall have paid or caused to be paid to the Agent for itself and
for the account of the Lenders to the extent not previously paid, all commitment
and other fees accrued through the Closing Date and the costs and expenses for
which the Agent and the Lenders are entitled to be reimbursed.

 

6.1.7.                     CONSENTS.

 

All material consents required to effectuate the transactions contemplated
hereby as set forth on Schedule 5.1.12 shall have been obtained.

 

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6.1.8.                     OFFICER’S CERTIFICATE REGARDING MACS.

 

Since October 31, 2004, no Material Adverse Change shall have occurred, and
there shall have been delivered to the Agent for the benefit of each Lender a
certificate dated the Closing Date and signed by the Chief Executive Officer,
President or Chief Financial Officer of each Loan Party to each such effect.

 

6.1.9.                     NO ACTIONS OR PROCEEDINGS.

 

No action, proceeding, investigation, regulation or legislation shall have been
instituted, threatened or proposed before any court, governmental agency or
legislative body to enjoin, restrain or prohibit, or to obtain damages in
respect of, this Agreement, the other Loan Documents or the consummation of the
transactions contemplated hereby or thereby.

 

6.1.10                  LIEN SEARCH.

 

The Borrower shall have delivered satisfactory results of a lien search to the
Agent evidencing no liens on Hovnanian or the Borrower which are not Permitted
Liens.

 

6.2                                 EACH ADDITIONAL LOAN OR LETTER OF CREDIT.

 

At the time of making any Loans or issuing any Letters of Credit other than
Loans made or Letters of Credit issued on the Closing Date and after giving
effect to the proposed extensions of credit:  the representations and warranties
of the Loan Parties contained in Section 5 [Representations and Warranties] and
in the other Loan Documents shall be true and correct in all material respects
on and as of the date of such additional Loan or Letter of Credit with the same
effect as though such representations and warranties had been made on and as of
such date (except representations and warranties which expressly relate solely
to an earlier date or time, which representations and warranties shall be true
and correct in all material respects on and as of the specific dates or times
referred to therein); no Event of Default or Potential Default shall have
occurred and be continuing or shall exist; and the Borrower shall have delivered
to the Agent a duly executed and completed Loan Request or application for a
Letter of Credit as the case may be (each such application shall be deemed to be
a representation by the Borrower that the conditions under this Section 6.2 for
the issuance of such additional Letter of Credit have been satisfied even if not
so stated in such application).

 

7.             COVENANTS

 

7.1                                 AFFIRMATIVE COVENANTS.

 

The Borrower and Hovnanian, jointly and severally, covenant and agree that until
payment in full of the Loans, Reimbursement Obligations and Letter of Credit
Borrowings, and interest thereon, expiration or termination of all Letters of
Credit, satisfaction of all of the Loan Parties’ other Obligations (other than
any contingent indemnity obligations not then due) under

 

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the Loan Documents and termination of the Commitments, they shall, and shall
cause the other Loan Parties to, comply at all times with the following
affirmative covenants:

 

7.1.1.                     PRESERVATION OF EXISTENCE, ETC.

 

Each Loan Party shall maintain its legal existence as a corporation, limited
partnership or limited liability company and its license or qualification and
good standing in each jurisdiction in which its ownership or lease of property
or the nature of its business makes such license or qualification necessary,
except as otherwise expressly permitted in Section 7.2.4 [Liquidations, Mergers,
Consolidations, Acquisitions] and except where failure to do so could not
reasonably be expected to constitute a Material Adverse Change with respect to
the Borrower or Hovnanian or with respect to the Loan Parties taken as a whole.

 

7.1.2.                     PAYMENT OF LIABILITIES, INCLUDING TAXES, ETC.

 

Each Loan Party shall duly pay and discharge all material liabilities to which
it is subject or which are asserted against it, promptly as and when the same
shall become due and payable, including all material taxes, assessments and
governmental charges upon it or any of its properties, assets, income or
profits, prior to the date on which penalties attach thereto, except to the
extent that such liabilities, including taxes, assessments or charges, are being
contested in good faith and by appropriate and lawful proceedings diligently
conducted and for which such reserve or other appropriate provisions, if any, as
shall be required by GAAP shall have been made, or to the extent that failure to
discharge any such liabilities would not result in any additional liability
which would adversely affect to a material extent the financial condition of the
Borrower or Hovnanian or of the Loan Parties taken as a whole, provided that the
Loan Parties will pay all such liabilities forthwith upon the commencement of
proceedings to foreclose any material Lien which may have attached as security
therefor.

 

7.1.3.                     MAINTENANCE OF INSURANCE.

 

Each Loan Party shall insure its properties and assets against loss or damage by
fire and such other insurable hazards as such assets are commonly insured
(including fire, extended coverage, property damage, workers’ compensation,
public liability, flood and business interruption insurance) and against other
risks (including errors and omissions) in such amounts as similar properties and
assets are insured by prudent companies in similar circumstances carrying on
similar businesses, and with reputable and financially sound insurers, including
self-insurance to the extent customary.

 

7.1.4.                     MAINTENANCE OF PROPERTIES AND LEASES.

 

Each Loan Party shall maintain in good repair, working order and condition
(ordinary wear and tear excepted) in accordance with the general practice of
other businesses of similar character and size, all of those properties
necessary to its business, and from time to time, such Loan Party will make or
cause to be made all appropriate repairs, renewals or replacements thereof.

 

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7.1.5.                     MAINTENANCE OF PATENTS, TRADEMARKS, ETC.

 

Each Loan Party shall maintain in full force and effect all patents, trademarks,
service marks, trade names, copyrights, licenses, franchises, permits and other
authorizations necessary for the ownership and operation of its properties and
business if the failure so to maintain the same would constitute a Material
Adverse Change.

 

7.1.6.                     VISITATION RIGHTS.

 

Each Loan Party shall permit any of the officers or authorized employees or
representatives of the Agent or (at the expense of such Lender) any of the
Lenders to visit and inspect any of its properties and to examine and make
excerpts from its books and records and discuss its business affairs, finances
and accounts with its officers, all in such detail and at such times and as
often as any of the Lenders may reasonably request, provided that each Lender
shall provide the Borrower and the Agent with reasonable notice prior to any
visit or inspection.  In the event any Lender desires to conduct an audit of any
Loan Party, such Lender shall make a reasonable effort to conduct such audit
contemporaneously with any audit to be performed by the Agent.

 

7.1.7.                     KEEPING OF RECORDS AND BOOKS OF ACCOUNT.

 

The Loan Parties shall maintain and keep proper books of record and account
which enable Hovnanian and its Subsidiaries to issue financial statements in
accordance with GAAP and as otherwise required by applicable Laws of any
Official Body having jurisdiction over Hovnanian or any Subsidiary of Hovnanian,
and in which full, true and correct entries shall be made in all material
respects of all its dealings and business and financial affairs.

 

7.1.8.                     PLANS AND BENEFIT ARRANGEMENTS.

 

The Loan Parties shall, and shall cause each member of the ERISA Group that is a
Subsidiary to, and shall use its reasonable best efforts to cause each other
member of the ERISA Group to, comply with ERISA, the Internal Revenue Code and
other applicable Laws applicable to Plans and, as to the Borrower, Benefit
Arrangements, except where such failure, alone or in conjunction with any other
failure, would not result in a Material Adverse Change.  Without limiting the
generality of the foregoing, the Loan Parties shall cause all of their Plans and
shall use reasonable best efforts to cause all Plans maintained by any member of
the ERISA Group, to be funded in accordance with the minimum funding
requirements of ERISA and shall make, and cause each Subsidiary to, and shall
use its reasonable best efforts to cause each member of the ERISA Group to make,
in a timely manner, all contributions due to Plans and Multiemployer Plans
except where such failure, alone or in conjunction with any other failure, would
not result in a Material Adverse Change.

 

7.1.9.                     COMPLIANCE WITH LAWS.

 

Each Loan Party shall comply with all applicable Laws, including all
Environmental Laws, in all respects, provided that it shall not be deemed to be
a

 

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violation of this Section 7.1.9 if any failure to comply with any Law would not
result in fines, penalties, remediation costs, other similar liabilities or
injunctive relief which in the aggregate would constitute a Material Adverse
Change.

 

7.1.10.               USE OF PROCEEDS.

 

The Loan Parties will use the Letters of Credit and the proceeds of the Loans
only for general corporate purposes and for working capital for the Borrower,
Hovnanian and the Restricted Subsidiaries.

 

7.1.11                  ANTI-TERRORISM LAWS.

 

The Loan Parties and their respective Affiliates and agents shall not
(i) conduct any business or engage in any transaction or dealing with any
Blocked Person, including the making or receiving any contribution of funds,
goods or services to or for the benefit of any Blocked Person, (ii) deal in, or
otherwise engage in any transaction relating to, any property or interests in
property blocked pursuant to the Executive Order No. 13224; or (iii) engage in
or conspire to engage in any transaction that evades or avoids, or has the
purpose of evading or avoiding, or attempts to violate, any of the prohibitions
set forth in the Executive Order No. 13224, the USA Patriot Act or any other
Anti-Terrorism Law.  The Borrower shall deliver to Lenders any certification or
other evidence requested from time to time by any Lender in its reasonable
discretion, confirming Borrower’s compliance with this Section 7.1.11.

 

7.2                                 NEGATIVE COVENANTS.

 

The Borrower and Hovnanian, jointly and severally, covenant and agree that until
payment in full of the Loans, Reimbursement Obligations and Letter of Credit
Borrowings and interest thereon, expiration or termination of all Letters of
Credit, satisfaction of all of the Loan Parties’ other Obligations hereunder
(other than any contingent indemnity obligations not then due) and termination
of the Commitments, they shall, and shall cause the other Loan Parties to,
comply with the following negative covenants:

 

7.2.1.                     INDEBTEDNESS.

 

EACH OF THE LOAN PARTIES SHALL NOT AT ANY TIME CREATE, INCUR, ASSUME OR SUFFER
TO EXIST ANY SECURED INDEBTEDNESS, EXCEPT INDEBTEDNESS SECURED BY PERMITTED
LIENS.

 

7.2.2.                     LIENS.

 

Each of the Loan Parties shall not at any time create, incur, assume or suffer
to exist any Lien on any of its property or assets, tangible or intangible, now
owned or hereafter acquired, or agree or become liable to do so, except
Permitted Liens.

 

7.2.3.                     LOANS AND INVESTMENTS.

 

Each of the Loan Parties shall not, at any time, make or suffer to remain
outstanding any Investment except Permitted Investments and, to the extent

 

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permitted by Section 7.2.6 [Restricted Payments; Restricted Investments;
Investments in Related Businesses], Restricted Investments and Investments in
Related Businesses.

 

7.2.4.                     LIQUIDATIONS, MERGERS, CONSOLIDATIONS, ACQUISITIONS.

 

Each of the Loan Parties shall not dissolve, liquidate or wind-up its affairs,
or become a party to any merger or consolidation, or acquire by purchase, lease
or otherwise all or substantially all of the assets or capital stock of any
other Person, provided that

 

(1)           any Loan Party other than the Borrower or Hovnanian may
consolidate or merge into another Loan Party (or any Person that concurrently
becomes a Loan Party), and

 

(2)           any Loan Party may consolidate or merge with a Person who is not a
Loan Party if the common stockholders of Hovnanian prior to such transaction
maintain at least 50% of the voting control (direct or indirect) of the combined
entity after consummation of the transaction, and

 

(3)           any Loan Party may acquire, whether by purchase or by merger,
(A) all or substantially all of the ownership interests of another Person or
(B) all or substantially all of assets of another Person or of a business or
division of another Person (each, a “Permitted Acquisition”), provided that each
of the following requirements is met:

 

(I)            IF THE LOAN PARTIES ARE ACQUIRING THE OWNERSHIP INTERESTS IN SUCH
PERSON, AND SUCH PERSON IS, OR CONCURRENTLY WILL BE, DESIGNATED A RESTRICTED
SUBSIDIARY, SUCH PERSON SHALL EXECUTE A GUARANTOR JOINDER AND JOIN THIS
AGREEMENT AS A GUARANTOR PURSUANT TO SECTION 10.18 [JOINDER OF GUARANTORS] AND
THE BORROWER SHALL HAVE OTHERWISE COMPLIED WITH SECTION 2.11.4 [DESIGNATION OF
RESTRICTED SUBSIDIARY] ON OR BEFORE THE DATE OF SUCH PERMITTED ACQUISITION;

 

(II)           IF SUCH PERSON’S SHARES ARE REGISTERED AS “PUBLIC” SHARES UNDER
APPLICABLE LAW, THE BOARD OF DIRECTORS OR OTHER EQUIVALENT GOVERNING BODY OF
SUCH PERSON SHALL HAVE APPROVED SUCH PERMITTED ACQUISITION;

 

(III)          THE BUSINESS ACQUIRED, OR THE BUSINESS CONDUCTED BY THE PERSON
WHOSE OWNERSHIP INTERESTS ARE BEING ACQUIRED, AS APPLICABLE, SHALL COMPLY WITH
SECTION 7.2.8 [CONTINUATION OF OR CHANGE IN BUSINESS]; AND

 

(IV)          NO POTENTIAL DEFAULT OR EVENT OF DEFAULT SHALL EXIST IMMEDIATELY
PRIOR TO AND AFTER GIVING EFFECT TO SUCH PERMITTED ACQUISITION.

 

(4)           the Loan Parties may make, whether by purchase or merger or
otherwise, Permitted Investments and, to the extent permitted by Section 7.2.6
[Restricted Investments; Restricted Payments; Investments in Related
Businesses], Restricted Investments, Restricted Payments and Investments in
Related Businesses;

 

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(5)           the Loan Parties may liquidate or wind-up Restricted Subsidiaries
of Hovnanian which are not individually material to Hovnanian, the Borrower or
to the Loan Parties taken as a whole; provided that the Loan Parties shall
satisfy the requirements of Section 2.11 [Designation of Subsidiaries and
Release of Guarantors], to the extent applicable;

 

(6)           the Loan Parties may effectuate any sale permitted by
Section 7.2.5 as a merger or consolidation; and

 

(7)           for the avoidance of doubt, any Loan Party may effect or allow the
liquidation or winding-up of any Non-Restricted Person.

 

7.2.5.                     DISPOSITIONS OF ASSETS OR SUBSIDIARIES.

 

EACH OF THE LOAN PARTIES SHALL NOT SELL, CONVEY, ASSIGN, LEASE, ABANDON OR
OTHERWISE TRANSFER OR DISPOSE OF, VOLUNTARILY OR INVOLUNTARILY, ANY OF ITS
PROPERTIES OR ASSETS, TANGIBLE OR INTANGIBLE (INCLUDING SALE, ASSIGNMENT,
DISCOUNT OR OTHER DISPOSITION OF ACCOUNTS, CONTRACT RIGHTS, CHATTEL PAPER,
EQUIPMENT OR GENERAL INTANGIBLES WITH OR WITHOUT RECOURSE OR OF CAPITAL STOCK,
SHARES OF BENEFICIAL INTEREST, PARTNERSHIP INTERESTS OR LIMITED LIABILITY
COMPANY INTERESTS OF A SUBSIDIARY OF SUCH LOAN PARTY, BUT EXCLUDING INVESTMENTS
IN NON-RESTRICTED PERSONS), EXCEPT:

 

(I)            ANY SALE, TRANSFER OR LEASE OF ASSETS IN THE ORDINARY COURSE OF
BUSINESS WHICH ARE NO LONGER NECESSARY OR REQUIRED IN THE CONDUCT OF SUCH LOAN
PARTY’S BUSINESS;

 

(II)           ANY SALE, TRANSFER OR LEASE OF ASSETS TO A LOAN PARTY;

 

(III)          ANY SALE, TRANSFER OR LEASE OF ASSETS IN THE ORDINARY COURSE OF
BUSINESS WHICH ARE REPLACED BY SUBSTITUTE ASSETS ACQUIRED NOT IN VIOLATION OF
THIS AGREEMENT;

 

(IV)          ANY SALE, TRANSFER OR LEASE OF ASSETS BY A NON-RESTRICTED
SUBSIDIARY; OR

 

(V)           ANY OTHER SALE, TRANSFER OR LEASE OF ASSETS NOT INCLUDED IN
CLAUSES (I) THROUGH (IV) ABOVE PROVIDED THAT (1) AFTER GIVING EFFECT TO SUCH
SALE THE LOAN PARTIES ARE IN COMPLIANCE WITH THE COVENANTS UNDER THIS AGREEMENT
(INCLUDING THE FINANCIAL COVENANTS IN SECTIONS 7.2.11 [MINIMUM ATNW], 7.2.12
[LEVERAGE RATIO], AND 7.2.13 [FIXED CHARGE COVERAGE RATIO]) AND NO POTENTIAL
DEFAULT OR EVENT OF DEFAULT, AND (2) ANY SUCH SALE DOES NOT CONSTITUTE ALL OR
SUBSTANTIALLY ALL OF THE ASSETS OF THE LOAN PARTIES TAKEN AS A WHOLE;

 

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7.2.6.                     RESTRICTED PAYMENTS; RESTRICTED INVESTMENTS;
INVESTMENTS IN RELATED BUSINESSES.

 

7.2.6.1      THE LOAN PARTIES SHALL NOT PAY OR MAKE RESTRICTED PAYMENTS,
RESTRICTED INVESTMENTS OR INVESTMENTS BY LOAN PARTIES IN OTHER LOAN PARTIES
ENGAGED IN RELATED BUSINESSES (“INVESTMENTS IN RELATED BUSINESSES”) FROM AND
AFTER JANUARY 31, 2001 WHICH EXCEED IN THE AGGREGATE THE SUM OF:

 

(I)            $45,000,000;

 

(II)           50% OF NET INCOME OF HOVNANIAN (CALCULATED AND CONSOLIDATED IN
ACCORDANCE WITH GAAP) FOR ALL FISCAL QUARTERS COMMENCING ON FEBRUARY 1, 2001 AND
THEREAFTER; AND

 

(III)          50% OF THE PROCEEDS (LESS COSTS OF ISSUANCE) OF ANY ISSUANCE OR
SALE OF EQUITY, INCLUDING QUALIFIED PREFERRED EQUITY, OF HOVNANIAN TO ANY PERSON
OTHER THAN A LOAN PARTY DURING ALL FISCAL QUARTERS COMMENCING ON FEBRUARY 1,
2001 AND THEREAFTER.

 

7.2.6.2     EACH OF THE LOAN PARTIES SHALL NOT ENTER INTO OR CARRY OUT ANY
TRANSACTION WITH ANY AFFILIATE (INCLUDING PURCHASING PROPERTY OR SERVICES FROM
OR SELLING PROPERTY OR SERVICES TO ANY AFFILIATE OF ANY LOAN PARTY OR OTHER
PERSON BUT EXCLUDING TRANSACTIONS BETWEEN LOAN PARTIES) UNLESS SUCH TRANSACTION
IS NOT OTHERWISE PROHIBITED BY THIS AGREEMENT, IS ENTERED INTO IN THE ORDINARY
COURSE OF BUSINESS UPON FAIR AND REASONABLE ARM’S-LENGTH TERMS AND IS IN
ACCORDANCE WITH ALL APPLICABLE LAW. WITHOUT LIMITING THE FOREGOING, THE
AGGREGATE AMOUNT OF ALL INDEBTEDNESS FOR OWED OR BORROWED MONEY OWING TO ANY
LOAN PARTY BY ANY OFFICER OR DIRECTOR, OR RELATIVE THEREOF, SHALL NOT EXCEED
$1,000,000 IN THE AGGREGATE OWING AT ANY ONE TIME AND ALL SUCH INDEBTEDNESS
SHALL BEAR INTEREST AT A RATE NOT LESS THAN THE COUPON RATE ON SIX MONTH U.S.
TREASURY BILLS AS OF THE DATE SUCH INDEBTEDNESS IS INCURRED.

 

7.2.6.3     THE LOAN PARTIES SHALL NOT PAY OR MAKE ANY RESTRICTED PAYMENT IN
RESPECT OF DIVIDENDS OR SUBORDINATED DEBT IF AN EVENT OF DEFAULT OR POTENTIAL
DEFAULT EXISTS AT THE TIME OF SUCH PAYMENT OR WOULD EXIST AFTER GIVING EFFECT
THERETO.

 

7.2.7.                     SUBSIDIARIES, PARTNERSHIPS AND JOINT VENTURES.

 

Each of the Loan Parties shall not own or create directly or indirectly any
Subsidiaries other than (i) any Subsidiary which has executed the Guaranty
Agreement as Guarantor on the Closing Date, (ii) any Subsidiary formed or
acquired after the Closing Date which joins the Guaranty Agreement as a
Guarantor pursuant to Section 10.18 [Joinder of Guarantors] or (iii) any
Non-Restricted Person.

 

7.2.8.                     CONTINUATION OF OR CHANGE IN BUSINESS.

 

Each of the Loan Parties existing on the Closing Date shall not engage in any
business other than the homebuilding business.  Each of the Loan Parties

 

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organized or acquired after the Closing Date shall not engage in any business
other than the homebuilding business or Related Businesses.

 

7.2.9.                     PLANS AND BENEFIT ARRANGEMENTS.

 

Each of the Loan Parties shall not engage in a Prohibited Transaction with any
Plan, Benefit Arrangement or Multiemployer Plan which, alone or in conjunction
with any other circumstances or set of circumstances, results in liability under
ERISA, except where the liability that could reasonably be expected to result
therefrom would not result in a Material Adverse Change.

 

7.2.10.               BORROWING BASE.

 

At any time that the Investment Grade Period is not in effect, the Loan Parties
shall not permit Senior Homebuilding Indebtedness minus the face amount of
outstanding letters of credit (whether “Letters of Credit” or not) in respect of
which a Loan Party is obligated and which is issued to guaranty or assure the
installation of site improvements on (or appurtenant to) land owned by a Loan
Party to exceed the Borrowing Base at such time.  Pursuant thereto, the Borrower
shall make (or cause to be made), on the Business Day following the date on
which any such excess is calculated, payments of principal of Senior
Homebuilding Indebtedness sufficient to reduce to zero ($0) on such date any
such excess.

 

7.2.11.     MINIMUM ATNW.

 

The Loan Parties shall not permit Adjusted Tangible Net Worth as of the last day
of any fiscal quarter to be less than the sum of: (i) $696,402,000 and (ii) 50%
of Hovnanian’s consolidated net income (calculated and consolidated in
accordance with GAAP) for each fiscal quarter commencing on February 1, 2005 and
thereafter in which net income was earned (as opposed to a net loss), (iii) 50%
of the proceeds (less costs of issuance) of any issuance or sale of equity of
Hovnanian (including Qualified Preferred Equity) to any Person other than a Loan
Party during each fiscal quarter commencing on February 1, 2005 and thereafter.

 

7.2.12.     LEVERAGE RATIO.

 

The Loan Parties shall not permit the Leverage Ratio as of the last day of any
fiscal quarter to exceed 2.25 to 1.0.

 

7.2.13.     FIXED CHARGE COVERAGE RATIO.

 

The Loan Parties shall not permit the Fixed Charge Coverage Ratio as of the last
day of any fiscal quarter to be less than the 1.75 to 1.0 for each of any two
(2) consecutive fiscal quarters if the second such fiscal quarter constitutes a
High Leverage Period.

 

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7.2.14.     INVENTORY LIMITS.

 

AT ANY TIME WHEN THE INVESTMENT GRADE PERIOD IS NOT IN EFFECT, THE LOAN PARTIES
SHALL NOT PERMIT:

 

(I)            THE DOLLAR VALUE OF UNENTITLED LAND TO EXCEED TWENTY PERCENT
(20%) OF THE SUM OF ADJUSTED TANGIBLE NET WORTH AND THE PRINCIPAL AMOUNT OF THE
SUBORDINATED DEBT, AS CALCULATED AS OF THE END OF EACH FISCAL QUARTER;

 

(II)           THE DOLLAR VALUE OF FINISHED LOTS AND LAND UNDER DEVELOPMENT PLUS
UNENTITLED LAND TO EXCEED THE SUM OF ADJUSTED TANGIBLE NET WORTH AND THE
PRINCIPAL AMOUNT OF THE SUBORDINATED DEBT, AS CALCULATED AS OF THE END OF EACH
FISCAL QUARTER; OR

 

(III)          THE NUMBER OF UNSOLD DWELLING UNITS EXISTING AS OF THE END OF ANY
FISCAL QUARTER TO EXCEED 25% OF THE NUMBER OF DWELLING UNITS CONVEYED BY ANY
PERSON WHO IS A LOAN PARTY ON THE DATE OF DETERMINATION OR ANY PERSON THAT WAS
ACQUIRED AND MERGED OR CONSOLIDATED WITH AND INTO A PERSON WHO IS A LOAN PARTY
ON THE DATE OF DETERMINATION TO THIRD PARTY PURCHASERS WITHIN THE PREVIOUS
TWELVE (12) MONTHS.

 

7.2.15.               FISCAL YEAR.

 

The Loan Parties shall not change their fiscal year from the twelve-month period
ending October 31.

 

7.2.16.               CHANGES IN SUBORDINATED DEBT DOCUMENTS.

 

The Loan Parties shall not amend or modify any provisions of the documents
relating to the Subordinated Debt without providing at least ten (10) calendar
days’ prior written notice to the Agent, and, if the same would adversely affect
the interests of the Agent and the Lenders in any material respect, obtaining
the prior written consent of the Required Lenders.  No Loan Party shall directly
or indirectly make any payment on the Subordinated Debt which would violate the
provisions of any applicable subordination agreement or provision.  Neither the
Senior Notes nor the Subordinated Debt shall become secured.

 

7.3                                 REPORTING REQUIREMENTS.

 

The Borrower and Hovnanian, jointly and severally, covenant and agree that until
payment in full of the Loans, Reimbursement Obligations and Letter of Credit
Borrowings and interest thereon, expiration or termination of all Letters of
Credit, satisfaction of all of the Loan Parties’ other Obligations hereunder and
under the other Loan Documents (other than any contingent indemnity obligations
not then due) and termination of the Commitments, they shall, and shall cause
the other Loan Parties to, to the extent applicable, furnish or cause to be
furnished to the Agent:

 

7.3.1.                     QUARTERLY FINANCIAL STATEMENTS.

 

As soon as available and in any event within fifty-five (55) calendar days after
the end of each of the first three fiscal quarters in each fiscal year of
Hovnanian, financial statements of Hovnanian, consisting of a consolidated
balance sheet as of

 

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the end of such fiscal quarter and related consolidated statements of income,
stockholders’ equity and cash flows for the fiscal quarter then ended and the
fiscal year through that date, all in reasonable detail and certified (subject
to normal year-end audit adjustments) by the Chief Executive Officer, President,
Treasurer or Chief Financial Officer or principal accounting officer of
Hovnanian as having been prepared in accordance with GAAP, consistently applied,
and setting forth in comparative form the respective financial statements for
the corresponding date and period in the previous fiscal year.  The Loan Parties
will be deemed to have complied with the delivery requirements of this
Section 7.3.1 if within fifty-five (55) days after the end of their fiscal
quarter, the Borrower delivers to the Agent a copy of Hovnanian’s Form 10-Q as
filed with the SEC and the financial statements contained therein meets the
requirements described in this Section 7.3.1.

 

7.3.2.                     ANNUAL FINANCIAL STATEMENTS.

 

As soon as available and in any event within ninety (90) days after the end of
each fiscal year of Hovnanian, financial statements of Hovnanian consisting of a
consolidated balance sheet as of the end of such fiscal year, and related
consolidated statements of income, stockholders’ equity and cash flows for the
fiscal year then ended, all in reasonable detail and setting forth in
comparative form the financial statements as of the end of and for the preceding
fiscal year, and certified by independent certified public accountants of
nationally recognized standing reasonably satisfactory to the Agent.  The
certificate or report of accountants shall be free of qualifications (other than
any consistency qualification that may result from a change in the method used
to prepare the financial statements as to which such accountants concur) and
shall not indicate the occurrence or existence of any event, condition or
contingency which would materially impair the prospect of payment or performance
of any covenant, agreement or duty of any Loan Party under any of the Loan
Documents or cause or constitute an Event of Default.  The Loan Parties will be
deemed to have complied with the delivery requirements of this Section 7.3.2 if
within ninety (90) days after the end of Hovnanian’s fiscal year, the Borrower
delivers to the Agent a copy of Hovnanian’s Annual Report and Form 10-K as filed
with the SEC and the financial statements and separately delivers the
above-referenced certification of public accountants.

 

7.3.3.                     CERTIFICATES OF THE BORROWER.

 

7.3.3.1                     COMPLIANCE CERTIFICATE.  CONCURRENTLY WITH THE
FINANCIAL STATEMENTS OF HOVNANIAN FURNISHED TO THE AGENT AND TO THE LENDERS
PURSUANT TO SECTIONS 7.3.1 [QUARTERLY FINANCIAL STATEMENTS] AND 7.3.2 [ANNUAL
FINANCIAL STATEMENTS]:

 

(a)           a certificate of the Borrower signed by the Chief Executive
Officer, President, Treasurer or Chief Financial Officer or principal accounting
officer of the Borrower, in the form of Exhibit 7.3.3.1 (each a “Compliance
Certificate”), to the effect that, except as described pursuant to
Section 7.3.3.2 [Borrowing Base Certificate], (i) the representations and
warranties of the Borrower contained in Section 5.1 [Representations and
Warranties] and in the other Loan Documents are true and correct in all material
respects on and as of the date of such certificate with the same effect as
though such representations and warranties had been made on and as of such date
(except representations and warranties which expressly relate solely to an
earlier date or time), (ii) no Event of Default or Potential Default

 

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exists and is continuing on the date of such certificate and (iii) containing
calculations in sufficient detail to demonstrate compliance as of the date of
such financial statements with all financial covenants contained in Section 7.2
[Negative Covenants].

 

(b)           summary consolidated financial statements for each of (i) the
Non-Restricted Persons as a group and (ii) the Borrower, Hovnanian and the
Restricted Subsidiaries as a group; provided that the statements provided in
footnote 20 entitled “Financial Information of Subsidiary Issuer and Subsidiary”
of the Borrower’s consolidated financial statements in Form 10-K and in footnote
16 in Form 10-Q shall be deemed to satisfy this requirement;

 

(c)           summary financial statements for each Joint Venture in which any
Loan Party has a Subsidiary Investment greater than an amount equal to 4% of
Adjusted Tangible Net Worth as of the last day of the previous fiscal quarter of
Hovnanian; and

 

(d)           to the extent not previously disclosed in writing to the Agent, a
report of any changes to Schedule 1.1(C) including changes arising under
Section 2.11 [Designation of Subsidiaries and Release of Guarantors].

 

7.3.3.2     BORROWING BASE CERTIFICATE.

 

As soon as available, but not later than fifty-five (55) days after the end of
each month, a Borrowing Base Certificate as of the end of such month,
appropriately completed, executed and delivered by an Authorized Officer,
together with a certificate of the Borrower signed by the Chief Executive
Officer, President, Treasurer or Chief Financial Officer or principal accounting
officer of the Borrower, in the form of Exhibit 7.3.3.2, to the effect that,
except as described pursuant to Section 7.3.4 [Notice of Default], no Event of
Default or Potential Default exists and is continuing on the date of such
Borrowing Base Certificate; provided, however, the Borrowing Base Certificate
delivered with respect to the month of October, in any year, may be in draft
form, subject to change as a result of the year-end audit, but in no event shall
be executed and delivered in final form later than ninety (90) days after the
end of such fiscal year.  The Borrower shall be required to deliver a Borrowing
Base Certificate as of the end of a month even if the Investment Grade Period is
in effect as of such month-end.

 

7.3.4.                     NOTICE OF DEFAULT.

 

Promptly after any officer of any Loan Party has learned of the occurrence of an
Event of Default or Potential Default, a certificate signed by the Chief
Executive Officer, President or Chief Financial Officer or principal accounting
officer of such Loan Party setting forth the details of such Event of Default or
Potential Default and the action which such Loan Party proposes to take with
respect thereto.

 

7.3.5.                     NOTICE OF LITIGATION.

 

Promptly after the commencement thereof, notice of all actions, suits,
proceedings or investigations before or by any Official Body or any other Person

 

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against any Loan Party that involve a claim or series of claims in excess of
$1,000,000 which is not covered by insurance or which could reasonably be
expected to constitute a Material Adverse Change.

 

7.3.6.                     NOTICE OF CHANGE IN DEBT RATING.

 

Within two (2) Business Days after Standard & Poor’s, Moody’s or Fitch announces
a change in Hovnanian’s Debt Rating, notice of such change.  Hovnanian will
deliver together with such notice a copy of any written notification which
Hovnanian received from the applicable rating agency regarding such change of
Debt Rating.

 

7.3.7.                     BUDGETS, FORECASTS, OTHER REPORTS AND INFORMATION.

 

Promptly upon their becoming available to any Loan Party:

 

(I)            ANY REPORTS, NOTICES OR PROXY STATEMENTS GENERALLY DISTRIBUTED BY
HOVNANIAN TO ITS STOCKHOLDERS,

 

(II)           REGULAR OR PERIODIC REPORTS, INCLUDING FORMS 10-K, 10-Q AND 8-K,
REGISTRATION STATEMENTS AND PROSPECTUSES, FILED BY HOVNANIAN WITH THE SEC, AND

 

(III)          SUCH OTHER REPORTS AND INFORMATION AS THE AGENT MAY FROM TIME TO
TIME REASONABLY REQUEST.  THE LOAN PARTIES SHALL ALSO NOTIFY THE AGENT PROMPTLY
OF THE ENACTMENT OR ADOPTION OF ANY LAW WHICH COULD REASONABLY BE EXPECTED TO
CONSTITUTE A MATERIAL ADVERSE CHANGE.

 

7.3.8.                     NOTICES REGARDING PLANS AND BENEFIT ARRANGEMENTS.

 

7.3.8.1     CERTAIN EVENTS.

 

Promptly after learning of the occurrence thereof, notice (including the nature
of the event and, when known, any action taken or threatened by the Internal
Revenue Service or the PBGC with respect thereto) of any of the following
events, or series of such events, if, individually or in the aggregate, any
liabilities or penalties resulting from such event(s) could reasonably be
expected to result in a Material Adverse Change:

 

(I)            ANY REPORTABLE EVENT WITH RESPECT TO ANY PLAN,

 

(II)           ANY PROHIBITED TRANSACTION WHICH COULD SUBJECT ANY LOAN PARTY OR
ANY OTHER MEMBER OF THE ERISA GROUP TO A CIVIL PENALTY ASSESSED PURSUANT TO
SECTION 502(I) OF ERISA OR A TAX IMPOSED BY SECTION 4975 OF THE INTERNAL REVENUE
CODE IN CONNECTION WITH ANY PLAN, ANY BENEFIT ARRANGEMENT OR ANY TRUST CREATED
THEREUNDER,

 

(III)          ANY WITHDRAWAL FROM A MULTIEMPLOYER PLAN BY THE BORROWER OR ANY
OTHER MEMBER OF THE ERISA GROUP UNDER TITLE IV OF ERISA OR ASSERTION BY A
MULTIEMPLOYER PLAN THAT SUCH A WITHDRAWAL HAS OCCURRED,

 

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(IV)          ANY CESSATION OF OPERATIONS (BY ANY LOAN PARTY OR ANY OTHER MEMBER
OF THE ERISA GROUP) AT A FACILITY IN THE CIRCUMSTANCES DESCRIBED IN
SECTION 4062(E) OF ERISA,

 

(V)           WITHDRAWAL BY ANY LOAN PARTY OR ANY OTHER MEMBER OF THE ERISA
GROUP FROM A PLAN IN THE CIRCUMSTANCES DESCRIBED IN SECTION 4063 OF ERISA OR THE
TERMINATION OF SUCH PLAN IN THE CIRCUMSTANCES DESCRIBED IN SECTION 4064 OF
ERISA,

 

(VI)          A FAILURE TO MAKE ANY REQUIRED CONTRIBUTION TO A PLAN OR THE
CREATION OF ANY LIEN IN FAVOR OF THE PBGC OR A PLAN,

 

(VII)         THE ADOPTION OF AN AMENDMENT TO A PLAN REQUIRING THE PROVISION OF
SECURITY TO SUCH PLAN PURSUANT TO SECTION 307 OF ERISA, OR

 

(VIII)        THE DISTRESS TERMINATION OF A PLAN, UNDER TITLE IV OF ERISA, WHICH
HAS INSUFFICIENT ASSETS TO PAY ALL LIABILITIES.

 

7.3.8.2     NOTICES OF INVOLUNTARY TERMINATION AND ANNUAL REPORTS.

 

Promptly after receipt thereof, copies of (a) all notices received by any Loan
Party or any other member of the ERISA Group of the PBGC’s intent to terminate
any Plan administered or maintained by the Borrower or any member of the ERISA
Group, or to have a trustee appointed to administer any such Plan; and (b) at
the request of the Agent or any Lender each annual report (IRS Form 5500 series)
and all accompanying schedules, the most recent actuarial reports, the most
recent financial information concerning the financial status of each Plan
administered or maintained by any Loan Party or any other member of the ERISA
Group, and schedules showing the amounts contributed to each such Plan by or on
behalf of the Borrower or any other member of the ERISA Group in which any of
their personnel participate or from which such personnel may derive a benefit,
and each Schedule B (Actuarial Information) to the annual report filed by any
Loan Party or any other member of the ERISA Group with the Internal Revenue
Service with respect to each such Plan.

 

7.3.8.3     NOTICE OF VOLUNTARY TERMINATION.

 

Where a termination of any Plan would result in a Material Adverse Change,
promptly upon the filing thereof, copies of any Form 5310, or any successor or
equivalent form to Form 5310, filed with the PBGC in connection with the
termination of any Plan.

 

8.             DEFAULT

 

8.1                                 EVENTS OF DEFAULT.

 

An Event of Default shall mean the occurrence or existence of any one or more of
the following events or conditions (whatever the reason therefor and whether
voluntary, involuntary or effected by operation of Law):

 

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8.1.1.                     PAYMENTS UNDER LOAN DOCUMENTS.

 

The Borrower shall fail to pay (i) any principal of any Loan (including
scheduled installments, mandatory prepayments or the payment due at maturity),
Reimbursement Obligation or Letter of Credit Borrowing when such principal is
due hereunder or (ii) any interest on any Loan, Reimbursement Obligation or
Letter of Credit Borrowing or any other amount owing hereunder or under the
other Loan Documents within three (3) Business Days after such interest or other
amount becomes due in accordance with the terms hereof or thereof;

 

8.1.2.                     BREACH OF WARRANTY.

 

Any representation or warranty made at any time by any of the Loan Parties
herein or by any of the Loan Parties in any other Loan Document, or in any
certificate, other instrument or statement furnished pursuant to the provisions
hereof or thereof, shall prove to have been false or misleading in any material
respect as of the time it was made or furnished;

 

8.1.3.                     BREACH OF CERTAIN NEGATIVE COVENANTS.

 

Any of the Loan Parties shall default in the observance or performance of any
covenant contained in Sections 7.2.10 [Borrower Base], 7.2.11 [Minimum ATNW],
7.2.12 [Leverage Ratio], 7.2.13 [Fixed Charge Coverage Ratio] or 7.2.14
[Inventory and Land Purchase Limits];

 

8.1.4.                     BREACH OF OTHER COVENANTS.

 

Any of the Loan Parties shall default in the observance or performance of any
other covenant, condition or provision hereof or of any other Loan Document and
such default shall continue unremedied for a period of thirty (30) Business Days
after notice to the Borrower from the Agent;

 

8.1.5.                     DEFAULTS IN OTHER AGREEMENTS OR INDEBTEDNESS.

 

Either (i) a default or event of default shall occur at any time under the terms
of any other agreement involving borrowed money or the extension of credit or
any other Indebtedness (excluding any surety bonds) under which any Loan Party
may be obligated as a borrower or guarantor in excess of $10,000,000 in the
aggregate, and such breach, default or event of default consists of the failure
to pay (beyond any period of grace permitted with respect thereto, whether
waived or not) any Indebtedness when due (whether at stated maturity, by
acceleration or otherwise) or if such breach or default permits or causes the
acceleration of any Indebtedness (whether or not such right shall have been
waived) or the termination of any commitment to lend, or (ii) draws shall be
made on surety bonds in excess of $10,000,000 in the aggregate issued on behalf
of any Loan Party and such Loan Party shall fail to reimburse the providers
thereof within 60 days after the date of the applicable draws;

 

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8.1.6.                     FINAL JUDGMENTS OR ORDERS.

 

Any final judgments or orders for the payment of money in excess of $10,000,000
in the aggregate (excluding amounts covered by insurance with respect to which
the relevant insurer acknowledged such coverage) shall be entered against any
Loan Party by a court having jurisdiction, which judgment is not discharged,
vacated, bonded or stayed pending appeal within a period of thirty (30) days
from the date of entry;

 

8.1.7.                     LOAN DOCUMENT UNENFORCEABLE.

 

Any of the Loan Documents shall cease to be legal, valid and binding agreements
enforceable against the party executing the same or such party’s successors and
assigns (as permitted under the Loan Documents) in accordance with the
respective terms thereof or shall in any way be terminated (except in accordance
with its terms or as permitted under the Loan Documents) or become or be
declared ineffective or inoperative or shall in any way be challenged or
contested or cease to give or provide the respective Liens, security interests,
rights, titles, interests, remedies, powers or privileges intended to be created
thereby;

 

8.1.8.                     UNINSURED LOSSES; PROCEEDINGS AGAINST ASSETS.

 

Any of the Loan Parties’ assets come within the possession of any receiver,
trustee, custodian or assignee for the benefit of creditors and the same is not
cured within thirty (30) days thereafter and could reasonably be expected to
constitute a Material Adverse Change;

 

8.1.9.                     NOTICE OF LIEN OR ASSESSMENT.

 

Any taxes or debts owing in excess of $10,000,000 in the aggregate at any time
or times hereafter to any of the United States, or any department, agency or
instrumentality thereof, or by any state, county, municipal or other
governmental agency, including the PBGC become payable and the same are not paid
within thirty (30) days after the same become payable;

 

8.1.10.               INSOLVENCY.

 

Any of (i) Hovnanian, (ii) the Borrower or (iii) Restricted Subsidiaries owning
as of the date of any event described in this Section 8.1.10 three percent (3%)
or more of the Dollar value of all of the assets of all of the Subsidiaries of
Hovnanian taken as a whole ceases to be solvent or admits in writing its
inability to pay its debts as they mature;

 

8.1.11.               EVENTS RELATING TO PLANS AND BENEFIT ARRANGEMENTS.

 

Any of the following occurs:  (i) any Reportable Event with respect to a Plan,
which the Agent reasonably determines in good faith constitutes grounds for the
termination of any Plan by the PBGC or the appointment of a trustee to
administer or liquidate any Plan, shall have occurred and be continuing;
(ii) proceedings shall have been instituted or other action taken to terminate
any Plan, or a termination notice shall have been

 

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filed with respect to any Plan; (iii) a trustee shall be appointed to administer
or liquidate any Plan; (iv) the PBGC shall give notice of its intent to
institute proceedings to terminate any Plan or Plans or to appoint a trustee to
administer or liquidate any Plan; and, in the case of the occurrence of (i),
(ii), (iii) or (iv) above, the Agent reasonably determines in good faith that
the amount of any Loan Party’s liability is likely to exceed 10% of the
Consolidated Tangible Net Worth of the Loan Parties; (v) any “accumulated
funding deficiency” (as defined in Section 302 of ERISA) shall exist with
respect to any Plan, or any Lien in favor of the PBGC or a Plan shall arise on
the assets of the Borrower or any other member of the ERISA Group,  (vi) any
Loan Party or any other member of the ERISA Group shall make any amendment to a
Plan with respect to which security is required under Section 307 of ERISA;
(vii) any Loan Party or any other member of the ERISA Group shall incur any
liability in connection with a withdrawal from a Multiemployer Plan; (viii) any
Loan Party or any other member of the ERISA Group shall withdraw under
Section 4063 of ERISA (or shall be deemed under Section 4062(e) of ERISA to
withdraw) from a Plan; or (ix) any applicable Law is adopted, changed or
interpreted by any Official Body with respect to or otherwise affecting one or
more Plans, Multiemployer Plans or Benefit Arrangements and, with respect to any
of the events specified in (v), (vi), (vii), (viii) or (ix), the Agent
reasonably determines in good faith that any such occurrence, together with all
other such events, would be reasonably likely to result in a Material Adverse
Change;

 

8.1.12.               CESSATION OF BUSINESS.

 

Any Loan Party is enjoined, restrained or in any way prevented by court order
from conducting all or any material part of its business and such injunction,
restraint or other preventive order is not dismissed within thirty (30) days
after the entry thereof and any of the foregoing could reasonably be expected to
constitute a Material Adverse Change;

 

8.1.13.               CHANGE OF CONTROL.

 

(I)            ANY PERSON OR GROUP OF PERSONS (WITHIN THE MEANING OF
SECTIONS 13(D) OR 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED)
SHALL HAVE ACQUIRED BENEFICIAL OWNERSHIP OF (WITHIN THE MEANING OF RULE 13D-3
PROMULGATED BY THE SEC UNDER SAID ACT) 40% OR MORE OF THE VOTING CAPITAL STOCK
OF HOVNANIAN; OR (II) WITHIN A PERIOD OF TWELVE (12) CONSECUTIVE CALENDAR
MONTHS, INDIVIDUALS WHO WERE DIRECTORS OF THE BORROWER ON THE FIRST DAY OF SUCH
PERIOD, OR WHO WERE NOMINATED BY A MAJORITY OF SUCH DIRECTORS, SHALL CEASE TO
CONSTITUTE A MAJORITY OF THE BOARD OF DIRECTORS OF THE BORROWER;

 

8.1.14.               INVOLUNTARY PROCEEDINGS.

 

A proceeding shall have been instituted in a court having jurisdiction seeking a
decree or order for relief in respect of any of (i) Hovnanian, (ii) the Borrower
or (iii) Restricted Subsidiaries owning as of the date of any event described in
this Section 8.1.14 three percent (3%) or more of the Dollar value of all of the
assets of all of the Subsidiaries of Hovnanian taken as a whole in an
involuntary case under any applicable bankruptcy, insolvency, reorganization or
other similar law now or hereafter in effect, or for the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator
(or similar official) of any Loan Party for any substantial part of its
property, or for the winding-up

 

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or liquidation of its affairs, and such proceeding shall remain undismissed or
unstayed and in effect for a period of sixty (60) consecutive days or such court
shall enter a decree or order granting any of the relief sought in such
proceeding; or

 

8.1.15.               VOLUNTARY PROCEEDINGS.

 

Any of (i) Hovnanian, (ii) the Borrower or (iii) Restricted Subsidiaries owning
as of the date of any event described in this Section 8.1.15 three percent (3%)
or more of the Dollar value of all of the assets of all of the Subsidiaries of
Hovnanian taken as a whole shall commence a voluntary case under any applicable
bankruptcy, insolvency, reorganization or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an involuntary case
under any such law, or shall consent to the appointment or taking possession by
a receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator
(or other similar official) of itself or for any substantial part of its
property or shall make a general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due, or shall take any
action in furtherance of any of the foregoing.

 

8.2                                 CONSEQUENCES OF EVENT OF DEFAULT.

 

8.2.1.                     EVENTS OF DEFAULT OTHER THAN BANKRUPTCY, INSOLVENCY
OR REORGANIZATION PROCEEDINGS.

 

If an Event of Default specified under Sections 8.1.1 [Payments Under Loan
Documents] through 8.1.13 [Change of Control] shall occur and be continuing, the
Lenders and the Agent shall be under no further obligation to make Loans or
issue Letters of Credit, as the case may be, and the Agent may, and upon the
request of the Required Lenders, shall (i) by written notice to the Borrower,
declare the unpaid principal amount of the Loan then outstanding and all
interest accrued thereon, any unpaid fees and all other Indebtedness of the
Borrower to the Lenders hereunder and thereunder to be forthwith due and
payable, and the same shall thereupon become and be immediately due and payable
to the Agent for the benefit of each Lender without presentment, demand, protest
or any other notice of any kind, all of which are hereby expressly waived, and
(ii) require the Borrower to, and the Borrower shall thereupon, deposit in an
interest-bearing account with the Agent, as cash collateral for its Obligations
under the Loan Documents, an amount equal to the maximum amount currently or at
any time thereafter available to be drawn on all outstanding Letters of Credit,
and the Borrower hereby pledges to the Agent and the Lenders, and grants to the
Agent and the Lenders a security interest in, all such cash as security for such
Obligations.  Upon the curing of all existing Events of Default, the Agent shall
return such cash collateral to the Borrower; and

 

8.2.2.                     BANKRUPTCY, INSOLVENCY OR REORGANIZATION PROCEEDINGS.

 

If an Event of Default specified under Section 8.1.14 [Involuntary Proceedings]
or 8.1.15 [Voluntary Proceedings] shall occur, the Lenders shall be under no
further obligations to make Loans or issue Letters of Credit hereunder and the
unpaid principal amount of the Loans then outstanding and all interest accrued
thereon, any unpaid fees and all other Indebtedness of the Borrower to the
Lenders hereunder and thereunder shall be

 

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immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived and the Borrower shall upon
such occurrence, deposit in an interest-bearing account with the Agent, as cash
collateral for its Obligations under the Loan Documents, an amount equal to the
maximum amount currently or at any time thereafter available to be drawn on all
outstanding Letters of Credit, and the Borrower hereby pledges to the Agent and
the Lenders, and grants to the Agent and the Lenders a security interest in, all
such cash as security for such Obligations; and

 

8.2.3.                     SET-OFF.

 

If an Event of Default shall occur and be continuing, any Lender to whom any
Obligation is owed by any Loan Party hereunder or under any other Loan Document
or any participant of such Lender which has agreed in writing to be bound by the
provisions of Section 9.13 [Equalization of Lenders] and any branch, Subsidiary
or Affiliate of such Lender or participant anywhere in the world shall have the
right, in addition to all other rights and remedies available to it, without
notice to such Loan Party, to set-off against and apply to the then unpaid
balance of all past-due Loans and all other past-due Obligations of the Borrower
and the other Loan Parties hereunder or under any other Loan Document any debt
owing to, and any other funds held in any manner for the account of, the
Borrower or such other Loan Party by such Lender or participant or by such
branch, Subsidiary or Affiliate, including all funds in all deposit accounts
(whether time or demand, general or special, provisionally credited or finally
credited, or otherwise) now or hereafter maintained by the Borrower or such
other Loan Party for its own account (but not including funds held in custodian
or trust accounts) with such Lender or participant or such branch, Subsidiary or
Affiliate; and

 

8.2.4.                     SUITS, ACTIONS, PROCEEDINGS.

 

If an Event of Default shall occur and be continuing, and whether or not the
Agent shall have accelerated the maturity of Loans pursuant to any of the
foregoing provisions of this Section 8.2 [Consequences of Event of Default], the
Agent or any Lender, if owed any amount with respect to the Loans, may proceed
to protect and enforce its rights by suit in equity, action at law and/or other
appropriate proceeding, whether for the specific performance of any covenant or
agreement contained in this Agreement or the other Loan Documents, including as
permitted by applicable Law the obtaining of the ex parte appointment of a
receiver, and, if such amount shall have become due, by declaration or
otherwise, proceed to enforce the payment thereof or any other legal or
equitable right of the Agent or such Lender; and

 

8.2.5.                     APPLICATION OF PROCEEDS.

 

From and after the date on which the Agent has taken any action pursuant to this
Section 8.2 [Consequences of Event of Default] and until all Obligations of the
Loan Parties have been paid in full, any and all proceeds received by the Agent
from the exercise of any remedy by the Agent, shall be applied as follows:

 

(I)            FIRST, TO REIMBURSE THE AGENT AND THE LENDERS FOR OUT-OF-POCKET
COSTS, EXPENSES AND DISBURSEMENTS, INCLUDING REASONABLE ATTORNEYS’ AND
PARALEGALS’

 

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fees and legal expenses, incurred by the Agent or the Lenders in connection with
collection of any Obligations of any of the Loan Parties under any of the Loan
Documents;

 

(II)           SECOND, TO THE REPAYMENT OF ALL INDEBTEDNESS THEN DUE AND UNPAID
OF THE LOAN PARTIES TO THE LENDERS INCURRED UNDER THIS AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS, WHETHER OF PRINCIPAL, INTEREST, FEES, EXPENSES OR
OTHERWISE, IN SUCH MANNER AS THE AGENT MAY DETERMINE IN ITS DISCRETION; AND

 

(III)          THE BALANCE, IF ANY, AS REQUIRED BY LAW.

 

8.2.6.                     OTHER RIGHTS AND REMEDIES.

 

In addition to all of the rights and remedies contained in this Agreement or in
any of the other Loan Documents, the Agent shall have all of the rights and
remedies under applicable Law, all of which rights and remedies shall be
cumulative and non-exclusive, to the extent permitted by Law.  The Agent may,
and upon the request of the Required Lenders shall, exercise all post-default
rights granted to the Agent and the Lenders under the Loan Documents or
applicable Law.

 

9.             THE AGENT

 

9.1                                 APPOINTMENT.

 

Each Lender hereby irrevocably designates, appoints and authorizes PNC Bank to
act as Agent for such Lender under this Agreement and to execute and deliver or
accept on behalf of each of the Lenders the other Loan Documents.  Each Lender
hereby irrevocably authorizes the Agent to take such action on its behalf under
the provisions of this Agreement and the other Loan Documents and any other
instruments and agreements referred to herein, and to exercise such powers and
to perform such duties hereunder as are specifically delegated to or required of
the Agent by the terms hereof, together with such powers as are reasonably
incidental thereto.  PNC Bank agrees to act as the Agent on behalf of the
Lenders to the extent provided in this Agreement.

 

9.2                                 DELEGATION OF DUTIES.

 

The Agent may perform any of its duties hereunder by or through agents or
employees (provided such delegation does not constitute a relinquishment of its
duties as Agent) and, subject to Sections 9.5 [Reimbursement and Indemnification
of Agent by the Borrower] and 9.6 [Exculpatory Provisions; Limitation of
Liability], shall be entitled to engage and pay for the advice or services of
any attorneys, accountants or other experts concerning all matters pertaining to
its duties hereunder and to rely upon any advice so obtained.

 

9.3                                 NATURE OF DUTIES; INDEPENDENT CREDIT
INVESTIGATION.

 

The Agent shall have no duties or responsibilities except those expressly set
forth in this Agreement and no implied covenants, functions, responsibilities,
duties, obligations, or liabilities shall be read into this Agreement or
otherwise exist.  The duties of the Agent shall be mechanical and administrative
in nature; the Agent shall not have by reason of this Agreement a

 

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fiduciary or trust relationship in respect of any Lender; and nothing in this
Agreement, expressed or implied, is intended to or shall be so construed as to
impose upon the Agent any obligations in respect of this Agreement except as
expressly set forth herein.  Without limiting the generality of the foregoing,
the use of the term “agent” in this Agreement with reference to the Agent is not
intended to connote any fiduciary or other implied (or express) obligations
arising under agency doctrine of any applicable Law.  Instead, such term is used
merely as a matter of market custom, and is intended to create or reflect only
an administrative relationship between independent contracting parties.  Each
Lender expressly acknowledges (i) that the Agent has not made any
representations or warranties to it and that no act by the Agent hereafter
taken, including any review of the affairs of any of the Loan Parties, shall be
deemed to constitute any representation or warranty by the Agent to any Lender;
(ii) that it has made and will continue to make, without reliance upon the
Agent, its own independent investigation of the financial condition and affairs
and its own appraisal of the creditworthiness of each of the Loan Parties in
connection with this Agreement and the making and continuance of the Loans
hereunder; and (iii) except as expressly provided herein, that the Agent shall
have no duty or responsibility, either initially or on a continuing basis, to
provide any Lender with any credit or other information with respect thereto,
whether coming into its possession before the making of any Loan or at any time
or times thereafter.

 

9.4                                 ACTIONS IN DISCRETION OF AGENT; INSTRUCTIONS
FROM THE LENDERS.

 

The Agent agrees, upon the written request of the Required Lenders, to take or
refrain from taking any action of the type specified as being within the Agent’s
rights, powers or discretion herein, provided that the Agent shall not be
required to take any action which exposes the Agent to personal liability or
which is contrary to this Agreement or any other Loan Document or applicable
Law.  In the absence of a request by the Required Lenders, the Agent shall have
authority, in its sole discretion, to take or not to take any such action,
unless this Agreement specifically requires the consent of the Required Lenders
or all of the Lenders.  Any action taken or failure to act pursuant to such
instructions or discretion shall be binding on the Lenders, subject to
Section 9.6 [Exculpatory Provisions; Limitation of Liability].  Subject to the
provisions of Section 9.6 [Exculpatory Provisions; Limitation of Liability], no
Lender shall have any right of action whatsoever against the Agent as a result
of the Agent acting or refraining from acting hereunder in accordance with the
instructions of the Required Lenders, or in the absence of such instructions, in
the absolute discretion of the Agent.+

 

9.5                                 REIMBURSEMENT AND INDEMNIFICATION OF AGENT
BY THE BORROWER.

 

The Borrower unconditionally agrees to pay or reimburse the Agent, its
Affiliates and their respective directors, officers, employees, agents and
advisors and hold such Persons harmless against (a) liability for the payment of
all reasonable out-of-pocket costs, expenses and disbursements, including fees
and expenses of counsel (including the allocated costs of staff counsel),
incurred by such Persons (i) in connection with the development, negotiation,
preparation, printing, execution, administration, syndication, interpretation
and performance of this Agreement and the other Loan Documents, (ii) relating to
any requested amendments, waivers or consents pursuant to the provisions hereof,
(iii) in connection with the enforcement of this Agreement or any other Loan
Document or collection of amounts due hereunder or thereunder or the proof and
allowability of any claim arising under this Agreement or any other

 

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Loan Document, whether in bankruptcy or receivership proceedings or otherwise,
and (iv) in any workout or restructuring or in connection with the protection,
preservation, exercise or enforcement of any of the terms hereof or of any
rights hereunder or under any other Loan Document or in connection with any
foreclosure, collection or bankruptcy proceedings, and (b) all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against such Persons, in their capacity as such, in
any way relating to or arising out of this Agreement or any other Loan Documents
or any action taken or omitted by such Persons hereunder or thereunder, provided
that the Borrower shall not be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements if the same results from such Persons’ gross
negligence or willful misconduct or from the gross negligence or willful
misconduct of any of such Person’s Affiliates, directors, officers, employees,
agents or advisors, or if the Borrower was not given notice of the subject claim
and the opportunity to participate in the defense thereof, at its expense
(except that the Borrower shall remain liable to the extent such failure to give
notice does not result in a loss to the Borrower), or if the same results from a
compromise or settlement agreement entered into without the consent of the
Borrower, which shall not be unreasonably withheld.  In addition, after the
occurrence and during the continuance of an Event of Default, the Borrower
agrees to reimburse and pay all reasonable out-of-pocket expenses of the Agent’s
regular employees and agents engaged periodically to perform audits of the Loan
Parties’ books, records and business properties.

 

9.6                                 EXCULPATORY PROVISIONS; LIMITATION OF
LIABILITY.

 

Neither the Agent nor any of its directors, officers, employees, agents,
attorneys or Affiliates shall (a) be liable to any Lender for any action taken
or omitted to be taken by it or them hereunder, or in connection herewith
including pursuant to any Loan Document, unless caused by its or their own gross
negligence or willful misconduct, (b) be responsible in any manner to any of the
Lenders for the effectiveness, enforceability, genuineness, validity or the due
execution of this Agreement or any other Loan Documents or for any recital,
representation, warranty, document, certificate, report or statement herein or
made or furnished under or in connection with this Agreement or any other Loan
Documents, or (c) be under any obligation to any of the Lenders to ascertain or
to inquire as to the performance or observance of any of the terms, covenants or
conditions hereof or thereof on the part of the Loan Parties, or the financial
condition of the Loan Parties, or the existence or possible existence of any
Event of Default or Potential Default.  No claim may be made by any of the Loan
Parties, any Lender, the Agent or any of their respective Subsidiaries against
the Agent, any Lender or any of their respective directors, officers, employees,
agents, attorneys or Affiliates, or any of them, for any special, indirect or
consequential damages or, to the fullest extent permitted by Law, for any
punitive damages in respect of any claim or cause of action (whether based on
contract, tort, statutory liability, or any other ground) based on, arising out
of or related to any Loan Document or the transactions contemplated hereby or
any act, omission or event occurring in connection therewith, including the
negotiation, documentation, administration or collection of the Loans, and each
of the Loan Parties (for itself and on behalf of each of its Subsidiaries), the
Agent and each Lender hereby waive, release and agree never to sue upon any
claim for any such damages, whether such claim now exists or hereafter arises
and whether or not it is now known or

 

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suspected to exist in its favor.  The Agent shall promptly distribute to each
Lender copies of financial statements delivered by the Borrower pursuant to
Section 7.3.1 and Section 7.3.2 and the Borrowing Base Certificates delivered
pursuant to Section 7.3.3.2.  Each Lender agrees that, except for notices,
reports and other documents expressly required to be furnished to the Lenders by
the Agent hereunder or given to the Agent for the account of or with copies for
the Lenders, the Agent and each of its directors, officers, employees, agents,
attorneys or Affiliates shall not have any duty or responsibility to provide any
Lender with credit or other information concerning the business, operations,
property, condition (financial or otherwise), prospects or creditworthiness of
the Loan Parties which may come into the possession of the Agent or any of its
directors, officers, employees, agents, attorneys or Affiliates.

 

9.7                                 REIMBURSEMENT AND INDEMNIFICATION OF AGENT
BY LENDERS.

 

Each Lender agrees to reimburse and indemnify the Agent (to the extent not
reimbursed by the Borrower and without limiting the obligation of the Borrower
to do so), its Affiliates and their respective directors, officers, employees,
agents and advisors in proportion to such Lender’s Ratable Share from and
against all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements, including attorneys’ fees
and disbursements (including the allocated costs of staff counsel), and costs of
appraisers and environmental consultants, of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against such Persons, in its capacity
as such, in any way relating to or arising out of this Agreement or any other
Loan Documents or any action taken or omitted by such Persons hereunder or
thereunder, provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements (a) if the same results from such Persons’
gross negligence or willful misconduct, or (b) if such Lender was not given
notice of the subject claim and the opportunity to participate in the defense
thereof, at its expense (except that such Lender shall remain liable to the
extent such failure to give notice does not result in a loss to the Lender), or
(c) if the same results from a compromise and settlement agreement entered into
without the consent of such Lender, which shall not be unreasonably withheld. 
In addition, each Lender agrees promptly upon demand to reimburse such Persons
(to the extent not reimbursed by the Borrower and without limiting the
obligation of the Borrower to do so) in proportion to its Ratable Share for all
amounts due and payable by the Borrower to the Agent in connection with the
Agent’s periodic audit of the Loan Parties’ books, records and business
properties.

 

9.8                                 RELIANCE BY AGENT.

 

The Agent shall be entitled to rely upon any writing, telegram, telex or
teletype message, electronic mail, resolution, notice, consent, certificate,
letter, cablegram, statement, order or other document or conversation by
telephone or otherwise believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons, and upon the advice and
opinions of counsel and other professional advisers selected by the Agent.  The
Agent shall be fully justified in failing or refusing to take any action
hereunder unless it shall first be indemnified to its satisfaction by the
Lenders against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action.

 

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9.9                                 NOTICE OF DEFAULT.

 

The Agent shall not be deemed to have knowledge or notice of the occurrence of
any Potential Default or Event of Default unless the Agent has received written
notice from a Lender or the Borrower referring to this Agreement, describing
such Potential Default or Event of Default and stating that such notice is a
“notice of default.”

 

9.10                           NOTICES.

 

The Agent shall promptly send to each Lender a copy of all notices received from
the Borrower pursuant to the provisions of this Agreement or the other Loan
Documents promptly upon receipt thereof.  The Agent shall promptly notify the
Borrower and the other Lenders of each change in the Base Rate and the effective
date thereof.

 

9.11                           LENDERS IN THEIR INDIVIDUAL CAPACITIES; AGENTS IN
ITS INDIVIDUAL CAPACITY.

 

With respect to its Revolving Credit Commitment, the Revolving Credit Loans made
by it and any other rights and powers given to it as a Lender hereunder or under
any of the other Loan Documents, the Agent shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were not
the Agent, and the term “Lender” and “Lenders” shall, unless the context
otherwise indicates, include the Agent in its individual capacity.  PNC Bank and
its Affiliates and each of the Lenders and their respective Affiliates may,
without liability to account, except as prohibited herein, make loans to, issue
letters of credit for the account of, acquire equity interests in, accept
deposits from, discount drafts for, act as trustee under indentures of, and
generally engage in any kind of banking, trust, financial advisory, underwriting
or other business with, the Loan Parties and their Affiliates, in the case of
the Agent, as though it were not acting as Agent hereunder and in the case of
each Lender, as though such Lender were not a Lender hereunder, in each case
without notice to or consent of the other Lenders.  The Lenders acknowledge
that, pursuant to such activities, the Agent or its Affiliates may (i) receive
information regarding the Loan Parties or any of their Subsidiaries or
Affiliates (including information that may be subject to confidentiality
obligations in favor of the Loan Parties or such Subsidiary or Affiliate) and
acknowledge that the Agent shall be under no obligation to provide such
information to them, and (ii) accept fees and other consideration from the Loan
Parties for services in connection with this Agreement and otherwise without
having to account for the same to the Lenders.

 

9.12                           HOLDERS OF NOTES.

 

The Agent may deem and treat any payee of any Note as the owner thereof for all
purposes hereof unless and until written notice of the assignment or transfer
thereof shall have been filed with the Agent.  Any request, authority or consent
of any Person who at the time of making such request or giving such authority or
consent is the holder of any Note shall be conclusive and binding on any
subsequent holder, transferee or assignee of such Note or of any Note or Notes
issued in exchange therefor.

 

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9.13                           EQUALIZATION OF LENDERS.

 

The Lenders and the holders of any participations in any Commitments or Loans or
other rights or obligations of a Lender hereunder agree among themselves that,
with respect to all amounts received by any Lender or any such holder for
application on any Obligation hereunder or under any such participation, whether
received by voluntary payment, by realization upon security, by the exercise of
the right of set-off or banker’s lien, by counterclaim or by any other non-pro
rata source, equitable adjustment will be made in the manner stated in the
following sentence so that, in effect, all such excess amounts will be shared
ratably among the Lenders and such holders in proportion to their interests in
payments on the Loans, except as otherwise provided in Section 3.4.3 [Agent’s
and Lender’s Rights], 4.4.2 [Replacement of a Lender] or 4.6 [Additional
Compensation in Certain Circumstances].  The Lenders or any such holder
receiving any such amount shall purchase for cash from each of the other Lenders
an interest in such Lender’s Loans in such amount as shall result in a ratable
participation by the Lenders and each such holder in the aggregate unpaid amount
of the Loans, provided that if all or any portion of such excess amount is
thereafter recovered from the Lender or the holder making such purchase, such
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, together with interest or other amounts, if any, required by law
(including court order) to be paid by the Lender or the holder making such
purchase.

 

9.14                           SUCCESSOR AGENT.

 

The Agent (i) may resign as Agent or (ii) shall resign if such resignation is
requested by the Required Lenders (if the Agent is a Lender, the Agent’s Loans
and its Commitment shall be considered in determining whether the Required
Lenders have requested such resignation) or required by Section 4.4.2
[Replacement of a Lender], in either case of (i) or (ii) by giving not less than
thirty (30) days’ prior written notice to the Borrower.  If the Agent shall
resign under this Agreement, then either (a) the Required Lenders shall appoint
from among the Lenders a successor agent for the Lenders, subject to the consent
of the Borrower, such consent not to be unreasonably withheld, or (b) if a
successor agent shall not be so appointed and approved within the thirty (30)
day period following the Agent’s notice to the Lenders of its resignation, then
the Agent shall appoint from among the Lenders, with the consent of the
Borrower, such consent not to be unreasonably withheld, a successor agent who
shall serve as Agent until such time as the Required Lenders appoint and the
Borrower consents to the appointment of a successor agent.  Upon its appointment
pursuant to either clause (a) or (b) above, such successor agent shall succeed
to the rights, powers and duties of the Agent, and the term “Agent” shall mean
such successor agent, effective upon its appointment, and the former Agent’s
rights, powers and duties as Agent shall be terminated without any other or
further act or deed on the part of such former Agent or any of the parties to
this Agreement.  After the resignation of any Agent hereunder, the provisions of
this Section 9 shall inure to the benefit of such former Agent and such former
Agent shall not by reason of such resignation be deemed to be released from
liability for any actions taken or not taken by it while it was an Agent under
this Agreement.

 

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9.15                           AGENT’S FEES.

 

The Borrower shall pay to the Agents nonrefundable fees (the “Agent’s Fees”)
under the terms of a letters (the “Agent’s Letters”) between the Borrower and
Agents, as amended from time to time.

 

9.16                           AVAILABILITY OF FUNDS.

 

The Agent may assume that each Lender has made or will make the proceeds of a
Loan available to the Agent unless the Agent shall have been notified by such
Lender on or before the later of (1) the close of Business on the Business Day
preceding the Borrowing Date with respect to such Loan or two (2) hours before
the time on which the Agent actually funds the proceeds of such Loan to the
Borrower (whether using its own funds pursuant to this Section 9.16 or using
proceeds deposited with the Agent by the Lenders and whether such funding occurs
before or after the time on which Lenders are required to deposit the proceeds
of such Loan with the Agent).  The Agent may, in reliance upon such assumption
(but shall not be required to), make available to the Borrower a corresponding
amount.  If such corresponding amount is not in fact made available to the Agent
by such Lender, the Agent shall be entitled to recover such amount on demand
from such Lender (or, if such Lender fails to pay such amount forthwith upon
such demand from the Borrower) together with interest thereon, in respect of
each day during the period commencing on the date such amount was made available
to the Borrower and ending on the date the Agent recovers such amount, at a rate
per annum equal to (i) the Federal Funds Effective Rate during the first three
(3) days after such interest shall begin to accrue and (ii) the applicable
interest rate in respect of such Loan after the end of such three-day period.

 

9.17                           CALCULATIONS.

 

In the absence of gross negligence or willful misconduct, the Agent shall not be
liable for any error in computing the amount payable to any Lender whether in
respect of the Loans, fees or any other amounts due to the Lenders under this
Agreement.  In the event an error in computing any amount payable to any Lender
is made, the Agent, the Borrower and each affected Lender shall, forthwith upon
discovery of such error, make such adjustments as shall be required to correct
such error, and any compensation therefor will be calculated at the Federal
Funds Effective Rate.

 

9.18                           BENEFICIARIES.

 

Except as expressly provided herein, the provisions of this Section 9 [The
Agent] are solely for the benefit of the Agent and the Lenders, and the Loan
Parties shall not have any rights to rely on or enforce any of the provisions
hereof.  In performing its functions and duties under this Agreement, the Agent
shall act solely as agent of the Lenders and does not assume and shall not be
deemed to have assumed any obligation toward or relationship of agency or trust
with or for any of the Loan Parties.

 

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10.           MISCELLANEOUS

 

10.1                           MODIFICATIONS, AMENDMENTS OR WAIVERS.

 

With the written consent of the Required Lenders, the Agent, acting on behalf of
all the Lenders, and the Borrower, on behalf of the Loan Parties, may from time
to time enter into written agreements amending or changing any provision of this
Agreement or any other Loan Document or the rights of the Lenders or the Loan
Parties hereunder or thereunder, or may grant written waivers or consents to a
departure from the due performance of the Obligations of the Loan Parties
hereunder or thereunder.  Any such agreement, waiver or consent made with such
written consent shall be effective to bind all the Lenders and the Loan Parties;
provided, that, without the written consent of all the Lenders, no such
agreement, waiver or consent may be made which will:

 

10.1.1.               INCREASE OF COMMITMENT.

 

Increase the amount of the aggregate Revolving Credit Commitments;

 

10.1.2.               EXTENSION OF PAYMENT; REDUCTION OF PRINCIPAL, INTEREST OR
FEES; MODIFICATION OF TERMS OF PAYMENT.

 

Subject to Section 2.10 [Extension by Lenders of the Expiration Date], but
whether or not any Loans are outstanding, extend the time for payment of
principal or interest of any Loan (excluding the due date of any mandatory
prepayment of a Loan or any mandatory Commitment reduction in connection with
such a mandatory prepayment hereunder except for mandatory reductions of the
Commitments on the Expiration Date), the Commitment Fee or any other fee payable
to any Lender, or reduce the principal amount of or the rate of interest borne
by any Loan or reduce the Commitment Fee or any other fee payable to any Lender,
or otherwise directly affect the terms of payment of the principal of or
interest of any Loan, the Commitment Fee or any other fee payable to any Lender;

 

10.1.3.               MISCELLANEOUS

 

Amend Section 2.11.1 [Release of Guarantors],  4.2 [Pro Rata Treatment of
Lenders], 9.6 [Exculpatory Provisions; Limitation of Liability], 9.13
[Equalization of Lenders] or this Section 10.1 [Modifications, Amendments or
Waivers] change the pro rata treatment of the Lenders, change the definition of
Required Lenders, or change any requirement providing for the Lenders or the
Required Lenders to authorize the taking of any action hereunder;

 

provided, that no agreement, waiver or consent which would modify the interests,
rights or obligations of the Agent in its capacity as Agent shall be effective
without the written consent of the Agent and provided further, that no provision
of Sections 2.1.2 [Swing Loan Commitment], 2.4.2 [Swing Loan Requests], 2.5.2
[Making Swing Loans], 2.6 [Swing Loan Note], 2.8 [Borrowings to Repay Swing
Loans] and 4.8 [Settlement Date Procedures] may be amended or modified without
the consent of PNC Bank.

 

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10.2                           NO IMPLIED WAIVERS; CUMULATIVE REMEDIES; WRITING
REQUIRED.

 

No course of dealing and no delay or failure of the Agent or any Lender in
exercising any right, power, remedy or privilege under this Agreement or any
other Loan Document shall affect any other or future exercise thereof or operate
as a waiver thereof, nor shall any single or partial exercise thereof or any
abandonment or discontinuance of steps to enforce such a right, power, remedy or
privilege preclude any further exercise thereof or of any other right, power,
remedy or privilege.  The rights and remedies of the Agent and the Lenders under
this Agreement and any other Loan Documents are cumulative and not exclusive of
any rights or remedies which they would otherwise have.  Any waiver, permit,
consent or approval of any kind or character on the part of any Lender of any
breach or default under this Agreement or any such waiver of any provision or
condition of this Agreement must be in writing and shall be effective only to
the extent specifically set forth in such writing.

 

10.3                           REIMBURSEMENT AND INDEMNIFICATION OF LENDERS BY
THE BORROWER; TAXES.

 

The Borrower agrees unconditionally upon demand to pay or reimburse to each
Lender (other than the Agent, as to which the Borrower’s Obligations are set
forth in Section 9.5 [Reimbursement and Indemnification of Agent by the
Borrower]) and its Affiliates, and their respective directors, officers,
employees, agents and advisors and to save such Persons harmless against
(i) liability for the payment of all reasonable out-of-pocket costs, expenses
and disbursements (including fees and expenses of counsel (including allocated
costs of staff counsel) for each such Person except with respect to (a) and
(b) below), incurred by such Person (a) in connection with the administration
and interpretation of this Agreement, and other instruments and documents to be
delivered hereunder, (b) relating to any amendments, waivers or consents
pursuant to the provisions hereof, (c) in connection with the enforcement of
this Agreement or any other Loan Document, or collection of amounts due
hereunder or thereunder or the proof and allowability of any claim arising under
this Agreement or any other Loan Document, whether in bankruptcy or receivership
proceedings or otherwise, and (d) in any workout or restructuring or in
connection with the protection, preservation, exercise or enforcement of any of
the terms hereof or of any rights hereunder or under any other Loan Document or
in connection with any foreclosure, collection or bankruptcy proceedings, or
(ii) all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against such Person,
in its capacity as such, in any way relating to or arising out of this Agreement
or any other Loan Documents or any action taken or omitted by such Person
hereunder or thereunder, provided that the Borrower shall not be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements (A) if the same results from
such Person’s gross negligence or willful misconduct or from the gross
negligence or willful misconduct of any of such Person’s Affiliates, directors,
officers, employees, agents or advisors, or (B) if the Borrower was not given
notice of the subject claim and the opportunity to participate in the defense
thereof, at its expense (except that the Borrower shall remain liable to the
extent such failure to give notice does not result in a loss to the Borrower),
or (C) if the same results from a compromise or settlement agreement entered
into without the consent of the Borrower, which shall not be unreasonably
withheld. The Borrower agrees unconditionally to pay all stamp, document,
transfer, recording or filing taxes or fees and similar impositions now or
hereafter determined by the Agent or any Lender to be

 

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payable in connection with this Agreement or any other Loan Document, and the
Borrower agrees unconditionally to save the Agent and the Lenders harmless from
and against any and all present or future claims, liabilities or losses with
respect to or resulting from any omission to pay or delay in paying any such
taxes, fees or impositions.

 

10.4                           HOLIDAYS.

 

Whenever payment of a Loan to be made or taken hereunder shall be due on a day
which is not a Business Day such payment shall be due on the next Business Day
(except as provided in Section 3.2 [Interest Periods] with respect to Interest
Periods under the LIBO-Rate Option) and such extension of time shall be included
in computing interest and fees, except that the Loans shall be due on the
Business Day preceding the Expiration Date if the Expiration Date is not a
Business Day.  Whenever any payment or action to be made or taken hereunder
(other than payment of the Loans) shall be stated to be due on a day which is
not a Business Day, such payment or action shall be made or taken on the next
following Business Day, and such extension of time shall not be included in
computing interest or fees, if any, in connection with such payment or action.

 

10.5                           FUNDING BY BRANCH, SUBSIDIARY OR AFFILIATE.

 

10.5.1.               NOTIONAL FUNDING.

 

Each Lender shall have the right from time to time, without notice to the
Borrower, to deem any branch, Subsidiary or Affiliate (which for the purposes of
this Section 10.5 shall mean any corporation or association which is directly or
indirectly controlled by or is under direct or indirect common control with any
corporation or association which directly or indirectly controls such Lender) of
such Lender to have made, maintained or funded any Loan to which the LIBO-Rate
Option applies at any time, provided that immediately following (on the
assumption that a payment were then due from the Borrower to such other office),
and as a result of such change, the Borrower would not be under any greater
financial obligation (including pursuant to Section 4.6 [Additional Compensation
in Certain Circumstances]) than it would have been in the absence of such
change.  Notional funding offices may be selected by each Lender without regard
to such Lender’s actual methods of making, maintaining or funding the Loans or
any sources of funding actually used by or available to such Lender.

 

10.5.2.               ACTUAL FUNDING.

 

Each Lender shall have the right from time to time to make or maintain any Loan
by arranging for a branch, Subsidiary or Affiliate of such Lender to make or
maintain such Loan subject to the last sentence of this Section 10.5.2.  If any
Lender causes a branch, Subsidiary or Affiliate to make or maintain any part of
the Loans hereunder, all terms and conditions of this Agreement shall, except
where the context clearly requires otherwise, be applicable to such part of the
Loans to the same extent as if such Loans were made or maintained by such
Lender, but in no event shall any Lender’s use of such a branch, Subsidiary or
Affiliate to make or maintain any part of the Loans hereunder cause such Lender
or such branch, Subsidiary or Affiliate to incur any cost or expenses payable by
the Borrower hereunder or

 

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require the Borrower to pay any other compensation to any Lender (including any
expenses incurred or payable pursuant to Section 4.6 [Additional Compensation in
Certain Circumstances]) which would otherwise not be incurred.

 

10.6                           NOTICES.

 

Any notice, request, demand, direction or other communication (for purposes of
this Section 10.6 only, a “Notice”) to be given to or made upon any party hereto
under any provision of this Agreement shall be given or made by telephone or in
writing (which includes means of electronic transmission (i.e., “e-mail”) or
facsimile transmission or by setting forth such Notice on a site on the World
Wide Web (a “Website Posting”) if Notice of such Website Posting (including the
information necessary to access such site) has previously been delivered to the
applicable parties hereto by another means set forth in this Section 10.6 in
accordance with this Section 10.6.  Any such Notice must be delivered to the
applicable parties hereto at the addresses and numbers set forth under their
respective names on Schedule 1.1(B) hereof or in accordance with any subsequent
unrevoked Notice from any such party that is given in accordance with this
Section 10.6.  Any Notice shall be effective:

 

(I)            IN THE CASE OF HAND-DELIVERY, WHEN DELIVERED;

 

(II)           IF GIVEN BY MAIL, FOUR (4) DAYS AFTER SUCH NOTICE IS DEPOSITED
WITH THE UNITED STATES POSTAL SERVICE, WITH FIRST-CLASS POSTAGE PREPAID, RETURN
RECEIPT REQUESTED;

 

(III)          IN THE CASE OF A TELEPHONIC NOTICE, WHEN A PARTY IS CONTACTED BY
TELEPHONE, IF DELIVERY OF SUCH TELEPHONIC NOTICE IS CONFIRMED NO LATER THAN THE
NEXT BUSINESS DAY BY HAND DELIVERY, A FACSIMILE OR ELECTRONIC TRANSMISSION, A
WEBSITE POSTING OR OVERNIGHT COURIER DELIVERY OF A CONFIRMATORY NOTICE (RECEIVED
AT OR BEFORE NOON ON SUCH NEXT BUSINESS DAY);

 

(IV)          IN THE CASE OF A FACSIMILE TRANSMISSION, WHEN SENT TO THE
APPLICABLE PARTY’S FACSIMILE MACHINE’S TELEPHONE NUMBER IF THE PARTY SENDING
SUCH NOTICE RECEIVES CONFIRMATION OF THE DELIVERY THEREOF FROM ITS OWN FACSIMILE
MACHINE;

 

(V)           IN THE CASE OF ELECTRONIC TRANSMISSION, WHEN ACTUALLY RECEIVED;

 

(VI)          IN THE CASE OF A WEBSITE POSTING, UPON DELIVERY OF A NOTICE OF
SUCH POSTING (INCLUDING THE INFORMATION NECESSARY TO ACCESS SUCH WEB SITE) BY
ANOTHER MEANS SET FORTH IN THIS SECTION 10.6; AND

 

(VII)         IF GIVEN BY ANY OTHER MEANS (INCLUDING BY OVERNIGHT COURIER), WHEN
ACTUALLY RECEIVED.

 

Any Lender giving a Notice to a Loan Party shall concurrently send a copy
thereof to the Agent, and the Agent shall promptly notify the other Lenders of
its receipt of such Notice.

 

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10.7                           SEVERABILITY.

 

The provisions of this Agreement are intended to be severable.  If any provision
of this Agreement shall be held invalid or unenforceable in whole or in part in
any jurisdiction, such provision shall, as to such jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without in any manner
affecting the validity or enforceability thereof in any other jurisdiction or
the remaining provisions hereof in any jurisdiction.

 

10.8                           GOVERNING LAW.

 

Each Letter of Credit and Section 2.10 [Letter of Credit Subfacility] shall be
subject to the Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce Publication No. 500, as the same
may be revised or amended from time to time, and to the extent not inconsistent
therewith, the internal laws of the State of New Jersey without regard to its
conflict of laws principles, and the balance of this Agreement shall be deemed
to be a contract under the Laws of the State of New Jersey and for all purposes
shall be governed by and construed and enforced in accordance with the internal
laws of the State of New Jersey without regard to its conflict of laws
principles.

 

10.9                           PRIOR UNDERSTANDING.

 

This Agreement and the other Loan Documents supersede all prior understandings
and agreements, whether written or oral, between the parties hereto and thereto
relating to the transactions provided for herein and therein, including any
prior confidentiality agreements and commitments.

 

10.10                     DURATION; SURVIVAL.

 

All representations and warranties of the Borrower and Hovnanian contained
herein or made in connection herewith shall survive the making of Loans and
issuance of Letters of Credit and shall not be waived by the execution and
delivery of this Agreement, any investigation by the Agent or the Lenders, the
making of Loans, issuance of Letters of Credit, or payment in full of the
Loans.  All covenants and agreements of the Borrower and Hovnanian contained in
Sections 7.1 [Affirmative Covenants], 7.2 [Negative Covenants] and 7.3
[Reporting Requirements] herein shall continue in full force and effect from and
after the date hereof so long as the Borrower may borrow or request Letters of
Credit hereunder and until termination of the Commitments and payment in full of
the Loans and expiration or termination of all Letters of Credit.  All covenants
and agreements of the Borrower contained herein relating to the payment of
principal, interest, premiums, additional compensation or expenses and
indemnification, including those set forth in Section 4 [Payments] and
Sections 9.5 [Reimbursement and Indemnification of Agent by the Borrower], 9.7
[Reimbursement and Indemnification of Agent by Lenders] and 10.3 [Reimbursement
and Indemnification of Lenders by Borrower; Taxes], shall survive payment in
full of the Loans, expiration or termination of the Letters of Credit and
termination of the Commitments.

 

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10.11                     SUCCESSORS AND ASSIGNS.

 

10.11.1    THIS AGREEMENT SHALL BE BINDING UPON AND SHALL INURE TO THE BENEFIT
OF THE LENDERS, THE AGENT, THE LOAN PARTIES A PARTY HERETO AND THEIR RESPECTIVE
SUCCESSORS AND ASSIGNS, EXCEPT THAT NONE OF THE LOAN PARTIES A PARTY HERETO MAY
ASSIGN OR TRANSFER ANY OF ITS RIGHTS AND OBLIGATIONS HEREUNDER OR ANY INTEREST
HEREIN.  EACH LENDER MAY, AT ITS OWN COST, MAKE ASSIGNMENTS OF OR SELL
PARTICIPATIONS IN ALL OR ANY PART OF ITS COMMITMENTS AND THE LOANS MADE BY IT TO
ONE OR MORE BANKS OR OTHER ENTITIES, SUBJECT TO THE CONSENT OF THE BORROWER AND
THE AGENT WITH RESPECT TO ANY ASSIGNEE, SUCH CONSENT NOT TO BE UNREASONABLY
WITHHELD PROVIDED THAT (1) NO CONSENT OF THE BORROWER SHALL BE REQUIRED (A) IF
AN EVENT OF DEFAULT EXISTS AND IS CONTINUING, (B) IN THE CASE OF AN ASSIGNMENT
BY A LENDER TO AN AFFILIATE OF SUCH LENDER, OR (C) IN RESPECT OF THE SALE OF A
PARTICIPATION, (2) ANY ASSIGNMENT BY A LENDER TO A PERSON OTHER THAN AN
AFFILIATE OF SUCH LENDER MAY NOT BE MADE IN AMOUNTS LESS THAN THE LESSER OF
$10,000,000 OR THE AMOUNT OF THE ASSIGNING LENDER’S COMMITMENT AND (3) NO
CONSENT OF THE AGENT SHALL BE REQUIRED IN THE CASE OF AN ASSIGNMENT BY A LENDER
TO AN AFFILIATE OF SUCH LENDER.  IN THE CASE OF AN ASSIGNMENT, UPON RECEIPT BY
THE AGENT OF THE ASSIGNMENT AND ASSUMPTION AGREEMENT, THE ASSIGNEE SHALL HAVE,
TO THE EXTENT OF SUCH ASSIGNMENT (UNLESS OTHERWISE PROVIDED THEREIN), THE SAME
RIGHTS, BENEFITS AND OBLIGATIONS AS IT WOULD HAVE IF IT HAD BEEN A SIGNATORY
LENDER HEREUNDER, THE COMMITMENTS SHALL BE ADJUSTED ACCORDINGLY, AND UPON
SURRENDER OF ANY NOTE SUBJECT TO SUCH ASSIGNMENT, THE BORROWER SHALL EXECUTE AND
DELIVER A NEW NOTE TO THE ASSIGNEE, IF SUCH ASSIGNEE REQUESTS SUCH A NOTE IN AN
AMOUNT EQUAL TO THE AMOUNT OF THE REVOLVING CREDIT COMMITMENT ASSUMED BY IT AND
A NEW REVOLVING CREDIT NOTE TO THE ASSIGNING LENDER, IF THE ASSIGNING LENDER
REQUESTS SUCH A NOTE, IN AN AMOUNT EQUAL TO THE REVOLVING CREDIT COMMITMENT OR
RETAINED BY IT HEREUNDER.  ANY LENDER WHICH ASSIGNS ANY OR ALL OF ITS COMMITMENT
OR LOANS TO A PERSON OTHER THAN AN AFFILIATE OF SUCH LENDER SHALL PAY TO THE
AGENT A SERVICE FEE IN THE AMOUNT OF $3,500 FOR EACH ASSIGNMENT.  IN THE CASE OF
A PARTICIPATION, THE PARTICIPANT SHALL ONLY HAVE THE RIGHTS SPECIFIED IN
SECTION 8.2.3 [SET-OFF] (THE PARTICIPANT’S RIGHTS AGAINST SUCH LENDER IN RESPECT
OF SUCH PARTICIPATION TO BE THOSE SET FORTH IN THE AGREEMENT EXECUTED BY SUCH
LENDER IN FAVOR OF THE PARTICIPANT RELATING THERETO AND NOT TO INCLUDE ANY
VOTING RIGHTS EXCEPT WITH RESPECT TO CHANGES OF THE TYPE REFERENCED IN
SECTIONS 10.1.1 [INCREASE OF COMMITMENT, EXTENSION OF EXPIRATION DATE], OR
10.1.2 [EXTENSION OF PAYMENT; REDUCTION OF PRINCIPAL, INTEREST OR FEES;
MODIFICATION OF TERMS OF PAYMENT]), ALL OF SUCH LENDER’S OBLIGATIONS UNDER THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL REMAIN UNCHANGED, AND ALL AMOUNTS
PAYABLE BY ANY LOAN PARTY HEREUNDER OR THEREUNDER SHALL BE DETERMINED AS IF SUCH
LENDER HAD NOT SOLD SUCH PARTICIPATION.

 

10.11.2    EACH LENDER OR ASSIGNEE OR PARTICIPANT OF A LENDER THAT IS NOT
INCORPORATED UNDER THE LAWS OF THE UNITED STATES OF AMERICA OR A STATE THEREOF
(AND, UPON THE WRITTEN REQUEST OF THE AGENT, EACH OTHER LENDER OR ASSIGNEE OR
PARTICIPANT OF A LENDER) SHALL DELIVER TO THE BORROWER AND THE AGENT A
WITHHOLDING CERTIFICATE AS DESCRIBED IN SECTION 10.17 [TAX WITHHOLDING CLAUSE]
RELATING TO FEDERAL INCOME TAX WITHHOLDING.  EACH LENDER MAY FURNISH ANY
PUBLICLY AVAILABLE INFORMATION CONCERNING HOVNANIAN OR ANY LOAN PARTY AND ANY
OTHER INFORMATION CONCERNING HOVNANIAN OR ANY LOAN PARTY IN THE POSSESSION OF
SUCH LENDER FROM TIME TO TIME TO ASSIGNEES AND PARTICIPANTS (INCLUDING
PROSPECTIVE ASSIGNEES OR PARTICIPANTS), PROVIDED THAT SUCH ASSIGNEES AND
PARTICIPANTS AGREE TO BE BOUND BY THE PROVISIONS OF SECTION 10.12
[CONFIDENTIALITY].

 

87

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10.11.3    NOTWITHSTANDING ANY OTHER PROVISION IN THIS AGREEMENT, ANY LENDER MAY
AT ANY TIME PLEDGE OR GRANT A SECURITY INTEREST IN ALL OR ANY PORTION OF ITS
RIGHTS UNDER THIS AGREEMENT, ITS NOTE (IF ANY) AND THE OTHER LOAN DOCUMENTS TO
ANY FEDERAL RESERVE LENDER IN ACCORDANCE WITH REGULATION A OF THE FRB OR U.S.
TREASURY REGULATION 31 CFR SECTION 203.14 WITHOUT NOTICE TO OR CONSENT OF THE
BORROWER OR THE AGENT.  NO SUCH PLEDGE OR GRANT OF A SECURITY INTEREST SHALL
RELEASE THE TRANSFEROR LENDER OF ITS OBLIGATIONS HEREUNDER OR UNDER ANY OTHER
LOAN DOCUMENT.

 

10.12                     CONFIDENTIALITY.

 

10.12.1.      GENERAL.

 

The Agent and the Lenders each agree to keep confidential all information
obtained from any Loan Party or its Subsidiaries which is nonpublic and
confidential or proprietary in nature (including any information the Borrower
specifically designates as confidential), except as provided below, and to use
such information only in connection with their respective capacities under this
Agreement and for the purposes contemplated hereby.  The Agent and the Lenders
shall be permitted to disclose such information (i) to outside legal counsel,
accountants and other professional advisors who need to know such information in
connection with the administration and enforcement of this Agreement, subject to
agreement of such Persons to maintain the confidentiality, (ii) to Moody’s,
Standard & Poor’s and similar rating agencies, (iii) to assignees and
participants as contemplated by Section 10.11 [Successors and Assigns], and
prospective assignees and participants subject to an agreement of such Persons
to maintain the confidentiality, (iv) to the extent requested by any bank
regulatory authority or, with notice to the Borrower, as otherwise required by
applicable Law or by any subpoena or similar legal process, or in connection
with any investigation or proceeding arising out of the transactions
contemplated by this Agreement, (v) if it becomes publicly available other than
as a result of a breach of this Agreement or becomes available from a source not
known to be subject to confidentiality restrictions, or (vi) if the Borrower
shall have consented to such disclosure.

 

10.12.2.         SHARING INFORMATION WITH AFFILIATES OF THE LENDERS.

 

Each Loan Party a party hereto acknowledges that from time to time financial
advisory, investment banking and other services (including the provision of
swaps, derivatives, securitizations or other financial products) may be offered
or provided to the Borrower or one or more of its Affiliates (in connection with
this Agreement or otherwise) by any Lender or by one or more Subsidiaries or
Affiliates of such Lender and each of the Loan Parties a party hereto hereby
authorizes each Lender to share any information delivered to such Lender by such
Loan Party and its Subsidiaries pursuant to this Agreement, or in connection
with the decision of such Lender to enter into this Agreement, to any such
Subsidiary or Affiliate of such Lender, it being understood that any such
Subsidiary or Affiliate of any Lender receiving such information shall be bound
by the provisions of Section 10.12 [Confidentiality] as if it were a Lender
hereunder.  Such Authorization shall survive the repayment of the Loans and
other Obligations and the termination of the Commitments.

 

88

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10.13                     COUNTERPARTS.

 

This Agreement may be executed by different parties hereto on any number of
separate counterparts, each of which, when so executed and delivered, shall be
an original, and all such counterparts shall together constitute one and the
same instrument.

 

10.14                     AGENT’S OR LENDER’S CONSENT.

 

Whenever the Agent’s or any Lender’s consent is required to be obtained under
this Agreement or any of the other Loan Documents as a condition to any action,
inaction, condition or event, unless specifically otherwise provided herein, the
Agent and each Lender shall be authorized to give or withhold such consent in
its sole and absolute discretion and to condition its consent upon the giving of
additional collateral, the payment of money or any other matter.

 

10.15                     EXCEPTIONS.

 

The representations, warranties and covenants contained herein shall be
independent of each other, and no exception to any representation, warranty or
covenant shall be deemed to be an exception to any other representation,
warranty or covenant contained herein unless expressly provided, nor shall any
such exceptions be deemed to permit any action or omission that would be in
contravention of applicable Law.

 

10.16                 CONSENT TO FORUM; WAIVER OF JURY TRIAL.

 

EACH LOAN PARTY A PARTY HERETO HEREBY IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE
JURISDICTION OF THE SUPERIOR COURT OF NEW JERSEY, LAW DIVISION, MIDDLESEX COUNTY
AND THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY AND WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO SUCH LOAN
PARTY AT THE ADDRESSES PROVIDED FOR IN SECTION 10.6 [NOTICES] AND SERVICE SO
MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF.  EACH LOAN
PARTY A PARTY HERETO WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY
ACTION INSTITUTED AGAINST IT AS PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY
DEFENSE BASED ON LACK OF JURISDICTION OR VENUE.  EACH LOAN PARTY A PARTY HERETO,
THE AGENT AND THE LENDERS HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, SUIT,
PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS
AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY COLLATERAL TO THE FULL EXTENT
PERMITTED BY LAW.

 

89

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10.17                     CERTIFICATIONS FROM LENDERS AND PARTICIPANTS.

 

10.17.1            TAX WITHHOLDING CLAUSE.

 

Each Lender or assignee or participant of a Lender that is not incorporated
under the Laws of the United States of America or a state thereof (and, upon the
written request of the Agent, each other Lender or assignee or participant of a
Lender) agrees that it will deliver to each of the Borrower and the Agent two
(2) duly completed appropriate valid Withholding Certificates (as defined under
§1.1441-1(c)(16) of the Income Tax Regulations (“Regulations”)) certifying its
status (i.e., U.S. or foreign person) and, if appropriate, making a claim of
reduced, or exemption from, U.S. withholding tax on the basis of an income tax
treaty or an exemption provided by the Internal Revenue Code. Such delivery may
be made by electronic transmission as described in §1.1441-1(e)(4)(iv) of the
Regulations if the Agent establishes an electronic delivery system. The term
“Withholding Certificate” means a Form W-9; a Form W-8BEN; a Form W-8ECI; a
Form W-8IMY and the related statements and certifications as required under
§1.1441-1(e)(3) of the Regulations; a statement described in
§1.871-14(c)(2)(v) of the Regulations; or any other certificates under the Code
or Regulations that certify or establish the status of a payee or beneficial
owner as a U.S. or foreign person. Each Lender, assignee or participant required
to deliver to the Borrower and the Agent a valid Withholding Certificate
pursuant to the preceding sentence shall deliver such valid Withholding
Certificate as follows: (A) each Lender which is a party hereto on the Closing
Date shall deliver such valid Withholding Certificate at least five (5) Business
Days prior to the first date on which any interest or fees are payable by the
Borrower hereunder for the account of such Lender; (B) each assignee or
participant shall deliver such valid Withholding Certificate at least five
(5) Business Days before the effective date of such assignment or participation
(unless the Agent in its sole discretion shall permit such assignee or
participant to deliver such Withholding Certificate less than five (5) Business
Days before such date in which case it shall be due on the date specified by the
Agent). Each Lender, assignee or participant which so delivers a valid
Withholding Certificate further undertakes to deliver to each of the Borrower
and the Agent two (2) additional copies of such Withholding Certificate (or a
successor form) on or before the date that such Withholding Certificate expires
or becomes obsolete or after the occurrence of any event requiring a change in
the most recent Withholding Certificate so delivered by it, and such amendments
thereto or extensions or renewals thereof as may be reasonably requested by the
Borrower or the Agent. Notwithstanding the submission of a Withholding
Certificate claiming a reduced rate of, or exemption from, United States
withholding tax, the Agent shall be entitled to withhold United States federal
income taxes at the full 30% withholding rate if in its reasonable judgment it
is required to do so under the due diligence requirements imposed upon a
withholding agent under §1.1441-7(b) of the Regulations. Further, the Agent is
indemnified under §1.1461-1(e) of the Regulations against any claims and demands
of any Lender or assignee or participant of a Lender for the amount of any tax
it deducts and withholds in accordance with regulations under §1441 of the
Internal Revenue Code.

 

10.17.2    USA Patriot Act.

 

Each Lender or assignee or participant of a Lender that is not incorporated
under the Laws of the United States of America or a state thereof (and is not
excepted from the certification requirement contained in Section 313 of the USA
Patriot Act and

 

90

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the applicable regulations because it is both (i) an affiliate of a depository
institution or foreign Lender that maintains a physical presence in the United
States or foreign country, and (ii) subject to supervision by a banking
authority regulating such affiliated depository institution or foreign bank)
shall deliver to the Agent the certification, or, if applicable,
recertification, certifying that such Lender is not a “shell” and certifying to
other matters as required by Section 313 of the USA Patriot Act and the
applicable regulations: (1) within 10 days after the Closing Date, and (2) as
such other times as are required under the USA Patriot Act.

 

10.18                     JOINDER OF GUARANTORS.

 

Any Subsidiary of Hovnanian which is required to join the Guaranty Agreement as
a Guarantor pursuant to Section 7.2.7 [Subsidiaries, Partnerships and Joint
Ventures] or which is to become, a Restricted Subsidiary shall execute and
deliver to the Agent or the Agent’s counsel (i) a Guarantor Joinder pursuant to
which it shall join as a Guarantor the Guaranty Agreement; and (ii) at the
request of the Agent or its counsel, documents in the forms described in
Section 6.1 [First Loans and Letters of Credit] modified as appropriate to
relate to such new Guarantor.  Hovnanian and Borrower shall deliver such
Guarantor Joinder and any related documents that the Agent or its counsel may
reasonably request to the Agent or its counsel after the formation thereof and
its designation as a Restricted Subsidiary; such Subsidiary shall not be a
Restricted Subsidiary until the delivery and effectiveness of the items required
herein.

 

10.19       CONCERNING AGENT TERMS.

 

Notwithstanding anything contained herein which may be construed to the
contrary, none of the Syndication Agents, the Documentation Agents, Co-Managing
Agents and the Joint Lead Arrangers and Joint Book Runners shall exercise any of
the rights or have any of the responsibilities of the Agent hereunder, or any
other rights or responsibilities other than their respective rights and
responsibilities (if any) as Lenders hereunder.

 

10.20                     RATIFICATION OF NOTES AND LOAN DOCUMENTS AND EXISTING
OBLIGATIONS.

 

All of the terms, conditions, provisions and covenants in the Prior Credit
Agreement, the Notes and other Loan Documents delivered in connection therewith,
and all other documents delivered to the Agent and the Lenders in connection
with any of the foregoing documents and obligations evidenced or secured thereby
shall remain unaltered and in full force and effect and are hereby ratified and
confirmed in all respects, except as specifically modified herein.  This
Agreement amends and restates, and supersedes, the Prior Credit Agreement and is
in no way intended to constitute a novation of the “Obligations” under the Prior
Credit Agreement.  On the date this Agreement becomes effective, and subject to
the satisfaction (or waiver by Agent in its sole discretion) of all applicable
conditions to advances hereunder, all sums owing under the Prior Credit
Agreement and the Loan Documents thereunder shall be deemed to be outstanding
and owing under, evidenced by, and governed by the terms of this Agreement, the
new Notes, and the other existing Loan Documents.

 

91

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10.21                     NO RELIANCE ON AGENT’S CUSTOMER IDENTIFICATION
PROGRAM.

 

Each Lender acknowledges and agrees that neither such Lender, nor any of its
Affiliates, participants or assignees, may rely on the Agent to carry out such
Lender’s, Affiliate’s, participant’s or assignee’s customer identification
program, or other obligations required or imposed under or pursuant to the USA
Patriot Act or the regulations thereunder, including the regulations contained
in 31 CFR 103.121 (as hereafter amended or replaced, the “CIP Regulations”), or
any other Anti-Terrorism Law, including any programs involving any of the
following items relating to or in connection with any of the Loan Parties, their
Affiliates or their agents, the Loan Documents or the transactions hereunder or
contemplated hereby: (1) any identity verification procedures, (2) any
recordkeeping, (3) comparisons with government lists, (4) customer notices or
(5) other procedures required under the CIP Regulations or such other Laws.

 

[SIGNATURES CONTINUED ON NEXT PAGE]

 

92

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[SIGNATURE PAGE 1 OF 27 TO THE CREDIT AGREEMENT]

 

IN WITNESS WHEREOF, the undersigned have executed this Agreement on the date
first written.

 

 

K. HOVNANIAN ENTERPRISES, INC.

 

 

 

 

 

 

 

By:

 

/s/ J. Larry Sorsby

 

 

 

 

Name:

J. Larry Sorsby

 

 

 

 

Title:

Executive Vice President and Chief
Financial Officer

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 2 OF 27 TO THE CREDIT AGREEMENT]

 

 

PNC BANK, NATIONAL ASSOCIATION

 

as Agent and as a Lender

 

 

 

 

 

 

 

By:

 

/s/ Douglas G. Paul

 

 

 

 

 

Name:

Douglas G. Paul

 

 

 

 

Title:

Senior Vice President

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 3 OF 27 TO THE CREDIT AGREEMENT]

 

 

WACHOVIA BANK, NATIONAL
ASSOCIATION

 

 

 

 

 

 

 

By:

/s/

John D. Powers

 

 

 

 

 

Name:

John D. Powers

 

 

 

 

Title:

Senior Vice President

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 4 OF 27 TO THE CREDIT AGREEMENT]

 

 

BANK OF AMERICA, N.A.

 

 

 

 

 

 

 

By:

/s/

Mark W. Lariviere

 

 

 

 

Name:

Mark W. Lariviere

 

 

 

 

Title:

Senior Vice President

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 5 OF 27 TO THE CREDIT AGREEMENT]

 

 

J.P. MORGAN CHASE BANK, N.A.

 

 

 

 

 

 

 

By:

/s/

Michael P. O’Keefe

 

 

 

 

 

Name:

Michael P. O’Keefe

 

 

 

 

Title:

Associate

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 6 OF 27 TO THE CREDIT AGREEMENT]

 

 

THE ROYAL BANK OF SCOTLAND
plc

 

 

 

 

 

 

 

By:

/s/

David Apps

 

 

 

 

Name:

David Apps

 

 

 

 

Title:

Senior Vice President

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 7 OF 27 TO THE CREDIT AGREEMENT]

 

 

KEYBANK NATIONAL ASSOCIATION

 

 

 

 

 

 

 

By:

/s/

Jeff V. Aycock

 

 

 

 

Name:

Jeff V. Aycock

 

 

 

 

Title:

Vice President

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 8 OF 27 TO THE CREDIT AGREEMENT]

 

 

GUARANTY BANK

 

 

 

 

 

 

 

By:

/s/

Randy Reid

 

 

 

 

Name:

Randy Reid

 

 

 

 

Title:

Senior Vice President

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 9 OF 27 TO THE CREDIT AGREEMENT]

 

 

SUNTRUST BANK

 

 

 

 

 

 

 

By:

/s/

W. John Wendler

 

 

 

 

 

Name:

W. John Wendler

 

 

 

 

Title:

Senior Vice President

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 10 OF 27 TO THE CREDIT AGREEMENT]

 

 

U.S. BANK NATIONAL ASSOCIATION

 

 

 

 

 

 

 

By:

/s/

Michael Raarup

 

 

 

 

Name:

Michael Raarup

 

 

 

 

Title:

Senior Vice President

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 11 OF 27 TO THE CREDIT AGREEMENT]

 

 

BNP PARIBAS

 

 

 

 

 

 

 

By:

/s/

Duane Helkowski

 

 

 

 

Name:

Duane Helkowski

 

 

 

 

Title:

Managing Director

 

 

 

 

and

 

 

 

 

By:

/s/

Simone Vinocour

 

 

 

 

 

Name:

Simone Vinocour

 

 

 

 

Title:

Vice President

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 12 OF 27 TO THE CREDIT AGREEMENT]

 

 

CALYON NEW YORK BRANCH

 

 

 

 

 

 

 

By:

/s/

Attila Coach

 

 

 

 

 

Name:

Attila Coach

 

 

 

 

Title:

Managing Director

 

 

 

 

and

 

 

 

 

By:

/s/

James Gibson

 

 

 

 

Name:

James Gibson

 

 

 

 

Title:

Managing Director

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 13 OF 27 TO THE CREDIT AGREEMENT]

 

 

COMERICA BANK

 

 

 

 

 

 

 

By:

/s/

Charles Weddell

 

 

 

 

 

Name:

Charles Weddell

 

 

 

 

Title:

Vice President

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 14 OF 27 TO THE CREDIT AGREEMENT]

 

 

WASHINGTON MUTUAL BANK, FA

 

 

 

 

 

 

 

By:

/s/

Paul S. Ulrich

 

 

 

 

Name:

Paul S. Ulrich

 

 

 

 

Title:

Senior Vice President

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 15 OF 27 TO THE CREDIT AGREEMENT]

 

 

EMIGRANT SAVINGS BANK

 

 

 

 

 

 

 

By:

/s/

Patricia Goldstein

 

 

 

 

Name:

Patricia Goldstein

 

 

 

 

Title:

Senior Executive V.P. and
Chief Credit Officer

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 16 OF 27 TO THE CREDIT AGREEMENT]

 

 

NATIONAL CITY BANK

 

 

 

 

 

 

 

By:

/s/

Brian Gallagher

 

 

 

 

 

Name:

Brian Gallagher

 

 

 

 

Title:

Vice President

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 17 OF 27 TO THE CREDIT AGREEMENT]

 

 

CITICORP NORTH AMERICA, INC.

 

 

 

 

 

 

 

By:

/s/

Jeanne M. Craig

 

 

 

 

 

Name:

Jeanne M. Craig

 

 

 

 

Title:

Vice President

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 18 OF 27 TO THE CREDIT AGREEMENT]

 

 

SOVEREIGN BANK

 

 

 

 

 

 

 

By:

/s/

T. Gregory Donahue

 

 

 

 

 

Name:

T. Gregory Donahue

 

 

 

 

Title:

Senior Vice President

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 19 OF 27 TO THE CREDIT AGREEMENT]

 

 

AMSOUTH BANK

 

 

 

 

 

 

 

By:

/s/

Ronny Hudspeth

 

 

 

 

Name:

Ronny Hudspeth

 

 

 

 

Title:

Senior Vice President

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 20 OF 27 TO THE CREDIT AGREEMENT]

 

 

UNION BANK OF CALIFORNIA, N.A.

 

 

 

 

 

 

 

By:

/s/

Gary L. Roberts

 

 

 

 

 

Name:

Gary L. Roberts

 

 

 

 

Title:

Vice President

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 21 OF 27 TO THE CREDIT AGREEMENT]

 

 

CREDIT SUISSE, CAYMAN ISLANDS
BRANCH

 

 

 

 

 

 

 

By:

/s/

Bill O’Daly

 

 

 

 

 

Name:

Bill O’Daly

 

 

 

 

Title:

Director

 

 

 

 

 

 

 

By:

/s/

Cassandra Droogan

 

 

 

 

 

Name:

Cassandra Droogan

 

 

 

 

Title:

Associate

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 22 OF 27 TO THE CREDIT AGREEMENT]

 

 

UBS LOAN FINANCE LLC

 

 

 

 

 

 

 

By:

/s/

Wilfred V. Saun

 

 

 

 

 

Name:

Wilfred V. Saun

 

 

 

 

Title:

Director

 

 

 

 

 

 

 

By:

/s/

Joselin Fernandes

 

 

 

 

Name:

Joselin Fernandes

 

 

 

 

Title:

Associate Director

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 23 OF 27 TO THE CREDIT AGREEMENT]

 

 

LASALLE BANK NATIONAL
ASSOCIATION

 

 

 

 

 

 

 

By:

/s/

Leticia Ruiz

 

 

 

 

 

Name:

Leticia Ruiz

 

 

 

 

Title:

Vice President

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 24 OF 27 TO THE CREDIT AGREEMENT]

 

 

CITY NATIONAL BANK

 

 

 

 

 

 

 

By:

/s/

Mary Bowman

 

 

 

 

 

Name:

Mary Bowman

 

 

 

 

Title:

Senior Vice President

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 25 OF 27 TO THE CREDIT AGREEMENT]

 

 

CALIFORNIA BANK & TRUST

 

 

 

 

 

 

 

By:

/s/

Stephanie L. Lantz

 

 

 

 

Name:

Stephanie L. Lantz

 

 

 

 

Title:

Vice President

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 26 OF 27 TO THE CREDIT AGREEMENT]

 

 

COMPASS BANK

 

 

 

 

 

 

 

By:

/s/

Johanna Duke Paley

 

 

 

 

 

Name:

Johanna Duke Paley

 

 

 

 

Title:

Senior Vice President

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 27 OF 27 TO THE CREDIT AGREEMENT]

 

ACCEPTED AND AGREED:

 

 

 

HOVNANIAN ENTERPRISES, INC.

as a Guarantor

 

 

 

 

By:

  /s/ J. Larry Sorsby

 

 

 

 

Name:

J. Larry Sorsby

 

 

 

 

Title:

Executive Vice President and

 

 

Chief Financial Officer

 

 

--------------------------------------------------------------------------------

 

SCHEDULE 1.1(A)(1)

 

PRICING GRID—

VARIABLE PRICING AND FEES

 

(expressed in basis points)

 

The following Grid shall apply based on the rating of Hovnanian’s senior
unsecured long-term debt (i.e. based on whether the Investment Grade Period is
in effect) and the Leverage Ratio.

 

Level

 

Investment Grade Period

 

Leverage Ratio

 

Commitment
Fee (1)

 

Base Rate Spread

 

LIBO-Rate Spread

 

 

 

In effect

 

Any Level

 

20

 

0

 

100

 

 

 

 

 

 

 

 

 

 

 

 

 

I

 

 

 

Less than or equal to 1.0 to 1.0

 

20

 

0

 

105

 

 

 

 

 

 

 

 

 

 

 

 

 

II

 

 

 

Greater than 1.0 to 1.0 but less than or equal to 1.25 to 1.0

 

25

 

0

 

125

 

 

 

 

 

 

 

 

 

 

 

 

 

III

 

 

 

Greater than 1.0 to 1.25 but less than or equal to 1.75 to 1.0

 

25

 

0

 

145

 

 

 

 

 

 

 

 

 

 

 

 

 

IV

 

 

 

Greater than 1.75 to 1.0 but less or equal to 2.00

 

25

 

0

 

170

 

 

 

 

 

 

 

 

 

 

 

 

 

V

 

 

 

Greater than 2.0 to 1.0

 

30

 

0

 

195

 

 

--------------------------------------------------------------------------------

(1)                              The Commitment Fee set forth in the grid at
each level shall be increased by 10 basis points for any calendar quarter if
both (i) the Average Daily Usage Percentage in such quarter is less than 25%,
and (ii) the Average Daily Usage Percentage in the immediately preceding
calendar quarter was less than 25%.

 

For purposes of determining the Applicable Margin and the Applicable Commitment
Fee Rate:

 

(a)           The Applicable Margin and the Applicable Commitment Fee Rate shall
be determined on the Closing Date based on the Leverage Ratio computed as of
January 31, 2005 pursuant to a Compliance Certificate to be delivered on the
Closing Date.

 

(b)           The Applicable Margin and the Applicable Commitment Fee Rate shall
be recomputed as of January 31, 2005 and the end of each subsequent fiscal
quarter based on the Leverage Ratio as of such quarter end.  Any increase or
decrease in the Applicable Margin or the Applicable Commitment Fee Rate computed
as of a quarter end shall be effective on the date on

 

(A) - 1

--------------------------------------------------------------------------------

 

which the Compliance Certificate evidencing such computation is due to be
delivered under Section 7.3.3, except that if the Applicable Margin and the
Applicable Commitment Fee Rate change as a result of a change in the rating of
Hovnanian’s senior unsecured long-term debt, such change shall occur on the
effective date of such change in the rating, provided that any reduction in the
Applicable Margin and the Applicable Commitment Fee Rate resulting from a change
in such rating shall not occur until the Borrower has notified the Agent of such
change.

 

(A) - 2

--------------------------------------------------------------------------------

 

SCHEDULE 1.1(A)(2)

AUTHORIZED OFFICERS AS OF THE CLOSING DATE

 

J. Larry Sorsby, Executive Vice President and Chief Financial Officer

 

Peter Reinhart, Senior Vice President and General Counsel

 

Paul Buchanan, Senior Vice President and Corporate Controller

 

Kevin C. Hake, Senior Vice President and Treasurer

 

Brad O’Connor, Vice President and Associate Corporate Controller

 

Nancy Marrazzo, Assistant Vice President and Assistant Treasurer

 

(A) - 3

--------------------------------------------------------------------------------

 

SCHEDULE 1.1(B)

 

COMMITMENTS OF LENDERS AND ADDRESSES FOR NOTICES

 

(Amended and Restated June 14, 2005)

 

Part 1 – Addresses Commitments of Lenders and Addresses for Notices to Lenders

 

Lender

 

Amount of
Commitment for
Revolving
Credit Loans

 

Ratable Share

 

 

 

 

 

 

 

Lender Name (also Agent):

 

 

 

 

 

PNC Bank, National Association

 

$

85,000,000

 

7.0833333

%

Address for Notices:
Two Tower Center, 18th Floor
E. Brunswick, NJ 08816

 

 

 

 

 

Attention:

Douglas G. Paul

 

 

 

 

 

Telephone:

(732) 220-3566

 

 

 

 

 

Telecopy:

(732) 220-3744

 

 

 

 

 

 

 

 

 

 

 

Address of Lending Office:
PNC Firstside Center
500 First Avenue, 4th Floor
Pittsburgh, PA 15219

 

 

 

 

 

Attention:

Rini Davis

 

 

 

 

 

Telephone:

(412) 762-7638

 

 

 

 

 

Telecopy:

(412) 762-8672

 

 

 

 

 

 

 

 

 

 

 

Lender Name:

 

 

 

 

 

Bank of America, N.A.

 

$

85,000,000

 

7.0833333

%

Address for Notices:
231 S. LaSalle Street
Mail Code IL 1-231-10-35
Chicago, IL 60697

 

 

 

 

 

Attention:

Mark Lariviere

 

 

 

 

 

Telephone:

(312) 828-2513

 

 

 

 

 

Telecopy:

(312) 974-4970

 

 

 

 

 

 

 

 

 

 

 

 

Address of Lending Office:
901 Main Street
14th Floor
Dallas, TX 75202

 

 

 

 

 

Attention:

Eldred Sholars

 

 

 

 

 

Telephone:

(214) 209-3044

 

 

 

 

 

Telecopy:

(214) 290-9429

 

 

 

 

 

 

(B) - 1

--------------------------------------------------------------------------------

 

Lender

 

Amount of
Commitment for
Revolving
Credit Loans

 

Ratable Share

 

 

 

 

 

 

 

Lender Name:

 

 

 

 

 

Wachovia Bank, National Association

 

$

85,000,000

 

7.0833333

%

Address for Notices:
Commercial Real Estate Group
2840 Morris Avenue; 3rd Floor
Union, NJ 07083

 

 

 

 

 

Attention:

John Powers

 

 

 

 

 

Telephone:

(908) 624-2857

 

 

 

 

 

Telecopy:

(908) 624-2870

 

 

 

 

 

 

 

 

 

 

 

 

Address of Lending Office:
Commercial Real Estate Group
2840 Morris Avenue; 3rd Floor
Union, NJ 07083

 

 

 

 

 

Attention:

John Powers

 

 

 

 

 

Telephone:

(908) 624-2857

 

 

 

 

 

Telecopy:

(908) 624-2870

 

 

 

 

 

 

 

 

 

 

 

 

Lender Name:

 

 

 

 

 

JPMorgan Chase Bank, N.A.

 

$

82,000,000

 

6.8333333

%

Address for Notices:
131 South Dearborn, Floor 5
Chicago, IL 60603

 

 

 

 

 

Attention:

Kenneth Nelson

 

 

 

 

 

Telephone:

(312) 325-3129

 

 

 

 

 

Telecopy:

(312) 325-3122

 

 

 

 

 

 

 

 

 

 

 

 

Address of Lending Office:
131 South Dearborn, Floor 5
Chicago, IL 60603

 

 

 

 

 

Attention:

Josh Barcelona

 

 

 

 

 

Telephone:

(312) 385-7015

 

 

 

 

 

Telecopy:

(312) 385-7101

 

 

 

 

 

 

(B) - 2

--------------------------------------------------------------------------------

 

Lender

 

Amount of
Commitment for
Revolving
Credit Loans

 

Ratable Share

 

 

 

 

 

 

 

 

Lender Name:

 

 

 

 

 

The Royal Bank of Scotland plc

 

$

82,000,000

 

6.8333333

%

Address for Notices:
101 Park Avenue, 12th Floor
New York, New York 10178

 

 

 

 

 

Attention:

David Apps

 

 

 

 

 

Telephone:

(212) 401-3745

 

 

 

 

 

Telecopy:

(212) 401-3456

 

 

 

 

 

 

 

 

 

 

 

 

Address of Lending Office:
101 Park Avenue, 12th Floor
New York, New York 10178

 

 

 

 

 

Attention:

Caroline Cancel

 

 

 

 

 

Telephone:

(212) 401-1407

 

 

 

 

 

Telecopy:

(212) 401-1494

 

 

 

 

 

 

 

 

 

 

 

 

Lender Name:

 

 

 

 

 

KeyBank National Association

 

$

73,000,000

 

6.0833333

%

Address for Notices
1200 Abernathy Road, Suite 1550
Atlanta, GA 30328

 

 

 

 

 

Attention:

Jeff V. Aycock

 

 

 

 

 

Telephone:

(770) 510-2105

 

 

 

 

 

Telecopy:

(770) 510-2195

 

 

 

 

 

 

 

 

 

 

 

 

Address of Lending Office:
KeyBank Real Estate Capital
1200 Abernathy Road, Suite 1550
Atlanta, GA 30328

 

 

 

 

 

Attention:

Jacky Krieger

 

 

 

 

 

Telephone:

(770) 510-2109

 

 

 

 

 

Telecopy:

(770) 510-2197

 

 

 

 

 

 

(B) - 3

--------------------------------------------------------------------------------

 

Lender

 

Amount of
Commitment for
Revolving
Credit Loans

 

Ratable Share

 

 

 

 

 

 

 

 

Lender Name:

 

 

 

 

 

Guaranty Bank

 

$

57,000,000

 

4.7500000

%

Address for Notices:
8333 Douglas Avenue
Dallas, Texas 75225

 

 

 

 

 

Attention:

Randall S. Reid

 

 

 

 

 

Telephone:

(214) 360-2735

 

 

 

 

 

Telecopy:

(214) 360-4892

 

 

 

 

 

 

 

 

 

 

 

 

Address of Lending Office:
8333 Douglas Avenue
Dallas, Texas 75225

 

 

 

 

 

Attention:

Jill Fallows

 

 

 

 

 

Telephone:

(214) 360-1681

 

 

 

 

 

Telecopy:

(214) 360-1661

 

 

 

 

 

 

 

 

 

 

 

 

Lender Name:

 

 

 

 

 

SunTrust Bank

 

$

50,000,000

 

4.1666666

%

Address for Notices:
8245 Boone Boulevard
Suite 820
Vienna, VA 22182

 

 

 

 

 

Attention:

John Wendler

 

 

 

 

 

Telephone:

(703) 442-1563

 

 

 

 

 

Telecopy:

(703) 442-1570

 

 

 

 

 

 

 

 

 

 

 

 

Address of Lending Office:
10710 Midlothian Turnpike,
Richmond, VA 23235

 

 

 

 

 

Attn:

DeCar Jeter

 

 

 

 

 

Telephone:

804-594-1072

 

 

 

 

 

Telecopy:

804-594-1139

 

 

 

 

 

 

(B) - 4

--------------------------------------------------------------------------------

 

Lender

 

Amount of
Commitment for
Revolving
Credit Loans

 

Ratable Share

 

 

 

 

 

 

 

 

Lender Name:

 

 

 

 

 

U.S. Bank National Association

 

$

50,000,000

 

4.1666666

%

Address for Notices:
US Bancorp Commercial Real Estate
800 Nicollet Mall, 3rd Floor
Minneapolis, MN 55402-7020

 

 

 

 

 

Attention:

Leslie Lynch

 

 

 

 

 

Telephone:

(612) 303-3595

 

 

 

 

 

Telecopy:

(612) 303-2270

 

 

 

 

 

 

 

 

 

 

 

 

Address of Lending Office:
U.S. Bank National Association
800 Nicollet Mall
Minneapolis, MN 55402

 

 

 

 

 

Attention:

Michael Raarup

 

 

 

 

 

Telephone:

(612) 303-3586

 

 

 

 

 

Telecopy:

(612) 303-2270

 

 

 

 

 

 

 

 

 

 

 

Lender Name: 

 

 

 

 

 

BNP PARIBAS

 

$

47,000,000

 

3.9166666

%

Address for Notices:
787 Seventh Avenue
New York, NY 10019

 

 

 

 

 

Attention:

Duane Helkowski

 

 

 

 

 

Telephone:

(212) 841-2940

 

 

 

 

 

Telecopy:

(212) 841-3830

 

 

 

 

 

 

 

 

 

 

 

 

Address of Lending Office:
787 Seventh Avenue
New York, NY 10019

 

 

 

 

 

Attention:

Duane Helkowski

 

 

 

 

 

Telephone:

(212) 841-2940

 

 

 

 

 

Telecopy:

(212) 841-3830

 

 

 

 

 

 

(B) - 5

--------------------------------------------------------------------------------

 

Lender

 

Amount of
Commitment for
Revolving
Credit Loans

 

Ratable Share

 

 

 

 

 

 

 

 

Lender Name: 

 

 

 

 

 

 

CALYON New York Branch

 

$

47,000,000

 

3.9166666

%

Address for Notices:
2200 Ross Avenue, Suite 4400
West
Dallas, TX 75201

 

 

 

 

 

Attention:

Robert Smith

 

 

 

 

 

Telephone:

(214) 220-2311

 

 

 

 

 

Telecopy:

(214) 220-2323

 

 

 

 

 

 

 

 

 

 

 

 

Address of Lending Office:
1301 Avenue of the Americas
New York NY 10019

 

 

 

 

 

Attention:

George Lewis

 

 

 

 

 

Telephone:

(212) 261-7641

 

 

 

 

 

Telecopy:

(212) 261-7696

 

 

 

 

 

 

 

 

 

 

 

Lender Name: 

 

 

 

 

 

Comerica Bank

 

$

47,000,000

 

3.9166666

%

Address for Notices:
500 Woodward Avenue
MC 3256
Detroit, MI 48226

 

 

 

 

 

Attention:

Charles Weddell

 

 

 

 

 

Telephone:

(313) 222-3323

 

 

 

 

 

Telecopy:

(313) 222-9295

 

 

 

 

 

 

 

 

 

 

 

Address of Lending Office:
500 Woodward Avenue
MC 3256
Detroit, MI 48226

 

 

 

 

 

Attention:

Keshia Boone

 

 

 

 

 

Telephone:

(313) 222-9284

 

 

 

 

 

Telecopy:

(313) 222-9295

 

 

 

 

 

 

(B) - 6

--------------------------------------------------------------------------------

 

Lender

 

Amount of
Commitment for
Revolving
Credit Loans

 

Ratable Share

 

 

 

 

 

 

 

Lender Name: 

 

 

 

 

 

Washington Mutual Bank, FA

 

$

45,000,000

 

3.7500000

%

Address for Notices:
620 W. Germantown Pike
Plymouth Meeting, PA 19462

 

 

 

 

 

Attention:

Paul Ulrich

 

 

 

 

 

Telephone:

(610) 238-6929

 

 

 

 

 

Telecopy:

(610) 828-7293

 

 

 

 

 

 

 

 

 

 

 

Lender Name: 

 

 

 

 

 

Emigrant Savings Bank

 

$

42,000,000

 

3.5000000

%

Address for Notices:
335 Madison Avenue, Floor 15
New York, NY 10017

 

 

 

 

 

Attention:

Tom Devine

 

 

 

 

 

Telephone:

(212) 850-4827

 

 

 

 

 

Telecopy:

(212) 850-4608

 

 

 

 

 

 

 

 

 

 

 

 

Address of Lending Office:
5 East Forty-Second Street
6th Floor
New York, NY 10017

 

 

 

 

 

Attention:

Rosemary Granza

 

 

 

 

 

Telephone:

(212) 850-4608

 

 

 

 

 

Telecopy:

(212) 850-4811

 

 

 

 

 

 

(B) - 7

--------------------------------------------------------------------------------

 

Lender

 

Amount of
Commitment for
Revolving
Credit Loans

 

Ratable Share

 

 

 

 

 

 

 

Lender Name: 

 

 

 

 

 

Citicorp North America, Inc.

 

$

42,000,000

 

3.5000000

%

Address for Notices:
390 Greenwich Street
New York, NY 10013

 

 

 

 

 

Attention:

Thomas Flanagan

 

 

 

 

 

Telephone:

(212) 723-6927

 

 

 

 

 

Telecopy:

(646) 862-8866

 

 

 

 

 

 

 

 

 

 

 

 

Address of Lending Office:
Two Penn’s Way
First Floor
New Castle, DE 19720

 

 

 

 

 

Attention:

Lenora Durant

 

 

 

 

 

Telephone:

(302) 894-6062

 

 

 

 

 

Telecopy:

(212) 994-0849

 

 

 

 

 

 

 

 

 

 

 

Lender Name: 

 

 

 

 

 

National City Bank

 

$

38,000,000

 

3.1666666

%

Address for Notices:
One South Broad Street
13th Floor
Philadelphia, PA 19107

 

 

 

 

 

Attention:

Brian Gallagher

 

 

 

 

 

Telephone:

(267) 256-4088

 

 

 

 

 

Telecopy:

(267) 256-4001

 

 

 

 

 

 

 

 

 

 

 

 

Address of Lending Office:
One South Broad Street, 13th Floor
Philadelphia, PA 19107

 

 

 

 

 

Attention:

Marie Pascale

 

 

 

 

 

Telephone:

(267) 256-4042

 

 

 

 

 

Telecopy:

(267) 256-4001

 

 

 

 

 

 

(B) - 8

--------------------------------------------------------------------------------

 

Lender

 

Amount of
Commitment for
Revolving
Credit Loans

 

Ratable Share

 

 

 

 

 

 

 

Lender Name: 

 

 

 

 

 

Sovereign Bank

 

$

33,000,000

 

2.7500000

%

Address for Notices:
75 State Street
Mail Code MA1 SST 04-11
Boston, MA 02109

 

 

 

 

 

Attention:

Erin Aslakson

 

 

 

 

 

Telephone:

(617) 757-5564

 

 

 

 

 

Telecopy:

(617) 757-5652

 

 

 

 

 

 

 

 

 

 

 

Lender Name: 

 

 

 

 

 

AmSouth Bank

 

$

30,000,000

 

2.5000000

%

Address for Notices:
1900 5th Avenue North
Birmingham, AL 35203

 

 

 

 

 

Attention:

Ronny Hudspeth

 

 

 

 

 

Telephone:

(205) 307-4227

 

 

 

 

 

Telecopy:

(205) 801-0138

 

 

 

 

 

 

 

 

 

 

 

 

Address of Lending Office:
1900 5th Avenue North
Birmingham, AL 35203

 

 

 

 

 

Attention:

Ronny Hudspeth

 

 

 

 

 

Telephone:

(205) 307-4227

 

 

 

 

 

Telecopy:

(205) 801-0138

 

 

 

 

 

 

(B) - 9

--------------------------------------------------------------------------------

 

Lender

 

Amount of
Commitment for
Revolving
Credit Loans

 

Ratable Share

 

 

 

 

 

 

 

Lender Name: 

 

 

 

 

 

Union Bank of California, N.A.

 

$

30,000,000

 

2.5000000

%

Address for Notices:
350 California Street, 7th Floor
San Francisco, CA 94104

 

 

 

 

 

Attention:

Gary Roberts

 

 

 

 

 

Telephone:

(415) 705-5035

 

 

 

 

 

Telecopy:

(415) 433-7438

 

 

 

 

 

 

 

 

 

 

 

Address of Lending Office:
350 California Street, 7th Floor
San Francisco, CA 94104

 

 

 

 

 

Attention:

Gary Roberts

 

 

 

 

 

Telephone:

(415) 705-5035

 

 

 

 

 

Telecopy:

(415) 433-7438

 

 

 

 

 

 

 

 

 

 

 

Lender Name: 

 

 

 

 

 

Credit Suisse, Cayman Islands Branch 

 

$

30,000,000

 

2.5000000

%

Address for Notices:
Eleven Madison Avenue
New York, NY 10010

 

 

 

 

 

Attention:

Williams O’Daly

 

 

 

 

 

Telephone:

(212) 325-1986

 

 

 

 

 

Telecopy:

(212) 743-2254

 

 

 

 

 

 

 

 

 

 

 

Address of Lending Office:
One Madison Avenue
New York, NY 10010

 

 

 

 

 

Attention:

Ed Markowski

 

 

 

 

 

Telephone:

(212) 538-3380

 

 

 

 

 

Telecopy:

(212) 325-9049

 

 

 

 

 

 

(B) - 10

--------------------------------------------------------------------------------

 

Lender

 

Amount of
Commitment for
Revolving
Credit Loans

 

Ratable Share

 

 

 

 

 

 

 

 

Lender Name: 

 

 

 

 

 

UBS Loan Finance LLC

 

$

30,000,000

 

2.5000000

%

Address for Notices:
UBS AG, Stamford Branch
677 Washington Blvd., 6-South
Stamford, CT 06901

 

 

 

 

 

Attention:

Wilfred Saint

 

 

 

 

 

Telephone:

(203) 719-4330

 

 

 

 

 

Telecopy:

(203) 719-3888

 

 

 

 

 

 

 

 

 

 

 

Address of Lending Office:
UBS AG, Stamford Branch
677 Washington Blvd., 6-South
Stamford, CT 06901

 

 

 

 

 

Attention:

Anthony Finocchi

 

 

 

 

 

Telephone:

(203) 719-3377

 

 

 

 

 

Telecopy:

(203) 719-3888

 

 

 

 

 

 

 

 

 

 

 

Lender Name: 

 

 

 

 

 

LaSalle Bank National Association 

 

$

25,000,000

 

2.0833333

%

Address for Notices:
610 Newport Center Drive
Suite 660
Newport Beach, CA 92660

 

 

 

 

 

Attention:

Leticia Ruiz

 

 

 

 

 

Telephone:

(949) 219-8968

 

 

 

 

 

Telecopy:

(949) 219-8977

 

 

 

 

 

 

 

 

 

 

 

 

Address of Lending Office:
135 South LaSalle
Chicago, IL 60603

 

 

 

 

 

Attention:

Gloria Favela

 

 

 

 

 

Telephone:

(312) 904-5417

 

 

 

 

 

Telecopy:

(312) 904-6691

 

 

 

 

 

 

(B) - 11

--------------------------------------------------------------------------------

 

Lender

 

Amount of
Commitment for
Revolving
Credit Loans

 

Ratable Share

 

 

 

 

 

 

 

Lender Name: 

 

 

 

 

 

City National Bank

 

$

25,000,000

 

2.0833333

%

Address for Notices:
2001 No. Main Street, Suite 200
Walnut Creek, CA 94596

 

 

 

 

 

Attention:

Mary Bowman

 

 

 

 

 

Telephone:

(925) 274-2793

 

 

 

 

 

Telecopy:

(925) 274-2758

 

 

 

 

 

 

 

 

 

 

 

 

Address of Lending Office:
9701 Wilshire Boulevard
Suite 600
Beverly Hills, CA 90212

 

 

 

 

 

Attention:

Laurel Burns

 

 

 

 

 

Telephone:

(310) 888-6484

 

 

 

 

 

Telecopy:

(310) 888-6493

 

 

 

 

 

 

 

 

 

 

 

Lender Name: 

 

 

 

 

 

California Bank & Trust 

 

$

20,000,000

 

1.6666666

%

Address for Notices:
2929 N. Central Avenue
Suite 1200
Phoenix, AZ 85012

 

 

 

 

 

Attention:

Stephanie L. Lanty

 

 

 

 

 

Telephone:

(602) 241-2227

 

 

 

 

 

Telecopy:

(602) 230-1345

 

 

 

 

 

 

 

 

 

 

 

 

Address of Lending Office:
2929 N. Central Avenue
Suite 1200
Phoenix, AZ 85012

 

 

 

 

 

Attention:

Stephanie L. Lanty

 

 

 

 

 

Telephone:

(602) 241-2227

 

 

 

 

 

Telecopy:

(602) 230-1345

 

 

 

 

 

 

(B) - 12

--------------------------------------------------------------------------------

 

Lender

 

Amount of
Commitment for
Revolving
Credit Loans

 

Ratable Share

 

 

 

 

 

 

 

 

Lender Name: 

 

 

 

 

 

 

Compass Bank 

 

$

20,000,000

 

1.6666666

%

Address for Notices:
15 South 20th Street
Birmingham, AL 35233

 

 

 

 

 

Attention:

Johanna Duke Paley

 

 

 

 

 

Telephone:

(205) 297-3851

 

 

 

 

 

Telecopy:

(205) 297-7994

 

 

 

 

 

 

 

 

 

 

 

 

Address of Lending Office:
15 South 20th Street
Birmingham, AL 35233

 

 

 

 

 

Attention:

Johanna Duke Paley

 

 

 

 

 

Telephone:

(205) 297-3851

 

 

 

 

 

Telecopy:

(205) 297-7994

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

1,200,000,000

 

100

%

 

(B) - 13

--------------------------------------------------------------------------------

 

AGENT

 

Name:

Douglas G. Paul, Senior Vice President

 

Address:

PNC Bank, National Association

 

 

Two Tower Center, 18th Floor

 

 

East Brunswick, New Jersey 08816

 

Telephone:

(732) 220-3566

 

Telecopy:

(732) 220-3744

 

 

 

BORROWER:

 

Name:

K. HOVNANIAN ENTERPRISES, INC.

 

Address:

10 Route 35, P.O. Box 500

 

 

Red Bank, NJ 07701

 

Attention:

Kevin C. Hake

 

Telephone:

(732) 747-7800

 

Telecopy:

(732) 747-6835

 

 

 

GUARANTORS:

 

Name:

[name of Guarantor]

 

Address:

c/o K. Hovnanian Enterprises, Inc.

 

 

10 Route 35, P.O. Box 500

 

 

Red Bank, NJ 07701

 

Attention:

Kevin C. Hake

 

Telephone:

(732) 747-7800

 

Telecopy:

(732) 747-6835

 

 

(B) - 14

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SCHEDULE 1.1(C)

LISTING OF RESTRICTED SUBSIDIARIES, JOINT VENTURES,

MORTGAGE SUBSIDIARIES AND NON-RESTRICTED PERSONS

 

See Schedule 5.1.2.

 

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SCHEDULE 1.1(E)

INCOME PRODUCING PROPERTIES

 

1.     96 unit rental property located at Ocean, New Jersey, know as Whalepond
Village.

 

2.     75 unit rental property located at Mahwah, New Jersey, know as Norfolk
Village.

 

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SCHEDULE 1.1(P)

PERMITTED LIENS

 

None.

 

--------------------------------------------------------------------------------

 

SCHEDULE 5.1.8

MATERIAL ADVERSE EVENTS SINCE OCTOBER 31, 2004

 

None.

 

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SCHEDULE 5.1.12

CONSENTS AND APPROVALS

 

None.

 

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EXHIBIT 1.1(A)

 

FORM OF

ASSIGNMENT AND ASSUMPTION AGREEMENT

 

This ASSIGNMENT AND ASSUMPTION AGREEMENT (the “Assignment”) is dated as of the
Effective Date set forth below and is entered into by and between [Insert name
of Assignor] (the “Assignor”) and [Insert name of Assignee] (the “Assignee”). 
Capitalized terms used but not defined herein shall have the meanings given to
them in the Credit Agreement identified below (as amended, the “Credit
Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. 
The Standard Terms and Conditions set forth in Annex 1 attached hereto are
hereby agreed to and incorporated herein by reference and made a part of this
Assignment as if set forth herein in full.

 

For an agreed consideration, the Assignor hereby irrevocably sells and assigns
to the Assignee, and the Assignee hereby irrevocably purchases and assumes from
the Assignor, subject to and in accordance with the Standard Terms and
Conditions and the Credit Agreement, as of the Effective Date inserted by the
Agent as contemplated below, the interest in and to all of the Assignor’s rights
and obligations under the Credit Agreement and any other documents or
instruments delivered pursuant thereto that represents the amount and percentage
interest identified below of all of the Assignor’s outstanding rights and
obligations under the respective facilities identified below (including, to the
extent included in any such facilities, letters of credit and swingline loans)
(the “Assigned Interest”).  Such sale and assignment is without recourse to the
Assignor and, except as expressly provided in this Assignment, without
representation or warranty by the Assignor.

 

1.

 

Assignor:

 

 

 

 

 

 

 

 

2.

 

Assignee:

 

 

 [and is an Affiliate(1)]

 

 

 

 

 

3.

 

Borrower:

 

K. Hovnanian Enterprises, Inc.

 

 

 

 

 

4.

 

Agent:

 

PNC Bank, National Association, as the agent under the Credit Agreement

 

 

 

 

 

5.

 

Credit Agreement:

 

The Fifth Amended and Restated Credit Agreement dated June 14, 2005 among K.
Hovnanian Enterprises, Inc. (the “Borrower”), Hovnanian Enterprises, Inc., as a
Guarantor, the Lenders now or hereafter party thereto and PNC Bank, National
Association, as administrative agent (the “Agent”)

 

--------------------------------------------------------------------------------

(1)          Insert if applicable.

 

--------------------------------------------------------------------------------

 

6.                                       Assigned Interest:

Facility Assigned

 

Aggregate
Amount of
Commitment/Loans
for all Lenders

 

Amount of
Commitment/Loans
Assigned

 

Percentage
Assigned of
Commitment/Loans(2)

 

 

(3)

$

 

$

 

 

%

 

 

$

 

$

 

 

%

 

 

$

 

$

 

 

%

 

Effective Date:                          , 20     [TO BE INSERTED BY AGENT AND
WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER
THEREFOR.](4)

 

The terms set forth in this Assignment are hereby agreed to:

 

 

ASSIGNOR

 

[NAME OF ASSIGNOR]

 

 

 

By:

 

 

 

 

Title:

 

 

 

 

 

 

ASSIGNEE

 

[NAME OF ASSIGNEE]

 

 

 

By:

 

 

 

 

Title:

 

 

[Consented to and](5) Accepted:

 

PNC BANK, NATIONAL ASSOCIATION, as

 Agent

 

By

 

 

 

Name:

 

Title:

 

--------------------------------------------------------------------------------

(2)   Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans
of all Lenders thereunder.

(3)   Fill in the appropriate terminology for the types of facilities under the
Credit Agreement that are being assigned under this Assignment (e.g. “Revolving
Credit Commitment”, “Term Loan Commitment”, etc.) The same percentage of each
facility owned by the Assignor shall be assigned to the Assignee.

(4)  Assignor shall pay a fee of $3,500 to the Agent in connection with the
Assignment.

(5)   To be added only if the consent of the Agent is required by the terms of
the Credit Agreement.

 

2

--------------------------------------------------------------------------------

 

[Consented to:](6)

 

[NAME OF BORROWER OR OTHER RELEVANT PARTY]

 

By

 

 

 

Name:

 

Title:

 

--------------------------------------------------------------------------------

(6)   To be added only if the consent of the Borrower and/or other parties (e.g.
Swingline Lender, L/C Issuer) is required by the terms of the Credit Agreement.

 

3

--------------------------------------------------------------------------------

 

ANNEX 1

 

[                  ](7)

 

STANDARD TERMS AND CONDITIONS FOR ASSIGNMENT
AND ASSUMPTION AGREEMENT

 

1.                                       Representations and Warranties.

 

1.1                                 Assignor.  The Assignor (a) represents and
warrants that (i) it is the legal and beneficial owner of the Assigned Interest,
(ii) the Assigned Interest is free and clear of any lien, encumbrance or other
adverse claim and (iii) it has full power and authority, and has taken all
action necessary, to execute and deliver this Assignment and to consummate the
transactions contemplated hereby; and (b) assumes no responsibility with respect
to (i) any statements, warranties or representations made in or in connection
with any Loan Document, (ii) the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any other
instrument or document delivered pursuant thereto, other than this Assignment
(herein collectively the “Loan Documents”), or any collateral thereunder,
(iii) the financial condition of the Borrower, any of its Subsidiaries or
Affiliates or any other Person obligated in respect of any Loan Document or
(iv) the performance or observance by the Borrower, any of its Subsidiaries or
Affiliates or any other Person of any of their respective obligations under any
Loan Document.

 

1.2.                              Assignee.  The Assignee (a) represents and
warrants that (i) it has full power and authority, and has taken all action
necessary, to execute and deliver this Assignment and to consummate the
transactions contemplated hereby and to become a Lender under the Credit
Agreement, (ii) it meets all requirements, if any, of an eligible assignee under
the Credit Agreement, (iii) from and after the Effective Date, it shall be bound
by the provisions of the Credit Agreement and, to the extent of the Assigned
Interest, shall have the obligations of a Lender thereunder, (iv) it has
received a copy of the Credit Agreement, together with copies of the most recent
financial statements delivered pursuant to Section 7.3 thereof, as applicable,
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment and to
purchase the Assigned Interest on the basis of which it has made such analysis
and decision, and (v) if Assignee is not incorporated or organized under the
laws of the United States of America or any State thereof, attached to the
Assignment is any documentation required to be delivered by it pursuant to the
terms of the Credit Agreement, duly completed and executed by the Assignee; and
(b) agrees that (i) it will, independently and without reliance on the Agent,
the Assignor or any other Lender, and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under the Loan Documents, and (ii) it will
perform in accordance with their terms all of the obligations which by the terms
of the Loan Documents are required to be performed by it as a Lender.

 

2.                                       Payments.  From and after the Effective
Date, the Agent shall make all payments in respect of the Assigned Interest
(including payments of principal, interest, fees and other amounts) to the
Assignor for amounts which have accrued to but excluding the Effective Date and
to the Assignee for amounts which have accrued from and after the Effective
Date.(8)

 

3.                                       General Provisions.  This Assignment
shall be binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns.  This Assignment may be executed in any
number of counterparts, which together shall constitute one instrument. 
Delivery of an executed counterpart of a signature page of this Assignment by
telecopy shall be effective as delivery of a manually executed counterpart of
this Assignment.  This Assignment shall be governed by, and construed in
accordance with, the laws of the State of New Jersey.

 

--------------------------------------------------------------------------------

(7)   Describe Credit Agreement at option of Agent.

(8)   Agent should consider whether this method conforms to its systems.  In
some circumstances, the following alternative language may be appropriate: 
“From and after the Effective Date, the Agent shall make all payments in respect
of the Assigned Interest (including payments of principal, interest, fees and
other amounts) to the Assignee whether such amounts have accrued prior to or on
or after the Effective Date.  The Assignor and the Assignee shall make all
appropriate adjustments in payments by the Agent for periods prior to the
Effective Date or with respect to the making of this assignment directly between
themselves.”

 

--------------------------------------------------------------------------------

 

EXHIBIT 1.1(G)(1)

 

FORM OF
AMENDED AND RESTATED GUARANTY AND SURETYSHIP AGREEMENT

 

THIS AMENDED AND RESTATED GUARANTY AND SURETYSHIP AGREEMENT (the “Guarantee”) is
made and entered into June 14, 2005, by each of the entities listed on the
signature pages hereto (each a “Guarantor” and collectively, the “Guarantors”),
in favor of PNC BANK, NATIONAL ASSOCIATION, including its successors and
assigns, as administrative agent for the Lenders under the Credit Agreement
described below (the “Agent”).

 

BACKGROUND:

 

In order to induce the Lenders to make loans to K. Hovnanian Enterprises, Inc.,
a California corporation (the “Borrower”), in accordance with that certain Fifth
Amended and Restated Credit Agreement of even date herewith (as it may hereafter
from time to time be amended, restated, modified or supplemented, the “Credit
Agreement”) by and among the Borrower, Hovnanian Enterprises, Inc. (one of the
Guarantors), the Agent, and the Lenders now or hereafter party thereto (the
“Lenders”), each Guarantor hereby unconditionally and irrevocably guarantees and
becomes surety as though it was a primary obligor for the full and timely
payment when due, whether at maturity, by declaration, acceleration or
otherwise, of the principal of and interest and fees on all Obligations (as
defined in the Credit Agreement), both those now in existence and those that
shall hereafter be made, of the Borrower to the Agent and the Lenders under the
Credit Agreement and the Notes issued by the Borrower in connection therewith
and any extensions, renewals, replacements or refundings thereof, and each and
every other obligation or liability (both those now in existence and those that
shall hereafter arise and including, without limitation, all costs and expenses
of enforcement and collection, including reasonable attorney’s fees) of the
Borrower to the Lenders under the Credit Agreement and the other Loan Documents
(as defined in the Credit Agreement), and any extensions, renewals, replacements
or refundings thereof (hereinafter referred to as the “Guaranteed
Indebtedness”), whether or not such Guaranteed Indebtedness or any portion
thereof shall hereafter be released or discharged or is for any reason invalid
or unenforceable.

 

1.                                       CAPITALIZED TERMS USED HEREIN AND NOT
OTHERWISE DEFINED HEREIN SHALL HAVE SUCH MEANINGS GIVEN TO THEM IN THE CREDIT
AGREEMENT.

 

2.                                       EACH GUARANTOR AGREES TO MAKE SUCH FULL
PAYMENT FORTHWITH UPON DEMAND OF THE AGENT WHEN THE GUARANTEED INDEBTEDNESS OR
ANY PORTION THEREOF IS DUE TO BE PAID BY THE BORROWER TO THE LENDERS, WHETHER AT
STATED MATURITY, BY DECLARATION, ACCELERATION OR OTHERWISE.  EACH GUARANTOR
AGREES TO MAKE SUCH FULL PAYMENT IRRESPECTIVE OF WHETHER OR NOT ANY ONE OR MORE
OF THE FOLLOWING EVENTS HAS OCCURRED:  (I) THE AGENT HAS MADE ANY DEMAND ON THE
BORROWER OR THE OTHER GUARANTORS; (II) THE AGENT HAS TAKEN ANY ACTION OF ANY
NATURE AGAINST THE BORROWER OR THE OTHER GUARANTORS; (III) THE AGENT HAS PURSUED
ANY RIGHTS WHICH IT HAS AGAINST ANY OTHER PERSON WHO MAY BE LIABLE FOR THE
GUARANTEED INDEBTEDNESS; (IV) THE AGENT HOLDS OR HAS RESORTED TO ANY SECURITY
FOR THE GUARANTEED INDEBTEDNESS; OR (V) THE AGENT HAS INVOKED ANY OTHER REMEDY
OR RIGHT IT HAS AVAILABLE WITH RESPECT TO THE GUARANTEED INDEBTEDNESS.  EACH
GUARANTOR FURTHER AGREES TO

 

--------------------------------------------------------------------------------

 

MAKE FULL PAYMENT TO THE LENDERS EVEN IF CIRCUMSTANCES EXIST WHICH OTHERWISE
CONSTITUTE A LEGAL OR EQUITABLE DISCHARGE OF SUCH GUARANTOR AS SURETY OR
GUARANTOR.

 

3.                                       THE TERMS, CONDITIONS AND PROVISIONS OF
SECTION 5.1 [REPRESENTATIONS AND WARRANTIES] OF THE CREDIT AGREEMENT ARE
INCORPORATED HEREIN BY REFERENCE AS IF FULLY SET FORTH IN THIS GUARANTEE.  THE
GUARANTORS, JOINTLY AND SEVERALLY, WITHOUT ANY FURTHER ACT OR UNDERTAKING OR THE
OCCURRENCE OF ANY OTHER EVENT, MAKE THE REPRESENTATIONS AND WARRANTIES SET FORTH
IN SECTION 5.1 [REPRESENTATIONS AND WARRANTIES] OF THE CREDIT AGREEMENT TO THE
AGENT AND TO EACH OF THE LENDERS ON THE DATE HEREOF AND ON THE CLOSING DATE AND
EACH DATE THEREAFTER ON WHICH A LOAN IS MADE OR A LETTER OF CREDIT IS ISSUED AS
PROVIDED IN AND SUBJECT TO SECTION 6.1 [FIRST LOANS AND LETTERS OF CREDIT] AND
SECTION 6.2 [EACH ADDITIONAL LOAN OR LETTER OF CREDIT] OF THE CREDIT AGREEMENT. 
IN ADDITION, EACH GUARANTOR WARRANTS TO THE AGENT AND THE LENDERS THAT: (I) NO
OTHER AGREEMENT, REPRESENTATION OR SPECIAL CONDITION EXISTS BETWEEN SUCH
GUARANTOR AND THE AGENT OR ANY LENDER REGARDING THE LIABILITY OF SUCH GUARANTOR
HEREUNDER, NOR DOES ANY UNDERSTANDING EXIST BETWEEN SUCH GUARANTOR AND ANY
LENDER THAT THE OBLIGATIONS OF SUCH GUARANTOR HEREUNDER ARE OR WILL BE OTHER
THAN AS SET FORTH HEREIN; AND (II) AS OF THE DATE HEREOF, SUCH GUARANTOR HAS NO
DEFENSE WHATSOEVER TO ANY ACTION OR PROCEEDING THAT MAY BE BROUGHT TO ENFORCE
THIS GUARANTEE.

 

4.                                       UNTIL ALL OF THE GUARANTEED
INDEBTEDNESS IS PAID IN FULL, EACH GUARANTOR WAIVES AND AGREES NOT TO ENFORCE
ANY OF THE RIGHTS OF SUCH GUARANTOR AGAINST THE BORROWER OR THE OTHER
GUARANTORS, INCLUDING, BUT NOT LIMITED TO: (I) ANY RIGHT OF SUCH GUARANTOR TO BE
SUBROGATED IN WHOLE OR IN PART TO ANY RIGHT OR CLAIM WITH RESPECT TO ANY
GUARANTEED INDEBTEDNESS OR ANY PORTION THEREOF TO THE LENDERS WHICH MIGHT
OTHERWISE ARISE FROM PAYMENT BY ANY GUARANTOR TO THE LENDERS ON THE ACCOUNT OF
THE GUARANTEED INDEBTEDNESS OR ANY PORTION THEREOF; AND (II) ANY RIGHT OF ANY
GUARANTOR TO REQUIRE THE MARSHALLING OF ASSETS OF THE BORROWER OR THE OTHER
GUARANTORS WHICH MIGHT OTHERWISE ARISE FROM PAYMENT BY ANY GUARANTOR TO THE
LENDERS ON ACCOUNT OF THE GUARANTEED INDEBTEDNESS OR ANY PORTION THEREOF.  IF
ANY AMOUNT SHALL BE PAID TO ANY GUARANTOR IN VIOLATION OF THE PRECEDING
SENTENCE, SUCH AMOUNT SHALL BE DEEMED TO HAVE BEEN PAID TO SUCH GUARANTOR FOR
THE BENEFIT OF, AND HELD IN TRUST FOR THE BENEFIT OF, THE LENDERS AND SHALL
FORTHWITH BE PAID TO THE AGENT AND THE LENDERS TO BE CREDITED AND APPLIED UPON
THE GUARANTEED INDEBTEDNESS, WHETHER MATURED OR UNMATURED, IN ACCORDANCE WITH
THE TERMS OF THE CREDIT AGREEMENT.  EACH GUARANTOR ACKNOWLEDGES THAT IT WILL
RECEIVE DIRECT AND INDIRECT BENEFITS FROM THE FINANCING ARRANGEMENTS
CONTEMPLATED BY THE CREDIT AGREEMENT AND THAT THE WAIVERS SET FORTH IN THIS
SECTION ARE KNOWINGLY MADE IN CONTEMPLATION OF SUCH BENEFITS.

 

5.                                       EACH GUARANTOR WAIVES PROMPTNESS AND
DILIGENCE BY THE LENDERS WITH RESPECT TO ITS RIGHTS UNDER THE CREDIT AGREEMENT
OR ANY OF THE OTHER LOAN DOCUMENTS, INCLUDING, BUT NOT LIMITED TO, THIS
GUARANTEE.

 

6.                                       EACH GUARANTOR WAIVES ANY AND ALL
NOTICE WITH RESPECT TO:  (I) ACCEPTANCE BY THE AGENT ON BEHALF OF THE LENDERS OF
THIS GUARANTEE; (II) THE PROVISIONS OF ANY NOTE, INSTRUMENT OR AGREEMENT
RELATING TO THE GUARANTEED INDEBTEDNESS; AND (III) ANY DEFAULT IN CONNECTION
WITH THE GUARANTEED INDEBTEDNESS.

 

7.                                       EACH GUARANTOR WAIVES ANY PRESENTMENT,
DEMAND, NOTICE OF DISHONOR OR NONPAYMENT, PROTEST, AND NOTICE OF PROTEST IN
CONNECTION WITH THE GUARANTEED INDEBTEDNESS.

 

2

--------------------------------------------------------------------------------

 

8.                                       EACH GUARANTOR AGREES THAT THE LENDERS
MAY FROM TIME TO TIME AND AS MANY TIMES AS THE LENDERS, IN THEIR SOLE
DISCRETION, DEEM APPROPRIATE, DO ANY OF THE FOLLOWING WITHOUT NOTICE TO ANY
GUARANTOR AND WITHOUT ADVERSELY AFFECTING THE VALIDITY OR ENFORCEABILITY OF THIS
GUARANTEE: (I) RELEASE, SURRENDER, EXCHANGE, COMPROMISE, OR SETTLE THE
GUARANTEED INDEBTEDNESS OR ANY PORTION THEREOF; (II) CHANGE, RENEW, OR WAIVE THE
TERMS OF THE GUARANTEED INDEBTEDNESS OR ANY PORTION THEREOF; (III) CHANGE,
RENEW, OR WAIVE THE TERMS, INCLUDING WITHOUT LIMITATION, THE RATE OF INTEREST
CHARGED TO THE BORROWER OR ANY GUARANTOR, OF ANY NOTE, INSTRUMENT, OR AGREEMENT
RELATING TO THE GUARANTEED INDEBTEDNESS OR ANY PORTION THEREOF; (IV) GRANT ANY
EXTENSION OR INDULGENCE WITH RESPECT TO THE PAYMENT TO THE LENDERS OF THE
GUARANTEED INDEBTEDNESS OR ANY PORTION THEREOF; (V) ENTER INTO ANY AGREEMENT OF
FORBEARANCE WITH RESPECT TO THE GUARANTEED INDEBTEDNESS OR ANY PORTION THEREOF;
(VI) RELEASE, SURRENDER, EXCHANGE OR COMPROMISE ANY SECURITY HELD BY THE AGENT
ON BEHALF OF THE LENDERS FOR THE GUARANTEED INDEBTEDNESS; (VII) RELEASE ANY
PERSON WHO IS A GUARANTOR OR SURETY OR WHO HAS AGREED TO PURCHASE THE GUARANTEED
INDEBTEDNESS OR ANY PORTION THEREOF; AND (VIII) RELEASE, SURRENDER, EXCHANGE OR
COMPROMISE ANY SECURITY OR LIEN HELD BY THE AGENT ON BEHALF OF THE LENDERS FOR
THE LIABILITIES OF ANY PERSON WHO IS A GUARANTOR OR SURETY FOR THE GUARANTEED
INDEBTEDNESS OR ANY PORTION THEREOF.  EACH GUARANTOR AGREES THAT THE AGENT ON
BEHALF OF THE LENDERS MAY DO ANY OF THE ABOVE AS IT DEEMS NECESSARY OR
ADVISABLE, IN ITS SOLE DISCRETION, WITHOUT GIVING ANY NOTICE TO ANY GUARANTOR,
AND THAT EACH GUARANTOR WILL REMAIN LIABLE FOR FULL PAYMENT TO THE LENDERS OF
THE GUARANTEED INDEBTEDNESS.

 

9.                                       EACH GUARANTOR AGREES TO BE JOINTLY AND
SEVERALLY BOUND BY THE TERMS OF THIS GUARANTEE AND JOINTLY AND SEVERALLY LIABLE
UNDER THIS GUARANTEE.  AS A RESULT OF SUCH LIABILITY, EACH GUARANTOR
ACKNOWLEDGES THAT THE LENDERS MAY, IN THEIR SOLE DISCRETION, ELECT TO ENFORCE
THIS GUARANTEE FOR THE TOTAL GUARANTEED INDEBTEDNESS AGAINST ANY GUARANTOR
WITHOUT ANY DUTY OR RESPONSIBILITY TO PURSUE THE OTHER GUARANTORS AND THAT SUCH
AN ELECTION BY THE LENDERS SHALL NOT BE A DEFENSE TO ANY ACTION THE AGENT ON
BEHALF OF THE LENDERS MAY ELECT TO TAKE AGAINST ANY GUARANTOR.

 

10.                                 IF ANY AMOUNT OWING HEREUNDER SHALL HAVE
BECOME DUE AND PAYABLE (BY ACCELERATION OR OTHERWISE), ANY LENDER AND ANY
BRANCH, SUBSIDIARY OR AFFILIATE OF ANY LENDER ANYWHERE IN THE WORLD SHALL EACH
HAVE THE RIGHT, AT ANY TIME AND FROM TIME TO TIME TO THE FULLEST EXTENT
PERMITTED BY LAW, IN ADDITION TO ALL OTHER RIGHTS AND REMEDIES AVAILABLE TO IT,
WITHOUT PRIOR NOTICE TO ANY GUARANTOR, TO SET-OFF AGAINST AND TO APPROPRIATE AND
APPLY TO SUCH DUE AND PAYABLE AMOUNTS ANY DEBT OWING TO, AND ANY OTHER FUNDS
HELD IN ANY MANNER FOR THE ACCOUNT OF ANY GUARANTOR BY ANY LENDER OR ANY SUCH
BRANCH, SUBSIDIARY OR AFFILIATE INCLUDING, WITHOUT LIMITATION, ALL FUNDS IN ALL
DEPOSIT ACCOUNTS (WHETHER TIME OR DEMAND, GENERAL OR SPECIAL, PROVISIONALLY
CREDITED OR FINALLY CREDITED, OR OTHERWISE) NOW OR HEREAFTER MAINTAINED BY ANY
GUARANTOR WITH ANY LENDER OR SUCH BRANCH, SUBSIDIARY OR AFFILIATE.  SUCH RIGHT
SHALL EXIST WHETHER OR NOT ANY LENDER SHALL HAVE GIVEN NOTICE OR MADE ANY DEMAND
HEREUNDER OR UNDER ANY OF THE NOTES OR LOAN DOCUMENTS, WHETHER OR NOT SUCH DEBT
OWING TO OR FUNDS HELD FOR THE ACCOUNT OF ANY GUARANTOR IS OR ARE MATURED OR
UNMATURED, AND REGARDLESS OF THE EXISTENCE OR ADEQUACY OF ANY COLLATERAL,
GUARANTEE OR ANY OTHER SECURITY, RIGHT OR REMEDY AVAILABLE TO ANY LENDER.  EACH
GUARANTOR HEREBY CONSENTS TO AND CONFIRMS THE FOREGOING ARRANGEMENTS, AND
CONFIRMS EACH LENDERS RIGHTS AND EACH SUCH BRANCH’S, SUBSIDIARY’S AND
AFFILIATE’S RIGHTS OF BANKER’S LIEN AND SET-OFF.

 

11.                                 EACH GUARANTOR RECOGNIZES AND AGREES THAT
THE BORROWER, AFTER THE DATE HEREOF, MAY INCUR ADDITIONAL OBLIGATIONS OR OTHER
OBLIGATIONS, FEES AND EXPENSES TO THE LENDERS UNDER THE

 

3

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CREDIT AGREEMENT, REFINANCE EXISTING GUARANTEED INDEBTEDNESS OR PAY EXISTING
GUARANTEED INDEBTEDNESS AND SUBSEQUENTLY INCUR ADDITIONAL OBLIGATIONS TO THE
LENDERS UNDER THE CREDIT AGREEMENT, AND THAT IN ANY SUCH TRANSACTION, EVEN IF
SUCH TRANSACTION IS NOT NOW CONTEMPLATED, THE LENDERS WILL RELY IN ANY SUCH CASE
UPON THIS GUARANTEE AND THE ENFORCEABILITY THEREOF AGAINST EACH GUARANTOR AND
THAT THIS GUARANTEE SHALL REMAIN IN FULL FORCE AND EFFECT WITH RESPECT TO SUCH
FUTURE OBLIGATIONS OF THE BORROWER TO THE LENDERS AND SUCH OBLIGATIONS SHALL FOR
ALL PURPOSES CONSTITUTE GUARANTEED INDEBTEDNESS.

 

12.                                 EACH GUARANTOR FURTHER AGREES THAT, IF AT
ANY TIME ALL OR ANY PART OF ANY PAYMENT, FROM WHOMEVER RECEIVED, THERETOFORE
APPLIED BY THE LENDERS TO ANY OF THE GUARANTEED INDEBTEDNESS IS OR MUST BE
RESCINDED OR RETURNED BY THE LENDERS FOR ANY REASON WHATSOEVER INCLUDING,
WITHOUT LIMITATION, THE INSOLVENCY, BANKRUPTCY OR REORGANIZATION OF ANY
GUARANTOR, SUCH LIABILITY SHALL, FOR THE PURPOSES OF THIS GUARANTEE, TO THE
EXTENT THAT SUCH PAYMENT IS OR MUST BE RESCINDED OR RETURNED, BE DEEMED TO HAVE
CONTINUED IN EXISTENCE, NOTWITHSTANDING SUCH APPLICATION BY ANY LENDER, AND THIS
GUARANTEE SHALL CONTINUE TO BE EFFECTIVE OR BE REINSTATED, AS THE CASE MAY BE,
AS TO SUCH LIABILITIES, ALL AS THOUGH SUCH APPLICATION BY THE LENDERS HAD NOT
BEEN MADE.

 

13.                                 EACH GUARANTOR AGREES THAT NO FAILURE OR
DELAY ON THE PART OF ANY LENDER OR OF THE AGENT ON BEHALF OF THE LENDERS TO
EXERCISE ANY OF ITS RIGHTS, POWERS OR PRIVILEGES UNDER THIS GUARANTEE SHALL BE A
WAIVER OF SUCH RIGHTS, POWERS OR PRIVILEGES OR A WAIVER OF ANY DEFAULT, NOR
SHALL ANY SINGLE OR PARTIAL EXERCISE OF ANY OF THE AGENT’S OR OF ANY LENDERS’
RIGHTS, POWERS OR PRIVILEGES PRECLUDE OTHER OR FURTHER EXERCISE THEREOF OR THE
EXERCISE OF ANY OTHER RIGHT, POWER OR PRIVILEGE OR BE CONSTRUED AS A WAIVER OF
ANY DEFAULT.  EACH GUARANTOR FURTHER AGREES THAT NO WAIVER OR MODIFICATION OF
ANY RIGHTS OF THE LENDERS OR OF THE AGENT UNDER THIS GUARANTEE SHALL BE
EFFECTIVE UNLESS IN WRITING AND SIGNED BY EACH LENDER AND THE AGENT.  EACH
GUARANTOR FURTHER AGREES THAT EACH WRITTEN WAIVER SHALL EXTEND ONLY TO THE
SPECIFIC INSTANCE ACTUALLY RECITED IN SUCH WRITTEN WAIVER AND SHALL NOT IMPAIR
THE RIGHTS OF ANY LENDER OR OF THE AGENT IN ANY OTHER RESPECT.

 

14.                                 EACH GUARANTOR UNCONDITIONALLY AGREES TO PAY
ALL COSTS AND EXPENSES, INCLUDING ATTORNEY’S FEES, INCURRED BY THE AGENT ON
BEHALF OF THE LENDERS IN ENFORCING THIS GUARANTEE AGAINST ANY GUARANTOR.

 

15.                                 EACH GUARANTOR AGREES THAT THIS GUARANTEE
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL FOR ALL PURPOSES BE
GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAW OF
THE STATE OF NEW JERSEY WITHOUT GIVING EFFECT TO ITS PRINCIPLES OF CONFLICT OF
LAWS.

 

16.                                 EACH GUARANTOR ACKNOWLEDGES THAT IN ADDITION
TO BINDING ITSELF TO THIS GUARANTEE, AT THE TIME OF EXECUTION OF THIS GUARANTEE
THE AGENT OFFERED TO SUCH GUARANTOR A COPY OF THIS GUARANTEE IN THE FORM IN
WHICH IT WAS EXECUTED AND THAT BY ACKNOWLEDGING THIS FACT SUCH GUARANTOR MAY NOT
LATER BE ABLE TO CLAIM THAT A COPY OF THE GUARANTEE WAS NOT RECEIVED BY IT.

 

17.                                 EACH GUARANTOR AGREES THAT THIS GUARANTEE
SHALL BE BINDING UPON EACH GUARANTOR AND ITS SUCCESSORS AND ASSIGNS; PROVIDED,
HOWEVER, THAT NO GUARANTOR MAY ASSIGN OR TRANSFER ANY OF ITS RIGHTS AND
OBLIGATIONS HEREUNDER OR ANY INTEREST HEREIN.  EACH GUARANTOR FURTHER AGREES
THAT (I) THIS GUARANTEE IS FREELY ASSIGNABLE AND TRANSFERABLE BY THE LENDERS IN
CONNECTION WITH ANY

 

4

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ASSIGNMENT OR TRANSFER OF THE GUARANTEED INDEBTEDNESS AND (II) THIS GUARANTEE
SHALL INURE TO THE BENEFIT OF THE LENDERS, AND THEIR SUCCESSORS AND ASSIGNS.

 

18.                                 EACH GUARANTOR AGREES THAT IF ANY GUARANTOR
FAILS TO PERFORM ANY COVENANT OR AGREEMENT HEREUNDER OR IF THERE OCCURS AND
CONTINUES TO EXIST AN EVENT OF DEFAULT UNDER THE CREDIT AGREEMENT, ALL OR ANY
PART OF THE GUARANTEED INDEBTEDNESS MAY BE DECLARED TO BE FORTHWITH DUE AND
PAYABLE AND, IN THE CASE OF AN EVENT OF DEFAULT DESCRIBED IN SECTION 8.1.14
[INVOLUNTARY PROCEEDINGS] OR SECTION 8.1.15 [VOLUNTARY PROCEEDINGS] OF THE
CREDIT AGREEMENT, THE GUARANTEED INDEBTEDNESS SHALL BE IMMEDIATELY DUE AND
PAYABLE, IN ANY CASE WITHOUT PRESENTMENT, DEMAND, PROTEST OR NOTICE OF ANY KIND,
ALL OF WHICH ARE HEREBY EXPRESSLY WAIVED.

 

19.                                 EACH GUARANTOR AGREES THAT THE ENUMERATION
OF THE LENDERS’ RIGHTS AND REMEDIES SET FORTH IN THIS GUARANTEE IS NOT INTENDED
TO BE EXHAUSTIVE AND THE EXERCISE BY ANY OF THE LENDERS OF ANY RIGHT OR REMEDY
SHALL NOT PRECLUDE THE EXERCISE OF ANY OTHER RIGHTS OR REMEDIES, ALL OF WHICH
SHALL BE CUMULATIVE AND SHALL BE IN ADDITION TO ANY OTHER RIGHT OR REMEDY GIVEN
HEREUNDER OR UNDER ANY OTHER AGREEMENT AMONG THE PARTIES TO THE LOAN DOCUMENTS
OR WHICH MAY NOW OR HEREAFTER EXIST AT LAW OR IN EQUITY OR BY SUIT OR OTHERWISE.

 

20.                                 EACH GUARANTOR AGREES THAT ALL NOTICES,
STATEMENTS, REQUESTS, DEMANDS AND OTHER COMMUNICATIONS UNDER THIS GUARANTEE
SHALL BE GIVEN TO EACH OF THE GUARANTORS AT THE ADDRESS SET FORTH BELOW THEIR
RESPECTIVE NAMES ON THE SIGNATURE PAGE HEREOF IN THE MANNER PROVIDED IN
SECTION 10.6 [NOTICES] OF THE CREDIT AGREEMENT.

 

21.                                 (A)                                  EACH
GUARANTOR AGREES THAT THE PROVISIONS OF THIS GUARANTEE ARE SEVERABLE, AND IN AN
ACTION OR PROCEEDING INVOLVING ANY STATE OR FEDERAL BANKRUPTCY, INSOLVENCY OR
OTHER LAW AFFECTING THE RIGHTS OF CREDITORS GENERALLY:

 

(I)                                     IF ANY CLAUSE OR PROVISION SHALL BE HELD
INVALID OR UNENFORCEABLE IN WHOLE OR IN PART IN ANY JURISDICTION, THEN SUCH
INVALIDITY OR UNENFORCEABILITY SHALL AFFECT ONLY SUCH CLAUSE OR PROVISION, OR
PART THEREOF, IN SUCH JURISDICTION AND SHALL NOT IN ANY MANNER AFFECT SUCH
CLAUSE OR PROVISION IN ANY OTHER JURISDICTION, OR ANY OTHER CLAUSE OR PROVISION
IN THIS GUARANTEE IN ANY JURISDICTION.

 

(II)                                  IF THIS GUARANTEE WOULD BE HELD OR
DETERMINED TO BE VOID, INVALID OR UNENFORCEABLE ON ACCOUNT OF THE AMOUNT OF A
GUARANTOR’S AGGREGATE LIABILITY UNDER THIS GUARANTEE, THEN, NOTWITHSTANDING ANY
OTHER PROVISION OF THIS GUARANTEE TO THE CONTRARY, THE AGGREGATE AMOUNT OF SUCH
LIABILITY SHALL, WITHOUT ANY FURTHER ACTION BY THE LENDERS, SUCH GUARANTOR OR
ANY OTHER PERSON, BE AUTOMATICALLY LIMITED AND REDUCED TO THE HIGHEST AMOUNT
WHICH IS VALID AND ENFORCEABLE AS DETERMINED IN SUCH ACTION OR PROCEEDING, WHICH
(WITHOUT LIMITING THE GENERALITY OF THE FOREGOING) MAY BE AN AMOUNT WHICH IS NOT
GREATER THAN THE GREATER OF:

 

(A)                              THE FAIR CONSIDERATION ACTUALLY RECEIVED BY
SUCH GUARANTOR UNDER THE TERMS OF AND AS A RESULT OF THE LOAN DOCUMENTS,
INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, AND TO THE EXTENT
NOT INCONSISTENT WITH APPLICABLE FEDERAL AND STATE LAWS AFFECTING THE
ENFORCEABILITY OF GUARANTEES, DISTRIBUTIONS OR ADVANCES MADE TO SUCH GUARANTOR
WITH THE PROCEEDS OF ANY CREDIT EXTENDED UNDER THE LOAN DOCUMENTS IN EXCHANGE
FOR ITS GUARANTY OF THE GUARANTEED INDEBTEDNESS, OR

 

5

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(B)                                THE EXCESS OF (1) THE AMOUNT OF THE FAIR
SALEABLE VALUE OF THE ASSETS OF SUCH GUARANTOR AS OF THE DATE OF THIS GUARANTEE
AS DETERMINED IN ACCORDANCE WITH APPLICABLE FEDERAL AND STATE LAWS GOVERNING
DETERMINATIONS OF THE INSOLVENCY OF DEBTORS AS IN EFFECT ON THE DATE THEREOF
OVER (2) THE AMOUNT OF ALL LIABILITIES OF SUCH GUARANTOR AS OF THE DATE OF THIS
GUARANTEE, ALSO AS DETERMINED ON THE BASIS OF APPLICABLE FEDERAL AND STATE LAWS
GOVERNING THE INSOLVENCY OF DEBTORS AS IN EFFECT ON THE DATE THEREOF.

 

(B)                                 IF THE GUARANTEE BY ANY ONE OR MORE
GUARANTORS OF THE GUARANTEED INDEBTEDNESS IS HELD OR DETERMINED TO BE VOID,
INVALID OR UNENFORCEABLE, IN WHOLE OR IN PART, SUCH HOLDING OR DETERMINATION
SHALL NOT IMPAIR OR AFFECT:

 

(I)                                     THE VALIDITY AND ENFORCEABILITY OF THE
GUARANTEE HEREUNDER BY ANY OTHER GUARANTOR, WHICH SHALL CONTINUE IN FULL FORCE
AND EFFECT IN ACCORDANCE WITH ITS TERMS; OR

 

(II)                                  THE VALIDITY AND ENFORCEABILITY OF ANY
CLAUSE OR PROVISION NOT SO HELD TO BE VOID, INVALID OR UNENFORCEABLE.

 

22.                                 EACH GUARANTOR HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR
IN CONNECTION WITH THIS GUARANTEE.  EACH GUARANTOR (I) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY LENDER HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVER, AND EXECUTION AND DELIVERY HEREOF BY EACH
GUARANTOR, AND (II) ACKNOWLEDGES THAT THE ENTERING INTO OF THE CREDIT AGREEMENT
BY THE LENDERS HAS BEEN INDUCED BY, AMONG OTHER THINGS, THE WAIVERS AND
CERTIFICATIONS SET FORTH IN THIS SECTION.

 

23.                                 EACH GUARANTOR (I) HEREBY IRREVOCABLY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE SUPERIOR COURT OF NEW JERSEY,
LAW DIVISION, MIDDLESEX COUNTY, OR ANY SUCCESSOR TO SAID COURT, AND TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT
OF NEW JERSEY, OR ANY SUCCESSOR TO SAID COURT (HEREINAFTER REFERRED TO AS THE
“NEW JERSEY COURTS”) FOR PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING WHICH
RELATES TO THIS GUARANTEE OR ANY OTHER LOAN DOCUMENT, (II) TO THE EXTENT
PERMITTED BY APPLICABLE LAW, HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY OF
MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY
CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF THE NEW JERSEY
COURTS; THAT SUCH SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT
FORUM; THAT THE VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER; OR THAT
THIS GUARANTEE OR ANY LOAN DOCUMENT MAY NOT BE ENFORCED IN OR BY THE NEW JERSEY
COURTS, (III) HEREBY AGREES NOT TO SEEK, AND HEREBY WAIVES, ANY COLLATERAL
REVIEW BY ANY OTHER COURT, WHICH MAY BE CALLED UPON TO ENFORCE THE JUDGMENT OF
ANY OF THE NEW JERSEY COURTS, OF THE MERITS OF ANY SUCH SUIT, ACTION OR
PROCEEDING OR THE JURISDICTION OF THE NEW JERSEY COURTS, AND (IV) WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH
SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL ADDRESSED AS PROVIDED
IN SECTION 20 HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON
ACTUAL RECEIPT THEREOF.  NOTHING HEREIN SHALL LIMIT ANY LENDERS RIGHT TO BRING
ANY SUIT, ACTION OR OTHER PROCEEDING

 

6

--------------------------------------------------------------------------------

 

AGAINST ANY GUARANTOR OR ANY OF ANY GUARANTOR’S ASSETS OR TO SERVE PROCESS ON
ANY GUARANTOR BY ANY MEANS AUTHORIZED BY LAW.

 

24.                                 EACH GUARANTOR WAIVES ALL DEFENSES BASED ON
SURETYSHIP NOT SPECIFICALLY WAIVED.

 

25.                                 At any time when the Borrower wishes to
cause the Lenders to release a Guarantor from its obligations under this
Guarantee (whether directly or in connection with the designation of a
Restricted Subsidiary as a Non-Restricted Person), the consent of the Lenders
shall be required as described below and shall be subject to the other
provisions of this Section 25.

 

(a)                                  For the release of (i) any Guarantor whose
assets are principally comprised of residential or commercial property which is
leased or held for the purposes of leasing to unaffiliated third parties or
(ii) any Guarantor in which any Loan Party (or Loan Parties in the aggregate)
has, at the time of such release, a Subsidiary Investment less than $1,000,000
or (iii) Corporate Office Subsidiary incident to it becoming an Non-Restricted
Person or (iv) any Guarantor at the time such Guarantor enters into a
newly-formed Joint Venture with a person which is not an Affiliate of the Loan
Parties and transfers all or a substantial portion of its assets to such Joint
Venture provided that such Guarantor is a Non-Restricted Person (or
simultaneously with Borrower’s request for such release the Borrower has
designated such Guarantor as a “Non-Restricted Person” in compliance with
Section 2.11.2 of the Credit Agreement), no consent of the Lenders shall be
required and such request of the Borrower shall be granted absent an Event of
Default or Potential Default, effective on the date specified by the Borrower
which shall not be earlier than five (5) Business Days after the receipt by the
Agent of such request;

 

(b)                                 For the release of any Guarantor (not
described in clause 26(a)(i) hereof) in which any Loan Party (or Loan Parties in
the aggregate) has, at the time of such release, a Subsidiary Investment greater
than or equal to $1,000,000 and less than $5,000,000 (except Corporate Office
Subsidiary, if otherwise applicable), the consent of Required Lenders shall be
required; and

 

(c)                                  For the release of Hovnanian or any
Guarantor (not described in clause 26(a)(i) hereof) in which any Loan Party (or
Loan Parties in the aggregate) has, at the time of such release, a Subsidiary
Investment greater than or equal to $5,000,000 (except Corporate Office
Subsidiary, if otherwise applicable), the consent of 100% of the Lenders shall
be required.

 

(d)                                 The designation of a Person as a
Non-Restricted Person for any reason shall not itself constitute a release of
any Guarantor and any such release of such Person shall be in accordance with
Section 2.11 of the Credit Agreement.

 

26.                                 All of the terms, conditions and provisions
of Sections 7.1 [Affirmative Covenants], Section 7.2 [Negative Covenants] and
Section 7.3 [Reporting Requirements] of the Credit Agreement are incorporated
herein by reference as if fully set forth herein.  Each of the Guarantors,
jointly and severally, without any further act or undertaking or the occurrence
of any other event, covenant and agree that until payment in full of the Loans,
Reimbursement Obligations and Letter of Credit Borrowings and interest thereon,
expiration or termination of all

 

7

--------------------------------------------------------------------------------

 

Letters of Credit, satisfaction of all of the Loan Parties’ other Obligations
under the Credit Agreement and the satisfaction of the Guaranteed Indebtedness
under this Guarantee and termination of the Commitments, they shall comply with
the affirmative covenants set forth in Section 7.1 [Affirmative Covenants] of
the Credit Agreement, comply with the negative covenants set forth in
Section 7.2 [Negative Covenants] of the Credit Agreement and comply Letters of
Credit, satisfaction of all of the Loan Parties’ other Obligations under the
Credit Agreement and the satisfaction of the Guaranteed Indebtedness under this
Guarantee and termination of the Commitments, they shall comply with the
affirmative covenants set forth in Section 7.1 [Affirmative Covenants] of the
Credit Agreement, comply with the negative covenants set forth in Section 7.2
[Negative Covenants] of the Credit Agreement and comply with Section 7.3
[Reporting Requirements] of the Credit Agreement.  In particular, each of the
Guarantors shall not own or create directly or indirectly any Subsidiaries other
than (i) any Subsidiary which has joined this Guarantee as a Guarantor on the
Closing Date, (ii) any Subsidiary formed or acquired after the Closing Date
which joins this Guarantee as a Guarantor pursuant to Section 27 below or
(iii) any Non-Restricted Person.  To the extent that the obligations set forth
in Section 7.3 [Reporting Requirements] are obligations which, by their nature,
can only be performed and/or satisfied by the Borrower and/or by Hovnanian, each
of the Guarantors shall fully cooperate with the Borrower and with Hovnanian in
their respective efforts to comply with their respective obligations set forth
therein.

 

27.           Any Subsidiary of Hovnanian which is required to join this
Guarantee as a Guarantor pursuant to Section 26 hereof or which is to become a
Restricted Subsidiary shall execute and deliver to the Agent (i) a Guarantor
Joinder pursuant to which it shall join as a Guarantor this Guarantee; and
(ii) at the request of the Agent, documents in the forms described in
Section 6.1 [First Loans and Letters of Credit] of the Credit Agreement,
modified as appropriate to relate to such new Guarantor.  Such new Guarantor
shall deliver such Guarantor Joinder and any related documents that the Agent
may reasonably request to the Agent after the formation thereof and its
designation as a Restricted Subsidiary, and such Subsidiary shall not be a
Restricted Subsidiary until the delivery and effectiveness of the items required
herein.

 

28.           All of the representations and warranties of the Guarantors
contained herein (either directly or indirectly) or made in connection herewith
shall survive the making of Loans and issuance of Letters of Credit and shall
not be waived by the execution and delivery of the Credit Agreement by any other
party, including the Agent and the Lenders, any investigation by the Agent or
the Lenders, the making of Loans, issuance of Letters of Credit, or payment in
full of the Loans.  All covenants and agreements of the Guarantors contained in
this Guarantee shall continue in full force and effect from and after the date
hereof so long as the Borrower may borrow or request Letters of Credit under the
Credit Agreement, and until termination of the Commitments and payment in full
of the Loans and expiration or termination of all Letters of Credit.

 

29.           Notwithstanding the other provisions contained herein, at such
time as the Guaranteed Indebtedness shall have been paid in full, this Guarantee
and all obligations of the Agent and each Guarantor hereunder shall terminate,
all without delivery of any instrument or performance of any act by any party. 
At the request and sole expense of the Guarantors, following any such
termination, the Agent shall execute and deliver to the Guarantors such
documents as the Guarantors shall reasonably request to evidence such
termination.

 

[SIGNATURES APPEAR ON FOLLOWING PAGE]

 

8

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 1 OF 35 TO THE GUARANTY AGREEMENT]

 

IN WITNESS WHEREOF, each Guarantor and the Agent, intending to be legally bound,
have executed this Guarantee on the date first above written.

 

 

HOVNANIAN ENTERPRISES, INC.

 

 

 

By:

 

 

 

Name:

J. Larry Sorsby

 

Title:

Executive Vice President and Chief
Financial Officer

 

 

 

 

 

ARROW PROPERTIES, INC.

 

 

 

HOVNANIAN DEVELOPMENTS OF FLORIDA,
INC.

 

 

 

K. HOV INTERNATIONAL, INC.

 

 

 

K. HOV IP, II, INC.

 

 

 

K. HOV IP, INC.

 

 

 

K. HOVNANIAN ACQUISITIONS, INC.

 

 

 

K. HOVNANIAN AT BALLANTRAE, INC.

 

 

 

K. HOVNANIAN AT BERNARDS IV, INC.

 

 

 

K. HOVNANIAN AT BRANCHBURG III, INC.

 

 

 

K. HOVNANIAN AT BRIDGEPORT, INC.

 

 

 

K. HOVNANIAN AT BRIDGEWATER VI, INC.

 

 

 

K. HOVNANIAN AT BURLINGTON III, INC.

 

 

 

K. HOVNANIAN AT BURLINGTON, INC.

 

 

 

K. HOVNANIAN AT CALABRIA, INC.

 

 

 

K. HOVNANIAN AT CARMEL DEL MAR, INC.

 

 

 

K. HOVNANIAN AT CASTILE, INC.

 

 

 

K. HOVNANIAN AT CHAPARRAL, INC.

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 2 OF 35 TO THE GUARANTY AGREEMENT]

 

 

K. HOVNANIAN AT CLARKSTOWN, INC.

 

 

 

K. HOVNANIAN AT CRESTLINE, INC.

 

 

 

K. HOVNANIAN AT DOMINGUEZ HILLS, INC.

 

 

 

K. HOVNANIAN AT EAST WHITELAND I, INC.

 

 

 

K. HOVNANIAN AT FREEHOLD TOWNSHIP I,
INC.

 

 

 

K. HOVNANIAN AT HERSHEY’S MILL, INC.

 

 

 

K. HOVNANIAN AT HACKETTSTOWN, INC.

 

 

 

K. HOVNANIAN AT HIGHLAND VINEYARDS,
INC.

 

 

 

K. HOVNANIAN AT HOPEWELL IV, INC.

 

 

 

K. HOVNANIAN AT HOPEWELL VI, INC.

 

 

 

K. HOVNANIAN AT HOWELL TOWNSHIP,
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 LOWER SAUCON, INC.

 

 

 

K. HOVNANIAN AT MAHWAH II, INC.

 

 

 

K. HOVNANIAN AT MAHWAH V, INC.

 

 

 

K. HOVNANIAN AT MAHWAH VI, INC.

 

 

 

K. HOVNANIAN AT MAHWAH VII, INC.

 

 

 

K. HOVNANIAN AT MANALAPAN, INC.

 

 

 

K. HOVNANIAN AT MARLBORO II, INC.

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 3 OF 35 TO THE GUARANTY AGREEMENT]

 

 

K. HOVNANIAN AT MARLBORO TOWNSHIP
IV, INC.

 

 

 

K. HOVNANIAN AT METRO DC SOUTH, INC.

 

 

 

K. HOVNANIAN AT MONTCLAIR NJ, INC.

 

 

 

K. HOVNANIAN AT MONTGOMERY I, INC.

 

 

 

K. HOVNANIAN AT MONROE II, INC.

 

 

 

K. HOVNANIAN AT NORTHERN
WESTCHESTER, INC.

 

 

 

K. HOVNANIAN AT NORTHLAKE, INC.

 

 

 

K. HOVNANIAN AT OCEAN TOWNSHIP, INC.

 

 

 

K. HOVNANIAN AT OCEAN WALK, INC.

 

 

 

K. HOVNANIAN AT PERKIOMEN I, INC.

 

 

 

K. HOVNANIAN AT PERKIOMEN II, INC.

 

 

 

K. HOVNANIAN AT PLAINSBORO III, INC.

 

 

 

K. HOVNANIAN AT PRINCETON, INC.

 

 

 

K. HOVNANIAN AT RANCHO CRISTIANITOS,
INC.

 

 

 

K. HOVNANIAN AT RESERVOIR RIDGE, INC.

 

 

 

K. HOVNANIAN AT SAN SEVAINE, INC.

 

 

 

K. HOVNANIAN AT SARATOGA, INC.

 

 

 

K. HOVNANIAN AT SAWMILL, INC.

 

 

 

K. HOVNANIAN AT SCOTCH PLAINS II, INC.

 

 

 

K. HOVNANIAN AT SCOTCH PLAINS, INC.

 

 

 

K. HOVNANIAN AT SMITHVILLE, INC.

 

 

 

K. HOVNANIAN AT SOUTH BRUNSWICK III,
INC.

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 4 OF 35 TO THE GUARANTY AGREEMENT]

 

 

K. HOVNANIAN AT SOUTH BRUNSWICK V,
INC.

 

 

 

K. HOVNANIAN AT STONE CANYON, INC.

 

 

 

K. HOVNANIAN AT STONY POINT, INC.

 

 

 

K. HOVNANIAN AT SYCAMORE, INC.

 

 

 

K. HOVNANIAN AT TANNERY HILL, INC.

 

 

 

K. HOVNANIAN AT THE BLUFF, INC.

 

 

 

K. HOVNANIAN AT THE CEDARS, INC.

 

 

 

K. HOVNANIAN AT 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 VAIL RANCH, 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 WILDROSE, INC.

 

 

 

K. HOVNANIAN COMPANIES NORTHEAST,
INC.

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 5 OF 35 TO THE GUARANTY AGREEMENT]

 

 

K. HOVNANIAN COMPANIES OF
CALIFORNIA, 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 II, INC.

 

 

 

K. HOVNANIAN CONSTRUCTION III, INC.

 

 

 

K. HOVNANIAN CONSTRUCTION
MANAGEMENT, INC.

 

 

 

K. HOVNANIAN DEVELOPMENT OF METRO
WASHINGTON, INC.

 

 

 

K. HOVNANIAN DEVELOPMENTS OF
ARIZONA, INC.

 

 

 

K. HOVNANIAN DEVELOPMENTS OF
CALIFORNIA, INC.

 

 

 

K. HOVNANIAN DEVELOPMENTS OF D.C.,
INC.

 

 

 

K. HOVNANIAN DEVELOPMENTS OF
DELAWARE, INC.

 

 

 

K. HOVNANIAN DEVELOPMENTS OF
ILLINOIS, INC.

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 6 OF 35 TO THE GUARANTY AGREEMENT]

 

 

K. HOVNANIAN DEVELOPMENTS OF
MARYLAND, INC.

 

 

 

K. HOVNANIAN DEVELOPMENTS OF METRO
WASHINGTON, INC.

 

 

 

K. HOVNANIAN DEVELOPMENTS OF
MICHIGAN, INC.

 

 

 

K. HOVNANIAN DEVELOPMENTS OF
MINNESOTA, INC.

 

 

 

K. HOVNANIAN DEVELOPMENTS OF NEW
JERSEY II, INC.

 

 

 

K. HOVNANIAN DEVELOPMENTS OF NEW
JERSEY, INC.

 

 

 

K. HOVNANIAN DEVELOPMENTS OF NEW
YORK, INC.

 

 

 

K. HOVNANIAN DEVELOPMENTS OF OHIO,
INC.

 

 

 

K. HOVNANIAN DEVELOPMENTS OF
PENNSYLVANIA, INC.

 

 

 

K. HOVNANIAN DEVELOPMENTS OF SOUTH
CAROLINA, INC.

 

 

 

K. HOVNANIAN DEVELOPMENTS OF TEXAS,
INC.

 

 

 

K. HOVNANIAN DEVELOPMENTS OF WEST
VIRGINIA, INC.

 

 

 

K. HOVNANIAN ENTERPRISES, INC.

 

 

 

K. HOVNANIAN EQUITIES, INC.

 

 

 

K. HOVNANIAN FORECAST HOMES, INC.

 

 

 

K. HOVNANIAN HOMES OF NORTH
CAROLINA, INC.

 

 

 

K. HOVNANIAN HOMES OF VIRGINIA, INC.

 

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[SIGNATURE PAGE 7 OF 35 TO THE GUARANTY AGREEMENT]

 

 

K. HOVNANIAN INVESTMENT PROPERTIES
OF NEW JERSEY, INC.

 

 

 

K. HOVNANIAN PA REAL ESTATE, INC.

 

 

 

K. HOVNANIAN PORT IMPERIAL URBAN
RENEWAL, INC.

 

 

 

K. HOVNANIAN PROPERTIES OF NEWARK
URBAN RENEWAL CORPORATION, INC.

 

 

 

K. HOVNANIAN PROPERTIES OF NORTH
BRUNSWICK V, INC.

 

 

 

K. HOVNANIAN PROPERTIES OF WALL, INC.

 

 

 

KHC ACQUISITION, INC.

 

 

 

LANDARAMA, INC.

 

 

 

M&M AT LONG BRANCH, INC.

 

 

 

MATZEL & MUMFORD OF DELAWARE, INC.

 

 

 

MCNJ, INC.

 

 

 

PINE BROOK COMPANY, INC.

 

 

 

REFLECTIONS OF YOU INTERIORS, INC.

 

 

 

SEABROOK ACCUMULATION
CORPORATION

 

 

 

STONEBROOK HOMES, INC.

 

 

 

THE MATZEL & MUMFORD ORGANIZATION,
INC.

 

 

 

WASHINGTON HOMES, INC.

 

 

 

WESTMINSTER HOMES OF TENNESSEE, INC.

 

 

 

WESTMINSTER HOMES, INC.

 

 

 

WH LAND I, INC.

 

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[SIGNATURE PAGE 8 OF 35 TO THE GUARANTY AGREEMENT]

 

 

WH PROPERTIES, INC.

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

On behalf of, and as Executive Vice
President and Chief Financial Officer of
each of the foregoing corporations

 

 

 

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

 

 

 

K. HOVNANIAN HOMES OF D.C., L.L.C.

 

 

 

 

By:

K. Hovnanian Developments of D.C., Inc.,
as the sole member of the foregoing limited
liability company

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

 

 

HOVNANIAN LAND INVESTMENT GROUP OF
MARYLAND, L.L.C.

 

 

 

HOVNANIAN LAND INVESTMENT GROUP OF
NORTH CAROLINA, L.L.C.

 

 

 

HOVNANIAN LAND INVESTMENT GROUP,
L.L.C.

 

 

 

K. HOVNANIAN AT KING FARM, L.L.C.

 

 

 

K. HOVNANIAN AT RODERUCK. L.L.C.

 

 

 

K. HOVNANIAN AT WILLOW BROOK, L.L.C.

 

 

 

K. HOVNANIAN COMPANIES OF METRO D.C.
NORTH, L.L.C.

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 9 OF 35 TO THE GUARANTY AGREEMENT]

 

 

K. HOVNANIAN’S FOUR SEASONS AT KENT
ISLAND CONDOMINIUMS, L.L.C.

 

 

 

K. HOVNANIAN’S FOUR SEASONS AT KENT
ISLAND, L.L.C.

 

 

 

K. HOVNANIAN’S FOUR SEASONS AT ST.
MARGARETS LANDING, L.L.C.

 

 

 

RIDGEMORE UTILITY, L.L.C.

 

 

 

WASHINGTON HOMES AT COLUMBIA TOWN
CENTER, L.L.C.

 

 

 

WESTMINSTER HOMES OF ALABAMA, L.L.C.

 

 

 

WESTMINSTER HOMES OF MISSISSIPPI,
L.L.C.

 

 

 

WOODLAND LAKES CONDOS @ BOWIE
NEWTOWN, L.L.C.

 

 

 

By:

K. Hovnanian Developments of Maryland,
Inc., as the sole member of each of the
foregoing limited liability companies.

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

 

 

DULLES COPPERMINE, L.L.C.

 

 

 

HOVNANIAN LAND INVESTMENT GROUP OF
VIRGINIA, L.L.C.

 

 

 

K. HOVNANIAN AT LAKE RIDGE CROSSING,
L.L.C.

 

 

 

K. HOVNANIAN AT LAKE TERRAPIN, L.L.C.

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 10 OF 35 TO THE GUARANTY AGREEMENT]

 

 

K. HOVNANIAN FOUR SEASONS AT
HISTORIC VIRGINIA, L.L.C.

 

 

 

K. HOVNANIAN HOMES AT CAMERON
STATION, L.L.C.

 

 

 

K. HOVNANIAN HOMES AT LAUREL
HIGHLANDS, L.L.C.

 

 

 

K. HOVNANIAN SUMMIT HOLDINGS, L.L.C.

 

 

 

K. HOVNANIAN’S FOUR SEASONS AT
ASHBURN VILLAGE, L.L.C.

 

 

 

K. HOVNANIAN’S FOUR SEASONS AT VINT
HILL, L.L.C.

 

 

 

By:

K. Hovnanian Developments of Metro
Washington, Inc., as the sole member of
each of the foregoing limited liability
companies.

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

 

 

EDISON CONTRACT SERVICES, 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 BLUE HERON PINES,
L.L.C.

 

 

 

K. HOVNANIAN AT BRIDGEWATER I, L.L.C

 

 

 

K. HOVNANIAN AT CAMDEN I, L.L.C.

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 11 OF 35 TO THE GUARANTY AGREEMENT]

 

 

K. HOVNANIAN AT CEDAR GROVE III, L.L.C.

 

 

 

K. HOVNANIAN AT CEDAR GROVE IV, L.L.C.

 

 

 

K. HOVNANIAN AT CHESTER I, L.L.C.

 

 

 

K. HOVNANIAN AT CHESTERFIELD, L.L.C.

 

 

 

K. HOVNANIAN AT CLIFTON II, L.L.C.

 

 

 

K. HOVNANIAN AT CLIFTON, 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 DEPTFORD TOWNSHIP,
L.L.C.

 

 

 

K. HOVNANIAN AT EDGEWATER II, L.L.C.

 

 

 

K. HOVNANIAN AT EDGEWATER, L.L.C.

 

 

 

K. HOVNANIAN AT EGG HARBOR
TOWNSHIP, L.L.C.

 

 

 

K. HOVNANIAN AT FLORENCE I, L.L.C.

 

 

 

K. HOVNANIAN AT FLORENCE II, L.L.C.

 

 

 

K. HOVNANIAN AT FOREST MEADOWS,
L.L.C.

 

 

 

K. HOVNANIAN AT FRANKLIN, L.L.C.

 

 

 

K. HOVNANIAN AT FREEHOLD TOWNSHIP,
L.L.C.

 

 

 

K. HOVNANIAN AT GREAT NOTCH, L.L.C.

 

 

 

K. HOVNANIAN AT GUTTENBERG, L.L.C.

 

 

 

K. HOVNANIAN AT HACKETTSTOWN II,
L.L.C.

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 12 OF 35 TO THE GUARANTY AGREEMENT]

 

 

K. HOVNANIAN AT HAMBURG
CONTRACTORS, L.L.C.

 

 

 

K. HOVNANIAN AT HAMBURG, L.L.C.

 

 

 

K. HOVNANIAN AT HAWTHORNE, L.L.C

 

 

 

K. HOVNANIAN AT JACKSON I, L.L.C.

 

 

 

K. HOVNANIAN AT JACKSON, L.L.C.

 

 

 

K. HOVNANIAN AT JERSEY CITY IV, L.L.C.

 

 

 

K. HOVNANIAN AT JERSEY CITY V URBAN
RENEWAL COMPANY, L.L.C.

 

 

 

K. HOVNANIAN AT LAFAYETTE ESTATES,
L.L.C.

 

 

 

K. HOVNANIAN AT LAWRENCE V, L.L.C.

 

 

 

K. HOVNANIAN AT LINWOOD, L.L.C.

 

 

 

K. HOVNANIAN AT LITTLE EGG HARBOR
TOWNSHIP II, L.L.C.

 

 

 

K. HOVNANIAN AT LITTLE EGG HARBOR
CONTRACTORS, L.L.C.

 

 

 

K. HOVNANIAN AT LITTLE EGG HARBOR,
L.L.C.

 

 

 

K. HOVNANIAN AT LONG BRANCH I, L.L.C.

 

 

 

K. HOVNANIAN AT MANALAPAN III, L.L.C.

 

 

 

K. HOVNANIAN AT MANSFIELD I, L.L.C.

 

 

 

K. HOVNANIAN AT MANSFIELD II, L.L.C.

 

 

 

K. HOVNANIAN AT MANSFIELD III, L.L.C.

 

 

 

K. HOVNANIAN AT MARLBORO TOWNSHIP
IX, L.L.C.

 

 

 

K. HOVNANIAN AT MARLBORO TOWNSHIP
V, L.L.C.

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 13 OF 35 TO THE GUARANTY AGREEMENT]

 

 

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 MENDHAM TOWNSHIP,
L.L.C.

 

 

 

K. HOVNANIAN AT MIDDLE TOWNSHIP,
L.L.C.

 

 

 

K. HOVNANIAN AT MIDDLETOWN II, L.L.C.

 

 

 

K. HOVNANIAN AT MIDDLETOWN, L.L.C.

 

 

 

K. HOVNANIAN AT MILLVILLE I, L.L.C.

 

 

 

K. HOVNANIAN AT MILLVILLE II, L.L.C.

 

 

 

K. HOVNANIAN AT MONROE III, L.L.C.

 

 

 

K. HOVNANIAN AT MONROE IV, L.L.C.

 

 

 

K. HOVNANIAN AT MONTVALE, L.L.C.

 

 

 

K. HOVNANIAN AT MT. OLIVE TOWNSHIP,
L.L.C.

 

 

 

K. HOVNANIAN AT NORTH BERGEN II, L.L.C.

 

 

 

K. HOVNANIAN AT NORTH BERGEN, L.L.C.

 

 

 

K. HOVNANIAN AT NORTH BRUNSWICK VI,
L.L.C.

 

 

 

K. HOVNANIAN AT NORTH CALDWELL II,
L.L.C.

 

 

 

K. HOVNANIAN AT NORTH CALDWELL,
L.L.C.

 

 

 

K. HOVNANIAN AT NORTH HALEDON, L.L.C.

 

 

 

K. HOVNANIAN AT NORTH WILDWOOD,
L.L.C.

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 14 OF 35 TO THE GUARANTY AGREEMENT]

 

 

K. HOVNANIAN AT NORTHFIELD, L.L.C.

 

 

 

K. HOVNANIAN AT OLD BRIDGE, L.L.C.

 

 

 

K. HOVNANIAN AT PARAMUS, L.L.C.

 

 

 

K. HOVNANIAN AT PARSIPPANY-TROY
HILLS, L.L.C.

 

 

 

K. HOVNANIAN AT PITTSGROVE, L.L.C.

 

 

 

K. HOVNANIAN AT RANDOLPH I, L.L.C.

 

 

 

K. HOVNANIAN AT READINGTON II, L.L.C.

 

 

 

K. HOVNANIAN AT RED BANK, L.L.C.

 

 

 

K. HOVNANIAN AT SAYREVILLE, L.L.C.

 

 

 

K. HOVNANIAN AT SCOTCH PLAINS, L.L.C.

 

 

 

K. HOVNANIAN AT SMITHVILLE III, L.L.C.

 

 

 

K. HOVNANIAN AT SOMERS POINT, L.L.C.

 

 

 

K. HOVNANIAN AT SOUTH BRUNSWICK,
L.L.C.

 

 

 

K. HOVNANIAN AT SPRINGFIELD, L.L.C.

 

 

 

K. HOVNANIAN AT TEANECK, L.L.C.

 

 

 

K. HOVNANIAN AT UNION TOWNSHIP II,
L.L.C.

 

 

 

K. HOVNANIAN AT UPPER FREEHOLD
TOWNSHIP II, L.L.C.

 

 

 

K. HOVNANIAN AT UPPER FREEHOLD
TOWNSHIP III, L.L.C.

 

 

 

K. HOVNANIAN AT WANAQUE, L.L.C.

 

 

 

K. HOVNANIAN AT WARREN TOWNSHIP,
L.L.C.

 

 

 

K. HOVNANIAN AT WASHINGTON, L.L.C.

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 15 OF 35 TO THE GUARANTY AGREEMENT]

 

 

K. HOVNANIAN AT WAYNE IX, L.L.C.

 

 

 

K. HOVNANIAN AT WAYNE VIII, L.L.C.

 

 

 

K. HOVNANIAN AT WEST MILFORD, L.L.C.

 

 

 

K. HOVNANIAN AT WEST WINDSOR, L.L.C.

 

 

 

K. HOVNANIAN AT WOODHILL ESTATES,
L.L.C.

 

 

 

K. HOVNANIAN AT WOOLWICH I, L.L.C.

 

 

 

K. HOVNANIAN CENTRAL ACQUISITIONS,
L.L.C.

 

 

 

K. HOVNANIAN INVESTMENTS, L.L.C.

 

 

 

K. HOVNANIAN NORTH CENTRAL
ACQUISITIONS, L.L.C.

 

 

 

K. HOVNANIAN NORTH JERSEY
ACQUISITIONS, L.L.C.

 

 

 

K. HOVNANIAN NORTHEAST SERVICES,
L.L.C.

 

 

 

K. HOVNANIAN SHORE ACQUISITIONS,
L.L.C.

 

 

 

K. HOVNANIAN SOUTHERN NEW JERSEY,
L.LC.

 

 

 

K. HOVNANIAN SOUTH JERSEY
ACQUISITIONS, L.L.C.K. HOVNANIAN T&C
INVESTMENT, L.L.C.

 

 

 

K. HOVNANIAN’S PRIVATE HOME
PORTFOLIO, L.L.C.

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 16 OF 35 TO THE GUARANTY AGREEMENT]

 

 

KHIP, L.L.C.By:        K. Hovnanian Holdings NJ,
L.L.C., as the sole member of each of the foregoing
limited liability companies.

 

 

 

 

By:

K. Hovnanian Developments of New
Jersey, Inc., as member

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

J. Larry Sorsby

 

 

 

 

Executive Vice President and
Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

 

 

 

 

 

 

AND

 

 

 

 

 

 

By:

K. Hovnanian Developments of New
Jersey II, Inc., as member

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

J. Larry Sorsby

 

 

 

 

Executive Vice President and
Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

 

 

HOVNANIAN LAND INVESTMENT GROUP OF
CALIFORNIA, L.L.C.

 

 

 

K. HOVNANIAN AT 4S II, L.L.C.

 

 

 

K. HOVNANIAN AT 4S, L.L.C.

 

 

 

K. HOVNANIAN AT ACQUA VISTA, L.L.C.

 

 

 

K. HOVNANIAN AT ALISO, L.L.C.

 

 

 

K. HOVNANIAN AT ARBOR HEIGHTS, L.L.C.

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 17 OF 35 TO THE GUARANTY AGREEMENT]

 

 

K. HOVNANIAN AT BELLA LAGO, L.L.C.

 

 

 

K. HOVNANIAN AT BRIDLEWOOD, L.L.C.

 

 

 

K. HOVNANIAN AT CAPISTRANO, L.L.C.

 

 

 

K. HOVNANIAN AT CARMEL VILLAGE, L.L.C.

 

 

 

K. HOVNANIAN AT CITY IN THE HILLS,
L.L.C.

 

 

 

K. HOVNANIAN AT CORTEZ HILL, L.L.C.

 

 

 

K. HOVNANIAN AT EASTLAKE, L.L.C.

 

 

 

K. HOVNANIAN AT ENCINITAS RANCH,
L.L.C.

 

 

 

K. HOVNANIAN AT GASLAMP SQUARE,
L.L.C.

 

 

 

K. HOVNANIAN AT HIGHWATER, L.L.C.

 

 

 

K. HOVNANIAN AT LA COSTA, L.L.C

 

 

 

K. HOVNANIAN AT LA HABRA KNOLLS,
L.L.C.

 

 

 

K. HOVNANIAN AT MENIFEE, L.L.C.

 

 

 

K. HOVNANIAN AT MOSAIC, L.L.C.

 

 

 

K. HOVNANIAN AT OLDE ORCHARD, L.L.C.

 

 

 

K. HOVNANIAN AT PACIFIC BLUFFS, L.L.C.

 

 

 

K. HOVNANIAN AT PARK LANE, L.L.C.

 

 

 

K. HOVNANIAN AT RANCHO SANTA
MARGARITA, L.L.C.

 

 

 

K. HOVNANIAN AT RIVERBEND II, L.L.C.

 

 

 

K. HOVNANIAN AT RIVERBEND, L.L.C.

 

 

 

K. HOVNANIAN AT ROWLAND HEIGHTS,
L.L.C.

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 18 OF 35 TO THE GUARANTY AGREEMENT]

 

 

K. HOVNANIAN AT SHELF COMPANY, L.L.C.

 

 

 

K. HOVNANIAN AT SKYE ISLE, L.L.C.

 

 

 

K. HOVNANIAN AT SUNSETS, L.L.C.

 

 

 

K. HOVNANIAN AT THE CROSBY, L.L.C.

 

 

 

K. HOVNANIAN AT THE GABLES, L.L.C.

 

 

 

K. HOVNANIAN AT THE PRESERVE, L.L.C.

 

 

 

K. HOVNANIAN AT THOMPSON RANCH,
L.L.C.

 

 

 

K. HOVNANIAN AT TRAIL RIDGE, L.L.C.

 

 

 

K. HOVNANIAN AT WINCHESTER, L.L.C.

 

 

 

K. HOVNANIAN T&C MANAGEMENT CO.,
L.L.C.

 

 

 

K. HOVNANIAN’S FOUR SEASONS AT
BAKERSFIELD, L.L.C.

 

 

 

K. HOVNANIAN’S FOUR SEASONS AT
HEMET, L.L.C.

 

 

 

K. HOVNANIAN’S FOUR SEASONS AT
MENIFEE VALLEY, L.L.C.

 

 

 

K. HOVNANIAN’S FOUR SEASONS AT PALM
SPRINGS, L.L.C.

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 19 OF 35 TO THE GUARANTY AGREEMENT]

 

 

K. HOVNANIAN’S FOUR SEASONS, L.L.C.

 

 

 

By:

K. Hovnanian Developments of California,
Inc., as the sole member of each of the
foregoing limited liability companies.

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

 

 

 

K. HOVNANIAN HOLDINGS NJ, L.L.C.

 

 

 

By:

K. Hovnanian Developments of New Jersey,
Inc., as member of each of the foregoing
limited liability companies.

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

 

AND

 

 

 

 

By:

K. Hovnanian Developments of New Jersey
II, Inc., as member of each of the foregoing
limited liability companies.

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 20 OF 35 TO THE GUARANTY AGREEMENT]

 

 

K. HOVNANIAN AT LOWER MACUNGIE
TOWNSHIP I, L.L.C.

 

 

 

K. HOVNANIAN AT LOWER MACUNGIE
TOWNSHIP II, L.L.C.

 

 

 

K. HOVNANIAN AT LOWER MAKEFIELD
TOWNSHIP I, L.L.C.

 

 

 

K. HOVNANIAN AT LOWER MORELAND I,

L.L.C.

 

 

 

K. HOVNANIAN AT LOWER MORELAND II,

L.L.C.

 

 

 

K. HOVNANIAN AT NORTHAMPTON. L.L.C.

 

 

 

K. HOVNANIAN AT RAPHO, L.L.C.

 

 

 

K. HOVNANIAN AT UPPER UWCHLAN II,

L.L.C.

 

 

 

K. HOVNANIAN AT UPPER UWCHLAN, L.L.C.

 

 

 

K. HOVNANIAN AT WEST BRADFORD, L.L.C.

 

 

 

K. HOVNANIAN HOMES OF PENNSYLVANIA,

L.L.C.

 

 

 

K. HOVNANIAN PENNSYLVANIA

ACQUISITIONS, L.L.C.

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 21 OF 35 TO THE GUARANTY AGREEMENT]

 

 

K. HOVNANIAN SUMMIT HOMES OF
PENNSYLVANIA, L.L.C.

 

 

 

By:

K. Hovnanian Companies of Pennsylvania,
Inc., as the sole member of each of the
foregoing limited liability companies.

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

 

 

 

HOVNANIAN LAND INVESTMENT GROUP OF
FLORIDA, L.L.C.

 

 

 

K. HOVNANIAN CAMBRIDGE HOMES, L.L.C.

 

 

 

K. HOVNANIAN HOMES AT CAMP SPRINGS,
L.L.C.

 

 

 

K. HOVNANIAN HOMES AT FOREST RUN,
L.L.C.

 

 

 

K. HOVNANIAN HOMES AT RENAISSANCE
PLAZA, L.L.C.

 

 

 

K. HOVNANIAN HOMES AT RUSSETT, L.L.C.

 

 

 

K. HOVNANIAN WINDWARD HOMES, L.L.C.

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 22 OF 35 TO THE GUARANTY AGREEMENT]

 

 

K. HOVNANIAN HOMES OF MARYLAND,
L.L.C.

 

 

 

By:

Hovnanian Developments of Florida, Inc., as
the sole member of each of the foregoing
limited liability companies.

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

 

 

 

K. HOVNANIAN COMPANIES, LLC

 

 

 

By:

K. Hovnanian Enterprises, Inc., as member
of the foregoing limited liability company.

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

 

AND

 

 

 

 

By:

K. Hovnanian Developments of New Jersey
II, Inc., as member of each of the foregoing
limited liability companies.

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 23 OF 35 TO THE GUARANTY AGREEMENT]

 

 

K. HOVNANIAN EASTERN PENNSYLVANIA,
L.L.C.

 

 

 

By:

K. Hovnanian at Perkiomen II, Inc., as the
sole member of the foregoing limited
liability company.

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

 

 

 

K. HOVNANIAN FOUR SEASONS AT GOLD
HILL, L.L.C.

 

 

 

 

K. HOVNANIAN HOMES OF SOUTH
CAROLINA, L.L.C.

 

 

 

By:

K. Hovnanian Developments of South
Carolina, Inc., as the sole member of each of
the foregoing limited liability companies.

 

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

 

 

K. HOVNANIAN GREAT WESTERN BUILDING
COMPANY, LLC

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 24 OF 35 TO THE GUARANTY AGREEMENT]

 

 

K. HOVNANIAN GREAT WESTERN HOMES,
L.L.C.

 

 

 

 

By:

K. Hovnanian Developments of Arizona, Inc., as the
sole member of each of the foregoing limited
liability companies.

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

 

 

 

K. HOVNANIAN AT HIGHLAND SHORES,
L.L.C.

 

 

 

 

K. HOVNANIAN HOMES OF MINNESOTA,
L.L.C.

 

 

 

By:

K. Hovnanian Developments of Minnesota,
Inc., as the sole member of each of the
foregoing limited liability companies.

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

 

 

 

K. HOVNANIAN OHIO REALTY, L.L.C.

 

 

 

K. HOVNANIAN SUMMIT HOMES, L.L.C.

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 25 OF 35 TO THE GUARANTY AGREEMENT]

 

 

MIDWEST BUILDING PRODUCTS &
CONTRACTOR SERVICES, L.L.C.

 

 

 

By:

K. Hovnanian Developments of Ohio, Inc.,
as the sole member of each of the foregoing
limited liability companies.

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

 

 

 

 

 

 

K. HOVNANIAN HOMES OF WEST VIRGINIA,
L.L.C.

 

 

 

 

K. HOVNANIAN SUMMIT HOMES OF WEST
VIRGINIA, L.L.C.

 

 

 

By:

K. Hovnanian Developments of West
Virginia, Inc., as the sole member of each of
the foregoing limited liability companies.

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 26 OF 35 TO THE GUARANTY AGREEMENT]

 

 

K. HOVNANIAN SUMMIT HOMES OF
MICHIGAN, L.L.C.

 

 

 

 

By:

K. Hovnanian Developments of Michigan,
Inc., as the sole member of the foregoing
limited liability company.

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

 

 

 

KINGS COURT AT MONTGOMERY, L.L.C.

 

 

 

 

M&M AT CHESTERFIELD, L.L.C.

 

 

 

 

M&M AT KENSINGTON WOODS, L.L.C.

 

 

 

 

M&M AT WEST ORANGE, L.L.C.

 

 

 

 

M&M AT APPLE RIDGE, L.L.C.

 

 

 

 

M&M AT BROOKHILL, L.L.C.

 

 

 

 

M&M AT EAST MILL, L.L.C.

 

 

 

 

M&M AT HERITAGE WOODS, L.L.C.

 

 

 

 

M&M AT MORRISTOWN, 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.

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 27 OF 35 TO THE GUARANTY AGREEMENT]

 

 

M&M AT THE HIGHLANDS, L.L.C.

 

 

 

MATZEL & MUMFORD AT CRANBURY
KNOLL, L.L.C.

 

 

 

MATZEL & MUMFORD AT EGG HARBOR,
L.L.C.

 

 

 

MATZEL & MUMFORD AT FREEHOLD, L.L.C.

 

 

 

MATZEL & MUMFORD AT HERITAGE
LANDING, L.L.C.

 

 

 

MATZEL & MUMFORD AT MONTGOMERY,
L.L.C.

 

 

 

MATZEL & MUMFORD AT PHILLIPSBURG,
L.L.C.

 

 

 

MATZEL & MUMFORD AT SOUTH
BRUNSWICK, L.L.C.

 

 

 

MATZEL & MUMFORD AT WOODLAND
CREST, L.L.C.

 

 

 

THE LANDINGS AT SPINNAKER POINTE,
L.L.C.

 

 

 

 

By:

The Matzel & Mumford Organization, Inc.,
as the sole member of each of the foregoing
limited liability companies.

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 28 OF 35 TO THE GUARANTY AGREEMENT]

 

 

M&M AT ROBERT MORRIS, L.L.C.

 

 

 

M&M AT TAMARACK HOLLOW, L.L.C.

 

 

 

M&M AT WHEATENA URBAN RENEWAL,
L.L.C.

 

 

 

MATZEL & MUMFORD AT SOUTH BOUND
BROOK URBAN RENEWAL, L.L.C.

 

 

 

MMIP, L.L.C.

 

 

 

By:

M&M Investments, LP, as the sole member
of each of the foregoing limited liability
companies.

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

 

 

 

K. HOVNANIAN HOMES AT FAIRWOOD,
L.L.C.

 

 

 

K. HOVNANIAN HOMES AT MAXWELL
PLACE. L.L.C.

 

 

 

K. HOVNANIAN HOMES AT MAXWELL
PLACE. L.L.C.

 

 

 

PADDOCKS, L.L.C.

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 29 OF 35 TO THE GUARANTY AGREEMENT]

 

 

PINE AYR, L.L.C.

 

 

 

By:

K. Hovnanian Homes of Maryland, L.L.C.,
as the sole member of each of the foregoing
limited liability companies.

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

 

 

 

HOVNANIAN LAND INVESTMENT GROUP OF
TEXAS, L.L.C.

 

 

 

By:

Goodman Family of Builders, L.P., as the
sole member of each of the foregoing
limited liability companies.

 

 

 

 

 

By:

K. Hovnanian Developments of
Florida, as general partner of each of
the foregoing limited partnerships.

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and
Chief Financial Officer

 

 

 

 

 

 

 

 

Attest:

 

 

 

 

 

Peter S. Reinhart

 

 

 

Secretary

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 30 OF 35 TO THE GUARANTY AGREEMENT]

 

 

NORTH MANATEE, L.L.C.

 

 

 

By:

Hovnanian Land Investment Group of
Florida, L.L.C., as the sole member of the
foregoing limited liability company.

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

 

 

 

 

 

 

 

K. HOVNANIAN AT YONKERS I, L.L.C.

 

 

 

 

 

K. HOVNANIAN AT YONKERS II,L.L.C.

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 31 OF 35 TO THE GUARANTY AGREEMENT]

 

 

K. HOVNANIAN AT YONKERS III, L.L.C.

 

 

 

By:

K. Hovnanian at Northern Westchester, Inc.,
as the sole member of each of the foregoing
limited liability companies.

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

 

 

 

 

 

 

K. HOVNANIAN’S FOUR SEASONS AT
DULLES DISCOVERY CONDOMINIUM, L.L.C.

 

 

 

 

K. HOVNANIAN’S FOUR SEASONS AT
DULLES DISCOVERY, L.L.C.

 

 

 

By:

K. Hovnanian Development of Metro
Washington, Inc., as the sole member of
each of the foregoing limited liability
companies.

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 32 OF 35 TO THE GUARANTY AGREEMENT]

 

 

K. HOVNANIAN HOMES OF DELAWARE,
L.L.C.

 

 

 

By:

K. Hovnanian Developments of Delaware,
Inc., as the sole member of the foregoing
limited liability company.

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

 

 

 

 

 

 

K. HOVNANIAN AT MENIFEE VALLEY
CONDOMINIUMS, L.L.C.

 

 

 

By:

K. Hovnanian’s Four Seasons At Menifee
Valley, L.L.C.

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 33 OF 35 TO THE GUARANTY AGREEMENT]

 

 

GOODMAN FAMILY OF BUILDERS, L.P.

 

 

 

By:

K. Hovnanian Developments of Florida, as
general partner of the foregoing limited
partnership.

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

K. HOVNANIAN OF HOUSTON II, L.P.

 

 

 

 

K. HOVNANIAN OF HOUSTON, L.P.

 

 

 

 

By:

K. Hovnanian Developments of Texas, Inc.,
as general partner of each of the foregoing
limited partnerships.

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 34 OF 35 TO THE GUARANTY AGREEMENT]

 

 

M&M INVESTMENTS, L.P.

 

 

 

By:

The Matzel & Mumford Organization, Inc.,
as general partner of the foregoing limited
partnership.

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

J. Larry Sorsby

 

 

 

Executive Vice President and Chief
Financial Officer

 

 

 

 

 

 

 

Attest:

 

 

 

 

Peter S. Reinhart

 

 

Secretary

 

 

 

 

 

 

 

Address for Notices for each of the foregoing
Guarantors:

 

 

 

 

c/o K. Hovnanian Enterprises, Inc.

 

10 Route 35, P.O. Box 500

 

Red Bank, NJ 07701

 

Attention: Kevin C. Hake

 

Telephone: (732) 747-7800

 

Telecopy: (732) 747-6835

 

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 35 OF 35 TO THE GUARANTY AGREEMENT]

 

 

PNC BANK, NATIONAL ASSOCIATION,

 

as Agent

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

--------------------------------------------------------------------------------

 

 

EXHIBIT 1.1.(G)(2)

 

FORM OF
JOINDER AND ASSUMPTION AGREEMENT

 

This JOINDER AND ASSUMPTION AGREEMENT is made                       by
                                 , a                                  (the “New
Guarantor”).

 

BACKGROUND

 

Reference is made to (i) the Fifth Amended and Restated Credit Agreement dated
June 14, 2005 as the same has been made and may be modified, supplemented or
amended, including on the date hereof, (the “Agreement”) among K. HOVNANIAN
ENTERPRISES, INC. (the “Borrower”), HOVNANIAN ENTERPRISES, INC., as a Guarantor,
the Lenders now or hereafter party thereto and PNC BANK, NATIONAL ASSOCIATION,
as administrative agent for itself and the other Lenders under the Credit
Agreement (the “Agent”), (ii) the Guaranty Agreement of each of the Guarantors
issued to Lenders and Agent, as the same may be modified, supplemented or
amended, and (iii) the other Loan Documents referred to in the Agreement, as the
same may be modified, supplemented or amended.  Capitalized terms defined in the
Agreement are used herein as defined therein.

 

In consideration of the New Guarantor becoming a Guarantor entitled to receive
loans or advances from Borrower under the terms of the Agreement and in
consideration of the value of the synergistic benefits received by New Guarantor
as a result of becoming affiliated with Borrower and the Guarantors, the New
Guarantor hereby agrees that effective as of the date hereof it hereby is, and
shall be deemed to be, a Guarantor under the Agreement, the Guaranty Agreement
and each of the other Loan Documents to which the Guarantors are a party and
agrees that from the date hereof and so long as the Commitment of any Lender
shall remain outstanding and until the payment in full of the Loans and the
Notes and the performance of all other obligations of Borrower under the Loan
Documents, New Guarantor has assumed the obligations of a Guarantor under, and
New Guarantor shall perform, comply with and be subject to and bound by, jointly
and severally, each of the terms, provisions and waivers of the Agreement, the
Guaranty Agreement and each of the other Loan Documents which are stated to
apply to or are made by a Guarantor.  Without limiting the generality of the
foregoing, the New Guarantor hereby represents and warrants that (i) each of the
representations and warranties set forth in Section 5 of the Agreement is true
and correct as to New Guarantor on and as of the date hereof as if made on and
as of the date hereof by New Guarantor and (ii) New Guarantor has heretofore
received a true and correct copy of the Agreement, the Guaranty Agreement and
each of the other Loan Documents (including any modifications thereof or
supple­ments or waivers thereto) as in effect on the date hereof.

 

New Guarantor hereby makes, affirms, and ratifies in favor of the Lenders and
the Agent the Agreement, the Guaranty Agreement and each of the other Loan
Documents given by the Guarantors to Agent and any of the Lenders.

 

--------------------------------------------------------------------------------

 

In furtherance of the foregoing, New Guarantor shall execute and deliver or
cause to be executed and delivered at any time and from time to time such
further instruments and documents and do or cause to be done such further acts
as may be reasonably necessary or proper in the opinion of Agent to carry out
more effectively the provisions and purposes of this Joinder and Assumption
Agreement.

 

IN WITNESS WHEREOF, the New Guarantor has duly executed this Joinder and
Assumption Agreement and delivered the same to the Agent for the benefit of the
Lenders, as of the date and year first above written.

 

 

 

[NAME OF NEW GUARANTOR]

 

 

 

By:

 

 

 

 

 

Title:

 

 

 

 

 

 

Acknowledged and accepted:

 

 

 

PNC BANK, NATIONAL ASSOCIATION, as Agent

 

 

 

 

 

By:

 

 

 

 

 

Title:

 

 

 

 

2

--------------------------------------------------------------------------------

 

EXHIBIT 1.1 (R)

 

FORM OF
[AMENDED AND RESTATED] REVOLVING CREDIT NOTE

 

 

Pittsburgh, Pennsylvania

$

, 2005

 

 

FOR VALUE RECEIVED, the undersigned, K. HOVNANIAN ENTERPRISES, INC., a
California corporation (herein called the “Borrower”), hereby promises to pay to
the order of                                         (the “Lender”) the lesser
of (i) the principal sum of                                         U.S. Dollars
(U.S. $                           ), and (ii) the aggregate unpaid principal
balance of all Revolving Credit Loans made by the Lender to the Borrower
pursuant to Section 2.1 of the Fifth Amended and Restated Credit Agreement dated
June 14, 2005 among the Borrower, Hovnanian Enterprises, Inc., as a Guarantor,
the Lenders now or hereafter party thereto, PNC Bank, National Association, as
administrative agent for the Lenders (the “Agent”) and the Lender (the “Credit
Agreement”), payable on the Expiration Date.

 

The Borrower shall pay interest on the unpaid principal balance hereof from time
to time outstanding from the date hereof at the rate or rates per annum
specified by the Borrower pursuant to Section 3.1 of, or as otherwise provided
in, the Credit Agreement.

 

To the extent permitted by Law, upon the occurrence of an Event of Default under
Sections 8.1.1, 8.1.10, 8.1.14 and/or 8.1.15 of the Credit Agreement, or the
Obligations are accelerated under the Credit Agreement, and until such time such
Event of Default shall have been cured or waived, the Borrower shall pay
interest on all past due principal and all past due accrued interest thereon and
fees and expenses and each other past due Obligation at a rate per annum equal
to the sum of the rate of interest applicable under the Base Rate Option plus an
additional three hundred basis points (3.0% per annum) from the time such
Obligation becomes due and payable and until it is paid in full (the “Default
Rate”).

 

Interest on this Revolving Credit Note will be payable as provided in the Credit
Agreement.

 

If any payment or action to be made or taken hereunder shall be stated to be or
become due on a day which is not a Business Day, such payment or action shall be
made or taken on the next following Business Day (or the prior Business Day in
respect of certain Revolving Credit Loans to which the LIBO-Rate Option applies)
and such extension of time shall be included in computing interest or fees, if
any, in connection with such payment or action.

 

Subject to the provisions of the Credit Agreement, payments of both principal
and interest shall be made without setoff, counterclaim or other deduction of
any nature at the Principal Office of the Agent, in lawful money of the United
States of America in immediately available funds.

 

1

--------------------------------------------------------------------------------

 

This Note is one of the Revolving Credit Notes referred to in, and is entitled
to the benefits of, the Credit Agreement and the other Loan Documents, including
the representations, warranties, covenants, conditions, security interests or
liens contained or granted therein.  The Credit Agreement among other things
contains provisions for acceleration of the maturity hereof upon the happening
of certain stated events and also for prepayment, in certain circumstances, on
account of principal hereof prior to maturity upon the terms and conditions
therein specified.

 

All capitalized terms used herein shall, unless otherwise defined herein, have
the same meanings given to such terms in the Credit Agreement.

 

Except as otherwise provided in the Credit Agreement, the Borrower waives
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
this Note and the Credit Agreement.

 

This Note shall bind the Borrower and its successors and assigns, and the
benefits hereof shall inure to the benefit of the Lender, the Agent and their
successors and assigns.  All references herein to the “Borrower”, the “Lender”
and the “Agent” shall be deemed to apply to the Borrower, the Lender and the
Agent, respectively, and their respective successors and assigns.

 

[This Note replaces and supersedes the Amended and Restated Revolving Credit
Note dated June 18, 2004, in the principal amount of $                        ,
(the “Prior Note”).  To the extent that the principal balance of this Note
includes the Borrower’s indebtedness hitherto evidenced by the Prior Note, this
Note (i) merely re-evidences the indebtedness hitherto evidenced by the Prior
Note, (ii) is given as substitution for, and not as payment of, the Prior Note,
and (iii) is in no way intended to constitute a novation of the Prior Note. 
Maker hereby agrees that this Note shall in all respects take the place of and
include the principal amount of the Prior Note.]

 

This Note and any other documents delivered in connection herewith and the
rights and obligations of the parties hereto and thereto shall for all purposes
be governed by and construed and enforced in accordance with the internal laws
of the State of New Jersey without giving effect to its conflicts of law
principles.

 

2

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 1 OF 1 TO REVOLVING CREDIT NOTE]

 

IN WITNESS WHEREOF, the undersigned has executed this Note by its duly
authorized officers.

 

 

 

 

K. HOVNANIAN ENTERPRISES, INC.

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

 

Title:

 

 

 

3

--------------------------------------------------------------------------------

 

EXHIBIT 1.1(S)

 

FORM OF
SWING LOAN NOTE

 

$

 

East Brunswick, New Jersey

 

 

FOR VALUE RECEIVED, the undersigned, K. HOVNANIAN ENTERPRISES, INC., a
California corporation (herein called the “Borrower”), hereby promises to pay to
the order of PNC BANK, NATIONAL ASSOCIATION (the “Lender”), the lesser of (i)
the principal sum of                         U.S. Dollars (U.S.
$                     ) and (ii) the aggregate unpaid principal amount of all
“Swing Loans” made by the Lender to the Borrower pursuant to the Fifth Amended
and Restated Credit Agreement dated June 14, 2005, among the Borrower, Hovnanian
Enterprises, Inc., as Guarantor, the Lenders now or hereafter party thereto and
PNC Bank, National Association, as administrative agent (the “Agent”) (as
amended, the “Credit Agreement”), payable on the Expiration Date.  The Borrower
shall pay interest on the unpaid principal balance hereof from time to time
outstanding from the date hereof at the rate provided in the Credit Agreement.

 

Interest hereon will be payable at the times specified in the Credit Agreement.

 

If any payment of principal or interest on this Note shall be requested or is
payable on a day which is not a Business Day, such payment shall be made on the
next succeeding Business Day and such extension of time shall in such case be
included in computing interest in connection with payment.

 

Subject to the provisions of the Credit Agreement, payments of both principal
and interest shall be made without setoff, counterclaim or other deduction of
any nature at the Principal Office of the Agent in lawful money of the United
States of America in immediately available funds.

 

This Note is the Swing Loan Note and is subject to the provisions of, and is
entitled to the security provided for in and the other benefits of the Credit
Agreement and the other Loan Documents.

 

Except as otherwise provided in the Credit Agreement, the Borrower waives
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement of
this Note and the Credit Agreement.

 

All capitalized terms used herein shall, unless otherwise defined herein, have
the same meanings assigned to such terms in the Credit Agreement.

 

This Note shall bind the Borrower and its respective successors and assigns, and
the benefits hereof shall inure to the benefit of the Agent, the Lenders and
their successors and

 

--------------------------------------------------------------------------------

 

assigns.  All references herein to the “Borrower,” the “Agent” and the “Lenders”
shall be deemed to apply to the Borrower, the Agent and the Lenders,
respectively, and their respective successors and assigns.

 

This Note and any other documents delivered in connection herewith and the
rights and obligations of the parties hereto and thereto shall for all purposes
be governed by and construed and enforced in accordance with the substantive law
of the State of New Jersey without giving effect to the principles of conflict
of laws.

 

2

--------------------------------------------------------------------------------

 

[SIGNATURE PAGE 1 0F 1 TO SWING LOAN NOTE]

 

IN WITNESS WHEREOF, the undersigned has executed this Note by its duly
authorized officers.

 

 

 

K. HOVNANIAN ENTERPRISES, INC.

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

 

Title:

 

 

 

3

--------------------------------------------------------------------------------

 

EXHIBIT 2.4.1

 

FORM OF
LOAN REQUEST

 

TO:

 

PNC BANK, NATIONAL ASSOCIATION, as agent

 

 

Telephone No.: 732-220-3566

 

 

Telecopier No.: 732-220-3744

 

 

Attention: Mr. Douglas G. Paul

 

 

 

FROM:

 

K. HOVNANIAN ENTERPRISES, INC.

 

 

 

 

 

RE:          Fifth Amended and Restated Credit Agreement (the “Credit
Agreement”) dated June 14, 2005 by and

between K. HOVNANIAN ENTERPRISES, INC. (the “Company”), HOVNANIAN ENTERPRISES,
INC., as a Guarantor, the Lenders from time to time parties thereto, and PNC
BANK, NATIONAL ASSOCIATION, as administrative agent for the Lenders (the
“Agent”).  Capitalized terms used but not defined herein shall have the meanings
given to them in the Credit Agreement.

 

 

A.            PURSUANT TO SECTION 2.4 OF THE CREDIT AGREEMENT THE UNDERSIGNED
HEREBY MAKES THE FOLLOWING LOAN REQUEST:

 

1.

 

Aggregate Principal Amount of Loan [amount shall be in integral multiples of
$500,000 and not be less than $2,500,000 for each Borrowing Tranche to which the
LIBO-Rate Option applies and amount shall be in integral multiples of $100,000
and not be less than $500,000 for each Borrowing Tranche to which to the Base
Rate Option applies]

 

U.S. $

 

 

 

 

 

2.

 

Proposed Borrowing Date: [must be at least 3 Business Days after receipt by
11:00 a.m. by Agent of this Loan Request with respect to Loans to which the
LIBO-Rate Option applies and no earlier than the same day with respect to Loans
to which the Base Rate Option applies]

 

 

 

 

 

 

 

3.

 

Place of Payment:

 

 

 

 

 

 

 

4.

 

Length of Interest Period
(if LIBO-Rate Option elected):
[must be: one, two, three or six months]

 

 

 

--------------------------------------------------------------------------------

 

B.         Borrower elects that interest on the Loan requested hereby shall be
based on the LIBO-Rate Option/Base Rate Option (circle one) and shall be
calculated in accordance with Section 3 of the Credit Agreement.

 

C.         As of the date hereof and the date of making of the Loan:  the
representations and warranties contained in Section 5 of the Credit Agreement
are and will be true in all material respects (except representations and
warranties that expressly relate solely to an earlier date or time, which
representations and warranties were true in all material respects on and as of
the specific date referred to therein); and no Event of Default or Potential
Default has occurred and is continuing or shall exist. The undersigned certifies
to the accuracy of the foregoing.

 

 

 

K. HOVNANIAN ENTERPRISES, INC.

 

 

 

 

Date:

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

--------------------------------------------------------------------------------

 

EXHIBIT 2.4.2

 

FORM OF
SWING LOAN REQUEST

 

TO:

 

PNC BANK, NATIONAL ASSOCIATION

 

 

Telephone No.: 732-220-3566

 

 

Telecopier No.: 732-220-3744

 

 

Attention: Mr. Douglas G. Paul

 

 

 

FROM:

 

K. HOVNANIAN ENTERPRISES, INC.

 

 

 

RE:

 

Fifth Amended and Restated Credit Agreement (the “Credit Agreement”) dated June
14, 2005 by and among K. HOVNANIAN ENTERPRISES, INC. (the “Borrower”), HOVNANIAN
ENTERPRISES, INC., as a Guarantor, the Lenders now or hereafter party thereto,
and PNC BANK, NATIONAL ASSOCIATION, in its capacity as administrative agent for
the Lenders (the “Agent”), as amended, restated, supplemented or modified from
time to time.

 

Capitalized terms used but not defined herein shall have the meanings given to
them in the Credit Agreement.

 

Pursuant to Section 2.4.2 of the Credit Agreement, the undersigned hereby makes
the following Swing Loan Request:

 

1.

 

Aggregate Principal Amount of Swing Loans:
[amount shall not be less than $100,000]

 

US$

 

 

 

 

 

2.

 

Proposed Borrowing Date: [this Swing Loan Request must be delivered to PNC Bank
not later than 2:00 p.m. Eastern time on the proposed Borrowing Date]

 

 

 

 

 

 

 

3.

 

As of the date hereof and the date of making of the Swing Loan requested hereby:
the representations and

warranties of the Loan Parties contained in Section 5 of the Credit Agreement
and in the other Loan Documents are and will be true in all material respects
(except representations and warranties that expressly relate solely to an
earlier date or time, which representations and warranties were true in all
material respects on and as of the specific dates or times referred to therein);
and no Event of Default or Potential Default has occurred and is continuing or
shall exist.

 

--------------------------------------------------------------------------------

 

The undersigned hereby certifies the accuracy of the
foregoing.                              

 

 

 

 

 

 

 

 

K. HOVNANIAN ENTERPRISES, INC.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Date:

 

 

By:

 

 

 

 

 

 

 

 

 

Name:

 

 

 

 

 

 

 

 

 

Title:

 

 

 

2

--------------------------------------------------------------------------------

 

EXHIBIT 2.12.1-1

 

FORM OF
REVOLVING CREDIT COMMITMENT INCREASE AGREEMENT

 

This Revolving Credit Commitment Increase Agreement (the “Acknowledgement”) is
made                            by                          , a
                                                                            (the
“Increasing Bank”).

 

Background

 

Reference is made to the Fifth Amended and Restated Credit Agreement dated June
14, 2005 (the “Agreement”) by and among K. HOVNANIAN ENTERPRISES, INC. (the
“Borrower”), HOVNANIAN ENTERPRISES, INC., as a Guarantor, the Lenders now or
hereafter party thereto, and PNC BANK, NATIONAL ASSOCIATION, as administrative
agent for itself and the other Lenders under the Credit Agreement (the
“Agent”).  Capitalized terms defined in the Agreement are used herein as defined
therein.

 

Agreement

 

The Increasing Lender, and each of the other parties hereto agree that, except
as set forth below, effective as of the date hereof it shall increase its
commitment by $                           so that its total commitment shall be
$                       .  The Increasing Lender hereby acknowledges that it has
heretofore received a new Note in the amount of the commitment as increased as
set forth above.

 

Reference is made to Section 2.12 [Increase in Commitments] of the Agreement. 
Schedule 1.1(B) hereto sets forth the Commitments of the Increasing Lender and
each of the other Lenders after giving effect to the increase on the date
hereof.  Schedule 1.1(B) to the Agreement is being amended and restated
effective on the date hereof to read as set forth on Schedule 1.1(B) hereto. 
Schedule 1 hereto lists as of the date hereof the amount of Loans under each
outstanding Borrowing Tranche.  Notwithstanding the foregoing (a) on the date
hereof the Borrower shall repay all outstanding Loans to which either of the
Base Rate Option or the LIBO-Rate Option applies and simultaneously reborrow a
like amount of Loans under each such Interest Rate Option from the Lenders
(including the Increasing Lender) according to the Ratable Shares set forth on
attached Schedule 1.1(B) and shall be subject to breakage fees and other
indemnities provided in Section 4.6.2.

 

IN WITNESS WHEREOF, the Increasing Lender has duly executed and delivered this
Joinder as of the date and year first above written.

 

--------------------------------------------------------------------------------

 

 

[INCREASING LENDER]

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

ACKNOWLEDGED AND AGREED TO:

 

 

 

 

BORROWER:

 

 

 

K. HOVNANIAN ENTERPRISES, INC.

 

 

 

 

 

By:

 

(SEAL)

 

Name:

 

 

Title:

 

 

 

 

 

 

AGENT AND LENDERS:

 

 

 

PNC BANK, NATIONAL ASSOCIATION,
as Agent

 

 

 

 

 

 

By:

 

 

Name:

 

 

Title:

 

 

 

2

--------------------------------------------------------------------------------

 

 

EXHIBIT 7.3.3.1

 

FORM OF
QUARTERLY COMPLIANCE CERTIFICATE

 

                           , 200

 

PNC Bank, National Association, as Agent

Two Tower Center, 18th Floor

East Brunswick, New Jersey  08816

Attn:  Douglas G. Paul, Senior Vice President

Telecopy: (732) 220-3744

 

Ladies/Gentlemen:

 

1.             I refer to the Fifth Amended and Restated Credit Agreement dated
June 14, 2005 (the “Credit Agreement”) by and among K. HOVNANIAN ENTERPRISES,
INC. (the “Borrower”), HOVNANIAN ENTERPRISES, INC., as a Guarantor the several
LENDERS and other financial institutions from time to time parties thereto and
PNC BANK, NATIONAL ASSOCIATION, as administrative agent for the Lenders (the
“Agent”).  Unless otherwise defined herein, terms defined in the Credit
Agreement are used herein with the same meanings.  I,
                                                   the                     of
the Borrower do hereby certify as of the [month/quarter/year] ended
                             , 200   (the “Report Date”), that the Borrower is
in compliance with the following covenants as more fully set forth and
calculated on the spreadsheets attached hereto as Exhibit A - “Borrowing Base
Compliance Calculations”, Exhibit B - “Summary Covenant Compliance
Calculations”, and Exhibit C - “Detailed Covenant Compliance Calculations”.

 

2.             Transactions subject to the restrictions set forth in Section
7.2.4 of the Credit Agreement with respect to Liquidations, Mergers,
Consolidations and Acquisitions are described on the additional page attached
hereto.

 

Compliance?

 

Yes

 

No

 

3.             Transactions subject to the restrictions set forth in Section
7.2.5 of the Credit Agreement with respect to Dispositions of Assets or
Subsidiaries are described on the additional page attached hereto.

 

Compliance?

 

Yes

 

No

 

--------------------------------------------------------------------------------

 

4.             Transactions subject to the restrictions set forth in Section
7.2.7 of the Credit Agreement with respect to Subsidiaries, Partnerships and
Joint Ventures are described on the additional page attached hereto.

 

Compliance?

 

Yes

 

No

 

5.             DEBT RATING. BASED ON THE DEBT RATING AND THE LEVERAGE RATIO, THE
APPLICABLE MARGIN TO BECOME EFFECTIVE AS OF                                   
SHALL BE                      .

 

6.             The Loan Parties are in compliance with, and since the most
recent prior Report Date has at all times complied with, the provisions of the
Credit Agreement, including, without limitation, the representations and
warranties contained in Article 6 thereof, except as follows:
                                                                .

 

7.             No event has occurred that is continuing which constitutes an
Event of Default or Potential Default, except as follows:
                                                                                             .

 

8.             With respect to all financial statements delivered by or on
behalf of the Loan Parties contemporaneously herewith, such statements are true
and correct in all material respects.

 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has executed this Compliance Certificate
this          day of                      , 200  .

 

 

 

 

 

 

 

 

 

K. HOVNANIAN ENTERPRISES, INC.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

 

Name:

 

 

 

 

 

 

 

 

 

Title:

 

 

 

--------------------------------------------------------------------------------

 

Exhibit A to Exhibit 7.3.3.1

 

Borrowing Base Compliance Calculations

 

--------------------------------------------------------------------------------

 

Exhibit B to Exhibit 7.3.3.1

 

Summary Covenant Compliance Calculations

 

--------------------------------------------------------------------------------

 

Exhibit C to Exhibit 7.3.3.1

 

Detailed Covenant Compliance Calculations

 

--------------------------------------------------------------------------------

 

EXHIBIT 7.3.3.2

 

FORM OF

BORROWING BASE CERTIFICATE

 

                            ,          

 

PNC BANK, NATIONAL ASSOCIATION, Agent

Two Tower Center, 18th Floor

East Brunswick, New Jersey  08816

Telecopy (732) 220-3744

 

Attn.:  Douglas G. Paul, Senior Vice President

 

Ladies/Gentlemen:

 

I refer to the Fifth Amended and Restated Credit Agreement dated June 14, 2005
(the “Credit Agreement”) among
K. HOVNANIAN ENTERPRISES, INC. (the “Borrower”), HOVNANIAN ENTERPRISES, INC., as
a Guarantor, the LENDERS now or hereafter party thereto and PNC BANK, NATIONAL
ASSOCIATION, as administrative agent for the Lenders (the “Agent”).

 

Unless otherwise defined herein, terms defined in the Credit Agreement are used
herein with the same meanings.  I,
                                                   Chief Executive Officer,
President, Treasurer, Chief Financial Officer or principal accounting officer of
the Borrower, do hereby certify on behalf of the Borrower as of the end of the
month ended                       ,         (the “Report Date”), that the
“Borrowing Base” and the components thereof are calculated and set forth on the
spreadsheet attached hereto as Exhibit A - “Borrowing Base Compliance
Calculations”.

 

The undersigned further certifies as follows:

 

1.             The Loan Parties are in compliance with, and since the most
recent prior Report Date have at all times complied with, the provisions of the
Credit Agreement.

 

2.             No event has occurred that is continuing which constitutes an
Event of Default or Potential Default.

 

3.             With respect to all financial statements delivered by or on
behalf of the Loan Parties contemporaneously herewith, such statements are true
and correct in all material respects.

 

[SIGNATURES APPEAR ON FOLLOWING PAGE]

 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the undersigned has executed this Borrowing Base Certificate
this       day of                       ,        .

 

 

 

 

 

 

 

 

 

K. HOVANIAN ENTERPRISES, INC.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

 

Name:

 

 

 

 

 

 

 

 

 

Title:

Chief Executive Officer, President,
Treasurer, Chief Financial Officer or
principal accounting officer

 

--------------------------------------------------------------------------------

 

Exhibit A to Exhibit 7.3.3.2

 

Borrowing Base Compliance Calculations

 

--------------------------------------------------------------------------------