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,
2005 (THE "ANNUAL STATEMENTS") AND UNAUDITED CONSOLIDATED QUARTER-END FINANCIAL
STATEMENTS FOR AND AS OF THE END OF THE FISCAL QUARTER ENDED JANUARY 31, 2006
(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
51
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, 2010 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).
(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, 2005, NO MATERIAL ADVERSE CHANGE HAS OCCURRED.
5.1.9.
USE OF PROCEEDS; MARGIN STOCK.
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].
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