Document:

Exhibit
10.1

 

CREDIT AGREEMENT

Dated as of October 11, 2006

among

K. HOVNANIAN ENTERPRISES, INC.,

as Borrower,

HOVNANIAN ENTERPRISES, INC.

and certain subsidiaries thereof,

as Guarantors

THE LENDERS PARTY HERETO,

CITICORP USA, INC.,

as Administrative Agent,

CITICORP USA, INC.,

as Issuing Bank,

and

THE BANK OF NEW YORK,

as Paying Agent

 

$125,000,000
REVOLVING AND LETTER OF CREDIT FACILITY

 

 

 

Table
of Contents

 

	
  

  	
  

  	
   

  	
  Page

  
	
  ARTICLE I         DEFINITIONS

  	
  1

  
	
  SECTION 1.01.

  	
  Defined Terms

  	
  1

  
	
  SECTION 1.02.

  	
  Terms Generally

  	
  18

  
	
  SECTION 1.03.

  	
  Accounting Terms; GAAP

  	
  18

  
	
   

  	
   

  	
   

  
	
  ARTICLE II         THE
  CREDITS

  	
  18

  
	
  SECTION 2.01.

  	
  Commitments

  	
  18

  
	
  SECTION 2.02.

  	
  Loans and Borrowings

  	
  19

  
	
  SECTION 2.03.

  	
  Requests for Borrowings

  	
  19

  
	
  SECTION 2.04.

  	
  The Letter of Credit

  	
  20

  
	
  SECTION 2.05.

  	
  Funding of Borrowings

  	
  23

  
	
  SECTION 2.06.

  	
  Interest Elections

  	
  24

  
	
  SECTION 2.07.

  	
  Termination of Commitments; Reduction of Commitments

  	
  25

  
	
  SECTION 2.08.

  	
  Repayment of Loans; Evidence of Debt; Obligations
  Absolute

  	
  26

  
	
  SECTION 2.09.

  	
  Prepayment of Loans

  	
  27

  
	
  SECTION 2.10.

  	
  Fees

  	
  28

  
	
  SECTION 2.11.

  	
  Interest

  	
  28

  
	
  SECTION 2.12.

  	
  Alternate Rate of Interest

  	
  29

  
	
  SECTION 2.13.

  	
  Increased Costs or Reduced Return Resulting from
  Taxes, Reserves, Capital Adequacy Requirements, Expenses, Etc.

  	
  29

  
	
  SECTION 2.14.

  	
  Break Funding Payments

  	
  30

  
	
  SECTION 2.15.

  	
  Payments Generally; Pro Rata Treatment; Sharing of
  Set-offs

  	
  31

  
	
  SECTION 2.16.

  	
  Mitigation Obligations; Replacement of Lenders

  	
  33

  
	
   

  	
   

  	
   

  
	
  ARTICLE III         REPRESENTATIONS
  AND WARRANTIES

  	
  33

  
	
  SECTION 3.01.

  	
  Organization and Qualification

  	
  33

  
	
  SECTION 3.02.

  	
  Subsidiaries

  	
  34

  
	
  SECTION 3.03.

  	
  Power and Authority

  	
  34

  
	
  SECTION 3.04.

  	
  Validity and Binding Effect

  	
  34

  
	
  SECTION 3.05.

  	
  No Conflict

  	
  34

  
	
  SECTION 3.06.

  	
  Litigation

  	
  35

  
	
  SECTION 3.07.

  	
  Title to Properties

  	
  35

  
	
  SECTION 3.08.

  	
  Financial Statements

  	
  35

  
	
  SECTION 3.09.

  	
  Disclosure

  	
  36

  
	
  SECTION 3.10.

  	
  Margin Stock

  	
  36

  
	
  SECTION 3.11.

  	
  Taxes

  	
  36

  
	
  SECTION 3.12.

  	
  Consents and Approvals

  	
  36

  
	
  SECTION 3.13.

  	
  No Defaults; Compliance with Instruments

  	
  36

  
	
  SECTION 3.14.

  	
  Investment Companies; Regulated Entities

  	
  37

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV         CONDITIONS

  	
  37

  
	
  SECTION 4.01.

  	
  Conditions to Effective Date

  	
  37

  
	
  SECTION 4.02.

  	
  Condition to Each Credit Event

  	
  38

  

 

 i
 

 

 

	
  ARTICLE V         COVENANTS

  	
  38

  
	
  SECTION 5.01.

  	
  Existence

  	
  38

  
	
  SECTION 5.02.

  	
  Payment of Taxes and Other Claims

  	
  38

  
	
  SECTION 5.03.

  	
  Maintenance of Properties and Insurance

  	
  39

  
	
  SECTION 5.04.

  	
  Limitations on Liens

  	
  39

  
	
  SECTION 5.05.

  	
  Limitations on Mergers, Consolidations and Sales of
  Assets

  	
  39

  
	
  SECTION 5.06.

  	
  Cash Collateralization

  	
  40

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI         GUARANTEES

  	
  42

  
	
  SECTION 6.01.

  	
  Guarantee

  	
  42

  
	
  SECTION 6.02.

  	
  Obligations of Each Guarantor Unconditional; Savings
  Clause

  	
  43

  
	
  SECTION 6.03.

  	
  Release of a Guarantor

  	
  43

  
	
  SECTION 6.04.

  	
  Joinder of Additional Guarantors

  	
  44

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII         EVENTS
  OF DEFAULT

  	
  44

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII         THE
  ADMINISTRATIVE AGENT AND THE PAYING AGENT

  	
  46

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX         MISCELLANEOUS

  	
  48

  
	
  SECTION 9.01.

  	
  Notices

  	
  48

  
	
  SECTION 9.02.

  	
  Waivers; Amendments

  	
  49

  
	
  SECTION 9.03.

  	
  Expenses; Indemnity; Damage Waiver

  	
  50

  
	
  SECTION 9.04.

  	
  Successors and Assigns

  	
  51

  
	
  SECTION 9.05.

  	
  Survival

  	
  53

  
	
  SECTION 9.06.

  	
  USA Patriot Act

  	
  54

  
	
  SECTION 9.07.

  	
  Counterparts; Integration; Effectiveness

  	
  54

  
	
  SECTION 9.08.

  	
  Severability

  	
  54

  
	
  SECTION 9.09.

  	
  Right of Setoff

  	
  54

  
	
  SECTION 9.10.

  	
  Governing Law; Jurisdiction; Consent to Service of
  Process; Process Agent; Waiver of Immunity

  	
  55

  
	
  SECTION 9.11.

  	
  WAIVER OF JURY TRIAL

  	
  55

  
	
  SECTION 9.12.

  	
  Headings

  	
  56

  
	
  SECTION 9.13.

  	
  Confidentiality

  	
  56

  
	
  SECTION 9.14.

  	
  Tax Withholding Clause

  	
  57

  

 

	
  SCHEDULES:

  	
   

  	
   

  
	
  Schedule 1.01

  	
  Restricted and Unrestricted Subsidiaries

  	
   

  
	
  Schedule 2.01

  	
  Commitments

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBITS:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  Form of Assignment and Acceptance

  	
   

  
	
  Exhibit B

  	
  Form of Notes

  	
   

  
	
  Exhibit C

  	
  Form of Notice of LC Request

  	
   

  
	
  Exhibit D

  	
  Form of Letter of Credit

  	
   

  
	
  Exhibit E

  	
  Form of Guarantee Joinder Agreement

  	
   

  
				

 

 ii

 

CREDIT AGREEMENT, dated as of October 11, 2006
(as amended, supplemented, amended and restated or otherwise modified from time
to time, this “Agreement”), among K.
HOVNANIAN ENTERPRISES, INC., a California corporation (the “Company”), HOVNANIAN ENTERPRISES,
INC., a Delaware corporation (“Hovnanian”),
the other GUARANTORS (as defined below) that become parties hereto from time to
time, the LENDERS party hereto (the “Lenders”),
CITICORP USA, INC. (“CUSA”), as
Administrative Agent (in such capacity, the “Administrative
Agent”), CUSA, as Issuing Bank (in such capacity, the “Issuing Bank”), and THE BANK OF NEW
YORK, not in its individual capacity, but solely as Paying Agent (the “Paying Agent”).

The Company has requested the Lenders to extend credit
to enable it to borrow on a revolving credit basis on and after the date hereof
and at any time and from time to time during the Availability Period (such term
and each other capitalized term used and not otherwise defined herein having
the meaning assigned to it in Article I) a principal amount not in excess of
$125,000,000 at any time outstanding. 
The Company has further requested the Issuing Bank to issue the Letter
of Credit to support other payment obligations of the Company.  The proceeds of borrowings hereunder are to
be used for general corporate purposes of the Company, Hovnanian and its
Subsidiaries and other purposes not inconsistent with this Agreement.

The Guarantors expect to derive substantial direct and
indirect benefits from the credit to be extended by the Lenders and the Issuing
Bank hereunder and are, accordingly, willing to guaranty the obligations of the
Company hereunder on the terms set forth herein.

The Lenders and the Issuing Bank are willing to extend
such credit to the Company on the terms and subject to the conditions set forth
herein.

Accordingly, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01.  Defined Terms.

As used in this Agreement, the following terms have
the meanings specified below:

“ABR”, when
used in reference to any Loan or Borrowing, means that such Loan, or the Loans
comprising such Borrowing, are bearing interest at a rate determined by
reference to the Alternate Base Rate.

“Adjusted LIBO Rate”
means, with respect to any Eurodollar Borrowing for any Interest Period, an
interest rate per annum (rounded upwards, if necessary, to the next 1/100 of
1%) equal to (i) the LIBO Rate for such Interest Period multiplied by
(ii) the Statutory Reserve Rate.

 

“Administrative Agent”
has the meaning ascribed to it in the preamble to this Agreement.

“Administrative
Questionnaire” means an Administrative Questionnaire in a form
supplied by the Administrative Agent.

“Affiliate”
means, when used with reference to a specified Person, any Person directly or
indirectly controlling, or controlled by or under direct or indirect common
control with the Person specified.

“Agents”
means the Administrative Agent and the Paying Agent.

“Agreement”
has the meaning ascribed to it in the preamble to this agreement.

“Alternate Base Rate”
means, for any day, a rate per annum equal to the higher of (i) the Base
Rate in effect on such day and (ii) the Federal Funds Effective Rate in
effect on such day plus 1⁄2 of 1%. 
Any change in the Alternate Base Rate due to a change in the Base Rate
or the Federal Funds Effective Rate shall be effective from and including the
effective date of such change in the Base Rate or the Federal Funds Effective
Rate, respectively.

“Applicable
Debt” means all Indebtedness of Hovnanian or any of its
Restricted Subsidiaries (i) under Credit Facilities or (ii) that is
publicly traded (including in the Rule 144A market), including without
limitation the Company’s senior notes and senior subordinated notes outstanding
on the date hereof.

“Applicable Percentage”
means, with respect to any Lender, the percentage of the total Commitments
represented by such Lender’s Commitment. 
If the Commitments have terminated or expired, the Applicable
Percentages shall be determined based upon the Commitments most recently in
effect, giving effect to any assignments.

“Assignment and Acceptance”
means an assignment and acceptance entered into by a Lender and an assignee
(with the consent of any party the consent of which is required by
Section 9.04), and accepted by the Administrative Agent, in the form of
Exhibit A or any other form approved by the Administrative Agent.

“Attributable Debt”
means, with respect to any Capitalized Lease Obligations, the capitalized
amount thereof determined in accordance with GAAP.

“Availability Period”
means the period from and including the Effective Date to but excluding the
earlier of the Maturity Date and the date of termination in whole of the
Commitments.

“Bankruptcy
Law” means title 11 of the United States Code, as amended, or
any similar federal or state law for the relief of debtors.

 2
 

 

“Base Rate”
means the rate of interest per annum publicly announced from time to time by
Citibank, as its “base” rate; each change in the Base Rate shall be effective
from and including the date such change is publicly announced as being
effective.

“Board”
means the Board of Governors of the Federal Reserve System of the United States
of America.

“Borrowing”
means Loans of the same Type, made, converted or continued on the same date
and, in the case of Eurodollar Loans, as to which a single Interest Period is
in effect.

“Borrowing Request”
means a request by the Company for Loans in accordance with Section 2.03.

“Business Day”
means any day that is not a Saturday, Sunday or other day on which commercial
banks in New York City are authorized or required by law to remain closed; provided that the term “Business Day”
shall also exclude, when used in connection with a Eurodollar Loan, any day on
which banks are not open for dealings in dollar deposits in the London
interbank market.

“Capitalized Lease
Obligations” of any Person means the obligations of such Person
to pay rent or other amounts under a lease that is required to be capitalized
for financial reporting purposes in accordance with GAAP, and the amount of
such obligations will be the capitalized amount thereof determined in
accordance with GAAP.

“Capital
Stock” means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of or in
such Person’s capital stock or other equity interests, and options, rights or
warrants to purchase such capital stock or other equity interests, whether now
outstanding or issued after the date hereof.

“Citibank”
means Citibank, N.A.

“Code” means
the Internal Revenue Code of 1986, as amended from time to time.

“Commitment”
means, with respect to each Lender, the commitment of such Lender to make Loans
and acquire participations in the Letter of Credit, as such commitment may be
(i) reduced or increased from time to time pursuant to Section 2.07
and (ii) reduced or increased from time to time pursuant to assignments by
or to such Lender pursuant to Section 9.04.  The initial amount of each Lender’s
Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance
pursuant to which such Lender shall have assumed its Commitment, as applicable.

“Commitment Increase”
has the meaning ascribed to it in Section 2.07(d).

“Common
Equity” of any Person means Capital Stock of such Person that is
generally entitled to (i) vote in the election of directors of such Person
or (ii) if such Person is not a corporation, vote or otherwise participate
in the selection of the governing

 3
 

 

body, partners, managers or others that will control
the management or policies of such Person.

“Company”
means K. Hovnanian Enterprises, Inc., a California corporation.

“Consolidated
Adjusted Tangible Assets” of Hovnanian as of any date means the
Consolidated Tangible Assets of Hovnanian, the Company and the Restricted
Subsidiaries at the end of the fiscal quarter immediately preceding the date
less any assets securing any Non-Recourse Indebtedness, as determined in
accordance with GAAP.

“Consolidated
Tangible Assets” of Hovnanian as of any date means the total
amount of assets of Hovnanian, the Company and the Restricted Subsidiaries
(less applicable reserves) on a consolidated basis at the end of the fiscal
quarter immediately preceding such date, as determined in accordance with GAAP,
less (i) Intangible Assets and (ii) appropriate adjustments on
account of minority interests of other Persons holding equity investments in
Restricted Subsidiaries.

“Continuing
Director” means a director who either was a member of the Board
of Directors of Hovnanian on the date hereof or who became a director of
Hovnanian subsequent to such date and whose election or nomination for election
by Hovnanian’s stockholders was duly approved by a majority of the Continuing
Directors on the Board of Directors of Hovnanian at the time of such approval,
either by a specific vote or by approval of the proxy statement issued by
Hovnanian on behalf of the entire Board of Directors of Hovnanian in which such
individual is named as nominee for director.

“control”
when used with respect to any Person, means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings
correlative to the foregoing.

“Credit Event”
means each Borrowing and each issuance, renewal, extension or increase of the
Letter of Credit.

“Credit
Facilities” means, collectively, each of the credit facilities
and lines of credit of Hovnanian or one or more Restricted Subsidiaries in
existence on the date hereof and one or more other facilities and lines of
credit among or between Hovnanian or one or more Restricted Subsidiaries and
one or more lenders pursuant to which Hovnanian or one or more Restricted
Subsidiaries may incur indebtedness for working capital and general corporate purposes
(including acquisitions), as any such facility or line of credit may be
amended, restated, supplemented or otherwise modified from time to time, and
includes any agreement extending the maturity of, increasing the amount of, or
restructuring, all or any portion of the Indebtedness under such facility or
line of credit or any successor facilities or lines of credit and includes any
facility or line of credit with one or more lenders refinancing or replacing
all or any portion of the Indebtedness under such facility or line of credit or
any successor facility or line of credit.

 4
 

 

“Currency
Agreement” of any Person means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect such Person or any of its Subsidiaries against fluctuations in currency
values.

“Default”
means any event or condition that constitutes an Event of Default or which upon
notice, lapse of time or both would, unless cured or waived, become an Event of
Default.

“dollars” or
“$” refers to lawful money of the
United States of America.

“Effective Date”
means the date on which the conditions set forth in Section 4.01 are satisfied
or waived in accordance with Section 9.02.

“Environmental Laws”
mean any and all federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or other governmental restrictions relating to
the environment or the release of any materials into the environment.

“Environmental Liability”
means any liability, contingent or otherwise (including any liability for
damages, costs of environmental remediation, fines, penalties or indemnities),
of Hovnanian, the Company or any of its Restricted Subsidiaries directly or
indirectly resulting from or based upon (i) violation of any Environmental Law,
(ii) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials (iii) exposure to any Hazardous Materials,
(iv) the release or threatened release of any Hazardous Materials into the
environment or (v) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.

“Eurodollar”,
when used in reference to any Loan or Borrowing, means that such Loan, or the
Loans comprising such Borrowing, are bearing interest at a rate determined by
reference to the Adjusted LIBO Rate.

“Event of Default”
has the meaning assigned to such term in Article VII.

“Exchange Act”
means the Securities Exchange Act of 1934, as amended.

“Facility Fee”
has meaning ascribed to it in Section 2.10.

“Federal Funds Effective
Rate” means, for any day, the weighted average (rounded upwards,
if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day that
is a Business Day, the average (rounded upwards, if necessary, to the next
1/100 of 1%) of the quotations for such day for such transactions received by
the Administrative Agent from three Federal funds brokers of recognized
standing selected by it.

 5
 

 

“Fee Letter”
means the fee letter, dated as of the date hereof, among the Company, Hovnanian
and CUSA, as amended, modified or supplemented from time to time.

“Financial Officer”
means, with respect to any Loan Party, the chief financial officer, principal
accounting officer, treasurer or controller of such Loan Party.

“GAAP” or “generally accepted accounting principles”
means generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
may be approved by a significant segment of the accounting profession of the
United States, as in effect on May 4, 1999.

“guarantee”
means any obligation, contingent or otherwise, of any Person directly or
indirectly guaranteeing any Indebtedness of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of such Person: (i) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Indebtedness of such other
Person (whether arising by virtue of partnership arrangements, or by agreement
to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for purposes of assuring in any other manner the obligee of
such Indebtedness of the payment thereof or to protect such obligee against
loss in respect thereof, in whole or in part; provided
that the term “guarantee” does not include
endorsements for collection or deposit in the ordinary course of business. The
term “guarantee” used as a verb has
a corresponding meaning.

“Guarantee Joinder
Agreement” means an agreement substantially in the form of
Exhibit E, pursuant to which a Subsidiary of Hovnanian shall become a Guarantor
hereunder.

“Guarantors”
means Hovnanian, each Restricted Subsidiary and each Unrestricted Subsidiary
that Hovnanian causes to be a “Guarantor” hereunder.

“Hazardous Materials”
means all explosive or radioactive substances or wastes and all hazardous or
toxic substances, wastes or other pollutants, including petroleum or petroleum
distillates, asbestos or asbestos containing materials, polychlorinated
biphenyls, radon gas, infectious or medical wastes and all other substances or
wastes of any nature regulated pursuant to any Environmental Law.

“Increasing Lender”
has the meaning ascribed to it in Section 2.07(d).

“Indemnitee”
has the meaning ascribed to it in Section 9.03.

“Indebtedness”
of any Person means, without duplication,

 6
 

 

(i)            any liability of such Person (A) for
borrowed money or under any reimbursement obligation relating to a letter of
credit or other similar instruments (other than standby letters of credit or
similar instrument issued for the benefit of or surety, performance, completion
or payment bonds, earnest money notes or similar purpose undertakings or
indemnifications issued by, such Person in the ordinary course of business),
(B) evidenced by a bond, note, debenture or similar instrument (including a
purchase money obligation) given in connection with the acquisition of any
businesses, properties or assets of any kind or with services incurred in
connection with capital expenditures (other than any obligation to pay a
contingent purchase price which, as of the date of incurrence thereof is not
required to be recorded as a liability in accordance with GAAP), or (C) in
respect of Capitalized Lease Obligations (to the extent of the Attributable
Debt in respect thereof);

(ii)           any Indebtedness of others that such
Person has guaranteed to the extent of the guarantee, provided,
however, that Indebtedness of Hovnanian and its Restricted
Subsidiaries will not include the obligations of Hovnanian or a Restricted
Subsidiary under warehouse lines of credit of Mortgage Subsidiaries to
repurchase mortgages at prices no greater than 98% of the principal amount thereof;

(iii)          to the extent not otherwise included,
the obligations of such Person under Currency Agreements or Interest Protection
Agreements to the extent recorded as liabilities not constituting Interest
Incurred, net of amounts recorded as assets in respect of such agreements, in
accordance with GAAP; and

(iv)          all Indebtedness of others secured by
a Lien on any asset of such Person, whether or not such Indebtedness is assumed
by such Person;

provided, that
Indebtedness shall not include accounts payable, liabilities to trade creditors
of such Person or other accrued expenses arising in the ordinary course of
business. The amount of Indebtedness of any Person at any date shall be (A) the
outstanding balance at such date of all unconditional obligations as described
above, net of any unamortized discount to be accounted for as Interest Expense,
in accordance with GAAP, (B) the maximum liability of such Person for any
contingent obligations under clause (i) above at such date, net of an
unamortized discount to be accounted for as Interest Expense in accordance with
GAAP, and (C) in the case of clause (iv) above, the lesser of (x) the fair
market value of any asset subject to a Lien securing the Indebtedness of others
on the date that the Lien attaches and (y) the amount of the Indebtedness
secured.

“Indenture”
means the Indenture, dated as of November 3, 2003, by and among the
Company, Hovnanian and Wachovia Bank, National Association, as supplemented by
a First Supplemental Indenture thereto, dated as of November 3, 2003, a
Second Supplemental Indenture thereto, dated as of March 18, 2004, a Third
Supplemental Indenture thereto, dated as of July 15, 2004, a Fourth
Supplemental Indenture thereto, dated as of April 19, 2005, a Fifth
Supplemental Indenture thereto, dated as of September 6, 2005, a Sixth
Supplemental Indenture thereto, dated as of February 27, 2006, and a
Seventh Supplemental Indenture thereto, dated as of June 12, 2006.

 7
 

 

“Information”
has the meaning ascribed to it in Section 9.13.

“Intangible
Assets” of Hovnanian means all unamortized debt discount and
expense, unamortized deferred charges, goodwill, patents, trademarks, service
marks, trade names, copyrights, write-ups of assets over their prior carrying
value (other than write-ups which occurred prior to the date hereof and other
than, in connection with the acquisition of an asset, the write-up of the value
of such asset (within one year of its acquisition) to its fair market value in
accordance with GAAP) and all other items that would be treated as intangible
on the consolidated balance sheet of Hovnanian, the Company and the Restricted
Subsidiaries prepared in accordance with GAAP.

“Interest Election Request”
means a request by the Company to convert or continue a Borrowing in accordance
with Section 2.06.

“Interest Expense”
of any Person for any period means, without duplication, the aggregate amount
of (i) interest that, in conformity with GAAP, would be set opposite the
caption “interest expense” or any like caption on an income statement for such
Person (including, without limitation, imputed interest included in Capitalized
Lease Obligations, all commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers’ acceptance financing, the net
costs (but reduced by net gains) associated with Currency Agreements and
Interest Protection Agreements, amortization of other financing fees and
expenses, the interest portion of any deferred payment obligation, amortization
of discount or premium, if any, and all other non-cash interest expense (other
than interest and other charges amortized to cost of sales), and (ii) all
interest actually paid by Hovnanian or a Restricted Subsidiary under any
guarantee of Indebtedness (including, without limitation, a guarantee of principal,
interest or any combination thereof) of any Person other than Hovnanian, the
Company or any Restricted Subsidiary during such period; provided,
that Interest Expense shall exclude any expense associated with the complete
write-off of financing fees and expenses in connection with the repayment of
any Indebtedness.

“Interest Incurred” of any Person for any period means,
without duplication, the aggregate amount of (i) Interest Expense and
(ii) all capitalized interest and amortized debt issuance costs.

“Interest Payment Date”
means (i) with respect to any ABR Loan, the last day of each March, June,
September and December, and (ii) with respect to any Eurodollar Loan, the
last day of the Interest Period applicable to the Borrowing of which such Loan
is a part and, in the case of a Eurodollar Borrowing with an Interest Period of
more than three months’ duration, each day during such Interest Period that
occurs at intervals of three months’ duration after the first day of such
Interest Period.

“Interest Period”
means with respect to any Eurodollar Borrowing, the period commencing on
the date of such Borrowing and ending on the day that is one day, one week or
two weeks thereafter, or the numerically corresponding day in the calendar
month that is one, two, three or six months thereafter, as the Company may
elect; provided, that (i) if any Interest
Period would end on a day other than a Business Day,

 8
 

 

such Interest Period shall be extended to the next
succeeding Business Day unless such next succeeding Business Day would fall in
the next calendar month, in which case such Interest Period shall end on the
next preceding Business Day, (ii) any Interest Period of one month or more
that commences on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the last calendar month of such
Interest Period) shall end on the last Business Day of the last calendar month
of such Interest Period and (iii) any Interest Period that otherwise would
extend beyond the second anniversary of the date hereof shall end on the date
of such second anniversary.  For purposes
hereof, the date of a Borrowing initially shall be the date on which such
Borrowing is made and thereafter shall be the effective date of the most recent
conversion or continuation of such Borrowing.

“Interest
Protection Agreement” of any Person means any interest rate swap
agreement, interest rate collar agreement, option or futures contract or other
similar agreement or arrangement designed to protect such Person or any of its
Subsidiaries against fluctuations in interest rates with respect to
Indebtedness.

“Investment
Grade” means, with respect to a debt rating of any securities of
Hovnanian or the Company, a rating of Baa3 or higher by Moody’s together with a
rating of BBB- or higher by S&P or, in the event S&P or Moody’s or both
shall cease rating such securities (for reasons outside the control of
Hovnanian or the Company) and Hovnanian shall select any other Rating Agency,
the equivalent of such ratings by such other Rating Agency.

“Issuing Bank”
has the meaning ascribed to it in the preamble to this Agreement.

“Law” means
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.

“LC Disbursement”
means a payment made by the Issuing Bank pursuant to the Letter of Credit.

“LC Exposure”
means, at any time, the sum of (i) the undrawn amount of the Letter of
Credit at such time plus (ii) the aggregate amount of all LC Disbursements
that have not yet been reimbursed by or on behalf of the Company at such
time.  The LC Exposure of any Lender at
any time shall be its Applicable Percentage of the total LC Exposure at such
time.

“Lenders”
means the Persons listed on Schedule 2.01 and any other Person that shall
have become a party hereto pursuant to an Assignment and Acceptance, other than
any such Person that ceases to be a party hereto pursuant to an Assignment and
Acceptance.

“Letter of Credit”
has the meaning ascribed to it in Section 2.04(a).

 9
 

 

“LIBO Rate”
means, with respect to each Interest Period, the rate per annum determined by
the Administrative Agent to be the offered rate for deposits in dollars with a
term comparable to such Interest Period that appears on the Telerate Page at
approximately 11:00 a.m., London time, two Business Days prior to the
beginning of such Interest Period; provided, however,
that if at any time for any reason such offered rate does not appear on the
Telerate Page, “LIBO Rate” shall mean, with
respect to each day during each Interest Period, the rate per annum (rounded
upward to the nearest 1/100 of 1%) at which dollar deposits of
$5,000,000 and for a maturity comparable to such Interest Period are offered by
the principal London office of Citibank or any of its Affiliates in immediately
available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the beginning of such
Interest Period.  In the event the LIBO
Rate is determined as set forth in the next preceding sentence, the LIBO Rate
shall be determined by the Administrative Agent on the basis of the applicable
rates furnished to and received by the Administrative Agent from Citibank or
any of its Affiliates on the second Business Day prior to the commencement of
such Interest Period.

“Lien”
means, with respect to any Property, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such Property.  For purposes of this definition, a Person
shall be deemed to own, subject to a Lien, any Property that it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
Property.

“Loan Documents”
means, collectively, this Agreement, any Note, the Fee Letter and any Guarantee
Joinder Agreement.

“Loan Parties”
means the Company and the Guarantors.

“Loans” means
the loans made by the Lenders to the Company pursuant to Sections 2.03 and
2.04(e).

“Margin Stock”
has the meaning ascribed to it in Regulation U of the Board.

“Material Adverse Change”
means a set of circumstances or events that (i) has or could reasonably be
expected to have any material adverse effect whatsoever upon the validity or
enforceability of any Loan Document, (ii) 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, (iii) 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
(iv) impairs materially or could reasonably be expected to impair materially
the ability of the Administrative Agent, the Issuing Bank or any of the
Lenders, to the extent permitted, to enforce their legal remedies pursuant to
any Loan Document.

“Maturity Date”
means September 20, 2009.

 10

 

 

“Moody’s”
means Moody’s Investors Service, Inc. or any successor to its debt rating
business.

“Mortgage Subsidiary”
means any Subsidiary of Hovnanian substantially all of the operations of which
consist of the mortgage lending business.

“Non-Recourse Indebtedness”
with respect to any Person means Indebtedness of such Person for which (i) the
sole legal recourse for collection of principal and interest on such
Indebtedness is against the specific property identified in the instruments
evidencing or securing such Indebtedness and such property was acquired with
the proceeds of such Indebtedness or such Indebtedness was incurred within 90
days after the acquisition of such property and (ii) no other assets of such
Person may be realized upon in collection of principal or interest on such
Indebtedness. Indebtedness that is otherwise Non-Recourse Indebtedness will not
lose its character as Non-Recourse Indebtedness because there is recourse to
the borrower, any guarantor or any other Person for (A) environmental warranties
and indemnities, or (B) indemnities for and liabilities arising from fraud,
misrepresentation, misapplication or non-payment of rents, profits, insurance
and condemnation proceeds and other sums actually received by the borrower from
secured assets to be paid to the lender, waste and mechanics’ liens.

“Note” has
the meaning ascribed to it in Section 2.08(e).

“Notice of LC Request”
means a notice substantially in the form of Exhibit C hereto delivered by the
Company to the Issuing Bank and the Administrative Agent pursuant to Section
2.04(b) with respect to the Letter of Credit.

“Official Body”
means 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.

“Participant”
has the meaning ascribed to it in Section 9.04(e).

“Paying Agent”
has the meaning ascribed to it in the preamble to this Agreement.

“Paying Agent’s Account”
means the account of the Paying Agent maintained by the Paying Agent at its
office at 4 New York Plaza, 15th Floor, New York, New York 10004-2413, or such
other account of the Paying Agent as is designated in writing from time to time
by the Paying Agent to the Company, the Administrative Agent, the Issuing Bank
and the Lenders for such purpose.

“Permitted
Hovnanian Holders” means, collectively, Kevork S. Hovnanian, Ara
K. Hovnanian, the members of their immediate families, the respective estates,
spouses, heirs, ancestors, lineal descendants, legatees and legal
representatives of any of the foregoing and the trustee of any bona fide trust of which one or more of
the foregoing are the sole beneficiaries or the grantors thereof, or any entity
of which any of the foregoing, individually or collectively, beneficially own
more than 50% of the Common Equity.

 11
 

 

“Permitted Liens” means:

(i)            Liens
for taxes, assessments or governmental or quasi-government charges or claims
that (A) are not yet delinquent, (B) are being contested in good faith by
appropriate proceedings and as to which appropriate reserves have been
established or other provisions have been made in accordance with GAAP, if
required, or (C) encumber solely property abandoned or in the process of being
abandoned;

(ii)           statutory
Liens of landlords and carriers’, warehousemen’s, mechanics’, suppliers’,
materialmen’s, repairmen’s or other Liens imposed by law and arising in the
ordinary course of business and with respect to amounts that, to the extent
applicable, either (A) are not yet delinquent or (B) are being contested in
good faith by appropriate proceedings and as to which appropriate reserves have
been established or other provisions have been made in accordance with GAAP, if
required;

(iii)          Liens
(other than any Lien imposed by the Employer Retirement Income Security Act of
1974, as amended) incurred or deposits made in the ordinary course of business
in connection with workers’ compensation, unemployment insurance and other
types of social security;

(iv)          Liens
incurred or deposits made to secure the performance of tenders, bids, leases,
statutory obligations, surety and appeal bonds, development obligations,
progress payments, government contacts, utility services, developer’s or other
obligations to make on-site or off-site improvements and other obligations of
like nature (exclusive of obligations for the payment of borrowed money but
including the items referred to in the parenthetical in clause (i)(A) of the
definition of “Indebtedness”), in each case incurred in the ordinary course of
business of Hovnanian, the Company and the Restricted Subsidiaries;

(v)           attachment
or judgment Liens not giving rise to a Default or an Event of Default;

(vi)          easements,
dedications, assessment district or similar Liens in connection with municipal
or special district financing, rights-of-way, restrictions, reservations and
other similar charges, burdens, and other similar charges or encumbrances not
materially interfering with the ordinary course of business of Hovnanian, the
Company and the Restricted Subsidiaries;

(vii)         zoning
restrictions, licenses, restrictions on the use of real property or minor
irregularities in title thereto, which do not materially impair the use of such
real property in the ordinary course of business of Hovnanian, the Company and
the Restricted Subsidiaries;

(viii)        Liens
on office buildings owned or occupied by Hovnanian or any Restricted Subsidiary
securing Indebtedness that does not exceed $25,000,000 aggregate principal
amount outstanding at any one time;

 12
 

 

(ix)           Liens
on mortgage loans and related assets of mortgage lending Subsidiaries in the
ordinary course of a mortgage lending business securing Indebtedness;

(x)            Liens
securing Indebtedness of Hovnanian, the Company or any Restricted Subsidiary; provided, that the aggregate amount of all consolidated
Indebtedness of Hovnanian, the Company and the Restricted Subsidiaries
(including, with respect to Capitalized Lease Obligations, the Attributable
Debt in respect thereof) secured by Liens (other than Non-Recourse Indebtedness
and Indebtedness under Credit Facilities that does not exceed $1,500,000,000
principal amount outstanding at any time) shall not exceed 40% of Consolidated
Adjusted Tangible Assets at any one time outstanding (after giving effect to
the incurrence of such Indebtedness and the use of the proceeds thereof);

(xi)           Liens
securing Non-Recourse Indebtedness of Hovnanian, the Company or any Restricted
Subsidiary; provided, that such Liens apply only to
the property financed out of the net proceeds of such Non-Recourse Indebtedness
within 90 days after the incurrence of such Non-Recourse Indebtedness;

(xii)          Liens
securing Purchase Money Indebtedness; provided that
such Liens apply only to the property acquired, constructed or improved with
the proceeds of such Purchase Money Indebtedness within 90 days after the
incurrence of such Purchase Money Indebtedness;

(xiii)         Liens
on property or assets of Hovnanian, the Company or any Restricted Subsidiary
securing Indebtedness of Hovnanian, the Company or any Restricted Subsidiary
owing to Hovnanian, the Company or one or more Restricted Subsidiaries;

(xiv)        leases
or subleases granted to others not materially interfering with the ordinary
course of business of Hovnanian and the Restricted Subsidiaries;

(xv)         purchase
money security interests (including, without limitation, Capitalized Lease
Obligations); provided that such Liens apply
only to the Property acquired and the related Indebtedness is incurred within
90 days after the acquisition of such Property;

(xvi)        any
right of first refusal, right of first offer, option, contract or other
agreement to sell an asset; provided that
such sale is not otherwise prohibited hereunder;

(xvii)       any
right of a lender or lenders to which Hovnanian, the Company or a Restricted
Subsidiary may be indebted to offset against, or appropriate and apply to the
payment of such, Indebtedness any and all balances, credits, deposits, accounts
or money of Hovnanian, the Company or a Restricted Subsidiary with or held by
such lender or lenders or its Affiliates;

(xviii)      any
pledge or deposit of cash or property in conjunction with obtaining surety,
performance, completion or payment bonds and letters of credit or other similar
instruments or providing earnest money obligations, escrows or similar purpose
undertakings or indemnifications in the ordinary course of business of
Hovnanian, the Company and the Restricted Subsidiaries;

 13
 

 

(xix)         Liens
for homeowner and property owner association developments and assessments;

(xx)          Liens
securing Refinancing Indebtedness; provided, that
such Liens extend only to the assets securing the Indebtedness being
refinanced;

(xxi)         Liens
incurred in the ordinary course of business as security for the obligations of
Hovnanian, the Company and the Restricted Subsidiaries with respect to
indemnification in respect of title insurance providers;

(xxii)        Liens
on property of a Person existing at the time such Person is merged with or into
or consolidated with Hovnanian or any Subsidiary of Hovnanian or becomes a
Subsidiary of Hovnanian; provided that
such Liens were in existence prior to the contemplation of such merger or
consolidation or acquisition and do not extend to any assets other than those
of the Person merged into or consolidated with Hovnanian or the Subsidiary or
acquired by Hovnanian or its Subsidiaries;

(xxiii)       Liens
on property existing at the time of acquisition thereof by Hovnanian or any
Subsidiary of Hovnanian, provided that
such Liens were in existence prior to the contemplation of such acquisition;

(xxiv)       Liens
existing on the date hereof and any extensions, renewals or replacements
thereof; and

(xxv)        Liens
on specific items of inventory or other goods and proceeds of any Person
securing such Person’s obligations in respect of bankers’ acceptances issued or
created for the account of such Person to facilitate the purchase, shipment or
storage of such inventory or other goods.

“Person”
means any individual, corporation, partnership, limited liability company,
joint venture, incorporated or unincorporated association, joint stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.

“Property”
of any Person means all types of real, personal, tangible, intangible or mixed
property owned by such Person, whether or not included in the most recent
consolidated balance sheet of such Person and its Subsidiaries under GAAP.

“Purchase
Money Indebtedness” means Indebtedness of Hovnanian, the Company
or any Restricted Subsidiary incurred for the purpose of financing all or any
part of the purchase price, or the cost of construction or improvement, of any
property to be used in the ordinary course of business by Hovnanian, the
Company and the Restricted Subsidiaries; provided, however, that (i) the aggregate principal amount of such
Indebtedness shall not exceed such purchase price or cost and (ii) such
Indebtedness shall be incurred no later than 90 days after the acquisition of
such property or completion of such construction or improvement.

 14
 

 

“Rating Agency” means a statistical rating agency or
agencies, as the case may be, nationally recognized in the United States and
selected by Hovnanian (as certified by a resolution of the Board of Directors
of Hovnanian), which shall be substituted for S&P or Moody’s, or both, as
the case may be.

“Refinancing
Indebtedness” means Indebtedness that refunds, refinances or
extends any Indebtedness of Hovnanian, the Company or any Restricted Subsidiary
outstanding on the date hereof or other Indebtedness permitted to be incurred
by Hovnanian, the Company or any Restricted Subsidiary pursuant to the terms
hereof, but only to the extent that:

(i)            the
Refinancing Indebtedness is subordinated, if at all, to the Loans or the Guarantees,
as the case may be, to the same extent as the Indebtedness being refunded,
refinanced or extended,

(ii)           the
Refinancing Indebtedness is scheduled to mature either (A) no earlier than the
Indebtedness being refunded, refinanced or extended or (B) after the Maturity
Date,

(iii)          the
portion, if any, of the Refinancing Indebtedness that is scheduled to mature on
or prior to the Maturity Date has a Weighted Average Life to Maturity at the
time such Refinancing Indebtedness is incurred that is equal to or greater than
the Weighted Average Life to Maturity of the portion of the Indebtedness being
refunded, refinanced or extended that is scheduled to mature on or prior to the
Maturity Date, and

(iv)          such
Refinancing Indebtedness is in an aggregate principal amount that is equal to
or less than the aggregate principal amount then outstanding under the
Indebtedness being refunded, refinanced or extended.

“Register”
has the meaning ascribed to it in Section 9.04(c).

“Regulation
U” means Regulation U of the Board, as the same is from time to
time in effect, and all official rulings and interpretations thereunder or
thereof.

“Regulation
X” means Regulation X of the Board, as the same is from time to
time in effect, and all official rulings and interpretations thereunder or
thereof.

“Reimbursement
Agreement” means the Agreement for Letter of Credit, dated as of
October 11, 2006, between Citibank and the Company, as amended, modified or
supplemented from time to time.

“Related
Parties” means, with respect to any specified Person, such
Person’s Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person’s Affiliates.

“Required
Lenders” means, (i) at any time prior to the termination of
the Commitments pursuant to Article VII, Lenders having Total Exposures
and unused Commitments representing more than 50% of the aggregate Total
Exposures and unused

 15
 

 

Commitments at such time,
and (ii) for all purposes after the termination of the Commitments
pursuant to Article VII, Lenders having outstanding Loans and LC Exposures
representing more than 50% of the aggregate outstanding principal amount of
Loans and LC Exposures.

“Restricted
Subsidiary” means any Subsidiary of Hovnanian that is not an
Unrestricted Subsidiary.

“S&P” means Standard and Poor’s Ratings Service, a
division of The McGraw Hill Companies, Inc., a New York corporation or any
successor to its debt rating business.

“SEC”
means the Securities and Exchange Commission.

“Securities
Act” means the Securities Act of 1933, as amended.

“Significant
Subsidiary” means any Subsidiary of Hovnanian that would
constitute a “significant subsidiary” as defined in Rule 1-02(w)(1) or (2) of
Regulation S-X under the Securities Act and the Exchange Act as in effect on
the date hereof.

“Statutory
Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject for
eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in
Regulation D of the Board).  Such
reserve percentages shall include those imposed pursuant to such
Regulation D.  Eurodollar Loans
shall be deemed to constitute eurocurrency funding and to be subject to such
reserve requirements without benefit of or credit for proration, exemptions or
offsets that may be available from time to time to any Lender under such
Regulation D or any comparable regulation. 
The Statutory Reserve Rate shall be adjusted automatically on and as of
the effective date of any change in any reserve percentage.

“Subsidiary”
of any Person means any corporation or other entity of which a majority of the
Capital Stock having ordinary voting power to elect a majority of the Board of
Directors or other persons performing similar functions is at the time directly
or indirectly owned or controlled by such Person.

“Telerate
Page” means the display designated as Page 3750 on the Dow
Jones Markets System (or such other page as may replace such page on such
service for the purpose of displaying the rates at which dollar deposits are
offered by leading banks in the London interbank deposit market).

“Total
Exposure” means, with respect to any Lender at any time, the sum
of the outstanding principal amount of such Lender’s Loans and its LC Exposure
at such time.

“Transactions”
means each of the execution, delivery and performance by each Loan Party of
each Loan Document to which such Loan Party is a party, the borrowing of

 16
 

 

Loans hereunder and the
issuance and modification of the Letter of Credit for the account of the
Company hereunder.

“Type”,
when used in reference to any Loan or Borrowing, refers to whether the rate of
interest on such Loan, or on the Loans comprising such Borrowing, is determined
by reference to the Adjusted LIBO Rate or the Alternate Base Rate.

“Unrestricted
Subsidiary” means any Subsidiary of Hovnanian so designated by a
resolution adopted by the Board of Directors of Hovnanian or a duly authorized
committee thereof as provided below; provided that
(i) the holders of Indebtedness thereof do not have direct or indirect recourse
against Hovnanian, the Company or any Restricted Subsidiary, and neither
Hovnanian, the Company nor any Restricted Subsidiary otherwise has liability
for any payment obligations in respect of such Indebtedness (including any
undertaking, agreement or instrument evidencing such Indebtedness), except, in
each case, to the extent that the amount thereof constitutes a “Restricted
Payment” as defined under and permitted by the Indenture, in the case of
Non-Recourse Indebtedness, to the extent such recourse or liability is for the
matters discussed in the last sentence of the definition of “Non-Recourse
Indebtedness”, or to the extent such Indebtedness is a guarantee by such
Subsidiary of Indebtedness of Hovnanian, the Company or a Restricted Subsidiary
and (ii) no holder of any Indebtedness of such Subsidiary shall have a right to
declare a default on such Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity as a result of a default on
any Indebtedness of Hovnanian, the Company or any Restricted Subsidiary. As of
the date hereof, the Unrestricted Subsidiaries will be the Subsidiaries of
Hovnanian designated as such on Schedule 1.01 hereto.

Subject to the foregoing,
the Board of Directors of Hovnanian or a duly authorized committee thereof may
designate any Subsidiary in addition to those named above to be an Unrestricted
Subsidiary; provided, however,
that after giving effect to such designation, no Default or Event of Default
shall have occurred or be continuing.

The Board of Directors of
Hovnanian or a duly authorized committee thereof may also redesignate an
Unrestricted Subsidiary to be a Restricted Subsidiary.  Any such designation or redesignation by the
Board of Directors of Hovnanian or a committee thereof will be evidenced to the
Administrative Agent by delivering to the Administrative Agent a certified copy
of the resolution of the Board of Directors of Hovnanian or a committee thereof
giving effect to such designation or redesignation and a Guarantee Joinder
Agreement, duly executed by such redesignated Subsidiary. The designation of
any Person as an Unrestricted Subsidiary shall be deemed to include a
designation of all Subsidiaries of such Person as Unrestricted Subsidiaries; provided, however, that
the ownership of the general partnership interest (or a similar member’s
interest in a limited liability company) by an Unrestricted Subsidiary shall
not cause a Subsidiary of Hovnanian of which more than 95% of the equity
interest is held by Hovnanian or one or more Restricted Subsidiaries to be
deemed an Unrestricted Subsidiary.

 17
 

 

“USA
Patriot Act” means the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001, as amended, supplemented, amended and restated or otherwise modified from
time to time.

“Weighted
Average Life to Maturity” means, when applied to any
Indebtedness or portion thereof at any date, the number of years obtained by
dividing (i) the sum of the products obtained by multiplying (A) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payment of principal, including, without limitation, payment at final
maturity, in respect thereof, by (B) the number of years (calculated to the
nearest one-twelfth) that will elapse between such date and the making of such
payment by (ii) the sum of all such payments described in clause (i)(A) above.

SECTION 1.02. 
Terms Generally.

The definitions of terms
herein shall apply equally to the singular and plural forms of the terms
defined.  Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms.  The words “include”, “includes”
and “including” shall be deemed to be followed by the phrase “without
limitation”.  The word “will” shall be
construed to have the same meaning and effect as the word “shall”.  Unless the context requires otherwise
(i) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument
or other document as from time to time amended, supplemented or otherwise
modified (subject to any restrictions on such amendments, supplements or
modifications set forth herein), (ii) any reference herein to any Person
shall be construed to include such Person’s permitted successors and assigns,
(iii) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Agreement in its entirety and not
to any particular provision hereof, (iv) all references herein to
Articles, Sections, Exhibits and Schedules shall be construed to refer to
Articles and Sections of, and Exhibits and Schedules to, this Agreement and
(v) the words “asset” and “property” shall be construed to have the same
meaning and effect and to refer to any and all tangible and intangible assets
and properties, including cash, securities, accounts and contract rights.

SECTION 1.03. 
Accounting Terms; GAAP.

All accounting terms used
herein and not expressly defined shall have the meanings assigned to such terms
in accordance with GAAP.

ARTICLE II

THE CREDITS

SECTION 2.01. 
Commitments.

Subject to the terms and
conditions set forth herein and without limiting each Lender’s obligation to
make Loans pursuant to Section 2.04(e), each Lender agrees to make Loans to the
Company from time to time during the Availability Period and to participate in
the Letter of Credit in an aggregate principal amount not exceeding the amount
of such Lender’s Commitment; provided, that
after giving effect to each Credit Event (i) no Lender’s Total Exposure
shall exceed such Lender’s Commitment, and (ii) the sum of the Total
Exposures of all the Lenders shall not exceed the sum of the Commitments of all
Lenders.  Within the foregoing 

 18
 

 

limits and subject
to the terms and conditions set forth herein, the Company may borrow, prepay
and reborrow Loans and request the issuance, renewal, extension and increase of
the Letter of Credit.

SECTION 2.02. 
Loans and Borrowings.

(a)           Each Loan shall be made as part of a
Borrowing consisting of Loans made by the Lenders, ratably in accordance with
their respective Commitments.  The
failure of any Lender to make any Loan required to be made by it shall not
relieve any other Lender of its obligations hereunder; provided that the Commitments
of the Lenders are several, and no Lender shall be responsible for any other
Lender’s failure to make Loans as required.

(b)           Subject to Sections 2.04(e) and
 2.12, each Borrowing shall be comprised entirely of ABR Loans or
Eurodollar Loans as the Company may request in accordance herewith and shall be
in dollars.  Each Lender at its option
may make any Loan by causing any domestic or foreign branch or Affiliate of
such Lender to make such Loan; provided that
any exercise of such option shall not affect the obligation of the Company to
repay such Loan in accordance with the terms of this Agreement and shall not be
inconsistent with the duty of such Lender under Section 2.16(a) to minimize the
amounts payable by the Company under Section 2.13.

(c)           At the commencement of each Interest
Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate
amount that is an integral multiple of $1,000,000 and not less than
$10,000,000; provided that a Eurodollar Borrowing may be in an aggregate amount
not less than $250,000 if it is equal to the entire unused balance of the
Commitments or if it is used to refinance an ABR Borrowing that was required to
finance the reimbursement of an LC Disbursement as contemplated by Section
2.04(e).  At the time that each ABR
Borrowing is made, such Borrowing shall be in an aggregate amount that is an
integral multiple of $1,000,000 and not less than $10,000,000; provided that an ABR Borrowing may be in an aggregate amount
that is equal to the entire unused balance of the total Commitments or that is
required to finance the reimbursement of an LC Disbursement as contemplated by
Section 2.04(e).  Borrowings of more
than one Type may be outstanding at the same time; provided
that there shall not at any time be more than a total of five outstanding
Eurodollar Borrowings.

SECTION 2.03. 
Requests for Borrowings.

To request a Borrowing,
except as otherwise provided with respect to Loans to be made pursuant to
Section 2.04(e), the Company shall notify the Administrative Agent of such
request by telephone (i) in the case of a Eurodollar Borrowing, not later
than 11:00 a.m., New York City time, three Business Days before the date of the
proposed Borrowing or (ii) in the case of any ABR Borrowing, not later
than 11:00 a.m., New York City time, on the Business Day of the proposed
Borrowing.  Each such telephonic
Borrowing Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent at its office set forth in
Section 9.01 of a written Borrowing Request in a form approved by the
Administrative Agent and signed by the Company, with a copy to the Paying
Agent.  Each such telephonic and written
Borrowing Request shall specify the following information in compliance with
Section 2.02:

 19
 

 

(A)          the
aggregate amount of the requested Borrowing;

(B)           the
date of such Borrowing, which shall be a Business Day;

(C)           whether
such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;

(D)          in
the case of a Eurodollar Borrowing, the initial Interest Period to be
applicable thereto, which shall be a period contemplated by the definition of
the term “Interest Period”; and

(E)           the
location and number of the Company’s account to which funds are to be
disbursed, which shall comply with the requirements of Section 2.05.

If no election as to the
Type of Borrowing is specified, then the requested Borrowing shall be an ABR
Borrowing.  If no Interest Period is
specified with respect to any requested Eurodollar Borrowing, then the Company
shall be deemed to have selected an Interest Period of one day’s duration.  Promptly following receipt of a Borrowing
Request in accordance with this Section, the Administrative Agent shall advise
each Lender of the details thereof and of the amount of such Lender’s Loan to
be made as part of the requested Borrowing.

SECTION 2.04. 
The Letter of Credit.

(a)           General.  Subject
to the terms and conditions set forth herein, the Issuing Bank agrees to issue
and amend (including, without limitation, to increase or decrease the stated
amount of the Letter of Credit) at the request and for the account of the
Company, a standby letter of credit substantially in the form of Exhibit D or
in such other form as may be reasonably acceptable to the Issuing Bank and the
Company (the “Letter of Credit”),
at any time and from time to time from the Effective Date until the last day of
the Availability Period; provided, however, the Company may not request that the stated amount
of the Letter of Credit be increased after the 90th day prior to the Maturity Date if the stated
expiry date of the Letter of Credit is a date later than the Maturity
Date.  The Issuing Bank shall not be
under any obligation to issue the Letter of Credit if any order, judgment or
decree of any Official Body or arbitrator binding upon the Issuing Bank shall
enjoin or restrain the Issuing Bank from issuing the Letter of Credit, or any
law, rule, regulation or orders of any Official Body applicable to the Issuing
Bank or any request or directive (whether or not having the force of law) from
any Official Body with jurisdiction over the Issuing Bank shall prohibit the
issuance of letters of credit generally or the Letter of Credit in particular
or shall impose upon the Issuing Bank with respect to the Letter of Credit any restriction,
reserve or capital requirement (for which the Issuing Bank is not otherwise
compensated hereunder) not in effect on the date hereof, or shall impose upon
the Issuing Bank any unreimbursed loss, cost or expense that was not applicable
on the date hereof and that the Issuing Bank in good faith deems material to
it.

(b)           Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions.  To request the issuance of the Letter of
Credit (or the amendment, renewal or extension of the Letter of Credit), the
Company shall hand deliver or telecopy (or transmit by electronic
communication, if arrangements for doing so have been approved by the Issuing
Bank) to the Issuing Bank and the Administrative Agent (at least one Business
Day in advance of the requested date of

 20
 

 

issuance, amendment, renewal or
extension) a Notice of LC Request requesting the issuance of the Letter of
Credit and specifying the requested date of issuance of the Letter of Credit
(which shall be a Business Day) and, as applicable, specifying the date of
amendment, renewal or extension (which shall be a Business Day), the date on
which the Letter of Credit is to expire (which shall comply with
subsection (c) of this Section), the amount of the Letter of Credit, the
name and address of the beneficiary thereof and such other information as shall
be necessary to prepare, amend, renew or extend the Letter of Credit.  The Letter of Credit shall be issued,
amended, renewed or extended only if (and upon issuance, amendment, renewal or
extension of the Letter of Credit the Company shall be deemed to represent and
warrant that), after giving effect to such issuance, amendment, renewal or
extension (i) the aggregate LC Exposure shall not exceed the aggregate
Commitments, and (ii) the Total Exposures shall not exceed the total
Commitments. The Issuing Bank shall promptly (and in any event within one
Business Day) notify the Administrative Agent of each issuance, amendment,
renewal, extension or expiry of the Letter of Credit, and shall provide to the
Administrative Agent such other information as the Administrative Agent shall
reasonably request as to the Letter of Credit.

(c)           Expiration Date. The Letter of Credit shall expire at or
prior to the Business Day immediately prior to the second anniversary of the
Maturity Date.

(d)           Participations. 
By the issuance of the Letter of Credit (or an amendment to the Letter
of Credit increasing the amount thereof) and without any further action on the
part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants to each
Lender, and each Lender hereby acquires from the Issuing Bank, a participation
in the Letter of Credit equal to such Lender’s Applicable Percentage of the
aggregate amount available to be drawn under the Letter of Credit.  In consideration and in furtherance of the
foregoing, each Lender hereby absolutely and unconditionally agrees to pay to
the Administrative Agent, for the account of the Issuing Bank, such Lender’s
Applicable Percentage of each LC Disbursement made by the Issuing Bank and not
reimbursed by the Company on the date due as provided in subsection (e) of this
Section, or of any reimbursement payment required to be refunded to the Company
for any reason.  Each Lender acknowledges
and agrees that its obligation to acquire participations pursuant to this
subsection in respect of the Letter of Credit is absolute and unconditional and
shall not be affected by any circumstance whatsoever, including any amendment,
renewal or extension of the Letter of Credit or the occurrence and continuance
of a Default or reduction or termination of the Commitments, and that each such
payment shall be made without any offset, abatement, withholding or reduction
whatsoever.

(e)           Reimbursement.  If
the Issuing Bank shall make any LC Disbursement, the Issuing Bank shall
promptly notify the Company by telephone, facsimile or other telecommunication
of the date and amount of such LC Disbursement. 
The Company shall reimburse such LC Disbursement, whether drawn before,
on or, to the extent in accordance with applicable law, after the expiration
date of the Letter of Credit, and payment of each such reimbursement obligation
shall be made on demand; provided that
unless the Company shall have notified the Administrative Agent otherwise, the
Company’s obligations shall be financed with an ABR Borrowing made under this
subsection (e) in an equivalent amount and, to the extent so financed, the
Company’s obligation to make such payment shall be discharged and replaced by
the resulting ABR Borrowing.  If the
Company fails to make such payment when due, the Administrative Agent shall
notify each Lender of the applicable LC Disbursement, the

 21
 

 

payment then due from the
Company in respect thereof and such Lender’s Applicable Percentage
thereof.  Promptly following receipt of
such notice, each Lender shall pay to the Administrative Agent its Applicable
Percentage of the payment then due from the Company, and the Administrative
Agent shall promptly pay to the Issuing Bank the amounts so received by it from
the Lenders.  Each Lender agrees to fund
its Applicable Percentage of such payment due from the Company on (i) the
Business Day on which demand therefore is made by the Issuing Bank, provided  that notice
of such demand is given not later than 11:00 a.m. (New York time) on such
Business Day, or (ii) the first Business Day next succeeding such demand if
notice of such demand is given after such time. 
If and to the extent that any Lender shall not have made such amount
available to the Administrative Agent, such Lender agrees to pay to the
Administrative Agent forthwith on demand such amount together with interest
thereon, for each day from the date of demand by the Issuing Bank until the
date such amount is paid to the Administrative Agent, at the Federal Funds Rate
for its account or the account of the Issuing Bank, as applicable.  If such Lender shall pay to the
Administrative Agent such amount for the account of the Issuing Bank on any
Business Day, such amount so paid in respect of principal shall constitute an
ABR Loan made by such Lender on such Business Day for purposes of this
Agreement.

(f)            Certain Liabilities Relating to the Letter of Credit.  None of the Administrative
Agent, the Lenders or the Issuing Bank, nor any of their Related Parties, shall
have any liability or responsibility by reason of or in connection with the
issuance or transfer of the Letter of Credit or any payment or failure to make
any payment thereunder (irrespective of any of the circumstances referred to in
Section 2.08(f)), or any error, omission, interruption, loss or delay in
transmission or delivery of any draft, notice or other communication under or
relating to the Letter of Credit (including any document required to make a
drawing thereunder), any error in interpretation of technical terms or any
consequence arising from causes beyond the control of the Issuing Bank; provided that, without limiting Section 2.08(f), the
foregoing shall not be construed to excuse the Issuing Bank from liability to
the Company to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by the Company to the
extent permitted by applicable law) suffered by the Company that are caused by
the Issuing Bank’s failure to exercise care when determining whether drafts and
other documents presented under the Letter of Credit comply with the terms
thereof.  The parties hereto expressly
agree that, in the absence of gross negligence or willful misconduct on the
part of the Issuing Bank (as finally determined by a court of competent
jurisdiction), the Issuing Bank shall be deemed to have exercised care in each
such determination.  In furtherance of
the foregoing and without limiting the generality thereof, the parties agree
that, with respect to documents presented that appear on their face to be in
substantial compliance with the terms of the Letter of Credit, the Issuing Bank
may, in its sole discretion, either accept and make payment upon such documents
without responsibility for further investigation, regardless of any notice or
information to the contrary (other than a valid injunction issued by a court of
competent jurisdiction), or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of the
Letter of Credit.

(g)           Disbursement Procedures. 
The Issuing Bank shall, promptly following its receipt thereof, examine
all documents purporting to represent a demand for payment under  the Letter of Credit.  The Issuing Bank shall promptly notify the
Administrative Agent and the Company by telephone (confirmed by telecopy) of
such demand for payment and whether the

 22
 

 

Issuing Bank has made or will
make an LC Disbursement thereunder; provided that
any failure to give or delay in giving such notice shall not relieve the Company
of its obligation to reimburse the Issuing Bank and the Lenders with respect to
any such LC Disbursement.

(h)           Interim Interest. 
If the Issuing Bank shall make any LC Disbursement, then, unless the
Company shall reimburse such LC Disbursement in full on the date such LC
Disbursement is made, the unpaid amount thereof shall bear interest, for each
day from and including the date such LC Disbursement is made to but excluding
the date that the Company reimburses such LC Disbursement, at the rate per annum
then applicable to ABR Loans; provided that,
if the Company fails to reimburse such LC Disbursement when due pursuant to
subsection (e) of this Section, then Section 2.11(d) shall apply.  Interest accrued pursuant to this subsection
shall be for the account of the Issuing Bank, except that interest accrued on
and after the date of payment by any Lender pursuant to subsection (e) of this
Section to reimburse the Issuing Bank shall be for the account of such Lender
to the extent of such payment.

SECTION 2.05. 
Funding of Borrowings.

(a)           Each Lender shall make each Loan to
be made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds to the account of the Administrative Agent most
recently designated
by it for such purpose by notice to the Lenders, with a copy to
the Paying Agent.; except as provided
otherwise with respect to ABR Loans made pursuant to Section 2.04(e), such
transfers shall be made by (x) 12:00 Noon, New York City
time in the case of Borrowings other than ABR Borrowings and
(y) 2:00 p.m., New York City time in the case of ABR Borrowings on
the date such Loan is made.  The
Administrative Agent will make such amounts available to the Company by
promptly crediting the amounts so received, in like funds, to an account of the
Company designated by the Company in the applicable Borrowing Request; provided that ABR Loans made to refinance the reimbursement
of an LC Disbursement as provided in Section 2.04(e) shall be remitted by
the Administrative Agent to the Issuing Bank.

(b)           Unless the Administrative Agent shall
have received notice from a Lender prior to the proposed time of any Borrowing
that such Lender will not make available to the Administrative Agent such
Lender’s share of such Borrowing, the Administrative Agent may assume that such
Lender has made such share available on such date in accordance with
subsection (a) of this Section and may (but shall not be required to), in
reliance upon such assumption, make available to the Company a corresponding amount.
 In such event, if a Lender has not in
fact made its share of the applicable Borrowing available to the Administrative
Agent, then the applicable Lender and the Company severally agree to pay to the
Administrative Agent forthwith on demand such corresponding amount with
interest thereon, for each day from and including the date such amount is made
available to the Company to but excluding the date of payment to the
Administrative Agent, at (i) in the case of such Lender, the Federal Funds
Effective Rate or (ii) in the case of the Company, the interest rate
applicable to such Loan.  If such Lender
pays such amount to the Administrative Agent, then such amount shall constitute
such Lender’s Loan included in such Borrowing.

 23

 

SECTION 2.06. 
Interest Elections.

(a)                                  Each
Borrowing initially shall be of the Type
specified in the applicable Borrowing Request and, in the case
of a Eurodollar Borrowing, shall have an initial Interest Period as specified
in such Borrowing Request.  Thereafter,
at any time prior to the Maturity Date, the Company may elect to convert such
Borrowing to a different Type or to continue such Borrowing and, in the case of
a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in
this Section.  The Company may elect
different options with respect to different portions of the affected Borrowing,
in which case each such portion shall be allocated ratably among the Lenders
holding the Loans comprising such Borrowing, and the Loans comprising each such
portion shall be considered a separate Borrowing.

(b)                                 To
make an election pursuant to this Section, the Company shall notify the
Administrative Agent of such election by telephone by the time that a Borrowing
Request would be required under Section 2.03 if the Company were
requesting a Borrowing of the Type resulting from such election to be made on
the effective date of such election. 
Each such telephonic Interest Election Request shall be irrevocable and
shall be confirmed promptly by hand delivery or telecopy to the Administrative
Agent of a written Interest Election Request in a form approved by the
Administrative Agent and signed by the Company.

(c)                                  Each
telephonic and written Interest Election Request shall specify the following
information in compliance with Section 2.02:

(i)                                     the Borrowing to
which such Interest Election Request applies and, if different options are
being elected with respect to different portions thereof, the portions thereof
to be allocated to each resulting Borrowing (in which case the information to
be specified pursuant to clauses (iii) and (iv) below shall be specified for
each resulting Borrowing);

(ii)                                  the effective date of
the election made pursuant to such Interest Election Request, which shall be a
Business Day;

(iii)                               whether the resulting
Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

(iv)                              if the resulting
Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable
thereto after giving effect to such election, which shall be a period
contemplated by the definition of the term “Interest Period”.

If any such Interest
Election Request requests a Eurodollar Borrowing but does not specify an
Interest Period, then the Company shall be deemed to have selected an Interest
Period of one day’s duration.

(d)                                 Promptly
following receipt of an Interest Election Request, the Administrative Agent
shall advise each Lender of the details thereof and of such Lender’s portion of
each resulting Borrowing.

 24
 

 

(e)                                  If
the Company fails to deliver a timely Interest Election Request with respect to
a Eurodollar Borrowing prior to the end of the Interest Period applicable
thereto, then, unless such Borrowing is repaid as provided herein, at the end
of such Interest Period such Borrowing shall be converted to a one day
Eurodollar Borrowing.  Notwithstanding
any contrary provision hereof, if an Event of Default has occurred and is
continuing and the Administrative Agent, at the request of the Required
Lenders, so notifies the Company, then, so long as an Event of Default is
continuing (i) no outstanding Borrowing may be converted to or continued
as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar
Borrowing shall be converted to an ABR Borrowing at the end of the Interest
Period applicable thereto.

SECTION 2.07. 
Termination of Commitments; Reduction of Commitments.

(a)                                  Unless
previously terminated, the Commitments shall terminate on the last day of the
Availability Period.

(b)                                 The
Company may at any time terminate, or from time to time reduce, the aggregate
amount of the Commitments; provided that
(i) each reduction of the Commitments shall be in an amount that is an
integral multiple of $1,000,000 and not less than $5,000,000, (ii) the
Company shall not terminate or reduce the Commitments if, after giving effect
to any concurrent prepayment of the Loans in accordance with Section 2.09,
the sum of the Total Exposures of all the Lenders would exceed the total
Commitments and (iii) the Company shall satisfy all its obligations under
Sections 2.14 and 9.03(d) in respect of such termination or reduction and any
concurrent repayment.

(c)                                  The
Company shall notify the Administrative Agent of any election to terminate or
reduce the Commitments under subsection (b) of this Section at least three
Business Days prior to the effective date of such termination or reduction,
specifying such election and the effective date thereof.  Promptly following receipt of any notice, the
Administrative Agent shall advise the Lenders of the contents thereof.  Each reduction of the Commitments shall be
made ratably among the Lenders based on their respective Commitments.

(d)                                                      (i)                                     The
Company may request an increase, which will be effective on any date during the
Availability Period specified by the Company, in the aggregate amount of the
Commitments by any amount but to an amount not greater than $250,000,000 (any
such increase, a “Commitment Increase”) by
delivering notice of such proposed Commitment Increase to the Administrative
Agent.  The Administrative Agent shall
promptly provide a copy of such notice to the Lenders and the Paying
Agent.  Each Lender shall, in its sole
discretion, determine whether and to what degree to participate in such
Commitment Increase and shall give prompt notice of such determination to the
Administrative Agent; provided, that
failure by any Lender to provide any such notice shall be deemed to be evidence
of such Lender’s determination not to participate in such Commitment
Increase.  The Administrative Agent, in
consultation with the Company, shall allocate increases in the Commitments
pursuant to such Commitment Increase among the Lenders that have indicated that
they are willing to participate in such Commitment Increase (each such Lender
being an “Increasing Lender”).

(ii)                                  Any
Commitment Increase shall become effective upon (A) the receipt by the
Administrative Agent of (1) an agreement in form and substance satisfactory to
the 

 25
 

 

Administrative
Agent signed by the Company and each Increasing Lender, setting forth the new
Commitments of such Lender, (2) an agreement in form and substance satisfactory
to the Administrative Agent and signed by the Company and each Increasing
Lender with respect to fees and such other matters as may be mutually agreed by
the parties, and (3) such opinions of counsel for the Company with respect to
the Commitment Increase as the Administrative Agent may reasonably request, (B)
the funding by each Lender of the Borrowing(s) to be made by each such Lender
described in paragraph (iii) below and (C) receipt by the Administrative Agent
of a certificate (the statements contained in which shall be true) of a duly
authorized officer of the Company stating that both before and after giving
effect to such Commitment Increase (1) no Event of Default has occurred and is
continuing, and (2) all representations and warranties made by the Company in
this Agreement are true and correct in all material respects.

(iii)                               Upon
the effective date of any Commitment Increase, the Company shall prepay the
outstanding Borrowings (if any) in full, and shall simultaneously make new
Borrowings hereunder in an amount equal to such prepayment, so that, after
giving effect thereto, the Borrowings are held ratably by the Lenders in
accordance with their respective Commitments (after giving effect to such
Commitment Increase).  Prepayments made
under this paragraph (iii) shall not be subject to the notice requirements of
Section 2.09.

(iv)                              Notwithstanding
any provision contained herein to the contrary, from and after the effective
date of any Commitment Increase and the making of any Borrowings on such date
pursuant to paragraph (iii) above, all calculations and payments of the
Facility Fee and of interest on the Borrowings shall take into account the
actual Commitment of each Lender and the principal amount outstanding of each
Borrowing made by such Lender during the relevant period of time.

SECTION 2.08. 
Repayment of Loans; Evidence of Debt; Obligations Absolute.

(a)                                  The
Company hereby unconditionally promises to pay to the Paying Agent for
application in accordance with Section 2.15 the outstanding principal amount of
(i) each Loan made prior to the last day of the Availability Period, on
such last day, and (ii) each Loan made on or after the last day of the
Availability Period, on demand.

(b)                                 Each
Lender shall maintain in accordance with its usual practice an account or
accounts evidencing the indebtedness of the Company to such Lender resulting
from each Loan made by such Lender to the Company, including the amounts of
principal and interest payable and paid to such Lender by the Company from time
to time hereunder.

(c)                                  The
Administrative Agent shall maintain accounts in which it shall record
(i) the amount of each Loan made hereunder, the Type thereof and the
Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Company to each
Lender hereunder and (iii) the amount of any sum received by the
Administrative Agent hereunder for the account of the Lenders and each Lender’s
share thereof.

(d)                                 The
entries made in the accounts maintained pursuant to subsection (b)
or (c) of this Section shall, absent manifest error, be prima facie
evidence of the existence and amounts of 

 26
 

 

the obligations recorded
therein; provided that the failure of any Lender
or the Administrative Agent to maintain such accounts or any error therein
shall not in any manner affect the obligation of the Company to repay the Loans
in accordance with the terms of this Agreement.

(e)                                  Any
Lender may request that Loans made by it be evidenced by a promissory
note.  In such event, the Company shall
prepare, execute and deliver to such Lender a nonnegotiable promissory note
substantially in the form attached as Exhibit B (a “Note”) payable to the order
of such Lender (or, if requested by such Lender, to such Lender and its
permitted registered assigns). 
Thereafter, the Loans evidenced by such Note and interest thereon shall
at all times (including after assignment pursuant to Section 9.04) be
represented by one or more Notes payable to the order of the payee named
therein (or, if such Note is a registered Note, to such payee and its permitted
registered assigns).

(f)                                      The Company’s obligation to repay the Loans,
to reimburse LC Disbursements and to make the other payments provided herein
shall be absolute, unconditional and irrevocable, and shall be performed
strictly in accordance with the terms of this Agreement under any and all
circumstances whatsoever and irrespective of (i) any lack of validity or
enforceability of the Letter of Credit or this Agreement, or any term or
provision therein, (ii) the existence of any claim, set-off, defense or other
right that the Company, or any Affiliate of the Company may have at any time
against the beneficiary or any transferee of the Letter of Credit (or any
Persons or entities for whom such beneficiary or transferee may be acting), the
Issuing Bank or any other Person, whether in connection with this Agreement,
the transactions contemplated herein or any unrelated transaction; (iii)
without limiting Section 2.04(f), any draft, demand certificate or any other
document presented under the Letter of Credit proving to be forged, fraudulent
or invalid in any respect or any statement therein being untrue or inaccurate
in any respect, (iv) payment by the Issuing Bank under the Letter of Credit
against presentation of a draft or other document that does not comply with the
terms of the Letter of Credit, (v) the surrender or impairment of any security
for the performance or observance of any of the terms of any of the Loan
Documents; (vi) any non-application or misapplication by the beneficiary of the
Letter of Credit of the proceeds of any drawing under the Letter of Credit;
(vii) the fact that a Default shall have occurred and be continuing; or (viii)
any other event or circumstance whatsoever, whether or not similar to any of
the foregoing, that might, but for the provisions of this Section, constitute a
legal or equitable discharge of, or provide a right of setoff against, the
Company’s obligations hereunder.

SECTION 2.09. 
Prepayment of Loans.

(a)                                  The
Company shall have the right at any time and from time to time to prepay any
Borrowing made by it in whole or in part, subject to prior notice in accordance
with subsection (b) of this Section.

(b)                                 The
Company shall notify the Administrative Agent by telephone (confirmed by
telecopy) of any prepayment hereunder (i) in the case of prepayment of a
Eurodollar Borrowing, not later than 11:00 a.m., New York City
time, three Business Days before the date of prepayment and (ii) in the
case of prepayment of an ABR Borrowing, not later than 11:00 a.m.,
New York City time, on the date of prepayment.  Each such notice shall be irrevocable and
shall specify the prepayment date and the principal amount of each Borrowing or
portion thereof to be 

 27
 

 

prepaid.  Promptly following receipt of any such notice
relating to a Borrowing, the Administrative Agent shall advise the Lenders and
the Paying Agent of the contents thereof. 
Each partial prepayment of any Borrowing shall be in an amount that
would be permitted in the case of an advance of a Borrowing of the same Type as
provided in Section 2.02.  Each
prepayment of a Borrowing shall be applied ratably to the Loans included in the
prepaid Borrowing.  Prepayments shall be
accompanied by accrued interest to the extent required by Section 2.11.

SECTION 2.10. 
Fees.

The
Company agrees to pay to the Paying Agent for application in accordance with
Section 2.15 a facility fee (the “Facility Fee”),
payable in such amounts and at the times specified in the Fee Letter. The
Facility Fee shall be paid on the dates due in immediately available
funds.  Absent manifest error, once paid,
the Facility Fee shall not be refundable under any circumstances.

SECTION 2.11. 
Interest.

(a)                                  The
Loans comprising each ABR Borrowing shall bear interest at a rate per annum
equal to the Alternate Base Rate.

(b)                                 The
Loans comprising each Eurodollar Borrowing shall bear interest at a rate per
annum equal to the Adjusted LIBO Rate for the Interest Period in effect for
such Borrowing.

(c)                                  Notwithstanding
the foregoing, if any principal of or interest on any Loan or any fee or other
amount payable by the Company hereunder is not paid when due, whether at stated
maturity, upon acceleration or otherwise, such overdue amount shall bear
interest, after as well as before judgment, at a rate per annum equal to
(i) in the case of overdue principal of any Loan, 2% plus the rate
otherwise applicable to such Loan as provided above or (ii) in the case of
any other amount, 2% plus the rate applicable to ABR Loans as provided above.

(d)                                 Accrued
interest on each Loan shall be payable in arrears on each Interest Payment Date
for such Loan; provided that (i) interest
accrued pursuant to subsection (c) of this Section shall be payable on demand,
(ii) in the event of any repayment or prepayment of any Loan (other than a
prepayment of an ABR Loan prior to the end of the Availability Period), accrued
interest on the principal amount repaid or prepaid shall be payable on the date
of such repayment or prepayment, (iii) in the event of any conversion of
any Eurodollar Loan prior to the end of the current Interest Period therefor,
accrued interest on such Loan shall be payable on the effective date of such
conversion and (iv) all accrued interest shall be payable upon termination
of the Commitments.

(e)                                  All
interest hereunder shall be computed on the basis of a year of 360 days,
except that interest computed by reference to the Alternate Base Rate at times
when the Alternate Base Rate is based on the Base Rate shall be computed on the
basis of a year of 365 days (or 366 days in a leap year), and shall
be payable for the actual number of days elapsed (including the first day but
excluding the last day).  The applicable
Alternate Base Rate or Adjusted LIBO Rate shall be 

 28
 

 

determined by the
Administrative Agent, and such determination shall be conclusive absent
manifest error.

SECTION 2.12. 
Alternate Rate of Interest.

If prior to the
commencement of any Interest Period for a Eurodollar Borrowing:

(a)                                  the
Administrative Agent determines (which determination shall be conclusive absent
manifest error) that adequate and reasonable means do not exist for
ascertaining the Adjusted LIBO Rate for such Interest Period; or

(b)                                 the
Administrative Agent is advised by the Required Lenders that because of a
change in circumstances affecting the eurodollar market generally the Adjusted
LIBO Rate for such Interest Period will not adequately and fairly reflect the
cost to such Lenders of making or maintaining their Loans included in such
Borrowing for such Interest Period;

then the Administrative
Agent shall give notice thereof to the Company and the Lenders by telephone or
telecopy as promptly as practicable thereafter and, until the Administrative
Agent notifies the Company and the Lenders that the circumstances giving rise
to such notice no longer exist (which the Administrative Agent shall do as
promptly as practicable after becoming aware that such circumstances no longer
exist), (i) any Interest Election Request that requests the conversion of
any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing
shall be ineffective, and (ii) if any Borrowing Request requests a
Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing.

SECTION 2.13. 
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 or the Issuing Bank 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 Company of principal, interest, Facility
Fees or other amounts due from the Company under any Loan Document (except for
taxes on the overall net income of such Lender or Issuing Bank, 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 9.14 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 the Issuing Bank, or

 29
 

 

(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 the Issuing Bank, or
(B) otherwise applicable to the obligations of any Lender or the Issuing
Bank under this Agreement,

and the result of any of
the foregoing is to increase the cost to, reduce the income receivable by, or
impose any expense upon any Lender or the Issuing Bank with respect to this
Agreement, or the making, maintenance or funding of any part of the Loans or
the issuance or maintenance of the Letter of Credit (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 or the Issuing Bank’s capital, taking into
consideration such Lender’s or the Issuing Bank’s customary policies with
respect to capital adequacy) by an amount which such Lender or the Issuing Bank
in its sole discretion deems to be material, such Lender or the Issuing Bank
shall from time to time notify the Company and the Administrative Agent of the
amount determined in good faith (using any averaging and attribution methods
employed in good faith) by such Lender or the Issuing Bank to be necessary to
compensate such Lender or the Issuing Bank for such increase in cost, reduction
of income, additional expense or reduced rate of return.  Such notice shall set forth in reasonable
detail the basis for such determination, provided, however,
that any such determination shall be conclusive and binding absent manifest
error.  Such amount shall be due and
payable by the Company to such Lender or the Issuing Bank ten Business Days
after such notice is given.

(iv)                              If any Lender or the
Issuing Bank receives a refund in respect of any amounts paid by the Company
pursuant to this Section 2.13, which refund in good faith judgment of such
Lender or the Issuing Bank is allocable to such payment, it shall notify the
Company of such refund and repay such refund to the Company net of all
out-of-pocket expenses of such Lender or the Issuing Bank, provided,
however, that the Company, upon the request of such Lender or the
Issuing Bank, agrees to repay the amount paid over to the Company to such
Lender or the Issuing Bank in the event such Lender or the Issuing Bank is
required to repay such refund.

SECTION 2.14. 
Break Funding Payments.

In the event of
(i) the payment of any principal of any Eurodollar Loan other than on the
last day of an Interest Period applicable thereto (including as a result of an
Event of Default), (ii) the conversion of any Eurodollar Loan other than
on the last day of the Interest Period applicable thereto, (iii) the
failure to borrow, convert, continue or prepay any Eurodollar Loan on the date
specified in any notice delivered pursuant hereto, or (iv)  the assignment
of any Eurodollar Loan other than on the last day of the Interest Period
applicable thereto as a result of a request by the Company pursuant to
Section 2.16(b), then, in any such event, the Company shall compensate
each Lender for the loss, cost and expense attributable to such event.  In the case of a Eurodollar Loan, the loss to
any Lender attributable to any such event shall be deemed to include an amount
determined by such Lender to be equal to the excess, if any, of (A) the
amount of interest that such Lender would pay for a deposit equal to the
principal amount of such Loan for the period from the date of such payment,
conversion, failure or assignment to the last day of the

 30
 

 

then current
Interest Period for such Loan (or, in the case of a failure to borrow, convert
or continue, the duration of the Interest Period that would have resulted from
such borrowing, conversion or continuation) if the interest rate payable on
such deposit were equal to the Adjusted LIBO Rate for such Interest Period,
over (B) the amount of interest that such Lender would earn on such
principal amount for such period if such Lender were to invest such principal
amount for such period at the interest rate that would be bid by such Lender
(or an affiliate of such Lender) for dollar deposits from other banks in the
eurodollar market at the commencement of such period.  A certificate of any Lender setting forth any
amount or amounts that such Lender is entitled to receive pursuant to this
Section and explaining in reasonable detail the method by which such amount or
amounts shall have been determined shall be delivered to the Company and shall
be conclusive absent manifest error; provided that
no Lender or Issuing Bank shall be required to deliver information pursuant to
this Section relating to its business, other than any such information that is
available to the Company on a nonconfidential basis prior to the date of such
certificate.  The Company shall pay the
amount shown as due on any such certificate to the Paying Agent for distribution
to the Administrative Agent for the account of such Lender in accordance with
Section 2.15 within ten days after receipt of such certificate.

SECTION 2.15. 
Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

(a)                                  The
Company shall make each payment required to be made by it hereunder (whether of
principal, interest, fees, reimbursement of LC Disbursements or of any amounts
under Section 2.13 or 2.14, or otherwise) prior to 12:00 noon, New York
City time, on the date when due in immediately available funds, without set-off
or counterclaim.  Any amounts received
after such time on any date may, in the discretion of the Administrative Agent,
be deemed to have been received on the next succeeding Business Day for
purposes of calculating interest thereon. 
All such payments shall be made to the Paying Agent to be credited to
the Paying Agent’s Account.  All payments
made by the Company to the Paying Agent as provided herein or in any Note shall
be deemed received by the Lenders or the Issuing Bank for all purposes as
between the Lenders or the Issuing Bank and the Company.  The Administrative Agent shall notify the
Paying Agent in advance of each such expected payment. The Paying Agent will
promptly thereafter cause to be distributed like funds relating to the payment
of principal, interest or Facility Fees to the Administrative Agent or, with
respect to payments to be made to the Issuing Bank, the Issuing Bank, and the
Administrative Agent or the Issuing Bank (as the case may be) will promptly
after any such payment cause to be distributed like funds relating to the
payment of principal or interest or Facility Fees (other than amounts payable
pursuant to Section 2.04(f), 2.13, 2.14 or 9.03(a), (b) or (c)) (according
to the Lenders’ respective Commitments) to the Lenders for the account of their
respective lending offices, and like funds relating to the payment of any other
amount payable to any Lender to the Administrative Agent, and the
Administrative Agent then shall cause like funds to be distributed to such
Lender for the account of its applicable lending office, in each case to be
applied in accordance with the terms of this Agreement or any Note.  The Administrative Agent shall distribute any
such payments received by it for the account of any other Person to the
appropriate recipient promptly following receipt thereof.  If any payment hereunder shall be due on a
day that is not a Business Day, the date for payment shall be extended to the
next succeeding Business Day, and, in the case of any payment accruing
interest, interest thereon shall be payable for the period of such
extension.  All payments hereunder shall
be made in dollars.

 31
 

 

(b)                                 If
at any time insufficient funds are received by and available to the
Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements,
interest and fees then due hereunder, such funds shall be applied
(i) first, to pay interest and fees then due hereunder, ratably among the
parties entitled thereto in accordance with the amounts of interest and fees
then due to such parties, and (ii) second, to pay principal and
unreimbursed LC Disbursements then due hereunder, ratably among the parties
entitled thereto in accordance with the amounts of principal and unreimbursed
LC Disbursements then due to such parties.

(c)                                  If
any Lender shall, by exercising any right of set-off or counterclaim or
otherwise, obtain payment in respect of any principal of or interest on any of
its Loans or participations in unreimbursed LC Disbursements resulting in such
Lender receiving payment of a greater proportion of the aggregate amount of its
Loans or participations in unreimbursed LC Disbursements and accrued interest
thereon than the proportion received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face value)
participations in the Loans or participations in unreimbursed LC Disbursements
of other Lenders to the extent necessary so that the benefit of all such
payments shall be shared by the Lenders ratably in accordance with the
aggregate amount of principal of and accrued interest on their respective Loans
or participations in unreimbursed LC Disbursements; provided
that (i) if any such participations are purchased and all or any portion
of the payment giving rise thereto is recovered, such participations shall be
rescinded and the purchase price restored to the extent of such recovery,
without interest, and (ii) the provisions of this subsection shall not be
construed to apply to any payment made by the Company pursuant to and in
accordance with the express terms of this Agreement or any payment obtained by
a Lender as consideration for the assignment of or sale of a participation in
any of its Loans to any assignee or participant, other than to the Company,
Hovnanian or any Subsidiary or Affiliate thereof (as to which the provisions of
this subsection shall apply).  Each Loan
Party consents to the foregoing and agrees, to the extent it may effectively do
so under applicable law, that any Lender acquiring a participation pursuant to
the foregoing arrangements may exercise against such Loan Party rights of
set-off and counterclaim with respect to such participation as fully as if such
Lender were a direct creditor of such Loan Party in the amount of such
participation.

(d)                                 The
Paying Agent shall have no obligation to make a payment distribution to the
Administrative Agent or the Lenders until it has received the required payment
from the Company.  Unless the Paying
Agent shall have received notice from the Company prior to the date on which
any payment is due to the Paying Agent for the account of the Lenders or the
Issuing Bank that the Company will not make such payment, the Paying Agent may
assume that the Company has made such payment on such date in accordance
herewith and may (but shall not be required to), in reliance upon such
assumption, distribute to the Administrative Agent, whereupon the
Administrative Agent shall distribute to the Lenders or the Issuing Bank, as
the case may be, the amount due.  In such
event, if the Company has not in fact made such payment, then each of the
Lenders or the Issuing Bank, as the case may be, severally agrees to repay to
the Paying Agent forthwith on demand the amount so distributed to such Lender
or the Issuing Bank with interest thereon, for each day from and including the
date such amount is distributed to it to but excluding the date of payment to
the Paying Agent, at the Federal Funds Effective Rate.

(e)                                  If
any Lender or the Issuing Bank shall fail to make any payment required to be
made by it pursuant to Section 2.04(d), 2.05(b) or 2.15(d), then the
Administrative Agent may, in 

 32
 

 

its discretion (notwithstanding
any contrary provision hereof), apply any amounts thereafter received by the
Administrative Agent for the account of such Lender or the Issuing Bank to satisfy
such Lender or the Issuing Bank’s obligations under such Sections until all
such unsatisfied obligations are fully paid.

SECTION 2.16. 
Mitigation Obligations; Replacement of Lenders.

(a)                                  If
any Lender requests compensation under Section 2.13, then such Lender shall use
reasonable efforts to designate a different lending office for funding or
booking its Loans hereunder or to assign its rights and obligations hereunder
to another of its offices, branches or affiliates, if, in the judgment of such
Lender, such designation or assignment (i) would eliminate or reduce
amounts payable pursuant to Section 2.13, in the future and
(ii) would not subject such Lender to any unreimbursed cost or expense and
would not otherwise be disadvantageous to such Lender.  The Company hereby agrees to pay all
reasonable costs and expenses incurred by any Lender in connection with any
such designation or assignment.

(b)                                 If
any Lender requests compensation under Section 2.13, or if any Lender
defaults in its obligation to fund Loans hereunder, or if in connection with
any proposed amendment, modification, waiver or consent, the consent of the
Required Lenders has been obtained but the consent of a Lender the consent of
which is required shall not have been obtained, then the Company may, at its
sole expense and effort, upon notice to such Lender and the Administrative
Agent, require such Lender to assign and delegate, without recourse (in
accordance with and subject to the restrictions contained in
Section 9.04), all its interests, rights and obligations under this
Agreement to an assignee that shall assume such obligations (which assignee may
be another Lender, if a Lender accepts such assignment); provided
that (i) the Company shall have received the prior written consent of the
Administrative Agent (and if a Commitment is being assigned, the Issuing Bank),
which consent shall not unreasonably be withheld or delayed, (ii) such
Lender shall have received payment of an amount equal to the outstanding
principal of its Loans and participations in LC Disbursements, accrued interest
thereon, accrued fees and all other amounts payable to it hereunder, from the
assignee (to the extent of such outstanding principal and accrued interest and
fees) or the Company (in the case of all other amounts) and (iii) in the
case of any such assignment resulting from a claim for compensation under
Section 2.13, such assignment will result in a reduction in such
compensation or payments.  A Lender shall
not be required to make any such assignment and delegation if, prior thereto,
as a result of a waiver by such Lender or otherwise, the circumstances
entitling the Company to require such assignment and delegation cease to apply.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

The Company and
Hovnanian, jointly and severally, represent and warrant to the Administrative
Agent, each of the Lenders and the Issuing Bank as follows:

SECTION 3.01. 
Organization and Qualification.

Each of the Company 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 

 33
 

 

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 do so could not, individually or in the aggregate, reasonably be expected
to cause a Material Adverse Change.

SECTION 3.02. 
Subsidiaries.

As of the date hereof,
Schedule 1.01 states the name of each of Hovnanian’s Subsidiaries and its
jurisdiction of incorporation and designates each such Subsidiary as either a
Restricted Subsidiary or an Unrestricted Subsidiary.  Hovnanian and each Loan Party has good and
marketable title to all of the Capital Stock in each Subsidiary it purports to
own, free and clear in each case of any Lien.

SECTION 3.03. 
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.

SECTION 3.04. 
Validity and Binding Effect.

This Agreement has been
duly and validly executed and delivered by the Company and Hovnanian, and each
other Loan Document that 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 that 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 such Loan Document may be
limited by bankruptcy, insolvency, reorganization moratorium or other similar
laws affecting the enforceability of creditor’s rights generally or limiting
the right of specific performance.

SECTION 3.05. 
No Conflict.

Neither the execution and
delivery of this Agreement or the other Loan Documents by any Loan Party nor
the consummation of the transactions herein or therein contemplated or
compliance with the terms and provisions hereof or thereof by any of them will
conflict with, constitute a default under or result in any breach of
(i) the terms and conditions of the certificate of incorporation, bylaws,
certificate of limited partnership, partnership agreement, certificate of
formation, limited liability company agreement or other organizational
documents of any Loan Party or (ii) any Law or any material agreement or
instrument or order, writ, judgment, injunction or decree to which any Loan Party
is a party or by which it is bound or to which it is 

 34
 

 

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) that could, individually or in the
aggregate, reasonably be expected to cause a Material Adverse Change.

SECTION 3.06. 
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 that 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
that may result in any Material Adverse Change.

SECTION 3.07. 
Title to Properties.

Each Loan Party has good
and marketable title to or a valid leasehold interest in all properties, assets
and other rights that it purports to own or lease or that 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.

SECTION 3.08. 
Financial Statements.

(a)                                  Historical Statements.  The Company has delivered to the
Administrative Agent copies of Hovnanian’s audited and 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 statements
for and as of the end of the fiscal quarters ended January 31, 2006,
April 30, 2006 and July 31, 2006 (the “Quarterly Statements”, and,
together with the Annual Statements, 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 (subject, in the case of Quarterly Statements, to
year-end adjustments) in all material respects the consolidated financial
conditions 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 as of the respective dates
of the Historical Statements.

(b)                                 Accuracy of Financial Statements.  As of the date hereof, 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 that may cause a
Material Adverse Change.  Except as disclosed
in reports filed by the Company or Hovnanian with the SEC prior to the date
hereof, since October 31, 2005, no Material Adverse Change has
occurred.

 35
 

 

SECTION 3.09. 
Disclosure.

Each of the reports
required to be filed by the Company or Hovnanian under Section 13(a) of the
Exchange Act on or prior to the date hereof has been filed and, as of the
respective dates thereof and the date hereof, such reports, taken as a whole,
did not contain and do not contain an untrue statement of a material fact and
did not omit and do not omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading in any material respect.

SECTION 3.10. 
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 that
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.

SECTION 3.11. 
Taxes.

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

SECTION 3.12. 
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.

SECTION 3.13. 
No Defaults; 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 under or pursuant to the
Loan Documents that constitutes a 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 

 36
 

 

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.

SECTION 3.14. 
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 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).

ARTICLE IV

CONDITIONS

SECTION 4.01. 
Conditions to Effective Date.

The obligations of the
Lenders to make Loans to the Company and of the Issuing Bank to issue the
Letter of Credit for the account of the Company shall not become effective
until the date on which each of the following conditions are satisfied (or
waived in accordance with Section 9.02):

(a)                                  The
Administrative Agent shall have received at least one executed counterpart of
this Agreement from the Company, each Guarantor in existence on the date
hereof, each Agent, the Issuing Bank and each Lender, and arrangements
satisfactory to the Administrative Agent shall have been made for the delivery
of additional executed counterparts, sufficient in number for distribution to
the Agents, the Issuing Bank, the Lenders and the Company, together with all
Exhibits and Schedules thereto;

(b)                                 The
Administrative Agent shall have received a favorable written opinion (addressed
to the Administrative Agent, the Issuing Bank and the Lenders and dated the
Effective Date), counsel to the Loan Parties, in a form reasonably satisfactory
to the Administrative Agent;

(c)                                  The
Administrative Agent shall have received documents and certificates relating to
the organization, existence and good standing of the Company and Hovnanian, the
authorization of the Transactions, the incumbency of the persons executing each
Loan Document on behalf of each Loan Party, all in form and substance
satisfactory to the Administrative Agent;

(d)                                 The
Administrative Agent shall have received a certificate, dated the Effective
Date and signed by the President, a Vice President or a Financial Officer of
the Company, confirming as of the Effective Date, that (i) the representations
and warranties of the Company and Hovnanian set forth in Article III of this
Agreement are true and correct in all material respects on and as of such date
and (ii) no Default has occurred and is continuing; and

(e)                                  The
Administrative Agent and each Lender (and its Affiliates) shall have received
all fees and other amounts due and payable on or prior to the Effective Date,
including, to the 

 37
 

 

extent invoiced, reimbursement
or payment of all out-of-pocket expenses required to be reimbursed or paid by
the Company hereunder.

SECTION 4.02. 
Condition to Each Credit Event.

The obligation of each
Lender to make a Loan to the Company on the occasion of any Borrowing (other
than a Borrowing made to reimburse the Issuing Bank for any LC Disbursement as
provided in Sections 2.04(d) and (e)), and the obligation of the Issuing Bank
to issue, renew, extend or increase the amount of the Letter of Credit, is
subject to the satisfaction of the condition that, at the time of and
immediately after giving effect to such Credit Event, no Event of Default shall
have occurred and be continuing.  Each
Credit Event shall be deemed to constitute a representation and warranty by the
Company on the date thereof as to the satisfaction of the condition described
in this Section.

ARTICLE V

COVENANTS

Until the Commitments
have expired or been terminated, the principal of and interest on each Loan and
all fees payable hereunder shall have been paid in full, and the Letter of
Credit shall have expired or terminated and all LC Disbursements shall have
been reimbursed, the Company and Hovnanian (as applicable) covenant and agree
with the Lenders and the Issuing Bank that:

SECTION 5.01. 
Existence.

Each of Hovnanian and the
Company will each do or cause to be done all things necessary to preserve and
keep in full force and effect its existence and the existence of each of its
Restricted Subsidiaries in accordance with their respective organizational
documents, and the material rights, licenses and franchises of Hovnanian, the
Company and each Restricted Subsidiary, provided that
Hovnanian and the Company are not required to preserve any such right, license
or franchise, or the existence of any Restricted Subsidiary, if the maintenance
or preservation thereof is no longer desirable in the conduct of the business
of Hovnanian and its Restricted Subsidiaries taken as a whole; and provided further that this Section does not prohibit any
transaction otherwise permitted by Section 5.05.

SECTION 5.02. 
Payment of Taxes and Other Claims.

Hovnanian will pay or
discharge, and cause each of its Subsidiaries to pay or discharge before the
same become delinquent (i) all material taxes, assessments and governmental
charges levied or imposed upon Hovnanian or any Subsidiary or its income or
profits or property, and (ii) all material lawful claims for labor, materials
and supplies that, if unpaid, might by law become a Lien upon the property of
Hovnanian or any Subsidiary, other than any such tax, assessment, charge or
claim the amount, applicability or validity of which is being contested in good
faith by appropriate proceedings and for which adequate reserves have been
established.

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SECTION 5.03. 
Maintenance of Properties and Insurance.

(a)           Hovnanian will cause
all properties used or useful in the conduct of its business or the business of
any of its Restricted Subsidiaries to be maintained and kept in good condition,
repair and working order as in the judgment of Hovnanian may be necessary so
that the business of Hovnanian and its Restricted Subsidiaries may be properly
and advantageously conducted at all times; provided that
nothing in this Section prevents Hovnanian or any Restricted Subsidiary from
discontinuing the use, operation or maintenance of any of such properties or
disposing of any of them, if such discontinuance or disposal is, in the
judgment of Hovnanian, desirable in the conduct of the business of Hovnanian
and its Restricted Subsidiaries taken as a whole.

(b)           Hovnanian will provide
or cause to be provided, for itself and its Restricted Subsidiaries, insurance
(including appropriate self-insurance) against loss or damage of the kinds
customarily insured against by corporations similarly situated and owning like
properties, including, but not limited to, products liability insurance and
public liability insurance, with reputable insurers, in such amounts, with such
deductibles and by such methods as are customary for corporations similarly
situated in the industry in which Hovnanian and its Restricted Subsidiaries are
then conducting business.

SECTION 5.04. 
Limitations on Liens.

Hovnanian and the Company
will not, and will not cause or permit any Restricted Subsidiary to, create,
incur, assume or suffer to exist any Liens, other than Permitted Liens, on any
of its Property, or on any shares of Capital Stock or Indebtedness of any
Restricted Subsidiary, unless contemporaneously therewith or prior thereto all
payments due under this Agreement and the Notes are secured on an equal and
ratable basis with the obligation or liability so secured until such time as
such Indebtedness is no longer secured by a Lien.

SECTION 5.05. 
Limitations on Mergers, Consolidations and Sales of Assets.

Neither the Company nor
any Guarantor will consolidate or merge with or into, or sell, lease, convey or
otherwise dispose of all or substantially all of its assets (including, without
limitation, by way of liquidation or dissolution), or assign any of its
obligations under any Loan Document (as an entirety or substantially as an
entirety in one transaction or in a series of related transactions), to any
Person (in each case other than in a transaction in which Hovnanian, the
Company or a Restricted Subsidiary is the survivor of a consolidation or
merger, or the transferee in a sale, lease, conveyance or other disposition)
unless:

(i)            the Person formed by or surviving such
consolidation or merger (if other than the Company, Hovnanian or any other
Guarantor, as the case may be), or to which such sale, lease, conveyance or
other disposition or assignment will be made (collectively, the “Successor”) is a corporation
or other legal entity organized and existing under the laws of the United
States or any state thereof or the District of Columbia, and the Successor
assumes by an agreement in a form reasonably satisfactory to the Administrative
Agent all of the obligations of Hovnanian, the Company or such Guarantor, as
the case may be, under the applicable Loan Documents, and

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(ii)           immediately after giving effect to such
transaction, no Default has occurred and is continuing.

The foregoing provisions
shall not apply to (i) a transaction involving the sale or disposition of
Capital Stock of a Guarantor, or the consolidation or merger of a Guarantor, or
the sale, lease, conveyance or other disposition of all or substantially all of
the assets of a Guarantor, that in any such case results in such Guarantor
being released from its Guarantee pursuant to Section 6.03 hereof, or (ii) a
transaction the purpose of which is to change the state of incorporation of the
Company, Hovnanian or any other Guarantor.

SECTION
5.06.  Cash Collateralization.  In the event that on the 90th day prior to the Maturity Date the Letter of Credit
remains outstanding, and the stated expiry date of the Letter of Credit is a
date later than the Maturity Date, then the Company shall (unless the Company
has made other arrangements satisfactory to the Lenders to secure the
obligations of the Loan Parties under the Loan Documents) immediately deposit
with the Administrative Agent an amount in the cash collateral account (the “Cash Collateral Account”)
described below equal to the undrawn amount of the Letter of Credit on such
date.  Such Cash Collateral Account shall
at all times be free and clear of all rights or claims of third parties.  The Cash Collateral Account shall be
maintained with the Administrative Agent in the name of, and under the sole
dominion and control of, the Administrative Agent, and amounts deposited in the
Cash Collateral Account shall bear interest at a rate equal to the rate
generally offered by Citibank for deposits equal to the amount deposited by the
Company in the Cash Collateral Account, for a term to be determined by the
Administrative Agent in its sole discretion. 
The Company hereby grants to the Administrative Agent for the benefit of
the Administrative Agent, the Issuing Bank and the Lenders a Lien on, and
hereby assigns to the Administrative Agent for the benefit of the
Administrative Agent, the Issuing Bank and the Lenders all of its right, title
and interest in, the Cash Collateral Account and all funds from time to time on
deposit therein to secure its obligations under the Loan Documents.  If any LC Disbursement is not reimbursed in
full immediately upon demand or the principal amount of any Loan is not paid
when due, then, in any such event, the Administrative Agent may, and, upon the
Company’s request, shall, apply the amounts then on deposit in the Cash
Collateral Account, in such priority as the Administrative Agent shall elect,
toward the payment in full of any or all of the Company’s obligations under the
Loan Documents as and when such obligations shall become due and payable.  Upon payment in full, after the termination
of the Letters of Credit and the Commitments, of all such obligations, the
Administrative Agent will repay and reassign to the Company any cash then on
deposit in the Cash Collateral Account, and the Lien of the Administrative
Agent on the Cash Collateral Account and the funds therein shall automatically
terminate.

SECTION 5.07. 
Reporting Requirements. The Company and
Hovnanian shall deliver, and shall cause each other Loan Party, to the extent
applicable, to deliver or to cause to be delivered to the Administrative Agent:

(a)           As soon as available
and in any event within 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 the end of such
fiscal quarter and related consolidated statements of income, stockholders’
equity and cash flows for the fiscal

 39
 

 

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 5.07(a) if within 55 days after the end of Hovnanian’s
fiscal quarter, the Company delivers to the Administrative Agent a copy of
Hovnanian’s Form 10-Q as filed with the SEC and the financial statements
contained therein meet the requirements described in this Section 5.07(a).

(b)           As soon as available
and in any event within 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 Administrative 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
that 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 5.07(b) if within 90 days after the end of Hovnanian’s fiscal year,
the Company delivers to the Administrative 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.

(c)           Promptly after any
officer of any Loan Party has learned of the occurrence of a 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 Default and the action that such Loan Party proposes to take
with respect thereto.

(d)           Promptly upon their
becoming available to any Loan Party and not otherwise provided to the
Administrative Agent under this Section 5.07: (i) any reports, notices or proxy
statements generally distributed by Hovnanian to its stockholders and (ii)
regular or periodic reports, including Forms 10-K, 10-Q and 8-K, registration
statements and prospectuses, filed by Hovnanian with the SEC.

(e)           Such other reports and
information as the  Administrative Agent may from time to time reasonably
request.

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ARTICLE VI

GUARANTEES

SECTION
6.01.  Guarantee.  (a) Each Guarantor
hereby unconditionally guarantees (each such guarantee to be referred to herein
as a “Guarantee”), jointly and
severally with each other Guarantor, (i) the due and punctual payment of the
principal of and any premium or interest on the Loans, whether at maturity or
on an Interest Payment Date, by acceleration, or otherwise, and interest on the
overdue principal of and interest, if any, on the Loans and all other
obligations of the Company hereunder and under any other Loan Document, all in
accordance with the terms hereof and of the other Loan Documents, and (ii) in
cases of any extension of time of payment or renewal of any such Loan or any of
such other obligations, the same shall be promptly paid in full when due or to
be performed in accordance with the terms of the extension or renewal, whether
at stated maturity, by acceleration or otherwise.

(b)           If the Company fails to
make any payment when due or any amount so guaranteed for whatever reason, each
Guarantor shall be obligated, jointly and severally with each other Guarantor,
if any, to pay the same immediately. 
Each Guarantor hereby agrees that its obligations hereunder shall be
continuing, absolute and unconditional, irrespective of, and shall be
unaffected by, the validity, regularity or enforceability of the Loans, any
Loan Document, the absence of any action to enforce the same, any waiver or
consent by any Lender, the Issuing Bank or the Administrative Agent with
respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other circumstance
that might otherwise constitute a legal or equitable discharge or defense of
such Guarantor.  Each Guarantor hereby
waives diligence, presentment, demand of payment, demand of performance, filing
of claims with a court in the event of insolvency or bankruptcy of the Company,
any right to require a proceeding first against the Company, the benefit of
discussion, protest, notice and all demand whatsoever and covenants that its
Guarantee shall not be discharged except by complete performance of the
obligations guaranteed by such Guarantee in this Article VI.  If the Issuing Bank, the Administrative Agent
or any Lender is required by any court or otherwise to return to the Company or
any Guarantor, or any custodian, trustee, liquidator or other similar official
acting in relation to the Company or any Guarantor, any amount paid by the
Company or such Guarantor under this Guarantee, then this Article VI, to the
extent theretofore discharged with respect to any Guarantee, shall be
reinstated in full force and effect. 
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in respect of any obligations guaranteed hereby until payment in
full of any obligations of the Company hereunder and under the other Loan
Documents.  Each Guarantor further agrees
that, as between such Guarantor, on the one hand, and the Administrative Agent,
the Issuing Bank and the Lenders, on the other hand, (i) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article VII
hereof, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and
(ii) in the event of any acceleration of such obligations as provided in
Article VII hereof, such obligations (whether or not due and payable) shall
forthwith become due and payable by such Guarantor, jointly and severally with
any other Guarantor, for the purpose of this Article VI.  In addition, without limiting the foregoing,
upon the effectiveness of an acceleration under Article VII, the
Administrative Agent may make a demand for payment under any Guarantee provided
hereunder and not discharged.

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(c)           With respect to each
Guarantee by a Guarantor, such Guarantor shall be subrogated to all rights of
each beneficiary of such Guarantee against the Company in respect of any
amounts paid to such beneficiary by such Guarantor pursuant to the provisions
of such Guarantee; provided that
the Guarantor shall not be entitled to enforce, or to receive any payments
arising out of or based upon, such right of subrogation until all obligations of
the Company under the Loan Documents shall have been paid in full and the
Letter of Credit shall no longer be outstanding.

SECTION
6.02.  Obligations of Each Guarantor
Unconditional; Savings Clause.  (a)Nothing contained in this Article VI or
elsewhere in this Agreement is intended to or shall impair, as between a
Guarantor and the beneficiaries of such Guarantor’s Guarantee, the obligations
of such Guarantor, which are absolute and unconditional, to pay to such
beneficiaries the principal of and interest on the Loans and all other amounts
payable by the Company under each Loan Document as and when the same shall
become due and payable in accordance with the provisions thereof or is intended
to or shall affect the relative rights of such beneficiaries and creditors of
such Guarantor, nor shall anything herein or therein prevent the Administrative
Agent or such beneficiary from exercising all remedies otherwise permitted by
applicable law upon the occurrence and during the continuation of an Event of
Default in respect of cash, property or securities of such Guarantor received
upon the exercise of any such remedy.

(b)           Upon any distribution
of assets of a Guarantor, the Administrative Agent and the other beneficiaries
of this Guarantee shall be entitled to rely upon any order or decree made by
any court of competent jurisdiction in which such dissolution, winding up,
liquidation or reorganization proceedings are pending, or a certificate of the
liquidating trustee or agent or other person making any distribution to the
Administrative Agent or to such beneficiaries, for the purpose of ascertaining
the persons entitled to participate in such distribution, the holders of other
indebtedness of such Guarantor, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article VI.

(c)           Notwithstanding
anything to the contrary in this Article, each Guarantor, the Administrative
Agent, the Issuing Bank and each Lender hereby confirm that it is the intention
of all such parties that the Guarantee of such Guarantor not constitute a
fraudulent conveyance under applicable fraudulent conveyance provisions of
Bankruptcy Law or any comparable provision of state law.  To the effectuate that intention, the
Administrative Agent, the Issuing Bank, the Lenders and the Guarantors hereby
irrevocably agree that the obligations of each Guarantor under its Guarantee
are limited to the maximum amount that would not render the Guarantor’s
obligations subject to avoidance under applicable fraudulent conveyance
provisions of Bankruptcy Law or any comparable provision of state law.

SECTION
6.03.  Release of a Guarantor.  (a)  If
all or substantially all of the assets of any Guarantor other than Hovnanian or
all of the Capital Stock of any Guarantor other than Hovnanian is sold
(including by consolidation, merger, issuance or otherwise) or disposed of
(including by liquidation, dissolution or otherwise) by Hovnanian or any of its
Subsidiaries, or, unless Hovnanian elects otherwise, if any Guarantor other
than Hovnanian is designated an Unrestricted Subsidiary in accordance with the
terms of this Agreement, then such Guarantor (in the event of a sale or other
disposition of all of the Capital Stock of such Guarantor or a designation as
an Unrestricted Subsidiary) or the Person acquiring such assets (in the event
of a

 42
 

 

sale or other disposition of all or substantially all
of the assets of such Guarantor) shall be deemed automatically and
unconditionally released and discharged from any of its obligations under this
Guarantee without any further action on the part of the Administrative Agent,
the Issuing Bank or any Lender.

(b)           Upon the release of the
guarantee by a Guarantor other than Hovnanian under all then outstanding Applicable
Debt, the Guarantee of such Guarantor under this Agreement will be released and
discharged, and no Restricted Subsidiary thereafter acquired or created will be
required to be a Guarantor. In the event that any such released Guarantor
thereafter guarantees any Applicable Debt (or if any released guarantee under
any Applicable Debt is reinstated or renewed), then any such released Guarantor
and any other Restricted Subsidiary of Hovnanian then existing (other than the
Restricted Subsidiaries excluded from the definition of “Guarantor”) will
Guarantee the obligations of the Company under the Loan Documents on the terms
and conditions set forth in this Article VI. For purposes of this clause (b),
Applicable Debt secured by a Lien on such Restricted Subsidiary’s Property or
issued by such Restricted Subsidiary shall be deemed guaranteed by such
Restricted Subsidiary.

(c)           An Unrestricted
Subsidiary that is a Guarantor shall be deemed automatically and
unconditionally released and discharged from all obligations under its
Guarantee upon notice from Hovnanian to the Administrative Agent to such
effect, without any further action required on the part of the Administrative
Agent, the Issuing Bank or any Lender.

SECTION
6.04.  Joinder of Additional Guarantors.  The Company and Hovnanian will cause each
Restricted Subsidiary that is formed or acquired or otherwise comes into
existence after the date hereof to become a Guarantor by executing and
delivering to the Administrative a Guarantee Joinder Agreement, together with,
upon the reasonable request of the Administrative Agent, an opinion of counsel
to such Restricted Subsidiary reasonably satisfactory to the Administrative
Agent.  In addition, the Company and
Hovnanian may cause any Subsidiary of Hovnanian that is not required by the
terms of this Agreement to become a Guarantor to become a Guarantor by
executing and delivering to the Administrative a Guarantee Joinder Agreement.

ARTICLE VII

Events of Default

If any of the following
events (“Events of Default”) shall
occur:

(i)            the failure by any Loan Party to pay
interest on any Loan or any fee or any other amount (other than amounts
described in clause (ii) below) payable under any Loan Document when the same
becomes due and payable and the continuance of any such failure for a period of
three Business Days;

(ii)           the failure by any Loan Party to pay the
principal of any Loan or any reimbursement obligation in respect of any LC
Disbursement when the same becomes due and payable at maturity, upon
acceleration or otherwise;

(iii)          the failure by any Loan Party to comply with
any of its agreements or covenants in, or provisions of any Loan Document and
such failure continues for a period of 30 days after written notice thereof
from the Administrative Agent to the Company

 43
 

 

(except in the case of a default under
Section 5.05 or 5.06 hereof, which will constitute Events of Default without
notice or the passage of time);

(iv)          the acceleration of any Indebtedness (other
than Non-Recourse Indebtedness) of any Loan Party that has an outstanding
principal amount of $25,000,000 or more, individually or in the aggregate, and
such acceleration does not cease to exist, or such Indebtedness is not
satisfied, in either case within 30 days after such acceleration;

(v)           the failure by any Loan Party to make any
principal or interest payment in an amount of $25,000,000 or more, individually
or in the aggregate, in respect of Indebtedness (other than Non-Recourse
Indebtedness) of such Loan Party within 30 days of such principal or interest becoming
due and payable (after giving effect to any applicable grace period set forth
in the documents governing such Indebtedness);

(vi)          a final judgment or judgments that exceed
$25,000,000 or more, individually or in the aggregate, for the payment of money
having been entered by a court or courts of competent jurisdiction against any
Loan Party and such judgment or judgments is not satisfied, stayed, annulled or
rescinded within 60 days of being entered;

(vii)         Hovnanian, the Company or any Restricted Subsidiary
that is a Significant Subsidiary pursuant to or within the meaning of any
Bankruptcy Law:

(A)          commences a voluntary case,

(B)           consents to the entry of an order for relief
against it in an involuntary case,

(C)           consents to the appointment of a custodian
of it or for all or substantially all of its property, or

(D)          makes a general assignment for the benefit of
creditors;

(viii)        a court of competent jurisdiction enters an
order or decree under any Bankruptcy Law that:

(A)          is for relief against Hovnanian, the Company
or any Restricted Subsidiary that is a Significant Subsidiary as debtor in an
involuntary case,

(B)           appoints a custodian of Hovnanian, the
Company or any Restricted Subsidiary that is a Significant Subsidiary or a
custodian for all or substantially all of the property of Hovnanian or any
Restricted Subsidiary that is a Significant Subsidiary, or

(C)           orders the liquidation of Hovnanian, the
Company or any Restricted Subsidiary that is a Significant Subsidiary,

and the order or decree
remains unstayed and in effect for 60 days; or

 44
 

 

(ix)           any Guarantee of a Guarantor that is a
Significant Subsidiary ceases to be in full force and effect (other than in
accordance with the terms of this Agreement) or is declared null and void and
unenforceable or found to be invalid, or any Guarantor denies its liability
under its Guarantee (other than by reason of release of a Guarantor from its
Guarantee in accordance with the terms of this Agreement); or

(x)            any representation or warranty made or
deemed made by or on behalf of any Loan Party in or in connection with any Loan
Document or any amendment or modification thereof or waiver thereunder, or in
any certificate furnished pursuant to or in connection with any Loan Document
or any amendment or modification thereof or waiver thereunder shall prove to
have been incorrect in any material respect when made or deemed made;

then, and in every such
event (other than an event with respect to the Company described in clause
(vii) of this Article), and at any time thereafter during the continuance of
such event, the Paying Agent (in the case of an Event of Default described in
clause (i) or (ii) above) shall promptly provide notice of such Event of
Default to the Administrative Agent, and the Administrative Agent, upon receipt
of such notice from the Paying Agent, and in the case of any other Event of
Default, shall, at the request of the Required Lenders, by notice to the
Company, take either or both of the following actions, at the same or different
times: (A) terminate the Commitments, and thereupon the Commitments shall
terminate immediately, and (B) declare the Loans then outstanding to be due and
payable in whole (or in part, in which case any principal not so declared to be
due and payable may thereafter be declared to be due and payable), and
thereupon the principal of the Loans so declared to be due and payable,
together with accrued interest thereon and all fees and other obligations of
the Company hereunder, shall become due and payable immediately, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
the Company; and in case of any event with respect to the Company described in
clause (vii) of this Article, the Commitments shall automatically terminate and
the principal of the Loans then outstanding, together with accrued interest
thereon and all fees and other obligations of the Company hereunder, shall
automatically become due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Company.

ARTICLE VIII

The ADMINISTRATIVE AGENT AND THE PAYING AGENT

Each of the Lenders and
the Issuing Bank hereby irrevocably appoints the Administrative Agent and the
Paying Agent as its agent and authorizes the Administrative Agent and the
Paying Agent to take such actions on its behalf and to exercise such powers as
are delegated to the Administrative Agent or the Paying Agent, as applicable,
by the terms hereof, together with such actions and powers as are reasonably
incidental thereto.

Any bank serving as the
Administrative Agent or the Paying Agent hereunder shall have the same rights
and powers in its capacity as a Lender or the Issuing Bank as any other Lender
and may exercise the same as though it were not the Administrative Agent or the
Paying Agent, as applicable, and such bank and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of business with
the Company or any of its Subsidiaries thereof or

 45
 

 

other Affiliate
thereof as if it were not the Administrative Agent or the Paying Agent, as
applicable, hereunder.

Neither Agent shall have
any duties or obligations except those expressly set forth for such Agent
herein.  Without limiting the generality
of the foregoing, (a) neither Agent shall be subject to any fiduciary or
other implied duties, regardless of whether a Default has occurred and is
continuing, (b) neither Agent shall have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated hereby that such Agent is required to
exercise in writing as directed by the Required Lenders, and (c) except as
expressly set forth herein, neither Agent shall not have any duty to disclose,
and shall not be liable for the failure to disclose, any information relating
to the Company or any of its Subsidiaries that is communicated to or obtained
by the bank serving as such Agent or any of its Affiliates in any
capacity.  Neither Agent shall be liable
for any action taken or not taken by it with the consent or at the request of
the Required Lenders (or such other number or percentage of the Lenders as
shall be necessary under the circumstances as provided in Section 9.02) to
the extent required by Section 9.02 or in the absence of its own gross
negligence or willful misconduct. 
Neither Agent shall be responsible for or have any duty to ascertain or
inquire into (i) any statement, warranty or representation made in or in
connection with this Agreement, (ii) the contents of any certificate,
report or other document delivered hereunder or in connection herewith,
(iii) the performance or observance of any of the covenants, agreements or
other terms or conditions set forth herein, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement or any other
agreement, instrument or document, or (v) the satisfaction of any
condition set forth in Article IV or elsewhere herein, other than, in the
case of the Administrative Agent, to confirm receipt of items expressly required
to be delivered to the Administrative Agent.

Each Agent shall be
entitled to rely upon, and shall not incur any liability for relying upon, any
notice, request, certificate, consent, statement, instrument, document or other
writing believed by it to be genuine and to have been signed or sent by the
proper Person.  Each Agent also may rely
upon any statement made to it orally or by telephone and believed by it to be
made by the proper Person, and shall not incur any liability for relying
thereon.  Each Agent may consult with
legal counsel (who may be counsel for the Company), independent accountants and
other experts selected by it, and shall not be liable for any action taken or
not taken by it in accordance with the advice of any such counsel, accountants
or experts.

The Administrative Agent
may perform any and all its duties and exercise its rights and powers by or
through any one or more subagents appointed by the Administrative Agent.  The Administrative Agent and any such subagent
may perform any and all its duties and exercise its rights and powers through
their respective Related Parties.  The
exculpatory provisions of the preceding subsections shall apply to any such
subagent and to the Related Parties of the Administrative Agent and any such subagent,
and shall apply to their respective activities in connection with the
syndication of the credit facilities provided for herein as well as activities
as Administrative Agent.

Subject to the
appointment and acceptance of an appropriate successor Agent as provided in
this subsection, each Agent may resign at any time by notifying the Lenders,
the Issuing Bank and the Company.  Upon
any such resignation, the Required Lenders shall have the right, with

 46
 

 

the consent of the
Company (not to be unreasonably withheld or delayed), to appoint a successor,
which must be a bank or trust company with an office in New York,
New York, or an Affiliate of any such bank.  If no such successor shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Agent gives notice of its resignation,
then the retiring Agent may, on behalf of the Lenders and in consultation with
the Company, appoint a successor Agent, which shall be a bank with an office in
New York, New York, or an Affiliate of any such bank.  Upon the acceptance of its appointment as an
Agent hereunder by a successor, such successor shall succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder.  The fees payable
by the Company to a successor Agent shall be the same as those, if any, payable
to its predecessor unless otherwise agreed between the Company and such successor.  After any Agent’s resignation hereunder, the
provisions of this Article and Section 9.03 shall continue in effect for
its benefit in respect of any actions taken or omitted to be taken by it while
it was acting as such Agent.

Each Lender acknowledges
that it has, independently and without reliance upon any Agent, the Issuing
Bank or any other Lender and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into
this Agreement.  Each Lender also
acknowledges that it will, independently and without reliance upon any Agent,
the Issuing Bank or any other Lender and based on such documents and
information as it shall from time to time deem appropriate, continue to make
its own decisions in taking or not taking action under or based upon this
Agreement, any related agreement or any document furnished hereunder or
thereunder.

ARTICLE IX

Miscellaneous

SECTION 9.01. 
Notices.

Except in the case of
notices and other communications expressly permitted to be given by telephone,
all notices and other communications provided for herein shall be in writing
and shall be delivered by hand or overnight courier service, mailed by
certified or registered mail or sent by telecopy, as follows:

(a)           if to the Company, to
110 West Front Street, Red Bank, New Jersey, 07701, Telecopy:  (732) 747-6835, E-mail: khake@khov.com,
Attention: Kevin Hake, Senior Vice President of Finance and Treasurer;

(b)           if to the
Administrative Agent, to Two Penns Way,
Suite 110, New Castle, Delaware 19720, Telecopy: (212) 994-0847, Email:
patricia.d.stewart@citigroup.com, Attention: Patricia D. Stewart.

(c)           if to the Paying Agent,
to 4 New York Plaza, New York, NY
10004-2413, Attention: Global Structured Finance, Telecopy: (212) 623-8251,
Email: joseph.g.powell@bankofny.com;

 47
 

 

(d)           if to any other Lender,
to it at its address (or telecopy number) set forth in its Administrative
Questionnaire (a copy of which the Administrative Agent shall provide to the
Company, unless such notice or communication was delivered by the Company); and

(e)           if to the Issuing Bank,
to Two Penns Way, Suite 110, New Castle,
Delaware 19720, Telecopy: (212) 994-0847, Email:
patricia.d.stewart@citigroup.com, Attention: Patricia D. Stewart.

Any party hereto may
change its address or telecopy number for notices and other communications
hereunder by notice to the other parties hereto.  All notices and other communications given to
any party hereto in accordance with the provisions of this Agreement shall be
deemed to have been given on the date of receipt.

SECTION 9.02. 
Waivers; Amendments.

(a)           No failure or delay by
any Agent, the Issuing Bank or any Lender in exercising any right or power
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power.  The rights and remedies of the Agents, the
Issuing Bank and the Lenders hereunder are cumulative and are not exclusive of
any rights or remedies that they would otherwise have.  No waiver of any provision of this Agreement
or consent to any departure by the Company therefrom shall in any event be
effective unless the same shall be permitted by this Section, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given.

(b)           Neither this Agreement
nor any provision hereof may be waived, amended or modified except pursuant to
an agreement or agreements in writing entered into by the Company and the
Required Lenders or by the Company and the Administrative Agent with the
consent of the Required Lenders; provided that
no such agreement shall (i) increase the Commitment of any Lender without
the written consent of such Lender, (ii) reduce the principal amount of
any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce
any fees payable hereunder, without the written consent of each Lender directly
affected thereby and the Issuing Bank, (iii) postpone the scheduled date
of payment of the principal amount of any Loan or LC Disbursement, or any
interest thereon, or any fees or any other amount payable hereunder, or reduce
the amount of, waive or excuse any such payment, or postpone the scheduled date
of expiration of any Commitment, without the written consent of each Lender
directly affected thereby, (iv) change Section 2.15(b) or (c) in a
manner that would alter the pro rata sharing of payments required thereby
without the written consent of each Lender, or (v) change any of the
provisions of this Section or the definition of “Required Lenders” or any other
provision hereof specifying the number or percentage of Lenders required to
waive, amend or modify any rights hereunder or make any determination or grant
any consent hereunder without the written consent of each Lender; provided further that (A) no such agreement shall
amend, modify or otherwise affect the rights or duties of any Agent hereunder
without the prior written consent of such Agent and (B) no amendment,
modification or waiver of this Agreement or any provision hereof that would
alter the rights or duties of the Issuing Bank hereunder shall be effective
without the written consent of the Issuing Bank.

 48
 

 

SECTION 9.03. 
Expenses; Indemnity; Damage Waiver.

(a)           The Company agrees to
pay (i) all reasonable out-of-pocket expenses incurred by each Agent and
its Affiliates, including the reasonable fees, charges and disbursements of
counsel for each Agent, in connection with the preparation and administration
of this Agreement or any amendments, modifications or waivers of the provisions
hereof (whether or not the transactions contemplated hereby or thereby shall be
consummated) and (ii) all reasonable out-of-pocket expenses incurred by
each Agent, the Issuing Bank or any Lender, including the reasonable fees,
charges and disbursements of one firm of counsel for each Agent, the Issuing
Bank and the Lenders, in connection with the enforcement or protection of its
rights in connection with this Agreement, including its rights under this
Section, or in connection with the Loans made hereunder and the Letter of
Credit, including in connection with any workout, restructuring or negotiations
in respect thereof; provided, however that the Company agrees to pay the reasonable fees,
charges and disbursements of separate counsel of each Agent, the Issuing Bank
or any Lender if the counsel chosen to represent such party would present such
counsel with a conflict of interest.

(b)           The Company agrees to
indemnify each Agent, the Issuing Bank and each Lender, and each Related Party
of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and
hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including the reasonable fees, charges and
disbursements of any counsel for any Indemnitee, incurred by or asserted
against any Indemnitee arising out of, in connection with, or as a result of
(i) the execution or delivery of this Agreement or any agreement or
instrument contemplated hereby, the performance by the parties hereto of their
respective obligations hereunder or the consummation of the Transactions or any
other transactions contemplated hereby, (ii) the representation or warranty set
forth in Section 3.09 of this Agreement being incorrect in any material respect
when made or deemed made under this Agreement, (iii) any Loan or the
Letter of Credit or the use of the proceeds thereof (including any refusal by
the Issuing Bank to honor a demand for payment under the Letter of Credit if
the documents presented in connection with such demand do not strictly comply
with the terms of the Letter of Credit), (iv) any actual or alleged presence
or release of Hazardous Materials on or from any property owned or operated by
the Company or any of its Subsidiaries, or any Environmental Liability related
in any way to the Company or any of its Subsidiaries, or (v) any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory and
regardless of whether any Indemnitee is a party thereto; provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee or its Affiliates or from a breach of this Agreement by such
Indemnitee.

(c)           To the extent that the
Company fails to pay any amount required to be paid by it to each Agent or the
Issuing Bank under subsection (a) or (b) of this Section, each Lender
severally agrees to pay to the applicable Agent or the Issuing Bank, as the
case may be, such Lender’s Applicable Percentage (determined as of the time
that the applicable unreimbursed expense or indemnity payment is sought) of
such unpaid amount; provided that the
unreimbursed expense or indemnified loss, claim, damage, liability or related
expense, as the case may be, was

 49
 

 

incurred by or asserted against
the Administrative Agent or the Issuing Bank in its capacity as such.

(d)           The Company
acknowledges and agrees that Citibank, CUSA and their respective affiliates
(each, an “indemnified party”)
may enter into certain transactions in order to mitigate credit risk arising
out of the financing contemplated by this Agreement.  The Company agrees to indemnify each indemnified
party against, in each case subject to and in accordance with the Fee Letter,
losses, costs or expenses that such indemnified party may sustain or incur as a
consequence of (i) any reduction or termination of the Commitments prior to the
Maturity Date, (ii) the assignment of any Indemnified Party’s Commitment or
Total Exposure as a result of a request by the Company pursuant to
Section 2.16 or (iii) the occurrence of any successor event (as defined
below), including without limitation any such losses, costs or expenses
sustained or incurred as a consequence of any event described in clause (i),
(ii) or (iii) above in connection with (A) the termination or adjustment of, or
(B) designation of a “Successor”
(as defined in the 2003 ISDA Credit Derivatives Definitions) to the Company or
Hovnanian under, or (C) any other modification to, any such transaction entered
into by an indemnified party in order to mitigate credit risk arising out of
the financing contemplated by this Agreement. 
For purposes of this Section
9.03(d), “successor event”
shall mean any event, such as a merger, consolidation, amalgamation,
transfer of assets or liabilities, demerger, spin-off or other similar event,
whereby another entity shall succeed to the obligations of the Company or
Hovnanian, whether by operation of law or pursuant to any agreement.

(e)           To the extent permitted
by applicable law, no party hereto shall assert, and each party hereto hereby
waives, any claim against any other party, on any theory of liability, for special,
consequential or punitive damages (as opposed to direct or actual damages)
arising out of, in connection with, or as a result of, any Loan Document or any
agreement or instrument contemplated hereby, the Transactions, any Loan, the
Letter of Credit or the use of the proceeds thereof.

(f)            All amounts due under
this Section shall be payable promptly after written demand therefore
accompanied by the appropriate invoice or other detail supporting such amount.

SECTION 9.04. 
Successors and Assigns.

(a)           The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby, except that
(i) the Company may not assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each Lender (and any
attempted assignment or transfer by the Company without such consent shall be
null and void) and (ii) no Lender may assign or otherwise transfer rights
or obligations hereunder except in accordance with this Section.  Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby and, to the
extent expressly contemplated hereby, Participants and the Related Parties of
the Agents, the Issuing Bank and the Lenders) any legal or equitable right,
remedy or claim under or by reason of this Agreement.

 50
 

 

(b)           Any Lender may assign
to one or more assignees all or a portion of its rights and obligations under
this Agreement (including all or a portion of its Commitment and the Loans and
participations in LC Disbursements at the time owing to it); provided that (i) each of the Company (except that
(A) in the case of an assignment to a Lender or an Affiliate of a Lender
or (B) upon the occurrence and during the continuance of an Event of
Default or an “Event of Default” under, and as defined in, the Reimbursement
Agreement (without regard to the proviso at the end of Section 14 of the Reimbursement
Agreement), the consent of the Company shall not be required), the
Administrative Agent and in the case of any assignment of a Commitment, the
Issuing Bank must give its prior written consent to such assignment (which
consent shall not be unreasonably withheld), (ii) except in the case of an
assignment to a Lender or an Affiliate of a Lender or an assignment of the
entire remaining amount of the assigning Lender’s Commitment, the amount of the
Commitment of the assigning Lender subject to each such assignment (determined
as of the date the Assignment and Acceptance with respect to such assignment is
delivered to the Administrative Agent) shall not be less than $5,000,000 unless
each of the Company and the Administrative Agent otherwise consent or unless an
Event of Default shall have occurred and be continuing, (iii) each partial
assignment shall be made as an assignment of a proportionate part of all the
assigning Lender’s rights and obligations under this Agreement, (iv) the
parties to each assignment shall execute and deliver to the Administrative
Agent an Assignment and Acceptance, together (except in the case of an
assignment by a Lender to one of its Affiliates or an assignment as a result of
any of the events contemplated by Section 2.17) with a processing and
recordation fee of $3,500, and (v) the assignee, if it shall not be a
Lender, shall deliver to the Administrative Agent and the Paying Agent an
Administrative Questionnaire.  Upon
acceptance and recording pursuant to subsection (d) of this Section, from
and after the effective date specified in each Assignment and Acceptance, the
assignee thereunder shall be a party hereto and, to the extent of the interest
assigned by such Assignment and Acceptance, have the rights and obligations of a
Lender under this Agreement, and the assigning Lender thereunder shall, to the
extent of the interest assigned by such Assignment and Acceptance, be released
from its obligations under this Agreement (and, in the case of an Assignment
and Acceptance covering all of the assigning Lender’s rights and obligations
under this Agreement, such Lender shall cease to be a party hereto but shall
continue to be entitled to the benefits of Sections 2.13, 2.14
and 9.03).  Any assignment or
transfer by a Lender of rights or obligations under this Agreement that does
not comply with this subsection shall be treated for purposes of this Agreement
as a sale by such Lender of a participation in such rights and obligations in
accordance with subsection (e) of this Section.

(c)           The Administrative
Agent, acting for this purpose as an agent of the Company, shall maintain at
one of its offices in The City of New York a copy of each Assignment and
Acceptance delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Commitment of, and principal amount of the
Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof
from time to time (the “Register”).  The entries in the Register shall be
conclusive absent manifest error, and the Company, each Agent, the Lenders and
the Issuing Bank may treat each Person whose name is recorded in the Register
pursuant to the terms hereof as a Lender hereunder for all purposes of this
Agreement, notwithstanding notice to the contrary.  The Register shall be available for
inspection by the Company, the Issuing Bank, the Paying Agent and any Lender,
at any reasonable time and from time to time upon reasonable prior notice.

 51
 

 

(d)           Upon its receipt of a
duly completed Assignment
and Acceptance executed by an assigning Lender and an assignee, the assignee’s
completed Administrative Questionnaire (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in
subsection (b) of this Section and any written consent to such assignment
required by subsection (b) of this Section, the Administrative Agent shall
accept such Assignment and Acceptance and record the information contained
therein in the Register.  No assignment
shall be effective for purposes of this Agreement unless it has been recorded
in the Register as provided in this subsection.

(e)           Any Lender may, without
the consent of any of the Company, the Administrative Agent or the Issuing
Bank, sell participations to one or more banks or other entities (each a “Participant”) in all or a
portion of such Lender’s rights and obligations under this Agreement (including
all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender’s obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations
and (iii) the Company, the Administrative Agent, the Issuing Bank and the
other Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement.  Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided
that such agreement or instrument may provide that such Lender will not,
without the consent of the Participant, agree to any amendment, modification or
waiver described in the first proviso to Section 9.02(b) that affects such
Participant.  Subject to
subsection (f) of this Section, the Company agrees that each Participant
shall be entitled to the benefits of Sections 2.13 and 2.14 to the same
extent as if it were a Lender and had acquired its interest by assignment
pursuant to subsection (b) of this Section.

(f)            A Participant shall
not be entitled to receive any greater payment under Section 2.13 than the
applicable Lender would have been entitled to receive with respect to the
participations sold to such Participant, unless the sale of the participations
to such Participant is made with the Company’s prior written consent.

(g)           Any Lender may at any
time pledge or assign a security interest in all or any portion of its rights
under this Agreement to secure obligations of such Lender, including any such
pledge or assignment to a Federal Reserve Bank, and this Section shall not
apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security
interest shall release a Lender from any of its obligations hereunder or
substitute any such assignee for such Lender as a party hereto.

SECTION 9.05. 
Survival.

All covenants,
agreements, representations and warranties made by the Company and Hovnanian
herein and in the certificates or other instruments delivered in connection
with or pursuant to this Agreement shall be considered to have been relied upon
by the other parties hereto and shall survive the execution and delivery of
this Agreement and the making of any Loans, regardless of any investigation
made by any such other party or on its behalf and notwithstanding that any
Agent or any Lender may have had notice or knowledge of any Default

 52
 

 

or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any fee or any other amount payable under this
Agreement is outstanding and unpaid and so long as the Commitments have not
expired or terminated.  The provisions of
Sections 2.13, 2.14 and 9.03 shall survive and remain in full force
and effect regardless of the consummation of the transactions contemplated
hereby, the repayment of the Loans, the expiration or termination of the
Commitments or the termination of this Agreement or any provision hereof.

SECTION 9.06. 
USA Patriot Act.

Each Lender hereby
notifies each Loan Party that pursuant to the requirements of the USA Patriot
Act, it is required to obtain, verify and record information that identifies
the Loan Parties, which information includes the name and address of each Loan
Party and other information that will allow such Lender to identify each Loan
Party in accordance with its requirements.

SECTION 9.07. 
Counterparts; Integration; Effectiveness.

This Agreement may be
executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which
when taken together shall constitute a single contract.  This Agreement, the Fee Letter and any other
separate letter agreements with respect to fees payable to the Administrative
Agent constitute the entire contract among the parties relating to the subject
matter hereof and supersede any and all previous agreements and understandings,
oral or written, relating to the subject matter hereof.  Except as provided in Section 4.01, this
Agreement shall become effective when it shall have been executed by the
Administrative Agent and when the Administrative Agent shall have received
counterparts hereof that, when taken together, bear the signatures of each of
the other parties hereto, and thereafter shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.  Delivery of an executed counterpart of a
signature page of this Agreement by telecopy shall be effective as delivery of
a manually executed counterpart of this Agreement.

SECTION 9.08. 
Severability.

Any provision of this
Agreement held to be invalid, illegal or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
invalidity, illegality or unenforceability without affecting the validity,
legality and enforceability of the remaining provisions hereof; and the
invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction.

SECTION 9.09. 
Right of Setoff.

If an Event of Default
shall have occurred and be continuing, each Lender is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by such
Lender to or for the credit or the account of any Loan Party against any of and
all the past-due obligations of such Loan Party now or hereafter existing under
this Agreement held by such Lender, irrespective of whether or not such

 53
 

 

Lender shall have
made any demand under this Agreement and although such obligations may be
unmatured.  The rights of each Lender
under this Section are in addition to other rights and remedies (including
other rights of setoff) which such Lender may have.  Any Lender exercising any of its rights
pursuant to this Section shall provide notice of the same to the Company
promptly after exercising the same; provided, however, the failure to give such
notice shall not effect the validity of such setoff.

SECTION 9.10. 
Governing Law; Jurisdiction; Consent to Service of Process; Process
Agent; Waiver of Immunity.

(a)           This Agreement shall be
construed in accordance with and governed by the law of the State of New York.

(b)           Each Loan Party hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of the Supreme Court of the State of New York
sitting in New York County and of the United States District Court of the
Southern District of New York, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement, or
for recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York
State or, to the extent permitted by law, in such Federal court.  Each of the parties hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.  Nothing in this
Agreement shall affect any right that the Administrative Agent or any Lender or
the Issuing Bank may otherwise have to bring any action or proceeding relating
to this Agreement against any Loan Party or its properties in the courts of any
jurisdiction.

(c)           Each Loan Party hereby
irrevocably and unconditionally waives, to the fullest extent it may legally
and effectively do so, any objection which it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to
this Agreement in any court referred to in subsection (b) of this
Section.  Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.

(d)           Each Loan Party and
each other party to this Agreement irrevocably consent to service of process in
the manner provided for notices to it in Section 9.01.  Nothing in this Agreement will affect the
right of any party to this Agreement to serve process in any other manner
permitted by law.

SECTION 9.11. 
WAIVER OF JURY TRIAL.

EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY
HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY
(WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR

 54
 

 

ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWL­EDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.

SECTION 9.12. 
Headings.

Article and Section
headings and the Table of Contents used herein are for convenience of reference
only, are not part of this Agreement and shall not affect the construction of,
or be taken into consideration in interpreting, this Agreement.

SECTION 9.13. 
Confidentiality.

Each of the
Administrative Agent, the Paying Agent and the Lenders and the Issuing Bank
agrees to maintain the confidentiality of the Information (as defined below),
except that Information may be disclosed (a) to its and its Affiliates’
directors, officers, employees and agents, including accountants, legal counsel
and other advisers (it being understood that the Persons to whom such
disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential) on a “need to know” basis solely in connection with the
Transactions, (b) to the extent requested by any regulatory authority, provided, however,
that, to the extent legally permitted, the Company is promptly notified in
order that it may seek a protective order or take other appropriate action,
(c) to the extent required by applicable laws or regulations or by any
subpoena or similar legal process, (d) to any other party to this
Agreement, (e) to the extent reasonably required or reasonably deemed
advisable in connection with the exercise of any remedies hereunder or any
suit, action or proceeding relating to this Agreement or the enforcement of
rights hereunder, (f) subject to an agreement containing provisions
substantially the same as those of this Section, to (i) any assignee of or
Participant in, or any prospective assignee of or Participant in, any of its
rights or obligations under this Agreement or (ii) any actual or prospective
counterparty (or its advisors) to any securitization, swap or derivatives
transaction relating to the Company, Hovnanian, any Subsidiary of Hovnanian and
the obligations hereunder, (g) with the consent of the Company or
(h) to the extent such Information (i) becomes publicly available
other than as a result of a breach of this Section or (ii) becomes available
to the Administrative Agent, the Paying Agent, any Lender or the Issuing Bank
on a nonconfidential basis from a source other than the Company.  For the purposes of this Section, “Information” means all information
received from the Company in connection with this Agreement relating to the
Company or its business, other than any such information that is available to
the Administrative Agent, any Lender or the Issuing Bank on a nonconfidential
basis prior to disclosure by the Company. 
Any Person required to maintain the confidentiality of Information as
provided in this Section shall be considered to have complied with its
obligation to do so if such Person has exercised the same degree of care to
maintain the confidentiality of such Information as such Person would accord to
its own confidential information.

 55

 

SECTION 9.14.  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 Administrative Agent, each
other Lender or assignee or participant of a Lender) agrees that it will
deliver to each of the Company and the Administrative Agent two duly completed
appropriate valid Withholding Certificates (as defined under §1.1441-1(c)(16)
of the Income Tax Regulations (the “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 Code.  Such delivery may
be made by electronic transmission as described in §1.1441-1(e)(4)(iv) of
the Regulations if the Administrative 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 Company and the Administrative Agent a valid Withholding
Certificate pursuant to the preceding sentence shall deliver such valid Withholding
Certificate as follows:  (A) each Lender
that is a party hereto on the date hereof shall deliver such valid Withholding
Certificate at least five Business Days prior to the first date on which any
interest or fees are payable by the Company hereunder for the account of such
Lender; (B) each assignee or participant shall deliver such valid Withholding
Certificate at least five Business Days before the effective date of such
assignment or participation (unless the Administrative Agent in its sole discretion
shall permit such assignee or participant to deliver such Withholding
Certificate less than five Business Days before such date, in which case it
shall be due on the date specified by the Administrative Agent).  Each Lender, assignee or participant that so
delivers a valid Withholding Certificate further undertakes to deliver to each
of the Company and the Administrative Agent two 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 Company or the Administrative Agent.  Notwithstanding the submission of a
Withholding Certificate claiming a reduced rate of, or exemption from, United
States withholding tax, the Administrative 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 Administrative
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 Code.

[Remainder
of page intentionally left blank]

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IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed by their respective authorized officers as
of the day and year first above written.

	
  

  	
   

  	
   

  
	
   

  	
  K. HOVNANIAN ENTERPRISES,
  INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  HOVNANIAN
  ENTERPRISES, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By 

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
						

 

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 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.

 58

 

K. HOVNANIAN AT CASTILE, INC.

K. HOVNANIAN AT CHAPARRAL, INC.

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 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.

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 SMITHVILLE, INC.

K. HOVNANIAN AT SOUTH BRUNSWICK III, INC.

 

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 TROVATA, 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.

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 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 DEVELOPMENTS OF VIRGINIA, INC.

K. HOVNANIAN DEVELOPMENTS OF ARIZONA, INC.

K. HOVNANIAN DEVELOPMENTS OF CALIFORNIA, INC.

K. HOVNANIAN DEVELOPMENTS OF CONNECTICUT, INC.

K. HOVNANIAN DEVELOPMENTS OF D.C., INC.

K. HOVNANIAN DEVELOPMENTS OF DELAWARE, INC.

K. HOVNANIAN DEVELOPMENTS OF GEORGIA, INC.

 

K. HOVNANIAN DEVELOPMENTS OF ILLINOIS, INC.

K. HOVNANIAN DEVELOPMENTS OF INDIANA, INC.

K. HOVNANIAN DEVELOPMENTS OF MARYLAND, 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 NORTH CAROLINA, 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 EQUITIES, INC.

K. HOVNANIAN FORECAST HOMES, INC.

K. HOVNANIAN HOMES OF NORTH CAROLINA, INC.

 

K. HOVNANIAN HOMES OF VIRGINIA, INC.

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.

 

 

	
  

  	
  WH PROPERTIES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  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:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
								

 

HOVNANIAN LAND INVESTMENT GROUP OF MARYLAND, 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.

K. HOVNANIAN HOMES AT BAYVIEW, 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 GREENWAY FARM PARK TOWNS, L.L.C.

 

K. HOVNANIAN HOMES AT GREENWAY FARM, L.L.C.

K. HOVNANIAN HOMES AT RENAISSANCE PLAZA, L.L.C.

K. HOVNANIAN HOMES AT RUSSETT, L.L.C.

K. HOVNANIAN HOMES OF MARYLAND, L.L.C.

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 AT 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:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
					

 

ALFORD, L.L.C.

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.

K. HOVNANIAN COMPANIES OF METRO WASHINGTON, L.L.C.

K. HOVNANIAN FOUR SEASONS @ HISTORIC VIRGINIA, L.L.C.

K. HOVNANIAN FRANCUSCUS HOMES, L.L.C.

K. HOVNANIAN HOMES AT BANYON COVE, L.L.C.

K. HOVNANIAN HOMES AT CAMERON STATION, L.L.C.

K. HOVNANIAN HOMES AT LAUREL HIGHLANDS, L.L.C.

K. HOVNANIAN HOMES AT PAYNE STREET, L.L.C.

K. HOVNANIAN HOMES AT THE EASTON, 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 Virginia, Inc., as the
  sole member of each of the foregoing limited liability companies.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
					

 

 

HOVNANIAN LAND INVESTMENT GROUP OF NEW JERSEY, L.L.C.

K. HOVNANIAN AT ABERDEEN URBAN RENEWAL, L.L.C.

K. HOVNANIAN AT BARNEGAT I, L.L.C.

K. HOVNANIAN AT BARNEGAT II, L.L.C.

K. HOVNANIAN AT BARNEGAT III, 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.

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 CHESTERFIELD II, 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 DOVER, 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 EGG HARBOR TOWNSHIP II, L.L.C.

K. HOVNANIAN AT FIFTH AVENUE, 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.

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 HAZLET, 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 MAPLE AVENUE I, L.L.C.

K. HOVNANIAN AT MAPLE AVENUE, L.L.C.

K. HOVNANIAN AT MARLBORO TOWNSHIP IX, L.L.C.

K. HOVNANIAN AT MARLBORO TOWNSHIP V, L.L.C.

K. HOVNANIAN AT MARLBORO TOWNSHIP VIII, L.L.C.

K. HOVNANIAN AT MARLBORO VI, L.L.C.

K. HOVNANIAN AT MARLBORO VII, L.L.C.

K. HOVNANIAN AT 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 MILLVILLE III, L.L.C.

K. HOVNANIAN AT MONROE III, L.L.C.

K. HOVNANIAN AT MONROE IV, L.L.C.

K. HOVNANIAN AT MONROE NJ, L.L.C.

K. HOVNANIAN AT MONTVALE, L.L.C.

K. HOVNANIAN AT MT. OLIVE TOWNSHIP, L.L.C.

K. HOVNANIAN AT NEW BRUNSWICK URBAN RENEWAL, 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.

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 PRINCETON LANDING, L.L.C.

 

K. HOVNANIAN AT PRINCETON NJ, 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 RIDGEMONT, 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 SPARTA, L.L.C.

K. HOVNANIAN AT SPRINCO, L.L.C.

K. HOVNANIAN AT SPRINGFIELD, L.L.C.

K. HOVNANIAN AT TEANECK, L.L.C.

K. HOVNANIAN AT THE MONARCH, L.L.C.

K. HOVNANIAN AT TRENTON, L.L.C.

K. HOVNANIAN AT TRENTON URBAN RENEWAL, 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 VINELAND, 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.

K. HOVNANIAN AT WAYNE IX, L.L.C.

K. HOVNANIAN AT WAYNE VIII, L.L.C.

K. HOVNANIAN AT WEST FRONT STREET, L.L.C.

K. HOVNANIAN AT WEST MILFORD, L.L.C.

K. HOVNANIAN AT WEST WINDSOR, L.L.C.

K. HOVNANIAN AT WILDWOOD BAYSIDE, 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 CLASSICS, L.L.C.

K. HOVNANIAN CLASSICS CIP, 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.

NORTHEAST BUILDING PRODUCTS & CONTRACTOR SERVICES,
L.L.C.

TERRAPIN REALTY, L.L.C.

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:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  AND

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  K. Hovnanian Developments of New Jersey II, Inc., as
  member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
					

 

HOVNANIAN LAND INVESTMENT GROUP OF CALIFORNIA, L.L.C.

K. HOVNANIAN AT 3 CHAPMAN, L.L.C.

K. HOVNANIAN AT EVERGREEN, 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.

K. HOVNANIAN AT AVENUE ONE, L.L.C.

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 CIELO, L.L.C.

K. HOVNANIAN AT ROSEMARY LANTANA, 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 EVERGREEN, 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 COSTA GREENS, L.L.C.

K. HOVNANIAN AT LA HABRA KNOLLS, L.L.C.

K. HOVNANIAN AT LAKE HILLS, L.L.C.

K. HOVNANIAN AT LITTLE TOKYO, L.L.C.

K. HOVNANIAN AT MENIFEE, L.L.C.

 

K. HOVNANIAN AT MOCKINGBIRD CANYON, 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 PACIFICA SAN JUAN, L.L.C.

K. HOVNANIAN AT PARK LANE, L.L.C.

K. HOVNANIAN AT PIAZZA D’ORO, L.L.C.

K. HOVNANIAN AT PRADO, L.L.C.

K. HOVNANIAN AT RANCHO SANTA MARGARITA, L.L.C.

K. HOVNANIAN AT RIVERBEND, L.L.C.

K. HOVNANIAN AT ROSEMARY LATANA, L.L.C.

K. HOVNANIAN AT ROWLAND HEIGHTS, L.L.C.

K. HOVNANIAN AT SAGE, 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 TOWNGATE, L.L.C.

K. HOVNANIAN AT TRAIL RIDGE, L.L.C.

K. HOVNANIAN AT WINCHESTER, L.L.C.

 

K. HOVNANIAN INTERNATIONAL, 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.

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:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

 

 

	
  

  	
  K. HOVNANIAN HOLDINGS NJ, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  K. Hovnanian Developments of New Jersey, Inc., as
  member of the foregoing limited liability company.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  AND

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  K. Hovnanian Developments of New Jersey II, Inc., as
  member of the foregoing limited liability company.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

 

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.

RIDGEMORE UTILITY ASSOCIATES OF PENNSYLVANIA, L.L.C.

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:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

HOVNANIAN LAND INVESTMENT GROUP OF FLORIDA, L.L.C.

K. HOVNANIAN CAMBRIDGE HOMES, L.L.C.

K. HOVNANIAN FCS, L.L.C.

K. HOVNANIAN FIRST HOMES, L.L.C.

K. HOVNANIAN STANDING ENTITY, L.L.C.

K. HOVNANIAN T&C HOMES AT FLORIDA, L.L.C.

K. HOVNANIAN WINDWARD HOMES, L.L.C.

 

 

	
  

  	
  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:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

	
  

  	
  K. HOVNANIAN COMPANIES, LLC

  
	
   

  	
   

  	
   

  
	
  

  	
  By:

  	
  K. Hovnanian Enterprises, Inc., as member of the
  foregoing limited liability company.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

	
  

  	
   

  	
  AND

  
	
   

  	
   

  	
   

  
	
  

  	
  By:

  	
  K. Hovnanian Developments of New Jersey II, Inc., as
  member of the foregoing limited liability company.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
					

 

	
  

  	
  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:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

 

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:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

K. HOVNANIAN GREAT WESTERN BUILDING COMPANY, L.L.C.

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:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

K. HOVNANIAN AT HIGHLAND SHORES, L.L.C.

K. HOVNANIAN AT RIDGESTONE, L.L.C.

K. HOVNANIAN HOMES OF MINNESOTA, L.L.C.

K. HOVNANIAN’S FOUR SEASONS AT RUSH CREEK, L.L.C.

 

K. HOVNANIAN T&C 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:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

K. HOVNANIAN OHIO REALTY, L.L.C.

K. HOVNANIAN SUMMIT HOMES, L.L.C.

	
  

  	
  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:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

K. HOVNANIAN HOMES OF WEST VIRGINIA, L.L.C.

K. HOVNANIAN’S FOUR SEASONS AT HUNTFIELD, 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:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

 

	
  

  	
  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:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

KINGS COURT AT MONTGOMERY, L.L.C.

M&M AT CHESTERFIELD, 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.

  
	
   

  	
   

  
	
   

  	
  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.

  
	
   

  	
   

  
	
   

  	
  MATZEL & MUMFORD OF DELAWARE, L,L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  The Matzel & Mumford Organization, Inc., as the
  sole member of each of the foregoing limited liability companies.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

 

 

	
  

  	
  M&M AT EAST RUTHERFORD, L.L.C.

  
	
   

  	
   

  
	
   

  	
  M&M AT KENSINGTON WOODS, L.L.C.

  
	
   

  	
   

  
	
   

  	
  M&M AT ROBERT MORRIS, L.L.C.

  
	
   

  	
   

  
	
   

  	
  M&M AT TAMARACK HOLLOW, L.L.C.

  
	
   

  	
   

  
	
   

  	
  M&M AT THE CHATEAU, L.LC.

  
	
   

  	
   

  
	
   

  	
  M&M AT WEST ORANGE, L.L.C.

  
	
   

  	
   

  
	
   

  	
  M&M AT WESTPORT, 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, L.P., as the sole member of
  each of the foregoing limited liability companies.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  K. HOVNANIAN HOMES AT FAIRWOOD, L.L.C.

  
	
   

  	
   

  
	
   

  	
  K. HOVNANIAN HOMES AT JONES STATION 1, L.L.C.

  
	
   

  	
   

  
	
   

  	
  K. HOVNANIAN HOMES AT JONES STATION 2, L.L.C.

  
	
   

  	
   

  
	
   

  	
  K. HOVNANIAN HOMES AT MAXWELL PLACE. L.L.C.

  
	
   

  	
   

  
	
   

  	
  K. HOVNANIAN HOMES AT PRIMERA, L.L.C.

  
	
   

  	
   

  
	
   

  	
  PADDOCKS, L.L.C.

  

 

 

 

	
  

  	
  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:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HOVNANIAN LAND INVESTMENT GROUP OF TEXAS, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Goodman Family of Builders, L.P., as the sole member
  of the foregoing limited liability company.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  K. Hovnanian Developments of Florida, as general
  partner of the foregoing limited partnership.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  K. HOVNANIAN AT NEW WINDSOR, L.L.C.

  
	
   

  	
   

  
	
   

  	
  K. HOVNANIAN AT YONKERS I, L.L.C.

  
	
   

  	
   

  
	
   

  	
  K. HOVNANIAN AT YONKERS II, L.L.C.

  
	
   

  	
   

  
	
   

  	
  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:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

 

 

	
  

  	
  K. HOVNANIAN’S FOUR SEASONS AT CHARLOTTESVILLE,
  L.L.C.

  
	
   

  	
   

  
	
   

  	
  K. HOVNANIAN’S FOUR SEASONS AT DULLES DISCOVERY
  CONDOMINIUM, L.L.C.

  
	
   

  	
   

  
	
   

  	
  K. HOVNANIAN’S FOUR SEASONS AT DULLES DISCOVERY,
  L.L.C.

  
	
   

  	
   

  
	
   

  	
  K. HOVNANIAN’S FOUR SEASONS AT NEW KENT, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  K. Hovnanian Developments of Virginia, Inc., as the
  sole member of each of the foregoing limited liability companies.

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  K. HOVNANIAN DELAWARE ACQUISITIONS, L.L.C.

  
	
   

  	
   

  
	
   

  	
  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:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

 

 

	
  

  	
  K. HOVNANIAN AT MENIFEE VALLEY CONDOMINIUMS, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  K. Hovnanian’s Four Seasons At Menifee Valley,
  L.L.C.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HOVNANIAN LAND INVESTMENT GROUP OF NORTH CAROLINA,
  L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  K. Hovnanian Developments of North Carolina, Inc.,
  as the sole member of the foregoing limited liability company.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  K. HOVNANIAN HOMES OF INDIANA, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  K. Hovnanian Developments of Indiana, Inc., as the
  sole member of the foregoing limited liability company.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

 

	
  

  	
  K. HOVNANIAN CONNECTICUT ACQUISITIONS, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  K. Hovnanian Developments of Connecticut, Inc., as
  the sole member of the foregoing limited liability company.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  K. HOVNANIAN VENTURE I, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  K. Hovnanian at Raritan I, Inc., as the sole member
  of the foregoing limited liability company.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  K. HOVNANIAN T&C HOMES AT ILLINOIS, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  K. Hovnanian Developments of Illinois, Inc., as the
  sole member of the foregoing limited liability company.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HOVNANIAN LAND INVESTMENT GROUP OF GEORGIA, L.L.C

  
	
   

  	
   

  
	
   

  	
  HOVNANIAN CRAFTBUILT HOMES OF GEORGIA, L.L.C.

  

 

 

 

	
  

  	
  By:

  	
  K. Hovnanian Developments of Georgia, Inc., as the
  sole member of each of the foregoing limited liability companies.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  HLIG INVESTMENT I, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  MSHOV Holding Company, L.L.C., as sole member of the
  foregoing limited liability company.

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:      K.
  Hovnanian Holdings NJ, L.L.C., as the sole member of the foregoing limited
  liability company.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  K. Hovnanian Developments of New Jersey, Inc., as
  member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AND

  
	
   

  	
   

  
	
   

  	
  By:

  	
  K. Hovnanian Developments of New Jersey II, Inc., as
  member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

 

	
  

  	
  GOODMAN FAMILY OF BUILDERS, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  K. Hovnanian Developments of Florida, Inc. as
  general partner of the foregoing limited partnership.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  K. Hovnanian Developments of Texas, Inc. as general
  partner of the foregoing limited partnership.

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  K. HOVNANIAN OF HOUSTON II, L.P.

  
	
   

  	
   

  
	
   

  	
  K. HOVNANIAN OF HOUSTON, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  K. Hovnanian Developments of California, Inc., as
  general partner of each of the foregoing limited partnerships.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  K. Hovnanian Developments of Texas, Inc. as limited
  partner of the foregoing limited partnership

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

 

	
  

  	
  M&M INVESTMENTS, L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  K. Hovnanian Holdings NJ, L.L.C., as general partner
  of the foregoing limited partnership.

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  CITICORP USA, INC.,

  
	
   

  	
  individually, as Administrative Agent, as Issuing
  Bank and as Lender

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  THE BANK OF NEW YORK,

  
	
   

  	
  not in its individual capacity,

  
	
   

  	
  but solely as Paying Agent

  
	
   

  	
   

  
	
   

  	
   

  	
  By

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

 

EXHIBIT A

to Credit Agreement

FORM OF

ASSIGNMENT AND ACCEPTANCE

This Assignment and Acceptance (the “Assignment and Acceptance”) 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 and Acceptance 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 Administrative Agent as contemplated
below (i) all of the Assignor’s rights and obligations in its capacity as a
Lender under the Credit Agreement and any other documents or instruments
delivered pursuant thereto to the extent related to the amount and percentage
interest identified below of all of such outstanding rights and obligations of
the Assignor under the Credit Agreement (including any letters of credit
included in such facility) and (ii) to the extent permitted to be assigned
under applicable law, all claims, suits, causes of action and any other right
of the Assignor (in its capacity as a Lender) against any Person, whether known
or unknown, arising under or in connection with the Credit Agreement, any other
documents or instruments delivered pursuant thereto or the loan transactions
governed thereby or in any way based on or related to any of the foregoing,
including contract claims, tort claims, malpractice claims, statutory claims
and all other claims at law or in equity related to the rights and obligations
sold and assigned pursuant to clause (i) above (the rights and obligations sold
and assigned pursuant to clauses (i) and (ii) above being referred to herein
collectively as the “Assigned Interest”).  Such sale and assignment is without recourse
to the Assignor and, except as expressly provided in this Assignment and
Acceptance, without representation or warranty by the Assignor.

	
  1.

  	
   

  	
  Assignor:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Assignee:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  [an Affiliate of [Lender]]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Company:

  	
   

  	
  K. HOVNANIAN ENTERPRISES, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Administrative Agent:

  	
   

  	
  CITICORP USA, INC., as the Administrative Agent
  under the Credit Agreement

  

 

 A-1
 

 

 

	
  5.

  	
   

  	
  Credit Agreement:

  	
   

  	
  Credit Agreement, dated as of October 11, 2006,
  among K. HOVNANIAN ENTERPRISES, INC., HOVNANIAN ENTERPRISES, INC., certain
  other guarantors named therein, the Lenders party thereto, CITICORP USA,
  INC., as Administrative Agent, and the other agents and the issuing bank
  parties thereto

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Assigned Interest:

  	
   

  	
   

  

 

	
  Aggregate Amount of

  Commitment/Loans/LC

  Exposure for all Lenders

  	
   

  	
  Amount of

  Commitment/Loans/

  LC Exposure Assigned

  	
   

  	
  Percentage Assigned

  of Commitment/

  Loans/LC Exposure(1)

  	
   

  
	
  $

  	
   

  	
  $

  	
   

  	
  %

  	
   

  

Effective Date:                           
          , 20      
[TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE
OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

(1)           Set forth, to at least 9 decimals, as
a percentage of the Commitment/Loans/LC Exposure of all Lenders thereunder.

 A-2
 

 

The terms set forth in this Assignment and Acceptance
are hereby agreed to:

	
   

  	
  ASSIGNOR

  
	
   

  	
   

  
	
   

  	
  [NAME OF ASSIGNOR]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  ASSIGNEE

  
	
   

  	
   

  	
   

  
	
   

  	
  [NAME OF ASSIGNEE]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Consented to and accepted:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  CITICORP USA, INC.,

  	
   

  	
   

  
	
  as Administrative Agent

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
  CITICORP USA, INC.,

  	
   

  	
   

  
	
  as Issuing Bank

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
							

 

 A-3
 

 

 

	
  [Consented
  to:](2)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  K. HOVNANIAN ENTERPRISES, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					

 

(2)                                  The
Company’s consent will not be required if an Event of Default has occurred and
is continuing or the assignment is to an Affiliate of the Assignor.

 A-4
 

 

ANNEX I

K. HOVNANIAN ENTERPRISES, INC.

CREDIT AGREEMENT

STANDARD TERMS AND
CONDITIONS FOR

ASSIGNMENT AND ACCEPTANCE

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 Acceptance 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 the Credit Agreement or any other
Loan Document, (ii) the financial condition of the Company, any of its
Subsidiaries or Affiliates or any other Person obligated in respect of any Loan
Document or (iii) the performance or observance by the Company, 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 Acceptance and to consummate the
transactions contemplated hereby and to become a Lender under the Credit
Agreement, (ii) it satisfies the requirements, if any, specified in the Credit
Agreement that are required to be satisfied by it in order to acquire the
Assigned Interest and become a Lender, (iii) from and after the Effective Date,
it shall be bound by the provisions of the Credit Agreement and the other Loan
Documents as a Lender thereunder 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 and the other Loan Documents, together with copies of
the most recent financial statements delivered pursuant to Section 5.07
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 Acceptance and to purchase the Assigned Interest on the
basis of which it has made such analysis and decision independently and without
reliance on the Administrative Agent or any other Lender, and (v) if it is a
Lender organized under the laws of a jurisdiction outside the United States,
attached to this Assignment and Acceptance 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 Administrative 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, and (ii) it will
perform in accordance with their terms all of the obligations which by the
terms of the Credit Agreement and the other Loan Documents are required to be
performed by it as a Lender.

2.             Payments.  From and after the Effective Date, the
Administrative 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

 A-5
 

 

Effective Date and to the
Assignee for amounts which have accrued from and after the Effective Date.

3.             General Provisions.  This Assignment and Acceptance shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns.  This
Assignment and Acceptance 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 and Acceptance by telecopy shall be effective as delivery of a
manually executed counterpart of this Assignment and Acceptance.  This Assignment and Acceptance shall be
governed by, and construed in accordance with, the law of the State of New
York.

 A-6

 

EXHIBIT B

to Credit Agreement

FORM OF NOTE

	
  $,       

  	
                          ,       

  

 

FOR VALUE RECEIVED, the undersigned, K. HOVNANIAN
ENTERPRISES, INC., a California corporation (the “Company”),
unconditionally promises to pay to the order of                                                 
(the “Lender”) the principal sum of
                                          
DOLLARS ($                  )
or, if less, the aggregate unpaid principal amount of all Loans made by the
Lender pursuant to the Credit Agreement, dated as of October 11, 2006 (as
amended, supplemented, amended and restated or otherwise modified from time to
time, the “Credit Agreement”), among the
Company, Hovnanian Enterprises, Inc., certain other guarantors parties thereto,
the financial institutions (including the Lender) from time to time parties
thereto, Citicorp USA, Inc., as the Administrative Agent, and each of the other
agents and the issuing bank party thereto, on such dates and in such amounts as
are set forth in the Credit Agreement. 
The amounts payable under the Credit Agreement  may be reduced only in accordance with the
terms of the Credit Agreement. Unless otherwise defined, capitalized terms used
herein have the meanings provided in the Credit Agreement.

The Company also promises to pay interest on the
unpaid principal amount hereof from time to time outstanding from and including
the date hereof until maturity (whether by acceleration or otherwise) and,
after maturity, until paid, at the rates per annum and on the dates specified
in the Credit Agreement.

Payments of both principal and interest are to be made
without setoff or counterclaim in lawful money of the United States of America
in same day or immediately available funds to the account designated by the
Paying Agent.

This Note is one of the Notes referred to in, and
evidences the Loans made by the Lender under, the Credit Agreement, to which
reference is made for a statement of the terms and conditions on which the
Company is permitted and required to make prepayments and repayments of
principal of the indebtedness evidenced by this Note and on which such
indebtedness may be declared to be or shall automatically become immediately
due and payable.

THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.

	
  

  	
  K. HOVNANIAN ENTERPRISES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 B-1
 

 

LOAN AND PRINCIPAL PAYMENTS

	
  Date

  	
   

  	
  Amount

  of Loan

  	
   

  	
  Amount of

  Principal Repaid

  	
   

  	
  Unpaid

  Principal Balance

  	
   

  	
  Notations

  Made By

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 B-2

 

EXHIBIT C

to Credit Agreement

[Letterhead of Company]

FORM OF 

NOTICE OF LC REQUEST

Certificate Date:             
  ,         

Citicorp USA,
Inc.,

as the Issuing Bank

Facsimile:  

Attention:  

Citicorp USA,
Inc.,

as the Administrative Agent

Facsimile: 

Attention: 

Re:          K. HOVNANIAN ENTERPRISES,
INC. — NOTICE OF LC REQUEST

Ladies and Gentlemen:

This Notice of LC Request is delivered to Citicorp
USA, Inc., as the issuing bank (the “Issuing Bank”),
pursuant to Section 2.04(b) of the Credit Agreement, dated as of October 11,
2006 (as amended, supplemented, amended and restated or otherwise modified from
time to time, the “Credit Agreement”), among K.
HOVNANIAN ENTERPRISES, INC., a California corporation (the “Company”), Hovnanian Enterprises,
Inc., certain other guarantors parties thereto, the financial institutions from
time to time parties thereto as lenders (the “Lenders”),
the Issuing Bank, and Citicorp USA, Inc., as the Administrative Agent.  Unless otherwise defined herein, capitalized
terms used herein have the meanings provided in the Credit Agreement.

1.             [We
request that the Letter of Credit (the “Letter of Credit”)
be issued as provided herein.  The amount
of the Letter of Credit is $125,000,000. 
After giving effect to the issuance of the Letter of Credit, the Total
Exposures of all Lenders do not exceed the aggregate Commitments.] [We request
that the [identify Letter of Credit] (the “Letter of Credit”)
be [amended] [renewed] [extended] as provided herein.  After giving effect to the [amendment] [renewal]
[extension] of the Letter of Credit, the Total Exposures of all Lenders do not
exceed the aggregate Commitments.]

2.             The
proposed date of the requested [issuance] [amendment] [renewal] [extension] of
the Letter of Credit is                     
    ,         
(which is a Business Day).

3.             The
expiration date of the Letter of Credit is                        
    ,             .(1)

(1)           Insert date which is at or prior
to                                            
..

 C-1
 

 

4.             [Company
to add any other description necessary to prepare, amend, renew or extend the
Letter of Credit (including amount of Letter of Credit, beneficiary thereof,
drawing conditions, etc.).]

The undersigned Financial Officer of the Company
certifies that each of the conditions precedent to the proposed issuance set
forth in Section 4.02 of the Credit Agreement has been satisfied.

The Company has caused this Notice of LC Request to be
executed and delivered by a Financial Officer of the Company this       
day of                     ,
          .

	
  

  	
  K. HOVNANIAN ENTERPRISES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 C-2

EXHIBIT D

to Credit Agreement

FORM OF STANDBY LETTER OF CREDIT

Date:               ,
200    

Beneficiary:

Citibank, N.A.

c/o Citicorp North America, Inc.

3800 Citibank Center

Building B 3rd Floor

Tampa, FL 33610

Letter of Credit No. [·]

Gentlemen:

By order of K. HOVNANIAN ENTERPRISES, INC. (the “Company”), we hereby open our
irrevocable Standby Letter of Credit No. [·]
(this “Credit”), in your favor for
an amount of USD [·]
and No Cents ([·] U.S. Dollars and
00/100), which may adjust from time to time as provided in the next paragraph,
effective immediately and expiring at our office located at 399 Park Avenue,
New York, NY 10022-4614 (the “Office”) on
September 20, 2011.

This Credit has been issued in your favor as security
in support of the letters of credit already issued by you or to be issued by
you on or after the date hereof in the amounts notified to us by you or to be
issued by you from time to time hereafter for the account of the Company
pursuant to the Agreement for Letter of Credit, dated as of October 11, 2006,
between the Company and you (the “Reimbursement Agreement”)
and any other written agreement between the Company and you regarding the
issuance of letters of credit for the account of the Company that specifies
that such letters of credit are to be considered Citibank LCs, as hereinafter
defined (such letters of credit being hereinafter referred to collectively as
the “Citibank LCs”).  The amount outstanding under this Credit may
adjust from time to time, without amendment, to account for (i) drawings
hereunder that we have honored (in the amount of such drawing), (ii)
cancellation, increase, reduction or expiration of Citibank LCs, upon receipt
by us of your notice describing such cancellation, increase, reduction or
expiration (in the amount of the available amount of the Citibank LCs that have
been cancelled or expired or in the amount of such reduction, as applicable),
and (iii) issuance by you from time to time after the date hereof of any
Citibank LC (in the amount of the available amount of such Citibank LC),
subject in the case of any increase described in clause (ii) or any issuance
described in clause (iii), to confirmation by us prior to such increase or
issuance of the available amount hereunder. 
In no event shall the amount available hereunder exceed $125,000,000.

Funds hereunder are available to you against your
sending to us by courier or facsimile either of the following written
certifications:

 

“We hereby demand
payment in the amount of USD                       
because, in connection with our Irrevocable Standby Letter of Credit No.                                   
(the “Credit”), the beneficiary has
drawn a draft under the Credit (the “Draft”), we
did not receive payment when due for the amount of such Draft.”

“We hereby demand payment in the amount of USD (which
amount does not exceed the aggregate outstanding undrawn amounts under the
letters of credit issued under the Agreement for Letter of Credit, dated as of
October 11, 2006, as amended, between K. Hovnanian Enterprises, Inc. and
Citibank, N.A.” (the “Reimbursement Agreement”)
because there has been an Event of Default (without regard to the proviso at
the end of Section 15 of the Reimbursement Agreement) under the Reimbursement
Agreement.

Any number of multiple draws are permitted from time
to time.

Presentation of drawing document(s) may also be made
by fax transmission to (212) 994-0847, or such other fax number identified by
Citicorp USA, Inc. in a written notice to you. 
To the extent a presentation is made by fax transmission, you must
provide telephone notification thereof to Citicorp USA, Inc. ([(302) 894-6035, Patricia D. Stewart]),
prior to or simultaneously with the sending of such fax transmission, provided, however, that
Citicorp USA, Inc.’s receipt of such telephone notice shall not be a condition
to payment hereunder.

We hereby agree to honor your drawing documents as
specified above, if presented in compliance with the terms and conditions of
this Standby Letter of Credit.

Should you have occasion to communicate with us
regarding this Standby Letter of Credit, please direct your correspondence to
our Office, making specific mention of the Letter of Credit number indicated
above.

[Remainder of page left intentionally blank.]

 D-2
 

 

Except as otherwise expressly stated herein, this
Standby Letter of Credit is subject to the International Standby Practices (“ISP98”), International Chamber of
Commerce, Publication No. 590, and as to matters not addressed by the ISP98,
shall be governed by and construed in accordance with the laws of the State of
New York and applicable U.S. Federal Law.

CITICORP USA, INC.

AUTHORIZED SIGNATURE

 D-3

 

Schedule 2.01

Commitments

	
  Lender

  	
   

  	
  Commitment

  	
   

  
	
  Citicorp USA, Inc.

  	
   

  	
  $

  	
  125,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  $

  	
  125,000,000

  	
   

  

 

 

 

EXHIBIT E

to Credit Agreement

FORM OF GUARANTEE JOINDER
AGREEMENT

This GUARANTEE JOINDER AGREEMENT is made [INSERT DATE]
by                                                             ,
a                                                       
(the “New Guarantor”).

Reference is made to (i) the Credit Agreement, dated
as of October 11, 2006, as modified, supplemented or amended from time to time,
including as of the date hereof (the “Credit Agreement”),
among K. HOVNANIAN ENTERPRISES, INC. (the “Company”),
HOVNANIAN ENTERPRISES, INC. and the other guarantors now or hereafter parties
thereto, the Lenders now or hereafter party thereto, CITICORP USA, INC., as
letter of credit issuing bank and as administrative agent for itself and the
other Lenders under the Credit Agreement (the “Administrative
Agent”), and The Bank of New York, as paying agent thereunder,
and (ii) the other Loan Documents referred to in the Credit Agreement, as the
same may be modified, supplemented or amended from time to time.  Capitalized terms defined in the Credit
Agreement are used herein as defined therein.

In consideration of the substantial direct and
indirect benefits received by the New Guarantor as a result of the extensions
of credit made by the Lenders and the Issuing Bank under the Credit Agreement,
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 Credit 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 the Company under the
Loan Documents, the New Guarantor has assumed the obligations of a Guarantor
under, and the New Guarantor shall perform, comply with and be subject to and
bound by, jointly and severally with the other Guarantors, each of the terms,
provisions and waivers of the Credit Agreement and each of the other Loan
Documents that 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
Article III of the Credit Agreement that applies to a Guarantor is true and
correct in all material respects as to the New Guarantor on and as of the date
hereof as if made on and as of the date hereof by the New Guarantor, and (ii)
the New Guarantor has heretofore received a true and correct copy of the Credit
Agreement and each of the other Loan Documents (including any modifications
thereof or supplements or waivers thereto) as in effect on the date hereof.

The New Guarantor hereby makes, affirms, and ratifies
in favor of the Lenders, the Issuing Bank and the Administrative Agent each of
the terms, provisions and waivers of the Credit Agreement and each of the other
Loan Documents that are stated to apply to or are made by a Guarantor.

In furtherance of the foregoing, the 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 

 E-1
 

 

documents and do or cause
to be done such further acts as may be reasonably necessary or proper in the opinion
of Administrative Agent to carry out more effectively the provisions and
purposes of this Guarantee Joinder Agreement.

IN WITNESS WHEREOF, the
New Guarantor has duly executed this Guarantee Joinder Agreement and delivered
the same to the Administrative Agent for the benefit of the Lenders and the
Issuing Bank, as of the date and year first above written.

	
   

  	
  NEW GUARANTOR

  
	
   

  	
   

  
	
   

  	
  [NAME OF NEW GUARANTOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Acknowledged and
  accepted:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  CITICORP USA,
  INC.,

  	
   

  	
   

  
	
  as
  Administrative Agent

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  	
   

  

 

 E-2Exhibit 10.2

Citibank, N.A.

AGREEMENT FOR LETTER OF CREDIT

dated as of October 11, 2006

Unless otherwise defined
in this Agreement, capitalized terms used in this Agreement shall have the
meanings set forth in Section 25.

Citibank, N.A. (“Citibank”)
agrees to issue at the request and for the account of the undersigned (“Applicant”)
one or more irrevocable letters of credit, each in a form satisfactory to
Applicant and Citibank (each a “Credit”, and collectively, the “Credits”),
up to an aggregate maximum amount not to exceed the amount of the Security
Letter of Credit, substantially in accordance with the terms and conditions
hereof.  In consideration of your
issuing, from time to time, one or more Credits substantially in accordance
with the terms and conditions provided by Applicant, Applicant unconditionally
agrees with Citibank as follows:

1.             Condition to Issuance of
any Credit.  The obligation of
Citibank to issue a Credit hereunder, on any Business Day, is subject to (a)
the Security Letter of Credit having an available amount not less than the sum
of (i) the aggregate amount of the Credits outstanding on such date, plus (ii)
the aggregate amount of Drafts, if any, not reimbursed by or on behalf of
Applicant on such date, plus (iii) the amount of the Credit that Applicant has
requested Citibank to issue on such date, (b) any such Credit having a maturity
date that is no later than five Business Days prior to the expiration date of
the Security Letter of Credit and (c) Citibank having received at least one
Business Day’s prior written notice at its office specified below requesting
such Credit in the form attached as Annex I.

2.             Reimbursement. Applicant
will pay Citibank the amount of each draft or other request for payment (each,
a “Draft”) drawn under any Credit, whether drawn before, on or, if in
accordance with applicable law, after the expiry date stated in any such
Credit. Each such payment shall be made, following payment by Citibank, on
demand.

3.             Commissions, Fees, Charges
and Expenses. Applicant will pay Citibank within ten Business Days
of demand therefor, all expenses, charges and other amounts which Citibank may
actually pay or actually incur in connection with the Credits, it being agreed
that Applicant is not obligated to pay to Citibank any commitment commission,
facility fee or letter of credit fee in respect of the Credits.

4.             Payments; Interest on Past
Due Amounts; Computations. All amounts due from Applicant shall be
paid to Citibank at 399 Park Avenue, New York, New York 10043 (or such other
address notified to Applicant in writing), with-out defense, set-off,
cross-claim, or counterclaim of any kind, in U.S. dollars and in same day
funds, provided, however,
that if any such amount is denominated in a currency other than U.S. Dollars,
Applicant will pay the equivalent of such amount in U.S. Dollars computed at
Citibank’s selling rate for cable transfers to the place where and in the
currency in which such amount is payable, or such other currency, place, form
and manner acceptable to Citibank in its sole discretion. Any amount not paid
when due shall bear interest until paid in full at a daily fluctuating interest
rate per annum equal to two percent per annum above the rate of interest
announced publicly from time to time by Citibank in New York as Citibank’s Base
Rate. Applicant authorizes Citibank to charge any account of Applicant for any
amount when due.  Unless otherwise agreed
in writing as to any Credit, all computations of commissions, fees and interest
shall be based on a 360-day year and actual days elapsed.

5.             Increased Costs or Reduced
Return.  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:  (a) subjects Citibank to any tax or changes
the basis of taxation (including in both cases withholding taxes) with respect
to this Agreement or the Credits (except for taxes on the overall net income of
Citibank, franchise taxes, any branch profits taxes, and any taxes attributable
to a failure of Citibank to withhold United States federal income taxes 

 1
 

 

under the due diligence
requirements imposed upon a withholding agent under §1.1441 7(b) of the income
tax regulations); (b) 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, Citibank; or (c) imposes,
modifies or deems applicable any capital adequacy or similar requirement (i)
against assets (funded or contingent) of, or letters of credit, other credits
or commitments to extend credit extended by, Citibank, or (ii) otherwise
applicable to the obligations of Citibank under this Agreement or the Credits,
and the result of any of the foregoing is to increase the cost to, reduce the
income receivable by, or impose any expense upon Citibank with respect to this
Agreement or the Credits, or the issuance or maintenance of any Credit (or, in
the case of any capital adequacy or similar requirement, to have the effect of
reducing the rate of return on Citibank’s capital, taking into consideration
Citibank’s customary policies with respect to capital adequacy) by an amount
which Citibank in its sole discretion deems to be material, Citibank shall from
time to time notify Applicant of the amount determined in good faith (using any
averaging and attribution methods employed in good faith) by Citibank to be
necessary to compensate Citibank 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 Applicant to Citibank ten Business Days
after such notice is given.  If Citibank
receives a refund in respect of any amounts paid by Applicant pursuant to this
Section 5, which refund in good faith judgment of Citibank is allocable to such
payment, it shall notify Applicant of such refund and repay such refund to
Applicant net of all out-of-pocket expenses of Citibank, provided,
however, that Applicant, upon the
request of Citibank, agrees to repay the amount paid over to Applicant to
Citibank in the event Citibank is required to repay such refund.

6.             Indemnification.  (a) Applicant agrees to pay (i) all
reasonable out-of-pocket expenses incurred by the Citibank and its Affiliates,
including the reasonable fees, charges and disbursements of counsel for
Citibank, in connection with the preparation and administration of this
Agreement or any amendments, modifications or waivers of the provisions hereof
(whether or not the transactions contemplated hereby or thereby shall be
consummated) and (ii) all reasonable out-of-pocket expenses incurred by Citibank,
including the reasonable fees, charges and disbursements of one firm of counsel
for Citibank, in connection with the enforcement or protection of its rights in
connection with this Agreement, including its rights under this Section, or in
connection with the Credits, including in connection with any workout,
restructuring or negotiations in respect thereof.

(b) Applicant agrees
to indemnify Citibank, and each Related Party of any of the foregoing Persons
(each such Person being called an “Indemnitee”)
against, and hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses, including the reasonable fees,
charges and disbursements of any counsel for any Indemnitee, incurred by or
asserted against any Indemnitee arising out of, in connection with, or as a
result of (i) the execution or delivery of this Agreement or any agreement
or instrument contemplated hereby, the performance by the parties hereto of
their respective obligations hereunder or the consummation of the transactions
contemplated hereby, (ii) any Credit or the use of the proceeds thereof
(including any refusal by Citibank to honor a demand for payment under any
Credit if the documents presented in connection with such demand do not strictly
comply with the terms of such Credit), (iii) any actual or alleged
presence or release of Hazardous Materials on or from any property owned or
operated by Applicant or any of its Subsidiaries, or any Environmental
Liability related in any way to Applicant or any of its Subsidiaries, or
(iv) any actual or prospective claim, litigation, investigation or
proceeding relating to any of the foregoing, whether based on contract, tort or
any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final 

 2
 

 

and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Indemnitee or its Affiliates or from a breach of this Agreement by such
Indemnitee.

(c) To the extent
permitted by applicable law, no party hereto shall assert and each party hereto
waives, any claim against any Indemnitee, on any theory of liability, for
special, consequential or punitive damages (as opposed to direct or actual
damages) arising out of, in connection with, or as a result of, this Agreement
or any agreement or instrument contemplated hereby, any Credit or the use of
the proceeds thereof.

(d) All amounts due
under this Section shall be payable promptly after written demand therefor
accompanied by the appropriate invoice or other detail supporting such amount.

7.             Obligations Absolute:
Limitations of Liability. (a) Applicant’s obligation to repay the
Drafts and to make the other payments provided herein (the “Obligations”) shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement under any and all circumstances whatsoever and
irrespective of (i) any lack of validity or enforceability of the Credits or
this Agreement, or any term or provision therein, (ii) the existence of any
claim, set-off, defense or other right that Applicant, or any Affiliate of
Applicant may have at any time against the beneficiary or any transferee of the
Credits (or any Persons or entities for whom such beneficiary or transferee may
be acting), Citibank or any other Person, whether in connection with this
Agreement, the transactions contemplated herein or any unrelated transaction;
(iii) without limiting Section 7(b) below, any Draft, demand certificate or any
other document presented under the Credits proving to be forged, fraudulent or
invalid in any respect or any statement therein being untrue or inaccurate in
any respect, (iv) payment by Citibank under the Credits against presentation of
a Draft or other document that does not comply with the terms of the Credits,
(v) the surrender or impairment of any security for the performance or
observance of any of the terms of this Agreement or any Credit; (vi) any
non-application or misapplication by the beneficiary of the Credits of the
proceeds of any drawing under the Credits; (vii) the fact that a Default shall
have occurred and be continuing; or (viii) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of,
or provide a right of setoff against, Applicant’s obligations hereunder.

(b) Neither Citibank nor
any of its Related Parties shall have any liability or responsibility by reason
of or in connection with the issuance or transfer of the Credits or any payment
or failure to make any payment thereunder (irrespective of any of the
circumstances referred to in the preceding subsection (a)), or any error,
omission, interruption, loss or delay in transmission or delivery of any Draft,
notice or other communication under or relating to the Credits (including any
document required to make a drawing thereunder), any error in interpretation of
technical terms or any consequence arising from causes beyond the control of
Citibank; provided that the foregoing shall not be
construed to excuse Citibank from liability to Applicant to the extent of any
direct damages (as opposed to consequential damages, claims in respect of which
are hereby waived by Applicant to the extent permitted by applicable law)
suffered by Applicant that are caused by Citibank’s failure to exercise care
when determining whether Drafts and other documents presented under the Credits
comply with the terms thereof.  The
parties hereto expressly agree that, in the absence of gross negligence or
willful misconduct on the part of Citibank (as finally determined by a court of
competent jurisdiction), Citibank shall be deemed to have exercised care in
each such determination.  In furtherance
of the foregoing and without limiting the generality thereof, the parties agree
that, with respect to documents presented that appear on their face to be in
substantial compliance with the terms of the Credits, Citibank may, in its sole
discretion, either accept and make payment upon such documents without
responsibility for further investigation, regardless of any notice or
information to the contrary (other than a valid injunction issued by a court of
competent jurisdiction), or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of the
Credits.

 3
 

 

8.             Independence. Applicant acknowledges that the rights and
obligations of Citibank under the Credits are independent of the existence,
performance or nonperformance of any contract or arrangement underlying the
Credits, including contracts or arrangements between Citibank and Applicant and
between Applicant and the beneficiary of any Credit. Citibank shall have no
duty to notify Applicant of its receipt of a Draft, certificate or other
document presented under any Credit or of its decision to honor any such
Credit. Citibank may, without incurring any liability to Applicant or impairing
its entitlement to reimbursement under this Agreement, honor any Credit despite
notice from Applicant of, and without any duty to inquire into, any defense to
payment or any adverse claims or other rights against the beneficiary of any
Credit or any other Person. Citibank shall have no duty to request or require
the presentation of any document, including any default certificate, not
required to be presented under the terms and conditions of any Credit. Citibank
shall have no duty to seek any waiver of discrepancies from Applicant, nor any
duty to grant any waiver of discrepancies which Applicant approves or requests.
Citibank shall have no duty to extend the expiration date or term of any Credit
or to issue a replacement letter of credit on or before the expiration date of
any Credit or the end of such term.

9.             Non-Documentary Conditions. Citibank is authorized (but
shall not be required) to disregard any non-documentary conditions stated in
any Credit.

10.           Transfers. If,
at Applicant’s request, any Credit is issued in transferable form, Citibank
shall have no duty to determine the proper identity of anyone appearing in any
transfer request, Draft, or other document as transferee, nor shall Citibank be
responsible for the validity or correctness of any transfer.

11.           Extensions and Modifications of the Credit. This Agreement
shall be binding upon Applicant with respect to any extension or modification
of any Credit made at Applicant’s request or with Applicant’s consent.
Applicant’s Obligations shall not be reduced or impaired in any way by any
agreement by Citibank and the beneficiary of any Credit extending Citibank’s
time to honor or to give notice of discrepancies and any such agreement shall
be binding upon Applicant.

12.           Covenants of Applicant. Applicant will, so long as any
Credit or any reimbursement or other payment obligation of Applicant under this
Agreement remains outstanding, comply with the covenants set forth below:

(a) Applicant will
do or cause to be done all things necessary to preserve and keep in full force
and effect its existence in accordance with its organizational documents, and
the material rights, licenses and franchises of Applicant; provided
that Applicant is not required to preserve any such right, license or
franchise, or the existence of any Subsidiary, if the maintenance or
preservation thereof is no longer desirable in the conduct of the business of
Applicant and its Subsidiaries taken as a whole; and provided
further that this Section does not
prohibit any transaction otherwise permitted by Section 5.05 of the of the
Credit Agreement.

(b) Applicant will
pay or discharge, and cause each of its Subsidiaries to pay or discharge before
the same become delinquent (i) all material taxes, assessments and governmental
charges levied or imposed upon Applicant or any of its Subsidiaries or its
income or profits or property, and (ii) all material lawful claims for labor,
materials and supplies that, if unpaid, might by law become a Lien upon the
property of Applicant or any of its Subsidiaries, other than any such tax,
assessment, charge or claim the amount, applicability or validity of which is
being contested in good faith by appropriate proceedings and for which adequate
reserves have been established.

(c) Applicant will
cause all properties used or useful in the conduct of its business to be
maintained and kept in good condition, repair and working order as in the
judgment of Applicant may be necessary so that the business of Applicant may be
properly and advantageously conducted at all times; provided
that nothing in this Section prevents Applicant from discontinuing the use,
operation or maintenance of any of such properties or disposing of any of them,
if such discontinuance or disposal is, in the judgment of Applicant, desirable
in the conduct of the business of Applicant.

 4
 

 

(d) Applicant will
provide or cause to be provided, for itself and its Subsidiaries, insurance
(including appropriate self-insurance) against loss or damage of the kinds
customarily insured against by corporations similarly situated and owning like
properties, including, but not limited to, products liability insurance and
public liability insurance, with reputable insurers, in such amounts, with such
deductibles and by such methods as are customary for corporations similarly
situated in the industry in which Applicant and its Subsidiaries are then
conducting business.

(e) Applicant will not,
and will not cause or permit any of its Subsidiaries to, create, incur, assume
or suffer to exist any Liens, other than Permitted Liens (as defined in the
Credit Agreement) on any of its or their Property, or on any shares of Capital
Stock unless permitted by or secured in accordance with the terms of the Credit
Agreement.

(f) Applicant will not
consolidate or merge with or into, or sell, lease, convey or otherwise dispose
of all or substantially all of its assets (including, without limitation, by
way of liquidation or dissolution), or assign any of its obligations under this
Agreement (as an entirety or substantially as an entirety in one transaction or
in a series of related transactions), to any Person (in each case other than in
a transaction permitted pursuant to Section 5.05 of the Credit Agreement.

(g) Applicant shall
deliver or cause to be delivered to Citibank as soon as available and in any
event within 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 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. 
Applicant will be deemed to have complied with the delivery requirements
of this Section 12(g) if within 55 days after the end of Hovnanian’s fiscal
quarter, Applicant delivers to Citibank a copy of Hovnanian’s Form 10-Q as
filed with the SEC and the financial statements contained therein meet the
requirements described in this Section 12(g).

(h) Applicant shall
deliver or cause to be delivered to Citibank as soon as available and in any
event within 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 Citibank. The certificate or report of accountants
delivered pursuant to this Section 12(h) 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 that would materially impair the prospect of payment or performance
of any covenant, agreement or duty of Applicant under this Agreement or cause
or constitute an Event of Default. 
Applicant will be deemed to have complied with the delivery requirements
of this Section 12(h) if within 90 days after the end of Hovnanian’s fiscal
year, Applicant delivers to Citibank 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.

(i) Promptly after
any officer of Applicant has learned of the occurrence of a Default, a
certificate signed by the Chief Executive Officer, President or Chief Financial
Officer or principal accounting officer of Applicant setting forth the details
of such Default and the action that Applicant proposes to take with respect
thereto.

 5
 

 

(m) Promptly upon
their becoming available to Applicant and not otherwise provided to Citibank
under clause (g), (h) or (i) of this Section 12 (A) any reports, notices or
proxy statements generally distributed by Hovnanian to its stockholders and (B)
regular or periodic reports, including Forms 10-K, 10-Q and 8-K, registration
statements and prospectuses, filed by Hovnanian with the SEC.

(n) Such other
reports and information as Citibank may from time to time reasonably request.

13.           Representations and
Warranties of Applicant. 
Applicant represents and warrants that:

(a) it is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization; (b) it has the lawful power to own or lease its
properties and to engage in the business it presently conducts or proposes to
conduct; (c) it is duly licensed or qualified and in good standing in each
jurisdiction where the failure to do so could not, individually or in the
aggregate, reasonably be expected to cause a Material Adverse Change; (d) it
has full power to enter into, execute, deliver and carry out this Agreement,
and to perform its obligations under this Agreement, and all such actions have
been duly authorized by all necessary proceedings on its part; (e) this
Agreement has been duly and validly executed and delivered by Applicant;
(f)  this Agreement constitutes, legal,
valid and binding obligation of Applicant, enforceable against Applicant in
accordance with its terms, except to the extent that enforceability of this
Agreement may be limited by bankruptcy, insolvency, reorganization moratorium
or other similar laws affecting the enforceability of creditor’s rights
generally or limiting the right of specific performance; (g) neither the
execution and delivery of this Agreement by Applicant nor the consummation of
the transactions herein or compliance with the terms and provisions hereof by
Applicant 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 formation or other organizational documents of Applicant
or (ii) any Law or any material agreement or instrument or order, writ,
judgment, injunction or decree to which Applicant 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 Applicant (other than Liens granted under the Credit Agreement)
that could, individually or in the aggregate, reasonably be expected to cause a
Material Adverse Change; (h) there are no actions, suits, proceedings or
investigations pending or, to the knowledge of Applicant, threatened against
Applicant at law or equity before any Official Body that individually or in the
aggregate may result in any Material Adverse Change; (i) it is not in violation
of any order, writ, injunction or any decree of any Official Body that may
result in any Material Adverse Change; (j) (i) Applicant has delivered to
Citibank copies of Hovnanian’s  audited
and 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 statements for and as of the end of the fiscal
quarters ended January 31, 2006, April 30, 2006 and July 31, 2006 (the “Quarterly
Statements”, and, together with the Annual Statements, the “Historical
Statements”), (ii) 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 (subject, in the case of Quarterly
Statements, to year-end adjustments) in all material respects the consolidated
financial conditions 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, (iii) the Historical
Statements accurately reflect the liabilities in all material respects of
Hovnanian and its Subsidiaries as of the respective dates of the Historical
Statements, (iv)  as of the date hereof,
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 that may cause a Material Adverse Change and (v) except as disclosed
in reports filed by Applicant or Hovnanian with the SEC prior to the date
hereof, since October 31, 2005, no Material Adverse Change has occurred; (k)
each of the reports required to be filed by Applicant under 

 6
 

 

Section 13(a) of the
Exchange Act on or prior to the date hereof has been filed and, as of the respective
dates thereof and the date hereof, such reports, taken as a whole,  did not contain and do not contain an untrue
statement of a material fact and did not omit and do not omit to state a
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading in any material
respect; (l) neither Applicant nor any of the Subsidiaries is engaged
principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying Margin Stock and (m)
neither Applicant nor any of the Subsidiaries is an “investment company” as
defined in, or subject to regulation under, the Investment Company Act of 1940.

14.           Default. Each of the following shall be an “Event of
Default” under this Agreement: (a) Applicant’s failure to pay within three
(3) Business Days when due, any interest on any obligation to Citibank or any
fee or other amount payable to Citibank under this Agreement; (b) Applicant’s
failure to pay when due, any principal of any obligation to Citibank under this
Agreement; (c) Applicant’s failure to observe or perform any covenant,
condition or agreement contained in this Agreement (other than those specified
in clauses (a) and (b) of this Section), and such failure shall continue
unremedied for a period of 30 days after written notice thereof from Citibank
to Applicant (except in the case of a default under Section 12(f) of this
Agreement, which will constitute Events of Default without notice or the
passage of time), (d) any representation or warranty made in this Agreement or
any document delivered by it under this Agreement, shall prove to have been
incorrect in any material respect when made, deemed made or delivered or (e)
any “Event of Default” under and as defined in the Credit Agreement, shall have
occurred and be continuing; provided, however, any Event of Default hereunder (other than the
Event of Default described in clause (e) above) shall be deemed waived by
Citibank if and for so long as the amount available to be drawn under the
Security Letter of Credit or the amount of Security Letter of Credit Proceeds
then held by Citibank equals of exceeds the aggregate amount of the Credits
plus the aggregate outstanding principal amount of reimbursement obligations
under Section 2 at the time of determination.

15.           Remedies; Security Letter of Credit Proceeds. (a) To the
extent the Obligations are not fully satisfied pursuant to the last sentence of
Section 15(b), if any Event of Default shall have occurred and be continuing,
the amount of each Credit as well as any or all Obligations shall, at Citibank’s
option, become due and payable immediately without presentment, demand,
protest, or notice of any kind, all of which are hereby expressly waived by
Applicant; provided, however,
that in the event of an actual or deemed entry of an order for relief with
respect to Applicant under the U.S. Federal Bankruptcy Code, the amount of the
Credit and all Obligations shall automatically become due and payable without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived by Applicant. In addition, Citibank may (i) if any Credit
shall not have been issued, by notice to Applicant declare its obligation to
issue any Credit to be terminated, whereupon the same shall forthwith
terminate, and (ii) send notice to Applicant of the occurrence of an Event of
Default thereby resulting in (I) the termination of the Credits on the
tenth Business Day following receipt by Applicant of such notice and
(II) pursue all other remedies available at law, by contract, in equity or
otherwise.

(b) Citibank agrees, to the
fullest extent permitted by law, (i) to apply the proceeds of each draw under
the Security Letter of Credit directly to the satisfaction of the Obligations
due and payable at the time of such draw and (ii) to apply any remaining amount
of such draw (and any proceeds or investments thereof) directly to the other
Obligations, when and as such Obligations become due and payable (such drawn
amounts and any proceeds or investments thereof, “Security Letter of Credit
Proceeds”).  Receipt or application
of the Security Letter of Credit Proceeds to the Obligations in accordance with
the foregoing shall constitute for all purposes of this Agreement (including
reinstatement, if applicable, of amounts available to be drawn under any
Credit) satisfaction of the Obligations to the extent of the amounts so
applied.

(c)  Subject to Section 15(b), Applicant
agrees that Citibank will have the sole right to sell, pledge, rehypothecate,
assign, invest, use, commingle or otherwise dispose of, or otherwise use in its
business any Security 

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Letter of Credit Proceeds it
holds, free from any claim or right of any nature whatsoever of Applicant,
including any equity or right of redemption by Applicant.  For purposes of any rights or remedies
authorized under this Agreement, Citibank will be deemed to continue to hold
all Security Letter of Credit Proceeds, regardless of whether Citibank has
exercised any rights with respect to any Security Letter of Credit Proceeds
pursuant to the preceding sentence.

(d) Citibank agrees that
promptly following the Termination Date, Citibank will return to Applicant all
Security Letter of Credit Proceeds, if any, then held by Citibank. Citibank and
Applicant agree that, for the avoidance of doubt, (i) the Security Letter of
Credit Proceeds are the property of Citibank and not of Applicant, (ii)
Applicant has no interest in the Security Letter of Credit or any Security Letter
of Credit Proceeds other than the right to receive any remaining Security
Letter of Credit Proceeds following the Termination Date as described in the
immediately preceding sentence, and (iii) this Agreement does not constitute a
transfer of the property of Applicant.

(e) Applicant agrees that,
from time to time upon the written request of Citibank, Applicant will execute
and deliver such further documents and do such other acts and things as
Citibank may reasonably request in order fully to effect the purposes of this
subsection.  Citibank may employ agents
and attorneys in fact in connection with this Section and shall not be
responsible for the negligence or misconduct of any such agents or attorneys in
fact selected by it in good faith.

16.           Set-off. If any Event of Default shall occur and be
continuing, Citibank may set-off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by Citibank to or for the credit or the account
of Applicant (“Deposits”) against any and all of the past-due
Obligations to the extent that such Obligations have not been fully satisfied
pursuant to the last sentence of Section 15(b) or otherwise, irrespective of
whether or not Citibank shall have made any demand under this Agreement and
although such Deposits or Obligations may be unmatured or contingent. Citibank’s
rights under this Section are in addition to other rights and remedies
(including other rights of set-off) which Citibank may have under this
Agreement or applicable law.

17.           Waiver of Immunity. Applicant acknowledges that this
Agreement is, and each Credit will be, entered into for commercial purposes
and, to the extent that Applicant now or later acquires any immunity from jurisdiction
of any court or from any legal process with respect to itself or its property,
Applicant now irrevocably waives its immunity with respect to the Obligations.

18.           Notices; Interpretation; Severability. Notices shall be
effective, if to Applicant, when sent to its address indicated below the
signature line and, if to Citibank, when received at Two Penns Way, Suite 110,
New Castle, Delaware 19720, Attention: Patricia D. Stewart, facsimile number:
212-994-0847, or as to either, such other address as either may notify the
other in writing. Headings are included only for convenience and are not
interpretative. The term “including” means “including without
limitation.” If any provision of this Agreement is held illegal or
unenforceable, the validity of the remaining provisions shall not be affected.

19.           Successors and Assigns. This Agreement shall be binding upon
Applicant and its successors and permitted assigns, and shall inure to the
benefit of and be enforceable by Citibank, its successors and assigns.
Applicant shall not voluntarily transfer or otherwise assign any of its
obligations under this Agreement. Citibank, subject, if the transferee is not
an Affiliate, to Applicant’s consent if no Event of Default exists, may
transfer or otherwise assign its rights and obligations under this Agreement,
in whole or in part, and shall be forever relieved from any liability with
respect to the portion of Citibank’s rights or obligations transferred or
assigned. Applicant acknowledges that information pertaining to Applicant as it
relates to this Agreement or the Credits may be disclosed to (actual or
potential) transferees or assignees so long as such actual or potential
transferee agrees to be bound by the confidentiality provisions hereof. This
Agreement shall not be construed to confer any right or benefit upon any Person
other than Applicant and Citibank and their respective successors and permitted
assigns.

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20.           Modification; No Waiver. None of the terms of this Agreement
may be waived or amended except in a writing signed by the party against whose
interest the term is waived or amended. Forbearance, failure or delay by
Citibank in the exercise of a remedy shall not constitute a waiver, nor shall
any exercise or partial exercise of any remedy preclude any further exercise of
that or any other remedy. Any waiver or consent by Citibank shall be effective
only in the specific instance and for the specific purpose for which it is
given and shall not be deemed, regardless of frequency given, to be a further
or continuing waiver or consent.

21.           Multiple Role Disclosure. Citibank and its Affiliates offer
a wide range of financial services, including back-office letter of credit
processing services on behalf of financial institutions and letter of credit
beneficiaries. Our services are provided internationally to a wide range of
customers, some of whom may be Applicant’s counter-parties or competitors.
Applicant acknowledges and accepts that Citibank and its Affiliates may perform
more than one role in relation to any particular Credit.

22.           Integration; Remedies Cumulative; Delivery by Facsimile.
This Agreement constitutes the entire agreement between the parties concerning
Citibank’s issuance of a Credit or Credits for Applicant’s account and
supersedes all prior or simultaneous agreements, written or oral. All rights
and remedies of Citibank under this Agreement and other documents delivered in
connection with this Agreement are cumulative and in addition to any other
right or remedy under this Agreement, the Credits or applicable law. Delivery
of a signed signature page to this Agreement by facsimile transmission shall be
effective as, and shall constitute physical delivery of, a signed original
counterpart of this Agreement.

23.           Termination; Surviving Provisions. This Agreement shall be
terminated only upon payment in full to Citibank of all Obligations hereunder.
The indemnity, tax, immunity, and jurisdiction provisions shall survive
termination of this Agreement. If any Credit is issued in favor of any bank or
other financial or commercial entity in support of an undertaking issued by
such bank or entity on behalf of Applicant or Citibank, Applicant shall remain
liable under this Agreement (even after expiry of any such Credit) for amounts
paid and expenses incurred by Citibank with respect to any such Credits or the
undertaking until Citibank is released by such other bank or entity.

24.           Governing Law; Submission to Jurisdiction; Confidentiality.
(a) This Agreement shall be construed in accordance with and governed by the
law of the State of New York.  Applicant
hereby submits to the nonexclusive jurisdiction of the United States District
Court for the Southern District of New York and of any New York State court
sitting in New York City for purposes of all legal proceedings arising out of
or relating to this Agreement or the transactions contemplated hereby.  Applicant irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to the
laying of venue of any such proceeding brought in such a court and any claim
that any such proceeding brought in such a court has been brought in an
inconvenient forum.

(b) Applicant agrees that Citibank may issue Credits
subject to the Uniform Customs and Practice for Documentary Credits, 1993
Revision, International Chamber of Commerce Publication No. 500 (the “UCP”)
or the International Standby Practices, International Chamber of Commerce No.
590 (the “ISP”) or, at Citibank’s option, such later revision thereof in
effect at the time of issuance of any Credit. The UCP or the ISP, as
applicable, shall serve, in the absence of proof to the contrary, as evidence
of general banking usage with respect to the subject matter thereof.

(c) Applicant agrees that for matters not addressed by
the UCP or the ISP, the Credits shall be subject to and governed by the laws of
the state of New York and applicable U.S. Federal laws. If, at Applicant’s
request, any Credit expressly chooses a state or country law other than New
York, U.S.A., or is silent with respect to UCP, ISP or governing law, Citibank
shall not be liable for any payment, cost, expense or loss resulting from any
action or inaction taken by Citibank if such action or inaction is justified
under UCP, ISP, New York law or the law governing any such Credit.

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(d) Citibank agrees to maintain the confidentiality of
the Information (as defined below), except that Information may be disclosed
(i) to Citibank and its Affiliates’ directors, officers, employees and agents,
including accountants, legal counsel and other advisers (it being understood
that the Persons to whom such disclosure is made will be informed of the
confidential nature of such Information and instructed to keep such Information
confidential) on a “need to know” basis solely in connection with the
transactions contemplated by this Agreement, (ii) to the extent requested by
any regulatory authority, provided, however, that, to the extent legally permitted, Applicant is
promptly notified in order that it may seek a protective order or take other
appropriate action, (iii) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (iv) to the extent
reasonably required or reasonably deemed advisable in connection with the
exercise of any remedies hereunder or any suit, action or proceeding relating
to this Agreement or the enforcement of rights hereunder, (v) subject to an
agreement containing provisions substantially the same as those of this
subsection (d), to (A) any assignee of or participant in, or any prospective
assignee of or participant in, any of its rights or obligations under this
Agreement or (B) any actual or prospective counterparty (or its advisors) to
any securitization, swap or derivatives transaction relating to Applicant, any
Subsidiaries and the obligations hereunder, (vi) with the consent of Applicant
or (vii) to the extent such Information (A) becomes publicly available other
than as a result of a breach of this subsection (d) or (B) becomes available to
Citibank on a nonconfidential basis from a source other than Applicant.  For the purposes of this subsection (d), “Information”
means all information received from Applicant in connection with this Agreement
relating to Applicant or its business, other than any such information that is
available to Citibank on a nonconfidential basis prior to disclosure by
Applicant.  Any Person required to
maintain the confidentiality of Information as provided in this subsection (d)
shall be considered to have complied with its obligation to do so if such
Person has exercised the same degree of care to maintain the confidentiality of
such Information as such Person would accord to its own confidential
information.

25.           Defined Terms.  Unless
otherwise defined in this Agreement, capitalized terms used in this Agreement
shall have the following meanings:

“Affiliate”
means, when used with reference to a specified Person, any Person directly or
indirectly controlling, or controlled by or under direct or indirect common
control with the Person specified.

“Applicant”
shall have the meaning set forth in the Preamble hereto.

“Attributable Debt”
means, with respect to any Capitalized Lease Obligations, the capitalized
amount thereof determined in accordance with GAAP.

“Business Day” means
any day that is not a Saturday, Sunday or other day on which commercial banks
in New York City are authorized or required by law to remain closed.

“Capital Stock”
means, with respect to any Person, any and all shares, interests,
participations or other equivalents (however designated) of or in such Person’s
capital stock or other equity interests, and options, rights or warrants to
purchase such capital stock or other equity interests, whether now outstanding
or issued after the date hereof.

“Capitalized Lease
Obligations” of any Person means the obligations of such Person
to pay rent or other amounts under a lease that is required to be capitalized
for financial reporting purposes in accordance with GAAP, and the amount of
such obligations will be the capitalized amount thereof determined in
accordance with GAAP.

“control”
when used with respect to any Person, means the power to direct the management
and policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms “controlling”
and “controlled” have meanings correlative to the foregoing.

“Credit”
shall have the meaning set forth in the Preamble hereto.

“Credit Agreement”
means the Credit Agreement, dated as of October 11, 2006, 

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among Applicant, as borrower, Hovnanian and certain
subsidiaries thereof as guarantors, the lenders named therein, Citicorp USA,
Inc., as issuing bank and administrative agent, and The Bank of New York, not
in its individual capacity, but solely as paying agent, as amended, supplemented,
modified, amended and restated or refinanced from time to time.

“Credit Agreement Parties”
means Applicant and each guarantor of the Credit Agreement.

“Currency Agreement”
of any Person means any foreign exchange contract, currency swap agreement or
other similar agreement or arrangement designed to protect such Person or any
of its Subsidiaries against fluctuations in currency values.

“Default”
means any event or condition that constitutes an Event of Default or that upon
notice, lapse of time or both would, unless cured or waived, become an Event of
Default.

“Deposits”  shall have the meaning set forth in
Section 16 hereto.

“Draft”
shall have the meaning set forth in Section 2 hereto.

“Environmental Laws”
means any and all federal, state, local and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements or other governmental
restrictions relating to the environment or the release of any materials into
the environment.

“Environmental Liability”
means any liability, contingent or otherwise (including any liability for
damages, costs of environmental remediation, fines, penalties or indemnities),
of Applicant or any of its Subsidiaries directly or indirectly resulting from
or based upon (a) violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage, treatment or disposal of
any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.

“Event of Default”  shall have the meaning set forth in Section 14
hereto.

“Exchange Act”
means the Securities Exchange Act of 1934, as amended.

“GAAP” means
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other entity as
may be approved by a significant segment of the accounting profession of the
United States, as in effect on May 4, 1999.

“Hazardous Materials”
means all explosive or radioactive substances or wastes and all hazardous or
toxic substances, wastes or other pollutants, including petroleum or petroleum
distillates, asbestos or asbestos containing materials, polychlorinated
biphenyls, radon gas, infectious or medical wastes and all other substances or
wastes of any nature regulated pursuant to any Environmental Law.

“Hovnanian”
means Hovnanian Enterprises, Inc., a Delaware corporation.

“Indebtedness”
“Indebtedness” of any Person means, without duplication, (i) any liability of
such Person (A) for borrowed money or under any reimbursement obligation
relating to a letter of credit or other similar instruments (other than standby
letters of credit or similar instrument issued for the benefit of or surety,
performance, completion or payment bonds, earnest money notes or similar
purpose undertakings or indemnifications issued by, such Person in the ordinary
course of business), (B) evidenced by a bond, note, debenture or similar
instrument (including a purchase money obligation) given in connection with the
acquisition of any businesses, properties or assets of any kind or with
services incurred in connection with capital expenditures (other than any
obligation to pay a contingent purchase price which, as of the date of
incurrence thereof is not required to be recorded as a liability in accordance
with GAAP), or (C) in respect of Capitalized Lease Obligations (to the extent
of the Attributable Debt in respect thereof); (ii) any Indebtedness of
others that such Person has guaranteed to 

 11
 

 

the extent of the guarantee, provided,
however, that Indebtedness of Applicant
will not include obligations under warehouse lines of credit of Mortgage
Subsidiaries to repurchase mortgages at prices no greater than 98% of the principal
amount thereof; (iii) to the extent not otherwise included, the
obligations of such Person under Currency Agreements or Interest Protection
Agreements to the extent recorded as liabilities not constituting Interest
Incurred, net of amounts recorded as assets in respect of such agreements, in
accordance with GAAP; and (iv) all Indebtedness of others secured by a Lien on
any asset of such Person, whether or not such Indebtedness is assumed by such
Person; provided, that Indebtedness shall not
include accounts payable, liabilities to trade creditors of such Person or
other accrued expenses arising in the ordinary course of business. The amount
of Indebtedness of any Person at any date shall be (A) the outstanding balance
at such date of all unconditional obligations as described above, net of any
unamortized discount to be accounted for as Interest Expense, in accordance
with GAAP, (B) the maximum liability of such Person for any contingent
obligations under clause (i) above at such date, net of an unamortized discount
to be accounted for as Interest Expense in accordance with GAAP, and (C) in the
case of clause (iv) above, the lesser of (x) the fair market value of any asset
subject to a Lien securing the Indebtedness of others on the date that the Lien
attaches and (y) the amount of the Indebtedness secured.

“Indemnitee”
shall have the meaning ascribed to it in Section 6.

“Interest Expense”
of any Person for any period means, without duplication, the aggregate amount of
(i) interest that, in conformity with GAAP, would be set opposite the caption “interest
expense” or any like caption on an income statement for such Person (including,
without limitation, imputed interest included in Capitalized Lease Obligations,
all commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers’ acceptance financing, the net costs (but reduced
by net gains) associated with Currency Agreements and Interest Protection
Agreements, amortization of other financing fees and expenses, the interest
portion of any deferred payment obligation, amortization of discount or
premium, if any, and all other non-cash interest expense (other than interest
and other charges amortized to cost of sales), and (ii) all interest actually
paid by a Credit Agreement Party under any guarantee of Indebtedness
(including, without limitation, a guarantee of principal, interest or any
combination thereof) of any Person other than a Credit Agreement Party during
such period; provided, that Interest Expense
shall exclude any expense associated with the complete write-off of financing
fees and expenses in connection with the repayment of any Indebtedness.

“Interest Protection
Agreement” of any Person means any interest rate swap agreement,
interest rate collar agreement, option or futures contract or other similar
agreement or arrangement designed to protect such Person or any of its
Subsidiaries against fluctuations in interest rates with respect to
Indebtedness.

“ISP” shall
have the meaning set forth in Section 24 hereto.

“Law” means
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.

“Lien”
means, with respect to any Property, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such Property.  For purposes of this definition, a Person
shall be deemed to own, subject to a Lien, any Property that it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
Property.

“Material Adverse Change” means a set
of circumstances or events that (i) has or could reasonably be expected to have
any material adverse effect whatsoever upon the validity or enforceability of
this Agreement, (ii) 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 Security Letter of Credit Parties taken
as a whole, (iii) impairs 

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materially or
could reasonably be expected to impair materially the ability of Applicant to
duly and punctually pay or perform its material Indebtedness for borrowed
money, or (iv) impairs materially or could reasonably be expected to impair
materially the ability of Citibank, to the extent permitted, to enforce its
legal remedies pursuant to this Agreement.

“Mortgage Subsidiary”
means any Subsidiary of Hovnanian substantially all of the operations of which
consist of the mortgage lending business.

“Obligations”
shall have the meaning set forth in Section 7 hereto.

“Official Body”
means 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.

“Person”
means any individual, corporation, partnership, limited liability company,
joint venture, incorporated or unincorporated association, joint stock company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.

“Property”
of any Person means all types of real, personal, tangible, intangible or mixed
property owned by such Person, whether or not included in the most recent
consolidated balance sheet of such Person and its Subsidiaries under GAAP.

“Related Parties”
means, with respect to any specified Person, such Person’s Affiliates and the
respective directors, officers, employees, agents and advisors of such Person
and such Person’s Affiliates.

“SEC”  means the Securities and Exchange Commission.

“Security Letter of Credit”  means a Letter of Credit issued by Citicorp
USA, Inc. naming Citibank as beneficiary to support the payment by Applicant of
the Obligations.

“Security Letter of Credit
Proceeds” shall have the meaning set forth in Section 15 hereto.

“Subsidiary”
of any Person means any corporation or other entity of which a majority of the
Capital Stock having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions is at the time directly
or indirectly owned or controlled by such Person.

“Termination Date”
means the later to occur of (a) the termination of the Security Letter of
Credit and (b) the date of the termination or expiry of all Credits and the
payment in full (including, without limitation, by application of Security
Letter of Credit Proceeds in accordance with this Agreement) of all Obligations
that are or may become payable.

“U.S.”
means the United States of America.

“UCP” shall
have the meaning set forth in Section 24 hereto.

“USA Patriot Act”
means the Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001, as amended,
supplemented, amended and restated or otherwise modified from time to time.

27. JURY TRIAL WAIVER. APPLICANT AND CITIBANK EACH
IRREVOCABLY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM, COUNTERCLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE CREDIT, OR ANY
DEALINGS WITH ONE ANOTHER RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT.

 

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  Very truly yours,

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Applicant: K. Hovnanian Enterprises, Inc.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: (Authorized Signer):

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Signature)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Print Name)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Title)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Signature)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Relationship Manager (Signature & Stamp)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Print Name)

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Title)

  	
   

  	
   

  	
  (Other required Signature & Stamp)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
  110 West Front Street

  	
   

  	
   

  
	
   

  	
  Red Bank, NJ 07701

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Co-Applicant (if any):

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By (Authorized Signer):

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Signature)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
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  (For Citibank Use Only)

  	
   

  	
   

  
	
  Approvals to Issue

  	
   

  	
   

  

 

 

 

 

 

  
  

 

Annex I

	
  Application for Standby Letter of Credit

  	
   

  	
   

  
	
  Citibank, N.A., New York, NY
  10043

  	
   

  	
   

  
	
  Attn: Standby Letter of Credit
  Dept.,

  	
   

  	
  Letter of Credit Reference No.

  

 

	
  Advising Bank (Name and

  Address)

  	
   

  	
   

  	
   

  	
  Applicant (Name and

  Address)

  	
   

  	
  K. Hovnanian Enterprises, Inc.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Beneficiary (Name and Address)

  	
   

  	
   

  	
   

  	
  Expiry Date and Place:

  	
   

  	
  [NOT LATER THAN FIVE BUSINESS
  DAYS PRIOR TO THE EXPIRATION DATE OF THE SECURITY LETTER OF CREDIT]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Amount (In specific

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
  currency):

  	
   

  	
   

  

 

This
Application is for the issuance of a standby letter of credit under and subject
to the terms and conditions of (select one):

x           The Agreement for Standby
Letter of Credit attached hereto:

o            The Continuing Agreement
for Commercial and / or Standby Letters of Credit dated                  . *

Other (describe): 

	
  

  	
   

  

 

Subject to
the following terms and conditions, please issue your irrevocable Letter of
Credit (hereinafter called the “Credit”) to be available by the beneficiary’s
draft(s):

Drawn at
sight on:

o            Citibank, N.A., New
York, NY

o            Other:

	
  

  
	
  (Name and Address of Paying
  Bank, if any)

  

 

Accompanied
by Beneficiary’s written statement that the amount of any drafts(s) drawn
hereunder represent funds due and payable because of the following reasons (select
one):

o            Applicant of the Credit has failed
to comply with terms or conditions of a contract described as:

 

	
   

  
	
   

  
	
   

  

 

o            Applicant of the Credit
has been awarded a contract under an offer to bid and has failed to become a
party to the contract related thereto

 1
 

 

 

	
  describe):

  
	
   

  
	
   

  
	
   

  

 

o            It has become necessary
for the Beneficiary bank or other financial entity to make payment under its
undertaking issued on behalf of Applicant of this Credit, with an expiration
date of                        , at its counters, in favor of                                                                                                                          , in relation to

	
  

  

 

o            Description of
transaction if other than described

	
  above:

  	
  See attached

  	
   

  
	
   

  	
   

  	
  (If a sample of the
  wording is attached, insert “See Attached” above)

  

 

*              If a Continuing Agreement is already in place,
submit only this Application, with customer’s signature and account manager’s
approvals on page 2 of this form.

o            Credit to be issued in
transferable form.

 2
 

 

 

	
  o

  	
  Any transfer(s) to this
  Credit to be effective by

  	
  Citibank, N.A., at its Tampa, FL offices

  
	
   

  	
   

  	
  (Indicate an appropriate transferring bank name and location)

  

 

o            Attachments hereto
impose additional terms and conditions on Applicant and / or Citibank and are
incorporated into this Application and Agreement as if fully set forth herein.

o            All banking charges,
other than Citibank, N.A. charges, are for account of:  Beneficiary
 Applicant

	
  Transmit the Credit by:

  	
   

  	
  o Cable / SWIFT

  	
   

  	
  o Airmail

  	
   

  	
  o Courier Service.

  

 

All drafts
and documents called for under the Credit are to be delivered by the
negotiating or paying bank to Citibank, N.A. New York by Airmail in a single
mailing.

	
  

  	
   

  	
   

  	
   

  
	
  Applicant’s Signature

  	
   

  	
  Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Account Manager’s Signature and Stamp

  	
   

  	
  Date

  	
   

  

 

	
  The undersigned Co-Applicant
  hereby agrees to all terms and conditions contained in any “CONTINUING
  AGREEMENT FOR STANDBY AND COMMERCIAL LETTERS OF CREDIT” that may be in place
  between Citibank, N.A. and the primary Applicant.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Co-Applicant Signature (if
  any)

  	
   

  	
  Co-Applicant Name

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Co-Applicant Address

  	
   

  	
  Date

  

 

 3

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