Document:

QuickLinks
 -- Click here to rapidly navigate through this document

 
 

Exhibit 4.1    
    

HILTON HOTELS

2005 EXECUTIVE DEFERRED COMPENSATION PLAN  

Effective as of November 12, 2004

 

	 
	 
	 	Page

	ARTICLE I TITLE AND DEFINITIONS	 	1
	

1.1  —	

Title	
 	

1
	

1.2  —	

Definitions	
 	

1
	

ARTICLE II PARTICIPATION	
 	

3
	

ARTICLE III DEFERRAL ELECTIONS	
 	

4
	

3.1  —	

Elections to Defer Compensation	
 	

4
	

3.2  —	

Distribution Elections	
 	

5
	

3.3  —	

Investment Elections	
 	

6
	

3.4  —	

Subsequent Elections	
 	

6
	

ARTICLE IV DISTRIBUTION OPTION ACCOUNTS	
 	

7
	

4.1  —	

Compensation Deferrals	
 	

7
	

4.2  —	

Company Contribution	
 	

8
	

4.3  —	

Investment Return	
 	

8
	

ARTICLE V VESTING	
 	

8
	

5.1  —	

Compensation Deferral	
 	

8
	

5.2  —	

Company Contribution	
 	

8
	

ARTICLE VI DISTRIBUTIONS	
 	

9
	

6.1  —	

Form and Timing of Distribution	
 	

9
	

6.2  —	

Payout	
 	

9
	

6.3  —	

Small Benefit Cashout	
 	

10
	

6.4  —	

Distributions to Key Employees	
 	

10
	

6.5  —	

Financial Hardship of Participant	
 	

10
	

6.6  —	

Permissible Distribution Event	
 	

11
	

6.7  —	

Payment by Trust	
 	

11
	

6.8  —	

Inability to Locate Participant	
 	

11
	

ARTICLE VII CHANGE IN CONTROL	
 	

11
	

ARTICLE VIII DEATH BENEFITS	
 	

11
	

ARTICLE IX CLAIMS PROCEDURES	
 	

11
	

9.1  —	

Claims	
 	

11
	

9.2  —	

Appeal	
 	

12
	

9.3  —	

Authority	
 	

12
	 	 	 	 

i

 

	

ARTICLE X ADMINISTRATION	
 	

12
	

10.1  —	

Committee	
 	

12
	

10.2  —	

Committee Action	
 	

13
	

10.3  —	

Powers and Duties of the Committee	
 	

13
	

10.4  —	

Construction and Interpretation	
 	

13
	

10.5  —	

Information	
 	

14
	

10.6  —	

Compensation, Expenses and Indemnity	
 	

14
	

10.7  —	

Quarterly Statements	
 	

14
	

ARTICLE XI MISCELLANEOUS	
 	

14
	

11.1  —	

Unsecured General Creditor	
 	

14
	

11.2  —	

Restriction Against Assignment	
 	

14
	

11.3  —	

Withholding	
 	

15
	

11.4  —	

Amendment, Modification, Suspension or Termination	
 	

15
	

11.5  —	

Governing Law	
 	

15
	

11.6  —	

Receipt or Release	
 	

15
	

11.7  —	

Payments on Behalf of Persons Under Incapacity	
 	

15
	

11.8  —	

Headings	
 	

15

ii

   HILTON HOTELS

2005 EXECUTIVE DEFERRED COMPENSATION PLAN  

        WHEREAS, Hilton Hotels Corporation (the "Company") hereby establishes a deferred compensation plan (the "Plan"), effective as of November 12, 2004 for
deferrals with respect to Compensation (as defined below) to be earned or to be otherwise paid on or after January 1, 2005, to provide supplemental retirement income benefits for a select group
of management and highly compensated employees through deferrals of base salary and bonus compensation and Company contributions. 

        NOW,
THEREFORE, the Plan is hereby established, on the terms and conditions hereinafter set forth: 

ARTICLE I

TITLE AND DEFINITIONS  

1.1—Title.  

        This Plan shall be known as the Hilton Hotels 2005 Executive Deferred Compensation Plan. 

1.2—Definitions.  

        Whenever the following words and phrases are used in this Plan, with the first letter capitalized, they shall have the meanings specified below. 

        "Base
Salary Deferral" shall mean that portion of Base Salary as to which an Eligible Employee has made an irrevocable election to defer receipt of until the date specified under the
In-Service Distribution Option and/or the Separation Distribution Option. 

        "Beneficiary"
or "Beneficiaries" shall mean the person or persons, including a trustee, personal representative or other fiduciary, last designated in writing by a Participant in
accordance with procedures established by the Committee to receive all of the benefits specified hereunder in the event of the Participant's death. No Beneficiary designation shall become effective
until it is filed with the Committee. If there is no Beneficiary designation in effect, or if there is no surviving designated Beneficiary, then the Participant's surviving spouse shall be the
Beneficiary. If there is no surviving spouse to receive any benefits payable in accordance with the preceding sentence, the duly appointed and currently acting personal representative of the
Participant's estate (which shall include either the Participant's probate estate or living trust) shall be the Beneficiary. In any case where there is no such personal representative of the
Participant's estate duly appointed and acting in that capacity within 90 days after the Participant's death (or such extended period as the Committee determines is reasonably necessary to
allow such personal representative to be appointed, but not to exceed 180 days after the Participant's death), then Beneficiary shall mean the person or persons who can verify by affidavit or
court order to the satisfaction of the Committee that they are legally entitled to receive the benefits specified hereunder. In the event any amount is payable under the Plan to a minor, payment shall
not be made to the minor, but instead be paid (i) to that person's living parent(s) to act as custodian, (ii) if that person's parents are then divorced, and one parent is the sole
custodial parent, to such custodial parent, or (iii) if no parent of that person is then living, to a custodian selected by the Committee to hold the funds for the minor under the Uniform
Transfers or Gifts to Minors Act in effect in the jurisdiction in which the minor resides. If no parent is living and the Committee decides not to select another custodian to hold the funds for the
minor, then payment shall be made to the duly appointed and currently acting guardian of the estate for the minor or, if no guardian of the estate for the minor is duly appointed and currently acting
within 60 days after the date the amount becomes payable, payment shall be deposited with the court having jurisdiction over the estate of the minor. 

        "Board"
shall mean the Board of Directors of Hilton Hotels Corporation. 

1

 

        "Bonus
Compensation Deferral" shall mean that portion of Bonus Compensation as to which an Eligible Employee has made an irrevocable election to defer receipt of until the date specified
under the In-Service Distribution Option and/or the Separation Distribution Option. 

        "Change
in Control" shall have the same meaning ascribed to the term "change in control" under the Treasury regulations to be issued under section 409A of the Code. 

        "Code"
shall mean the Internal Revenue Code of 1986, as amended. 

        "Committee"
shall mean the Committee appointed by the Board to administer the Plan in accordance with Article X, or its delegate. 

        "Company"
shall mean Hilton Hotels Corporation, any successor corporation and each corporation which is a member of a controlled group of corporations (within the meaning of
section 414(b) of the Code) of which Hilton Hotels Corporation is a component member. 

        "Company
Contribution" shall equal the amount described in Section 4.2. 

        "Compensation"
shall mean the total salary paid to the Eligible Employee, including cash bonuses, in a Plan Year. An Eligible Employee's "Compensation" shall consist of the Eligible
Employee's "Base Salary" as in effect from time to time during a Plan Year and the Eligible Employee's "Bonus Compensation" which shall equal the amount of any cash incentive to be paid to an Eligible
Employee under an incentive plan maintained by the Company. 

        "Compensation
Deferral" means that portion of Compensation as to which a Participant has made an irrevocable election to defer receipt until the date specified under the
In-Service Distribution Option and/or the Separation Distribution Option. 

        "Disabled"
or "Disability" shall mean that a Participant is disabled due to sickness or injury which qualifies the Participant for disability payments under the Company's long term
disability plan. A Participant shall be considered totally and permanently disabled on the date he qualifies for such long term disability payments. 

        "Distribution
Option" shall mean the two distribution options which are available under the Plan, consisting of the Separation Distribution Option and the In-Service
Distribution Option. 

        "Distribution
Option Account" or "Accounts" shall mean, with respect to a Participant, the Separation Distribution Account and/or the In-Service Distribution Account(s)
established on the books of account of the Company, pursuant to Article IV, for each Participant. 

        "Effective
Date" shall mean November 12, 2004. 

        "Eligible
Employee" shall mean (i) officers of Hilton Hotels Corporation at the Vice President level or higher, (ii) hotel managers who are employed by the Company and
selected by the Committee to participate in the Plan pursuant to Article II, or (iii) Highly Compensated Employees who are selected by the Committee to participate in the Plan pursuant
to Section 2.1. 

        "Enrollment
Agreement" shall mean the authorization form which an Eligible Employee files with the Committee to participate in the Plan. 

        "Fund"
or "Funds" shall mean one or more of the investments selected by the Committee pursuant to Section 3.3(a). 

        "Highly
Compensated Employee" shall mean an employee of the Company who the Committee, in its discretion, anticipates will receive Compensation in excess of the salary limitation
contained in section 401(a)(17) of the Code for the applicable Plan Year. 

2

 

        "In-Service
Distribution Account or Accounts" shall mean the Account(s) maintained for a Participant to which Compensation Deferrals and Company Contributions are credited
pursuant to the In-Service Distribution Option. 

        "In-Service
Distribution Option" shall mean the Distribution Option pursuant to which benefits are payable in accordance with Article VI. 

        "Investment
Return" shall mean, for each Fund, an amount equal to the net investment performance of such Fund on a given day, as determined by the Committee. 

        "Key
Employee" shall mean (i) officers of the Company having annual compensation greater than $130,000 (adjusted for inflation and limited to 50 employees), (ii) five
percent owners, and (iii) one percent owners having annual compensation from the employer greater than $150,000, all as determined by the Committee in a manner consistent with the regulations
issues under section 409A of the Code. 

        "Participant"
shall mean any Eligible Employee who elects to defer Compensation in accordance with Section 3.1. 

        "Plan"
shall mean the Hilton Hotels 2005 Executive Deferred Compensation Plan set forth herein, in effect as of the Effective Date, or as amended from time to time. 

        "Plan
Year" shall mean the 12 consecutive month period beginning on a January 1. 

        "Retirement"
shall mean a Participant's Separation from Service (for reasons other than death) on or after the combination of the Participant's age and Years of Vesting Service equals at
least 55. 

        "Separation
Date" shall mean the date a Participant incurs a Separation from Service. 

        "Separation
Distribution Account" shall mean the Account maintained for a Participant to which Compensation Deferrals and Company Contributions are credited pursuant to the Separation
Distribution Option. 

        "Separation
Distribution Option" shall mean the Distribution Option pursuant to which benefits are payable in accordance with Article VI. 

        "Separation
from Service" shall mean a Participant's separation from service with the Company within the meaning of section 409A of the Code and the regulations issued thereunder. 

        "Year
of Vesting Service" shall mean a "Year of Vesting Service" as defined in the Hilton Hotels 401(k) Savings Plan. 

ARTICLE II

PARTICIPATION  

        Prior to December 31 of each Plan Year, the Committee shall designate which hotel managers and which Highly Compensated Employees shall become Eligible
Employees for the following Plan Year. An Eligible Employee designated as a Participant shall thereafter, unless otherwise determined by the Committee, be eligible to make a Compensation Deferral for
each Plan Year. Participation in the Plan shall be made conditional upon an Eligible Employee's acknowledgement, in writing or by making a deferral election under the Plan, that all decisions and
determinations of the Committee shall be final and binding on the Participant, his or her beneficiaries and any other person having or claiming an interest under the Plan. 

3

 

ARTICLE III

DEFERRAL ELECTIONS  

3.1—Elections to Defer Compensation.  

        (a)   Each
Eligible Employee may elect to make a Compensation Deferral by filing with the Committee an election that conforms to the requirements set forth in this
Article III, on an Enrollment Agreement provided by the Committee, no later than December 31 of the Plan Year preceding the Plan Year for which the Compensation is to be earned and
specifying whether the Participant elects a Base Salary Deferral or a Bonus Compensation Deferral or a combination, the Distribution Option Accounts to which such amounts will be credited, the form
and timing of distribution and such other information as the Committee shall require. 

        (i)    Notwithstanding
(a) above, if an Eligible Employee's Bonus Compensation is "performance-based compensation" as contemplated by section 409A of the Code and
related regulations, the Committee may allow the Eligible Employee to elect to defer all or a portion of his Bonus Compensation for a Plan Year at a time determined by the Committee, which may be no
less than six months before the end of the applicable Plan Year in which such Bonus Compensation is to be earned. 

        (ii)   The
Eligible Employee shall elect to allocate his or her Compensation Deferrals (and any Company Contributions that may be credited with respect thereto) between the
Distribution Options in whole percentage increments; provided that 100 percent of such Deferrals (and Company Contributions) may be allocated to one or the other of the Distribution Options. 

        (iii)  The
Committee may establish minimum or maximum amounts that may be deferred under this Section and may change such standards from time to time. Any such limits shall
be communicated by the Committee to the Plan Administrator and by the Plan Administrator to the Participants prior to the commencement of a Plan Year. No Participant may have more than one Separation
Distribution Account. 

        (b)   Notwithstanding
anything herein to the contrary, no Eligible Employee shall be permitted to defer Compensation which the Committee reasonably determines is required to
pay the Eligible Employee's portion of payroll taxes and contributions towards benefits (including, but not limited to, medical, life, dental and disability) provided to the Eligible Employee and his
or her dependents. 

        (c)   Any
Compensation Deferral made under Section 3.1(a) above shall remain in effect and be irrevocable, notwithstanding any change in a Participant's Compensation,
for the entire Plan Year for which it is effective and for all subsequent Plan Years unless the Participant files a new Enrollment Agreement changing his or her Compensation Deferral election for a
subsequent Plan Year in accordance with Section 3.1(a) above. If a Participant elects to allocate all or a portion of his Compensation Deferrals to an In-Service Distribution
Account, that election will remain effective only for the Plan Year to which the Enrollment Agreement relates. If the Participant does not elect an in-service distribution date for
deferrals to the In-Service Distribution Account in a subsequent Plan Year, such deferrals shall automatically be allocated to the Participant's Separation Distribution Account.
Compensation Deferral elections shall be made on an Enrollment Agreement filed with the Committee by December 31 of a Plan Year (or such earlier date as may be designated by the Committee) to
make a Compensation Deferral for Compensation to be earned on or after January 1 of the immediately following Plan Year. 

        (d)   The
Committee may, in its discretion, permit Employees who first become Eligible Employees after the beginning of a Plan Year, including Employees who become Eligible
Employees because they are promoted or hired by the Company on or after January 1 of a Plan 

4

 

Year
to a position of Vice President or as a hotel manager designated by the Committee as an Eligible Employee, to enroll in the Plan for that Plan Year by filing a completed and fully executed
Enrollment Agreement as soon as practicable following the date the Employee becomes an Eligible Employee but, in any event, within 30 days after such date. Notwithstanding the foregoing,
however, any Enrollment Agreement executed by an Eligible Employee, pursuant to this Section, to make a Compensation Deferral shall apply only to Compensation earned by the Eligible Employee after the
date on which such Enrollment Agreement is filed. 

        (e)   All
deferral elections under the Plan shall be made in accordance with section 409A of the Code, and the regulations thereunder. 

3.2—Distribution Elections.  

        Subject to Section 3.4, in the Enrollment Agreement, each Eligible Employee shall select the form and the timing of payment with respect to the Eligible
Employee's Compensation Deferral. An Eligible Employee's deferral election under this Article III shall not be effective unless and until the Eligible Employee makes the required distribution
elections under this Section 3.2. Each Eligible Employee shall make the following form and timing of payment elections: 

        (a)    Retirement.    An Eligible Employee shall elect the form of payment in which amounts credited to the Eligible
Employee's Distribution Option Accounts shall be paid where (i) the Eligible Employee's Separation Date occurs on or after eligibility for Retirement and (ii) the amount to be
distributed from all of the Eligible Employee's Distribution Option Accounts exceeds $100,000 (taking into account all deferrals made to all of the Eligible Employee's Distribution Option Accounts),
and shall specify the date on which payments shall commence. The Eligible Employee may elect a lump sum, or quarterly, semi-annual or annual installments payable over 5, 10, 15 or
20 years and may elect a specific date for commencement that is one to ten years following the Eligible Employee's Separation Date but no later than the date on which the Eligible Employee
attains age 65. This election shall apply to all Compensation Deferrals credited on behalf of the Eligible Employee to his Distribution Option Accounts in the Plan Year to which the Enrollment
Agreement relates and all subsequent Plan Years unless changed in a subsequent Enrollment Agreement in accordance with Section 3.4 below. In the event the amount to be distributed from a
Participant's Distribution Option Accounts upon a Separation from Service after eligibility for Retirement does not exceed $100,000 (taking into account all deferrals made to all of the Eligible
Employee's Distribution Option Accounts) as of the applicable distribution date, the Participant's Distribution Option Accounts shall be paid in a lump sum in accordance with Section 6.2
without regard to the Participant's actual form of payment election(s). 

        (b)    In-Service Distribution.    An Eligible Employee shall elect (i) the form of payment in
which amounts credited to the Eligible Employee's In-Service Distribution Account, if applicable, shall be paid where the amount to be distributed exceeds $25,000 and (ii) the Plan
Year in which such payment shall commence; provided that the Plan Year selected in (ii) may not be prior to the third Plan Year following the Plan Year in which the Compensation Deferral is
made. The Eligible Employee may elect a lump sum, or quarterly, semi-annual or annual installments payable over 2, 3, 4 or 5 years. This election shall apply only to the
Compensation Deferrals credited on behalf of the Eligible Employee to the In-Service Distribution Account created pursuant to the Enrollment Form to which such Compensation Deferrals
relate, except to the extent changed pursuant to a subsequent election in accordance with Section 3.4 below. In the event the amount to be distributed from a Participant's
In-Service Distribution Account does not exceed $25,000 as of the applicable distribution date, the Participant's In-Service Distribution Account shall be paid in a lump sum in
accordance with Section 6.2 without regard to the Participant's actual form of payment election(s). If a Participant incurs a Separation from Service prior to the in-service
distribution date elected by the Participant with respect to the Participant's In-Service Distribution 

5

 

Account,
the Participant's distribution election with respect to such In-Service Distribution Account shall become invalid and distribution shall instead be made in accordance with the
Participant's elections under Sections 3.2(a), 3.2(c) or 3.4, as applicable. 

        (c)    Separation from Service.    

        An
Eligible Employee shall elect the form of payment in which amounts credited to the Eligible Employee's Separation Distribution Account, if applicable, shall be paid where
(i) the Eligible Employee's Separation Date occurs prior to eligibility for Retirement, and (ii) the amount to be distributed from all of the Eligible Employee's Distribution Option
Accounts exceeds $100,000 (taking into account all deferrals made to all of the Eligible Employee's Distribution Option Accounts). The Eligible Employee may elect a lump sum, or annual installments
payable over 5 years. This election shall apply to all Compensation Deferrals credited on behalf of the Eligible Employee to his Distribution Option Accounts in the Plan Year to which the
Enrollment Agreement relates and all subsequent Plan Years unless changed in a subsequent Enrollment Agreement in accordance with Section 3.4 below. In the event the amount to be distributed
from a Participant's Distribution Option Accounts upon a Separation from Service before eligibility for Retirement does not exceed $100,000 (taking into account all deferrals made to all of the
Eligible Employee's Distribution Option Accounts) as of the applicable distribution date, the Participant's Distribution Option Accounts shall be paid in a lump sum in accordance with
Section 6.2 without regard to the Participant's actual form of payment election(s). 

3.3—Investment Elections.  

        (a)   At
the time of making the deferral elections described in Section 3.1 and the distribution elections described in Section 3.2, the Participant shall
designate, in a manner prescribed by the Committee, which Funds the Participant's Accounts will be deemed to be invested in for purposes of determining the Investment Return to be credited to those
Accounts. The Funds shall be as selected by the Committee from time to time and the Committee may add, change, or delete Funds at any time. In making the designation pursuant to this
Section 3.3, the Participant may specify that all or any whole percentage of his Accounts be deemed to be invested in one or more of the Funds. A Participant may change the designation made
under this Section 3.3, in a manner prescribed by the Committee, on any business day. Such change shall be effective as soon as administratively feasible after it is received. 

        (b)   If
a Participant fails to elect a type of Fund under this Section 3.3, he or she shall be deemed to have elected an S & P 500 Index Fund (or, if no such
Fund exists, the Fund designated by the Committee). 

        (c)   Although
the Participant may designate the Funds according to Section 3.3(a) above, the Committee shall select from time to time, in its sole discretion, for each
of the Funds described in Section 3.3(a) above, a commercially available mutual fund or contract or an investment fund established with and administered by an investment manager selected by the
Committee. The Investment Return of each such commercially available mutual fund, contract or investment fund shall be used to determine the amount of earnings to be credited to Participants' Accounts
under Article IV although nothing set forth in this Plan shall require an actual investment of monies in any such mutual fund or in any other Fund designated as a deemed investment vehicle for
Compensation Deferrals. 

3.4—Subsequent Elections.  

        The Committee may establish rules allowing a Participant to make a subsequent election to postpone payment of Compensation Deferrals under his
In-Service Distribution Account(s) and/or his Separation Distribution Account, in accordance with the rules in this Section 3.4; provided that any 

6

 

such
subsequent election shall be made in accordance with the requirements of section 409A of the Code and the regulations thereunder and that no subsequent election may result in an
impermissible acceleration of payment as described in section 409A of the Code and the regulations thereunder. The following rules shall apply to subsequent elections under the Plan: 

        (a)   With
respect to Compensation Deferrals under an In-Service Distribution Account, a Participant may make a subsequent election to defer the payment to a later
Plan Year or to change the form of payment applicable to such In-Service Distribution Account; provided that (i) the subsequent election must be made at least 12 months prior
to the January in which the first scheduled payment was to occur, (ii) the subsequent election may not take effect until at least 12 months after the date on which the election is made,
and (iii) except with respect to an election related to payment upon an unforeseeable emergency, the first payment with respect to which such election is made must be deferred for a period of
not less than five years from the date such payment would otherwise have been made. 

        (b)   A
Participant may make a subsequent election to change the date upon which distributions are to commence and/or the form of payment applicable to his Separation
Distribution Account as elected pursuant to Section 3.2(a) above; provided that such election to change shall only apply with respect to Compensation Deferrals relating to Compensation earned
in the Plan Year following the Plan Year in which the election is made and all subsequent Plan Years unless changed for future Compensation in accordance with this Section 3.4. 

        (c)   A
Participant may make a subsequent election to change the form of payment applicable to distributions from his Distribution Option Accounts upon Separation from Service
pursuant to Sections 3.2(c); provided that such election to change shall only apply with respect to Compensation Deferrals relating to Compensation earned in the Plan Year following the Plan Year in
which the election is made and all subsequent Plan Years unless changed for future Compensation Deferrals in accordance with this Section 3.4. 

ARTICLE IV

DISTRIBUTION OPTION ACCOUNTS  

4.1—Compensation Deferrals.  

        The Committee shall establish and maintain separate Distribution Option Accounts with respect to a Participant. A Participant's Distribution Option Accounts may
consist of a Separation Distribution Account and/or one or more In-Service Distribution Account(s), as elected by the Participant. Each Participant's Distribution Option Accounts shall be
further divided into separate subaccounts ("subaccounts"), each of which corresponds to a Fund elected by the Participant pursuant to Section 3.3(a). A Participant's Distribution Option Account
shall be credited as follows: 

        As
soon as practicable after the end of each calendar month, the Committee shall credit the subaccounts of the Participant's Distribution Option Account with an amount equal to the Base
Salary and/or Bonus Compensation that would otherwise have been earned for such calendar month in accordance with the Distribution Option irrevocably elected by the Participant in the Enrollment
Agreement and in accordance with the Participant's investment elections under Section 3.3(a). Any amount once taken into account as Base Salary and/or Bonus Compensation for purposes of this
Plan shall not be taken into account thereafter. The Participant's Distribution Option Accounts shall be reduced by the amount of payments made by the Company to the Participant or the Participant's
Beneficiary pursuant to this Plan. 

7

 

4.2—Company Contribution.  

        A Participant's Distribution Option Account shall be further credited with the Company Contribution for that Participant as follows: 

        (a)   As
soon as practicable after the end of each calendar month, the Committee shall credit the subaccounts of the Participant's Distribution Option Account with an amount
equal to the portion of the Company Contribution, if any, which the Participant elected to be deemed to be invested in a certain type of Fund. A Participant's Company Contribution for any payroll
period shall be equal to 50% of the Compensation Deferral by the Participant during such payroll period in accordance with
the Participant's election under Section 3.1(a), disregarding any such deferral in excess of 10% of the Participant's Compensation for such payroll period. Company Contributions, when credited,
are credited to the Distribution Option Accounts in the same proportion as the Base Salary and/or Bonus Compensation they match; 

        (b)   As
of the last day of each month, forfeitures that occur under Section 5.2 during such month shall be returned to the Company for its unrestricted use; and 

        (c)   Notwithstanding
Sections 4.2(a) and (b) above, from time-to-time and in its sole discretion, the Board may provide that additional Company
Contributions be credited to some or all Participants, according to the terms and conditions determined by the Board. 

4.3—Investment Return.  

        Each subaccount of a Participant's Distribution Option Account shall, as of each business day, be credited with earnings and debited with losses in an amount
equal to that determined by multiplying the balance credited to such subaccount as of the previous day by the Investment Return for the corresponding Fund pursuant to Section 3.3(a). 

ARTICLE V

VESTING  

5.1—Compensation Deferral.  

        A Participant's Compensation Deferral credited to his or her Distribution Option Account shall be 100% vested at all times. 

5.2—Company Contribution.  

        (a)   All
Company Contributions credited to a Participant's Distribution Option Account shall become nonforfeitable in the following increments: (i) 25% upon the
Participant's completion of two Years of Vesting Service, (ii) an additional 25% (50% total) upon completion of three Years of Vesting Service, (iii) an additional 25% (75% total) upon
completion of four Years of Vesting Service, and (iv) the Distribution Option Account balance shall be fully nonforfeitable in its entirety on and after the Participant's completion of five
Years of Vesting Service. 

        (b)   Notwithstanding
Section 5.2(a) above, a Participant's Distribution Option Account balance shall be fully nonforfeitable in its entirety should: (i) the
Participant die while providing service to the Company, (ii) the Participant become Disabled while providing service to the Company, or (iii) there occur a Change in Control. 

        (c)   When
a Participant incurs a Separation Date, the portion of the Company Contribution credited to his or her Distribution Option Account which is not vested shall
immediately be forever forfeited to the Company, and the Company shall have no obligation to the Participant (or Beneficiary) with respect to such forfeited amount. 

8

 

ARTICLE VI

DISTRIBUTIONS  

6.1—Form and Timing of Distribution.  

        (a)   Subject
to Section 6.2, in the case of a Participant whose Separation Date occurs on or after eligibility for Retirement and the vested portion of the
Participant's Separation Distribution Account exceeds $100,000 (taking into account all deferrals made to the Participant's Separation Distribution Account), the Participant's Separation Distribution
Account shall be distributed as of the date and in the form or forms elected by the Participant pursuant to Sections 3.2 and 3.4, as applicable, and shall be paid, or commence to be paid, as soon as
reasonably practicable following the date or dates specified by the Participant. 

        (b)   Subject
to Section 6.2 and to (i) and (ii) below, in the case of a Participant who continues to provide service to the Company and the vested
portion of a Participant's In-Service Distribution Account exceeds $25,000 (applied on an Account by Account basis), the vested portion of the Participant's In-Service
Distribution Account shall be paid to the Participant as soon as reasonable practicable following the date elected by the Participant pursuant to Sections 3.2 and 3.4, as applicable; provided that if
the amount to be distributed does not exceed $25,000, distribution shall be made in a lump sum in accordance with Section 6.2. 

        (i)    If
the Participant is not fully vested when the In-Service Distribution Account is to be paid, the non-vested portion at the date of first
payment will automatically be transferred to the Participant's Separation Distribution Account. 

        (ii)   If
the Participant incurs a Separation from Service after distribution has commenced in accordance with this Section 6.1(b) but prior to the date on which the
Participant's In-Service Distribution Account(s) is fully distributed, distribution of the remaining amounts shall be governed by the Participant's distribution elections under
Section 3.2(a) or 3.2(c), as applicable, and shall be distributed in accordance with Section 6.1(a) or 6.1(c), as applicable. 

        (c)   In
the case of a Participant whose Separation Date occurs prior to the earliest date on which the Participant is eligible for Retirement, other than by reason of death,
and the vested portion of the Participant's Distribution Option Accounts exceeds $100,000 (taking into account all deferrals made to the Participant's Distribution Option Accounts), the vested portion
of a Participant's Distribution Option Accounts shall be distributed in the form or forms elected by the Participant pursuant to Sections 3.2 and 3.4, as applicable. The unvested portion of any
Distribution Option Account shall be forfeited in accordance with Section 5.2. 

6.2—Small Benefit Cashout.  

        (a)   Notwithstanding
any provision of the Plan or election by a Participant to the contrary, in the event the value of the vested portion of a Participant's Separation
Distribution Account does not exceed $100,000 (taking into account all deferrals made to the Eligible Employee's Separation Distribution Account) as of the date the Participant's Account becomes
distributable, then the vested portion of the Participant's Account shall be paid in a lump sum as soon as reasonably practicable following the date the Participant's Account becomes distributable. 

        (b)   Notwithstanding
any provision of the Plan or election by a Participant to the contrary, in the event the value of the vested portion of a Participant's
In-Service Distribution Account does not exceed $25,000 (applied on an Account by Account basis) as of the date the Participant's Account becomes distributable, then the vested portion of
the Participant's Account shall be paid in a lump sum as soon as reasonably practicable following the date the Participant's Account becomes distributable. 

9

 

6.3—Payout.  

        (a)   Any
lump sum benefit payable under this Article VI shall be paid in January of the Plan Year elected by the Participant pursuant to Sections 3.2 and 3.4, as
applicable, in an amount equal to the vested value of the portion of such Distribution Option Account being distributed as of the business day the Funds are deemed to be liquidated to make the
payment. 

        (b)   Installment
payments, if any, payable under this Article VI shall commence in January of the Plan Year elected by the Participant pursuant to Sections 3.2 and
3.4, as applicable, in an amount equal to (i) the vested value of such portion of such Distribution Option Account being distributed as of the business day the Funds are deemed to be liquidated
to make the payment, divided by (ii) the number of installment payments elected by the Participant in the Enrollment Agreement pursuant to which such Distribution Option Account was
established. The remaining installments shall be paid in an amount equal to (i) the vested value of such portion of the Distribution Option Account being distributed as of the business day the
Funds are deemed to be liquidated to make the payment divided by (ii) the number of installments remaining. 

6.4—Distributions to Key Employees.  

        Notwithstanding any provision of the Plan to the contrary, distributions under Sections 6.1(a) and 6.1(c) to Participants who are Key Employees shall be postponed
to a date that is not less than 6 months following the Participant's Separation Date. 

6.5—Financial Hardship of Participant.  

        (a)   At
any time prior to commencement of payment pursuant to this Article VI, a Participant may request payment to him or her of all or a portion of the amounts that
the Participant has deferred under the Plan. The decision to approve or deny such a request shall be in the absolute discretion of the Committee. However, such a request shall be approved only upon a
finding that the Participant has suffered a severe financial hardship which has resulted from an illness or accident of the Participant, the Participant's spouse, or a dependent (as defined in
section 152(a) of the Code) of the Participant, loss of the Participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events
beyond the Participant's control, and then only in an amount necessary to eliminate such hardship plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after
taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or by liquidation of the Participant's assets (to the extent the
liquidation of such assets would not itself cause severe financial hardship). In the event such a request is approved, payment of all or a portion of the amounts previously deferred by the
Participant, with credited interest, to the extent approved by the Committee, shall be made as soon as practicable to the Participant. Amounts otherwise payable to a Participant hereunder shall be
adjusted (as determined by the Committee in its absolute discretion) to take into account such financial hardship payment. The Committee shall administer hardship distribution requests consistently
with section 409A of the Code and the regulations thereunder. 

        (b)   If
a Participant elects to take a hardship distribution prior to June 30 of any Plan Year, the Participant shall be suspended from participation in the Plan for
the remainder of the Plan Year in which the hardship distribution occurs. If a Participant elects to take a hardship distribution on or after June 30 of any Plan Year, the Participant shall be
suspended from Participation in the Plan for the remainder of the Plan Year in which the hardship distribution occurs and the following Plan Year. 

10

 

6.6—Permissible Distribution Event.  

        Notwithstanding any provision of the Plan to the contrary, no distributions shall be made except upon a specified date or event as permitted pursuant to
section 409A of the Code and the regulations thereunder. 

6.7—Payment by Trust.  

        The Company may cause the payment of benefits under this Plan to be made in whole or in part by the trustee of a trust designated by the Committee (the "Trust").
The Committee may direct the Trustee to pay the Participant's or Beneficiary's benefit at the time and in the amount described herein. In the event the amounts allocated to the Participant under the
Trust are not sufficient to provide the full amount of benefit payable to the Participant, the Company shall pay the remainder of such benefit. 

6.8—Inability to Locate Participant.  

        In the event that the Committee is unable to locate a Participant or Beneficiary within two years following the date the Participant was to commence receiving
payment, the entire amount allocated to the Participant's Deferral Account and Company Contribution Account shall be forfeited. If, after such forfeiture, the Participant or Beneficiary later claims
such benefit, such benefit shall be reinstated without interest or earnings from the date payment was to commence pursuant to the Participant's elections under Sections 3.2 and 3.4, as applicable. 

ARTICLE VII

CHANGE IN CONTROL  

        In the event of a Change in Control, any Participant shall receive a distribution of 100% of the value of the Participant's Distribution Option Accounts at the
time of the distribution. Such distribution shall be made in a lump sum within 30 days following the date the Change in Control is consummated, in an amount equal to the value of such
Distribution Option Accounts as of the business day the Funds are deemed to be liquidated to make the payment. 

ARTICLE VIII

DEATH BENEFITS  

        Upon the death of a Participant before his or her Distribution Option Account(s) has been paid in full (either in a lump sum or installment payments), his or her
Beneficiary shall receive the balance of the Participant's vested Account as of the date of death, as adjusted by subsequent gains or losses prior to distribution, in the form of a lump sum payment as
soon as reasonably practicable following the date of the Participant's death. 

ARTICLE IX

CLAIMS PROCEDURES  

9.1—Claims.  

        A Participant or, following the Participant's death, a Beneficiary (collectively referred to in this section as "Claimant") may submit a claim for benefits under
the Plan. Any claim for benefits under this Plan shall be made in writing to the Committee. If such claim for benefits is wholly or partially denied, the Committee shall, within 90 days after
receipt of the claim, notify the Claimant of the denial of the claim unless special circumstances require an extension of time for processing the claim, which extension shall not exceed
180 days from receipt of the claim. If such extension is required, written notice of the extension shall be furnished to the Claimant prior to the termination of the initial 90-day
period and shall indicate the special circumstances requiring an extension of time and the date by 

11

 

which
the Committee expects to render a final decision. A notice of denial shall be in writing, shall be written in a manner calculated to be understood by the Claimant, and shall contain the specific
reason or reasons for denial of the claim, a specific reference to the pertinent Plan provisions upon which the denial is based, a description of the additional material or information (if any)
necessary to perfect the claim, together with an explanation of why such material or information is necessary, and an explanation of the claims review procedure set forth below, including a statement
of the Claimant's right to bring a civil action under section 502(a) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") following an adverse benefit determination on
review. 

9.2—Appeal.  

        Within 60 days after the receipt by a Claimant of a written notice of denial of a claim, the Claimant may file a written request with the Committee
that it conduct a full and fair review of the denial of the claim for benefits. The Claimant, or duly authorized representative, shall receive, upon request and free of charge, reasonable access to,
and copies of, all documents, records and other information relevant to the Claimant's claim for benefits. The Claimant, or duly authorized representative may also submit written comments, documents,
records and other information relating to the claim for benefits, and the review will take into account such items whether or not they were considered in the initial benefit determination. 

        The
Committee shall deliver to the Claimant, or authorized representative, a written decision on the claim within 60 days after the receipt of the request for review, except that
if there are special circumstances that require an extension of time, the 60-day period may be extended to 120 days. If such extension is required, written notice shall be furnished
to the Claimant, or authorized representative, prior to the termination of the initial 60-day period and shall indicate the special circumstances requiring an extension of time and the
date by which the final decision will be rendered. The decision shall be written in a manner calculated to be understood by the Claimant, include the specific reason or reasons for the decision,
include a statement that the Claimant is entitled to receive upon request and free of charge, access to and copies of all documents and other information relevant to the claim, contain a specific
reference to the pertinent Plan provisions upon which the decision is based, and include a statement describing any voluntary appeal procedures offered by the Plan and a statement of the Claimant's
right to bring an action under section 502(a) of ERISA. 

9.3—Authority.  

        The Committee, in determining claims for benefits, shall have the complete discretion to review and determine related factual questions, to construe the terms of
the Plan, and to bind the Company with respect to the Plan. 

ARTICLE X

ADMINISTRATION  

10.1—Committee.  

        A committee shall be appointed by, and serve at the pleasure of, the Board. The number of members comprising the Committee shall be determined by the Board which
may from time to time vary the number of members. A member of the Committee may resign by delivering a written notice of resignation to the Board. The Board may remove any member by delivering a
certified copy of its resolution of removal to such member. Vacancies in the membership of the Committee shall be filled promptly by the Board. 

12

 

10.2—Committee Action.  

        The Committee shall act at meetings by affirmative vote of a majority of the members of the Committee. Any action permitted to be taken at a meeting may be taken
without a meeting if, prior to such action, a written consent to the action is signed by all members of the Committee and such written consent is filed with the minutes of the proceedings of the
Committee. A member of the Committee shall not vote or act upon any matter which relates solely to himself or herself as a Participant. The Chairman or any other member or members of the Committee
designated by the Chairman may execute any certificate or other written direction on behalf of the Committee. 

10.3—Powers and Duties of the Committee.  

        (a)   The
Committee, on behalf of the Participants and their Beneficiaries, shall enforce the Plan in accordance with its terms, shall be charged with the general
administration of the Plan, and shall have all powers necessary to accomplish its purposes, including, but not by way of limitation, the following: 

	(i)
	To
select the mutual funds, contracts or investment funds to be the Funds in accordance with Section 3.3(b) hereof;

	(ii)
	To
construe and interpret the terms and provisions of this Plan and to make factual determinations;

	(iii)
	To
compute and certify to the amount and kinds of benefits payable to Participants and their Beneficiaries;

	(iv)
	To
maintain all records that may be necessary for the administration of the Plan;

	(v)
	To
provide for the disclosure of all information and the filing or provision of all reports and statements to Participants, Beneficiaries or governmental agencies as shall be required
by law;

	(vi)
	To
make and publish such rules for the regulation of the Plan and procedures for the administration of the Plan as are not inconsistent with the terms hereof; and

	(vii)
	To
appoint a plan administrator or any other agent, and to delegate to them such powers and duties in connection with the administration of the Plan as the Committee may from time
to time prescribe.

	(viii)
	On
behalf of the Company, to select those Highly Compensated Employees who shall be Eligible Employees. 

10.4—Construction and Interpretation.  

        (a)   The
Committee shall have full discretion to construe and interpret the terms and provisions of this Plan, which interpretation or construction shall be final and binding
on all parties, including but not limited to, the Company and any Participant or Beneficiary. The Committee shall administer such terms and provisions in a uniform and nondiscriminatory manner and in
full accordance with any and all laws applicable to the Plan. 

        (b)   Nothing
contained in the Plan shall be construed to prevent the Company from taking any action which is deemed by it to be appropriate or in its best interest. No
Participant, Beneficiary, or other person shall have any claim against the Company as a result of such action. Any decisions, actions or interpretations to be made under the Plan by the Company or the
Board, or the Committee acting on behalf of the Company, shall be made in its respective sole discretion, not as a fiduciary, need not be uniformly applied to similarly situated individuals and shall
be final, binding and conclusive on all persons interested in the Plan. 

13

 

10.5—Information.  

        To enable the Committee to perform its functions, the Company shall supply full and timely information to the Committee on all matters relating to the
Compensation of all Participants, their death, Disability, or other cause of termination, and such other pertinent facts as the Committee may require. 

10.6—Compensation, Expenses and Indemnity.  

        (a)   The
Committee is authorized at the expense of the Company to employ such legal counsel as it may deem advisable to assist in the performance of its duties hereunder.
Expenses and fees in connection with the administration of the Plan shall be paid by the Company. 

        (b)   To
the extent permitted by applicable state law, the Company shall indemnify and save harmless the Committee and each member thereof, the Board and any delegate of the
Committee who is an employee of the Company against any and all expenses, liabilities and claims, including legal fees to defend against such liabilities and claims arising out of their discharge in
good faith of responsibilities under or incident to the Plan, other than expenses and liabilities arising out of willful misconduct. This indemnity shall not preclude such further indemnities as may
be available under insurance purchased by the Company or provided by the Company under any bylaw, agreement or otherwise, as such indemnities are permitted under state law. 

10.7—Quarterly Statements.  

        Under procedures established by the Committee, a Participant shall receive a statement with respect to such Participant's Accounts on a quarterly basis as of each
March 31, June 30, September 30 and December 31. 

ARTICLE XI

MISCELLANEOUS  

11.1—Unsecured General Creditor.  

        Participants and their Beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights, claims, or interest in any specific property or
assets of the Company. No assets of the Company shall be held under any trust, or held in any way as collateral security for the fulfilling of the obligations of the Company under this Plan. Any and
all of the Company's assets shall be, and remain, the general unpledged, unrestricted assets of the Company. The Company's obligation under the Plan shall be merely that of an unfunded and unsecured
promise of the Company to pay money in the future, and the rights of the Participants and Beneficiaries shall be no greater than those of unsecured general creditors. 

11.2—Restriction Against Assignment.  

        The Company shall pay all amounts payable hereunder only to the person or persons designated by the Plan and not to any other person or corporation. No part of a
Participant's Accounts shall be liable for the debts, contracts, or engagements of any Participant, his or her Beneficiary, or successors in interest, nor shall a Participant's Accounts be subject to
execution by levy, attachment, or garnishment or by any other legal or equitable proceeding, nor shall any such person have any right to alienate, anticipate, commute, pledge, encumber, or assign any
benefits or payments hereunder in any manner whatsoever. If any Participant, Beneficiary or successor in interest is adjudicated bankrupt or purports to anticipate, alienate, sell, transfer, assign,
pledge, encumber or charge any distribution or payment from the Plan, voluntarily or involuntarily, the Committee, in its discretion, may cancel such 

14

 

distribution
or payment (or any part thereof) to or for the benefit of such Participant, Beneficiary or successor in interest in such mariner as the Committee shall direct. 

11.3—Withholding.  

        There shall be deducted from each payment made under the Plan or any other compensation payable to the Participant (or Beneficiary) all taxes which are required
to be withheld by the Company in respect to such payment or this Plan. The Company shall have the right to reduce any payment (or compensation) by the amount of cash sufficient to provide the amount
of said taxes. 

11.4—Amendment, Modification, Suspension or Termination.  

        It is the intention of the Company to continue the Plan and to distribute benefits to Participants in accordance with Article 6 in the absence of the
development of circumstances concerning construction or operation of the Plan which are materially adverse to the Company or the Participants. However, the Committee or the Board may at any time, or
from time to time, in its sole discretion amend or terminate the Plan in any manner that the Committee or Board deems appropriate, including amending or terminating outstanding deferral elections, if
necessary or appropriate to comply with changes to applicable law, without the consent of any Participant. In the event the Committee or the Board acts to terminate the Plan, distribution to
Participant shall be made in accordance with Article 6, unless an alternative method of distribution is permitted under applicable law. 

11.5—Governing Law.  

        This Plan shall be construed, governed and administered in accordance with the laws of the State of California. 

11.6—Receipt or Release.  

        Any payment to a Participant or the Participant's Beneficiary in accordance with the provisions of the Plan shall, to the extent thereof, be in full satisfaction
of all claims against the Committee, the Company and the Trustee. The Committee may require such Participant or Beneficiary, as a condition precedent to such payment, to execute a receipt and release
to such effect. 

11.7—Payments on Behalf of Persons Under Incapacity.  

        In the event that any amount becomes payable under the Plan to a person who, in the sole judgement of the Committee, is considered by reason of physical or mental
condition to be unable to give a valid receipt therefore, the Committee may direct that such payment be made to any person found by the Committee, in its sole judgement, to have assumed the care of
such person. Any payment made pursuant to such determination shall constitute a full release and discharge of the Committee and the Company. 

11.8—Headings.  

        Headings and subheadings in this Plan are inserted for convenience of reference only and are not to be considered in the construction of the provisions hereof. 

        IN
WITNESS WHEREOF, the Company has caused this document to be executed by its duly authorized officer to be effective as of the Effective Date stated herein. 

	 	 	HILTON HOTELS CORPORATION
	

 	
 	

 	

 
	 	 	By:	/s/  MOLLY MCKENZIE-SWARTS      
	 	 	Its:	Senior Vice President, Human Resources
	 	 	 	 

15

QuickLinks

Exhibit 4.1Exhibit 4(i)

 

 

K. HOVNANIAN ENTERPRISES, INC.,

as Issuer

 

HOVNANIAN ENTERPRISES, INC.

and

the other Guarantors party hereto

 

and

 

WACHOVIA BANK, NATIONAL ASSOCIATION,

as Senior Trustee

 

 

Indenture

 

Dated as of November 30, 2004

 

 

61/4% Senior
Notes Due 2015

 

 

 

CROSS-REFERENCE TABLE

 

	
  TIA Sections

  	
   

  	
  Indenture Sections

  
	
   

  	
   

  	
   

  
	
  310

  	
  (a)

  	
   

  	
  7.10

  
	
   

  	
  (b)

  	
   

  	
  7.08

  
	
   

  	
  (c)

  	
   

  	
  Inapplicable

  
	
  311

  	
   

  	
   

  	
  Inapplicable

  
	
  312

  	
   

  	
   

  	
  11.02

  
	
  313

  	
   

  	
   

  	
  7.06

  
	
  314

  	
  (a)

  	
   

  	
  4.15, 4.16

  
	
   

  	
  (b)

  	
   

  	
  Inapplicable

  
	
   

  	
  (c)

  	
   

  	
  11.04

  
	
   

  	
  (d)

  	
   

  	
  Inapplicable

  
	
   

  	
  (e)

  	
   

  	
  11.05

  
	
   

  	
  (f)

  	
   

  	
  Inapplicable

  
	
  315

  	
  (a)

  	
   

  	
  7.01, 7.02

  
	
   

  	
  (b)

  	
   

  	
  7.02, 7.05

  
	
   

  	
  (c)

  	
   

  	
  7.01

  
	
   

  	
  (d)

  	
   

  	
  7.02

  
	
   

  	
  (e)

  	
   

  	
  5.09

  
	
  316

  	
  (a)

  	
   

  	
  2.06, 5.01, 5.03, 5.04

  
	
   

  	
  (b)

  	
   

  	
  5.06

  
	
   

  	
  (c)

  	
   

  	
  11.02

  
	
  317

  	
  (a)(1)

  	
   

  	
  5.07

  
	
   

  	
  (a)(2)

  	
   

  	
  5.07

  
	
   

  	
  (b)

  	
   

  	
  2.03

  
	
  318

  	
   

  	
   

  	
  11.01

  

 

 

TABLE OF CONTENTS

 

	
  RECITALS

  	
   

  
	
   

  	
   

  
	
  ARTICLE 1

  	
   

  
	
  Definitions and
  Incorporation by Reference

  	
   

  
	
   

  	
   

  
	
  Section 1.01. Definitions.

  	
   

  
	
  Section 1.02. Rules of Construction

  	
   

  
	
   

  	
   

  
	
  ARTICLE 2

  	
   

  
	
  The Notes

  	
   

  
	
   

  	
   

  
	
  Section
  2.01. Form, Dating and Denominations;
  Legends

  	
   

  
	
  Section
  2.02. Execution and Authentication;
  Exchange Notes; Additional Notes

  	
   

  
	
  Section
  2.03. Registrar, Paying Agent and
  Authenticating Agent; Paying Agent to Hold Money in Trust

  	
   

  
	
  Section
  2.04. Replacement Notes

  	
   

  
	
  Section
  2.05. Outstanding Notes

  	
   

  
	
  Section
  2.06. Temporary Notes

  	
   

  
	
  Section
  2.07. Cancellation

  	
   

  
	
  Section
  2.08. CUSIP and ISIN Numbers

  	
   

  
	
  Section
  2.09. Registration, Transfer and Exchange

  	
   

  
	
  Section
  2.10. Restrictions on Transfer and Exchange

  	
   

  
	
  Section
  2.11. Regulation S Temporary Global Notes

  	
   

  
	
   

  	
   

  
	
  ARTICLE 3

  	
   

  
	
  Redemption; Offer to
  Purchase

  	
   

  
	
   

  	
   

  
	
  Section
  3.01. Optional Redemption

  	
   

  
	
  Section
  3.02. Sinking Fund; Mandatory Redemption

  	
   

  
	
  Section
  3.03. Method And Effect of Redemption

  	
   

  
	
  Section
  3.04. Offer to Purchase

  	
   

  
	
   

  	
   

  
	
  ARTICLE 4

  	
   

  
	
  Covenants

  	
   

  
	
   

  	
   

  
	
  Section
  4.01. Payment of Notes

  	
   

  
	
  Section
  4.02. Maintenance of Office or Agency

  	
   

  
	
  Section
  4.03. Existence

  	
   

  
	
  Section
  4.04. Payment of Taxes and Other Claims

  	
   

  

 

i

 

	
  Section
  4.05. Maintenance of Properties and
  Insurance

  	
   

  
	
  Section
  4.06. Limitations on Indebtedness

  	
   

  
	
  Section
  4.07. Limitations on Restricted Payments

  	
   

  
	
  Section
  4.08. Limitations on Liens

  	
   

  
	
  Section
  4.09. Limitations on Restrictions
  Affecting Restricted Subsidiaries

  	
   

  
	
  Section
  4.10. Limitations on Dispositions of
  Assets

  	
   

  
	
  Section
  4.11. Guarantees By Restricted
  Subsidiaries

  	
   

  
	
  Section
  4.12. Repurchase of Notes upon a Change of
  Control

  	
   

  
	
  Section
  4.13. Limitations on Transactions with
  Affiliates

  	
   

  
	
  Section
  4.14. Limitations on Mergers,
  Consolidations and Sales of Assets

  	
   

  
	
  Section
  4.15. Reports to Holders of Notes

  	
   

  
	
  Section
  4.16. Reports to Senior Trustee

  	
   

  
	
  Section
  4.17. Notice of Other Defaults

  	
   

  
	
  Section
  4.18. Limitation of Applicability of
  Certain Covenants if Notes Rated Investment Grade

  	
   

  
	
   

  	
   

  
	
  ARTICLE 5

  	
   

  
	
  Remedies

  	
   

  
	
   

  	
   

  
	
  Section
  5.01. Events of Default

  	
   

  
	
  Section
  5.02. Other Remedies

  	
   

  
	
  Section
  5.03. Waiver of Defaults by Majority of
  Holders

  	
   

  
	
  Section
  5.04. Direction of Proceedings

  	
   

  
	
  Section
  5.05. Application of Moneys Collected by
  Senior Trustee

  	
   

  
	
  Section
  5.06. Proceedings by Holders

  	
   

  
	
  Section
  5.07. Proceedings by Senior Trustee

  	
   

  
	
  Section
  5.08. Remedies Cumulative and Continuing

  	
   

  
	
  Section
  5.09. Undertaking to Pay Costs

  	
   

  
	
  Section
  5.10. Notice of Defaults

  	
   

  
	
  Section
  5.11. Waiver of Stay, Extension or Usury
  Laws

  	
   

  
	
  Section
  5.12. Senior Trustee May File Proof of
  Claim

  	
   

  
	
  Section
  5.13. Payment of Notes on Default; Suit
  Therefor

  	
   

  
	
   

  	
   

  
	
  ARTICLE 6

  	
   

  
	
  Guarantees; Release of
  Guarantor

  	
   

  
	
   

  	
   

  
	
  Section
  6.01. Guarantee

  	
   

  
	
  Section
  6.02. Obligations of each Guarantor
  Unconditional

  	
   

  
	
  Section
  6.03. Release of a Guarantor

  	
   

  
	
  Section
  6.04. Execution and Delivery of Guarantee

  	
   

  
	
  Section
  6.05. Limitation on Guarantor Liability

  	
   

  
	
  Section
  6.06. Article 6 Not to Prevent Events of
  Default

  	
   

  
	
  Section
  6.07. Waiver by the Guarantors

  	
   

  
	
  Section
  6.08. Subrogation and Contribution

  	
   

  
	
  Section
  6.09. Stay of Acceleration

  	
   

  

 

ii

 

	
  Section
  6.10. Guarantors as “obligors” for
  Provisions Included in the Indenture Pursuant to the Trust Indenture Act

  	
   

  
	
   

  	
   

  
	
  ARTICLE 7

  	
   

  
	
  The
  Senior Trustee

  	
   

  
	
   

  	
   

  
	
  Section
  7.01. General

  	
   

  
	
  Section
  7.02. Certain Rights of the Senior Trustee

  	
   

  
	
  Section
  7.03. Individual Rights of the Senior
  Trustee

  	
   

  
	
  Section
  7.04. Senior Trustee’s Disclaimer

  	
   

  
	
  Section
  7.05. Reserved.

  	
   

  
	
  Section
  7.06. Reports by Senior Trustee to Holders

  	
   

  
	
  Section
  7.07. Compensation and Indemnity

  	
   

  
	
  Section
  7.08. Replacement of Senior Trustee

  	
   

  
	
  Section
  7.09. Successor Senior Trustee by Merger

  	
   

  
	
  Section
  7.10. Eligibility

  	
   

  
	
  Section
  7.11. Money Held in Trust

  	
   

  
	
   

  	
   

  
	
  ARTICLE 8

  	
   

  
	
  Defeasance and Discharge

  	
   

  
	
   

  	
   

  
	
  Section
  8.01. Legal Defeasance And Discharge

  	
   

  
	
  Section
  8.02. Covenant Defeasance

  	
   

  
	
  Section
  8.03. Conditions To Legal Or Covenant
  Defeasance

  	
   

  
	
  Section
  8.04. Deposited Money And Government
  Securities To Be Held In Trust; Other Miscellaneous Provisions

  	
   

  
	
  Section
  8.05. Repayment To Issuer

  	
   

  
	
  Section 8.06.
  Reinstatement

  	
   

  
	
  Section
  8.07. Survival

  	
   

  
	
  Section
  8.08. Satisfaction and Discharge of
  Indenture

  	
   

  
	
   

  	
   

  
	
  ARTICLE 9

  	
   

  
	
  Amendments,
  Supplements and Waivers

  	
   

  
	
   

  	
   

  
	
  Section
  9.01. Amendments Without Consent of
  Holders

  	
   

  
	
  Section
  9.02. Amendments With Consent of Holders

  	
   

  
	
  Section
  9.03. Effect of Consent

  	
   

  
	
  Section
  9.04. Senior Trustee’s Rights and
  Obligations

  	
   

  
	
  Section
  9.05. Conformity with Trust Indenture Act

  	
   

  
	
  Section
  9.06. Payments for Consents

  	
   

  
	
   

  	
   

  
	
  ARTICLE 10

  	
   

  
	
  Release of
  Issuer and Guarantors

  	
   

  
	
   

  	
   

  
	
  Section
  10.01. Release of Issuer

  	
   

  

 

iii

 

	
  ARTICLE 11

  	
   

  
	
  Miscellaneous

  	
   

  
	
   

  	
   

  
	
  Section
  11.01. Trust Indenture Act of 1939

  	
   

  
	
  Section
  11.02. Holder Communications; Holder
  Actions

  	
   

  
	
  Section
  11.03. Notices

  	
   

  
	
  Section
  11.04. Certificate and Opinion as to
  Conditions Precedent

  	
   

  
	
  Section
  11.05. Statements Required in Certificate
  or Opinion

  	
   

  
	
  Section
  11.06. Payment Date Other Than a Business
  Day

  	
   

  
	
  Section
  11.07. Governing Law

  	
   

  
	
  Section
  11.08. No Adverse Interpretation of Other
  Agreements

  	
   

  
	
  Section
  11.09. Successors

  	
   

  
	
  Section
  11.10. Duplicate Originals

  	
   

  
	
  Section
  11.11. Separability

  	
   

  
	
  Section
  11.12. Table of Contents and Headings

  	
   

  
	
  Section
  11.13. No Liability of Directors,
  Officers, Employees, Partners, Incorporators and Stockholders

  	
   

  
	
  Section
  11.14. Provisions of Indenture for the
  Sole Benefit of Parties and Holders of Notes

  	
   

  

 

iv

 

EXHIBITS

 

	
  EXHIBIT A

  	
   

  	
  Form of Note

  
	
  EXHIBIT B

  	
   

  	
  Form of
  Supplemental Indenture

  
	
  EXHIBIT C

  	
   

  	
  Restricted
  Legend

  
	
  EXHIBIT D

  	
   

  	
  DTC Legend

  
	
  EXHIBIT E

  	
   

  	
  Regulation S
  Certificate

  
	
  EXHIBIT F

  	
   

  	
  Rule 144A
  Certificate

  
	
  EXHIBIT G

  	
   

  	
  Institutional
  Accredited Investor Certificate

  
	
  EXHIBIT H

  	
   

  	
  Certificate of
  Beneficial Ownership

  
	
  EXHIBIT I

  	
   

  	
  Regulation S
  Temporary Global Note Legend

  

 

v

 

INDENTURE, dated as of November 30, 2004, among K.
HOVNANIAN ENTERPRISES, INC., a California corporation (the “Issuer”), HOVNANIAN ENTERPRISES, INC., a
Delaware corporation (the “Company”),
each of the other Guarantors (as defined hereafter) and WACHOVIA BANK, NATIONAL
ASSOCIATION, as Senior Trustee (the “Senior
Trustee”).

 

RECITALS

 

The Issuer has duly authorized the execution and
delivery of the Indenture to provide for the issuance of up to $200,000,000
aggregate principal amount of the Issuer’s 61/4% Senior
Notes Due 2015, and, if and when issued, any Initial Additional Notes (together
with any Exchange Notes issued therefor as provided herein, the “Notes”). 
All things necessary to make the Indenture a valid agreement of the
Issuer, in accordance with its terms, have been done, and the Issuer has done
all things necessary to make the Notes (in the case of any Additional Notes,
when duly authorized), when duly issued and executed by the Issuer and
authenticated and delivered by the Senior Trustee, the valid obligations of the
Issuer as hereinafter provided.

 

In addition, the Guarantors party hereto have duly
authorized the execution and delivery of the Indenture as guarantors of the
Notes.  All things necessary to make the
Indenture a valid agreement of each Guarantor, in accordance with its terms,
have been done, and each Guarantor has done all things necessary to make the
Guarantees (in the case of the Guarantee of any Additional Notes, when duly
authorized), when duly issued and executed by each Guarantor and when the Notes
have been authenticated and delivered by the Senior Trustee, the valid
obligation of such Guarantor as hereinafter provided.

 

This Indenture is subject to, and will be governed by,
the provisions of the Trust Indenture Act that are required to be a part of,
and govern indentures qualified under, the Trust Indenture Act.

 

THIS INDENTURE WITNESSETH

 

For and in consideration of the premises and the
purchase of the Notes by the Holders thereof, the parties hereto covenant and
agree, for the equal and proportionate benefit of all Holders, as follows:

 

ARTICLE 1

Definitions and Incorporation by Reference

 

Section
1.01.  Definitions.

 

“Acquired
Indebtedness” means (a) with respect to any Person that becomes a
Restricted Subsidiary (or is merged into the Company, the Issuer or

 

1

 

any Restricted
Subsidiary) after the Issue Date, Indebtedness of such Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
(or is merged into the Company, the Issuer or any Restricted Subsidiary) that
was not incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary (or being merged into the Company, the Issuer
or any Restricted Subsidiary) and (b) with respect to the Company, the Issuer
or any Restricted Subsidiary, any Indebtedness expressly assumed by the
Company, the Issuer or any Restricted Subsidiary in connection with the
acquisition of any assets from another Person (other than the Company, the
Issuer or any Restricted Subsidiary), which Indebtedness was not incurred by
such other Person in connection with or in contemplation of such acquisition.  Indebtedness incurred in connection with or
in contemplation of any transaction described in clause (a) or (b) of the
preceding sentence shall be deemed to have been incurred by the Company or a
Restricted Subsidiary, as the case may be, at the time such Person becomes a
Restricted Subsidiary (or is merged into the Company, the Issuer or any
Restricted Subsidiary) in the case of clause (a) or at the time of the
acquisition of such assets in the case of clause (b), but shall not be deemed
Acquired Indebtedness.

 

“Additional Interest”
means additional interest or liquidated damages owed to the Holders pursuant to
a Registration Rights Agreement.

 

“Additional Notes”
means any notes of the Issuer issued under the Indenture in addition to the
Original Notes, including any Exchange Notes issued in exchange for such
Additional Notes, having the same terms in all respects as the Original Notes
except that interest will accrue on the Additional Notes from their date of
issuance.

 

“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.

 

“Affiliate
Transaction” has the meaning ascribed to it in Section 4.13 hereof.

 

“Agent” means
any Registrar, Paying Agent or Authenticating Agent.

 

“Agent Member”
means a member of, or a participant in, the Depositary.

 

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

 

2

 

“Asset Acquisition”
means (a) an Investment by the Company, the Issuer or any Restricted Subsidiary
in any other Person if, as a result of such Investment, such Person shall
become a Restricted Subsidiary or shall be consolidated or merged with or into
the Company, the Issuer or any Restricted Subsidiary or (b) the acquisition by
the Company, the Issuer or any Restricted Subsidiary of the assets of any
Person, which constitute all or substantially all of the assets or of an
operating unit or line of business of such Person or which is otherwise outside
the ordinary course of business.

 

“Asset Disposition”
means any sale, transfer, conveyance, lease or other disposition (including,
without limitation, by way of merger, consolidation or sale and leaseback or
sale of shares of Capital Stock in any Subsidiary) (each, a “transaction”) by the Company, the Issuer or
any Restricted Subsidiary to any Person of any Property having a Fair Market
Value in any transaction or series of related transactions of at least $5
million. The term “Asset Disposition”
shall not include:

 

(a)                                  a
transaction between the Company, the Issuer and any Restricted Subsidiary or a
transaction between Restricted Subsidiaries,

 

(b)                       a
transaction in the ordinary course of business, including, without limitation,
sales (directly or indirectly), dedications and other donations to governmental
authorities, leases and sales and leasebacks of (i) homes, improved land and
unimproved land and (ii) real estate (including related amenities and
improvements),

 

(c)                        a
transaction involving the sale of Capital Stock of, or the disposition of
assets in, an Unrestricted Subsidiary,

 

(d)                       any
exchange or swap of assets of the Company, the Issuer or any Restricted
Subsidiary for assets that (i) are to be used by the Company, the Issuer or any
Restricted Subsidiary in the ordinary course of its Real Estate Business and
(ii) have a Fair Market Value not less than the Fair Market Value of the assets
exchanged or swapped,

 

(e)                        any
sale, transfer, conveyance, lease or other disposition of assets and properties
that is governed by Section 4.14 hereof, or

 

(f)                          dispositions
of mortgage loans and related assets and mortgage-backed securities in the
ordinary course of a mortgage lending business.

 

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

 

3

 

“Authenticating
Agent” refers to a Person engaged to authenticate the Notes in the
stead of the Senior Trustee.

 

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

 

“Board of Directors”
means, when used with reference to the Issuer or the Company, as the case may
be, the board of directors or any duly authorized committee of that board or
any director or directors and/or officer or officers to whom that board or
committee shall have duly delegated its authority.

 

“Board Resolution”
means a resolution duly adopted by the Board of Directors which, as of the date
of any certification thereof, remains in full force and effect.

 

“Business Day”
means any day except a Saturday, Sunday or other day on which commercial banks
in New York City or in the city where the Corporate Trust Office of the Senior
Trustee is located are authorized or required by law or regulation to close.

 

“Capital Stock”
means, with respect to any Person, any and all shares, interests,
participations or other equivalents (however designated) of or in such Person’s
capital stock or other equity interests, and options, rights or warrants to
purchase such capital stock or other equity interests, whether now outstanding
or issued after the Issue Date, including, without limitation, all Disqualified
Stock and Preferred Stock.

 

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

 

“Cash Equivalents”
means

 

(a)                                  U.S.
dollars;

 

(b)                                 securities
issued or directly and fully guaranteed or insured by the U.S. government or
any agency or instrumentality thereof having maturities of one year or less
from the date of acquisition;

 

(c)                                  certificates
of deposit and eurodollar time deposits with maturities of one year or less
from the date of acquisition, bankers’ acceptances with maturities not
exceeding six months and overnight bank deposits, in each case

 

4

 

with any domestic
commercial bank having capital and surplus in excess of $500 million;

 

(d)                                 repurchase
obligations with a term of not more than seven days for underlying securities
of the types described in clauses (b) and (c) entered into with any financial
institution meeting the qualifications specified in clause (c) above;

 

(e)                                  commercial
paper rated P-1, A-1 or the equivalent thereof by Moody’s or S&P,
respectively, and in each case maturing within six months after the date of
acquisition; and

 

(f)                                    investments
in money market funds substantially all of the assets of which consist of
securities described in the foregoing clauses (a) through (e).

 

“cash transaction”
has the meaning ascribed to it in Section 7.03 hereof.

 

“Certificate of
Beneficial Ownership” means a certificate substantially in the form
of Exhibit H.

 

“Certificated Note”
means a Note in registered individual form without interest coupons.

 

“Change of Control”
means

 

(a)                                  any
sale, lease or other transfer (in one transaction or a series of transactions)
of all or substantially all of the consolidated assets of the Company and its
Restricted Subsidiaries to any Person (other than a Restricted Subsidiary); provided, however,
that a transaction where the holders of all classes of Common Equity of the
Company immediately prior to such transaction own, directly or indirectly, more
than 50% of all classes of Common Equity of such Person immediately after such
transaction shall not be a Change of Control;

 

(b)                                 a
“person” or “group” (within the meaning of Section 13(d)
of the Exchange Act (other than (x) the Company or (y) the Permitted Hovnanian
Holders)) becomes the “beneficial owner”
(as defined in Rule 13d-3 under the Exchange Act) of Common Equity of the
Company representing more than 50% of the voting power of the Common Equity of
the Company;

 

(c)                                  Continuing
Directors cease to constitute at least a majority of the Board of Directors of
the Company;

 

(d)                                 the
stockholders of the Company approve any plan or proposal for the liquidation or
dissolution of the Company; provided,
however, that a liquidation or
dissolution of the Company which is part of a transaction that does

 

5

 

not constitute a
Change of Control under the proviso contained in clause (a) above shall not
constitute a Change of Control; or

 

(e)                                  a
change of control shall occur as defined in the instrument governing any
publicly traded debt securities of the Company or the Issuer which requires the
Company or the Issuer to repay or repurchase such debt securities.

 

“Clearstream”
means Clearstream Banking, société anonyme, Luxembourg, formerly Cedelbank.

 

“Commission”
means the Securities and Exchange Commission.

 

“Common Equity”
of any Person means Capital Stock of such Person that is generally entitled to
(a) vote in the election of directors of such Person or (b) if such Person is
not a corporation, vote or otherwise participate in the selection of the governing
body, partners, managers or others that will control the management or policies
of such Person.

 

“Company”
has the meaning ascribed to it in the preamble hereof and shall also refer to
any successor obligor under the Indenture and its Guarantee(s).

 

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

 

“Consolidated Cash
Flow Available for Fixed Charges” means, for any period,
Consolidated Net Income for such period plus (each to the extent deducted in
calculating such Consolidated Net Income and determined in accordance with
GAAP) the sum for such period, without duplication, of:

 

(a)                                  income
taxes,

 

(b)                                 Consolidated
Interest Expense,

 

(c)                                  depreciation
and amortization expenses and other non-cash charges to earnings, and

 

(d)                                 interest
and financing fees and expenses which were previously capitalized and which are
amortized to cost of sales, minus

 

all other non-cash
items (other than the receipt of notes receivable) increasing such Consolidated
Net Income.

 

6

 

“Consolidated Fixed
Charge Coverage Ratio” means, with respect to any determination
date, the ratio of (x) Consolidated Cash Flow Available for Fixed Charges for
the prior four full fiscal quarters (the “Four
Quarter Period”) for which financial results have been reported
immediately preceding the determination date (the “Transaction Date”), to (y) the aggregate Consolidated Interest
Incurred for the Four Quarter Period. For purposes of this definition, “Consolidated Cash Flow Available for Fixed Charges”
and “Consolidated Interest Incurred”
shall be calculated after giving effect on a pro
forma basis for the period of such calculation to:

 

(a)                                  the
incurrence or the repayment, repurchase, defeasance or other discharge or the
assumption by another Person that is not an Affiliate (collectively, “repayment”) of any Indebtedness of the
Company, the Issuer or any Restricted Subsidiary (and the application of the
proceeds thereof) giving rise to the need to make such calculation, and any
incurrence or repayment of other Indebtedness (and the application of the
proceeds thereof), at any time on or after the first day of the Four Quarter
Period and on or prior to the Transaction Date, as if such incurrence or
repayment, as the case may be (and the application of the proceeds thereof),
occurred on the first day of the Four Quarter Period, except that Indebtedness
under revolving credit facilities shall be deemed to be the average daily
balance of such Indebtedness during the Four Quarter Period (as reduced on such
pro forma basis by the
application of any proceeds of the incurrence of Indebtedness giving rise to
the need to make such calculation);

 

(b)                                 any
Asset Disposition or Asset Acquisition (including, without limitation, any
Asset Acquisition giving rise to the need to make such calculation as a result
of the Company, the Issuer or any Restricted Subsidiary (including any Person
that becomes a Restricted Subsidiary as a result of any such Asset Acquisition)
incurring Acquired Indebtedness at any time on or after the first day of the
Four Quarter Period and on or prior to the Transaction Date), as if such Asset
Disposition or Asset Acquisition (including the incurrence or repayment of any
such Indebtedness) and the inclusion, notwithstanding clause (b) of the
definition of “Consolidated Net Income,” of any Consolidated Cash Flow
Available for Fixed Charges associated with such Asset Acquisition as if it
occurred on the first day of the Four Quarter Period; provided, however, that the Consolidated Cash
Flow Available for Fixed Charges associated with any Asset Acquisition shall
not be included to the extent the net income so associated would be excluded
pursuant to the definition of “Consolidated Net Income,” other than clause (b)
thereof, as if it applied to the Person or assets involved before they were
acquired; and

 

(c)                                  the
Consolidated Cash Flow Available for Fixed Charges and the Consolidated
Interest Incurred attributable to discontinued operations, as determined in
accordance with GAAP, shall be excluded.

 

7

 

Furthermore, in calculating “Consolidated Cash Flow
Available for Fixed Charges” for purposes of determining the denominator (but
not the numerator) of this “Consolidated Fixed Charge Coverage Ratio,”

 

(a)                                  interest
on Indebtedness in respect of which a pro
forma calculation is required that is determined on a fluctuating
basis as of the Transaction Date (including Indebtedness actually incurred on
the Transaction Date) and which will continue to be so determined thereafter
shall be deemed to have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transaction Date, and

 

(b)                                 notwithstanding
clause (a) above, interest on such Indebtedness determined on a fluctuating
basis, to the extent such interest is covered by agreements relating to
Interest Protection Agreements, shall be deemed to accrue at the rate per annum
resulting after giving effect to the operation of such agreements.

 

“Consolidated Interest
Expense” of the Company for any period means the Interest Expense of
the Company, the Issuer and the Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP.

 

“Consolidated
Interest Incurred” for any period means the Interest Incurred of the
Company, the Issuer and the Restricted Subsidiaries for such period, determined
on a consolidated basis in accordance with GAAP.

 

“Consolidated Net
Income” for any period means the aggregate net income (or loss) of
the Company and its Subsidiaries for such period, determined on a consolidated
basis in accordance with GAAP; provided,
that there will be excluded from such net income (loss) (to the extent
otherwise included therein), without duplication:

 

(a)                                  the
net income (or loss) of (x) any Unrestricted Subsidiary (other than a Mortgage
Subsidiary) or (y) any Person (other than a Restricted Subsidiary or a Mortgage
Subsidiary) in which any Person other than the Company, the Issuer or any
Restricted Subsidiary has an ownership interest, except, in each case, to the
extent that any such income has actually been received by the Company, the
Issuer or any Restricted Subsidiary in the form of cash dividends or similar
cash distributions during such period, which dividends or distributions are not
in excess of the Company’s, the Issuer’s or such Restricted Subsidiary’s (as
applicable) pro rata share of such Unrestricted Subsidiary’s or such other
Person’s net income earned during such period,

 

(b)                                 except
to the extent includable in Consolidated Net Income pursuant to the foregoing
clause (a), the net income (or loss) of any Person that accrued prior to the
date that (i) such Person becomes a Restricted Subsidiary or is

 

8

 

merged with or
into or consolidated with the Company, the Issuer or any of its Restricted
Subsidiaries (except, in the case of an Unrestricted Subsidiary that is
redesignated a Restricted Subsidiary during such period, to the extent of its
retained earnings from the beginning of such period to the date of such
redesignation) or (ii) the assets of such Person are acquired by the Company or
any Restricted Subsidiary,

 

(c)                                  the
net income of any Restricted Subsidiary to the extent that (but only so long
as) the declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of that income is not permitted by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Restricted Subsidiary during
such period,

 

(d)                                 the
gains or losses, together with any related provision for taxes, realized during
such period by the Company, the Issuer or any Restricted Subsidiary resulting
from (i) the acquisition of securities, or extinguishment of Indebtedness, of
the Company or any Restricted Subsidiary or (ii) any Asset Disposition by the
Company or any Restricted Subsidiary,

 

(e)                                  any
extraordinary gain or loss together with any related provision for taxes,
realized by the Company, the Issuer or any Restricted Subsidiary, and

 

(f)                                    any
non-recurring expense recorded by the Company, the Issuer or any Restricted
Subsidiary in connection with a merger accounted for as a
“pooling-of-interests” transaction;

 

provided
further, that for purposes of calculating Consolidated Net
Income solely as it relates to clause (iii) of Section 4.07(a) hereof, clause
(d)(ii) above shall not be applicable.

 

“Consolidated Net
Worth” of any Person as of any date means the stockholders’ equity
(including any Preferred Stock that is classified as equity under GAAP, other
than Disqualified Stock) of such Person and its Restricted Subsidiaries on a
consolidated basis at the end of the fiscal quarter immediately preceding such
date, as determined in accordance with GAAP, less any amount attributable to
Unrestricted Subsidiaries.

 

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

 

9

 

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

 

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

 

“Corporate Trust
Office” means the office of the Senior Trustee at which the
corporate trust business of the Senior Trustee is principally administered,
which at the date of the Indenture is located at 21 South Street, Morristown,
NJ 07960.

 

“Covenant Defeasance”
has the meaning ascribed to it in Section 8.02 hereof.

 

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

 

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

 

“Custodian”
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.

 

10

 

“Default”
means any event, act or condition that is, or after notice or the passage of
time or both would be, an Event of Default.

 

“Depositary”
means the depositary of each Global Note, which will initially be DTC.

 

“Designation Amount”
has the meaning provided in the definition of Unrestricted Subsidiary.

 

“Disqualified Stock”
means any Capital Stock that, by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable), or upon the
happening of any event, (a) matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the option of the
holder thereof, in whole or in part, on or prior to the final maturity date of
the Notes or (b) is convertible into or exchangeable or exercisable for
(whether at the option of the issuer or the holder thereof) (i) debt securities
or (ii) any Capital Stock referred to in (a) above, in each case, at any time
prior to the final maturity date of the Notes; provided,
however, that any Capital Stock
that would not constitute Disqualified Stock but for provisions thereof giving
holders thereof (or the holders of any security into or for which such Capital
Stock is convertible, exchangeable or exercisable) the right to require the
Company to repurchase or redeem such Capital Stock upon the occurrence of a
change in control occurring prior to the final maturity date of the Notes shall
not constitute Disqualified Stock if the change in control provision applicable
to such Capital Stock are no more favorable to such holders than Section 4.12
hereof and such Capital Stock specifically provides that the Company will not
repurchase or redeem any such Capital Stock pursuant to such provisions prior
to the Company’s repurchase of the Notes as are required pursuant to Section
4.12 hereof.

 

“DTC”
means The Depository Trust Company, a New York corporation.

 

“DTC Legend”
means the legend set forth in Exhibit D.

 

“Euroclear”
means Euroclear Bank S.A./N.V. and its successors or assigns, as operator of
the Euroclear System.

 

“Event of Default”
has the meaning ascribed to such term in Section 5.01.

 

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

 

“Exchange Notes”
means the notes of the Issuer issued under the Indenture in exchange for, and
in an aggregate principal amount equal to, the Initial Notes or any Initial
Additional Notes in compliance with the terms of a Registration Rights
Agreement and containing terms substantially identical to the Initial Notes or
any Initial Additional Notes (except that (i) such Exchange Notes

 

11

 

will be registered
under the Securities Act and will not be subject to transfer restrictions or
bear the Restricted Legend, and (ii) the provisions relating to Additional
Interest will be eliminated).

 

“Exchange Offer”
means an offer by the Issuer to the Holders of the Initial Notes or any Initial
Additional Notes to exchange such Notes for Exchange Notes, as provided for in
a Registration Rights Agreement.

 

“Exchange Offer
Registration Statement” means the Exchange Offer Registration
Statement as defined in a Registration Rights Agreement.

 

“expiration date”
has the meaning ascribed to it in Section 3.04(b) hereof.

 

“Extinguished
Covenants” has the meaning ascribed to such term in Section 4.18
hereof.

 

“Fair Market Value”
means, with respect to any asset, the price (after taking into account any
liabilities relating to such assets) that would be negotiated in an
arm’s-length transaction for cash between a willing seller and a willing and
able buyer, neither of which is under any compulsion to complete the
transaction, as such price is determined in good faith by the Board of
Directors of the Company or a duly authorized committee thereof, as evidenced
by a resolution of such Board or committee.

 

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

 

“Global Note”
means a Note in registered, global form without interest coupons.

 

“Guarantee”
means the guarantee of the Notes by each Guarantor under the Indenture.

 

“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: (a) 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

 

12

 

maintain financial
statement conditions or otherwise) or (b) 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.

 

“Guarantors”
means (a) initially, the Company and each of the other Guarantors signatory
hereto as set forth on Schedule A hereto, which includes each of the Company’s
Restricted Subsidiaries in existence on the Issue Date, other than the Issuer,
KHL, Inc. and K. Hovnanian Poland, sp.zo.o. and (b) each of the Company’s
Subsidiaries which becomes a Guarantor of the Notes pursuant to the provisions
of this Indenture, and their successors, in each case until released from its
respective Guarantee pursuant to this Indenture.

 

“Holder”
or “Holder of Notes” means the
Person in whose name a Note is registered in the books of the Registrar for the
Notes.

 

“incurrence”
has the meaning ascribed to it in Section 4.06(a) hereof.

 

“Indebtedness”
of any Person means, without duplication,

 

(a)                                  any
liability of such Person (i) 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), (ii) 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 (iii) in respect of Capitalized Lease Obligations (to the extent
of the Attributable Debt in respect thereof),

 

(b)                                 any
Indebtedness of others that such Person has guaranteed to the extent of the
guarantee; provided, however, that Indebtedness of the Company
and its Restricted Subsidiaries will not include the obligations of the Company
or a Restricted Subsidiary under warehouse lines of credit of Mortgage
Subsidiaries to repurchase mortgages at prices no greater than 98% of the
principal amount thereof, and upon any such purchase the excess, if any, of the
purchase price thereof over the Fair Market Value of the mortgages acquired,
will constitute Restricted Payments subject to Section 4.07 hereof,

 

13

 

(c)                                  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

 

(d)                                 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 (i) 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, (ii) the maximum liability of such
Person for any contingent obligations under clause (a) above at such date, net
of an unamortized discount to be accounted for as Interest Expense in
accordance with GAAP, and (iii) in the case of clause (d) 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 this indenture, as amended or supplemented from time to time.

 

“Initial Additional
Notes” means Additional Notes of the Issuer issued under the
Indenture in an offering not registered under the Securities Act and any Notes
issued in replacement therefor, but not including any Exchange Notes issued in
exchange therefor.

 

“Initial Notes”
means the notes of the Issuer issued under the Indenture on the Issue Date and
any Notes issued in replacement thereof, but not including any Exchange Notes
issued in exchange therefor.

 

“Initial Purchasers”
means the initial purchasers party to a purchase agreement with the Issuer, the
Company and the Guarantors party thereto relating to the sale of the Initial
Notes by the Issuer.

 

“Institutional
Accredited Investor Certificate” means a certificate substantially
in the form of Exhibit G hereto.

 

“Intangible Assets”
of the Company means all unamortized debt discount and expense, unamortized
deferred charges, goodwill, patents, trademarks, service marks, trade names,
copyrights, write-ups of assets over their prior carrying value (other than
write-ups which occurred prior to the Issue Date and other than, in connection
with the acquisition of an asset, the write-up of the value of such asset
(within one year of its acquisition) to its fair market value in accordance
with

 

14

 

GAAP) and all
other items which would be treated as intangible on the consolidated balance
sheet of the Company, the Issuer and the Restricted Subsidiaries prepared in
accordance with GAAP.

 

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

 

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

 

“Interest Payment
Date” means each January 15 and July 15 of each year, commencing
January 15, 2005.

 

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

 

“Investment Grade”
means, with respect to a debt rating of the Notes, 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 the Notes (for reasons outside the
control of the Company or the Issuer) and the Company shall select any other
Rating Agency, the equivalent of such ratings by such other Rating Agency.

 

“Investments”
of any Person means (a) all investments by such Person in any other Person in
the form of loans, advances or capital contributions, (b) all

 

15

 

guarantees of
Indebtedness or other obligations of any other Person by such Person, (c) all
purchases (or other acquisitions for consideration) by such Person of
Indebtedness, Capital Stock or other securities of any other Person and (d) all
other items that would be classified as investments in any other Person
(including, without limitation, purchases of assets outside the ordinary course
of business) on a balance sheet of such Person prepared in accordance with
GAAP.

 

“Issue Date”
means November 30, 2004.

 

“Issuer”
has the meaning ascribed to it in the preamble hereof and shall also refer to
any successor obligor under the Indenture.

 

“Legal Defeasance”
has the meaning ascribed to it in Section 8.01 hereof.

 

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

 

“Make-Whole Amount”
means, in connection with any optional redemption of any Note pursuant to
Section 3.01 hereof, the excess, if any, of: (a) the aggregate present value as
of the date of such redemption of each dollar of principal being redeemed and
the amount of interest (exclusive of interest accrued to the redemption date)
that would have been payable in respect of such dollar if such prepayment had
not been made, determined by discounting, on a semiannual basis, such principal
and interest at the Treasury Rate (determined on the Business Day preceding the
date of such redemption) plus 0.50%, from the respective dates on which such
principal and interest would have been payable if such payment had not been
made; over (b) the principal amount of the Note being redeemed.

 

“Marketable
Securities” means (a) equity securities that are listed on the New
York Stock Exchange, the American Stock Exchange or The Nasdaq National Market
and (b) debt securities that are rated by a nationally recognized rating
agency, listed on the New York Stock Exchange or the American Stock Exchange or
covered by at least two reputable market makers.

 

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

 

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

 

16

 

“Net Cash Proceeds”
means with respect to an Asset Disposition, cash payments received (including
any cash payments received by way of deferred payment of principal pursuant to
a note or installment receivable or otherwise (including any cash received upon
sale or disposition of such note or receivable), but only as and when
received), excluding any other consideration received in the form of assumption
by the acquiring Person of Indebtedness or other obligations relating to the
Property disposed of in such Asset Disposition or received in any other
non-cash form unless and until such non-cash consideration is converted into
cash therefrom, in each case, net of all legal, title and recording tax
expenses, commissions and other fees and expenses incurred, and all federal,
state and local taxes required to be accrued as a liability under GAAP as a
consequence of such Asset Disposition, and in each case net of a reasonable
reserve for the after-tax cost of any indemnification or other payments (fixed
and contingent) attributable to the seller’s indemnities or other obligations
to the purchaser undertaken by the Company, the Issuer or any of its Restricted
Subsidiaries in connection with such Asset Disposition, and net of all payments
made on any Indebtedness which is secured by or relates to such Property, in
accordance with the terms of any Lien or agreement upon or with respect to such
Property or which must by its terms or by applicable law be repaid out of the
proceeds from such Asset Disposition, and net of all contractually required
distributions and payments made to minority interest holders in Restricted
Subsidiaries or joint ventures as a result of such Asset Disposition.

 

“Non-Recourse
Indebtedness” with respect to any Person means Indebtedness of such
Person for which (a) 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 (b) no other
assets of such Person may be realized upon in collection of principal or
interest on such Indebtedness. Indebtedness which is otherwise Non-Recourse
Indebtedness will not lose its character as Non-Recourse Indebtedness because
there is recourse to the borrower, any guarantor or any other Person for (i)
environmental warranties and indemnities, or (ii) 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.

 

“Non-U.S. Person”
means a Person that is not a “U.S. person,” as such term is defined in
Regulation S.

 

“Notes”
has the meaning ascribed to such term in the Recitals.

 

17

 

“offer”
has the meaning ascribed to such term in Section 3.04(a).

 

“Offer to Purchase”
has the meaning ascribed to such term in Section 3.04(a).

 

“Officer,”
when used with respect to the Issuer or the Company, means the chairman of the
Board of Directors, the president or chief executive officer, any vice
president, the chief financial officer, the treasurer, any assistant treasurer,
the controller, any assistant controller, the secretary or any assistant
secretary of the Issuer or the Company, as the case may be.

 

“Officers’
Certificate,” when used with respect to the Issuer or the Company,
means a certificate signed by the chairman of the Board of Directors, the
president or chief executive officer, or any vice president and by the chief
financial officer, the treasurer, any assistant treasurer, the controller, any
assistant controller, the secretary or any assistant secretary of the Issuer or
the Company, as the case may be.

 

“Opinion of Counsel”
means a written opinion signed by legal counsel of the Issuer or the Company,
who may be an employee of, or counsel to, the Issuer or the Company, and who
shall be reasonably satisfactory to the Senior Trustee.

 

“Original Notes”
means the Initial Notes and any Exchange Notes issued in exchange therefor.

 

“Paying Agent”
refers to a Person engaged to perform the obligations of the Senior Trustee in
respect of payments made or funds held hereunder in respect of the Notes.

 

“Permanent
Regulation S Global Note” means a Regulation S Global Note that does
not bear the Regulation S Temporary Global Note Legend.

 

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

 

“Permitted
Indebtedness” means

 

(a)                                  Indebtedness
under Credit Facilities which does not exceed $1.0 billion principal amount
outstanding at any one time;

 

18

 

(b)                                 Indebtedness
in respect of obligations of the Company and its Subsidiaries to the trustees
under indentures for debt securities;

 

(c)                                  intercompany
debt obligations of (i) the Company to the Issuer, (ii) the Issuer to the
Company, (iii) the Company or the Issuer to any Restricted Subsidiary and (iv)
any Restricted Subsidiary to the Company or the Issuer or any other Restricted
Subsidiary; provided, however, that any Indebtedness of any
Restricted Subsidiary or the Issuer or the Company owed to any Restricted
Subsidiary or the Issuer that ceases to be a Restricted Subsidiary shall be
deemed to be incurred and shall be treated as an incurrence for purposes of
Section 4.06(a) hereof at the time the Restricted Subsidiary in question ceases
to be a Restricted Subsidiary;

 

(d)                                 Indebtedness
of the Company or the Issuer or any Restricted Subsidiary under any Currency
Agreements or Interest Protection Agreements in a notional amount no greater
than the payments due (at the time the related Currency Agreement or Interest
Protection Agreement is entered into) with respect to the Indebtedness or
currency being hedged;

 

(e)                                  Purchase
Money Indebtedness;

 

(f)                                    Capitalized
Lease Obligations;

 

(g)                                 obligations
for, pledge of assets in respect of, and guaranties of, bond financings of
political subdivisions or enterprises thereof in the ordinary course of
business;

 

(h)                                 Indebtedness
secured only by office buildings owned or occupied by the Company or any
Restricted Subsidiary, which Indebtedness does not exceed $10 million aggregate
principal amount outstanding at any one time;

 

(i)                                     Indebtedness
under warehouse lines of credit, repurchase agreements and Indebtedness secured
by mortgage loans and related assets of mortgage lending Subsidiaries in the
ordinary course of a mortgage lending business; and

 

(j)                                     Indebtedness
of the Company or any Restricted Subsidiary which, together with all other
Indebtedness under this clause (j), does not exceed $50 million aggregate
principal amount outstanding at any one time.

 

“Permitted
Investment” means

 

(a)                                  Cash
Equivalents;

 

19

 

(b)                                 any
Investment in the Company, the Issuer or any Restricted Subsidiary or any
Person that becomes a Restricted Subsidiary as a result of such Investment or
that is consolidated or merged with or into, or transfers all or substantially
all of the assets of it or an operating unit or line of business to, the
Company or a Restricted Subsidiary;

 

(c)                                  any
receivables, loans or other consideration taken by the Company, the Issuer or
any Restricted Subsidiary in connection with any asset sale otherwise permitted
by the Indenture;

 

(d)                                 Investments
received in connection with any bankruptcy or reorganization proceeding, or as
a result of foreclosure, perfection or enforcement of any Lien or any judgment
or settlement of any Person in exchange for or satisfaction of Indebtedness or
other obligations or other property received from such Person, or for other
liabilities or obligations of such Person created, in accordance with the terms
of the Indenture;

 

(e)                                  Investments
in Currency Agreements or Interest Protection Agreements described in the
definition of Permitted Indebtedness;

 

(f)                                    any
loan or advance to an executive officer, director or employee of the Company or
any Restricted Subsidiary made in the ordinary course of business or in
accordance with past practice; provided,
however, that any such loan or
advance exceeding $1 million shall have been approved by the Board of Directors
of the Company or a committee thereof consisting of disinterested members;

 

(g)                                 Investments
in joint ventures in a Real Estate Business with unaffiliated third parties in
an aggregate amount at any time outstanding not to exceed 10% of Consolidated
Tangible Assets at such time;

 

(h)                                 Investments
in interests in issuances of collateralized mortgage obligations, mortgages,
mortgage loan servicing, or other mortgage related assets;

 

(i)                                     obligations
of the Company or a Restricted Subsidiary under warehouse lines of credit of
Mortgage Subsidiaries to repurchase mortgages; and

 

(j)                                     Investments
in an aggregate amount outstanding not to exceed $10 million.

 

“Permitted Liens”
means

 

(a)                                  Liens
for taxes, assessments or governmental or quasi-government charges or claims
that (i) are not yet delinquent, (ii) are being contested in good faith by
appropriate proceedings and as to which appropriate reserves have been

 

20

 

established or
other provisions have been made in accordance with GAAP, if required, or (iii)
encumber solely property abandoned or in the process of being abandoned,

 

(b)                                 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 (i)
are not yet delinquent or (ii) 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,

 

(c)                                  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,

 

(d)                                 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 (a)(i) of the
definition of “Indebtedness”), in each case incurred in the ordinary course of
business of the Company, the Issuer and the Restricted Subsidiaries,

 

(e)                                  attachment
or judgment Liens not giving rise to a Default or an Event of Default,

 

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

 

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

 

(h)                                 Liens
securing Indebtedness incurred pursuant to clause (h) or (i) of the definition
of Permitted Indebtedness,

 

(i)                                     Liens
securing Indebtedness of the Company, the Issuer or any Restricted Subsidiary
permitted to be incurred under the Indenture; provided,
that

 

21

 

the aggregate
amount of all consolidated Indebtedness of the Company, the Issuer and the
Restricted Subsidiaries (including, with respect to Capitalized Lease
Obligations, the Attributable Debt in respect thereof) secured by Liens (other
than Non-Recourse Indebtedness and Indebtedness incurred pursuant to clause (i)
of the definition of Permitted Indebtedness) shall not exceed 40% of
Consolidated Adjusted Tangible Assets at any one time outstanding (after giving
effect to the incurrence of such Indebtedness and the use of the proceeds
thereof),

 

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

 

(k)                                  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,

 

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

 

(m)                               leases
or subleases granted to others not materially interfering with the ordinary
course of business of the Company and the Restricted Subsidiaries,

 

(n)                                 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,

 

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

 

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

 

(q)                                 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

 

22

 

similar purpose
undertakings or indemnifications in the ordinary course of business of the
Company, the Issuer and the Restricted Subsidiaries,

 

(r)                                    Liens
for homeowner and property owner association developments and assessments,

 

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

 

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

 

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

 

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

 

(w)                               Liens
existing on the Issue Date and any extensions, renewals or replacements
thereof, and

 

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

 

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

 

“Preferred Stock”
of any Person means all Capital Stock of such Person which has a preference in
liquidation or with respect to the payment of dividends.

 

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

 

23

 

“purchase amount”
has the meaning ascribed to it in Section 3.04(b) hereof.

 

“purchase date”
has the meaning ascribed to it in Section 3.04(b) hereof.

 

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

 

“Qualified Stock”
means Capital Stock of the Company other than Disqualified Stock.

 

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

 

“Real Estate
Business” means homebuilding, housing construction, real estate
development or construction and related real estate activities, including the
provision of mortgage financing or title insurance.

 

“Record Date”
for the interest payable on any Interest Payment Date means the January 1 or
July 1 (whether or not a Business Day) next preceding such Interest Payment
Date.

 

“Refinancing
Indebtedness” means Indebtedness (to the extent not Permitted
Indebtedness) that refunds, refinances or extends any Indebtedness of the
Company, the Issuer or any Restricted Subsidiary (to the extent not Permitted
Indebtedness) outstanding on the Issue Date or other Indebtedness (to the
extent not Permitted Indebtedness) permitted to be incurred by the Company, the
Issuer or any Restricted Subsidiary pursuant to the terms of the Indenture, but
only to the extent that:

 

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

 

(b)                                 the
Refinancing Indebtedness is scheduled to mature either (i) no earlier than the
Indebtedness being refunded, refinanced or extended or (ii) after the maturity
date of the Notes,

 

24

 

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

 

(d)                                 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 such term in Section 2.09.

 

“Registrar”
means a Person engaged to maintain the Register.

 

“Registration Rights
Agreement” means (i) the Registration Rights Agreement dated the
Issue Date among the Company, the Issuer, the other Guarantors party thereto
and the Initial Purchasers with respect to the Initial Notes, and (ii) with
respect to any Initial Additional Notes, any registration rights agreements
among the Company, the Issuer, the other Guarantors party thereto and the
initial purchasers party thereto relating to rights given by the Issuer to the
purchasers of Initial Additional Notes to register such Initial Additional
Notes or exchange them for Exchange Notes registered under the Securities Act.

 

“Regulation S”
means Regulation S under the Securities Act.

 

“Regulation S
Certificate” means a certificate substantially in the form of
Exhibit E hereto.

 

“Regulation S Global
Note” means a Global Note representing Notes issued and sold
pursuant to Regulation S.

 

“Regulation S
Temporary Global Note” means an Regulation S Global Note that bears
the Regulation S Temporary Global Note Legend.

 

“Regulation S
Temporary Global Note Legend” means the legend set forth in Exhibit
I.

 

“Repurchase Date”
has the meaning ascribed to it in Section 4.12(a) hereof.

 

“Responsible Officer,”
when used with respect to the Senior Trustee, means any officer of the Senior
Trustee with direct responsibility for the administration of the trust created
by this Indenture.

 

25

 

“Restricted Legend”
means the legend set forth in Exhibit C.

 

“Restricted Payment”
means any of the following:

 

(a)                                  the
declaration or payment of any dividend or any other distribution on Capital
Stock of the Company, the Issuer or any Restricted Subsidiary or any payment
made to the direct or indirect holders (in their capacities as such) of Capital
Stock of the Company, the Issuer or any Restricted Subsidiary (other than (i)
dividends or distributions payable solely in Qualified Stock and (ii) in the
case of the Issuer or Restricted Subsidiaries, dividends or distributions
payable to the Company, the Issuer or a Restricted Subsidiary);

 

(b)                                 the
purchase, redemption or other acquisition or retirement for value of any
Capital Stock of the Company, the Issuer or any Restricted Subsidiary (other
than a payment made to the Company, the Issuer or any Restricted Subsidiary);
and

 

(c)                                  any
Investment (other than any Permitted Investment), including any Investment in
an Unrestricted Subsidiary (including by the designation of a Subsidiary of the
Company as an Unrestricted Subsidiary) and any amounts paid in accordance with
clause (b) of the definition of Indebtedness.

 

“Restricted Period”
means the relevant 40-day “distribution compliance period” as such term is
defined in Regulation S, which, for each relevant Note, commences on the date
such Note is issued.

 

“Restricted
Subsidiary” means any Subsidiary of the Company which is not an
Unrestricted Subsidiary.

 

“Rule 144A”
means Rule 144A under the Securities Act.

 

“Rule 144A
Certificate” means a certificate substantially in the form of
Exhibit F hereto.

 

“Rule 144A Global
Note” means a Global Note that bears the Restricted Legend
representing Notes issued and sold pursuant to Rule 144A.

 

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

 

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

 

“self-liquidating
paper” has the meaning ascribed to it in Section 7.03 hereof.

 

26

 

“Senior Trustee”
means the party named as such in the preamble of the Indenture until such time,
if any, a successor replaces such party in accordance with the applicable
provisions of the Indenture and thereafter means the successor serving
hereunder.

 

“Shelf Registration
Statement” means the Shelf Registration Statement as defined in a
Registration Rights Agreement.

 

“Significant
Subsidiary” means any Subsidiary of the Company which 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 Issue Date.

 

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

 

“Successor”
has the meaning ascribed to it in Section 4.14 hereof.

 

“Treasury Rate”
means, in connection with the calculation of any Make-Whole Amount with respect
to any Note, the yield to maturity at the time of computation of United States
Treasury securities with a constant maturity, as compiled by and published in
the most recent Federal Reserve Statistical Release H.15 (519) that has become
publicly available at least two business days prior to the redemption date (or,
if such Statistical Release is no longer published, any publicly available
source or similar market data), equal to the then remaining maturity of the
Note being prepaid.  If no maturity
exactly corresponds to such maturity, yields for the published maturities
occurring prior to and after such maturity most closely corresponding to such
maturity shall be calculated pursuant to the immediately preceding sentence and
the Treasury Rate shall be interpolated or extrapolated from such yields on a
straight-line basis, rounding in each of such relevant periods to the nearest
month.

 

“Trust Indenture Act”
means the Trust Indenture Act of 1939, as amended.

 

“U.S. Government Obligations”
means non-callable, non-payable bonds, notes, bills or other similar
obligations issued or guaranteed by the United States government or any agency
thereof the full and timely payment of which are backed by the full faith and
credit of the United States.

 

“Unrestricted
Subsidiary” means any Subsidiary of the Company so designated by a
resolution adopted by the Board of Directors of the Company or a duly
authorized committee thereof as provided below; provided, that (a) the

 

27

 

holders of
Indebtedness thereof do not have direct or indirect recourse against the
Company, the Issuer or any Restricted Subsidiary, and neither the Company, the
Issuer nor any Restricted Subsidiary otherwise has liability for, any payment
obligations in respect of such Indebtedness (including any undertaking,
agreement or instrument evidencing such Indebtedness), except, in each case, to
the extent that the amount thereof constitutes a Restricted Payment permitted
by the Indenture, in the case of Non-Recourse Indebtedness, to the extent such
recourse or liability is for the matters discussed in the last sentence of the
definition of “Non-Recourse Indebtedness,” or to the extent such Indebtedness
is a guarantee by such Subsidiary of Indebtedness of the Company, the Issuer or
a Restricted Subsidiary and (b) no holder of any Indebtedness of such
Subsidiary shall have a right to declare a default on such Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity as a result of a default on any Indebtedness of the Company, the
Issuer or any Restricted Subsidiary. As of the Issue Date, the Unrestricted
Subsidiaries will be the following:

 

Alford, L.L.C., Brightbeach Development, Ltd.,
Brightchase, Ltd., Brighton Homes At Walden, Ltd., Brighton Homes At Walden
Management, L.L.C., Eastern Title Agency, Inc., Founders Title Agency, Inc.,
Founders Title Agency of Maryland, L.L.C., Gosling Road Development Co., Inc.,
Governor’s Abstract Co., Inc., Heritage Pines, L.L.C., Hexter Fair Land Title
Company I, Inc., Homebuyer’s Mortgage, Inc., Hovnanian Financial Services I,
Inc., Hovnanian Financial Services II, Inc., Hovnanian Financial Services IV,
Inc., Hovnanian Land Investment Group, L.L.C., Hovnanian Land Investment Group
of California, L.L.C., Hovnanian Land Investment Group of Florida, L.L.C.,
Hovnanian Land Investment Group of Maryland, L.L.C., Hovnanian Land Investment Group
of North Carolina, L.L.C., Hovnanian Land Investment Group of Texas, L.L.C.,
Hovnanian Land Investment Group of Virginia, L.L.C., K. Hovnanian American
Mortgage, L.L.C., K. Hovnanian Chesterfield Investment, L.L.C., K. Hovnanian At
Lake Rancho Viejo, L.L.C., Jaeger Road 530, L.L.C., K. Hovnanian At Manalapan
III, L.L.C., K. Hovnanian At Philadelphia I, L.L.C., K Hovnanian At
Philadelphia Investment I, L.L.C., K. Hovnanian At Port Imperial Urban Renewal
II, L.L.C., K. Hovnanian At Port Imperial Urban Renewal III, L.L.C., K.
Hovnanian At Thompson Ranch, L.L.C., K Hovnanian’s Four Seasons At Beaumont,
L.L.C., K. Hovnanian Investment Properties, Inc., K. Hovnanian Mortgage, Inc.,
K. Hovnanian Skye Isle, L.L.C., K. Hovnanian Title Reinsurance, Inc., K. Hovnanian
Venture I, L.L.C., Hunter Mill Village, L.L.C., Kings Crossing at Montgomery,
L.L.C., Laurel Highlands, L.L.C., McKinley Court, L.L.C., M&M at Monroe
Woods, L.L.C., MM-Beachfront North I, L.L.C., New Homebuyers Title Company,
L.L.C., New Homebuyers Title Co. (Virginia) L.L.C., New Homebuyers Title
Company (West Virginia), L.L.C., NRD, L.L.C., Park Title Company, L.L.C.,
Parkway Development, Sovereign Group, L.P., PI Investments, L.L.C., Pinnacle
Mortgage Group, Inc., Preston Grande Homes, Inc., Preston Parker, L.L.C., RR
Houston Developers, L.L.C., RR Houston

 

28

 

Development, L.P.,
RR Houston Investment, L.P., RR Houston Investors, L.L.C., Title Group II,
L.L.C., Thompson Ranch Joint Development, L.L.C., Town Homes at Montgomery,
L.L.C., 12th Street Residential, Ltd., WHI-Republic, L.L.C., and Wright Farm,
L.L.C.

 

Subject to the foregoing, the Board of Directors of
the Company or a duly authorized committee thereof may designate any Subsidiary
in addition to those named above to be an Unrestricted Subsidiary; provided, however,
that (a) the net amount (the “Designation
Amount”) then outstanding of all previous Investments by the Company
and the Restricted Subsidiaries in such Subsidiary will be deemed to be a
Restricted Payment at the time of such designation and will reduce the amount
available for Restricted Payments under Section 4.07 hereof to the extent
provided therein, (b) the Company must be permitted under Section 4.07 hereof
to make the Restricted Payment deemed to have been made pursuant to clause (a),
and (c) after giving effect to such designation, no Default or Event of Default
shall have occurred or be continuing. In accordance with the foregoing, and not
in limitation thereof, Investments made by any Person in any Subsidiary of such
Person prior to such Person’s merger with the Company or any Restricted
Subsidiary (but not in contemplation or anticipation of such merger) shall not
be counted as an Investment by the Company or such Restricted Subsidiary if
such Subsidiary of such Person is designated as an Unrestricted Subsidiary.

 

The Board of Directors of the Company or a duly
authorized committee thereof may also redesignate an Unrestricted Subsidiary to
be a Restricted Subsidiary; provided,
however, that (a) the
Indebtedness of such Unrestricted Subsidiary as of the date of such
redesignation could then be incurred under Section 4.06 hereof and (b)
immediately after giving effect to such redesignation and the incurrence of any
such additional Indebtedness, the Company and the Restricted Subsidiaries could
incur $1.00 of additional Indebtedness under Section 4.06(a) hereof. Any such
designation or redesignation by the Board of Directors of the Company or a
committee thereof will be evidenced to the Senior Trustee by the filing with
the Senior Trustee of a certified copy of the resolution of the Board of
Directors of the Company or a committee thereof giving effect to such
designation or redesignation and an Officers’ Certificate certifying that such
designation or redesignation complied with the foregoing conditions and setting
forth the underlying calculations of such Officers’ Certificate. The
designation of any Person as an Unrestricted Subsidiary shall be deemed to
include a designation of all Subsidiaries of such Person as Unrestricted
Subsidiaries; provided, however, that the ownership of the general
partnership interest (or a similar member’s interest in a limited liability
company) by an Unrestricted Subsidiary shall not cause a Subsidiary of the
Company of which more than 95% of the equity interest is held by the Company or
one or more Restricted Subsidiaries to be deemed an Unrestricted Subsidiary.

 

29

 

“Weighted Average
Life to Maturity” means, when applied to any Indebtedness or portion
thereof at any date, the number of years obtained by dividing (a) the sum of
the products obtained by multiplying (i) 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 (ii) the number of years (calculated to the nearest one-twelfth)
that will elapse between such date and the making of such payment by (b) the
sum of all such payments described in clause (a)(i) above.

 

Section
1.02.  Rules of Construction.   Unless
the context otherwise requires or except as otherwise expressly provided,

 

(a)                        an
accounting term not otherwise defined has the meaning assigned to it in
accordance with GAAP;

 

(b)                       “herein,”
“hereof” and other words of similar import refer to the Indenture as a whole
and not to any particular Section, Article other subdivision;

 

(c)                        all
references to Sections or Articles or Exhibits refer to Sections or Articles or
Exhibits of or to the Indenture unless otherwise indicated;

 

(d)                       references
to agreements or instruments, or to statutes or regulations, are to such
agreements or instruments, or statutes or regulations, as amended from time to
time (or to successor statutes and regulations); and

 

(e)                        in
the event that a transaction meets the criteria of more than one category of
permitted transactions or listed exceptions, the Issuer may classify such
transaction as it, in its sole discretion, determines.

 

ARTICLE 2

The Notes

 

Section
2.01.  Form, Dating and Denominations; Legends.  (a) The Notes and the Senior
Trustee’s certificate of authentication will be substantially in the form
attached as Exhibit A.  The terms and
provisions contained in the form of the Note annexed as Exhibit A constitute
and are hereby expressly made a part of the Indenture.  The Notes may have notations, legends or
endorsements required by this Indenture, law, rules of or agreements with
national securities exchanges to which the Issuer is subject, or usage.  Each Note will be dated the date of its
authentication.  The Notes will be
issuable in denominations of $1,000 in principal amount and any multiple of
$1,000 in excess thereof.

 

30

 

(b)         (i)
Except as otherwise provided in paragraph (c) or Section 2.09(b)(iv) or
Sections 2.10(b)(iii), (b)(v), or (c), each Initial Note or Initial Additional
Note will bear the Restricted Legend.

 

(ii)                                  Each
Global Note, whether or not an Original Note or Additional Note, will bear the
DTC Legend.

 

(iii)                               Each
Regulation S Temporary Global Note will bear the Regulation S Temporary Global
Note Legend.

 

(iv)                              Initial
Notes and Initial Additional Notes offered and sold in reliance on Regulation S
will be issued as provided in Section 2.11(a).

 

(v)                                 Initial
Notes and Initial Additional Notes offered and sold in reliance on any
exception under the Securities Act other than Regulation S and Rule 144A will
be issued, and upon the request of the Issuer to the Senior Trustee, Initial
Notes offered and sold in reliance on Rule 144A may be issued, in the form of
Certificated Notes.

 

(vi)                              Exchange
Notes will be issued, subject to Section 2.09(b), in the form of one or more
Global Notes.

 

(c)                                  (i)
If the Issuer determines (upon the advice of counsel and after consideration of
other certifications and evidence as the Issuer may reasonably require) that a
Note is eligible for resale pursuant to Rule 144(k) under the Securities Act
(or a successor provision) and that the Restricted Legend is no longer
necessary or appropriate in order to ensure that subsequent transfers of the
Note (or a beneficial interest therein) are effected in compliance with the
Securities Act, or

 

(ii)                                  after
an Initial Note or any Initial Additional Note is

 

(A)                sold
pursuant to an effective registration statement under the Securities Act, filed
pursuant to a Registration Rights Agreement or otherwise, or

 

(B)                  is
validly tendered for an Exchange Note pursuant to an Exchange Offer

 

then, the Issuer
may instruct the Senior Trustee to cancel the Note and issue to the Holder
thereof (or to its transferee) a new Note of like tenor and amount, registered
in the name of the Holder thereof (or its transferee), that does not bear the
Restricted Legend, and the Senior Trustee will comply with such instruction.

 

31

 

(d)                       By
its acceptance of any Note bearing the Restricted Legend (or any beneficial
interest in such a Note), each Holder thereof and each owner of a beneficial
interest therein acknowledges the restrictions on transfer of such Note (and
any such beneficial interest) set forth in this Indenture and in the Restricted
Legend and agrees that it will transfer such Note (and any such beneficial
interest) only in accordance with the Indenture and such legend.

 

Section
2.02.  Execution and Authentication; Exchange Notes;
Additional Notes.  (a)  An
Officer shall execute the Notes for the Issuer by facsimile or manual signature
in the name and on behalf of the Issuer. 
If an Officer whose signature is on a Note no longer holds that office
at the time the Note is authenticated, the Note will still be valid.

 

(b)                       A
Note will not be valid until the Senior Trustee manually signs the certificate
of authentication on the Note, with the signature conclusive evidence that the
Note has been authenticated under the Indenture.

 

(c)                        At
any time and from time to time after the execution and delivery of the
Indenture, the Issuer may deliver Notes executed by the Issuer to the Senior
Trustee for authentication.  The Senior
Trustee will authenticate and deliver:

 

(i)                                     Initial
Notes for original issue in the aggregate principal amount not to exceed
$200,000,000,

 

(ii)                                  Initial
Additional Notes from time to time for original issue in aggregate principal
amounts specified by the Issuer, and

 

(iii)                               Exchange
Notes from time to time for issue in exchange for a like principal amount of
Initial Notes or Initial Additional Notes

 

after the
following conditions have been met:

 

(A)                Receipt
by the Senior Trustee of a certificate, executed by an Officer specifying

 

(1)          the
amount of Notes to be authenticated and the date on which the Notes are to be
authenticated,

 

(2)          whether
the Notes are to be Initial Notes, Initial Additional Notes or Exchange Notes,

 

(3)          in
the case of Initial Additional Notes, that the issuance of such Notes does not
contravene any provision of Article 4,

 

32

 

(4)          whether
the Notes are to be issued as one or more Global Notes or Certificated Notes,
and

 

(5)          other
information the Issuer may determine to include or the Senior Trustee may
reasonably request.

 

(B)                  In
the case of Initial Additional Notes, receipt by the Senior Trustee of an
Opinion of Counsel confirming that the Holders of the outstanding Notes will be
subject to federal income tax in the same amounts, in the same manner and at
the same times as would have been the case if such Initial Additional Notes
were not issued.

 

(C)                  In
the case of Exchange Notes, effectiveness of an Exchange Offer Registration
Statement and Consummation (as defined in the Registration Rights Agreement) of
the exchange offer thereunder (and receipt by the Senior Trustee of an
Officers’ Certificate to that effect). 
Initial Notes or Initial Additional Notes exchanged for Exchange Notes
will be cancelled by the Senior Trustee, who will dispose of them in accordance
with its normal procedures or the written instructions of the Issuer.

 

Section
2.03.  Registrar, Paying Agent and Authenticating Agent;
Paying Agent to Hold Money in Trust.  (a) The Issuer may appoint one or more
Registrars and one or more Paying Agents, and the Senior Trustee may appoint an
Authenticating Agent, in which case each reference in the Indenture to the
Senior Trustee in respect of the obligations of the Senior Trustee to be
performed by that Agent will be deemed to be references to the Agent.  The Issuer may act as Registrar or (except
for purposes of Article 8) Paying Agent. 
In each case, the Issuer and the Senior Trustee will enter into an
appropriate agreement with the Agent implementing the provisions of the
Indenture relating to the obligations of the Senior Trustee to be performed by
the Agent and the related rights.

 

(b)                       The
Issuer will require each Paying Agent other than the Senior Trustee to agree in
writing that the Paying Agent will hold in trust for the benefit of the Holders
or the Senior Trustee all money held by the Paying Agent for the payment of
principal of, premium, if any, and interest and Additional Interest, if any,
on, the Notes and will promptly notify the Senior Trustee of any default by the
Issuer in making any such payment.  The
Issuer at any time may require a Paying Agent to pay all money held by it to
the Senior Trustee and account for any funds disbursed, and the Senior Trustee
may at any time during the continuance of any payment default, upon written
request to a Paying Agent, require the Paying Agent to pay all money held by it
to the Senior Trustee and to

 

33

 

account
for any funds disbursed.  Upon doing so,
the Paying Agent will have no further liability for the money so paid over to
the Senior Trustee.

 

Section
2.04.  Replacement Notes. 
If a mutilated Note is surrendered to the Senior Trustee or
if a Holder claims that its Note has been lost, destroyed or wrongfully taken,
the Issuer will issue and the Senior Trustee will authenticate a replacement
Note of like tenor and principal amount and bearing a number not contemporaneously
outstanding.  Every replacement Note is
an additional obligation of the Issuer and entitled to the benefits of the
Indenture.  If required by the Senior
Trustee or the Issuer, an indemnity must be furnished that is sufficient in the
judgment of both the Senior Trustee and the Issuer to protect the Issuer and
the Senior Trustee from any loss they may suffer if a Note is replaced.  The Issuer may charge the Holder for the
expenses of the Issuer and the Senior Trustee in replacing a Note.  In case the mutilated, lost, destroyed or
wrongfully taken Note has become or is about to become due and payable, the
Issuer in its discretion may pay the Note instead of issuing a replacement
Note.

 

Section
2.05.  Outstanding Notes. 
(a)  Notes outstanding at any time are all Notes
that have been authenticated by the Senior Trustee except for:

 

(i)                                     Notes
cancelled by the Senior Trustee or delivered to it for cancellation;

 

(ii)                                  any
Note which has been replaced pursuant to Section 2.04 unless and until the
Senior Trustee and the Issuer receive proof satisfactory to them that the
replaced Note is held by a bona  fide purchaser; and

 

(iii)                               on
or after the maturity date or any redemption date or date for purchase of the
Notes pursuant to an Offer to Purchase, those Notes payable or to be redeemed
or purchased on that date for which the Senior Trustee (or Paying Agent, other
than the Issuer or an Affiliate of the Issuer) holds money sufficient to pay
all amounts then due.

 

(b)                       A
Note does not cease to be outstanding because the Issuer or one of its
Affiliates holds the Note; provided,
that in determining whether the Holders of the requisite principal amount of
the outstanding Notes have given or taken any request, demand, authorization,
direction, notice, consent, waiver or other action hereunder, Notes owned by
the Issuer or any Affiliate of the Issuer will be disregarded and deemed not to
be outstanding (it being understood that in determining whether the Senior
Trustee is protected in relying upon any such request, demand, authorization,
direction, notice, consent, waiver or other action, only Notes which the Senior
Trustee knows to be so owned will be so disregarded).  Notes so owned which have been pledged in
good faith may be regarded as outstanding if the pledgee establishes to the
satisfaction of the Senior

 

34

 

Trustee
the pledgee’s right so to act with respect to such Notes and that the pledgee
is not the Issuer or any Affiliate of the Issuer.

 

Section
2.06.  Temporary Notes.  Until definitive Notes are ready
for delivery, the Issuer may prepare and the Senior Trustee will authenticate
temporary Notes.  Temporary Notes will be
substantially in the form of definitive Notes but may have insertions,
substitutions, omissions and other variations determined to be appropriate by
the Officer executing the temporary Notes, as evidenced by the execution of the
temporary Notes.  If temporary Notes are
issued, the Issuer will cause definitive Notes to be prepared without
unreasonable delay.  After the
preparation of definitive Notes, the temporary Notes will be exchangeable for
definitive Notes upon surrender of the temporary Notes at the office or agency
of the Issuer designated for the purpose pursuant to Section 4.02 without
charge to the Holder.  Upon surrender for
cancellation of any temporary Notes, the Issuer will execute and the Senior
Trustee will authenticate and deliver in exchange therefor a like principal
amount of definitive Notes of authorized denominations.  Until so exchanged, the temporary Notes will
be entitled to the same benefits under the Indenture as definitive Notes.

 

Section
2.07.  Cancellation.  The
Issuer at any time may deliver to the Senior Trustee for cancellation any Notes
previously authenticated and delivered hereunder which the Issuer may have
acquired in any manner whatsoever, and may deliver to the Senior Trustee for
cancellation any Notes previously authenticated hereunder which the Issuer has
not issued and sold.  Any Registrar or
the Paying Agent will forward to the Senior Trustee any Notes surrendered to it
for transfer, exchange or payment.  The
Senior Trustee will cancel all Notes surrendered for transfer, exchange,
payment or cancellation and dispose of them in accordance with its normal
procedures or the written instructions of the Issuer.  The Issuer may not issue new Notes to replace
Notes that it has paid in full or delivered to the Senior Trustee for
cancellation, except for Exchange Notes.

 

Section
2.08.  CUSIP and ISIN Numbers.  The Issuer in issuing the Notes
may use “CUSIP” and “ISIN” numbers, and the Senior Trustee will use CUSIP
numbers or ISIN numbers in notices of redemption or exchange or in Offers to
Purchase as a convenience to Holders, the notice to state that no
representation is made as to the correctness of such numbers either as printed
on the Notes or as contained in any notice of redemption or exchange or Offer
to Purchase.  The Issuer will promptly
notify the Senior Trustee of any change in the CUSIP or ISIN numbers.

 

Section
2.09.  Registration, Transfer and Exchange.  (a)  The Notes will be issued in registered form
only, without coupons, and the Issuer shall cause the Senior Trustee to
maintain a register (the “Register”)
of the Notes, for registering

 

35

 

the record
ownership of the Notes by the Holders and transfers and exchanges of the Notes.

 

(b)                       (i)
Each Global Note will be registered in the name of the Depositary or its
nominee and, so long as DTC is serving as the Depositary thereof, will bear the
DTC Legend.

 

(ii)                                  Each
Global Note will be delivered to the Senior Trustee as custodian for the
Depositary.  Transfers of a Global Note
(but not a beneficial interest therein) will be limited to transfers thereof in
whole, but not in part, to the Depositary, its successors or their respective
nominees, except (A) as set forth in Section 2.09(b)(iv) and (B) transfers of
portions thereof in the form of Certificated Notes may be made upon request of
an Agent Member (for itself or on behalf of a beneficial owner) by 20 days’
prior written notice given to the Senior Trustee by or on behalf of the
Depositary in accordance with customary procedures of the Depositary and in
compliance with this Section and Section 2.10.

 

(iii)                               Agent
Members will have no rights under the Indenture with respect to any Global Note
held on their behalf by the Depositary, and the Depositary may be treated by
the Issuer, the Senior Trustee and any agent of the Issuer or the Senior
Trustee as the absolute owner and Holder of such Global Note for all purposes
whatsoever.  Notwithstanding the
foregoing, the Depositary or its nominee may grant proxies and otherwise
authorize any Person (including any Agent Member and any Person that holds a
beneficial interest in a Global Note through an Agent Member) to take any
action which a Holder is entitled to take under the Indenture or the Notes, and
nothing herein will impair, as between the Depositary and its Agent Members,
the operation of customary practices governing the exercise of the rights of a
holder of any security.

 

(iv)                              If
(x) the Depositary (i) notifies the Issuer that it is unwilling or unable to
continue as Depositary for a Global Note and a successor depositary is not
appointed by the Issuer within 90 days of the notice or (ii) has ceased to be a
clearing agency registered under the Exchange Act, (y) the Issuer, at its
option, notifies the Senior Trustee in writing that it elects to cause the
issuance of Certificated Notes or (z) a Default or an Event of Default with
respect to the Notes has occurred and is continuing, the Senior Trustee will
promptly exchange each beneficial interest in the Global Note for one or more
Certificated Notes in authorized denominations having an equal aggregate
principal amount registered in the name of the owner of such beneficial
interest, as identified to the Senior Trustee by the Depositary, and thereupon
the Global Note will be deemed canceled. 
If such Note does not bear the

 

36

 

Restricted Legend, then the Certificated Notes issued
in exchange therefor will not bear the Restricted Legend.  If such Note bears the Restricted Legend,
then the Certificated Notes issued in exchange therefor will bear the
Restricted Legend; provided, that
any Holder of any such Certificated Note issued in exchange for a beneficial
interest in a Regulation S Temporary Global Note will have the right upon
presentation to the Senior Trustee of a duly completed Certificate of
Beneficial Ownership after the Restricted Period to exchange such Certificated
Note for a Certificated Note of like tenor and amount that does not bear the
Restricted Legend, registered in the name of such Holder.

 

(c)                        Each
Certificated Note will be registered in the name of the holder thereof or its
nominee.

 

(d)                       A
Holder may transfer a Note (or a beneficial interest therein) to another Person
or exchange a Note (or a beneficial interest therein) for another Note or Notes
of any authorized denomination by presenting to the Senior Trustee a written
request therefor stating the name of the proposed transferee or requesting such
an exchange, accompanied by any certification, opinion or other document
required by Section 2.10.  The Senior
Trustee will promptly register any transfer or exchange that meets the
requirements of this Section and Section 2.10 noting the same in the register
maintained by the Senior Trustee for the purpose; provided, that

 

(i)                  no
transfer or exchange will be effective until it is registered in such register,
and

 

(ii)               the
Senior Trustee will not be required (x) to issue, register the transfer of or
exchange any Note for a period of 15 days before a selection of Notes to be
redeemed or purchased pursuant to an Offer to Purchase, (y) to register the
transfer of or exchange any Note so selected for redemption or purchase in
whole or in part, except, in the case of a partial redemption or purchase, that
portion of any Note not being redeemed or purchased, or (z) if a redemption or
a purchase pursuant to an Offer to Purchase is to occur after a Record Date but
on or before the corresponding Interest Payment Date, to register the transfer
of or exchange any Note on or after the Record Date and before the date of
redemption or purchase.  Prior to the
registration of any transfer, the Issuer, the Senior Trustee and their agents
will treat the Person in whose name the Note is registered as the owner and
Holder thereof for all purposes (whether or not the Note is overdue), and will
not be affected by notice to the contrary.

 

37

 

From time to time the Issuer will execute and the
Senior Trustee will authenticate additional Notes as necessary in order to
permit the registration of a transfer or exchange in accordance with this
Section.

 

No service charge will be imposed in connection with
any transfer or exchange of any Note, but the Issuer may require payment of a
sum sufficient to cover any transfer tax or similar governmental charge payable
in connection therewith (other than a transfer tax or other similar
governmental charge payable upon exchange pursuant to subsection (b)(iv)).

 

(e)                                  (i)  Global
Note to Global Note.  If a
beneficial interest in a Global Note is transferred or exchanged for a
beneficial interest in another Global Note, the Senior Trustee will
(x) record a decrease in the principal amount of the Global Note being
transferred or exchanged equal to the principal amount of such transfer or
exchange and (y) record a like increase in the principal amount of the
other Global Note.  Any beneficial
interest in one Global Note that is transferred to a Person who takes delivery
in the form of an interest in another Global Note, or exchanged for an interest
in another Global Note, will, upon transfer or exchange, cease to be an interest
in such Global Note and become an interest in the other Global Note and,
accordingly, will thereafter be subject to all transfer and exchange
restrictions, if any, and other procedures applicable to beneficial interests
in such other Global Note for as long as it remains such an interest.

 

(ii)                             Global Note to Certificated Note.  If a beneficial interest in a Global Note is
transferred or exchanged for a Certificated Note, the Senior Trustee will (x)
record a decrease in the principal amount of such Global Note equal to the
principal amount of such transfer or exchange and (y) deliver one or more new
Certificated Notes in authorized denominations having an equal aggregate
principal amount to the transferee (in the case of a transfer) or the owner of
such beneficial interest (in the case of an exchange), registered in the name
of such transferee or owner, as applicable.

 

(iii)                          Certificated Note to Global Note.  If a Certificated Note is transferred or
exchanged for a beneficial interest in a Global Note, the Senior Trustee will
(x) cancel such Certificated Note, (y) record an increase in the principal
amount of such Global Note equal to the principal amount of such transfer or
exchange and (z) in the event that such transfer or exchange involves less than
the entire principal amount of the canceled Certificated Note, deliver to the
Holder thereof one or more new Certificated Notes in authorized denominations
having an aggregate

 

38

 

principal amount equal to the untransferred or
unexchanged portion of the canceled Certificated Note, registered in the name
of the Holder thereof.

 

(iv)                         Certificated Note to Certificated Note.  If a Certificated Note is transferred or
exchanged for another Certificated Note, the Senior Trustee will (x) cancel the
Certificated Note being transferred or exchanged, (y) deliver one or more new
Certificated Notes in authorized denominations having an aggregate principal
amount equal to the principal amount of such transfer or exchange to the
transferee (in the case of a transfer) or the Holder of the canceled
Certificated Note (in the case of an exchange), registered in the name of such
transferee or Holder, as applicable, and (z) if such transfer or exchange
involves less than the entire principal amount of the canceled Certificated
Note, deliver to the Holder thereof one or more Certificated Notes in
authorized denominations having an aggregate principal amount equal to the
untransferred or unexchanged portion of the canceled Certificated Note,
registered in the name of the Holder thereof.

 

Section
2.10.  Restrictions on Transfer and Exchange.  (a) The transfer or exchange of
any Note (or a beneficial interest therein) may only be made in accordance with
this Section and Section 2.09 and, in the case of a Global Note (or a
beneficial interest therein), the applicable rules and procedures of the
Depositary.  The Senior Trustee shall
refuse to register any requested transfer or exchange that does not comply with
the preceding sentence.

 

(b)                       Subject
to paragraph (c), the transfer or exchange of any Note (or a beneficial
interest therein) of the type set forth in column A below for a Note (or a
beneficial interest therein) of the type set forth opposite in column B below
may only be made in compliance with the certification requirements (if any)
described in the clause of this paragraph set forth opposite in column C below.

 

	
  A

  	
   

  	
  B

  	
   

  	
  C

  	
   

  
	
  Rule 144A Global
  Note

  	
   

  	
  Rule 144A Global Note

  	
   

  	
  (i)

  	
   

  
	
  Rule 144A Global
  Note

  	
   

  	
  Regulation S Global Note

  	
   

  	
  (ii)

  	
   

  
	
  Rule 144A Global
  Note

  	
   

  	
  Certificated Note

  	
   

  	
  (iii)

  	
   

  
	
  Regulation S
  Global Note

  	
   

  	
  Rule 144A Global Note

  	
   

  	
  (iv)

  	
   

  
	
  Regulation S
  Global Note

  	
   

  	
  Regulation S Global Note

  	
   

  	
  (i)

  	
   

  
	
  Regulation S
  Global Note

  	
   

  	
  Certificated Note

  	
   

  	
  (v)

  	
   

  
	
  Certificated
  Note

  	
   

  	
  Rule 144A Global Note

  	
   

  	
  (iv)

  	
   

  
	
  Certificated
  Note

  	
   

  	
  Regulation S Global Note

  	
   

  	
  (ii)

  	
   

  
	
  Certificated
  Note

  	
   

  	
  Certificated Note

  	
   

  	
  (iii)

  	
   

  

 

(i)                                     No
certification is required.

 

39

 

(ii)                                  The
Person requesting the transfer or exchange must deliver or cause to be
delivered to the Senior Trustee a duly completed Regulation S Certificate; provided, that if the requested transfer
or exchange is made by the Holder of a Certificated Note that does not bear the
Restricted Legend, then no certification is required.

 

(iii)                               The
Person requesting the transfer or exchange must deliver or cause to be
delivered to the Senior Trustee (x) a duly completed Rule 144A Certificate, (y)
a duly completed Regulation S Certificate or (z) a duly completed Institutional
Accredited Investor Certificate, and/or an opinion of counsel and such other
certifications and evidence as the Issuer may reasonably require in order to
determine that the proposed transfer or exchange is being made in compliance
with the Securities Act and any applicable securities laws of any state of the
United States; provided, that if
the requested transfer or exchange is made by the Holder of a Certificated Note
that does not bear the Restricted Legend, then no certification is
required.  In the event that a Rule 144A
Global Note or a Certificated Note that does not bear the Restricted Legend is
surrendered for transfer or exchange, upon transfer or exchange the Senior
Trustee will deliver a Certificated Note that does not bear the Restricted
Legend.

 

(iv)                              The
Person requesting the transfer or exchange must deliver or cause to be
delivered to the Senior Trustee a duly completed Rule 144A Certificate and must
comply with all applicable securities laws of any state of the United States or
any other jurisdiction.

 

(v)                                 If
the requested transfer involves a beneficial interest in a Regulation S
Temporary Global Note, the Person requesting the registration of transfer must
deliver or cause to be delivered to the Senior Trustee (x) a duly completed
Rule 144A Certificate or (y) a duly completed Institutional Accredited Investor
Certificate and/or an opinion of counsel and such other certifications and
evidence as the Issuer may reasonably require in order to determine that the
proposed transfer is being made in compliance with the Securities Act and any
applicable securities laws of any state of the United States.  If the requested transfer or exchange
involves a beneficial interest in a Permanent Regulation S Global Note, no
certification is required and the Senior Trustee will deliver a Certificated
Note that does not bear the Restricted Legend. 
Notwithstanding anything to the contrary contained herein, no such
exchange is permitted if the requested exchange involves a beneficial interest
in a Regulation S Temporary Global Note.

 

(c)                        No
certification is required in connection with any transfer or exchange of any
Note (or a beneficial interest therein)

 

40

 

(i)                                     after
such Note is eligible for resale pursuant to Rule 144(k) under the Securities
Act (or a successor provision); provided,
that the Issuer has provided the Senior Trustee with a certificate to that
effect, and the Issuer may require from any Person requesting a transfer or
exchange in reliance upon this clause (i) an opinion of counsel and any other
reasonable certifications and evidence in order to support such certificate; or

 

(ii)                                  (A)
sold pursuant to an effective registration statement under the Securities Act,
filed pursuant to a Registration Rights Agreement or otherwise (B) which is
validly tendered for exchange into an Exchange Note pursuant to an Exchange
Offer.

 

Any Certificated Note delivered in reliance upon this
paragraph will not bear the Restricted Legend.

 

(d)                       The
Senior Trustee will retain copies of all certificates, opinions and other
documents received in connection with the transfer or exchange of a Note (or a
beneficial interest therein), and the Issuer will have the right to inspect and
make copies thereof at any reasonable time upon written notice to the Senior
Trustee.

 

Section
2.11.  Regulation S Temporary Global Notes.  (a) Each Note originally sold by
the Initial Purchasers in reliance upon Regulation S will be evidenced by one
or more Regulation S Global Notes that bear the Regulation S Temporary Global
Note Legend.

 

(b)                       An
owner of a beneficial interest in a Regulation S Temporary Global Note (or a
Person acting on behalf of such an owner) may provide to the Senior Trustee
(and the Senior Trustee will accept) a duly completed Certificate of Beneficial
Ownership at any time after the Restricted Period (it being understood that the
Senior Trustee will not accept any such certificate during the Restricted
Period).  Promptly after acceptance of a
Certificate of Beneficial Ownership with respect to such a beneficial interest,
the Senior Trustee will cause such beneficial interest to be exchanged for an
equivalent beneficial interest in a Permanent Regulation S Global Note, and
will (x) permanently reduce the principal amount of such Regulation S Temporary
Global Note by the amount of such beneficial interest and (y) increase the
principal amount of such Permanent Regulation S Global Note by the amount of
such beneficial interest.

 

(c)                        Notwithstanding
anything to the contrary contained herein, beneficial interests in a Regulation
S Temporary Global Note may be held through the Depositary only through
Euroclear or Clearstream and their respective direct and indirect participants.

 

41

 

(d)                       Notwithstanding
paragraph (b), if after the Restricted Period any Initial Purchaser owns a
beneficial interest in a Regulation S Temporary Global Note, such Initial
Purchaser may, upon written request to the Senior Trustee accompanied by a
certification as to its status as an Initial Purchaser, exchange such
beneficial interest for an equivalent beneficial interest in a Permanent
Regulation S Global Note, and the Senior Trustee will comply with such request
and will (x) permanently reduce the principal amount of such Regulation S
Temporary Global Note by the amount of such beneficial interest and (y)
increase the principal amount of such Permanent Regulation S Global Note by the
amount of such beneficial interest.

 

ARTICLE 3

Redemption; Offer to Purchase

 

Section
3.01.  Optional Redemption. 
The Notes will be redeemable, in whole, at any time, or in
part, from time to time, at the option of the Issuer upon not less than 30 nor
more than 60 days’ notice at a redemption price equal to the sum of:

 

(a)                        100%
of the principal amount thereof, plus accrued and unpaid interest thereon to
the redemption date; plus

 

(b)                       the
Make-Whole Amount.

 

The Senior Trustee shall have no responsibility in
connection with the calculation of such redemption price.

 

Section
3.02.  Sinking Fund; Mandatory Redemption.  There is no sinking fund for, or
mandatory redemption of, the Notes.

 

Section
3.03.  Method And Effect of Redemption.  (a) If the Issuer elects to redeem
Notes, it must notify the Senior Trustee of the redemption date and the principal
amount of Notes to be redeemed by delivering an Officers’ Certificate at least
45 days before the redemption date (unless a shorter period is satisfactory to
the Senior Trustee).  If fewer than all
of the Notes are being redeemed, the Officers’ Certificate must also specify a
record date not less than 15 days after the date of the notice of redemption is
given to the Senior Trustee, and the Senior Trustee will select the Notes to be
redeemed pro rata, or as nearly a pro rata basis as is practicable (subject to
the procedures of DTC), unless such method is otherwise prohibited, in which
case, by lot or by any other method the Senior Trustee in its sole discretion
deems fair and appropriate, in denominations of $1,000 principal amount and
multiples thereof.  The Senior Trustee
will notify the Issuer promptly of the Notes or portions of Notes to be called
for redemption.

 

42

 

Notice of
redemption must be sent by the Issuer or, at the Issuer’s request, by the Senior
Trustee in the name and at the expense of the Issuer to Holders whose Notes are
to be redeemed at least 30 days but not more than 60 days before the redemption
date.  Notices of redemption may not be
conditional.

 

(b)                       The
notice of redemption will identify the Notes to be redeemed and will include or
state the following:

 

(i)                                     the
redemption date;

 

(ii)                                  the
redemption price, including the portion thereof representing any accrued
interest or Additional Interest, if any;

 

(iii)                               the
place or places where Notes are to be surrendered for redemption (Notes called
for redemption must be so surrendered in order to collect the redemption
price);

 

(iv)                              that
on the redemption date, the redemption price will become due and payable on
Notes called for redemption, and interest on Notes called for redemption will
cease to accrue on and after the redemption date;

 

(v)                                 that
if any Note is redeemed in part, the portion of the principal amount thereof to
be redeemed, and that on and after the redemption date, upon surrender of such
Note, new Notes equal in principal amount to the unredeemed portion will be
issued; and

 

(vi)                              if
any Note contains a CUSIP or ISIN number, no representation is being made as to
the correctness of the CUSIP or ISIN number either as printed on the Notes or
as contained in the notice of redemption and that the Holder should rely only
on the other identification numbers printed on the Notes.

 

(c)                        Once
notice of redemption is sent to the Holders, Notes called for redemption become
due and payable at the redemption price on the redemption date, and upon
surrender of the Notes called for redemption, the Issuer shall redeem such
Notes at the redemption price. 
Commencing on the redemption date, Notes redeemed will cease to accrue
interest.  Upon surrender of any Note
redeemed in part, the Holder will receive a new Note equal in principal amount
to the unredeemed portion of the surrendered Note.

 

Section
3.04.  Offer to Purchase. 
(a) An “Offer to Purchase”
means an offer by the Issuer to purchase Notes as required by the
Indenture.  An Offer to Purchase must be
made by written offer (the “offer”)
sent to the Holders.  The Issuer will
notify the Senior Trustee at least 15 days (or such shorter period as is

 

43

 

acceptable to the
Senior Trustee) prior to sending the offer to Holders of its obligation to make
an Offer to Purchase, and the offer will be sent by the Issuer or, at the
Issuer’s request, by the Senior Trustee in the name and at the expense of the
Issuer.

 

(b)                       The
offer must include or state the following as to the terms of the Offer to
Purchase:

 

(i)                                     the
provision of the Indenture pursuant to which the Offer to Purchase is being
made;

 

(ii)                                  the
aggregate principal amount of the outstanding Notes offered to be purchased by
the Issuer pursuant to the Offer to Purchase (including, if less than 100%, the
manner by which such amount has been determined pursuant to the Indenture) (the
“purchase amount”);

 

(iii)                               the
purchase price, including the portion thereof representing accrued interest and
Additional Interest, if any;

 

(iv)                              an
expiration date (the “expiration date”)
not less than 30 days or more than 60 days after the date of the offer, and a
settlement date for purchase (the “purchase
date”) not more than five Business Days after the expiration date;

 

(v)                                 information
concerning the business of the Company, the Issuer and its Subsidiaries which
the Issuer in good faith believes will enable the Holders to make an informed
decision with respect to the Offer to Purchase, at a minimum to include:

 

(A)                the
most recent annual and quarterly financial statements and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” for
the Company,

 

(B)                  a
description of material developments in the Company’s business subsequent to
the date of the latest of the financial statements (including a description of
the events requiring the Issuer to make the Offer to Purchase), and

 

(C)                  if
applicable, appropriate pro forma
financial information concerning the Offer to Purchase and the events requiring
the Issuer to make the Offer to Purchase;

 

(vi)                              a
Holder may tender all or any portion of its Notes, subject to the requirement
that any portion of a Note tendered must be in a multiple of $1,000 principal
amount;

 

44

 

(vii)                           the
place or places where Notes are to be surrendered for tender pursuant to the
Offer to Purchase;

 

(viii)                        each
Holder electing to tender a Note pursuant to the offer will be required to surrender
such Note at the place or places specified in the offer prior to the close of
business on the expiration date (such Note being, if the Issuer or the Senior
Trustee so requires, duly endorsed or accompanied by a duly executed written
instrument of transfer);

 

(ix)                                interest
on any Note not tendered, or tendered but not purchased by the Issuer pursuant
to the Offer to Purchase, will continue to accrue;

 

(x)                                   on
the purchase date the purchase price will become due and payable on each Note
accepted for purchase, and interest on Notes purchased will cease to accrue on
and after the purchase date;

 

(xi)                                Holders
are entitled to withdraw Notes tendered by giving notice, which must be
received by the Issuer or the Senior Trustee not later than the close of business
on the expiration date, setting forth the name of the Holder, the principal
amount of the tendered Notes, the certificate number of the tendered Notes and
a statement that the Holder is withdrawing all or a portion of the tender;

 

(xii)                             (A)
if Notes in an aggregate principal amount less than or equal to the purchase
amount are duly tendered and not withdrawn pursuant to the Offer to Purchase,
the Issuer will purchase all such Notes, and (B) if the Offer to Purchase is
for less than all of the outstanding Notes and Notes in an aggregate principal
amount in excess of the purchase amount are tendered and not withdrawn pursuant
to the offer, the Issuer will purchase Notes having an aggregate principal
amount equal to the purchase amount on a pro
rata basis, with adjustments so that only Notes in multiples of
$1,000 principal amount will be purchased;

 

(xiii)                          if
any Note is purchased in part, new Notes equal in principal amount to the
unpurchased portion of the Note will be issued; and

 

(xiv)                         if
any Note contains a CUSIP or ISIN number, no representation is being made as to
the correctness of the CUSIP or ISIN number either as printed on the Notes or
as contained in the offer and that the Holder should rely only on the other
identification numbers printed on the Notes.

 

45

 

(c)                        Prior
to the purchase date, the Issuer will accept tendered Notes for purchase as
required by the Offer to Purchase and deliver to the Senior Trustee all Notes
so accepted together with an Officers’ Certificate specifying which Notes have
been accepted for purchase.  On the
purchase date, the purchase price will become due and payable on each Note
accepted for purchase, and interest on Notes purchased will cease to accrue on
and after the purchase date.  The Senior
Trustee will promptly return to Holders any Notes not accepted for purchase and
send to Holders new Notes equal in principal amount to any unpurchased portion
of any Notes accepted for purchase in part.

 

(d)                       The
Issuer will comply with Rule 14e-1 under the Exchange Act and all other
applicable laws in making any Offer to Purchase, and the above procedures will
be deemed modified as necessary to permit such compliance.

 

ARTICLE 4

Covenants

 

Section
4.01.  Payment of Notes.  
(a)  The Issuer agrees to pay the principal of, premium,
if any, and interest and Additional Interest, if any, on the Notes on the dates
and in the manner provided in the Notes and the Indenture.  The Issuer shall pay Additional Interest in
the amounts set forth in the Registration Rights Agreement.  Not later than 9:00 A.M. (New York City time)
on the due date of any principal of, premium, if any, or interest and
Additional Interest, if any, on, any Notes, or any redemption or purchase price
of the Notes, the Issuer will deposit with the Senior Trustee (or Paying Agent)
money in immediately available funds sufficient to pay such amounts; provided, that if the Issuer or any
Affiliate of the Issuer is acting as Paying Agent, it will, on or before each
due date, segregate and hold in a separate trust fund for the benefit of the
Holders a sum of money sufficient to pay such amounts until paid to such
Holders or otherwise disposed of as provided in the Indenture.  In each case the Issuer will promptly notify
the Senior Trustee of its compliance with this paragraph.

 

(b)                       An
installment of principal, premium, if any, or interest and Additional Interest,
if any, will be considered paid on the date due if the Senior Trustee (or
Paying Agent, other than the Issuer or any Affiliate of the Issuer) holds on
that date money designated for and sufficient to pay the installment.  If the Issuer or any Affiliate of the Issuer
acts as Paying Agent, an installment of principal, premium, if any, or interest
and Additional Interest, if any, will be considered paid on the due date only
if paid to the Holders.

 

(c)                        The
Issuer agrees to pay interest on overdue principal, and, to the extent lawful,
overdue installments of interest and Additional Interest at the rate per annum
specified in the Notes.

 

46

 

(d)                       Payments
in respect of the Notes represented by the Global Notes are to be made by wire
transfer of immediately available funds to the accounts specified by the
Holders of the Global Notes. With respect to Certificated Notes, the Issuer
will make all payments by wire transfer of immediately available funds to the
accounts specified by the Holders thereof or, if no such account is specified,
by mailing a check to each Holder’s registered address.

 

Section
4.02.  Maintenance of Office or Agency.  The Company and the Issuer will
maintain an office or agency where Notes may be surrendered for registration of
transfer or exchange or for presentation for payment and where notices and
demands to or upon the Company and the Issuer in respect of the Notes and the
Indenture may be served.  The Issuer and
the Company hereby initially designate the Corporate Trust Office of the Senior
Trustee as such office of the Issuer and the Company.  The Issuer will give prompt written notice to
the Senior Trustee of the location, and any change in the location, of such
office or agency.  If at any time the
Issuer and the Company fail to maintain any such required office or agency or fail
to furnish the Senior Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served to the Senior Trustee.

 

The Issuer may also from time to time designate one or
more other offices or agencies where the Notes may be surrendered or presented
for any of such purposes and may from time to time rescind such
designations.  The Issuer will give
prompt written notice to the Senior Trustee of any such designation or
rescission and of any change in the location of any such other office or
agency.

 

Section
4.03.  Existence.  The
Company and the Issuer will each do or cause to be done all things necessary to
preserve and keep in full force and effect their existence and the existence of
each of the Restricted Subsidiaries in accordance with their respective
organizational documents, and the material rights, licenses and franchises of
the Company, the Issuer and each Restricted Subsidiary; provided, that the Company and the Issuer
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 the Company and its
Restricted Subsidiaries taken as a whole; and provided,
further, that this Section not
prohibit any transaction otherwise permitted by Section 4.10 or Section 4.14.

 

Section
4.04.  Payment of Taxes and Other Claims.  The Company will pay or discharge,
and cause each of its Subsidiaries to pay or discharge before the same become
delinquent (a) all material taxes, assessments and governmental charges levied
or imposed upon the Company or any Subsidiary or its income or profits or
property, and (b) all material lawful claims for labor, materials and supplies
that, if unpaid, might by law become a Lien upon the property of the

 

47

 

Company 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.

 

Section
4.05.  Maintenance of Properties and Insurance. (a)  The Company 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 the Company may be necessary so that the business
of the Company and its Restricted Subsidiaries may be properly and
advantageously conducted at all times; provided,
that nothing in this Section prevents the Company 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 the Company, desirable in the conduct of the business of the
Company and its Restricted Subsidiaries taken as a whole.

 

(b)                       The
Company 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 the Company and its
Restricted Subsidiaries are then conducting business.

 

Section
4.06.  Limitations on Indebtedness.  (a) 
The Company and the Issuer will not, and will not cause or permit any
Restricted Subsidiary, directly or indirectly, to create, incur, assume, become
liable for or guarantee the payment of (collectively, an “incurrence”) any Indebtedness (including
Acquired Indebtedness) unless, after giving effect thereto and the application
of the proceeds therefrom, the Consolidated Fixed Charge Coverage Ratio on the
date thereof would be at least 2.0 to 1.0.

 

(b)                       Notwithstanding
the foregoing, the provisions of the Indenture will not prevent the incurrence
of:

 

(i)                                     Permitted
Indebtedness,

 

(ii)                                  Refinancing
Indebtedness,

 

(iii)                               Non-Recourse
Indebtedness,

 

(iv)                              any
Guarantee of Indebtedness represented by the Notes or the Issuer’s 6% Senior
Subordinated Notes due 2010, and

 

48

 

(v)                                 any
guarantee of Indebtedness incurred under Credit Facilities in compliance with
the Indenture.

 

(c)                        For
purposes of determining compliance with this covenant, in the event that an
item of Indebtedness may be incurred through the first paragraph of this
covenant or by meeting the criteria of one or more of the types of Indebtedness
described in the second paragraph of this covenant (or the definitions of the
terms used therein), the Company, in its sole discretion,

 

(i)                                     may
classify such item of Indebtedness under and comply with either of such
paragraphs (or any of such definitions), as applicable,

 

(ii)                                  may
classify and divide such item of Indebtedness into more than one of such
paragraphs (or definitions), as applicable, and

 

(iii)                               may
elect to comply with such paragraphs (or definitions), as applicable, in any
order.

 

(d)                       The
Company and the Issuer will not, and will not cause or permit any Guarantor to,
directly or indirectly, in any event incur any Indebtedness that purports to be
by its terms (or by the terms of any agreement governing such Indebtedness)
subordinated to any other Indebtedness of the Company or of such Guarantor, as
the case may be, unless such Indebtedness is also by its terms (or by the terms
of any agreement governing such Indebtedness) made expressly subordinated to
the Notes or the Guarantee of such Guarantor, as the case may be, to the same
extent and in the same manner as such Indebtedness is subordinated to such
other Indebtedness of the Company or such Guarantor, as the case may be.

 

Section
4.07.  Limitations on Restricted Payments.  (a) The Company and the Issuer
will not, and will not cause or permit any Restricted Subsidiary to, directly
or indirectly, make any Restricted Payment unless:

 

(i)                                     no
Default or Event of Default shall have occurred and be continuing at the time
of or immediately after giving effect to such Restricted Payment;

 

(ii)                                  immediately
after giving effect to such Restricted Payment, the Company could incur at
least $1.00 of Indebtedness pursuant to Section 4.06(a) hereof; and

 

(iii)                               immediately
after giving effect to such Restricted Payment, the aggregate amount of all
Restricted Payments (including the Fair Market Value of any non-cash Restricted
Payment) declared or made after May 4, 1999 does not exceed the sum of:

 

49

 

(A)                50%
of the Consolidated Net Income of the Company on a cumulative basis during the
period (taken as one accounting period) from and including February 1, 1999 and
ending on the last day of the Company’s fiscal quarter immediately preceding
the date of such Restricted Payment (or in the event such Consolidated Net
Income shall be a deficit, minus 100% of such deficit), plus

 

(B)                  100%
of the aggregate net cash proceeds of and the Fair Market Value of Property
received by the Company from (1) any capital contribution to the Company after
February 1, 1999 or any issue or sale after February 1, 1999 of Qualified Stock
(other than to any Subsidiary of the Company) and (2) the issue or sale after
February 1, 1999 of any Indebtedness or other securities of the Company
convertible into or exercisable for Qualified Stock of the Company that have
been so converted or exercised, as the case may be, plus

 

(C)                  in
the case of the disposition or repayment of any Investment constituting a
Restricted Payment made after May 4, 1999, an amount (to the extent not
included in the calculation of Consolidated Net Income referred to in (A))
equal to the lesser of (x) the return of capital with respect to such
Investment (including by dividend, distribution or sale of Capital Stock) and
(y) the amount of such Investment that was treated as a Restricted Payment, in
either case, less the cost of the disposition or repayment of such Investment
(to the extent not included in the calculation of Consolidated Net Income
referred to in (A)), plus

 

(D)                 with
respect to any Unrestricted Subsidiary that is redesignated as a Restricted
Subsidiary after May 4, 1999, in accordance with the definition of Unrestricted
Subsidiary (so long as the designation of such Subsidiary as an Unrestricted
Subsidiary was treated as a Restricted Payment made after the Issue Date, and
only to the extent not included in the calculation of Consolidated Net Income
referred to in (A)), an amount equal to the lesser of (x) the proportionate
interest of the Company or a Restricted Subsidiary in an amount equal to the
excess of (I) the total assets of such Subsidiary, valued on an aggregate basis
at the lesser of book value and Fair Market Value thereof, over (II) the total
liabilities of such Subsidiary, determined in accordance with GAAP, and (y) the
Designation Amount at the time of such Subsidiary’s designation as an
Unrestricted Subsidiary, plus

 

50

 

(E)                   $17
million, minus

 

(F)                   the
aggregate amount of all Restricted Payments (other than Restricted Payments
referred to in clause (iii) of paragraph (b) below) made after February 1, 1999
through May 4, 1999.

 

(b)                       clauses
(ii) and (iii) of paragraph (a) will not prohibit:

 

(i)                                     the
payment of any dividend within 60 days of its declaration if such dividend
could have been made on the date of its declaration without violation of the
provisions of the Indenture;

 

(ii)                                  the
repurchase, redemption or retirement of any shares of Capital Stock of the
Company in exchange for, or out of the net proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company) of, other shares of
Qualified Stock; and

 

(iii)                               the
purchase, redemption or other acquisition, cancellation or retirement for value
of Capital Stock, or options, warrants, equity appreciation rights or other
rights to purchase or acquire Capital Stock, of the Company or any Subsidiary
held by officers or employees or former officers or employees of the Company or
any Subsidiary (or their estates or beneficiaries under their estates) not to
exceed $10 million in the aggregate since May 4, 1999;

 

provided,
however, that each Restricted
Payment described in clauses (i) and (ii) of this sentence shall be taken into
account for purposes of computing the aggregate amount of all Restricted
Payments pursuant to clause (iii) of the immediately preceding paragraph.

 

(c)                        For
purposes of determining the aggregate and permitted amounts of Restricted
Payments made, the amount of any guarantee of any Investment in any Person that
was initially treated as a Restricted Payment and which was subsequently
terminated or expired, net of any amounts paid by the Company or any Restricted
Subsidiary in respect of such guarantee, shall be deducted.

 

(d)                       In
determining the “Fair Market Value of Property” for purposes of clause (iii) of
paragraph (a), Property other than cash, Cash Equivalents and Marketable
Securities shall be deemed to be equal in value to the “equity value” of the
Capital Stock or other securities issued in exchange therefor.  The equity value of such Capital Stock or
other securities shall be equal to (i) the number of shares of Common Equity
issued in the transaction (or issuable upon conversion or exercise of the
Capital Stock or other securities issued in the transaction) multiplied by the
closing sale price of the Common Equity on its principal market

 

51

 

on the
date of the transaction (less, in the case of Capital Stock or other securities
which require the payment of consideration at the time of conversion or
exercise, the aggregate consideration payable thereupon) or (ii) if the Common
Equity is not then traded on the New York Stock Exchange, American Stock
Exchange or Nasdaq National Market, or if the Capital Stock or other securities
issued in the transaction do not consist of Common Equity (or Capital Stock or
other securities convertible into or exercisable for Common Equity), the value
(if more than $10 million) of such Capital Stock or other securities as
determined by a nationally recognized investment banking firm retained by the
Board of Directors of the Company.

 

Section
4.08.  Limitations on Liens. 
The Company and the Issuer will not, and will not cause or
permit any Restricted Subsidiary to, create, incur, assume or suffer to exist
any Liens, other than Permitted Liens, on any of its Property, or on any shares
of Capital Stock or Indebtedness of any Restricted Subsidiary, unless
contemporaneously therewith or prior thereto all payments due under the
Indenture 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
4.09.  Limitations on Restrictions Affecting
Restricted Subsidiaries.  The
Company and the Issuer will not, and will not cause or permit any Restricted
Subsidiary to, create, assume or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction (other than encumbrances or
restrictions imposed by law or by judicial or regulatory action or by
provisions of agreements that restrict the assignability thereof) on the
ability of any Restricted Subsidiary to:

 

(a)                        pay
dividends or make any other distributions on its Capital Stock or any other
interest or participation in, or measured by, its profits, owned by the Company
or any other Restricted Subsidiary, or pay interest on or principal of any
Indebtedness owed to the Company or any other Restricted Subsidiary,

 

(b)                       make
loans or advances to the Company or any other Restricted Subsidiary, or

 

(c)                        transfer
any of its property or assets to the Company or any other Restricted
Subsidiary,

 

except for:

 

(i)                                     encumbrances
or restrictions existing under or by reason of applicable law,

 

52

 

(ii)                                  contractual
encumbrances or restrictions in effect on the Issue Date and any amendments,
modifications, restatements, renewals, supplements, refundings, replacements or
refinancings thereof; provided,
that such amendments, modifications, restatements, renewals, supplements,
refundings, replacements or refinancings are no more restrictive, taken as a
whole, with respect to such dividend and other payment restrictions than those
contained in such contractual encumbrances or restrictions, as in effect on the
Issue Date,

 

(iii)                               any
restrictions or encumbrances arising under Acquired Indebtedness; provided, that such encumbrance or
restriction applies only to either the assets that were subject to the
restriction or encumbrance at the time of the acquisition or the obligor on
such Indebtedness and its Subsidiaries prior to such acquisition,

 

(iv)                              any
restrictions or encumbrances arising in connection with Refinancing
Indebtedness; provided, however, that any restrictions and
encumbrances of the type described in this clause (iv) that arise under such
Refinancing Indebtedness shall not be materially more restrictive or apply to
additional assets than those under the agreement creating or evidencing the
Indebtedness being refunded, refinanced, replaced or extended,

 

(v)                                 any
Permitted Lien, or any other agreement restricting the sale or other
disposition of property, securing Indebtedness permitted by the Indenture if
such Permitted Lien or agreement does not expressly restrict the ability of a
Subsidiary of the Company to pay dividends or make or repay loans or advances
prior to default thereunder,

 

(vi)                              reasonable
and customary borrowing base covenants set forth in agreements evidencing
Indebtedness otherwise permitted by the Indenture,

 

(vii)                           customary
non-assignment provisions in leases, licenses, encumbrances, contracts or
similar assets entered into or acquired in the ordinary course of business,

 

(viii)                        any
restriction with respect to a Restricted Subsidiary imposed pursuant to an
agreement entered into for the sale or disposition of all or substantially all
of the Capital Stock or assets of such Restricted Subsidiary pending the
closing of such sale or disposition,

 

(ix)                                encumbrances
or restrictions existing under or by reason of the Indenture or the Notes,

 

53

 

(x)                                   purchase
money obligations that impose restrictions on the property so acquired of the
nature described in clause (c) of the preceding paragraph,

 

(xi)                                Liens
permitted under the Indenture securing Indebtedness that limit the right of the
debtor to dispose of the assets subject to such Lien,

 

(xii)                             provisions
with respect to the disposition or distribution of assets or property in joint
venture agreements, assets sale agreements, stock sale agreements and other
similar agreements,

 

(xiii)                          customary
provisions of any franchise, distribution or similar agreements,

 

(xiv)                         restrictions
on cash or other deposits or net worth imposed by contracts entered into in the
ordinary course of business, and

 

(xv)                            any
encumbrance or restrictions of the type referred to in clauses (a), (b) or (c)
of the first paragraph of this section imposed by any amendments,
modifications, restatements, renewals, supplements, refinancings, replacements
or refinancings of the contracts, instruments or obligations referred to in
clauses (i) through (xiv) of this paragraph; provided,
that such amendments, modifications, restatements, renewals, supplements,
refundings, replacements or refinancings are, in the good faith judgment of the
Company’s Board of Directors, no more restrictive with respect to such dividend
and other payment restrictions than those contained in the dividend or other
payment restrictions prior to such amendment, modification, restatement,
renewal, supplement, refunding, replacement or refinancing.

 

Section
4.10.  Limitations on Dispositions of Assets.  (a) The Company and the Issuer
will not, and will not cause or permit any Restricted Subsidiary to, make any
Asset Disposition unless (x) the Company (or such Restricted Subsidiary, as the
case may be) receives consideration at the time of such Asset Disposition at
least equal to the Fair Market Value thereof, and (y) not less than 70% of the
consideration received by the Company (or such Restricted Subsidiary, as the
case may be) is in the form of cash, Cash Equivalents and Marketable
Securities.

 

The amount of (i) any Indebtedness (other than any
Indebtedness subordinated to the Notes) of the Company or any Restricted
Subsidiary that is actually assumed by the transferee in such Asset Disposition
and (ii) the fair market value (as determined in good faith by the Board of
Directors of the Company) of any property or assets received that are used or
useful in a Real

 

54

 

Estate Business,
shall be deemed to be consideration required by clause (y) above for purposes
of determining the percentage of such consideration received by the Company or
the Restricted Subsidiaries.

 

(b)                       The
Net Cash Proceeds of an Asset Disposition shall, within one year, at the
Company’s election, (1) be used by the Company or a Restricted Subsidiary in
the business of the construction and sale of homes conducted by the Company and
the Restricted Subsidiaries or any other business of the Company or a
Restricted Subsidiary existing at the time of such Asset Disposition or (2) to
the extent not so used, be applied to make an Offer to Purchase Notes and, if
the Company or a Restricted Subsidiary elects or is required to do so repay,
purchase or redeem any other unsubordinated Indebtedness (on a pro rata basis if the amount available for
such repayment, purchase or redemption is less than the aggregate amount of (i)
the principal amount of the Notes tendered in such Offer to Purchase and (ii)
the lesser of the principal amount, or accreted value, of such other
unsubordinated Indebtedness, plus, in each case accrued interest to the date of
repayment, purchase or redemption) at 100% of the principal amount or accreted
value thereof, as the case may be, plus accrued and unpaid interest, if any, to
the date of repurchase or repayment.

 

(c)                        Notwithstanding
the foregoing, (A) the Company will not be required to apply such Net Cash
Proceeds to the repurchase of Notes in accordance with clause (2) of the
preceding paragraph except to the extent that such Net Cash Proceeds, together
with the aggregate Net Cash Proceeds of prior Asset Dispositions (other than
those so used) which have not been applied in accordance with this provision
and as to which no prior Offer to Purchase shall have been made, exceed 5% of
Consolidated Tangible Assets and (B) in connection with an Asset Disposition,
the Company and the Restricted Subsidiaries will not be required to comply with
the requirements of clause (y) of the first sentence of the first paragraph of
this covenant to the extent that the non-cash consideration received in
connection with such Asset Disposition, together with the sum of all non-cash
consideration received in connection with all prior Asset Dispositions that has
not yet been converted into cash, does not exceed 5% of Consolidated Tangible
Assets; provided, however, that
when any non-cash consideration is converted into cash, such cash shall
constitute Net Cash Proceeds and be subject to the preceding sentence.

 

Section
4.11.  Guarantees By Restricted Subsidiaries.  Each existing Restricted
Subsidiary (other than the Issuer (for so long as it remains the Issuer), KHL,
Inc. and K. Hovnanian Poland, sp.zo.o.) will be a Guarantor. The Company is
permitted to cause any Unrestricted Subsidiary to be a Guarantor.  If the Issuer, the Company or any of its
Restricted Subsidiaries acquires or creates a Restricted Subsidiary after the
Issue Date, such Restricted Subsidiary shall (subject to Section 6.03(b))
execute a guarantee substantially in the form included in Exhibit A,

 

55

 

execute a
supplemental indenture in the form of Exhibit B, and deliver an Opinion of
Counsel to the Senior Trustee to the effect that the supplemental indenture has
been duly authorized, executed and delivered by the new Restricted Subsidiary
and constitutes a valid and binding obligation of the new Restricted
Subsidiary, enforceable against the new Restricted Subsidiary in accordance
with its terms (subject to customary exceptions).

 

Section
4.12.  Repurchase of Notes upon a Change of
Control.  (a) In the event
that there shall occur a Change of Control, each Holder of Notes shall have the
right, at such Holder’s option, to require the Issuer to purchase all or any
part of such Holder’s Notes on a date (the “Repurchase
Date”) that is no later than 90 days after notice of the Change of
Control, at 101% of the principal amount thereof plus accrued and unpaid
interest and Additional Interest, if any, to the Repurchase Date.

 

(b)                       On
or before the thirtieth day after any Change of Control, the Issuer is
obligated to mail, or cause to be mailed, to all Holders of record of Notes and
the Senior Trustee a notice regarding the Change of Control and the repurchase
right. The notice shall state the Repurchase Date, the date by which the
repurchase right must be exercised, the price for the Notes and the procedure
which the Holder must follow to exercise such right.  Substantially simultaneously with mailing of
the notice, the Issuer shall cause a copy of such notice to be published in a
newspaper of general circulation in the Borough of Manhattan, The City of New
York.  To exercise such right, the Holder
of such Note must deliver at least ten days prior to the Repurchase Date
written notice to the Issuer (or an agent designated by the Issuer for such purpose)
of the Holder’s exercise of such right, together with the Note with respect to
which the right is being exercised, duly endorsed for transfer; provided, however,
that if mandated by applicable law, a Holder may be permitted to deliver such
written notice nearer to the Repurchase Date than may be specified by the
Issuer.

 

(c)                        The
Issuer will comply with applicable law, including Section 14(e) of Exchange Act
and Rule 14e-1 thereunder, if applicable, if the Issuer is required to give a
notice of a right of repurchase as a result of a Change of Control.

 

Section
4.13.  Limitations on Transactions with Affiliates.  (a) The Company and the Issuer
will not, and will not cause or permit any Restricted Subsidiary to, make any
loan, advance, guarantee or capital contribution to, or for the benefit of, or
sell, lease, transfer or otherwise dispose of any property or assets to or for
the benefit of, or purchase or lease any property or assets from, or enter into
or amend any contract, agreement or understanding with, or for the benefit of,
any Affiliate of the Company or any Affiliate of any of the Company’s
Subsidiaries or any holder of 10% or more of the Common Equity of the Company
(including any Affiliates of such holders), in a single transaction or

 

56

 

series of related
transactions (each, an “Affiliate Transaction”),
except for any Affiliate Transaction the terms of which are at least as
favorable as the terms which could be obtained by the Company, the Issuer or
such Restricted Subsidiary, as the case may be, in a comparable transaction
made on an arm’s length basis with Persons who are not such a holder, an
Affiliate of such a holder or an Affiliate of the Company or any of the
Company’s Subsidiaries.

 

(b)                       In
addition, the Company and the Issuer will not, and will not cause or permit any
Restricted Subsidiary to, enter into an Affiliate Transaction unless:

 

(i)                                     with
respect to any such Affiliate Transaction involving or having a value of more
than $1 million, the Company shall have (x) obtained the approval of a majority
of the Board of Directors of the Company and (y) either obtained the approval
of a majority of the Company’s disinterested directors or obtained an opinion
of a qualified independent financial advisor to the effect that such Affiliate
Transaction is fair to the Company, the Issuer or such Restricted Subsidiary,
as the case may be, from a financial point of view, and

 

(ii)                                  with
respect to any such Affiliate Transaction involving or having a value of more
than $10 million, the Company shall have (x) obtained the approval of a
majority of the Board of Directors of the Company and (y) delivered to the
Senior Trustee an opinion of a qualified independent financial advisor to the
effect that such Affiliate Transaction is fair to the Company, the Issuer or
such Restricted Subsidiary, as the case may be, from a financial point of view.

 

(c)                        Notwithstanding
the foregoing, an Affiliate Transaction will not include:

 

(i)                                     any
contract, agreement or understanding with, or for the benefit of, or plan for
the benefit of, employees of the Company or its Subsidiaries generally (in
their capacities as such) that has been approved by the Board of Directors of
the Company,

 

(ii)                                  Capital
Stock issuances to directors, officers and employees of the Company or its
Subsidiaries pursuant to plans approved by the stockholders of the Company,

 

(iii)                               any
Restricted Payment otherwise permitted under Section 4.07 hereof,

 

(iv)                              any
transaction between or among the Company and one or more Restricted
Subsidiaries or between or among Restricted Subsidiaries (provided, however, no such transaction
shall involve any other Affiliate

 

57

 

of the Company (other than an Unrestricted Subsidiary
to the extent the applicable amount constitutes a Restricted Payment permitted
by this Indenture)),

 

(v)                                 any
transaction between one or more Restricted Subsidiaries and one or more
Unrestricted Subsidiaries where all of the payments to, or other benefits
conferred upon, such Unrestricted Subsidiaries are substantially
contemporaneously dividended, or otherwise distributed or transferred without
charge, to the Company or a Restricted Subsidiary,

 

(vi)                              issuances,
sales or other transfers or dispositions of mortgages and collateralized
mortgage obligations in the ordinary course of business between Restricted
Subsidiaries and Unrestricted Subsidiaries of the Company, and

 

(vii)                           the
payment of reasonable and customary fees to, and indemnity provided on behalf
of, officers, directors, employees or consultants of the Company, the Issuer or
any Restricted Subsidiary.

 

Section
4.14.  Limitations on Mergers, Consolidations and
Sales of Assets.  Neither the
Issuer nor any Guarantor will consolidate or merge with or into, or sell,
lease, convey or otherwise dispose of all or substantially all of its assets
(including, without limitation, by way of liquidation or dissolution), or
assign any of its obligations under the Notes, the Guarantees or the Indenture
(as an entirety or substantially as an entirety in one transaction or in a
series of related transactions), to any Person (in each case other than in a
transaction in which the Company, the Issuer or a Restricted Subsidiary is the
survivor of a consolidation or merger, or the transferee in a sale, lease, conveyance
or other disposition) unless:

 

(i)                                     the
Person formed by or surviving such consolidation or merger (if other than the
Company, the Issuer or the Guarantor, as the case may be), or to which such
sale, lease, conveyance or other disposition or assignment will be made
(collectively, the “Successor”),
is a corporation or other legal entity organized and existing under the laws of
the United States or any state thereof or the District of Columbia, and the
Successor assumes by supplemental indenture in a form reasonably satisfactory
to the Senior Trustee all of the obligations of the Company, the Issuer or the
Guarantor, as the case may be, under the Notes or a Guarantee, as the case may
be, and the Indenture,

 

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

 

58

 

(iii)                               immediately
after giving effect to such transaction, the Company (or its Successor) could
incur at least $1.00 of Indebtedness pursuant to Section 4.06(a) hereof.

 

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, or (ii) a transaction the purpose of which
is to change the state of incorporation of the Company, the Issuer or any
Guarantor.

 

Section
4.15.  Reports to Holders of Notes.   (a)  The Company shall file with the Commission
the annual reports and the information, documents and other reports required to
be filed pursuant to Section 13 or 15(d) of the Exchange Act. The Company shall
file with the Senior Trustee and mail to each Holder of record of Notes such
reports, information and documents within 15 days after it files them with the
Commission.  In the event that the
Company is no longer subject to these periodic reporting requirements of the
Exchange Act, it will nonetheless continue to file reports with the Commission
and the Senior Trustee and mail such reports to each Holder of Notes as if it
were subject to such reporting requirements. 
Regardless of whether the Company is required to furnish such reports to
its stockholders pursuant to the Exchange Act, the Company will cause its
consolidated financial statements and a “Management’s Discussion and Analysis
of Results of Operations and Financial Condition” written report, similar to
those that would have been required to appear in annual or quarterly reports,
to be delivered to Holders of Notes.

 

(b)                       For
so long as any of the Notes remain outstanding and constitute “restricted
securities” under Rule 144, the Company will furnish to the Holders of Notes
and prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.

 

(c)                        All
“obligors,” as that term is defined under the Trust Indenture Act, on the
Notes, including the Issuer and the Guarantors, will comply with Section 314(a)
of the Trust Indenture Act.

 

(d)                       Delivery
of these reports and information to the Senior Trustee is for informational
purposes only and the Senior Trustee’s receipt of them will not constitute
constructive notice of any information contained therein or determinable from
information contained therein, including the Issuer’s and/or the Company’s
compliance with any of its covenants hereunder (as to which the Senior Trustee
is entitled to rely exclusively on Officers’ Certificates).

 

59

 

Section
4.16.  Reports to Senior Trustee.  (a) The Company will deliver to
the Senior Trustee within 120 days after the end of each fiscal year a written
statement by the Company’s independent public accountants stating (i) that
their audit examination has included a review of the terms of this Indenture
and the Notes as they relate to accounting matters, and (ii) whether, in
con­nection with their audit examination, any Default has come to their
attention and, if a Default has come to their attention, specifying the nature
and period of the existence thereof.

 

(b)                       The
Company shall deliver to the Senior Trustee, on or prior to each Interest
Payment Date, an Officer’s Certificate setting forth the amount of Additional
Interest, if any, the Issuer is required to pay on that Interest Payment
Date.  If no Additional Interest are
required to be paid on a given Interest Payment Date, no such Officer’s
Certificate is required to be delivered to the Senior Trustee for that Interest
Payment Date.

 

(c)                        All
“obligors,” as that term is defined under the Trust Indenture Act, on the
Notes, including the Issuer and the Guarantors, will comply with Section 314(a)
of the Trust Indenture Act.  The Company
will notify the Senior Trustee when any Notes are listed on any national
securities exchange and of any delisting.

 

Section
4.17.  Notice of Other Defaults.  In the event that any Indebtedness of the
Issuer or any Guarantor is declared due and payable before its maturity because
of the occurrence of any default under such Indebtedness, the Issuer or the
relevant Guarantor, as the case may be, shall promptly deliver to the Senior
Trustee and Officers’ Certificate stating such declaration; provided, that the term “Indebtedness” as
used in this Section 4.17 shall not include Non-Recourse Indebtedness.

 

Section
4.18.  Limitation of Applicability of Certain Covenants if
Notes Rated Investment Grade. 
(a) The Issuer, the Company and its Restricted Subsidiaries’ obligations
to comply with the provisions of the Indenture under this Article 4 (except for
Sections 4.01, 4.02, 4.03, 4.04, 4.05, 4.08, 4.11 (subject to Section 6.03(b)),
4.12, 4.14 (other than clause (iii) of the first paragraph thereof), 4.15,
4.16, 4.17 and this Section 4.18, will terminate (such terminated covenants,
the “Extinguished Covenants”) and
cease to have any further effect from and after the first date when the Notes
issued under the Indenture are rated Investment Grade; provided, that if the Notes subsequently
cease to be rated Investment Grade, then, from and after the time the Notes
cease to be rated Investment Grade, the Issuer’s, the Company’s and its Restricted
Subsidiaries’ obligation to comply with the Extinguished Covenants shall be
reinstated.

 

60

 

(b)                       In
the event of any such reinstatement of the obligation to comply with the
Extinguished Covenants, no action taken or omitted to be taken by the Issuer,
the Company or any of its Subsidiaries prior to such reinstatement shall give
rise to a Default or Event of Default under the Indenture upon reinstatement; provided, that with respect to Restricted Payments made after any such
reinstatement, the amount of Restricted Payments made after May 4, 1999 will be
calculated as though Section 4.07 hereof had been in effect during the entire
period after such date.

 

ARTICLE 5

Remedies

 

Section
5.01.  Events of Default.  “Event
of Default” means any one or more of the following events:

 

(i)                                     the
failure by the Company, the Issuer and the Guarantors to pay interest on, or
Additional Interest, if any, with respect to, any Note when the same becomes
due and payable and the continuance of any such failure for a period of 30
days;

 

(ii)                                  the
failure by the Company, the Issuer and the Guarantors to pay the principal or
premium of any Note when the same becomes due and payable at maturity, upon
acceleration or otherwise;

 

(iii)                               the
failure by the Company, the Issuer or any Restricted Subsidiary to comply with
any of its agreements or covenants in, or provisions of, the Notes, the
Guarantees or the Indenture and such failure continues for the period and after
the notice specified below (except in the case of a default under Section 4.12
and 4.14, which will constitute Events of Default with notice but without
passage of time);

 

(iv)                              the
acceleration of any Indebtedness (other than Non-Recourse Indebtedness) of the
Company, the Issuer or any Restricted Subsidiary that has an outstanding
principal amount of $10 million or more, individually or in the aggregate, and
such acceleration does not cease to exist, or such Indebtedness is not
satisfied, in either case within 30 days after such acceleration;

 

(v)                                 the
failure by the Company, the Issuer or any Restricted Subsidiary to make any
principal or interest payment in an amount of $10 million or more, individually
or in the aggregate, in respect of Indebtedness (other than Non-Recourse Indebtedness)
of the Company or any Restricted Subsidiary within 30 days of such principal or
interest

 

61

 

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 $10 million or more, individually or in
the aggregate, for the payment of money having been entered by a court or
courts of competent jurisdiction against the Company, the Issuer or any of its
Restricted Subsidiaries and such judgment or judgments is not satisfied,
stayed, annulled or rescinded within 60 days of being entered;

 

(vii)                           the
Company, the Issuer 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 its creditors;

 

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

 

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

 

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

 

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

 

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

 

(ix)                                any
Guarantee of a Guarantor which is a Significant Subsidiary ceases to be in full
force and effect (other than in accordance

 

62

 

with the terms of such Guarantee and this Indenture)
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 the
Indenture and the Guarantee).

 

A Default as described in subclause (iii) above will
not be deemed an Event of Default until the Senior Trustee notifies the
Company, or the Holders of at least 25 percent in principal amount of the then
outstanding Notes notify the Company and the Senior Trustee, of the Default and
(except in the case of a default with respect to Section 4.12 and 4.14 hereof)
the Company does not cure the Default within 60 days after receipt of the
notice. The notice must specify the Default, demand that it be remedied and
state that the notice is a “Notice of Default.” If such a Default is cured
within such time period, it ceases.

 

If an Event of Default (other than an Event of Default
with respect to the Company or the Issuer resulting from subclauses (vii) or
(viii) above), shall have occurred and be continuing under the Indenture, the
Senior Trustee by notice to the Company, or the Holders of at least 25 percent
in principal amount of the Notes then outstanding by notice to the Company and
the Senior Trustee, may declare all Notes to be due and payable
immediately.  Upon such declaration of
acceleration, the amounts due and payable on the Notes will be due and payable
immediately.  If an Event of Default with
respect to the Company or the Issuer specified in subclauses (vii) or (viii)
above occurs, such an amount will ipso facto
become and be immediately due and payable without any declaration, notice or
other act on the part of the Senior Trustee and the Company or any Holder.  This provision, however, is subject to the
condition that, if at any time after the unpaid principal amount (or such
specified amount) of the Notes shall have been so declared due and payable and
before any judgment or decree for the payment of the moneys due shall have been
obtained or entered as hereinafter provided, the Issuer shall pay or shall
deposit with the Senior Trustee a sum sufficient to pay all matured
installments of interest and Additional Interest, if any, upon all of the Notes
and the principal of all the Notes which shall have become due otherwise than
by acceleration (with interest on overdue installments of interest and
Additional Interest, if any, to the extent that payment of such interest is
enforceable under applicable law and on such principal at the rate borne by the
Notes to the date of such payment or deposit) and the reasonable compensation,
disbursements, expenses and advances of the Senior Trustee and all other
amounts due the Senior Trustee under Section 7.07, and any and all defaults
under this Indenture, other than the nonpayment of such portion of the
principal amount of and accrued interest and Additional Interest, if any, on
Notes which shall have become due by acceleration, shall have been cured or
shall have been waived in accordance with Section 5.03 or provision deemed by
the Senior Trustee to be adequate shall have been made therefor, then and in
every such case the Holders

 

63

 

of a majority in
aggregate principal amount of the Notes then outstanding, by written notice to
the Issuer and to the Senior Trustee, may rescind and annul such declaration
and its consequences; but no such rescission and annulment shall extend to or
shall affect any subsequent default, or shall impair any right consequent
thereon.  Notwithstanding the previous
sentence, no waiver shall be effective against any Holder for any Event of
Default or event which with notice or lapse of time or both would be an Event
of Default with respect to any covenant or provision which cannot be modified
or amended without the consent of the Holder of each outstanding Note affected
thereby, unless all such affected Holders agree, in writing, to waive such
Event of Default or other event.

 

If the Senior Trustee shall have proceeded to enforce
any right under this Indenture and such proceedings shall have been
discontinued or abandoned because of such rescission or annulment or for any
reason or shall have been determined to be adverse to the Senior Trustee, then
and in every such case the Issuer, the Senior Trustee and the Holders of Notes
shall be restored respectively to their several positions and rights hereunder,
and all rights, remedies and powers of the Issuer, the Senior Trustee and the
Holders of Notes shall continue as though no such proceeding had been taken.

 

Except with respect to an Event of Default pursuant to
clauses (i) or (ii) of this Section 5.01, the Senior Trustee shall not be
charged with knowledge of any Event of Default unless written notice thereof
shall have been given to the Senior Trustee by the Issuer, a Paying Agent or
any Holder.

 

Section
5.02.  Other Remedies.  If an Event of Default occurs and is
continuing, the Senior Trustee may pursue, in its own name or as trustee of an
express trust, any available remedy by proceeding at law or in equity to
collect the payment of principal of, premium, if any, and interest or
Additional Interest, if any, on the Notes or to enforce the performance of any
provision of the Notes or the Indenture. 
The Senior Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding.

 

Section
5.03.  Waiver of Defaults by Majority of Holders.  By written notice to the Senior
Trustee and the Company, the Holders of a majority in aggregate principal
amount of the Notes then outstanding may on behalf of the Holders of all of the
Notes waive any past Default or Event of Default hereunder and its
consequences, except a Default in the payment of interest and Additional
Interest, if any, on, or the principal of, the Notes.  Upon any such waiver, the Issuer, the Senior
Trustee and the Holders of Notes shall be restored to their former positions
and rights hereunder, respectively; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereon.  Whenever any Default or Event
of Default hereunder shall have been waived as permitted by this Section 5.03,
said Default or Event of

 

64

 

Default shall for
all purposes of the Notes and this Indenture be deemed to have been cured and
to be not continuing.

 

Section
5.04.  Direction of Proceedings.  The Holders of a majority in aggregate
principal amount of the outstanding Notes shall have the right to direct the
time, method, and place of conducting any proceeding for any remedy available
to the Senior Trustee, or exercising any trust or power conferred on the Senior
Trustee with respect to the Notes; provided,
however, that (subject to the
provisions of Section 7.01) the Senior Trustee shall have the right to decline
to follow any such direction if the Senior Trustee shall determine upon advice
of counsel that the action or proceeding so directed may not lawfully be taken
or if the Senior Trustee in good faith by its board of directors, its executive
committee, or a trust committee of directors or Responsible Officers or both
shall determine that the action or proceeding so directed would involve the
Senior Trustee in personal liability.

 

Section
5.05.  Application of Moneys Collected by Senior Trustee.  Any moneys collected by the Senior Trustee
pursuant to this Article respect to outstanding Notes shall be applied in the
order following, at the date or dates fixed by the Senior Trustee for the
distribution of such moneys, upon presentation of the Notes and stamping
thereon the payment, if only partially paid, and upon surrender thereof, if
fully paid:

 

FIRST: To the payment of costs and expenses of
collection and reasonable compensation to the Senior Trustee, its agents, attorneys
and counsel, and all other expenses and liabilities incurred, and all advances
made, by the Senior Trustee pursuant to Section 7.07 except as a result of its
negligence or bad faith;

 

SECOND: If the principal of the Notes shall not have
become due and be unpaid, to the payment of interest or Additional Interest, if
any, on the Notes, in the order of the maturity of the installments of such
interest or Additional Interest, if any, with interest (to the extent that such
interest has been collected by the Senior Trustee) upon the overdue
installments of interest and Additional Interest, if any, at the rate borne by
the Notes, such payment to be made ratably to the Persons entitled thereto;

 

THIRD: If the principal of the Notes shall have become
due, by declaration or otherwise, to the payment of the whole amount then owing
and unpaid upon the Notes for principal, interest and Additional Interest, if
any, with interest on the overdue principal and (to the extent that such
interest has been collected by the Senior Trustee) upon overdue installments of
interest and Additional Interest, if any, at the rate borne by the Notes, and
in case such moneys shall be insufficient to pay in full the

 

65

 

whole amounts so due and unpaid upon the Notes, then
to the payment of such principal and interest and Additional Interest, if any,
without preference or priority of principal over interest or Additional
Interest, if any, or of interest or Additional Interest, if any, over
principal, or of interest over Additional Interest, if any, or of any
installment of interest, if any, or Additional Interest, if any, over any other
installment of interest or Additional Interest, if any, ratably to the
aggregate of such principal and accrued and unpaid interest and Additional
Interest, if any; and

 

FOURTH: To the payment of any surplus then remaining
to the Issuer, its successors or assigns, or to whomsoever may be lawfully
entitled to receive the same.

 

No claim for interest which in any manner at or after
maturity shall have been transferred or pledged separate or apart from the
Notes to which it relates, or which in any manner shall have been kept alive
after maturity by an extension (otherwise than pursuant to an extension made
pursuant to a plan proposed by the Issuer to the Holders of all Notes),
purchase, funding or otherwise by or on behalf or with the consent or approval
of the Issuer shall be entitled, in case of a default hereunder, to any benefit
of this Indenture, except after prior payment in full of the principal of all
Notes and of all claims for interest not so transferred, pledged, kept alive,
extended, purchased or funded.

 

Section
5.06.  Proceedings by Holders.  No holder of any Notes shall have any right
by virtue of or by availing of any provision of this Indenture to institute any
suit, action or proceeding in equity or at law upon or under or with respect to
this Indenture for the appointment of a receiver or trustee or similar
official, or for any other remedy hereunder, unless such Holder previously
shall have given to the Senior Trustee written notice of default and of the
continuance thereof, as hereinbefore provided, and unless the Holders of not
less than 25% in aggregate principal amount of the Notes then outstanding shall
have made written request to the Senior Trustee to institute such action, suit
or proceeding in its own name as Senior Trustee hereunder and shall have
offered to the Senior Trustee such reasonable indemnity as it may require
against the costs, expenses and liabilities to be incurred therein or thereby,
and the Senior Trustee for 60 days after its receipt of such notice, request
and offer of indemnity shall have neglected or refused to institute any such
action, suit or proceeding, it being understood and intended, and being
expressly covenanted by the Holder of every Note with every other Holder and
the Senior Trustee, that no one or more Holders of Notes shall have any right
in any manner whatever by virtue of or by availing of any provision of this
Indenture or of the Notes to affect, disturb or prejudice the rights of any
other Holder of Notes, or to obtain or seek to obtain priority over or
preference as to any other such Holder, or to enforce any right under this

 

66

 

Indenture or the
Notes, except in the manner herein provided and for the equal, ratable and
common benefit of all Holders of Notes.

 

Notwithstanding any other provisions in this
Indenture, however, the right of any Holder of any Note to receive payment of
the principal of, premium, if any, and interest and Additional Interest, if
any, on such Note, on or after the maturity thereof, or to institute suit for
the enforcement of any such payment on or after such respective dates shall not
be impaired or affected without the consent of such Holder.

 

Section
5.07.  Proceedings by Senior Trustee.  In case of an Event of Default hereunder, the
Senior Trustee may in its discretion proceed to protect and enforce the rights
vested in it by this Indenture by such appropriate judicial proceedings as the
Senior Trustee shall deem most effectual to protect and enforce any of such
rights, either by suit in equity or by action at law or by proceedings in
bankruptcy or otherwise, whether for the specific enforcement of any covenant
or agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture, or to enforce any other legal or equitable right
vested in the Senior Trustee by this Indenture or by law.

 

Section
5.08.  Remedies Cumulative and Continuing.  All powers and remedies given by this Article
5 to the Senior Trustee or to the Holders shall, to the extent permitted by
law, be deemed cumulative and not exclusive of any thereof or of any other
powers and remedies available to the Senior Trustee or the Holders, by judicial
proceedings or otherwise, to enforce the performance or observance of the
covenants and agreements contained in this Indenture, and no delay or omission
of the Senior Trustee or of any Holder to exercise any right or power accruing
upon any default occurring and continuing as aforesaid shall impair any such
right or power, or shall be construed to be a waiver of any such default or an
acquiescence therein; and, subject to the provisions of Section 5.06, every
power and remedy given by this Article 5 or by law to the Senior Trustee or to
the Holders may be exercised from time to time, and as often as shall be deemed
expedient, by the Senior Trustee or by the Holders.

 

Section
5.09.  Undertaking to Pay Costs.  All parties to this Indenture agree, and each
Holder of any Note by his acceptance thereof shall be deemed to have agreed,
that any court may in its discretion require, or in any suit for the
enforcement of any right or remedy under this Indenture, or in any suit against
the Senior Trustee for any action taken or omitted by it as Senior Trustee, the
filing by any party litigant in such suit of an undertaking to pay the cost of
such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys’ fees and expenses, against any party litigant
in such suit, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; but the provisions of this Section 5.09
shall not apply to any

 

67

 

suit instituted by
the Senior Trustee, to any suit instituted by any Holder, or group of Holders,
holding in the aggregate more than 10% in principal amount of the then
outstanding Notes, or to any suit instituted by any Holders for the enforcement
of the payment of the principal of, premium, if any, or interest or Additional
Interest, if any, on any Note against the Issuer on or after the due date of
such Note.

 

Section
5.10.  Notice of Defaults.  (a) The Company is required to deliver to the
Senior Trustee an annual statement regarding compliance with the Indenture, and
include in such statement, if any officer of the Company is aware of any
Default or Event of Default, a statement specifying such Default or Event of
Default and what action the Company is taking or proposes to take with respect
thereto. In addition, the Company is required to deliver to the Senior Trustee
prompt written notice of the occurrence of any Default or Event of Default.

 

(b)                       The
Senior Trustee shall, within 90 days after the occurrence of a default known to
the Senior Trustee, with respect to the Notes, mail to all Holders of Notes, as
the names and the addresses of such Holders appear upon the Register, notice of
all defaults, unless such defaults shall have been cured before the giving of
such notice (the term “default”
for the purpose of this Section 5.10(b) being hereby defined to be the events
specified in clauses (i), (ii), (iii), (iv), (v), (vi), (vii), (viii) and (ix)
of Section 5.01, not including periods of grace, if any, provided for therein
and irrespective of the giving of the written notice specified in said clause
(iii) but in the case of any default of the character specified in said clause
(iii) no such notice to Holders shall be given until at least 60 days after the
giving of written notice thereof to the Company pursuant to said clause (iii));
provided, however, that, except in the case of
default in the payment of the principal of, premium, if any, or interest and
Additional Interest, if any, on any of the Notes, or in the payment or
satisfaction of a purchase obligation, the Senior Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee, a trust committee of directors or a Responsible Officer of the
Senior Trustee in good faith determines that the withholding of such notice is
in the best interests of the Holders. Notice to Holders under this Section
shall be given in the manner and to the extent provided in Trust Indenture Act
Section 313(c).

 

Section
5.11.  Waiver of Stay, Extension or Usury Laws.  The Company, the Issuer and each
Guarantor covenants, to the extent permitted by applicable law, that it will
not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive the Company, the Issuer or the
Guarantor from paying all or any portion of the principal of, premium, if any,
or interest or Additional Interest, if any, on the Notes as contemplated
herein, wherever enacted, now or at any time hereafter in force, or that may
affect the

 

68

 

covenants or
the performance of the Indenture.  The
Company, the Issuer and each Guarantor hereby expressly waives, to the extent
that it may lawfully do so, all benefit or advantage of any such law and
covenants that it will not hinder, delay or impede the execution of any power
herein granted to the Senior Trustee, but will suffer and permit the execution
of every such power as though no such law had been enacted.

 

Section 5.12.  Senior
Trustee May File Proof of Claim. 
The Senior Trustee may file proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Senior Trustee (including any claim for the compensation, expenses,
disbursements and advances of the Senior Trustee, its agents and counsel, and
any other amounts due the Senior Trustee hereunder) and the Holders allowed in
any judicial proceedings relating to the Company, the Issuer or any Guarantor
or their respective creditors or property, and is entitled and empowered to
collect, receive and distribute any money, securities or other property payable
or deliverable upon conversion or exchange of the Notes or upon any such
claims.  Any custodian, receiver,
assignee, trustee, liquidator, sequestrator or other similar official in any such
judicial proceeding is hereby authorized by each Holder to make such payments
to the Senior Trustee and, if the Senior Trustee consents to the making of such
payments directly to the Holders, to pay to the Senior Trustee any amount due
to it for the reasonable compensation, expenses, disbursements and advances of
the Senior Trustee, its agent and counsel, and any other amounts due the Senior
Trustee hereunder.  Nothing in the
Indenture will be deemed to empower the Senior Trustee to authorize or consent
to, or accept or adopt on behalf of any Holder, any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the rights of any
Holder thereof, or to authorize the Senior Trustee to vote in respect of the
claim of any Holder in any such proceeding.

 

Section 5.13.  Payment of Notes on Default;
Suit Therefor.  The Issuer
covenants that (a) if default shall be made in the payment of any installment
of interest and Additional Interest, if any, upon the Notes as and when the
same shall become due and payable, and such default shall have continued for a
period of 30 days, or (b) if default shall be made in the payment of the
principal of, and premium, if any, on the Notes as and when the same shall have
become due and payable, whether at maturity of the Notes or upon redemption or
by declaration or otherwise, then, upon demand of the Senior Trustee, the
Issuer will pay to the Senior Trustee, for the benefit of the Holders, the
whole amount that then shall have become due and payable on all such Notes for
principal, and premium, if any, or interest and Additional Interest, if any, or
both, as the case may be, with interest upon the overdue principal and (to the
extent that payment of such interest is enforceable under applicable law) upon
the overdue installments of interest and Additional Interest, if any, at the
rate borne by the Notes; and, in addition thereto, such further amount as shall
be sufficient to cover the costs and expenses of

 

69

 

collection,
including a reasonable compensation to the Senior Trustee, its agent, attorneys
and counsel, and any expenses or liabilities incurred by the Senior Trustee
hereunder other than through its negligence or bad faith.

 

If the Issuer shall fail forthwith to pay such amounts upon such
demand, the Senior Trustee, in its own name and as trustee of an express trust,
shall be entitled and empowered to institute any actions or proceedings at law
or in equity for the collection of the sums so due and unpaid, and may
prosecute any such action or proceeding to judgment or final decree, and may
enforce any such judgment or final decree against the Issuer or any other
obligor on the Notes and collect in the manner provided by law out of the
property of the Issuer or any other obligor on the Notes, wherever situated,
the moneys adjudged or decreed to be payable.

 

If there shall be pending proceedings for the bankruptcy or for the
reorganization of the Issuer or any other obligor on the Notes under any
bankruptcy, insolvency or other similar law now or hereafter in effect, or if a
receiver or trustee or similar official shall have been appointed for the
property of the Issuer or such other obligor, or in the case of any other
similar judicial proceedings relative to the Issuer or other obligor on the
Notes, or to the creditors or property of the Issuer or such other obligor, the
Senior Trustee, irrespective of whether the principal of the Notes shall then
be due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Senior Trustee shall have made any demand pursuant
to the provisions of this Section 5.13, shall be entitled and empowered by
intervention in such proceedings or otherwise to file and prove a claim or
claims for the whole amount of principal, premium, if any, interest and
Additional Interest, if any, owing and unpaid in respect of the Notes, and, in
case of any judicial proceedings, to file such proofs of claim and other papers
or documents as may be necessary or advisable in order to have the claims of
the Senior Trustee and of the Holders allowed in such judicial proceedings
relative to the Issuer or any other obligor on the Notes, its or their
creditors, or its or their property, and to collect and receive any moneys or
other property payable or deliverable on any such claims, and to distribute the
same after the deduction of its charges and expenses, and any receiver,
assignee or trustee or similar official in bankruptcy or reorganization is
hereby authorized by each of the Holders to make such payments to the Senior
Trustee, and, if the Senior Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Senior Trustee any amount due
it for compensation and expenses or otherwise pursuant to Section 7.07,
including counsel fees and expenses incurred by it up to the date of such
distribution.  To the extent that such
payment of reasonable compensation, expenses and counsel fees and expenses out
of the estate in any such proceedings shall be denied for any reason, payment
of the same shall be secured by a lien on, and shall be paid out of, any and
all distributions, dividends, moneys, securities and other property which the
Holders

 

70

 

of Notes may be entitled to receive in such
proceedings, whether in liquidation or under any plan of reorganization or
arrangement or otherwise.

 

All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Senior Trustee without the possession
of any of the Notes, or the production thereof at any trial or other proceeding
relative thereto, and any such suit or proceeding instituted by the Senior
Trustee shall be brought in its own name as trustee of an express trust, and
any recovery of judgment shall be for the ratable benefit of the Holders of
Notes in respect of which such judgment has been recovered.

 

ARTICLE 6

GUARANTEES; RELEASE OF GUARANTOR

 

Section 6.01.  Guarantee.
Each of the Guarantors hereby unconditionally guarantees, jointly and
severally with each other Guarantor, to each Holder and to the Senior Trustee
and its successors and assigns, irrespective of the validity and enforceability
of this Indenture, the Notes or the obligations of the Issuer hereunder or
thereunder, that:  (i) the due and
punctual payment of the principal of, premium, if any, and interest or
Additional Interest, if any, on the Notes, whether at maturity or on an
interest payment date, by acceleration, pursuant to an Offer to Purchase or
otherwise, to the extent lawful, and all other obligations of the Issuer to the
Holders or the Senior Trustee hereunder or thereunder shall be promptly paid in
full when due, all in accordance with the terms hereof and thereof, including
all amounts payable to the Senior Trustee under Section 7.07 hereof, and (ii)
in case of any extension of time of payment or renewal of any Notes or any of
such other obligations, the same shall be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise.

 

If the Issuer fails to make any payment when due of any amount so
guaranteed for whatever reason, each Guarantor shall be obligated, jointly and
severally with each other Guarantor, 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 Notes, this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder or the Senior Trustee
with respect to any provisions hereof or thereof, the recovery of any judgment
against the Issuer, any action to enforce the same or any other circumstance which
might otherwise constitute a legal or equitable discharge or defense of such
Guarantor.  If any Holder or the Senior
Trustee is required by any court or otherwise to return to the Issuer or any
Guarantor, or any custodian, trustee, liquidator or other similar official
acting in relation to the Issuer or such

 

71

 

Guarantor, any amount paid by the Issuer or
any Guarantor to the Senior Trustee or such Holder, this Article 6, 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 relation to the Holders in respect of any obligations guaranteed
hereby by such Guarantor until payment in full of all such obligations.  Each Guarantor further agrees that, as
between such Guarantor, on the one hand, and the Holders of Notes and the
Senior Trustee on the other hand, (i) the maturity of the obligations
guaranteed hereby may be accelerated as provided in Article 5 hereof for the
purposes of such Guarantee, 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 5 hereof such obligations (whether or not due and
payable) shall forthwith become due and payable by such Guarantor, jointly and
severally with each other Guarantor, for the purpose of this Article 6.  In addition, without limiting the foregoing,
upon the effectiveness of an acceleration under Article 5, the Senior Trustee
may make a demand for payment on the Notes under any Guarantee provided
hereunder and not discharged.

 

The Guarantee set forth in this Section 6.01 shall not be valid or
become obligatory for any purpose with respect to a Note until the certificate
of authentication on such Note shall have been signed by the Senior Trustee or
any duly appointed agent.

 

Section 6.02.  Obligations
of each Guarantor Unconditional. 
Nothing contained in this Article 6 or elsewhere in this Indenture or in
any Note is intended to or shall impair, as between each Guarantor and the
Holders, the obligations of such Guarantor which are absolute and
unconditional, to pay to the Holders the principal of, premium, if any, and
interest and Additional Interest, if any, on the Notes as and when the same
shall become due and payable in accordance with the provisions of their
Guarantee or is intended to or shall affect the relative rights of the Holders
and creditors of such Guarantor, nor shall anything herein or therein prevent
the Senior Trustee or any Holder from exercising all remedies otherwise
permitted by applicable law upon any Default under this Indenture in respect of
cash, property or securities of such Guarantor received upon the exercise of
any such remedy.

 

Upon any distribution of assets of a Guarantor referred to in this
Article 6 the Senior Trustee, subject to the provisions of Article 7, the
Holders 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 Senior Trustee
or to such Holders for the purpose of ascertaining the persons entitled to
participate in such distribution, the

 

72

 

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 6.

 

Section 6.03.  Release of
a Guarantor.  (a) If all or
substantially all of the assets of any Guarantor other than the Company or all
of the Capital Stock of any Guarantor other than the Company is sold (including
by consolidation, merger, issuance or otherwise) or disposed of (including by
liquidation, dissolution or otherwise) by the Company or any of its
Subsidiaries, or, unless the Company elects otherwise, if any Guarantor other
than the Company is designated an Unrestricted Subsidiary in accordance with
the terms of the Indenture, then such Guarantor (in the event of a sale or
other disposition of all of the Capital Stock of such Guarantor or a
designation as an Unrestricted Subsidiary) or the Person acquiring such assets
(in the event of a sale or other disposition of all or substantially all of the
assets of such Guarantor) shall be deemed automatically and unconditionally
released and discharged from any of its obligations under the Indenture without
any further action on the part of the Senior Trustee or any Holder of Notes.

 

(b)         Upon
the release of the guarantee by a Guarantor (including, for the avoidance of
doubt, the Issuer after it ceases to be the Issuer pursuant to Article 10)
other than the Company under all then outstanding Applicable Debt, at any time
after the suspension of the Extinguished Covenants pursuant to Section 4.18
hereof, the Guarantee of such Guarantor under the Indenture will be released
and discharged in respect of the Notes at such time and no Restricted
Subsidiary thereafter acquired or created will be required to be a Guarantor in
respect of the Notes; provided, that
the foregoing shall not apply to any release of any Guarantor done in
contemplation of, or in connection with, any cessation of the Notes being rated
Investment Grade.  In the event that (i)
any such released Guarantor thereafter guarantees any Applicable Debt (or if
any released guarantee under any Applicable Debt is reinstated or renewed) or
(ii) the Extinguished Covenants cease to be suspended pursuant to Section 4.18
hereof then any such released Guarantor and any other Restricted Subsidiary of
Hovnanian then existing (other than KHL, Inc., the Issuer (for so long as it
remains the Issuer) and K. Hovnanian Poland, sp.zo.o.) will Guarantee the Notes
on the terms and conditions set forth in this Indenture.  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 the Company to the Senior Trustee to such effect,
without any further action required on the part of the Senior Trustee or any
Holder.

 

73

 

Section 6.04.  Execution
and Delivery of Guarantee.  The
execution by each Guarantor of the Indenture (or a supplemental indenture in
the form of Exhibit B) together with an executed guarantee substantially
in the form included in Exhibit A evidences the Guarantee of such Guarantor,
whether or not the person signing as an officer of the Guarantor still holds
that office at the time of authentication of any Note.  The delivery of any Note by the Senior
Trustee after authentication constitutes due delivery of the Guarantee on
behalf of each Guarantor.

 

Section 6.05.  Limitation
on Guarantor Liability. 
Notwithstanding anything to the contrary in this Article 6, each
Guarantor, and by its acceptance of a Note, each Holder, hereby confirms 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 the United States Bankruptcy Code or any comparable provision of
state law.  To effectuate that intention,
the Senior Trustee, the Holders 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 the United
States Bankruptcy Code or any comparable provision of state law.

 

Section 6.06.  Article 6
Not to Prevent Events of Default. 
The failure to make a payment on account of principal, premium, if any,
or interest or Additional Interest, if any, on the Notes by reason of any
provision in this Article 6 shall not be construed as preventing the occurrence
of any Event of Default under Section 5.01.

 

Section 6.07.  Waiver by
the Guarantors.  To the extent permitted by applicable law, each
Guarantor hereby irrevocably waives diligence, presentment, demand of payment,
demand of performance, filing of claims with a court in the event of insolvency
of bankruptcy of the Issuer, any right to require a proceeding first against
the Issuer, the benefit of discussion, protest, notice and all demand
whatsoever and covenants that this Guarantee shall not be discharged except by
complete performance of the obligations contained in the Notes, in this
Indenture and in this Article 6.

 

Section 6.08.  Subrogation
and Contribution.   Upon making any
payment with respect to any obligation of the Issuer under this Article, the
Guarantor making such payment will be subrogated to the rights of the payee
against the Issuer with respect to such obligation; provided, that the Guarantor may not enforce either any
right of subrogation, or any right to receive payment in the nature of
contribution, or otherwise, from any other Guarantor, with respect to such
payment so long as any amount payable by the Issuer hereunder or under the
Notes remains unpaid.

 

74

 

Section 6.09.  Stay of
Acceleration.  If acceleration
of the time for payment of any amount payable by the Issuer under the Indenture
or the Notes is stayed upon the insolvency, bankruptcy or reorganization of the
Issuer, all such amounts otherwise subject to acceleration under the terms of
the Indenture are nonetheless payable by the Guarantors hereunder forthwith on
demand by the Senior Trustee or the Holders.

 

Section 6.10.  Guarantors as “obligors” for
Provisions Included in the Indenture Pursuant to the Trust Indenture Act.  Each provision included in the
Indenture which is required to be included by any of Sections 310 to 317 of the
Trust Indenture Act, inclusive, or is deemed applicable to the Indenture by
virtue of the provisions of the Trust Indenture Act, and which applies to an “obligor,”
as that term is defined under the Trust Indenture Act, shall apply to each of
the Guarantors.

 

ARTICLE 7

THE SENIOR TRUSTEE

 

Section 7.01.  General.  (a) The duties and
responsibilities of the Senior Trustee are as provided by the Trust Indenture
Act and as set forth herein.  Whether or
not expressly so provided, every provision of the Indenture relating to the
conduct or affecting the liability of, or affording protection to, the Senior
Trustee is subject to this Article.

 

(b)        Except
during the continuance of an Event of Default, the Senior Trustee need perform
only those duties that are specifically set forth in the Indenture and no
others, and no implied covenants or obligations will be read into this
Indenture against the Senior Trustee.  In
case an Event of Default has occurred and is continuing, the Senior Trustee
shall exercise those rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.

 

Section 7.02.  Certain Rights of the Senior Trustee. 
Subject to Trust Indenture Act Sections 315(a) through (d):

 

(a)           The
Senior Trustee may rely, and will be protected in acting or refraining from
acting, upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document believed by it to be
genuine and to have been signed or presented by the proper Person.  The Senior Trustee need not investigate any
fact or matter stated in the document, but the Senior Trustee, in its

 

75

 

discretion, may make further inquiry or
investigation into such facts or matters as it sees fit.

 

(b)           Before
the Senior Trustee acts or refrains from acting, it may require an Officers’
Certificate or an Opinion of Counsel conforming to Section 11.05 and the Senior
Trustee will not be liable for any action it takes or omits to take in good
faith in reliance on such a certificate or opinion.  Unless otherwise specifically provided in
this Indenture, any demand, request, direction or notice from the Issuer or the
Company, as applicable, shall be sufficient if signed by an Officer of the
Issuer or the Company, as applicable.

 

(c)           The
Senior Trustee may act through its attorneys and agents and will not be
responsible for the misconduct or negligence of any agent appointed with due
care.

 

(d)           The
Senior Trustee will be under no obligation to exercise any of the rights or
powers vested in it by this Indenture at the request or direction of any of the
Holders, unless such Holders have offered to the Senior Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction.

 

(e)           The
Senior Trustee will not be liable for any action it takes or omits to take in
good faith that it believes to be authorized or within its rights or powers or
for any action it takes or omits to take in accordance with the direction of
the Holders in accordance with Section 5.04 relating to the time, method and
place of conducting any proceeding for any remedy available to the Senior
Trustee, or exercising any trust or power conferred upon the Senior Trustee,
under the Indenture.

 

(f)            The
Senior Trustee may consult with counsel, and the written advice of such counsel
or any Opinion of Counsel will be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon.

 

(g)           No
provision of the Indenture will require the Senior Trustee to expend or risk
its own funds or otherwise incur any financial liability in the performance of
its duties hereunder, or in the exercise of its rights or powers, unless it
receives indemnity satisfactory to it against any loss, liability or expense.

 

Section 7.03.  Individual Rights of the Senior Trustee.  The Senior Trustee, in its
individual or any other capacity, may become the owner or pledgee of Notes and
may otherwise deal with the Company or its Affiliates with the same rights it

 

76

 

would have if
it were not the Senior Trustee.  Any
Agent may do the same with like rights. 
However, the Senior Trustee is subject to Trust Indenture Act Sections
310(b) and 311.  For purposes of Trust
Indenture Act Section 311(b)(4) and (6):

 

(a)       “cash transaction”
means any transaction in which full payment for goods or securities sold is
made within seven days after delivery of the goods or securities in currency or
in checks or other orders drawn upon banks or bankers and payable upon demand;
and

 

(b)      “self-liquidating paper” means any draft,
bill of exchange, acceptance or obligation which is made, drawn, negotiated or
incurred for the purpose of financing the purchase, processing, manufacturing,
shipment, storage or sale of goods, wares or merchandise and which is secured
by documents evidencing title to, possession of, or a lien upon, the goods,
wares or merchandise or the receivables or proceeds arising from the sale of
the goods, wares or merchandise previously constituting the security, provided
the security is received by the Senior Trustee simultaneously with the creation
of the creditor relationship arising from the making, drawing, negotiating or
incurring of the draft, bill of exchange, acceptance or obligation.

 

Section 7.04.  Senior
Trustee’s Disclaimer.  The
Senior Trustee (a) makes no representation as to the validity or adequacy of
this Indenture or the Notes, (b) is not accountable for the Company’s use or
application of the proceeds from the Notes and (c) is not responsible for any
statement in the Notes other than its certificate of authentication.

 

Section 7.05.  Reserved.

 

Section 7.06.  Reports by
Senior Trustee to Holders.  Within
60 days after each May 1, beginning with May 1, 2005, the Senior Trustee will
mail to each Holder, as provided in Trust Indenture Act Section 313(c) a brief
report dated as of such May 1, if required by Trust Indenture Act Section
313(a).

 

Section 7.07.  Compensation
and Indemnity.  (a) The Company will pay the Senior
Trustee compensation as agreed upon in writing for its services.  The compensation of the Senior Trustee is not
limited by any law on compensation of a trustee of an express trust.  The Company will reimburse the Senior Trustee
upon request for all reasonable out-of-pocket expenses, disbursements and
advances incurred or made by the Senior Trustee, including the reasonable
compensation and expenses of the Senior Trustee’s agents and counsel.

 

(b)        In
addition to any other indemnity provided to the Senior Trustee hereunder, the
Company will indemnify the Senior Trustee for, and hold it

 

77

 

harmless
against, any loss or liability or expense incurred by it without negligence or
bad faith on its part arising out of or in connection with the acceptance or
administration of the Indenture and its duties under the Indenture and the
Notes, including the costs and expenses of defending itself against any claim
or liability and of complying with any process served upon it or any of its
officers in connection with the exercise or performance of any of its powers or
duties under the Indenture and the Notes.

 

(c)        To
secure the Company’s payment obligations in this Section or as otherwise
provided in the Indenture, the Senior Trustee will have a lien prior to the
Notes on all money or property held or collected by the Senior Trustee, in its
capacity as Senior Trustee, except money or property held in trust to pay
principal of, premium, if any, and interest or Additional Interest, if any, on
particular Notes.

 

Section 7.08.  Replacement
of Senior Trustee.   (a) (i)  The Senior Trustee may resign at any time by
written notice to the Issuer.

 

(ii)           The
Holders of a majority in principal amount of the outstanding Notes may remove
the Senior Trustee by written notice to the Senior Trustee.

 

(iii)          If
the Senior Trustee is no longer eligible under Section 7.10 or in the
circumstances described in Trust Indenture Act Section 310(b), any Holder that
satisfies the requirements of Trust Indenture Act Section 310(b) may petition
any court of competent jurisdiction for the removal of the Senior Trustee and
the appointment of a successor Senior Trustee.

 

(iv)          The
Issuer may remove the Senior Trustee if: (A) the Senior Trustee is no longer
eligible under Section 7.10; (B) the Senior Trustee is adjudged bankrupt or an
insolvent; (C) a receiver or other public officer takes charge of the Senior
Trustee or its property; or (D) the Senior Trustee becomes incapable of acting.

 

A resignation or removal of the Senior
Trustee and appointment of a successor Senior Trustee will become effective
only upon the successor Senior Trustee’s acceptance of appointment as provided
in this Section.

 

(b)        If
the Senior Trustee has been removed by the Holders, Holders of a majority in
principal amount of the Notes may appoint a successor Senior Trustee with the
consent of the Issuer.  Otherwise, if the
Senior Trustee resigns or is removed, or if a vacancy exists in the office of
Senior Trustee for any reason, the Issuer will promptly appoint a successor
Senior Trustee.  If the successor Senior
Trustee does not deliver its written acceptance within 30 days after the
retiring Senior Trustee resigns or is removed, the retiring Senior Trustee, the
Issuer or the

 

78

 

Holders of a
majority in principal amount of the outstanding Notes may petition any court of
competent jurisdiction for the appointment of a successor Senior Trustee.

 

(c)        Upon
delivery by the successor Senior Trustee of a written acceptance of its
appointment to the retiring Senior Trustee and to the Issuer, (i) the retiring
Senior Trustee will transfer all property held by it as Senior Trustee to the
successor Senior Trustee, subject to the lien provided for in Section 7.07,
(ii) the resignation or removal of the retiring Senior Trustee will become
effective, and (iii) the successor Senior Trustee will have all the rights,
powers and duties of the Senior Trustee under the Indenture.  Upon request of any successor Senior Trustee,
the Issuer will execute any and all instruments for fully and vesting in and
confirming to the successor Senior Trustee all such rights, powers and trusts.  The Issuer will give notice of any resignation
and any removal of the Senior Trustee and each appointment of a successor
Senior Trustee to all Holders, and include in the notice the name of the
successor Senior Trustee and the address of its Corporate Trust Office.

 

(d)        Notwithstanding
replacement of the Senior Trustee pursuant to this Section, Issuer’s
obligations under Section 7.07 will continue for the benefit of the retiring
Senior Trustee.

 

(e)        The
Senior Trustee agrees to give the notices provided for in, and otherwise comply
with, Trust Indenture Act Section 310(b).

 

Section 7.09.  Successor
Senior Trustee by Merger.  If
the Senior Trustee consolidates with, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation or
national banking association, the resulting, surviving or transferee
corporation or national banking association without any further act will be the
successor Senior Trustee with the same effect as if the successor Senior
Trustee had been named as the Senior Trustee in the Indenture.

 

Section 7.10.  Eligibility.  The Indenture must always have a
Senior Trustee that satisfies the requirements of Trust Indenture Act Section
310(a) and has a combined capital and surplus of at least $25,000,000 as set
forth in its most recent published annual report of condition.

 

Section 7.11.  Money Held
in Trust.  The Senior Trustee
will not be liable for interest on any money received by it except as it may
agree with the Issuer.  Money held in
trust by the Senior Trustee need not be segregated from other funds except to
the extent required by law and except for money held in trust under Article 8.

 

79

 

ARTICLE 8

DEFEASANCE AND DISCHARGE

 

Section 8.01.  Legal Defeasance And
Discharge.  The Issuer, the
Company and the Guarantors shall, subject to the satisfaction of the conditions
set forth in Section 8.03 hereof, be deemed to have been discharged from their
respective obligations with respect to the Notes and the Guarantees on the date
the conditions set forth below are satisfied (hereinafter, “Legal Defeasance”). 
For this purpose, Legal Defeasance means that the Issuer shall be deemed
to have paid and discharged the entire Indebtedness represented by the Notes,
which shall thereafter be deemed to be outstanding only for the purposes of
Section 8.04 hereof and the other Sections of this Indenture referred to in
clauses (a) through (f) below, and the Issuer, the Company and the Guarantors
shall be deemed to have satisfied all of their respective obligations under the
Notes, the Guarantees and this Indenture (and the Senior Trustee, on demand of
and at the expense of the Issuer, shall execute proper instruments delivered to
it by the Issuer acknowledging the same), except of the following provisions
which shall survive until otherwise terminated or discharged hereunder: (a) the
rights of Holders of Notes to receive payments in respect of the principal,
premium, if any, and interest and Additional Interest, if any, on the Notes
when such payments are due from the trust referred to below; (b) the Issuer’s
obligations with respect to the Notes concerning mutilated, destroyed, lost or
stolen Notes and the maintenance of an office or agency for payment and money
for security payments held in trust; (c) the rights, powers, trusts, duties and
immunities of the Senior Trustee, and the Issuer’s and the Guarantors’
obligations in connection therewith; (d) the Legal Defeasance provisions of
this Indenture; (e) the rights of registration of transfer and exchange of the
Notes; and (f) the rights of Holders that are beneficiaries with respect to
property so deposited with the Senior Trustee payable to all or any of them.

 

Section 8.02.  Covenant Defeasance.  The Issuer, the Company and the
Guarantors shall, subject to the satisfaction of the conditions set forth in
Section 8.03 hereof, be released from their obligations with respect to the
Notes and the Guarantees under the covenants contained in Sections 4.06, 4.07,
4.08, 4.09, 4.10, 4.11, 4.12, 4.13, clause (iii) of Section 4.14 and Article 6
(except for Sections 6.03 and 6.10) and each Guarantor’s obligation under its
Guarantee, on and after the date that the conditions set forth in Section 8.03
are satisfied (hereinafter, “Covenant Defeasance”),
and the Notes shall thereafter be deemed not outstanding for the purposes of
any direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed outstanding for all other purposes hereunder (it being
understood that the Notes shall not be deemed outstanding for accounting
purposes).  For this purpose, Covenant
Defeasance means that, with respect to the Notes and the Guarantees, the
Issuer, the Company and the

 

80

 

Guarantors may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein
or in any other document and such omission to comply shall not constitute a
Default or an Event of Default under Section 5.01 hereof, but, except as specified
above, the remainder of this Indenture and the Notes shall be unaffected
thereby.  Subject to the satisfaction of
the conditions set forth in Section 8.03 hereof, Sections 5.01(iii) (with
respect to the covenants so defeased), 5.01(iv), 5.01(v), 5.01(vi) and 5.01(ix)
shall not constitute Events of Default or Defaults hereunder.

 

Section 8.03.  Conditions To Legal Or
Covenant Defeasance.  The
following shall be the conditions to the application of either Section 8.01 or
Section 8.02 hereof to the Notes:

 

In order to exercise either Legal Defeasance or Covenant Defeasance:

 

(a)        the
Issuer must irrevocably deposit, or cause to be deposited, with the Senior
Trustee, in trust, for the benefit of the Holders of Notes, cash in U.S.
dollars, U.S. Government Obligations, or a combination thereof, in such amounts
as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay, without reinvestment, the principal of,
premium, if any, and interest and Additional Interest, if any, on the Notes on
the stated maturity thereof or on the applicable redemption date, as the case
may be, and the Issuer must specify whether the Notes are being defeased to
maturity or to a particular redemption date;

 

(b)        in
the case of Legal Defeasance, the Issuer must deliver to the Senior Trustee an
Opinion of Counsel reasonably acceptable to the Senior Trustee confirming that
the Issuer has received from, or there has been published by, the Internal
Revenue Service a ruling, or there has been a change in the applicable United
States federal income tax law after the date of this Indenture, in either case
to the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Holders of Notes will not recognize income, gain or loss for United
States federal income tax purposes as a result of such Legal Defeasance, and
will be subject to United States federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;

 

(c)        in
the case of Covenant Defeasance, the Issuer must deliver to the Senior Trustee
an Opinion of Counsel reasonably acceptable to the Senior Trustee confirming
that the Holders of Notes will not recognize income, gain or loss for United
States federal income tax purposes as a result of such Covenant Defeasance, and
such Holders will be subject to United States federal income tax

 

81

 

on the same
amounts, in the same manner and at the same times as would have been the case
if such Covenant Defesance had not occurred;

 

(d)        no
Default or Event of Default shall have occurred and be continuing on the date
of such deposit (other than a Default or Event of Default resulting from the
borrowing of funds to be applied to such deposit) or insofar as Events of
Default from bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit;

 

(e)        such
Legal Defeasance or Covenant Defeasance will not result in a breach or
violation of, or constitute a default under, any material agreement or
instrument (other than the Indenture) to which the Issuer or any of its
Restricted Subsidiaries is a party or by which the Issuer or any of its
Restricted Subsidiaries is bound;

 

(f)         the
Issuer must deliver to the Senior Trustee an Officers’ Certificate stating that
the deposit was not made by the Issuer with the intent of preferring the
Holders of Notes over other creditors of the Issuer, or with the intent of defeating,
hindering, delaying or defrauding creditors of the Issuer or others; and

 

(g)        the
Issuer must deliver to the Senior Trustee an Officers’ Certificate and an
Opinion of Counsel in the United States reasonably acceptable to the Senior
Trustee, each stating that the conditions precedent provided for or relating to
Legal Defeasance or Covenant Defeasance, as applicable, in the case of the
Officer’s Certificate, in clauses (a) through (f) and, in the case of the
opinion of Counsel, in clauses (b) and (c) of this paragraph, have been
complied with.

 

Section 8.04.  Deposited Money And Government
Securities To Be Held In Trust; Other Miscellaneous Provisions.  Subject to Section 8.05 hereof,
all money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Senior Trustee (or other qualifying trustee, collectively,
and solely for purposes of this Section 8.04, the “Senior Trustee”) pursuant to
Section 8.03 or Section 8.08 hereof in respect of the Notes shall be held in
trust and applied by the Senior Trustee, in accordance with the provisions of
the Notes and this Indenture, to the payment, either directly or indirectly or
through any paying agent (including the Issuer acting as paying agent) as the
Senior Trustee may determine, to the Holders of such Notes of all sums due and
to become due thereon in respect of principal, premium, if any, interest and
Additional Interest, if any, but such money need not be segregated from other
funds except to the extent required by law.

 

The Company shall pay and indemnify the Senior Trustee against any tax,
fee or other charge imposed on or assessed against the cash or non-callable
U.S. Government Obligations deposited pursuant to Section 8.03 or Section 8.08
hereof or the principal, premium, if any, interest and Additional Interest, if
any,

 

82

 

received in respect thereof other than any
such tax, fee or other charge which by law is for the account of the Holders of
Notes.

 

Subject to the preceeding paragraph and Section 7.07 herein, anything
in this Article 8 to the contrary notwithstanding, the Senior Trustee shall
deliver or pay, solely to the extent available in such trust, to the Issuer
from time to time upon the request of the Issuer any money or non-callable U.S.
Government Obligations held by it as provided in Section 8.03 or Section 8.08
hereof which, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to
the Senior Trustee (which may be the opinion delivered under Section 8.03(a)
hereof), are in excess of the amount thereof that would then be required to be
deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

 

Section 8.05.  Repayment To Issuer.  Any money deposited with the
Senior Trustee or any paying agent, or then held by the Issuer, in trust for
the payment of the principal, premium, if any, interest and Additional
Interest, if any, on the Notes and remaining unclaimed for two years after such
principal, premium, if any, interest and Additional Interest, if any, has
become due and payable shall be paid to the Issuer on its request or (if then
held by the Issuer) shall be discharged from such trust; and the Holder of such
Note shall thereafter, as an unsecured creditor, look only to the Issuer for
payment thereof, and all liability of the Senior Trustee or such paying agent
with respect to such trust money, and all liability of the Issuer as trustee
thereof, shall thereupon cease; provided, however,
that the Senior Trustee or such paying agent, before being required to make any
such repayment, may at the expense of the Issuer cause to be published once, in
The New York Times and The Wall Street Journal (national editions), notice that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such notification or
publication, any unclaimed balance of such money then remaining will be repaid
to the Issuer.

 

Section 8.06.  Reinstatement.  If the Senior Trustee or paying
agent is unable to apply any money or non-callable U.S. Government Obligations
in accordance with Section 8.01, Section 8.02 or Section 8.08 hereof, as the
case may be, by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application,
then the Issuer’s obligations under this Indenture and the Notes shall be
revived and reinstated as though no deposit had occurred pursuant to Section
8.01, Section 8.02 or Section 8.08 hereof until such time as the Senior Trustee
or paying agent is permitted to apply all such money in accordance with Section
8.01, Section 8.02 or Section 8.08 hereof, as the case may be; provided, however, that,
if the Issuer makes any payment of principal of, premium, if any, or interest
or Additional Interest, if any, on any Note following the reinstatement of its

 

83

 

obligations,
the Issuer shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money held by the Senior Trustee or paying agent.

 

Section 8.07.  Survival.  The Senior Trustee’s rights under
Article 7 and this Article 8 shall survive termination of this Indenture.

 

Section 8.08.  Satisfaction and Discharge of
Indenture.  If at any time (a)
(i) the Issuer shall have paid or caused to be paid the principal of, premium,
if any, and interest and Additional Interest, if any, on all the outstanding
Notes (other than Notes which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 2.04) as and when the same
shall have become due and payable, or (ii) the Issuer shall have delivered to
the Senior Trustee for cancellation all Notes theretofore authenticated (other
than Notes which have been destroyed, lost or stolen and which have been
replaced or paid as provided in Section 2.04), or (b) (i) the Notes mature
within one year, or all of them are to be called for redemption within one year
under arrangements satisfactory to the Senior Trustee for giving the notice of
redemption, (ii) the Issuer irrevocably deposits in trust with the Senior
Trustee, as trust funds solely for the benefit of the Holders, money or U.S.
Government Obligations or a combination thereof sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed in a
written certificate delivered to the Senior Trustee, without consideration of
any reinvestment, to pay principal of and premium, interest and Additional
Interest, if any, on the Notes to maturity or redemption, as the case may be,
and to pay all other sums payable by it hereunder, (iii) no Default has
occurred and is continuing on the date of the deposit, (iv) the deposit will
not result in a breach or violation of, or constitute a default under, the
Indenture or any other agreement or instrument to which the Issuer is a party
or by which it is bound, and (v) the Issuer delivers to the Senior Trustee an
Officers’ Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the satisfaction and
discharge of the Indenture have been complied with; and if, in any such case,
the Issuer shall also pay or cause to be paid all other sums payable hereunder
by the Issuer (including all amounts, payable to the Senior Trustee pursuant to
Section 7.07), then, (x) after satisfying the conditions in clause (a), only
the Company’s obligations under Sections 7.07 and 8.04 will survive or (y)
after satisfying the conditions in clause (b), only the Issuer’s or the Company’s,
as appicable, obligations in Article 2 and Sections 4.01, 4.02, 7.07, 7.08,
8.04, 8.05 and 8.06 will survive, and, in either case, the Senior Trustee, on
demand of the Issuer accompanied by an Officers’ Certificate and an Opinion of
Counsel, each stating that all conditions precedent relating to the
satisfaction and discharge contemplated by this provision have been complied
with, and at the cost and expense of the Issuer, shall execute proper
instruments acknowledging such satisfaction and discharging of this
Indenture.  The Issuer agrees to
reimburse the Senior Trustee for any costs or

 

84

 

expenses
thereafter reasonably and properly incurred, and to compensate the Senior
Trustee for any services thereafter reasonably and properly rendered, by the
Senior Trustee in connection with this Indenture or the Notes.

 

ARTICLE 9

AMENDMENTS, SUPPLEMENTS AND WAIVERS

 

Section 9.01.  Amendments Without Consent of
Holders.  The Company, the
Issuer, the Guarantors and the Senior Trustee may amend, supplement or waive
the Indenture or the Notes without notice to or the consent of any Holder:

 

(a)        to
convey, transfer, assign, mortgage or pledge to the Senior Trustee as security
for the Notes any property or assets;

 

(b)        to
evidence the succession of another Person to the Issuer or the Company or
successive successions, and the assumption by the successor Person of the
covenants, agreements and obligations of the Issuer or the Company herein and
in the Notes or the Guarantees;

 

(c)        to
add to the covenants of the Issuer or the Company such further covenants,
restrictions, conditions or provisions for the protection of the Holders of
Notes, or to surrender any right or power herein conferred upon the Issuer or
the Company, and to make the occurrence, or the occurrence and continuance, of
a default in any such additional covenants, restrictions, conditions or
provisions an Event of Default permitting the enforcement of all or any of the
several remedies provided in this Indenture as herein set forth; provided, however, that
in respect of any such additional covenants, restrictions, conditions or
provisions such amendment, supplemented indenture or waiver may provide for a
particular period of grace after default (which period may be shorter or longer
than that allowed in the case of other defaults) or may provide for an
immediate enforcement upon such an Event of Default or may limit the remedies
available to the Senior Trustee upon such an Event of Default or may limit the
right of the Holders of a majority in aggregate principal amount of the Notes
to waive such an Event of Default;

 

(d)        to
confirm and evidence the termination or discharge of any Guarantee of or Lien
securing the Notes when such release, termination or discharge is permitted by
the Indenture;

 

(e)        to
cure any ambiguity, defect or inconsistency in the Indenture or the Notes;

 

(f)         to
evidence compliance with Section 4.14;

 

85

 

(g)        to
comply with any requirements of the Commission in connection with the
qualification of the Indenture under the Trust Indenture Act;

 

(h)        to
evidence and provide for the acceptance of appointment hereunder by a successor
Senior Trustee;

 

(i)         to
provide for uncertificated Notes in addition to, or in place of, Certificated
Notes;

 

(j)         to
provide for any Guarantee of the Notes, to secure the Notes or to confirm and
evidence the release, termination or discharge of any Guarantee of or Lien
securing the Notes when such release, termination or discharge is permitted by
the Indenture;

 

(k)        to
provide for or confirm the issuance of Additional Notes; or

 

(l)         to
make any other change that does not adversely affect the legal rights of any
Holder.

 

Section 9.02.  Amendments
With Consent of Holders.  (a) Except as otherwise provided in Sections 5.01, 5.03 and
5.06 or paragraph (b), the Company, the Issuer, the Guarantors and the Senior
Trustee may amend or supplement the Indenture and the Notes with the written
consent of the Holders of a majority in principal amount of the outstanding
Notes (which may include consents obtained in connection with a tender offer or
exchange offer), and the Holders of a majority in principal amount of the outstanding
Notes by written notice to the Senior Trustee may waive future compliance by
the Company, the Issuer and the Guarantors with any provision of the Indenture
or the Notes (which may include waivers obtained in connection with a tender
offer or exchange offer).

 

(b)        Notwithstanding
the provisions of paragraph (a), without the consent of each Holder affected,
an amendment or waiver may not:

 

(i)         reduce
the amount of Notes whose Holders must consent to an amendment, supplement or
waiver,

 

(ii)        reduce
the rate of, or change the time for payment of, any interest, including default
interest, on any Note,

 

(iii)       reduce
principal of, or change the fixed maturity of, any Note or alter the provisions
(including related definitions) with respect to redemptions described under
Article 3 or with respect to mandatory offers to repurchase Notes described
under Section 4.10 and Section 4.12,

 

86

 

(iv)       make
any Note payable in money other than that stated in the Note,

 

(v)        modify
the ranking or priority of the Notes or any Guarantee,

 

(vi)       make
any change in Sections 5.03 or 5.06,

 

(vii)      release
any Guarantor from any of its obligations under its Guarantee or the Indenture
otherwise than in accordance with the Indenture, or

 

(viii)     waive
a continuing Default or Event of Default in the payment of principal of,
premium, if any, or interest or Additional Interest, if any, on the Notes.

 

(c)        It
is not necessary for Holders to approve the particular form of any proposed
amendment, supplement or waiver, but is sufficient if their consent approves
the substance thereof.

 

(d)        An
amendment, supplement or waiver under this Section will become effective on
receipt by the Senior Trustee of written consents from the Holders of the
requisite percentage in principal amount of the outstanding Notes.  After an amendment, supplement or waiver
under this Section becomes effective, the Issuer (or the Senior Trustee at the
request and expense of the Issuer) will send to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver.  The Issuer will send supplemental indentures
to Holders upon request.  Any failure of
the Issuer to send such notice, or any defect therein, will not, however, in
any way impair or affect the validity of any such supplemental indenture,
amendment or waiver.

 

Section 9.03.  Effect of
Consent.  (a) After an amendment, supplement
or waiver becomes effective, it will bind every Holder unless it is of the type
requiring the consent of each Holder affected. 
If the amendment, supplement or waiver is of the type requiring the
consent of each Holder affected, the amendment, supplement or waiver will bind
each Holder that has consented to it and every subsequent Holder of a Note that
evidences the same debt as the Note of the consenting Holder.

 

(b)        If
an amendment, supplement or waiver changes the terms of a Note, the Senior
Trustee may require the Holder to deliver it to the Senior Trustee so that the
Senior Trustee may place an appropriate notation of the changed terms on the
Note and return it to the Holder, or exchange it for a new Note that reflects
the changed terms.  The Senior Trustee
may also place an appropriate notation on any Note thereafter authenticated.  However, the effectiveness of the amendment,

 

87

 

supplement or
waiver shall not be affected or impaired by any failure to annotate or exchange
Notes in this fashion.

 

Section 9.04.  Senior
Trustee’s Rights and Obligations.  The
Senior Trustee is entitled to receive, and will be fully protected in relying
upon, an Opinion of Counsel stating (i) that the execution of any amendment,
supplement or waiver authorized pursuant to this Article is authorized or
permitted by the Indenture and (ii) in the case of an amendment, supplement or
waiver in connection with Section 9.01(l) that such amendment, supplement or
waiver does not adversely affect the legal rights of any Holder of Notes
affected by such change.  If the Senior
Trustee has received such an Opinion of Counsel, it shall sign the amendment,
supplement or waiver so long as the same does not adversely affect the rights
of the Senior Trustee.  The Senior
Trustee may, but is not obligated to, execute any amendment, supplement or
waiver that affects the Senior Trustee’s own rights, duties or immunities under
the Indenture.

 

Section 9.05.  Conformity
with Trust Indenture Act.  Every
supplemental indenture executed pursuant to this Article shall conform to the
requirements of the Trust Indenture Act.

 

Section 9.06.  Payments
for Consents.  Neither the
Issuer, the Company nor any of its Subsidiaries or Affiliates may, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of the Indenture
or the Notes unless such consideration is offered to be paid or agreed to be
paid to all Holders of Notes that consent, waive or agree to amend such term or
provision within the time period set forth in the solicitation documents
relating to the consent, waiver or amendment.

 

ARTICLE 10

RELEASE OF ISSUER AND GUARANTORS

 

Section 10.01.  Release of Issuer.  (a) The Issuer shall be released
from its obligations under this Indenture and the Notes, without the consent of
the Holders, if: (1) the Company or any successor to the Company has assumed
the obligations of the Issuer under this Indenture and the Notes, by
supplemental indenture executed and delivered to the Senior Trustee and
satisfactory in form to the Senior Trustee, (2) the Company delivers an Opinion
of Counsel to the Senior Trustee to the effect that Holders will not recognize
income, gain or loss for United States federal income tax purposes as a result
of such release and such Holders will be subject to United States federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such release had not occurred and (3) the Issuer
shall (w) become a Guarantor subject

 

88

 

to the
provisions of Article 6 and Section 4.11 hereof, (x) execute a Guarantee, (y)
execute a supplemental indenture evidencing its Guarantee and (z) deliver an
Opinion of Counsel to the Senior Trustee to the effect that the supplemental
indenture has been duly authorized, executed and delivered by the Issuer and
constitutes a valid and binding obligation of the Issuer, enforceable against
the Issuer in accordance with its terms (subject to customary exceptions).

 

(b)        A
Guarantor may be released from its obligations under the Indenture, the Notes
and its Guarantee in accordance with the provisions contained in Section 6.03
herein.

 

ARTICLE 11

MISCELLANEOUS

 

Section 11.01.  Trust
Indenture Act of 1939.  The
Indenture shall incorporate and be governed by the provisions of the Trust
Indenture Act that are required to be part of and to govern indentures
qualified under the Trust Indenture Act. 
To the extent permitted by applicable law, in the event of any
inconsistency between the terms of the Notes and the terms of the Indenture,
the terms of the Indenture will control.

 

Section 11.02.  Holder
Communications; Holder Actions.  (a) The rights of Holders to
communicate with other Holders with respect to the Indenture or the Notes are
as provided by the Trust Indenture Act, and the Company and the Issuer shall
comply with the requirements of Trust Indenture Act Section 312(a).  Neither the Company, the Issuer nor the
Senior Trustee will be held accountable by reason of any disclosure of
information as to names and addresses of Holders made pursuant to the Trust
Indenture Act.

 

(b)        (i)          any
request, demand, authorization, direction, notice, consent to amendment,
supplement or waiver or other action provided by this Indenture to be given or
taken by a Holder (an “act”) may
be evidenced by an instrument signed by the Holder delivered to the Senior
Trustee.  The fact and date of the
execution of the instrument, or the authority of the person executing it, may
be proved in any manner that the Senior Trustee deems sufficient.

 

(ii)         The
Senior Trustee may make reasonable rules for action by or at a meeting of
Holders, which will be binding on all the Holders.

 

(c)        Any
act by the Holder of any Note binds that Holder and every subsequent Holder of
a Note that evidences the same debt as the Note of the acting Holder, even if
no notation thereof appears on the Note. 
Subject to paragraph (d), a Holder may revoke an act as to its Notes,
but only if the Senior

 

89

 

Trustee
receives the notice of revocation before the date the amendment or waiver or
other consequence of the act becomes effective.

 

(d)        The
Issuer may, but is not obligated to, fix a record date (which need not be
within the time limits otherwise prescribed by Trust Indenture Act Section
316(c)) for the purpose of determining the Holders entitled to act with respect
to any amendment or waiver or in any other regard, except that during the
continuance of an Event of Default, only the Senior Trustee may set a record
date as to notices of Default, any declaration or acceleration or any other
remedies or other consequences of the Event of Default.  If a record date is fixed, those Persons that
were Holders at such record date and only those Persons will be entitled to
act, or to revoke any previous act, whether or not those Persons continue to be
Holders after the record date.  No act
will be valid or effective for more than 90 days after the record date.

 

Section 11.03.  Notices.  (a) Any notice or
communication to the Issuer or the Company will be deemed given if in writing
(i) when delivered in person or (ii) five days after mailing when mailed by
first class mail or (iii) when sent by facsimile transmission, with
transmission confirmed.  Notices or
communications to a Guarantor will be deemed given if given to the
Company.  Any notice to the Senior
Trustee will be effective only upon receipt. 
In each case the notice or communication should be addressed as follows:

 

if to the
Issuer or the Company:

 

K. Hovnanian
Enterprises, Inc.

10 Highway 35

P.O. Box 500

Red Bank, NJ 07701

Facsimile: (732) 747-7159

Attention:  General Counsel

 

if to the
Senior Trustee:

 

Wachovia Bank, National
Association

21 South Street

Morristown, NJ 07960

ATTN: Corporate Trust Administration

(K. Hovnanian Enterprises, Inc. Senior 

Notes due 2015)

Facsimile: (973) 682-4531

 

The Issuer or the Senior Trustee by notice to
the other may designate additional or different addresses for subsequent notices
or communications.

 

90

 

(b)        Except
as otherwise expressly provided with respect to published notices, any notice
or communication to a Holder will be deemed given when mailed to the Holder at
its address as it appears on the Register by first class mail or, as to any
Global Note registered in the name of DTC or its nominee, as agreed by the
Issuer, the Senior Trustee and DTC. 
Copies of any notice or communication to a Holder, if given by the
Issuer or the Company, will be mailed to the Senior Trustee at the same
time.  Defect in mailing a notice or
communication to any particular Holder will not affect its sufficiency with
respect to other Holders.

 

(c)        Where
the Indenture provides for notice, the notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
the waiver will be the equivalent of the notice.  Waivers of notice by Holders must be filed
with the Senior Trustee, but such filing is not a condition precedent to the
validity of any action taken in reliance upon such waivers.

 

Section 11.04.  Certificate
and Opinion as to Conditions Precedent.  Upon
any request or application by the Issuer or the Company to the Senior Trustee
to take any action under the Indenture, the Issuer or the Company will furnish
to the Senior Trustee:

 

(a)           an
Officers’ Certificate stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in the Indenture relating to the
proposed action have been complied with; and

 

(b)           an
Opinion of Counsel stating that all such conditions precedent relating to the
proposed action have been complied with.

 

Section 11.05.  Statements
Required in Certificate or Opinion.  Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in the Indenture must include:

 

(a)           a
statement that each person signing the certificate or opinion has read the
covenant or condition and the related definitions;

 

(b)           a
brief statement as to the nature and scope of the examination or investigation
upon which the statement or opinion contained in the certificate or opinion is
based;

 

(c)           a
statement that, in the opinion of each such person, that person has made such
examination or investigation as is necessary to enable the person to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and

 

91

 

(d)           a
statement as to whether or not, in the opinion of each such person, such
condition or covenant has been complied with, provided,
that an Opinion of Counsel may rely on an Officers’ Certificate or certificates
of public officials with respect to matters of fact.

 

Any certificate, statement or opinion of an Officer of the Issuer or
the Company, as applicable, may be based, insofar as it relates to legal
matters, upon a certificate or opinion of or representations by counsel, unless
such Officer knows that the certificate or opinion or representations with
respect to the matters upon which such certificate, statement or opinion may be
based as aforesaid are erroneous, or in the exercise of reasonable care should
know that the same are erroneous.  Any
certificate, statement or Opinion of Counsel may be based, insofar as it
relates to factual matters on information with respect to which is in the
possession of the Issuer, or the Company, as applicable, upon the certificate,
statement or opinion of or representations by an officer or officers of the
Issuer, or the Company, as applicable, unless such counsel knows that the
certificate, statement or opinion or representations with respect to the
matters upon which such certificate, statement or opinion may be based as
aforesaid are erroneous, or in the exercise of reasonable care should know that
the same are erroneous.

 

Any certificate, statement or opinion of an Officer of the Issuer or
the Company, as applicable, or of counsel may be based, insofar as it relates
to accounting matters, upon a certificate or opinion of or representations by
an accountant or firm of accountants in the employ of the Issuer or the
Company, as applicable, unless such Officer or counsel, as the case may be,
knows that the certificate or opinion or representations with respect to the
accounting matters upon which such certificate, statement or opinion may be
based as aforesaid are erroneous, or in the exercise of reasonable care should
know that the same are erroneous.

 

Any certificate or opinion of any independent firm of public
accountants filed with and directed to the Senior Trustee shall contain a
statement that such firm is independent.

 

Section 11.06.  Payment
Date Other Than a Business Day.  If
any payment with respect to a payment of any principal of, premium, if any, or
interest or Additional Interest, if any, on any Note (including any payment to
be made on any date fixed for redemption or purchase of any Note) is due on a
day which is not a Business Day, then the payment need not be made on such
date, but may be made on the next Business Day with the same force and effect
as if made on such date, and no interest will accrue for the intervening
period.

 

92

 

Section 11.07.  Governing
Law.  The Indenture, the
Guarantees and the Notes shall be governed by, and construed in accordance
with, the laws of the State of New York.

 

Section 11.08.  No Adverse Interpretation of Other Agreements.  The Indenture may not be used to
interpret another indenture or loan or debt agreement of the Issuer, the Company
or any Subsidiary of the Company, and no such indenture or loan or debt
agreement may be used to interpret the Indenture.

 

Section 11.09.  Successors.  All agreements of the Issuer, the
Company or any Guarantor in the Indenture and the Notes will bind its
successors.  All agreements of the Senior
Trustee in the Indenture will bind its successor.

 

Section 11.10.  Duplicate
Originals.  The parties may
sign any number of copies of the Indenture. 
Each signed copy shall be an original, but all of them together
represent the same agreement.

 

Section 11.11.  Separability.  To the extent permitted by
applicable law, in case any provision in the Indenture or in the Notes is
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions will not in any way be affected or impaired thereby.

 

Section 11.12.  Table of
Contents and Headings.  The
Table of Contents, Cross-Reference Table and headings of the Articles and
Sections of the Indenture have been inserted for convenience of reference only,
are not to be considered a part of the Indenture and in no way modify or
restrict any of the terms and provisions of the Indenture.

 

Section 11.13.  No
Liability of Directors, Officers, Employees, Partners, Incorporators and
Stockholders.  No recourse
under or upon any obligation, covenant or agreement contained in this
Indenture, or in the Notes, or because of any indebtedness evidenced thereby,
shall be had against any incorporator, as such or against any past, present or
future stockholder, officer, director or employee, as such, of the Issuer, the
Company or the Guarantors or any partner of the Issuer, the Company or the
Guarantors or of any successor, either directly or through the Issuer, the
Company or the Guarantors or any successor, under any rule of law, statute or
constitutional provision or by the enforcement of any assessment or by any
legal or equitable proceeding or otherwise, all such liability being expressly
waived and released by the acceptance of the Notes by the Holders thereof and
as part of the consideration for the issue of the Notes.

 

Section 11.14.  Provisions of Indenture for
the Sole Benefit of Parties and Holders of Notes.  Nothing in this Indenture or in
the Notes, expressed or implied, shall give or be construed to give to any
Person, other than the parties hereto and their successors and the Holders of
Notes, any legal or equitable right, remedy or

 

93

 

claim under
this Indenture or under any covenant or provision herein contained, all such
covenants and provisions being for the sole benefit of the parties hereto and
their successors and of the Holders of Notes.

 

94

 

SIGNATURES

 

IN WITNESS WHEREOF, the parties hereto have caused the Indenture to be
duly executed as of the date first written above.

 

	
   

  	
  K. HOVNANIAN ENTERPRISES, INC.,

  as Issuer

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ J.
  Larry Sorsby

  
	
   

  	
   

  	
  Name: J.
  Larry Sorsby

  
	
   

  	
   

  	
  Title: Executive Vice-President and

  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HOVNANIAN ENTERPRISES, INC.,

  as the Company and a Guarantor

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ J.
  Larry Sorsby

  
	
   

  	
   

  	
  Name: J.
  Larry Sorsby

  
	
   

  	
   

  	
  Title: Executive Vice-President and

  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  On behalf of each entity named in

  Schedule A hereto, as a Guarantor

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ J.
  Larry Sorsby

  
	
   

  	
   

  	
  Name: J.
  Larry Sorsby

  
	
   

  	
   

  	
  Title:  Authorized
  Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  WACHOVIA BANK, NATIONAL

  ASSOCIATION, as Senior Trustee

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/
  Stephanie Roche

  	
   

  	
   

  
	
   

  	
  Name:  Stephanie Roche

  	
   

  
	
   

  	
  Title:   Vice President

  	
   

  
							

 

95

 

[signature page to the Indenture]

 

96

 

SCHEDULE A

 

Guarantors

 

ALL SEASONS, INC.

ARROW PROPERTIES, INC.

CONDOMINIUM COMMUNITY (BOWIE NEW TOWN), INC.

CONDOMINIUM COMMUNITY (LARGO TOWN), INC.

CONDOMINIUM COMMUNITY (PARK PLACE), INC.

CONDOMINIUM COMMUNITY (QUAIL RUN), INC.

CONDOMINIUM COMMUNITY (TRUMAN DRIVE), INC.

CONSULTANTS CORPORATION

DESIGNED CONTRACTS, INC.

EDISON CONTRACT SERVICES, L.L.C.

EXC, INC.

FORTIS HOMES, INC.

HOUSING-HOME SALES, 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 ALISO, L.L.C.

K. HOVNANIAN AT ASHBURN VILLAGE, INC.

K. HOVNANIAN AT BALLANTRAE ESTATES, INC.

K. HOVNANIAN AT BARRINGTON, INC.

K. HOVNANIAN AT BELLA LAGO,
L.L.C.

K. HOVNANIAN AT BELMONT, INC.

K. HOVNANIAN AT BERNARDS IV, INC.

K. HOVNANIAN AT BRANCHBURG III, INC.

K. HOVNANIAN AT BRIDGEPORT, INC.

K. HOVNANIAN AT BRIDGEWATER VI, INC.

K. HOVNANIAN AT BRIDLEWOOD,
L.L.C.

K. HOVNANIAN AT BULL RUN, INC.

K. HOVNANIAN AT BURLINGTON III, INC.

K. HOVNANIAN AT BURLINGTON, INC.

K. HOVNANIAN AT CALABRIA, INC.

K. HOVNANIAN AT CAPISTRANO,
L.L.C.

K. HOVNANIAN AT CAMERON CHASE, INC.

K. HOVNANIAN AT CARMEL DEL MAR, INC.

K. HOVNANIAN AT CASTILE, INC.

K. HOVNANIAN AT CEDAR GROVE I, INC.

K. HOVNANIAN AT CEDAR GROVE II, INC.

K. HOVNANIAN AT CEDAR GROVE IV,
L.L.C.

K. HOVNANIAN AT CHAPARRAL, INC.

K. HOVNANIAN AT CHESTERFIELD,
L.L.C.

 

A-1

 

K. HOVNANIAN AT CITY IN THE
HILLS, L.L.C.

K. HOVNANIAN AT CLARKSTOWN, INC.

K. HOVNANIAN AT CRESTLINE, INC.

K. HOVNANIAN AT DEPTFORD
TOWNSHIP, L.L.C.

K. HOVNANIAN AT DOMINGUEZ HILLS, INC.

K. HOVNANIAN AT DOMINION RIDGE, INC.

K. HOVNANIAN AT EAST BRUNSWICK VI, INC.

K. HOVNANIAN AT EAST WHITELAND I, INC.

K. HOVNANIAN AT EXETER HILLS, INC.

K. HOVNANIAN AT FAIR LAKES GLEN, INC.

K. HOVNANIAN AT FAIR LAKES, INC.

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

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

K. HOVNANIAN AT FRANKLIN,
L.L.C.

K. HOVNANIAN AT FREEHOLD TOWNSHIP I, INC.

K. HOVNANIAN AT GASLAMP SQUARE,
L.L.C.

K. HOVNANIAN AT HACKETTSTOWN, INC.

K. HOVNANIAN AT HAMPTON OAKS, INC.

K. HOVNANIAN AT HAWTHORNE,
L.L.C.

K. HOVNANIAN AT HERSHEY’S MILL, INC.

K. HOVNANIAN AT HIGHLAND VINEYARDS, INC.

K. HOVNANIAN AT HIGHWATER,
L.L.C.

K. HOVNANIAN AT HOLLY CREST, INC.

K. HOVNANIAN AT HOPEWELL IV, INC.

K. HOVNANIAN AT HOPEWELL VI, INC.

K. HOVNANIAN AT HOWELL TOWNSHIP, INC.

K. HOVNANIAN AT HUDSON POINT,
L.L.C.

K. HOVNANIAN AT HUNTER ESTATES, INC.

K. HOVNANIAN AT KINGS GRANT I, INC.

K. HOVNANIAN AT KLOCKNER FARMS, INC.

K. HOVNANIAN AT LA TERRAZA, INC.

K. HOVNANIAN AT LA TROVATA, INC.

K. HOVNANIAN AT LAKEWOOD, INC.

K. HOVNANIAN AT LOWER SAUCON II, 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 MARLBORO TOWNSHIP III, INC.

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

 

A-2

 

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

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

K. HOVNANIAN OF METRO DC SOUTH, INC.

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

K. HOVNANIAN AT MONROE II, INC.

K. HOVNANIAN AT MONTCLAIR NJ, INC.

K. HOVNANIAN AT MONTCLAIR, INC.

K. HOVNANIAN AT MONTGOMERY I, INC.

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

K. HOVNANIAN AT NORTH BERGEN
II, L.L.C.

K. HOVNANIAN AT NORTH CALDWELL
II, L.L.C.

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 P.C. PROPERTIES, INC.

K. HOVNANIAN AT PARK RIDGE, INC.

K. HOVNANIAN AT PERKIOMEN I, INC.

K. HOVNANIAN AT PERKIOMEN II, INC.

K. HOVNANIAN AT PITTSGROVE,
L.L.C.

K. HOVNANIAN AT PLAINSBORO III, INC.

K. HOVNANIAN AT PRINCETON, INC.

K. HOVNANIAN AT RANCHO CHRISTIANITOS, INC.

K. HOVNANIAN AT RESERVOIR RIDGE, INC.

K. HOVNANIAN AT RIVER OAKS, INC.

K. HOVNANIAN AT SAN SEVAINE, INC.

K. HOVNANIAN AT SARATOGA, INC.

K. HOVNANIAN AT SCOTCH PLAINS II, INC.

K. HOVNANIAN AT SCOTCH PLAINS, INC.

K. HOVNANIAN AT SCOTCH PLAINS,
L.L.C.

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 STUART ROAD, INC.

K. HOVNANIAN AT SULLY STATION, INC.

K. HOVNANIAN AT SUMMERWOOD, INC.

K. HOVNANIAN AT SYCAMORE, INC.

K. HOVNANIAN AT TANNERY HILL, INC.

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

K. HOVNANIAN AT THE BLUFF, INC.

K. HOVNANIAN AT THE CEDARS, INC.

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

 

A-3

 

K. HOVNANIAN AT THE GLEN, INC.

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

K. HOVNANIAN AT THORNBURY, INC.

K. HOVNANIAN AT TIERRASANTA, INC.

K. HOVNANIAN AT TUXEDO, INC.

K. HOVNANIAN AT UNION TOWNSHIP I, INC.

K. HOVNANIAN AT UPPER 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 AT WOODMONT, INC.

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

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

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

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 NORTH CAROLINA, INC.

K. HOVNANIAN COMPANIES OF PENNSYLVANIA, INC.

K. HOVNANIAN COMPANIES OF SOUTHERN CALIFORNIA, INC.

K. HOVNANIAN CONSTRUCTION MANAGEMENT, INC.

K. HOVNANIAN DEVELOPMENTS OF ARIZONA, INC.

K. HOVNANIAN DEVELOPMENTS OF CALIFORNIA, INC.

K. HOVNANIAN DEVELOPMENTS OF MARYLAND, INC.

K. HOVNANIAN DEVELOPMENTS OF METRO WASHINGTON, INC.

K. HOVNANIAN DEVELOPMENTS OF MICHIGAN, INC.

K. HOVNANIAN DEVELOPMENTS OF NEW JERSEY II, INC.

K. HOVNANIAN DEVELOPMENTS OF NEW JERSEY, INC.

K. HOVNANIAN DEVELOPMENTS OF NEW YORK, INC.

K. HOVNANIAN DEVELOPMENTS OF OHIO, INC.

K. HOVNANIAN DEVELOPMENTS OF PENNSYLVANIA, INC.

K. HOVNANIAN DEVELOPMENTS OF SOUTH CAROLINA, INC.

K. HOVNANIAN DEVELOPMENTS OF TEXAS, INC.

K. HOVNANIAN DEVELOPMENTS OF WEST VIRGINIA, INC.

K. HOVNANIAN EQUITIES, INC.

K. HOVNANIAN FORECAST HOMES, INC.

K. HOVNANIAN’S FOUR SEASONS AT ASHBURN VILAGE, L.L.C.

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

 

A-4

 

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
KENT ISLAND CONDOMINIUMS, L.L.C.

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

K. HOVNANIAN’S FOUR SEASONS AT
MENIFEE VALLEY, L.L.C.

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

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

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

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

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

K. HOVNANIAN INVESTMENT
PROPERTIES OF NEW JERSEY, INC.

K. HOVNANIAN MARINE, 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
PISCATAWAY, INC.

K. HOVNANIAN PROPERTIES OF RED
BANK, INC.

K. HOVNANIAN PROPERTIES OF
WALL, INC.

KHC ACQUISITION, INC.

LANDARAMA, INC.

M&M AT LONG BRANCH, INC.

MATZEL & MUMFORD OF
DELAWARE, INC.

MATZEL & MUMFORD AT EGG
HARBOR, L.L.C.

MCNJ, INC.

PINE BROOK COMPANY, INC.

QUE CORPORATION

REFLECTIONS OF YOU INTERIORS,
INC.

SEABROOK ACCUMULATION
CORPORATION

STONEBROOK HOMES, INC.

THE MATZEL & MUMFORD
ORGANIZATION, INC.

THE NEW FORTIS CORPORATION

THE SOUTHAMPTON CORPORATION

WASHINGTON HOMES AT CAMERON
STATION, L.L.C.

WASHINGTON
HOMES AT RUSSETT, L.L.C.

WASHINGTON
HOMES OF WEST VIRGINIA, INC.

WASHINGTON
HOMES, INC.

WASHINGTON
HOMES, INC. OF VIRGINIA

WESTMINSTER
HOMES (CHARLOTTE), INC.

WESTMINSTER
HOMES OF TENNESSEE, INC.

WESTMINSTER
HOMES, INC.

 

A-5

 

WH LAND I, INC

WH LAND II, INC.

WH PROPERTIES, INC.

ARBOR WEST, L.L.C.

DULLES COPPERMINE, L.L.C.

K. HOVNANIAN AT 4S, L.L.C.

K. HOVNANIAN
AT ACQUA VISTA, L.L.C.

K. HOVNANIAN AT ARBOR HEIGHTS, LLC

K. HOVNANIAN AT ASHBURN VILLAGE, L.L.C.

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

K. HOVNANIAN AT BERKELEY, L.L.C.

K. HOVNANIAN AT BERNARDS V, L.L.C.

K. HOVNANIAN AT BLOOMS CROSSING, L.L.C.

K. HOVNANIAN AT BLUE HERON PINES, L.L.C.

K. HOVNANIAN AT BRENBROOKE, L.L.C.

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

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

K. HOVNANIAN AT CARMEL VILLAGE, L.L.C.

K. HOVNANIAN AT CEDAR GROVE III, L.L.C.

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

K. HOVNANIAN AT CLIFTON, L.L.C.

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

K. HOVNANIAN AT CORTEZ HILL, 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 EASTLAKE, L.L.C.

K. HOVNANIAN AT EDGEWATER, L.L.C.

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

K. HOVNANIAN AT EGG HARBOR TOWNSHIP, L.L.C.

K. HOVNANIAN AT ENCINITAS RANCH, L.L.C.

K. HOVNANIAN AT FOREST MEADOWS, 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, L.L.C.

K. HOVNANIAN AT HAMBURG CONTRACTORS, 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 CO., L.L.C.

K. HOVNANIAN AT KINCAID, L.L.C.

K. HOVNANIAN AT KING FARM, L.L.C.

 

A-6

 

K. HOVNANIAN
AT LA COSTA, L.L.C.

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

K. HOVNANIAN AT LAFAYETTE ESTATES, L.L.C.

K. HOVNANIAN AT LAKE RIDGE CROSSING, L.L.C.

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

K. HOVNANIAN AT LAWRENCE V, L.L.C.

K. HOVNANIAN AT LINWOOD, L.L.C.

K. HOVNANIAN AT LITTLE EGG HARBOR, L.L.C.

K. HOVNANIAN AT LITTLE EGG HARBOR CONTRACTORS, L.L.C.

K. HOVNANIAN AT LONG BRANCH I, L.L.C.

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 MANALAPAN II, L.L.C.

K. HOVNANIAN AT MANSFIELD I, LLC

K. HOVNANIAN AT MANSFIELD II, LLC

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

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

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

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

K. HOVNANIAN AT MOSAIC, L.L.C.

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

K. HOVNANIAN AT NORTH HALEDON, L.L.C.

K. HOVNANIAN AT NORTH WILDWOOD, L.L.C.

K. HOVNANIAN AT NORTHAMPTON, L.L.C.

K. HOVNANIAN AT NORTHFIELD, L.L.C.

K. HOVNANIAN AT OLD BRIDGE, L.L.C.

K. HOVNANIAN AT OLDE ORCHARD, L.L.C.

K. HOVNANIAN AT PACIFIC BLUFFS, L.L.C.

K. HOVNANIAN AT PARAMUS, L.L.C.

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

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

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

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

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

 

A-7

 

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

K. HOVNANIAN
AT RODERUCK. L.L.C.

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

K. HOVNANIAN AT SAYREVILLE, L.L.C.

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

K. HOVNANIAN AT SOMERS POINT, L.L.C.

K. HOVNANIAN AT SOUTH AMBOY, L.L.C.

K. HOVNANIAN AT SOUTH BANK, L.L.C.

K. HOVNANIAN AT SOUTH BRUNSWICK, L.L.C.

K. HOVNANIAN AT SPRING HILL ROAD, L.L.C.

K. HOVNANIAN AT SUNSETS, L.L.C.

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

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

K. HOVNANIAN AT UPPER FREEHOLD
TOWNSHIP I, INC.

K. HOVNANIAN AT UPPER FREEHOLD TOWNSHIP II, L.L.C.

K. HOVNANIAN AT UPPER FREEHOLD TOWNSHIP III, L.L.C.

K. HOVNANIAN AT UPPER UWCHLAN, L.L.C.

K. HOVNANIAN AT UPPER UWCHLAN II, L.L.C.

K. HOVNANIAN AT WANAQUE, L.L.C.

K. HOVNANIAN AT WASHINGTON, L.L.C.

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

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

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

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

K. HOVNANIAN AT WILLOW BROOK, L.L.C.

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

K. HOVNANIAN AT WOODHILL ESTATES, L.L.C.

K. HOVNANIAN CENTRAL ACQUISITIONS, L.L.C.

K. HOVNANIAN COMPANIES OF METRO D.C. NORTH, L.L.C.

K. HOVNANIAN COMPANIES, LLC

K. HOVNANIAN CONSTRUCTION II, INC.

K. HOVNANIAN CONSTRUCTION III, INC.

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

K. HOVNANIAN DEVELOPMENTS OF
DELAWARE, INC.

K. HOVNANIAN DEVELOPMENTS OF
MINNESOTA, INC.

K. HOVNANIAN EASTERN PENNSYLVANIA, L.L.C.

K. HOVNANIAN ENTERPRISES, INC.

K. HOVNANIAN FOUR SEASONS AT GOLD HILL, L.L.C.

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

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

K. HOVNANIAN GREAT WESTERN HOMES, L.L.C.

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

K. HOVNANIAN INVESTMENTS, L.L.C.

K. HOVNANIAN NORTH CENTRAL ACQUISITIONS, L.L.C.

 

A-8

 

K. HOVNANIAN NORTH JERSEY
ACQUISITIONS, L.L.C.

K. HOVNANIAN NORTHEAST SERVICES, L.L.C.

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

K. HOVNANIAN PENNSYLVANIA ACQUISITIONS, L.L.C.

K. HOVNANIAN SHORE ACQUISITIONS, L.L.C.

K. HOVNANIAN SOUTH JERSEY ACQUISITION, L.L.C.

K. HOVNANIAN SOUTHERN NEW JERSEY, L.L.C.

K. HOVNANIAN SUMMIT HOLDINGS, L.L.C.

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

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

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

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

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

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

K. HOVNANIAN’S FOUR SEASONS AT PALM SPRINGS, L.L.C.

K. HOVNANIAN’S FOUR SEASONS AT VINT HILL, L.L.C.

K. HOVNANIAN’S FOUR SEASONS, L.L.C.

K. HOVNANIAN’S PRIVATE HOME PORTFOLIO, L.L.C.

KHIP, LLC

KINGS COURT AT MONTGOMERY, L.L.C.

M&M AT APPLE RIDGE, L.L.C.

M&M AT BROOKHILL, L.L.C.

M&M AT CHESTERFIELD, L.L.C.

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

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

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

M&M AT MORRISTOWN, L.L.C.

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

M&M AT SHERIDAN, L.L.C.

M & M AT SOUTH BOUND BROOK, 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.

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

M&M AT WHEATENA URBAN
RENEWAL, L.L.C.

MATZEL & MUMFORD AT CRANBURY KNOLL, 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.

A-9

 

MATZEL & MUMFORD AT
WOODLAND CREST, L.L.C.

MMIP, L.L.C.

PADDOCKS, L.L.C.

RIDGEMORE UTILITY, L.L.C.

THE LANDINGS AT SPINNAKER POINTE, L.L.C.

WASHINGTON HOMES AT COLUMBIA TOWN CENTER, L.L.C.

WASHINGTON HOMES AT CAMP SPRINGS, L.L.C.

WASHINGTON HOMES AT FOREST RUN, L.L.C.

WASHINGTON HOMES AT LAUREL HIGHLANDS, L.L.C.

WASHINGTON HOMES AT RENAISSANCE PLAZA, L.L.C.

WASHINGTON HOMES OF MARYLAND I, L.L.C.

WESTMINSTER HOMES OF ALABAMA, L.L.C.

WESTMINSTER HOMES OF MISSISSIPPI, L.L.C.

WESTMINSTER HOMES OF SOUTH CAROLINA, L.L.C.

WOODLAND LAKES CONDOS AT BOWIE NEWTOWN, LLC

GOODMAN FAMILY OF BUILDERS, L.P.

K. HOVNANIAN OF HOUSTON II, L.P.

K. HOVNANIAN OF HOUSTON, L.P.

M & M INVESTMENTS, L.P.

WASHABAMA, L.P.

 

A-10

 

EXHIBIT A

 

[FACE OF NOTE]

 

K. HOVNANIAN ENTERPRISES, INC.

 

61/4 % Senior Notes Due 2015

 

	
   

  	
  CUSIP No.:

  	
   

  	
   

  
	
  No.

  	
  $

  	
   

  
	
   

  	
   

  
					

 

K. Hovnanian Enterprises, Inc., a California corporation (the “Issuer,” which term includes any successor under the Indenture
hereinafter referred to), for value received, promises to pay to
                                          ,
or its registered assigns, the principal sum of
                           
DOLLARS ($              ),
[or such other amount as is provided in a schedule attached hereto](1), on
January 15, 2015.

 

Interest Rate:  61/4
% per annum.

 

Interest Payment Dates:  January
15 and July 15, commencing January 15, 2005.

 

Record Dates:  January 1 and July
1.

 

Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which will for all purposes have the same effect
as if set forth at this place.

 

 

(1)           For
Global Notes

 

A-1

 

IN WITNESS WHEREOF, the Issuer has caused this Note to be signed
manually or by facsimile by its duly authorized officer.

 

	
   

  	
  Dated:

  	
  K. HOVNANIAN
  ENTERPRISES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
					

 

A-2

[Form of] Senior Trustee’s Certificate of Authentication

 

This is one of
the 61/4% Senior Notes Due 2015 described in the
Indenture referred to in this Note.

 

	
   

  	
  WACHOVIA BANK, NATIONAL

  ASSOCIATION, as Senior Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Authorized Signatory

  

 

A-3

 

[REVERSE SIDE OF NOTE]

 

K. HOVNANIAN
ENTERPRISES, INC.

 

61/4%
Senior Notes Due 2015

 

Capitalized
terms used herein are used as defined in the Indenture referred to below unless
otherwise indicated.

 

1.             Principal and Interest.

 

K. Hovnanian
Enterprises, Inc. (the “Issuer,” which
term includes any successor under the Indenture hereinafter referred to), a
California corporation, promises to pay the principal of this Note on January
15, 2015.

 

The Issuer promises
to pay interest on the principal amount of this Note on each interest payment
date, as set forth on the face of this Note, at the rate of 61/4%
per annum.

 

Interest will
be payable semiannually (to the holders of record of the Notes at the close of
business on the January 1 or July 1 immediately preceding the interest payment
date) on each interest payment date, commencing January 15, 2005.

 

[The Holder of
this Note is entitled to the benefits of the Registration Rights Agreement,
dated November 30, 2004, among the Issuer, the Guarantors party thereto and the
Initial Purchasers named therein (the “Registration
Rights Agreement”). In the event of a Registration Default (as
defined in the Registration Rights Agreement), the Holder shall be entitled to
Additional Interest as specified in the Registration Rights Agreement until the
Registration Default is cured.](2)

 

Interest on
this Note will accrue from the most recent date to which interest has been paid
on this Note or the Note surrendered in exchange for this Note (or, if there is
no existing default in the payment of interest and if this Note is
authenticated between a regular record date and the next interest payment date,
from such interest payment date) or, if no interest has been paid, from November
30, 2004.  Interest will be computed on
the basis of a 360-day year of twelve 30-day months.

 

(2) For
Initial Notes and Initial Additional Notes only.

 

A-4

 

2.             Paying Agent and Registrar.

 

Initially,
Wachovia Bank, National Association (the “Senior Trustee”)
will act as Paying Agent and Registrar. 
The Issuer may change or appoint any Paying Agent, Registrar or
co-Registrar without notice to any Holder. 
The Issuer or any of its Subsidiaries may act as Paying Agent, Registrar
or co-Registrar.

 

3.             Indenture; Guarantees.

 

This is one of
the Notes issued under an Indenture dated as of November 30, 2004 (as amended
from time to time, the “Indenture”),
among the Issuer, the Guarantors party thereto and the Senior Trustee.  The terms of the Notes include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act.  The Notes are subject to
all such terms, and Holders are referred to the Indenture and the Trust Indenture
Act for a statement of all such terms. 
To the extent permitted by applicable law, in the event of any
inconsistency between the terms of this Note and the terms of the Indenture,
the terms of the Indenture will control.

 

The Notes are
general unsecured obligations of the Issuer. 
The Indenture limits the original aggregate principal amount of the
Notes issued thereunder to $200,000,000, but Additional Notes may be issued
pursuant to the Indenture, and the originally issued Notes and all such
Additional Notes vote together for all purposes as a single class.  This Note is guaranteed by the Guarantors as
set forth in the Indenture and the Guarantee endorsed hereon.

 

Reference is
hereby made to the Indenture for a statement of the respective rights, duties and
obligations thereunder of the Guarantors, the Senior Trustee and the Holders.

 

4.             Optional Redemption.

 

The Notes will
be redeemable, in whole, at any time, or in part, from time to time, at the
option of the Issuer upon not less than 30 nor more than 60 days’ notice at a
redemption price equal to the sum of:

 

(a)           100%
of the principal amount thereof, plus accrued and unpaid interest thereon to
the redemption date; plus

 

(b)           the
Make-Whole Amount.

 

The Senior
Trustee shall have no responsibility in connection with the calculation of such
redemption price.

 

A-5

 

“Make-Whole Amount” means, in connection with any optional
redemption of any Note, the excess, if any, of: 
(a) the aggregate present value as of the date of such redemption of
each dollar of principal being redeemed and the amount of interest (exclusive
of interest accrued to the redemption date) that would have been payable in
respect of such dollar if such prepayment had not been made, determined by
discounting, on a semiannual basis, such principal and interest at the Treasury
Rate (determined on the Business Day preceding the date of such redemption)
plus 0.50%, from the respective dates on which such principal and interest
would have been payable if such payment had not been made; over (b) the
principal amount of the Note being redeemed.

 

“Treasury Rate” means, in connection with the calculation of
any Make-Whole Amount with respect to any Note, the yield to maturity at the
time of computation of United States Treasury securities with a constant
maturity, as compiled by and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
business days prior to the redemption date (or, if such Statistical Release is
no longer published, any publicly available source or similar market data),
equal to the then remaining maturity of the Note being prepaid.  If no maturity exactly corresponds to such
maturity, yields for the published maturities occurring prior to and after such
maturity most closely corresponding to such maturity shall be calculated
pursuant to the immediately preceding sentence and the Treasury Rate shall be
interpolated or extrapolated from such yields on a straight-line basis,
rounding in each of such relevant periods to the nearest month.

 

If less than
all of the Notes are to be redeemed at any time, the Senior Trustee will select
Notes for redemption on a pro rata basis,
by lot or by such other method as the Senior Trustee in its sole discretion
shall deem appropriate and fair.

 

No Notes of
$1,000 in original principal amount or less shall be redeemed in part.  Notices of redemption may not be conditional.

 

If any Note is
to be redeemed in part only, the notice of redemption that relates to that Note
shall state the portion of the principal amount thereof to be redeemed.  A new Note in principal amount equal to the
unredeemed portion of the original Note will be issued in the name of the Holder
thereof upon cancellation of the original Note. 
Notes called for redemption become due on the date fixed for
redemption.  On and after the redemption
date, interest ceases to accrue on Notes or portions thereof called for
redemption.

 

5.             Mandatory Redemption.

 

There is no
sinking fund for, or mandatory redemption of, the Notes.

 

A-6

 

6.             Discharge
and Defeasance.

 

If the Issuer
deposits with the Senior Trustee money and/or U.S. Government Obligations
sufficient to pay the then outstanding principal of, premium, interest and
Additional Interest, if any, and accrued interest on the Notes to redemption or
maturity, as the case may be, the Issuer, the Company and the Guarantors may in
certain circumstances be discharged from the Indenture, the Notes and the
Guarantees or may be discharged from certain of their obligations under certain
provisions of the Indenture.

 

7.             Registered Form; Denominations; Transfer; Exchange.

 

The Notes are
in registered form only without coupons in denominations of $1,000 principal
amount and any multiple of $1,000 in excess thereof.  A Holder may register the transfer or
exchange of Notes in accordance with the Indenture.  The Senior Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and to pay any taxes and fees required by law or permitted by the
Indenture.  Pursuant to the Indenture,
there are certain periods during which the Senior Trustee will not be required
to issue, register the transfer of, or exchange any Note or certain portions of
a Note.

 

8.             Persons Deemed Owners.

 

The registered
Holder of this Note shall be treated as the owner of it for all purposes.

 

9.             Defaults and Remedies.

 

If an Event of
Default occurs and is continuing, the Senior Trustee or the Holders of at least
25% in principal amount of the Notes may declare all the Notes to be due and
payable immediately.  If a bankruptcy or
insolvency default with respect to the Issuer or the Company occurs and is continuing,
the Notes automatically become immediately due and payable.  Holders may not enforce the Indenture or the
Notes except as provided in the Indenture. 
The Senior Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Notes. 
Subject to certain limitations, Holders of a majority in principal
amount of the Notes then outstanding may direct the Senior Trustee in its
exercise of remedies.

 

10.           Amendment, Supplement and Waiver.

 

Subject to
certain exceptions, the Indenture, the Notes and the Guarantees may be amended
or supplemented, or future compliance therewith may be waived, with the consent
of the Holders of a majority in principal amount of the outstanding Notes.  Without notice to or the consent of any
Holder, the Issuer, the

 

A-7

 

Company, the Guarantors and the
Senior Trustee may amend or supplement the Indenture, the Notes or the
Guarantees to, among other things, cure any ambiguity, defect or inconsistency
or if such amendment or supplement does not adversely affect the legal rights
of any Holder.

 

11.           Senior Trustee Dealings With Issuer.

 

The Senior
Trustee, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with the Issuer or its affiliates, with
the same rights as if it were not Senior Trustee; however,
if it acquires any conflicting interest (as defined in the Trust Indenture
Act), it must eliminate such conflict, apply to the Commission for permission
to continue or resign.

 

12.           No Recourse Against Others.

 

An
incorporator, and any past, present or future director, officer, partner,
employee or stockholder, as such, of the Issuer, the Company or the Guarantors
shall not have any liability for any obligations of the Issuer, the Company or
the Guarantors under the Notes, the Indenture or the Guarantees or for any
claim based on, in respect of, or by reason of, such obligations or their
creation.  Each Holder by accepting a
Note waives and releases all such liability. 
The waiver and release are part of the consideration for the issue of
the Notes.

 

13.           Governing Law.

 

THIS NOTE
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK.

 

14.           CUSIP Numbers.

 

Pursuant to a
recommendation promulgated by the Committee on Uniform Note Identification
Procedures, the Issuer has caused CUSIP numbers to be printed on the Notes, and
the Senior Trustee may use CUSIP numbers in notices as a convenience to
Holders.  No representation is made as to
the accuracy of such numbers either as printed on the Notes or as contained in
any notice and reliance may be placed only on the other identification numbers
placed thereon.

 

15.           Authentication.

 

This Note is
not valid until the Senior Trustee (or Authenticating Agent) manually signs the
certificate of authentication on the other side of this Note.

 

A-8

 

16.           Abbreviations.

 

Customary
abbreviations may be used in the name of a Holder or an assignee, such as:  TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian) and U/G/M/A/ (= Uniform Gifts
to Minors Act).

 

The Issuer
will furnish a copy of the Indenture to any Holder upon written request and
without charge.

 

A-9

 

[FORM OF TRANSFER NOTICE]

 

FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto

 

Insert Social Security or Taxpayer Identification No.

	
   

  
	
   

  
	
   

  
	
  Please print or typewrite name and address, including zip code, of
  assignee

  
	
   

  
	
   

  
	
   

  
	
   

  
	
  the within Note and all rights thereunder, hereby irrevocably
  constituting and appointing

  
	
   

  
	
   

  

 

 

agent to
transfer this Note on the books of the Issuer with full power of substitution
in the premises.

 

 

	
  Dated:

  	
   

  	
   

  	
  Signed:

  	
   

  
	
   

  	
  (sign exactly as name
  appears on the other side of this Note)

  
	
   

  	
   

  
	
  Signature
  Guarantee(3):

  	
   

  	
   

  
							

 

 

(3) Signatures
must be guaranteed by an “eligible guarantor
institution” meeting the requirements of the Registrar, which
requirements include membership or participation in the Note Transfer Agent
Medallion Program (“STAMP”) or
such other “signature guarantee program”
as may be determined by the Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

 

A-10

 

[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL

CERTIFICATES BEARING A RESTRICTED LEGEND]

 

In connection
with any transfer of this Note occurring prior to the date which is the date
following the second anniversary of the original issuance of this Note, the
undersigned confirms that such transfer is made without utilizing any general
solicitation or general advertising in connection with the transfer and further
as follows:

 

Check One

 

o            (1)
This Note is being transferred to a “qualified institutional buyer” in
compliance with Rule 144A under the Securities Act of 1933, as amended, and
certification in the form of Exhibit F to the Indenture is being furnished
herewith.

 

o            (2)
This Note is being transferred to a non-”U.S. Person,” as defined in Rule 902
of Regulation S under the Securities Act in compliance with the exemption from
registration under the Securities Act of 1933, as amended, provided by
Regulation S thereunder, and certification in the form of Exhibit E to the
Indenture is being furnished herewith.

 

or

 

o            (3)
This Note is being transferred other than in accordance with (1) or (2) above
and documents are being furnished herewith which comply with the conditions of
transfer set forth in this Note and the Indenture.

 

If none of the
foregoing boxes is checked, the Senior Trustee is not obligated to register
this Note in the name of any Person other than the Holder hereof unless and
until the conditions to any such transfer of registration set forth herein and
in the Indenture have been satisfied.

 

	
  Dated:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Transferor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signed:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  NOTICE:  The signature to this assignment

  must correspond with the name as written

  upon the face of the within-mentioned

  
						

 

A-11

 

	
   

  	
  instrument
  in every particular, without

  alteration or any change whatsoever.

  
	
   

  	
   

  
	
  Signature
  Guarantee:(4)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  (To be
  executed by an executive officer)

  	
   

  
					

 

 

(4) Signatures
must be guaranteed by an “eligible guarantor
institution” meeting the requirements of the Registrar, which
requirements include membership or participation in the Note Transfer Agent
Medallion Program (“STAMP”) or
such other “signature guarantee program”
as may be determined by the Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

 

A-12

 

OPTION OF
HOLDER TO ELECT PURCHASE

 

If you wish to
have all of this Note purchased by the Issuer pursuant to Section 4.10 or
Section 4.12 of the Indenture, check the box:  o

 

If you wish to
have a portion of this Note purchased by the Issuer pursuant to Section 4.10 or
Section 4.12 of the Indenture, state the amount (in original principal amount)
below:

 

$                     .

 

	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Your
  Signature:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (Sign
  exactly as your name appears on the other side of this Note)

  	
   

  
	
   

  	
   

  
	
  Signature
  Guarantee:(5)

  	
   

  	
   

  	
   

  
									

 

 

(5) Signatures
must be guaranteed by an “eligible guarantor
institution” meeting the requirements of the Senior Trustee, which
requirements include membership or participation in the Note Transfer Agent
Medallion Program (“STAMP”) or
such other “signature guarantee program”
as may be determined by the Senior Trustee in addition to, or in substitution
for, STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended.

 

A-13

 

SCHEDULE OF
EXCHANGES OF INTERESTS IN GLOBAL NOTES(6)

 

The following
exchanges of a part of this Global Note for Certificated Notes or an interest
in another Global Note, or exchanges of a part of another Global Note or
Certificated Note for an interest in this Global Note, have been made:

 

	
  Date of Exchange

  	
   

  	
  Amount of

  decrease in

  principal amount

  of this Global Note

  	
   

  	
  Amount of

  increase in

  principal amount

  of this Global Note

  	
   

  	
  Principal amount

  of this Global Note

  following such

  decrease or

  increase

  	
   

  	
  Signature of

  authorized officer

  of Senior Trustee

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

(6) For Global
Notes

 

A-14

 

[FORM OF
NOTATION ON NOTE RELATING TO GUARANTEE]

 

GUARANTEE

 

The
undersigned (the “Guarantors”)
have unconditionally guaranteed, jointly and severally (such guarantee by each
Guarantor being referred to herein as the “Guarantee”)
(i) the due and punctual payment of the principal of and interest and
Additional Interest, if any, on the Issuer’s 61/4% Senior
Notes due 2015 (the “Notes”),
whether at maturity or on an interest payment date, by acceleration or
otherwise, on the Notes, to the extent lawful, and of all other obligations of
the Issuer to the Holders or the Senior Trustee all in accordance with the
terms set forth in Article 6 of the Indenture and (ii) in case of any extension
of time of payment or renewal of any Notes or any of such other obligations,
that the same will be promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.

 

No past,
present or future stockholder, officer, director, employee, partner or
incorporator, as such, of any of the Guarantors shall have any liability under
the Guarantee evidenced hereby by reason of such person’s status as
stockholder, officer, director, employee, partner or incorporator. Each Holder
of a Note by accepting a Note waives and releases all such liability. This
waiver and release are part of the consideration for the issuance of the
Guarantee.

 

Each Holder of
a Note by accepting a Note agrees that any Guarantor named below shall have no
further liability with respect to its Guarantee if such Guarantor otherwise
ceases to be liable in respect of its Guarantee in accordance with the terms of
the Indenture.

 

The Guarantee
evidenced hereby shall not be valid or obligatory for any purpose until the
certificate of authentication on the Notes upon which the Guarantee is noted
shall have been executed by the Senior Trustee under the Indenture by the
manual signature of one of its authorized officers.

 

This Guarantee
shall be governed by, and construed in accordance with, the laws of the State
of New York.

 

 

HOVNANIAN ENTERPRISES, INC.

ALL SEASONS, INC.

ARROW PROPERTIES, INC.

CONDOMINIUM COMMUNITY (BOWIE NEW TOWN), INC.

CONDOMINIUM COMMUNITY (LARGO TOWN), INC.

CONDOMINIUM COMMUNITY (PARK PLACE), INC.

 

A-15

 

CONDOMINIUM COMMUNITY (QUAIL
RUN), INC.

CONDOMINIUM COMMUNITY (TRUMAN DRIVE), INC.

CONSULTANTS CORPORATION

DESIGNED CONTRACTS, INC.

EDISON CONTRACT SERVICES, L.L.C.

EXC, INC.

FORTIS HOMES, INC.

HOUSING-HOME SALES, 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 ALISO, L.L.C.

K. HOVNANIAN AT ASHBURN VILLAGE, INC.

K. HOVNANIAN AT BALLANTRAE ESTATES, INC.

K. HOVNANIAN AT BARRINGTON, INC.

K. HOVNANIAN AT BELLA LAGO, L.L.C.

K. HOVNANIAN AT BELMONT, INC.

K. HOVNANIAN AT BERNARDS IV, INC.

K. HOVNANIAN AT BRANCHBURG III, INC.

K. HOVNANIAN AT BRIDGEPORT, INC.

K. HOVNANIAN AT BRIDGEWATER VI, INC.

K. HOVNANIAN AT BRIDLEWOOD, L.L.C.

K. HOVNANIAN AT BULL RUN, INC.

K. HOVNANIAN AT BURLINGTON III, INC.

K. HOVNANIAN AT BURLINGTON, INC.

K. HOVNANIAN AT CALABRIA, INC.

K. HOVNANIAN AT CAPISTRANO, L.L.C.

K. HOVNANIAN AT CAMERON CHASE, INC.

K. HOVNANIAN AT CARMEL DEL MAR, INC.

K. HOVNANIAN AT CASTILE, INC.

K. HOVNANIAN AT CEDAR GROVE I, INC.

K. HOVNANIAN AT CEDAR GROVE II, INC.

K. HOVNANIAN AT CEDAR GROVE IV, L.L.C.

K. HOVNANIAN AT CHAPARRAL, INC.

K. HOVNANIAN AT CHESTERFIELD, L.L.C.

K. HOVNANIAN AT CITY IN THE HILLS, L.L.C.

K. HOVNANIAN AT CLARKSTOWN, INC.

K. HOVNANIAN AT CRESTLINE, INC.

K. HOVNANIAN AT DEPTFORD TOWNSHIP, L.L.C.

K. HOVNANIAN AT DOMINGUEZ HILLS, INC.

K. HOVNANIAN AT DOMINION RIDGE, INC.

K. HOVNANIAN AT EAST BRUNSWICK VI, INC.

 

A-16

 

K. HOVNANIAN AT EAST WHITELAND
I, INC.

K. HOVNANIAN AT EXETER HILLS, INC.

K. HOVNANIAN AT FAIR LAKES GLEN, INC.

K. HOVNANIAN AT FAIR LAKES, INC.

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

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

K. HOVNANIAN AT FRANKLIN, L.L.C.

K. HOVNANIAN AT FREEHOLD TOWNSHIP I, INC.

K. HOVNANIAN AT GASLAMP SQUARE, L.L.C.

K. HOVNANIAN AT HACKETTSTOWN, INC.

K. HOVNANIAN AT HAMPTON OAKS, INC.

K. HOVNANIAN AT HAWTHORNE, L.L.C.

K. HOVNANIAN AT HERSHEY’S MILL, INC.

K. HOVNANIAN AT HIGHLAND VINEYARDS, INC.

K. HOVNANIAN AT HIGHWATER, L.L.C.

K. HOVNANIAN AT HOLLY CREST, INC.

K. HOVNANIAN AT HOPEWELL IV, INC.

K. HOVNANIAN AT HOPEWELL VI, INC.

K. HOVNANIAN AT HOWELL TOWNSHIP, INC.

K. HOVNANIAN AT HUDSON POINT, L.L.C.

K. HOVNANIAN AT HUNTER ESTATES, INC.

K. HOVNANIAN AT KINGS GRANT I, INC.

K. HOVNANIAN AT KLOCKNER FARMS, INC.

K. HOVNANIAN AT LA TERRAZA, INC.

K. HOVNANIAN AT LA TROVATA, INC.

K. HOVNANIAN AT LAKEWOOD, INC.

K. HOVNANIAN AT LOWER SAUCON II, 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 MARLBORO TOWNSHIP III, INC.

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

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

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

K. HOVNANIAN OF METRO DC SOUTH, INC.

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

K. HOVNANIAN AT MONROE II, INC.

K. HOVNANIAN AT MONTCLAIR NJ, INC.

 

A-17

 

K. HOVNANIAN AT MONTCLAIR, INC.

K. HOVNANIAN AT MONTGOMERY I, INC.

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

K. HOVNANIAN AT NORTH BERGEN II, L.L.C.

K. HOVNANIAN AT NORTH CALDWELL II, L.L.C.

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 P.C. PROPERTIES, INC.

K. HOVNANIAN AT PARK RIDGE, INC.

K. HOVNANIAN AT PERKIOMEN I, INC.

K. HOVNANIAN AT PERKIOMEN II, INC.

K. HOVNANIAN AT PITTSGROVE, L.L.C.

K. HOVNANIAN AT PLAINSBORO III, INC.

K. HOVNANIAN AT PRINCETON, INC.

K. HOVNANIAN AT RANCHO CHRISTIANITOS, INC.

K. HOVNANIAN AT RESERVOIR RIDGE, INC.

K. HOVNANIAN AT RIVER OAKS, INC.

K. HOVNANIAN AT SAN SEVAINE, INC.

K. HOVNANIAN AT SARATOGA, INC.

K. HOVNANIAN AT SCOTCH PLAINS II, INC.

K. HOVNANIAN AT SCOTCH PLAINS, INC.

K. HOVNANIAN AT SCOTCH PLAINS, L.L.C.

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 STUART ROAD, INC.

K. HOVNANIAN AT SULLY STATION, INC.

K. HOVNANIAN AT SUMMERWOOD, INC.

K. HOVNANIAN AT SYCAMORE, INC.

K. HOVNANIAN AT TANNERY HILL, INC.

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

K. HOVNANIAN AT THE BLUFF, INC.

K. HOVNANIAN AT THE CEDARS, INC.

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

K. HOVNANIAN AT THE GLEN, INC.

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

K. HOVNANIAN AT THORNBURY, INC.

K. HOVNANIAN AT TIERRASANTA, INC.

K. HOVNANIAN AT TUXEDO, INC.

K. HOVNANIAN AT UNION TOWNSHIP I, INC.

 

A-18

 

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 AT WOODMONT, INC.

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

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

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

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 NORTH CAROLINA, INC.

K. HOVNANIAN COMPANIES OF PENNSYLVANIA, INC.

K. HOVNANIAN COMPANIES OF SOUTHERN CALIFORNIA, INC.

K. HOVNANIAN CONSTRUCTION MANAGEMENT, INC.

K. HOVNANIAN DEVELOPMENTS OF ARIZONA, INC.

K. HOVNANIAN DEVELOPMENTS OF CALIFORNIA, INC.

K. HOVNANIAN DEVELOPMENTS OF MARYLAND, INC.

K. HOVNANIAN DEVELOPMENTS OF METRO WASHINGTON, INC.

K. HOVNANIAN DEVELOPMENTS OF MICHIGAN, INC.

K. HOVNANIAN DEVELOPMENTS OF NEW JERSEY II, INC.

K. HOVNANIAN DEVELOPMENTS OF NEW JERSEY, INC.

K. HOVNANIAN DEVELOPMENTS OF NEW YORK, INC.

K. HOVNANIAN DEVELOPMENTS OF OHIO, INC.

K. HOVNANIAN DEVELOPMENTS OF PENNSYLVANIA, INC.

K. HOVNANIAN DEVELOPMENTS OF SOUTH CAROLINA, INC.

K. HOVNANIAN DEVELOPMENTS OF TEXAS, INC.

K. HOVNANIAN DEVELOPMENTS OF WEST VIRGINIA, INC.

K. HOVNANIAN EQUITIES, INC.

K. HOVNANIAN FORECAST HOMES, INC.

K. HOVNANIAN’S FOUR SEASONS AT ASHBURN VILAGE, L.L.C.

K. HOVNANIAN’S FOUR SEASONS AT BAKERSFIELD, 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 KENT ISLAND CONDOMINIUMS, L.L.C.

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

 

A-19

 

K. HOVNANIAN’S FOUR SEASONS AT
MENIFEE VALLEY, L.L.C.

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

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

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

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

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

K. HOVNANIAN INVESTMENT PROPERTIES OF NEW JERSEY, INC.

K. HOVNANIAN MARINE, 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 PISCATAWAY, INC.

K. HOVNANIAN PROPERTIES OF RED BANK, INC.

K. HOVNANIAN PROPERTIES OF WALL, INC.

KHC ACQUISITION, INC.

LANDARAMA, INC.

M&M AT LONG BRANCH, INC.

MATZEL & MUMFORD OF DELAWARE, INC.

MATZEL & MUMFORD AT EGG HARBOR, L.L.C.

MCNJ, INC.

PINE BROOK COMPANY, INC.

QUE CORPORATION

REFLECTIONS OF YOU INTERIORS, INC.

SEABROOK ACCUMULATION CORPORATION

STONEBROOK HOMES, INC.

THE MATZEL & MUMFORD ORGANIZATION, INC.

THE NEW FORTIS CORPORATION

THE SOUTHAMPTON CORPORATION

WASHINGTON HOMES AT CAMERON STATION, L.L.C.

WASHINGTON HOMES AT RUSSETT, L.L.C.

WASHINGTON HOMES OF WEST VIRGINIA, INC.

WASHINGTON HOMES, INC.

WASHINGTON HOMES, INC. OF VIRGINIA

WESTMINSTER HOMES (CHARLOTTE), INC.

WESTMINSTER HOMES OF TENNESSEE, INC.

WESTMINSTER HOMES, INC.

WH LAND I, INC

WH LAND II, INC.

WH PROPERTIES, INC.

ARBOR WEST, L.L.C.

DULLES COPPERMINE, L.L.C.

K. HOVNANIAN AT 4S, L.L.C.

 

A-20

 

K. HOVNANIAN AT ACQUA VISTA,
L.L.C.

K. HOVNANIAN AT ARBOR HEIGHTS, LLC

K. HOVNANIAN AT ASHBURN VILLAGE, L.L.C.

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

K. HOVNANIAN AT BERKELEY, L.L.C.

K. HOVNANIAN AT BERNARDS V, L.L.C.

K. HOVNANIAN AT BLOOMS CROSSING, L.L.C.

K. HOVNANIAN AT BLUE HERON PINES, L.L.C.

K. HOVNANIAN AT BRENBROOKE, L.L.C.

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

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

K. HOVNANIAN AT CARMEL VILLAGE, L.L.C.

K. HOVNANIAN AT CEDAR GROVE III, L.L.C.

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

K. HOVNANIAN AT CLIFTON, L.L.C.

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

K. HOVNANIAN AT CORTEZ HILL, 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 EASTLAKE, L.L.C.

K. HOVNANIAN AT EDGEWATER, L.L.C.

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

K. HOVNANIAN AT EGG HARBOR TOWNSHIP, L.L.C.

K. HOVNANIAN AT ENCINITAS RANCH, L.L.C.

K. HOVNANIAN AT FOREST MEADOWS, 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, L.L.C.

K. HOVNANIAN AT HAMBURG CONTRACTORS, 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 CO., L.L.C.

K. HOVNANIAN AT KINCAID, L.L.C.

K. HOVNANIAN AT KING FARM, L.L.C.

K. HOVNANIAN AT LA COSTA, L.L.C.

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

K. HOVNANIAN AT LAFAYETTE ESTATES, L.L.C.

K. HOVNANIAN AT LAKE RIDGE CROSSING, L.L.C.

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

K. HOVNANIAN AT LAWRENCE V, L.L.C.

 

A-21

 

K. HOVNANIAN AT LINWOOD, L.L.C.

K. HOVNANIAN AT LITTLE EGG HARBOR, L.L.C.

K. HOVNANIAN AT LITTLE EGG HARBOR CONTRACTORS, L.L.C.

K. HOVNANIAN AT LONG BRANCH I, L.L.C.

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 MANALAPAN II, L.L.C.

K. HOVNANIAN AT MANSFIELD I, LLC

K. HOVNANIAN AT MANSFIELD II, LLC

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

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

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

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

K. HOVNANIAN AT MOSAIC, L.L.C.

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

K. HOVNANIAN AT NORTH HALEDON, L.L.C.

K. HOVNANIAN AT NORTH WILDWOOD, L.L.C.

K. HOVNANIAN AT NORTHAMPTON, L.L.C.

K. HOVNANIAN AT NORTHFIELD, L.L.C.

K. HOVNANIAN AT OLD BRIDGE, L.L.C.

K. HOVNANIAN AT OLDE ORCHARD, L.L.C.

K. HOVNANIAN AT PACIFIC BLUFFS, L.L.C.

K. HOVNANIAN AT PARAMUS, L.L.C.

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

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

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

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

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

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

K. HOVNANIAN AT RODERUCK. L.L.C.

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

K. HOVNANIAN AT SAYREVILLE, L.L.C.

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

K. HOVNANIAN AT SOMERS POINT, L.L.C.

 

A-22

 

K. HOVNANIAN AT SOUTH AMBOY,
L.L.C.

K. HOVNANIAN AT SOUTH BANK, L.L.C.

K. HOVNANIAN AT SOUTH BRUNSWICK, L.L.C.

K. HOVNANIAN AT SPRING HILL ROAD, L.L.C.

K. HOVNANIAN AT SUNSETS, L.L.C.

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

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

K. HOVNANIAN AT UPPER FREEHOLD TOWNSHIP I, INC.

K. HOVNANIAN AT UPPER FREEHOLD TOWNSHIP II, L.L.C.

K. HOVNANIAN AT UPPER FREEHOLD TOWNSHIP III, L.L.C.

K. HOVNANIAN AT UPPER UWCHLAN, L.L.C.

K. HOVNANIAN AT UPPER UWCHLAN II, L.L.C.

K. HOVNANIAN AT WANAQUE, L.L.C.

K. HOVNANIAN AT WASHINGTON, L.L.C.

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

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

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

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

K. HOVNANIAN AT WILLOW BROOK, L.L.C.

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

K. HOVNANIAN AT WOODHILL ESTATES, L.L.C.

K. HOVNANIAN CENTRAL ACQUISITIONS, L.L.C.

K. HOVNANIAN COMPANIES OF METRO D.C. NORTH, L.L.C.

K. HOVNANIAN COMPANIES, LLC

K. HOVNANIAN CONSTRUCTION II, INC.

K. HOVNANIAN CONSTRUCTION III, INC.

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

K. HOVNANIAN DEVELOPMENTS OF DELAWARE, INC.

K. HOVNANIAN DEVELOPMENTS OF MINNESOTA, INC.

K. HOVNANIAN EASTERN PENNSYLVANIA, L.L.C.

K. HOVNANIAN ENTERPRISES, INC.

K. HOVNANIAN FOUR SEASONS AT GOLD HILL, L.L.C.

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

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

K. HOVNANIAN GREAT WESTERN HOMES, L.L.C.

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

K. HOVNANIAN PENNSYLVANIA ACQUISITIONS, L.L.C.

K. HOVNANIAN SHORE ACQUISITIONS, L.L.C.

K. HOVNANIAN SOUTH JERSEY ACQUISITION, L.L.C.

 

A-23

 

K. HOVNANIAN SOUTHERN NEW
JERSEY, L.L.C.

K. HOVNANIAN SUMMIT HOLDINGS, L.L.C.

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

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

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

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

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

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

K. HOVNANIAN’S FOUR SEASONS AT PALM SPRINGS, L.L.C.

K. HOVNANIAN’S FOUR SEASONS AT VINT HILL, L.L.C.

K. HOVNANIAN’S FOUR SEASONS, L.L.C.

K. HOVNANIAN’S PRIVATE HOME PORTFOLIO, L.L.C.

KHIP, LLC

KINGS COURT AT MONTGOMERY, L.L.C.

M&M AT APPLE RIDGE, L.L.C.

M&M AT BROOKHILL, L.L.C.

M&M AT CHESTERFIELD, L.L.C.

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

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

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

M&M AT MORRISTOWN, L.L.C.

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

M&M AT SHERIDAN, L.L.C.

M & M AT SOUTH BOUND BROOK, 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.

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

M&M AT WHEATENA URBAN RENEWAL, L.L.C.

MATZEL & MUMFORD AT CRANBURY KNOLL, 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.

MMIP, L.L.C.

PADDOCKS, L.L.C.

RIDGEMORE UTILITY, L.L.C.

THE LANDINGS AT SPINNAKER POINTE, L.L.C.

WASHINGTON HOMES AT COLUMBIA TOWN CENTER, L.L.C.

 

A-24

 

WASHINGTON HOMES AT CAMP
SPRINGS, L.L.C.

WASHINGTON HOMES AT FOREST RUN, L.L.C.

WASHINGTON HOMES AT LAUREL HIGHLANDS, L.L.C.

WASHINGTON HOMES AT RENAISSANCE PLAZA, L.L.C.

WASHINGTON HOMES OF MARYLAND I, L.L.C.

WESTMINSTER HOMES OF ALABAMA, L.L.C.

WESTMINSTER HOMES OF MISSISSIPPI, L.L.C.

WESTMINSTER HOMES OF SOUTH CAROLINA, L.L.C.

WOODLAND LAKES CONDOS AT BOWIE NEWTOWN, LLC

GOODMAN FAMILY OF BUILDERS, L.P.

K. HOVNANIAN OF HOUSTON II, L.P.

K. HOVNANIAN OF HOUSTON, L.P.

M & M INVESTMENTS, L.P.

WASHABAMA, L.P.

 

 

	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   Name:

  
	
   

  	
   

  	
   Title:

  	
  Authorized Officer

  

 

A-25

 

EXHIBIT B

 

SUPPLEMENTAL
INDENTURE

 

dated as of           ,
    

 

among

 

K. HOVNANIAN
ENTERPRISES, INC.

 

HOVNANIAN
ENTERPRISES, INC.

 

The Other
Guarantors Party Hereto

 

and

 

WACHOVIA BANK,
NATIONAL ASSOCIATION

 

as Senior
Trustee

 

 

61/4%
Senior Notes due 2015

 

 

THIS
[          ] SUPPLEMENTAL
INDENTURE (this “[         ] Supplemental Indenture”), entered into as
of           ,     ,
among K. Hovnanian Enterprises, Inc., a California corporation (the “Issuer”), Hovnanian Enterprises, Inc. (the “Company”), [list each new guarantor and its
jurisdiction of incorporation] (each an “Undersigned”)
and Wachovia Bank, National Association, as Senior Trustee (the “Senior Trustee”).

 

RECITALS

 

WHEREAS, the
Issuer, Company, the other Guarantors party thereto and the Senior Trustee
entered into an indenture, dated as of November 30, 2004 (the “Indenture”), relating to the Company’s 61/4%
Senior Notes due 2015 (the “Notes”);

 

WHEREAS, as a
condition to the purchase of the Notes by the Holders, the Company agreed
pursuant to the Indenture to cause any newly acquired or created Restricted
Subsidiaries to provide Guarantees.

 

AGREEMENT

 

NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained and intending to be legally bound, the parties hereto hereby agree as
follows:

 

SECTION 1.  Capitalized
terms used herein and not otherwise defined herein are used as defined in the
Indenture.

 

SECTION 2.  Each
Undersigned, by its execution of this
[         ] Supplemental
Indenture, agrees to be a Guarantor under the Indenture and to be bound by the
terms of the Indenture applicable to Guarantors, including, but not limited to,
Article 6 thereof.

 

SECTION 3.  This
[         ] Supplemental Indenture
shall be governed by and construed in accordance with the laws of the State of
New York.

 

SECTION 4.  This
[         ] Supplemental Indenture
may be signed in various counterparts which together will constitute one and the
same instrument.

 

SECTION 5.  This
[         ] Supplemental Indenture
is an amendment supplemental to the Indenture and the Indenture and this
[         ] Supplemental Indenture
will henceforth be read together.

 

B-1

 

IN WITNESS
WHEREOF, the parties hereto have caused this
[         ] Supplemental Indenture
to be duly executed as of the date first above written.

 

 

	
   

  	
  K. HOVNANIAN ENTERPRISES, INC.,

  as Issuer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  HOVNANIAN ENTERPRISES, INC. 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [GUARANTOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WACHOVIA BANK, NATIONAL

  ASSOCIATION, as Senior Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

B-2

 

EXHIBIT C

 

RESTRICTED
LEGEND

 

THIS NOTE (OR
ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN
THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT
AS SET FORTH IN THE NEXT SENTENCE.  BY
ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:

 

(1)           REPRESENTS THAT (A) IT
IS A “QUALIFIED INSTITUTIONAL BUYER” (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) (A “QIB”), (B) IT
HAS ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION
S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL “ACCREDITED INVESTOR”
(AS DEFINED IN RULE 501(a) (1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) (AN “IAI”),

 

(2)           AGREES THAT IT WILL NOT
RESELL OR OTHERWISE TRANSFER THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN,
EXCEPT (A) TO THE ISSUER, HOVNANIAN OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR
904 OF REGULATION S OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO
SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF THIS NOTE (THE FORM
OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT
OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN $250,000, AN OPINION OF
COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL
ACCEPTABLE TO THE ISSUER) OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS
OF ANY

 

C-1

 

STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND

 

(3)           AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.

 

AS USED
HEREIN, THE TERMS “OFFSHORE TRANSACTIONS” AND “UNITED STATES” HAVE THE MEANINGS
GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT.  THE INDENTURE CONTAINS A PROVISION REQUIRING
THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE
FOREGOING.

 

C-2

 

EXHIBIT D

 

DTC LEGEND

 

UNLESS THIS
NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION (“DTC”),
TO THE ISSUER OR ANY OF ITS SUBSIDIARIES OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS A
BENEFICIAL INTEREST HEREIN.

 

THIS NOTE IS A
GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED.  TRANSFERS OF THIS GLOBAL NOTE ARE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, BY DTC TO A NOMINEE OF DTC OR BY A NOMINEE
OF DTC TO DTC OR ANOTHER NOMINEE OF DTC OR BY DTC OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY AND TRANSFERS OF
PORTIONS OF THIS GLOBAL NOTE ARE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE TRANSFER PROVISIONS OF THE INDENTURE.

 

D-1

 

EXHIBIT E

 

Regulation S
Certificate

 

         ,
    

 

Wachovia Bank, National Association

21 South Street

Morristown, NJ 07960

Attention: Corporate Trust Administration

 

	
  Re:

  	
   

  	
  K. Hovnanian Enterprises, Inc.

  
	
   

  	
   

  	
  61/4% Senior Notes due 2015 (the “Notes”)

  
	
   

  	
   

  	
  Issued under the Indenture (the “Indenture”)
  dated as

  
	
   

  	
   

  	
  as of November 30, 2004 relating to the Notes

  	
   

  

 

Dear Sirs:

 

Terms are used
in this Certificate as used in Regulation S (“Regulation S”)
under the Securities Act of 1933, as amended (the “Securities
Act”), except as otherwise stated herein.

 

[CHECK A OR B AS APPLICABLE.]

 

o  A.         This
Certificate relates to our proposed transfer of $     principal
amount of Notes issued under the Indenture. 
We hereby certify as follows:

 

1.             The
offer and sale of the Notes was not and will not be made to a person in the
United States (unless such person is excluded from the definition of “U.S.
person” pursuant to Rule 902(k)(2)(vi) or the account held by it for which it
is acting is excluded from the definition of “U.S. person” pursuant to Rule
902(k)(2)(i) under the circumstances described in Rule 902(g)(3)) and such
offer and sale was not and will not be specifically targeted at an identifiable
group of U.S. citizens abroad.

 

2.             Unless
the circumstances described in the parenthetical in paragraph 1 above are
applicable, either (a) at the time the buy order was originated, the buyer was
outside the United States or we and any person acting on our behalf reasonably
believed that the buyer was outside the United States or (b) the transaction
was

 

E-1

 

executed in, on or through the facilities of
a designated offshore securities market, and neither we nor any person acting
on our behalf knows that the transaction was pre-arranged with a buyer in the
United States.

 

3.             Neither
we, any of our affiliates, nor any person acting on our or their behalf has
made any directed selling efforts in the United States with respect to the
Notes.

 

4.             The
proposed transfer of Notes is not part of a plan or scheme to evade the
registration requirements of the Securities Act.

 

5.             If
we are a dealer or a person receiving a selling concession, fee or other
remuneration in respect of the Notes, and the proposed transfer takes place
during the Restricted Period (as defined in the Indenture), or we are an
officer or director of the Company or an Initial Purchaser (as defined in the
Indenture), we certify that the proposed transfer is being made in accordance
with the provisions of Rule 904(b) of Regulation S.

 

o  B.          This
Certificate relates to our proposed exchange of $     
principal amount of Notes issued under the Indenture for an equal principal
amount of Notes to be held by us.  We
hereby certify as follows:

 

1.             At
the time the offer and sale of the Notes was made to us, either (i) we were not
in the United States or (ii) we were excluded from the definition of “U.S.
person” pursuant to Rule 902(k)(2)(vi) or the account held by us for which we
were acting was excluded from the definition of “U.S. person” pursuant to Rule
902(k)(2)(i) under the circumstances described in Rule 902(g)(3); and we were
not a member of an identifiable group of U.S. citizens abroad.

 

2.             Unless
the circumstances described in paragraph 1(ii) above are applicable, either (a)
at the time our buy order was originated, we were outside the United States or
(b) the transaction was executed in, on or through the facilities of a
designated offshore securities market and we did not pre-arrange the
transaction in the United States.

 

E-2

 

3.             The
proposed exchange of Notes is not part of a plan or scheme to evade the
registration requirements of the Securities Act.

 

You and the
Issuer are entitled to rely upon this Certificate and are irrevocably
authorized to produce this Certificate or a copy hereof to any interested party
in any administrative or legal proceeding or official inquiry with respect to
the matters covered hereby.

 

 

	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [NAME OF
  SELLER (FOR

  TRANSFERS) OR OWNER (FOR

  EXCHANGES)]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
  Address:

  

 

	
  Date:

  	
   

  	
   

  
	
   

  
	
  Upon transfer of certificated Notes, the
  Notes would be registered in the name of the new beneficial owner as follows:

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  
	
   

  	
   

  
	
  Taxpayer ID number:

  	
   

  	
   

  
								

 

E-3

 

EXHIBIT F

 

Rule 144A
Certificate

 

         ,
    

 

Wachovia Bank, National Association

21 South Street

Morristown, NJ 07960

Attention: Corporate Trust Administration

 

	
  Re:

  	
   

  	
  K. Hovnanian Enterprises, Inc.

  
	
   

  	
   

  	
  61/4% Senior Notes due 2015 (the “Notes”)

  
	
   

  	
   

  	
  Issued under the Indenture (the “Indenture”)
  dated as

  
	
   

  	
   

  	
  as of November 30, 2004 relating to the Notes

  	
   

  

 

Ladies and Gentlemen:

 

This Certificate relates to:

 

[CHECK A OR B AS APPLICABLE.]

 

o  A.         Our
proposed purchase of $     principal amount of Notes issued
under the Indenture.

 

o  B.          Our
proposed transfer or exchange of $     principal amount of
Notes issued under the Indenture for an equal principal amount of Notes to be
held by us.

 

We and, if
applicable, each account for which we are acting, are a qualified institutional
buyer within the meaning of Rule 144A (“Rule 144A”)
under the Securities Act of 1933, as amended (the “Securities
Act”).  If we are acting on
behalf of an account, we exercise sole investment discretion with respect to
such account. We are aware that the transfer of Notes to us, or such exchange,
as applicable, is being made in reliance upon the exemption from the provisions
of Section 5 of the Securities Act provided by Rule 144A.  Prior to the date of this Certificate we have
received such information regarding the Company as we have requested pursuant
to Rule 144A(d)(4) or have determined not to request such information.

 

You and the
Issuer are entitled to rely upon this Certificate and are irrevocably
authorized to produce this Certificate or a copy hereof to any

 

F-1

 

interested party in any
administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.

 

 

	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [NAME OF PURCHASER (FOR

  TRANSFERS) OR OWNER (FOR

  EXCHANGES)]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
  Address:

  

 

	
  Date:

  	
   

  	
   

  
	
   

  
	
  Upon transfer of certificated Notes, the
  Notes would be registered in the name of the new beneficial owner as follows:

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  
	
   

  	
   

  
	
  Taxpayer ID number:

  	
   

  	
   

  
								

 

F-2

 

EXHIBIT G

 

Institutional
Accredited Investor Certificate

 

Wachovia Bank, National Association

21 South Street

Morristown, NJ 07960

Attention: Corporate Trust Administration

 

	
  Re:

  	
   

  	
  K. Hovnanian Enterprises, Inc.

  
	
   

  	
   

  	
  61/4% Senior Notes due 2015 (the “Notes”)

  
	
   

  	
   

  	
  Issued under the Indenture (the “Indenture”)
  dated as

  
	
   

  	
   

  	
  as of November 30, 2004 relating to the Notes

  	
   

  

 

Ladies and Gentlemen:

 

This Certificate relates to:

 

[CHECK A, B OR C AS APPLICABLE.]

 

o  A.         Our
proposed purchase of $     principal amount of Notes issued
under the Indenture.

 

o  B.          Our
proposed purchase of $     principal amount of a beneficial
interest in a Global Note

 

o  C.          Our
proposed transfer or exchange of $     principal amount of
Notes issued under the Indenture for an equal principal amount of Notes to be
held by us.

 

We hereby
confirm that:

 

1.             We
are an institutional “accredited investor” as defined in Rule 501(a)(1), (2),
(3) or (7) of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”) (an “Institutional Accredited
Investor”).

 

2.             Any
acquisition of Notes by us will be for our own account or for the account of
one or more other Institutional Accredited Investors as to which we exercise
sole investment discretion.

 

G-1

 

3.             We
have such knowledge and experience in financial and business matters that we
are capable of evaluating the merits and risks of an investment in the Notes
and we and any accounts for which we are acting are able to bear the economic
risks of and an entire loss of our or their investment in the Notes.

 

4.             We
are not acquiring the Notes or beneficial interest therein with a view to any
distribution thereof in a transaction that would violate the Securities Act or
the securities laws of any State of the United States or any other applicable
jurisdiction; provided, that the
disposition of our property and the property of any accounts for which we are
acting as fiduciary will remain at all times within our and their control.

 

5.             We
acknowledge that the Notes have not been registered under the Securities Act
and that the Notes may not be offered or sold within the United States or to or
for the benefit of U.S. persons except as set forth below.

 

6.             The
principal amount of Notes to which this Certificate relates is at least equal to
$250,000.

 

We agree for
the benefit of the Issuer and the Guarantors, on our own behalf and on behalf
of each account for which we are acting, that we will not resell or otherwise
transfer this note or any beneficial interest herein except (A) to the Issuer,
the Company or any of its subsidiaries, (B) to a person whom we reasonably
believe is a QIB purchasing for its own account or for the account of a QIB in
a transaction meeting the requirements of Rule 144A, (C) in an offshore
transaction meeting the requirements of Rule 903 or 904 of Regulation S of the
Securities Act, (D) in a transaction meeting the requirements of Rule 144 under
the Securities Act, (E) to an Institutional Accredited Investor that, prior to
such transfer, furnishes the Senior Trustee a signed letter containing certain
representations and agreements relating to the transfer of the Notes (the form
of which can be obtained from the Senior Trustee) and, if such transfer is in
respect of an aggregate principal amount of Notes less than $250,000, an
opinion of counsel acceptable to the Issuer that such transfer is in compliance
with the Securities Act, (F) in accordance with another exemption form the
registration requirements of the Securities Act (and based upon an opinion of
counsel acceptable to the Issuer) or (G) pursuant to an effective Registration
Statement and, in each case, in accordance with the applicable securities laws
of any state of the United States or any other applicable jurisdiction.

 

G-2

 

Prior to the
registration of any transfer or exchange, we acknowledge that the Issuer
reserves the right to require the delivery of such legal opinions,
certifications or other evidence as may reasonably be required in order to
determine that the proposed transfer or exchange is being made in compliance
with the Securities Act and applicable state securities laws.  We acknowledge that no representation is made
as to the availability of any Rule 144 exemption from the registration
requirements of the Securities Act.

 

We understand
that the Senior Trustee will not be required to accept for registration of
transfer or exchange any Notes acquired by us, except upon presentation of
evidence satisfactory to the Issuer and the Senior Trustee that the foregoing
restrictions on transfer have been complied with.  We further agree to deliver to each person
acquiring any of the Notes or any beneficial interest therein from us a notice
advising such person that resales of the Notes are restricted as stated herein.

 

We agree to
notify you promptly in writing if any of our acknowledgments, representations
or agreements herein ceases to be accurate and complete.

 

We represent
to you that we have full power to make the foregoing acknowledgments,
representations and agreements on our own behalf and on behalf of any account
for which we are acting.

 

You and the
Issuer are entitled to rely upon this Certificate and are irrevocably
authorized to produce this Certificate or a copy hereof to any interested party
in any administrative or legal proceeding or official inquiry with respect to
the matters covered hereby.

 

	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [NAME OF PURCHASER (FOR

  TRANSFERS) OR OWNER (FOR

  EXCHANGES)]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
  Address:

  

 

	
  Date:

  	
   

  	
   

  

 

G-3

 

	
  Upon transfer of certificated Notes, the
  Notes would be registered in the name of the new beneficial owner as follows:

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  
	
   

  	
   

  
	
  Taxpayer ID number:

  	
   

  	
   

  
						

 

G-4

 

EXHIBIT H

 

[COMPLETE
FORM I OR FORM II AS APPLICABLE.]

 

[FORM I]

 

Certificate
of Beneficial Ownership

 

	
  To:

  	
  Wachovia
  Bank, National Association

  21 South Street

  Morristown, NJ 07960

  Attention: Corporate Trust Administration OR

  
	
   

  
	
  [Euroclear Bank S.A./N.V., as operator of the Euroclear System] OR

  
	
   

  	
   

  	
   

  
	
  [Clearstream Banking, société anonyme]

  
	
   

  	
   

  	
   

  
	
  Re:

  	
   

  	
  K. Hovnanian Enterprises, Inc.

  
	
   

  	
   

  	
  61/4% Senior Notes due 2015 (the “Notes”)

  
	
   

  	
   

  	
  Issued under the Indenture (the “Indenture”)
  dated as

  
	
   

  	
   

  	
  as of November 30, 2004 relating to the Notes

  	
   

  
					

 

Ladies and Gentlemen:

 

We are the
beneficial owner of $     principal amount of Notes issued
under the Indenture and represented by a Regulation S Temporary Global Note (as
defined in the Indenture).

 

[CHECK A OR B AS APPLICABLE.]

 

o  A.         We
are a non-U.S. person (within the meaning of Regulation S under the Securities
Act of 1933, as amended).

 

o  B.          We
are a U.S. person (within the meaning of Regulation S under the Securities Act
of 1933, as amended) that purchased the Notes in a transaction that did not
require registration under the Securities Act of 1933, as amended.

 

You and the
Issuer are entitled to rely upon this Certificate and are irrevocably
authorized to produce this Certificate or a copy hereof to any interested party
in any administrative or legal proceeding or official inquiry with respect to
the matters covered hereby.

 

H-1

 

	
   

  	
  Very truly
  yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [NAME OF BENEFICIAL OWNER]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
  Address:

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  	
   

  
					

 

[FORM II]

 

Certificate
of Beneficial Ownership

 

	
  To:

  	
   

  	
  Wachovia Bank, National Association

  21 South Street

  Morristown, NJ 07960

  Attention: Corporate Trust Administration OR

  
	
   

  	
   

  	
   

  
	
  Re:

  	
   

  	
  K. Hovnanian Enterprises, Inc.

  
	
   

  	
   

  	
  61/4% Senior Notes due 2015 (the “Notes”)

  
	
   

  	
   

  	
  Issued under the Indenture (the “Indenture”)
  dated as

  
	
   

  	
   

  	
  as of November 30, 2004 relating to the Notes

  	
   

  

 

Ladies and Gentlemen:

 

This is to
certify that based solely on certifications we have received in writing, by
tested telex or by electronic transmission from member organizations (“Member Organizations”) appearing in our records as persons
being entitled to a portion of the principal amount of Notes represented by a
Regulation S Temporary Global Note issued under the above-referenced Indenture,
that as of the date hereof, $     principal amount of Notes
represented by the Regulation S Temporary Global Note being submitted herewith
for exchange is beneficially owned by persons that are either (i) non-U.S.
persons (within the meaning of Regulation S under the Securities Act of 1933,
as amended) or (ii) U.S. persons that purchased the Notes in a transaction that
did not require registration under the Securities Act of 1933, as amended.

 

We further
certify that (i) we are not submitting herewith for exchange any portion of
such Regulation S Temporary Global Note excepted in such Member

 

H-2

 

Organization certifications and
(ii) as of the date hereof we have not received any notification from any
Member Organization to the effect that the statements made by such Member
Organization with respect to any portion of such Regulation S Temporary Global
Note submitted herewith for exchange are no longer true and cannot be relied
upon as of the date hereof.

 

You and the
Issuer are entitled to rely upon this Certificate and are irrevocably
authorized to produce this Certificate or a copy hereof to any interested party
in any administrative or legal proceeding or official inquiry with respect to the
matters covered hereby.

 

	
   

  	
  Yours faithfully,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [EUROCLEAR BANK S.A./N.V., as

  operator of the Euroclear System]

  
	
   

  	
   

  
	
   

  	
  OR

  
	
   

  	
   

  
	
   

  	
  [CLEARSTREAM BANKING, société

  anonyme]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
  Address:

  
	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  	
   

  
					

 

H-3

 

EXHIBIT I

 

THIS NOTE IS A TEMPORARY GLOBAL NOTE. 
PRIOR TO THE EXPIRATION OF THE RESTRICTED PERIOD APPLICABLE HERETO,
BENEFICIAL INTERESTS HEREIN MAY NOT BE HELD BY ANY PERSON OTHER THAN (1) A
NON-U.S. PERSON OR (2) A U.S. PERSON THAT PURCHASED SUCH INTEREST IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE “SECURITIES ACT”).  BENEFICIAL INTERESTS HEREIN ARE NOT
EXCHANGEABLE FOR CERTIFICATED NOTES OTHER THAN A PERMANENT GLOBAL NOTE IN
ACCORDANCE WITH THE TERMS OF THE INDENTURE. TERMS IN THIS LEGEND ARE USED AS
USED IN REGULATION S UNDER THE SECURITIES ACT.

 

I-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00076-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00076-of-00352.parquet"}]]