Document:

Exhibit 4(j)

 

 

 

K. HOVNANIAN ENTERPRISES, INC.,

as Issuer

HOVNANIAN ENTERPRISES, INC.

and

the other Guarantors party hereto

and

WACHOVIA BANK, NATIONAL ASSOCIATION,

as Trustee

 

 

Indenture

Dated as of November 30, 2004

 

 

6% Senior Subordinated Notes Due 2010

 

 

 

 

CROSS-REFERENCE TABLE

 

	
  TIA Sections

  	
   

  	
  Indenture Sections

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  § 310 (a)

  	
   

  	
  7.10

  	
   

  
	
   

  	
  (b)

  	
   

  	
  7.08

  	
   

  
	
  § 312

  	
   

  	
   

  	
  13.02

  	
   

  
	
  § 313

  	
   

  	
   

  	
  7.06

  	
   

  
	
  § 314 (a)

  	
   

  	
  4.15, 4.16

  	
   

  
	
   

  	
  (c)

  	
   

  	
  13.04

  	
   

  
	
   

  	
  (e)

  	
   

  	
  13.05

  	
   

  
	
  § 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)

  	
   

  	
  13.02

  	
   

  
	
  § 317 (a) (1)

  	
   

  	
  5.07

  	
   

  
	
   

  	
  (a) (2)

  	
   

  	
  5.07

  	
   

  
	
   

  	
  (b)

  	
   

  	
  2.04

  	
   

  
	
  § 318

  	
   

  	
   

  	
  13.01

  	
   

  

 

i

 

TABLE OF CONTENTS

 

 

	
  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

  	
   

  	
   

  
	
  Section
  4.05. Maintenance of Properties and Insurance

  	
   

  	
   

  
	
  Section
  4.06. Limitations on Indebtedness

  	
   

  	
   

  
	
  Section
  4.07. Limitation on Restricted Payments

  	
   

  	
   

  

 

ii

 

	
  Section
  4.08. Limitation 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. Limitation 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 Trustee

  	
   

  	
   

  
	
  Section 4.17. Notice
  of Other Defaults

  	
   

  	
   

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

  	
   

  	
   

  
	
  Section 4.19. Limitation on Senior Subordinated Indebtedness

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  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 Trustee

  	
   

  	
   

  
	
  Section 5.06. Proceedings by Holders

  	
   

  	
   

  
	
  Section
  5.07. Proceedings by 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. Trustee May File Proof of Claim

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6

  
	
  GUARANTEE

  
	
   

  	
   

  	
   

  
	
  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 Guaranty

  	
   

  	
   

  
	
  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

  	
   

  	
   

  

 

iii

 

	
  ARTICLE 7

  
	
  THE TRUSTEE

  
	
   

  	
   

  	
   

  
	
  Section 7.01. General

  	
   

  	
   

  
	
  Section 7.02. Certain
  Rights of Trustee

  	
   

  	
   

  
	
  Section 7.03.
  Individual Rights of Trustee

  	
   

  	
   

  
	
  Section 7.04.
  Trustee’s Disclaimer

  	
   

  	
   

  
	
  Section 7.05. Notice
  of Default

  	
   

  	
   

  
	
  Section 7.06. Reports
  by Trustee to Holders

  	
   

  	
   

  
	
  Section 7.07.
  Compensation and Indemnity

  	
   

  	
   

  
	
  Section 7.08.
  Replacement of Trustee

  	
   

  	
   

  
	
  Section 7.09.
  Successor Trustee by Merger

  	
   

  	
   

  
	
  Section 7.10.
  Eligibility

  	
   

  	
   

  
	
  Section 7.11. Money
  Held in Trust

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8

  
	
  DEFEASANCE AND DISCHARGE

  
	
   

  	
   

  	
   

  
	
  Section 8.01.
  Discharge Of Issuer’s Obligations

  	
   

  	
   

  
	
  Section 8.02. Legal
  Defeasance

  	
   

  	
   

  
	
  Section 8.03. Covenant
  Defeasance

  	
   

  	
   

  
	
  Section 8.04.
  Application Of Trust Money

  	
   

  	
   

  
	
  Section 8.05.
  Repayment To Issuer

  	
   

  	
   

  
	
  Section 8.06.
  Reinstatement

  	
   

  	
   

  
	
  Section 8.07. Indemnity
  For U.s. Government Obligations

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  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.
  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

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11

  
	
  SUBORDINATION OF NOTES

  
	
   

  	
   

  	
   

  
	
  Section 11.01. Notes
  Subordinated to Senior Debt of the Issuer

  	
   

  	
   

  

 

 

iv

 

	
  Section 11.02. Issuer
  Not To Make Payments with Respect to Notes in Certain Circumstances.

  	
   

  	
   

  
	
  Section 11.03. Notes
  Subordinated to Prior Payment of All Senior Debt of the Issuer on
  Dissolution, Winding Up, Liquidation or Reorganization of Issuer.

  	
   

  	
   

  
	
  Section 11.04. Holders
  to be Subrogated to Rights of Holders of Senior Debt of the Issuer.

  	
   

  	
   

  
	
  Section 11.05.
  Obligations of the Issuer Unconditional.

  	
   

  	
   

  
	
  Section 11.06. Trustee
  Entitled to Assume Payments Not Prohibited in Absence of Notice.

  	
   

  	
   

  
	
  Section 11.07.
  Application by Trustee of Monies Deposited With it.

  	
   

  	
   

  
	
  Section 11.08.
  Subordination Rights Not Impaired by Acts or Omissions of Issuer or Holders
  of Senior Debt of the Issuer.

  	
   

  	
   

  
	
  Section 11.09. Holders
  Authorize Trustee to Effectuate Subordination of Notes.

  	
   

  	
   

  
	
  Section 11.10. Right of
  Trustee to Hold Senior Debt of the Issuer.

  	
   

  	
   

  
	
  Section 11.11. Trustee
  Not Fiduciary for Holders of Senior Debt of the Issuer.

  	
   

  	
   

  
	
  Section 11.12. Article
  10 Not to Prevent Events of Default.

  	
   

  	
   

  
	
  Section 11.13.
  Officers’ Certificate.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 12

  
	
  SUBORDINATION OF GUARANTEES

  
	
   

  	
   

  	
   

  
	
  Section 12.01.
  Guarantees Subordination to Senior Debt of a Guarantor.

  	
   

  	
   

  
	
  Section 12.02.
  Guarantor Not to Make Payments With Respect to Notes in Certain
  Circumstances.

  	
   

  	
   

  
	
  Section 12.03.
  Guarantee Subordinated to Prior Payment of All Senior Debt of a Guarantor on
  Dissolution, Winding Up, Liquidation or Reorganization of a Guarantor.

  	
   

  	
   

  
	
  Section
  12.04. Holders to Be Subrogated to Rights of Holders
  of Senior Debt of a Guarantor.

  	
   

  	
   

  
	
  Section
  12.05. Obligations of the Guarantors Unconditional.

  	
   

  	
   

  
	
  Section
  12.06. Trustee Entitled to Assume Payments Not
  Prohibited in Absence of Notice.

  	
   

  	
   

  
	
  Section
  12.07. Application by Trustee of Monies Deposited With
  it.

  	
   

  	
   

  
	
  Section
  12.08. Subordination Rights Not Impaired by Acts or
  Omissions of Any Guarantor or Holders of Senior Debt of a Guarantor.

  	
   

  	
   

  
	
  Section
  12.09. Holders Authorize Trustee to Effectuate
  Subordination of Notes.

  	
   

  	
   

  
	
  Section
  12.10. Right of Trustee to Hold Senior Debt of a
  Guarantor.

  	
   

  	
   

  
	
  Section
  12.11. Trustee Not Fiduciary for Holders of Senior
  Debt of a Guarantor.

  	
   

  	
   

  
	
  Section
  12.12. Article 11 Not to Prevent Events of Default.

  	
   

  	
   

  

 

v

 

	
  Section
  12.13. Subordination of Indebtedness Owed by the
  Issuer to a Guarantor.

  	
   

  	
   

  
	
  Section
  12.14. Officers’ Certificate.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 13

  
	
  MISCELLANEOUS

  
	
   

  	
   

  	
   

  
	
  Section
  13.01. Trust Indenture Act of 1939

  	
   

  	
   

  
	
  Section
  13.02. Holder Communications; Holder Actions

  	
   

  	
   

  
	
  Section
  13.03. Notices

  	
   

  	
   

  
	
  Section
  13.04. Certificate and Opinion as to Conditions
  Precedent

  	
   

  	
   

  
	
  Section
  13.05. Statements Required in Certificate or Opinion

  	
   

  	
   

  
	
  Section
  13.06. Payment Date Other Than a Business Day

  	
   

  	
   

  
	
  Section
  13.07. Governing Law

  	
   

  	
   

  
	
  Section
  13.08. No Adverse Interpretation of Other Agreements

  	
   

  	
   

  
	
  Section
  13.09. Successors

  	
   

  	
   

  
	
  Section
  13.10. Duplicate Originals

  	
   

  	
   

  
	
  Section
  13.11. Separability

  	
   

  	
   

  
	
  Section
  13.12. Table of Contents and Headings

  	
   

  	
   

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

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  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

  	
   

  	
   

  

 

vi

 

INDENTURE, dated as of November 30, 2004,
between 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 Trustee (the “Trustee”).

 

RECITALS

 

The Issuer has duly authorized the execution
and delivery of the Indenture to provide for the issuance of up to $100,000,000
aggregate principal amount of the Issuer’s 6% Senior Subordinated Notes Due
2010, and, if and when issued, any Additional Notes (subject to the limitations
set forth in Section 2.02), 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
the Additional Notes, when duly authorized), when executed by the Issuer and
authenticated and delivered by the Trustee and duly issued by the Issuer, 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 Note Guarantees, when executed by each Guarantor, and the Notes, when
executed by the Issuer and authenticated and delivered by the Trustee and duly
issued by the Issuer, the valid obligations 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 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 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 direct or
indirectly controlling, or controlled by or under direct or indirect common
control with the Person specified.

 

“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.

 

“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,

 

2

 

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 (A) homes, improved land and unimproved land
and (B) 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
(x) are to be used by the Company, the Issuer or any Restricted Subsidiary in
the ordinary course of its Real Estate Business and (y) 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
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 the board of directors of the Issuer, or any committee thereof duly
authorized to act on its behalf.

 

“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 Trustee
is located are authorized by law 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 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)

 

4

 

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).

 

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

 

5

 

(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” means
Hovnanian Enterprises, Inc., or any successor obligor under the Indenture and
the Note Guarantees pursuant to Section 4.14.

 

“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.

 

“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”)

 

6

 

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.

 

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,”

 

7

 

(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 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

 

8

 

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.

 

“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

 

9

 

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 Trustee at which the corporate trust business of the
Trustee is principally administered, which at the date of the Indenture is
located at 21 South Street, Morristown, NJ 07960.

 

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

 

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

 

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

 

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

 

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

 

10

 

“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 assigned to such term in Section 5.01.

 

“Exchange Act”
means the Securities Exchange Act of 1934.

 

“Exchange Notes”
means the Notes of the Issuer issued pursuant to 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 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).

 

11

 

“Exchange Offer”
means an offer by the Issuer to the Holders of the Initial Notes or any Initial
Additional Notes to exchange outstanding 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.

 

“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.

 

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

 

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

 

“Guarantee Initial Period”
has the meaning set forth in Section 12.02.

 

“Guarantee Payment Blockage
Period” has the meaning set forth in Section 12.02.

 

“Guarantors”
means (a) initially, the Company and each of the Company’s Restricted
Subsidiaries in existence on the Issue Date, except the Issuer, KHL, Inc. and
K. Hovnanian Poland, sp. zo.o. (the names of which are specified on Schedule A
hereto) and (b) each of the Company’s Subsidiaries that executes a supplemental
indenture in the form of Exhibit B to the Indenture providing for the guaranty
of the payment of the Notes, or any successor obligor under its Note Guaranty
pursuant to Section 4.14, in each case unless and until such Guarantor is
released from its Note Guaranty pursuant to the Indenture.

 

12

 

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

 

“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,

 

(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

 

13

 

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 issued in an offering not registered under the
Securities Act and any Notes issued in replacement thereof, but not including
any Exchange Notes issued in exchange therefor.

 

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

 

“Initial Period”
has the meaning set forth in Section 11.02.

 

“Initial Purchasers”
means the initial purchasers party to a purchase agreement with the Issuer
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 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

 

14

 

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
writeoff 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 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, the date on which the Initial Notes are originally
issued under the Indenture.

 

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

 

15

 

“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.

 

“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 noncash
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.

 

16

 

“Non-Payment Default”
means any event (other than a Payment Default), the occurrence of which
entitles one or more Persons to accelerate the maturity of any Senior Debt of
the Issuer or any Senior Debt of a Guarantor.

 

“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, including waste and
mechanics’ liens.

 

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

 

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

 

“Offer to Purchase”
has the meaning assigned to such term in Section 3.04.

 

“Officer” means
the chairman of the Board of Directors, the president or chief executive
officer, any vice president, the chief financial officer, the treasurer or any
assistant treasurer, or the secretary or any assistant secretary, of the
Company.

 

“Officers’ Certificate”
means a certificate signed in the name of the Company (i) by the chairman of
the Board of Directors, the president or chief executive officer or a vice
president and (ii) by the chief financial officer, the treasurer or any
assistant treasurer or the secretary or any assistant secretary.

 

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

 

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

 

17

 

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

 

“Payment Blockage Period”
has the meaning set forth in Section 11.02.

 

“Payment Default”
means any default in the payment of principal of or interest on any Senior Debt
of the Issuer or any Senior Debt of a Guarantor beyond any applicable grace
period with respect thereto.

 

“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;

 

(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;

 

18

 

(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;

 

(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

 

19

 

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
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

 

20

 

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 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,

 

21

 

 

(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 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,

 

22

 

(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.

 

“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.

 

“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

 

23

 

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
Guarantee, 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,

 

(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 assigned 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 between the Company and the Initial Purchasers party thereto with
respect to the Initial Notes, and (ii) with respect to any Additional Notes,
any registration rights agreements between the Company and the initial
purchasers party thereto relating to rights given by the Company to the
purchasers of Additional Notes to register such Additional Notes or exchange
them for Notes registered under the Securities Act.

 

“Regular 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.

 

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

 

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

 

24

 

“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.

 

“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 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 (i) a certificate substantially in the form of Exhibit F hereto or (ii) a
written certification addressed to the Issuer and the Trustee to the effect
that the Person making such certification (x) is acquiring such Note (or
beneficial interest) for its own account or one or more accounts with respect
to which it exercises sole investment discretion and that it and each such
account is a qualified institutional buyer within the meaning of Rule 144A,

 

25

 

(y) is aware
that the transfer to it or 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, and (z) acknowledges that it has received such
information regarding the Issuer as it has requested pursuant to Rule
144A(d)(4) or has determined not to request such information.

 

“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 and Poor’s Ratings Services, a division of McGraw Hill, Inc., a New
York corporation or any successor to its debt rating business.

 

“Securities Act”
means the Securities Act of 1933.

 

“Senior Debt of a Guarantor”
has the meaning set forth in Section 12.01.

 

“Senior Debt of the Issuer”
has the meaning set forth in Section 11.01.

 

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

 

“Significant Subsidiary”
means any Subsidiary of the Company that would constitute a “significant
subsidiary” as defined in Article 1, Rule 1-02 (w)(1) or (2) of Regulation S-X
promulgated under the Securities Act, as such regulation is in effect on the
date of the Indenture.

 

“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.

 

“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.

 

26

 

“Trustee” means
the party named as such in the first paragraph of the Indenture or any successor
trustee under the Indenture pursuant to Article 7.

 

“Trust Indenture Act”
means the Trust Indenture Act of 1939.

 

“U.S. Government
Obligations” means obligations issued or directly and fully
guaranteed or insured by the United States of America or by any agent or
instrumentality thereof, provided that the full faith and credit of the United
States of America is pledged in support thereof.

 

“Unrestricted Subsidiary”
means any Subsidiary of the Company so designated by a resolution adopted by
the Board of Directors of the Company or a duly authorized committee thereof as
provided below; provided that (a) the holders of
Indebtedness thereof do not have direct or indirect recourse against the
Company, the Issuer or any Restricted Subsidiary, and neither the Company, the
Issuer nor any Restricted Subsidiary otherwise has liability for, any payment
obligations in respect of such Indebtedness (including any undertaking,
agreement or instrument evidencing such Indebtedness), except, in each case, to
the extent that the amount thereof constitutes a Restricted Payment permitted
by the 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

 

27

 

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 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 hereof. Any such
designation or redesignation by the Board of Directors of the Company or a
committee thereof will be evidenced to the Trustee by the filing with the
Trustee of a certified copy of the resolution of the Board of

 

28

 

Directors of
the Company or a committee thereof giving effect to such designation or
redesignation and an Officers’ Certificate certifying that such designation or
redesignation complied with the foregoing conditions and setting forth the
underlying calculations of such Officers’ Certificate. The designation of any
Person as an Unrestricted Subsidiary shall be deemed to include a designation
of all Subsidiaries of such Person as Unrestricted Subsidiaries; provided, however, that the ownership of the general
partnership interest (or a similar member’s interest in a limited liability
company) by an Unrestricted Subsidiary shall not cause a Subsidiary of the
Company of which more than 95% of the equity interest is held by the Company or
one or more Restricted Subsidiaries to be deemed an Unrestricted Subsidiary.

 

“Weighted Average Life to
Maturity” means, when applied to any Indebtedness or portion thereof
at any date, the number of years obtained by dividing (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 or 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.

 

29

 

 

ARTICLE 2

The Notes

 

Section 2.01.  Form, Dating and
Denominations; Legends.  (a)
The Notes and the 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 Notes 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 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.

 

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

 

(ii)           Each Global Note, whether or not an
Initial 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 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 such 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

 

30

 

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

 

(iii)          is validly tendered for exchange into
an Exchange Note pursuant to an Exchange Offer

 

the Issuer may
instruct the 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 Trustee will comply with such instruction.

 

(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 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 Trustee for authentication.  The Trustee will authenticate and deliver

 

(i)            Initial Notes for original issue in
the aggregate principal amount not to exceed $100,000,000,

 

(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 Trustee of a
certificate, executed by an Officer specifying

 

31

 

(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 or, Additional Notes or Exchange Notes,

 

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

 

(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 Trustee may reasonably request.

 

(B)            In the case of Initial Additional
Notes, receipt by the 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 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 Trustee of an Officers’ Certificate to that effect).  Initial Notes or Initial Additional Notes
exchanged for Exchange Notes will be cancelled by the Trustee.

 

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 Trustee may appoint an
Authenticating Agent, in which case each reference in the Indenture to the
Trustee in respect of the obligations of the 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 Trustee will enter into an appropriate
agreement with the Agent implementing the provisions of the Indenture relating
to the obligations of the Trustee to be performed by the Agent and the related
rights.

 

(b)        The Issuer will require each
Paying Agent other than the Trustee to agree in writing that the Paying Agent
will hold in trust for the benefit of the Holders or the Trustee all money held
by the Paying Agent for the payment of

 

32

 

principal of and interest on the Notes and will promptly notify the
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 Trustee and account for any funds
disbursed, and the 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 Trustee and to account for any funds
disbursed.  Upon doing so, the Paying
Agent will have no further liability for the money so paid over to the Trustee.

 

Section 2.04.  Replacement Notes.  If a mutilated Note is surrendered
to the Trustee or if a Holder claims that its Note has been lost, destroyed or
wrongfully taken, the Issuer will issue and the 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 Trustee or the Issuer, an indemnity must be furnished that is sufficient
in the judgment of both the Trustee and the Issuer to protect the Issuer and
the 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 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 Trustee except for

 

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

 

(ii)           any Note which has been replaced
pursuant to Section 2.04 unless and until the 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 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

 

33

 

determining whether the Trustee is protected in relying upon any such
request, demand, authorization, direction, notice, consent, waiver or other
action, only Notes which the 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 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 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 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 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 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 Trustee any Notes surrendered to it for transfer, exchange
or payment.  The 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 it has paid in full or delivered to the Trustee for
cancellation.

 

Section 2.08.  CUSIP and ISIN Numbers.  The Issuer in issuing the Notes
may use “CUSIP” and “ISIN” numbers, and the 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 Trustee
of any change in the CUSIP or ISIN numbers.

 

34

 

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 Trustee to maintain a
register (the “Register”) of the Notes, for
registering 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 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 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 Trustee and
any agent of the Issuer or the 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, (ii) or has ceased to be a clearing agency registered under the
Exchange Act, (y) the Issuer, at its option, notifies the Trustee in writing
that it elects to cause the issuance of Certificated Notes or (z) an Event of
Default has occurred and is continuing and the Trustee has received a request
from the Depositary, the 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

 

35

 

identified to
the Trustee by the Depositary, and thereupon the Global Note will be deemed
canceled.  If such Note does not bear the
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 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 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 Trustee will promptly register any
transfer or exchange that meets the requirements of this Section by noting the
same in the register maintained by the Trustee for the purpose; provided that

 

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

 

(ii)           the 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 Regular Record Date but on or before the
corresponding Interest Payment Date, to register the transfer of or exchange
any Note on or after the Regular Record Date and before the date of redemption
or purchase.  Prior to the registration
of any transfer, the Issuer, the 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.

 

36

 

From time to time the Issuer will execute and
the 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)(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 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 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 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 principal amount equal to
the untransferred or unexchanged portion of the canceled Certificated Note,
registered in the name of the Holder thereof.

 

37

 

(iv)          Certificated Note to
Certificated Note.  If a
Certificated Note is transferred or exchanged for another Certificated Note,
the 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 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.

 

(ii)           The Person requesting the transfer or
exchange must deliver or cause to be delivered to the 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.

 

38

 

(iii)          The Person requesting the transfer or
exchange must deliver or cause to be delivered to the 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) the
requested transfer or exchange takes place after the Restricted Period and a
duly completed Regulation S Certificate is delivered to the Trustee or (B) a
Certificated Note that does not bear the Restricted Legend is surrendered for
transfer or exchange, upon transfer or exchange the 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 Trustee a duly completed
Rule 144A Certificate.

 

(v)           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.  If the requested transfer or
exchange involves a beneficial interest in a Permanent Regulation S Global
Note, no certification is required and the Trustee will deliver a Certificated
Note that does not bear the Restricted Legend.

 

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

 

(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 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, pursuant to the Registration Rights Agreement or
otherwise or (B) which is validly tendered for exchange into an Exchange Note
pursuant to an Exchange Offer.

 

39

 

 

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

 

(d)        The 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 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 Trustee (and the Trustee will accept) a duly completed
Certificate of Beneficial Ownership at any time after the Restricted Period (it
being understood that the 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 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 and Clearstream and their
respective direct and indirect participants.

 

(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
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 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.

 

40

 

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 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 Trustee of the redemption date and the
principal amount of Notes to be redeemed by delivering an Officers’ Certificate
at least 60 days before the redemption date (unless a shorter period is
satisfactory to the 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 Trustee, and the 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 Trustee in its sole discretion deems
fair and appropriate, in denominations of $1,000 principal amount and multiples
thereof.  The Trustee will notify the
Issuer promptly of the Notes or portions of Notes to be called for
redemption.   Notice of redemption must
be sent by the Issuer or at the Issuer’s request, by the 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.

 

(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;

 

(iii)          the place or places where Notes are to
be surrendered for redemption;

 

41

 

(iv)          Notes called for redemption must be so
surrendered in order to collect the redemption price;

 

(v)           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;

 

(vi)          if any Note is redeemed in part, 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

 

(vii)         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
Trustee at least 15 days (or such shorter period as is acceptable to the
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 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”);

 

42

 

(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 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;

 

(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 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;

 

43

 

(xi)           Holders are entitled to withdraw
Notes tendered by giving notice, which must be received by the Issuer or the
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.

 

(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 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 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.

 

44

 

ARTICLE 4

Covenants

 

Section 4.01.  Payment of Notes.  (a) The Issuer agrees to pay the
principal of 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 or interest on any Notes, or any redemption
or purchase price of the Notes, the Issuer will deposit with the 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 Trustee of its compliance with this paragraph.

 

(b)        An installment of principal or interest will be
considered paid on the date due if the 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 or interest 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.

 

(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 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 Issuer in respect of the Notes and the Indenture may be served.  The Issuer hereby initially designates the
Corporate Trust Office of the Trustee as such office of the Issuer.  The Issuer will give prompt written notice to
the Trustee of the location, and any change in the location, of such office or
agency.  If at any time the Issuer fails
to maintain any such required office or agency or fails to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served to the Trustee.

 

45

 

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 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 its
existence and the existence of each of its Restricted Subsidiaries in
accordance with their respective organizational documents, and the material
rights, licenses and franchises of 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 does 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 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 

 

46

 

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 1/4% Senior Notes due 2015, and

 

(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.

 

Section 4.07.  Limitation 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:

 

47

 

(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:

 

(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

 

48

 

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

 

(E)        $17 million, minus

 

(F)        the aggregate amount of all Restricted
Payments (other than Restricted Payments referred to in clause (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
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

 

49

 

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 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.  Limitation 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, which secures Indebtedness other than Senior Indebtedness 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 obligation or
liability 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,

 

50

 

(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,

 

(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,

 

51

 

(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,

 

(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.  The Company and the Issuer will
not, and will not cause or permit any Restricted Subsidiary to,

 

52

 

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 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. The Net Cash Proceeds of an Asset Disposition
shall, within one year, at the Company’s election, (a) be used by the Company
or a Restricted Subsidiary in the business of the construction and sale of
homes conducted by the Company and the Restricted Subsidiaries or any other
business of the Company or a Restricted Subsidiary existing at the time of such
Asset Disposition, (b) be used to repay Senior Debt of the Issuer or Senior
Debt of a Guarantor or (c) 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 pari passu
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 pari passu 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
interest and Additional Interest, if any, to the date of repurchase or
repayment. Notwithstanding the foregoing, (A) the Company will not be required
to apply such Net Cash Proceeds to the repurchase of Notes in accordance with
clause (c) of the preceding sentence except to the extent that such Net Cash
Proceeds, together with the aggregate Net Cash Proceeds of prior Asset
Dispositions (other than those so used) which have not been applied in
accordance with this provision and as to which no prior 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 Disposition 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.

 

53

 

Section 4.11.  Guarantees by Restricted Subsidiaries. 
Each existing Restricted Subsidiary (other than the Issuer,
KHL, Inc. and K. Hovnanian Poland, sp.zo.o.) will provide a Note Guaranty. The
Company will be permitted to cause any Unrestricted Subsidiary to provide a
Note Guaranty.  If the Issuer, the
Company or any of its Restricted Subsidiaries acquires or creates a Restricted
Subsidiary after the date of the Indenture, the new Restricted Subsidiary
(subject to Section 6.03(b)) must provide a Note Guaranty.

 

A Restricted Subsidiary required to provide a
Note Guaranty shall execute a Guarantee substantially in the form inclued in
Exhibit A, execute a supplemental indenture in the form of Exhibit B, and
deliver an Opinion of Counsel to the Trustee to the effect that the
supplemental indenture has been duly authorized, executed and delivered by the
Restricted Subsidiary and constitutes a valid and binding obligation of the
Restricted Subsidiary, enforceable against the 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 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.

 

54

 

Section 4.13.  Limitation 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 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 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,

 

55

 

(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 of the Company (other than an
Unrestricted Subsidiary to the extent the applicable amount constitutes a
Restricted Payment permitted by the 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 Company nor 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 Guarantee 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

 

56

 

or other legal
entity organized and existing under the laws of the United States or any state
thereof or the District of Columbia, and the Successor assumes by supplemental
indenture in a form reasonably satisfactory to the Trustee all of the
obligations of the Company, the Issuer or the Guarantor, as the case may be,
under the 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

 

(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 the Indenture, 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 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 requirements of the Exchange Act, it will nonetheless
continue to file reports with the Commission and the Trustee and mail such
reports to each Holder of 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 the 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 on the Notes will comply with Section
314(a) of the Trust Indenture Act.

 

57

 

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

 

Section 4.16.  Reports to Trustee.  (a)
The Company will deliver to the 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 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 Trustee for that
Interest Payment Date.

 

(c)        The Company will notify the 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 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, 4.19 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.

 

58

(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.

 

Section 4.19.  Limitation on Senior Subordinated Indebtedness. 
The Company and the Issuer will not, and will not cause or
permit any Guarantor to, incur any Indebtedness that is subordinate in right of
payment to any Senior Debt of the Issuer or Senior Debt of a Guarantor, as the
case may be, unless such Indebtedness is pari passu with, or subordinated in
right of payment to, the Notes or any Note Guarantee; provided
that the foregoing limitation shall not apply to distinctions between
categories of Senior Debt of the Issuer or Senior Debt of a Guarantor that
exist by reason of any Liens or guarantees arising or created in respect of
some but not all such Senior Debt of the Issuer or Senior Debt of a Guarantor
or priorities of paydown, from proceeds of collateral or otherwise, among
classes or tranches of any issue of Senior Debt of the Issuer or Senior Debt of
a Guarantor.

 

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 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
(whether or not prohibited by Article 11);

 

(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
Guarantee or the Indenture and such failure continues for the period and after
the notice specified below (except in the case of a default under Sections 4.12
and 4.14 hereof, which will constitute Events of Default with notice but
without passage of time);

 

59

 

(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 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 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 or any Restricted Subsidiary that is a Significant
Subsidiary as debtor in an involuntary case,

 

(B)       appoints
a Custodian of the Company or any Restricted Subsidiary that is a Significant
Subsidiary or a

 

60

 

Custodian
for all or substantially all of the property of the Company or any Restricted
Subsidiary that is a Significant Subsidiary, or

 

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

 

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

 

(ix)           any
Guarantee of a Guarantor which is a Significant Subsidiary ceases to be in full
force and effect (other than in accordance with the terms of such Guarantee and
the 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 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 Trustee, of the Default and (except in the case of a default with
respect to Sections 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
resulting from subclauses (vii) and (viii) above), shall have occurred and be
continuing under the Indenture, the 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 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 specified in subclauses (vii) and
(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
Trustee and the Company or any Holder.

 

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

 

Section 5.02.  Other Remedies.  If an Event
of Default occurs and is continuing, the Trustee may pursue, in its own name or
as trustee of an express

 

61

 

trust, any available remedy by proceeding at law or in
equity to collect the payment of principal of 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
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. 
The Holders of a majority in principal amount of the Notes
then outstanding by written notice to the Trustee and the Company may waive any
Default or Event of Default (other than any Default or Event of Default in
payment of principal or interest or Additional Interest) on the Notes under the
Indenture. Holders of a majority in principal amount of the then outstanding
Notes may rescind an acceleration and its consequence (except an acceleration
due to nonpayment of principal or interest or Additional Interest, if any, on
the Notes) if the rescission would not conflict with any judgment or decree and
if all existing Events of Default (other than the non-payment of accelerated
principal) have been cured or waived.

 

Section 5.04.  Direction of Proceedings.  The
Holders of a majority in aggregate principal amount of the outstanding Notes
may direct the Trustee in its exercise of any trust or power conferred on the
Trustee. However, the Trustee may refuse to follow any direction that conflicts
with law or the Indenture, that may involve the Trustee in personal liability,
or that the Trustee determines in good faith may be unduly prejudicial to the
rights of Holders of Notes not joining in the giving of such direction, and may
take any other action it deems proper that is not inconsistent with any such
direction received from Holders of Notes.

 

Section 5.05.  Application of Moneys Collected by Trustee.  Any
moneys collected by the Trustee pursuant to this Article with respect to Notes
shall be applied in the order following, at the date or dates fixed by the
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 Trustee,
its agents, attorneys and counsel, and all other expenses and liabilities
incurred, and all advances made, by the Trustee pursuant to Section 7.07;

 

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 with interest (to the
extent that such interest has been collected by the 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;

 

62

 

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
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 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 or of
interest or Additional Interest over principal, or of interest over Additional
Interest, or of any installment of interest or Additional Interest over any other
installment of interest or Additional Interest, 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 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 shall have made written request to the Trustee to institute
such action, suit or proceeding in its own name as Trustee hereunder and shall
have offered to the Trustee such reasonable indemnity as it may require against
the costs, expenses and liabilities to be incurred therein or thereby, and the
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 Trustee, that no
one or more Holders of Notes shall have any right in any manner whatever by virtue
of or by availing

 

63

 

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 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 Trustee.  In case of an Event of Default
hereunder, the 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 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 Trustee by this Indenture or by law.

 

Section 5.08.  Remedies Cumulative and Continuing. 
All powers and remedies given by this Article Five to the
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 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 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 Trustee or to
the Holders may be exercised from time to time, 
and as often as shall be deemed expedient, by the 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 Trustee for any action taken or omitted
by it as Trustee, the filing by any party litigant in such suit of any
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

 

64

 

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 suit instituted by the Trustee, to any suit instituted by any Holder, or
group of Holders, holding in the aggregate more than 10% in principal amount of
the Notes, or to any suit instituted by any Holders for the enforcement of the
payment of the principal of 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.  The
Company is required to deliver to the 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 Trustee prompt written notice of the occurrence of any Default
or Event of Default.

 

Section 5.11.  Waiver of Stay, Extension or Usury Laws.  The
Company, the Issuer and each Guarantor covenants, to the extent that it may
lawfully do so, 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, 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 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 Trustee, but will
suffer and permit the execution of every such power as though no such law had
been enacted.

 

Section 5.12.  Trustee May File Proof of Claim.  The
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 Trustee (including
any claim for the compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee
hereunder) and the Holders allowed in any judicial proceedings relating to the
Company 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 Trustee and, if the Trustee consents to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the

 

65

 

Trustee, its agent and counsel, and any other amounts
due the Trustee hereunder.  Nothing in
the Indenture will be deemed to empower the 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 Trustee to vote in respect of the claim of
any Holder in any such proceeding.

 

ARTICLE
6

Guarantee

 

Section 6.01.  Guarantee.   Each of the Guarantors hereby unconditionally
guarantees, jointly and severally, to each Holder and to the 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 and any premium, interest or Additional Interest on the
Notes, whether at maturity or on an interest payment date, by acceleration,
pursuant to an Offer to Purchase or otherwise, and interest on the overdue
principal of and interest and Additional Interest, if any, on the Notes, if
lawful, and all other obligations of the Issuer to the Holders or the Trustee
hereunder or thereunder shall be promptly paid in full when due or performed in
accordance with the terms hereof and thereof; including all amounts payable to
the 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 to be 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 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 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 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 Guarantor, any amount paid by the Issuer or any Guarantor
to the Trustee or such Holder, this Article 6, to the extent theretofore
discharged, shall be reinstated in full force and effect.  Each Guarantor agrees that is shall not be
entitled to any

 

66

 

right of subrogation in relation to the Holders in
respect of any obligations guaranteed hereby until payment in full of all
obligations guaranteed hereby.

 

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 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,
which are absolute and unconditional, to pay to the Holders the principal of
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 the Guarantee
or is intended to or shall affect the relative rights of the Holders and
creditors of the Issuer, nor shall anything herein or therein prevent the
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 Trustee, subject to the provisions of Article 7,
and 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
Trustee or to the Holders, for the purpose of ascertaining the persons entitled
to participate in such distribution, the holders of other indebtedness of such
Guarantor, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 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 Trustee or any Holder of the Notes.

 

67

 

(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 11) 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 Trustee to such effect, without any further action required on
the part of the Trustee or any Holder.

 

Section 6.04.  Execution and Delivery of Guaranty.  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 Note Guaranty 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 Trustee after
authentication constitutes due delivery of the Note Guaranty set forth in the
Indenture on behalf of each Guarantor.

 

Section 6.05.  Limitation on Guarantor Liability.  Notwithstanding
anything to the contrary in this Article, each Guarantor, and by its acceptance
of Notes, each Holder, hereby confirms that it is the intention of all such
parties that the Note Guaranty 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 Trustee,
the Holders and the Guarantors hereby irrevocably agree that the obligations of
each Guarantor under its Note Guaranty 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.

 

68

 

Section 6.06.  Article 6 Not to Prevent Events of Default.  The
failure to make a payment on account of principal 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.  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.

 

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 Trustee or the Holders.

 

ARTICLE 7

THE TRUSTEE

 

Section 7.01.  General.  (a) The duties and
responsibilities of the 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 Trustee is subject
to this Article.

 

(b)                       Except during the continuance of
an Event of Default, the 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 the Indenture against the Trustee.  In case an Event of Default has occurred and
is continuing, the Trustee shall exercise those rights and powers vested in it
by the Indenture,

 

69

 

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 Trustee.  Subject to
Trust Indenture Act Sections 315(a) through (d):

 

(a)          The 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 Trustee need not investigate any fact or
matter stated in the document, but the Trustee, in its discretion, may make further
inquiry or investigation into such facts or matters as it sees fit.

 

(b)         Before the Trustee acts
or refrains from acting, it may require an Officers’ Certificate or an Opinion
of Counsel conforming to Section 13.05 and the Trustee will not be liable
for any action it takes or omits to take in good faith in reliance on the
certificate or opinion.  Unless otherwise
specifically provided in the Indenture, any demand, request, direction or
notice from the Company shall be sufficient if signed by an Officer of the
Company.

 

(c)          The 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 Trustee will be under
no obligation to exercise any of the rights or powers vested in it by the
Indenture at the request or direction of any of the Holders, unless such
Holders have offered to the 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 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 Trustee, or exercising any trust or
power conferred upon the Trustee, under the Indenture.

 

(f)            The Trustee may
consult with counsel, and the written advice of such counsel or any Opinion of
Counsel will be full and

 

70

 

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 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 Trustee.  The 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
would have if it were not the Trustee. 
Any Agent may do the same with like rights.  However, the 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 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.  Trustee’s Disclaimer.  The Trustee (a)
makes no representation as to the validity or adequacy of the 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.  Notice of Default.  If any Default
occurs and is continuing and is known to the Trustee, the Trustee will send
notice of the Default to each Holder within 90 days after it occurs, unless the
Default has been cured; provided that,
except in the case of a default in the payment of the principal of or interest
or Additional Interest, if any, on any Note or a Default that resulted from the
failure to comply with Section 4.12 hereof, the Trustee may withhold the
notice if and so

 

71

 

long as the board
of directors, the executive committee or a trust committee of directors of the
Trustee in good faith determines that withholding the notice is in the interest
of the Holders.  Notice to Holders under
this Section will be given in the manner and to the extent provided in
Trust Indenture Act Section 313(c).

 

Section 7.06.  Reports by Trustee to Holders.  Within 60
days after each May 1, beginning with May 1, 2005, the 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 Trustee compensation as agreed upon in writing for its
services.  The compensation of the
Trustee is not limited by any law on compensation of a trustee of an express
trust.  The Company will reimburse the
Trustee upon request for all reasonable out-of-pocket expenses, disbursements
and advances incurred or made by the Trustee, including the reasonable
compensation and expenses of the Trustee’s agents and counsel.

 

(b)                       In addition to any other
indemnity provided to the Trustee hereunder, the Company will indemnify the
Trustee for, and hold it 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 this Indenture,
the Trustee will have a lien prior to the Notes on all money or property held
or collected by the Trustee, in its capacity as Trustee, except money or
property held in trust to pay principal of, and interest or Additional
Interest, if any, on particular Notes.

 

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

 

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

 

(iii)       If the 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)

 

72

 

may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 7.09.  Successor Trustee by Merger.  If the
Trustee consolidates with, merges or converts into, or transfers all or
substantially all of its corporate

 

73

 

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 Trustee with the same effect as if the successor
Trustee had been named as the Trustee in the Indenture.

 

Section 7.10.  Eligibility.  The Indenture must
always have a 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 Trustee
will not be liable for interest on any money received by it except as it may
agree with the Company.  Money held in
trust by the 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.

 

ARTICLE 8

DEFEASANCE AND DISCHARGE

 

Section 8.01.  Discharge Of Issuer’s Obligations.  (a)
Subject to paragraph (b), the Issuer’s obligations under the Notes and the
Indenture, and each Guarantor’s obligations under its Note Guaranty, will
terminate if:

 

(i)             all Notes previously
authenticated and delivered (other than (A) destroyed, lost or stolen Notes
that have been replaced or (B) Notes that are paid pursuant to Section 4.01
or (C) Notes for whose payment money or U.S. Government Obligations have been
held in trust and then repaid to the Issuer pursuant to Section 8.05) have
been delivered to the Trustee for cancellation and the Issuer has paid all sums
payable by it hereunder; or

 

(ii)          (A) the Notes mature
within one year, or all of them are to be called for redemption within one year
under arrangements satisfactory to the Trustee for giving the notice of
redemption,

 

(B)                                     the
Issuer irrevocably deposits in trust with the 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 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,

 

74

 

as the case may be, and
to pay all other sums payable by it hereunder,

 

(C)                                     no
Default has occurred and is continuing on the date of the deposit,

 

(D)                                    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

 

(E)                                      the
Issuer delivers to the 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.

 

(b)                       After satisfying the conditions
in clause (a)(i), only the Company’s obligations under Section 7.07 and
8.07 will survive.  After satisfying the
conditions in clause (a)(ii), only the Issuer’s or the Company’s, as
applicable, obligations in Article 2 and Sections 4.01, 4.02, 7.07, 7.08,
8.05, 8.06 and 8.07 will survive.  In
either case, the Trustee, upon the request and at the cost and expense of the
Issuer, will acknowledge in writing the discharge of the Issuer’s obligations
under the Notes and the Indenture other than the surviving obligations.

 

Section 8.02.  Legal Defeasance.  On the 91st day
following the deposit referred to in clause (1), the Issuer will be deemed to
have paid and will be discharged from its obligations in respect of the Notes
and the Indenture, other than its or the Company’s, as applicable, obligations
in Article 2 and Sections 4.01, 4.02, 7.07, 7.08, 8.05, 8.06 and 8.07, and
each Guarantor’s obligations under its Note Guaranty will terminate, provided
the following conditions have been satisfied:

 

(1)          The Issuer has
irrevocably deposited in trust with the 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 thereof
delivered to the 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, provided that any
redemption before maturity has been irrevocably provided for under arrangements
satisfactory to the Trustee.

 

75

 

(2)          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.

 

(3)          The Issuer has delivered
to the Trustee either (x) a ruling received from the Internal Revenue Service
to the effect that the Holders will not recognize income, gain or loss for
federal income tax purposes as a result of the defeasance and will be subject
to federal income tax on the same amount and in the same manner and at the same
times as would otherwise have been the case or (y) an Opinion of Counsel, based
on a change in law after the date of the Indenture, to the same effect as the
ruling described in clause (x).

 

(4)          The Issuer has delivered
to the Trustee an Officers’ Certificate and an Opinion of Counsel, in each case
stating that all conditions precedent provided for herein relating to the
defeasance have been complied with.

 

Prior to the end of the 91-day period, none of the
Issuer’s obligations under the Indenture will be discharged.  Thereafter, the Trustee, upon the request and
at the cost and expense of the Issuer, will acknowledge in writing the
discharge of the Issuer’s obligations under the Notes and the Indenture except
for the surviving obligations specified above.

 

Section 8.03.  Covenant Defeasance.  After the 91st
day following the deposit referred to in clause (1), the Issuer’s obligations
set forth in Sections 4.06 through 4.13, inclusive and clause (iii) of Section 4.14,
and each Guarantor’s obligations under its Note Guaranty, will terminate, and
clauses  (iii), (iv), (v), (vi) and (ix)
of Section 5.01 will no longer constitute Events of Default, provided the
following conditions have been satisfied:

 

(1)          The Issuer has complied
with clauses (1), (2) and (4) of Section 8.02; and

 

(2)          the Issuer has delivered
to the Trustee an Opinion of Counsel to the effect that the Holders will not
recognize income, gain or loss for federal income tax purposes as a result of
the defeasance and will be subject to federal income tax on the same amount and
in the same manner and at the same times as would otherwise have been the case.

 

Except as specifically stated above, none of the
Issuer’s or the Company’s obligations under the Indenture will be discharged.

 

Section 8.04.  Application Of Trust Money.  Subject to
Section 8.05, the Trustee will hold in trust the money or U.S. Government
Obligations deposited

 

76

 

with it pursuant
to Section 8.01, 8.02 or 8.03, and apply the deposited money and the
proceeds from deposited U.S. Government Obligations to the payment of principal
of and premium, interest and Additional Interest, if any, on the Notes in
accordance with the Notes and the Indenture. 
Such money and U.S. Government Obligations need not be segregated from
other funds except to the extent required by law.

 

Section 8.05.  Repayment To Issuer.  Subject to Section 7.07,
8.01, 8.02, 8.03 or 8.07, the Trustee will promptly pay to the Issuer upon
request any excess money held by the Trustee at any time and thereupon be
relieved from all liability with respect to such money.  The Trustee will pay to the Issuer upon
written request, unless otherwise required by mandatory provisions of
applicable escheat or abandoned or unclaimed property law, any money deposited
with or paid to the Trustee for the payment of the principal of, premium,
interest or Additional Interest, if any, with respect to the Notes and not
applied but remaining unclaimed for two years after the date upon which such
principal, premium, interest or Additional Interest, shall have become due and
payable; provided, however, that the 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.  Thereafter, the Holder of the Notes must look
solely to the Issuer for any payment such Holder may be entitled to collect,
unless otherwise required by mandatory provisions of applicable escheat or
abandoned or unclaimed property laws, and all liability of the Trustee with
respect to such money shall thereupon cease.

 

Section 8.06.  Reinstatement.  If and for so long
as the Trustee is unable to apply any money or U.S. Government Obligations held
in trust pursuant to Section 8.01, 8.02 or 8.03 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Issuer’s obligations under the Indenture and the Notes will be reinstated as
though no such deposit in trust had been made. 
If the Issuer makes any payment of principal of or interest or
Additional Interest, if any, on any Notes because of the reinstatement of its
obligations, it will be subrogated to the rights of the Holders of such Notes
to receive such payment from the money or U.S. Government Obligations held in
trust.

 

Section 8.07.  Indemnity For U.S. Government Obligations.  The
Company shall pay and indemnify the Trustee against any tax, fee or other
charge imposed on or assessed against the U.S. Government Obligations deposited
pursuant to Section 8.01, 8.02 or 8.03.

 

77

 

ARTICLE 9

AMENDMENTS, SUPPLEMENTS AND WAIVERS

 

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

 

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

 

(b)                       to comply with Section 4.14;

 

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

 

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

 

(e)                        to provide for uncertificated
Notes in addition to or in place of certificated Notes;

 

(f)                          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;

 

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

 

(h)                       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 or 5.06 or paragraph (b), the
Company, the Issuer, the Guarantors and the 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 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).

 

78

 

(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 Section 3.01
or with respect to mandatory offers to repurchase Notes described under Section 4.10
and 4.12,

 

(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 Section 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 or interest
or Additional Interest 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 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 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 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

 

79

 

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 Trustee may require the Holder to
deliver it to the Trustee so that the 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 Trustee may also place an appropriate notation on any Note
thereafter authenticated.  However, the
effectiveness of the amendment, supplement or waiver is not affected by any
failure to annotate or exchange Notes in this fashion.

 

Section 9.04.  Trustee’s Rights and Obligations.  The
Trustee is entitled to receive, and will be fully protected in relying upon, an
Opinion of Counsel stating that the execution of any amendment, supplement or
waiver authorized pursuant to this Article is authorized or permitted by
the Indenture.  If the 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 Trustee.  The Trustee may, but is not obligated to,
execute any amendment, supplement or waiver that affects the 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 the 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 Trustee and
satisfactory in form to the

 

80

 

Trustee, (2) the
Company delivers an Opinion of Counsel to the 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 to the
provisions of Section 4.11 and Article 6 hereof, (x) execute a
Guarantee, (y) execute a supplemental indenture evidencing its Guarantee and
(z) deliver an Opinion of Counsel to the 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

SUBORDINATION OF NOTES

 

Section 11.01.  Notes Subordinated to Senior Debt of the Issuer.  The
Issuer covenants and agrees, and each Holder of the Notes by his acceptance
thereof likewise covenants and agrees, that the payment of the principal and
interest on the Notes is subordinated, to the extent and in the manner provided
in this Article 11, to the prior payment in full of all Senior Debt of the
Issuer.  The obligations of the Issuer
and the Guarantors in respect of the Notes and the Guarantees shall rank on a
parity with the obligations of the Issuer and the Guarantors under the Issuer’s
87/8% Senior Subordinated Notes due 2012, and 73/4%
Senior Subordinated Notes due 2013 and the guarantees thereof, as applicable.

 

“Senior Debt of the Issuer”
means the principal of and interest on:

 

(1)          all Indebtedness of the
Issuer;

 

(2)          lease obligations of the
Issuer;

 

(3)          all Indebtedness,
secured or unsecured, in connection with the acquisition or improvement of any
property or asset or the acquisition of any business by the Issuer;

 

(4)          all Indebtedness secured
by any mortgage, lien, pledge, charge or encumbrance upon property owned by the
Issuer and all Indebtedness

 

81

 

secured in the manner
specified in this clause (4) even if the Issuer has not assumed or become
liable for the payment thereof;

 

(5)          all customer deposits
held in escrow accounts by the Issuer pending closing of the related sales;

 

(6)          all Indebtedness of the
Issuer created or arising under any conditional sale or other title retention
agreement with respect to property acquired by the Issuer or otherwise
representing the deferred and unpaid balance of the purchase price of any such
property, including all indebtedness created or arising in the manner specified
in this clause (6) even though the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or
sale of such property;

 

(7)          guarantees by the
Issuer, direct or indirect, of any indebtedness of another Person of the types
referred to in clauses (1), (2), (3), (4), (5) or (6); and

 

(8)          contingent obligations
of the Issuer in respect of, or to purchase or otherwise acquire or be
responsible or liable for through the purchase of products or services
irrespective of whether such products are delivered or such services are rendered,
any such indebtedness referred to in clauses (1), (2), (3), (4), (5) or (6),

 

which indebtedness, lease obligation, deposit,
guarantee or contingent obligation the Issuer has directly or indirectly
created, incurred, assumed, guaranteed, or otherwise become liable or
responsible for, whether currently outstanding or hereafter created.  Any reference in this definition to any
indebtedness shall be deemed to include any renewals, extensions, refundings,
amendments and modifications of any such indebtedness issued in exchange for
such indebtedness; provided, however,
that Senior Debt of the Issuer shall not include, without limitation, (i) the
Notes issued under this Indenture and related Guarantees, (ii) the Issuer’s 87/8%
Senior Subordinated Notes due 2012 and related guarantees, (iii) the 73/4%
Senior Subordinated Notes due 2013 and related guarantees, (iv) accounts
payable or any other indebtedness to trade creditors created or assumed by the
Issuer or a Guarantor in the ordinary course of business in connection with the
obtaining of materials or services, (v) any liability for federal, state or
local taxes owed or owing by the Issuer or a Guarantor, (vi) all obligations of
the Issuer to the Company or any Subsidiary and (vii) any Indebtedness as to
which, in the instrument creating or evidencing the same or pursuant to which
the same is outstanding, it is provided that such indebtedness is on a parity
with or otherwise not superior in right of payment to the Notes or Guarantees,
as applicable.

 

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This Article 11 shall constitute a continuing
offer to all persons who, in reliance upon such provisions, become holders of,
or continue to hold, Senior Debt of the Issuer, and such provisions are made
for the benefit of the holders of Senior Debt of the Issuer, and such holders
are made obligees hereunder and any one or more of them may enforce such
provisions.

 

Section 11.02.  Issuer Not To Make Payments with Respect to Notes in Certain Circumstances.

 

(a)                        Upon the maturity of the
principal of any Senior Debt of the Issuer (other than payment of sinking fund
installments) by lapse of time, acceleration or otherwise, all principal
thereof and interest thereon shall first be paid in full, or such payment duly
provided for in cash or in a manner satisfactory to the holders of such Senior
Debt of the Issuer, before any deposit is made pursuant to Article 8
hereof or any payment is made on account of the principal of or interest on the
Notes or to acquire any of the Notes or on account of the mandatory redemption
provisions in the Notes (except mandatory redemption payments made in respect
of Notes acquired by the Issuer before the maturity of such Senior Debt of the
Issuer), including any payment pursuant to Section 4.10 or 4.12.

 

(b)                       Unless Section 11.03 shall
be applicable, upon (1) the occurrence of a Payment Default with respect to any
Senior Debt of the Issuer and receipt by the Trustee and the Issuer of written
notice of such occurrence or (2) upon acceleration of such Senior Debt of the
Issuer, then no deposit pursuant to Article 8 hereof and no payment or
distribution of any assets of the Issuer of any kind or character shall be made
by the Issuer or the Trustee on account of principal of or interest on the Notes
or on account of the purchase or redemption or other acquisition of Notes,
including any payment pursuant to Section 4.10 or 4.12, unless and until
such Payment Default shall have been cured or waived in writing or shall have
ceased to exist or such Senior Debt of the Issuer shall have been discharged,
after which the Issuer shall resume making any and all required payments in
respect of the Notes, including any missed payments.

 

(c)                        Unless Section 11.03 shall
be applicable, upon (1) the occurrence of a Non-Payment Default and (2) receipt
by the Trustee of written notice of such occurrence, then no deposit pursuant
to Article 8 hereof and no payment or distribution of any assets of the
Issuer of any kind or character shall be made by the Issuer or the Trustee on
account of any principal of or interest on the Notes or on account of the
purchase or redemption or other acquisition of Notes, including any payment
pursuant to Section 4.10 or 4.12, for a period (“Payment
Blockage Period”) commencing upon receipt by the Trustee of such
written notice from the holders of Senior Debt of the Issuer or of a Guarantor
or any representative of a holder of Senior Debt of the Issuer or of a
Guarantor unless and until (subject to any blockage of payment that may then be
in effect under subsection (a) or (b) of this Section 11.02) the
earlier of (x) more than 120 days shall have elapsed since

 

83

 

receipt of such
written notice by the Trustee, (y) such Non-Payment Default shall have been
cured or waived in writing or shall have ceased to exist or such Senior Debt of
the Issuer or of a Guarantor shall have been discharged or (z) such Payment
Blockage Period shall have been terminated by written notice to the Issuer or
the relevant Guarantor, as the case may be, or to the Trustee from the holders
of the Senior Debt of the Issuer or any representative of the holders of the
Senior Debt of the Issuer or of a Guarantor initiating such Payment Blockage
Period, after which, in the case of clause (x), (y) or (z), the Issuer shall
promptly resume making any and all required payments in respect of the Notes,
including any missed payments.  In no
event shall a Payment Blockage Period extend beyond 120 days from the date of
the receipt by the Trustee of the notice referred to in clause (2) hereof (the
“Initial Period”).  Any number of additional Payment Blockage
Periods may be commenced during the Initial Period; provided,
however, that no such additional period shall extend beyond the
Initial Period.  After the expiration of
the Initial Period, no Payment Blockage Period may be commenced on the basis of
a Non-Payment Default on the Senior Debt of the Issuer or Senior Debt of a
Guarantor which was the basis of a Payment Blockage Period commenced during the
Initial Period until at least 270 consecutive days have elapsed from the last
day of the Initial Period.  No
Non-Payment Default with respect to Senior Debt of the Issuer or Senior Debt of
a Guarantor which existed or was continuing on the date of the commencement of
any Payment Blockage Period and of which the applicable holder(s) of Senior
Debt of the Issuer or Senior Debt of a Guarantor are aware shall be, or can be
made, the basis for the commencement of a second Payment Blockage Period whether
or not within a period of 270 consecutive days unless such event of default
shall have been cured or waived for a period of not less than 90 consecutive
days.

 

(d)                       In the event that
notwithstanding the provisions of this Section 11.02 the Issuer shall make
any deposit pursuant to Article 8 hereof or any payment or distribution of
any character to the Trustee on account of the principal of or interest on the
Notes, or on account of the mandatory redemption provisions contained in this
Indenture, including any payment pursuant to Section 4.10 or 4.12 after
the happening of an event of default with respect to any Senior Debt of the
Issuer based on a default in the payment of the principal of or interest on
Senior Debt of the Issuer, or after receipt by the Trustee of written notice as
provided in this Section 11.02 of an event of default with respect to any
Senior Debt of the Issuer, or after the acceleration of the Notes pursuant to Section 5.01,
then, but only if the Trustee is in receipt of the notice specified in Section 11.06
unless and until such default or event of default shall have been cured or
waived or shall have ceased to exist, or such acceleration shall have been
rescinded, such payment or deposit (subject to the provisions of Section 11.05
and 11.06) shall be held by the Trustee in trust for the benefit of, and, if
the Senior Debt of the Issuer shall have been declared immediately due and
payable, shall be paid forthwith over and delivered to, the holders of Senior
Debt of the Issuer (pro rata as to each

 

84

 

of such holders on
the basis of the respective amounts of Senior Debt of the Issuer held by them)
or their representative or the trustee under the indenture or other agreement
(if any) pursuant to which Senior Debt of the Issuer may have been issued, as
their respective interests may appear, such payments to be made in accordance
with an Officers’ Certificate as provided in Section 11.13 (on which the
Trustee may conclusively rely) identifying all holders of Senior Debt of the
Issuer and the principal amount of Senior Debt of the Issuer then outstanding
held by each and stating the reasons why such Officers’ Certificate is being
delivered to the Trustee, for application to the payment of all Senior Debt of
the Issuer remaining unpaid to the extent necessary to pay all Senior Debt of
the Issuer in full in accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Debt of the
Issuer.  In the event of the failure of
any Holder of a Note to endorse or assign any such payment or distribution,
each holder of Senior Debt of the Issuer is hereby irrevocably authorized to
endorse or assign the same.  The Issuer
shall give prompt written notice to the Trustee of any default under any Senior
Debt of the Issuer or under any agreement pursuant to which Senior Debt of the
Issuer may have been issued, as required by Section 4.17.

 

Section 11.03.  Notes Subordinated to Prior Payment of All Senior Debt of the Issuer on
Dissolution, Winding Up, Liquidation or Reorganization of Issuer.

 

In the event of (i) any insolvency, bankruptcy,
receivership, liquidation, reorganization, readjustment, composition or other
similar proceeding relating to the Issuer, its creditors or its property, (ii)
any case or proceeding for the liquidation, dissolution or other winding-up of
the Issuer, voluntary or involuntary, whether or not involving insolvency or
bankruptcy proceedings, (iii) any assignment by the Issuer for the benefit of
creditors, or (iv) any other marshalling of the assets of the Issuer:

 

(a)                        the holders of all Senior Debt
of the Issuer shall first be entitled to receive payment in full (or to have
such payment duly provided for) of the principal and interest due thereon
(including any interest thereon accruing after commencement of any such
proceeding) before the Holders of the Notes are entitled to receive any payment
or any distribution, whether in cash, securities or other property, on account
of the principal of or interest on the Notes;

 

(b)                       any payment or distribution of
assets of the Issuer of any kind or character, whether in cash, property or
securities (other than securities of the Issuer as reorganized or readjusted or
securities of the Issuer or any other Issuer, trust or corporation provided for
by a plan of reorganization or readjustment, junior, or the payment of which is
otherwise subordinate, at least to the extent provided in this Article 11,
to the payment of all Senior Debt of the Issuer at the time outstanding and to
the payment of all securities issued in exchange therefor to the holders of the
Senior Debt of the Issuer at the time outstanding), to which

 

85

 

the Holders of the
Notes or the Trustee on behalf of the Holders of the Notes would be entitled
except for the provisions of this Article 11, including any such payment
or distribution which may be payable or deliverable by reason of the payment of
any other indebtedness of the Issuer being subordinated to the payment of the
Notes, shall be paid by the liquidating trustee or agent or other person making
such payment or distribution directly to the holders of Senior Debt of the
Issuer or their representative(s), or to the trustee under any indenture under
which Senior Debt of the Issuer may have been issued (pro rata as to each such
holder, representative or trustee on the basis of the respective amounts of
unpaid Senior Debt of the Issuer held or represented by each), to the extent
necessary to make payment in full of all Senior Debt of the Issuer remaining
unpaid after giving effect to any concurrent payment or distribution or
provision therefor to the holders of such Senior Debt of the Issuer; and

 

(c)                        in the event that
notwithstanding the foregoing provisions of this Section 11.03, any
payment or distribution of assets of the Issuer of any kind or character,
whether in cash, property or securities shall be received by the Trustee or the
Holders of the Notes on account of principal or interest on the Notes before
all Senior Debt of the Issuer is paid in full, or effective provisions made for
its payment, such payment or distribution (subject to the provisions of Section 11.05
and 11.06) shall be received and held in trust for and shall be paid over or
delivered forthwith to the liquidating trustee, agent or other person making
such payment or distribution or to the holders of the Senior Debt of the Issuer
or their representative, or to the trustee under any indenture under which
Senior Debt of the Issuer may have been issued (pro rata as provided in subsection (b)
above), for application to the payment of such Senior Debt of the Issuer until
all such Senior Debt of the Issuer shall have been paid in full, after giving
effect to any concurrent payment or distribution or provision therefor to the
holders of such Senior Debt of the Issuer.

 

If the Issuer effects a transaction permitted by Section 4.14,
such transaction shall not be deemed to be a dissolution, winding up,
liquidation or reorganization of the Issuer for purposes of this Section 11.03.

 

The Issuer shall give prompt written notice to the
Trustee of any dissolution, winding up, liquidation or reorganization of the
Issuer, assignment for the benefit of creditors by the Issuer or any other
marshalling of assets of the Issuer.

 

Section 11.04.  Holders to be Subrogated to Rights of Holders of Senior Debt of the Issuer.

 

Subject to the payment in full of all Senior Debt of
the Issuer, the Holders of the Notes shall be subrogated to the rights of the
holders of Senior Debt of the Issuer to receive payments or distributions of
assets of the Issuer applicable to the

 

86

 

Senior Debt of the Issuer until all amounts owing on
the Notes shall be paid in full, and for the purpose of such subrogation no
payments or distributions to the holders of Senior Debt of the Issuer by virtue
of this Article 11 which otherwise would have been made to the Holders of
the Notes shall, as among the Issuer, its creditors other than the holders of
Senior Debt of the Issuer and the Holders of the Notes, be deemed to be payment
by the Issuer to or on account of the Senior Debt of the Issuer, it being
understood that the provisions of this Article 11 are intended solely for
the purpose of defining the relative rights of the Holders of the Notes, on the
one hand, and the holders of the Senior Debt of the Issuer, on the other hand.

 

If any payment or distribution to which the Holders
would otherwise have been entitled but for the provisions of this Article 11
shall have been applied, pursuant to the provisions of this Article 11, to
the payment of all amounts payable under the Senior Debt of the Issuer, then
and in such case, the Holders shall be entitled to receive from the holders of
such Senior Debt of the Issuer at the time outstanding any payments or
distributions received by such holders of Senior Debt of the Issuer in excess
of the amount sufficient to pay all amounts payable under or in respect of the
Senior Debt of the Issuer in full.

 

Section 11.05.  Obligations of the Issuer Unconditional.

 

Nothing contained in this Article 11 or elsewhere
in this Indenture or in any Note is intended to or shall impair, as among the
Issuer, its creditors other than holders of Senior Debt of the Issuer and the
Holders of the Notes, the obligation of the Issuer, which is absolute and
unconditional, to pay to the Holders of the Notes the principal of and interest
on the Notes as and when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative rights of the
Holders of the Notes and creditors of the Issuer other than the holders of the
Senior Debt of the Issuer, nor shall anything herein or therein prevent the
Trustee or the Holder of any Note from exercising all remedies otherwise
permitted by applicable law upon the occurrence of a Default under this
Indenture, subject to the rights, if any, under this Article 11 of the
holders of Senior Debt of the Issuer in respect of cash, property or securities
of the Issuer received upon the exercise of any such remedy.

 

Upon any distribution of assets of the Issuer referred
to in this Article 11, the Trustee, subject to the provisions of Article 7,
and the Holders of the Notes 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
Trustee or to the Holders of the Notes, for the purpose of ascertaining the
persons entitled to participate in such distribution, the holders of the Senior
Debt and other indebtedness of the Issuer, the amount

 

87

 

thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article 11.

 

Section 11.06.  Trustee Entitled to Assume Payments Not Prohibited in Absence of Notice.

 

The Trustee shall not at any time be charged with
knowledge of the existence of any facts which would prohibit the making of any
payment to or by the Trustee, and the Trustee shall not be required to withhold
payment to the Holders of Notes as provided in Section 11.02(d), unless
and until the Trustee shall have received written notice thereof at its
Corporate Trust Office from the Issuer or from one or more holders of Senior
Debt of the Issuer or from any representative thereof or trustee therefor
identifying the specific sections of this Indenture involved and describing in
detail the facts that would obligate the Trustee to withhold payments to
Holders of Notes, as well as any other facts required by the next succeeding
paragraph of this Section 11.06; and, prior to the receipt of any such
written notice, the Trustee, subject to the provisions of Article 7, shall
be entitled to assume conclusively that no such facts exist.

 

The Trustee shall be entitled to rely on the delivery
to it of a written notice by a Person representing himself to be a holder of
Senior Debt of the Issuer (or a trustee on behalf of such holder) to establish
that such notice has been given by a holder of Senior Debt of the Issuer or a
trustee on behalf of any such holder.  In
the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior Debt of
the Issuer to participate in any payment or distribution pursuant to this Article 11,
the Trustee may request such person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Debt held by such
Person, the extent to which such person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
person under this Article 11, and if such evidence is not furnished the
Trustee may defer any payment to such person pending judicial determination as
to the right of such person to receive such payment.

 

Section 11.07.  Application by Trustee of Monies Deposited With it.

 

Except as provided in Section 8.04 any deposit of
monies by the Issuer with the Trustee or any Paying Agent (whether or not in
trust) for the payment of the principal of or interest on any Notes shall be
subject to the provisions of Sections 11.01, 11.02, 11.03 or 11.04, except
that, if prior to the opening of business on the date on which by the terms of
this Indenture any such monies may become payable for any purpose (including,
without limitation, the payment of either the principal or the interest on any
Note), the Trustee shall not have received with respect to such monies the
notice provided for in Section 11.06, then the Trustee shall have full
power and authority to receive such monies and to

 

88

apply the same to the purpose for which they were
received and shall not be affected by any notice to the contrary which may be
received by it on or after such date, without, however, limiting any rights
that holders of Senior Debt of the Issuer may have to recover any such payments
from the Holders in accordance with the provisions of this Article 11.

 

Section 11.08.  Subordination Rights Not Impaired by Acts or Omissions of Issuer or Holders of Senior
Debt of the Issuer.

 

No right of any present or future holders of any
Senior Debt of the Issuer to enforce subordination as provided herein shall at
any time in any way be prejudiced or impaired by any act or failure to act on
the part of the Issuer or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by the Issuer with the terms of this
Indenture, regardless of any knowledge thereof which any such holder may have
or be otherwise charged with.  The
holders of Senior Debt of the Issuer may extend, renew, modify or amend the
terms of the Senior Debt of the Issuer or any security therefor and release,
sell or exchange such security and otherwise deal freely with the Issuer, all
without affecting the liabilities and obligations of the parties to this
Indenture or the Holders.

 

Section 11.09.  Holders Authorize Trustee to Effectuate Subordination of Notes.

 

Each Holder of the Notes by his acceptance thereof
authorizes and expressly directs the Trustee (subject to Sections 7.02(d) and
(g) hereof) on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article 11
and appoints the Trustee his attorney-in-fact for such purpose, including, in
the event of any dissolution, winding up, liquidation or reorganization of the
Issuer (whether in bankruptcy, insolvency or receivership proceedings,
voluntary liquidation or upon assignment for the benefit of creditors or
otherwise) tending towards liquidation of the business and assets of the
Issuer, the timely filing of a claim for the unpaid balance of its or his Notes
in the form required in said proceedings and cause said claim to be
approved.  If the Trustee does not file a
proper claim or proof of debt in the form required in such proceeding on or
prior to 30 days before the expiration of the time to file such claim or
claims, then the holders of Senior Debt of the Issuer have the right to file
and are hereby authorized to file an appropriate claim for and on behalf of the
Holders of said Notes.

 

Section 11.10.  Right of Trustee to Hold Senior Debt of the Issuer.

 

The Trustee, in its individual capacity, shall be
entitled to all of the rights set forth in this Article 11 in respect of
any Senior Debt of the Issuer at any time held by it to the same extent as any
other holder of Senior Debt of the Issuer, and

 

89

 

nothing in this Indenture shall be construed to
deprive the Trustee of any of its rights as such holder.

 

Section 11.11.  Trustee Not Fiduciary for Holders of Senior Debt of the Issuer.

 

With respect to the holders of Senior Debt of the
Issuer, the Trustee undertakes to perform or to observe only such of its
covenants and obligations as are specifically set forth in this Article 11,
and no implied covenants or obligations with respect to the holders of Senior
Debt of the Issuer shall be read into this Indenture against the Trustee.  The Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt of the Issuer and the Trustee
shall not be liable to any holder of Senior Debt of the Issuer if it shall pay
over or deliver to Holders of Notes, the Issuer or any other person monies or
assets to which any holder of Senior Debt of the Issuer shall be entitled by
virtue of this Article 11 or otherwise.

 

Section 11.12.  Article 10 Not to Prevent Events of Default.

 

The failure to make a payment on account of principal
or interest on the Notes by reason of any provision in this Article 11
shall not be construed as preventing the occurrence of an Event of Default under
Section 5.01.

 

Section 11.13.  Officers’ Certificate.

 

If there occurs an event referred to in the first
sentence of Section 11.02(d) or the first sentence of Section 11.03,
the Issuer shall promptly give to the Trustee an Officers’ Certificate (on which
the Trustee may conclusively rely) identifying all holders of Senior Debt of
the Issuer and the principal amount of Senior Debt of the Issuer then
outstanding held by each such holder and stating the reasons why such Officers’
Certificate is being delivered to the Trustee.

 

ARTICLE 12

SUBORDINATION OF GUARANTEES

 

Section 12.01.  Guarantees Subordination to Senior Debt of a Guarantor.

 

Each Guarantor covenants and agrees, and each Holder
of the Notes by his acceptance thereof likewise covenants and agrees, that the
payments pursuant to the Guarantee by such Guarantor shall be subordinated in
accordance with the following provisions of this Article 12 to the prior
payment in full of all Senior Debt of a Guarantor for such Guarantor.

 

“Senior Debt of a Guarantor”
means the Principal of and interest on:

 

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(1)          all Indebtedness of a
Guarantor;

 

(2)          lease obligations of a
Guarantor;

 

(3)          all Indebtedness,
secured or unsecured, in connection with the acquisition or improvement of any
property or asset or the acquisition of any business by a Guarantor;

 

(4)          all Indebtedness secured
by any mortgage, lien, pledge, charge or encumbrance upon property owned by a
Guarantor and all Indebtedness secured in the manner specified in this clause
(4) even if such Guarantor has not assumed or become liable for the payment
thereof;

 

(5)          all customer deposits
held by a Guarantor in escrow accounts pending closing of the related sales;

 

(6)          all Indebtedness of a
Guarantor created or arising under any conditional sale or other title
retention agreement with respect to property acquired by a Guarantor or
otherwise representing the deferred and unpaid balance of the purchase price of
any such property, including all Indebtedness created or arising in the manner
specified in this clause (6) even though the rights and remedies of the seller
or lender under such agreement in the event of default are limited to
repossession or sale of such property;

 

(7)          guarantees by a
Guarantor, direct or indirect, of any indebtedness of another Person of the
types referred to in clauses (1), (2), (3), (4), (5) or (6); and

 

(8)          contingent obligations
of a Guarantor in respect of, or to purchase or otherwise acquire or be
responsible or liable for through the purchase of products or services,
irrespective of whether such products are delivered or such services are
rendered, any such indebtedness referred to in clauses (1), (2), (3), (4), (5)
or (6),

 

which indebtedness, lease obligation, deposit,
guarantee or contingent obligation a Guarantor has directly or indirectly
created, incurred, assumed, guaranteed or otherwise become liable or
responsible for, whether currently outstanding or hereafter created.  All references to indebtedness include any
renewals, extensions, refundings, amendments and modifications of any such
Indebtedness issued in exchange for such indebtedness; provided,
however, that Senior Debt of a Guarantor shall not include, without
limitation (i) a Guarantee, (ii) the guarantee by a Guarantor of the Issuer’s 87/8%
Senior Subordinated Notes due 2012, (iii) the guarantee by a Guarantor of the
Issuer’s 73/4% Senior Subordinated Notes due 2013, (iv)
accounts payable or any other indebtedness to trade creditors created or

 

91

 

assumed by a Guarantor in the ordinary course of
business in connection with the obtaining of materials or services, (v) any
liability for federal, state or local taxes owed or owing by a Guarantor, (vi)
any obligation of a Guarantor to the Company or any Subsidiary and (vii) any
Indebtedness as to which, in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is provided that such
indebtedness is on a parity with or otherwise not superior in right of payment
to a Guarantee.

 

This Article 12 shall constitute a continuing
offer to all persons who, in reliance upon such provisions, become holders of,
or continue to hold, Senior Debt of a Guarantor, and such provisions are made
for the benefit of the holders of Senior Debt of a Guarantor, and such holders
are made obligees hereunder and any one or more of them may enforce such
provisions.

 

Section 12.02.  Guarantor Not to Make Payments With Respect to Notes in Certain Circumstances.

 

(a)                        Upon the maturity of the
principal of any Senior Debt of a Guarantor (other than payment of sinking fund
installments) by lapse of time, acceleration or otherwise, all principal
thereof and interest thereon shall first be paid in full, or such payment duly provided
for in cash or in a manner satisfactory to the holders of such Senior Debt of a
Guarantor, before any payment, pursuant to the Guarantee, is made on account of
the principal of or interest on the Notes or to acquire any of the Notes or on
account of the mandatory redemption provisions in the Notes (except mandatory
redemption payments made in respect of Notes acquired by such Guarantor before
the maturity of such Senior Debt of a Guarantor), including any payment
pursuant to Section 4.10 or 4.12.

 

(b)                       Unless Section 12.03 shall
be applicable, upon (1) the occurrence of a Payment Default with respect to any
Senior Debt of a Guarantor and receipt by the relevant Guarantor and the
Trustee of written notice of such occurrence or (2) upon the acceleration of
such Senior Debt of a Guarantor, then no payment or distribution of any assets
of such Guarantor of any kind or character shall be made by such Guarantor or
the Trustee on account of principal of or interest on the Notes or on account
of the purchase or redemption or other acquisition of Notes, including any
payment pursuant to Section 4.10 or 4.12, unless and until such Payment
Default shall have been cured or waived in writing or shall have ceased to
exist or such Senior Debt of a Guarantor shall have been discharged, after
which the relevant Guarantor shall resume making any and all required payments
in respect of the Notes, including any missed payments.

 

(c)                        Unless Section 12.03 shall
be applicable, upon (1) the occurrence of a Non-Payment Default and (2) receipt
by the Trustee of written notice of such occurrence, then no payment or
distribution of any assets of the relevant Guarantor of any kind or character
shall be made by such Guarantor or the

 

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Trustee on account
of any principal of or interest on the Notes or on account of the purchase or
redemption or other acquisition of Notes, including, any payment pursuant to Section 4.10
or 4.12, for a period (“Guarantee Payment Blockage
Period”) commencing on the earlier of the date of receipt by the
Trustee of such written notice from the holders of Senior Debt of a Guarantor
or of the Issuer, or any representative of a holder of Senior Debt of a
Guarantor or of the Issuer unless and until (subject to any blockage of payment
that may then be in effect under subsection (a) or (b) of this Section 12.02)
the earlier of (x) more than 120 days shall have elapsed since receipt of such
written notice by the Trustee, (y) such Non-Payment Default shall have been cured
or waived in writing or shall have ceased to exist or such Senior Debt of a
Guarantor or of the Issuer shall have been discharged or (z) such Guarantee
Payment Blockage Period shall have been terminated by written notice to the
relevant Guarantor or to the Issuer, as the case may be, or to the Trustee from
the holders of the Senior Debt of a Guarantor or of the Issuer or any
representative of the holders of the Senior Debt of a Guarantor or of the
Issuer initiating such Guarantee Payment Blockage Period, after which, in the
case of clause (x), (y) or (z), the relevant Guarantor shall promptly resume
making any and all required payments in respect of the Notes, including any
missed payments.  In no event shall a Guarantee
Payment Blockage Period extend beyond 120 days from the date of the receipt by
the Trustee of the notice referred to in clause (2) hereof (the “Guarantee Initial Period”). 
Any number of additional Guarantee Payment Blockage Periods may be
commenced during the Guarantee Initial Period; provided,
however, that no such additional period shall extend beyond the
Initial Period.  After the expiration of
the Guarantee Initial Period, no Guarantee Payment Blockage Period may be
commenced on the basis of a Non-Payment Default on the Senior Debt of the
Issuer or Senior Debt of a Guarantor which was the basis of a Guarantee Payment
Blockage Period commenced during the Guarantee Initial Period until at least
270 consecutive days have elapsed from the last day of the Guarantee Initial
Period.  No Non-Payment Default with
respect to Senior Debt of the Issuer or Senior Debt of a Guarantor which
existed or was continuing on the date of the commencement of any Guarantee
Payment Blockage Period and of which the applicable holder(s) of Senior Debt of
the Issuer or Senior Debt of a Guarantor are aware shall be, or can be made,
the basis for the commencement of a second Guarantee Payment Blockage Period
whether or not within a period of 270 consecutive days unless such event of
default shall have been cured or waived for a period of not less than 90
consecutive days.

 

(d)                       In the event that
notwithstanding the provisions of this Section 12.02 a Guarantor shall
make, pursuant to its Guarantee, any payment or distribution of any character
to the Trustee on account of the principal of or interest on the Notes, or on
account of the mandatory redemption provisions contained in this Indenture,
including any payment pursuant to Section 4.10 or 4.12, after the
happening of an event of default with respect to any Senior Debt of a Guarantor
based on a default

 

93

 

in the payment of
the principal of or interest on Senior Debt of a Guarantor, or after receipt by
the Trustee of written notice as provided in this Section 12.02 of an
event of default with respect to any Senior Debt of a Guarantor, or after the
acceleration of the Notes pursuant to Section 5.01, then, but only if the
Trustee is in receipt of the notice specified in Section 12.06, unless and
until such default or event of default shall have been cured or waived or shall
have ceased to exist, or such acceleration shall have been rescinded, such
payment (subject to the provisions of Sections 12.05 and 12.06) shall be held
by the Trustee in trust for the benefit of, and, if the Senior Debt of a
Guarantor shall have been declared immediately due and payable, shall be paid
forthwith over and delivered to, the holders of Senior Debt of a Guarantor (pro
rata as to each of such holders on the basis of the respective amounts of Senior
Debt of a Guarantor held by them) or their representative or the trustee under
the indenture or other agreement (if any) pursuant to which Senior Debt of a
Guarantor may have been issued, as their respective interests may appear, such
payments to be made in accordance with an Officers’ Certificate as provided in Section 12.13
(on which the Trustee may conclusively rely) identifying all holders of Senior
Debt of a Guarantor and the principal amount of Senior Debt of a Guarantor then
outstanding held by each and stating the reasons why such Officers’ Certificate
is being delivered to the Trustee, for application to the payment of all Senior
Debt of a Guarantor remaining unpaid to the extent necessary to pay all Senior
Debt of a Guarantor in full in accordance with its terms, after giving effect
to any concurrent payment or distribution to or for the holders of Senior Debt
of a Guarantor.  In the event of the
failure of any Holder of a Note to endorse or assign any such payment or
distribution, each holder of Senior Debt of a Guarantor is hereby irrevocably
authorized to endorse or assign the same. 
The relevant Guarantor shall give prompt written notice to the Trustee
of any default under any Senior Debt of a Guarantor or under any agreement
pursuant to which Senior Debt of a Guarantor may have been issued, as required
by Section 4.17.

 

Section 12.03.  Guarantee Subordinated to Prior Payment of All Senior Debt of a Guarantor on Dissolution,
Winding Up, Liquidation or Reorganization of a Guarantor.

 

In the event of (i) any insolvency, bankruptcy,
receivership, liquidation, reorganization, readjustment, composition or other
similar proceeding relating to a Guarantor, its creditors or its property, (ii)
any case or proceeding for the liquidation, dissolution or other winding-up of
a Guarantor, voluntary or involuntary, whether or not involving insolvency or
bankruptcy proceedings, (iii) any assignment by a Guarantor for the benefit of
creditors, or (iv) any other marshalling of the assets of a Guarantor:

 

(a)                        the holders of all Senior Debt
of a Guarantor shall first be entitled to receive payment in full (or to have
such payment duly provided for) of the principal and interest due thereon
(including any interest thereon accruing after

 

94

 

commencement of
any such proceeding) before the Holders of the Notes are entitled to receive,
pursuant to this Guarantee any payment or any distribution, whether in cash,
securities or other property, on account of the principal of or interest on the
Notes;

 

(b)                       any payment or distribution of
assets of the Issuer of any kind or character, whether in cash, property or
securities (other than securities of a Guarantor as reorganized or readjusted
or securities of a Guarantor or any other Issuer, trust or corporation provided
for by a plan of reorganization or readjustment, junior, or the payment of
which is otherwise subordinate, at least to the extent provided in this Article 12,
to the payment of all Senior Debt of a Guarantor at the time outstanding and to
the payment of all securities issued in exchange therefor to the holders of the
Senior Debt of a Guarantor at the time outstanding), to which the Holders of
the Notes or the Trustee on behalf of the Holders of the Notes would be entitled,
pursuant to this Guarantee except for the provisions of this Article 12,
including any such payment or distribution which may be payable or deliverable
by reason of the payment of any other indebtedness of a Guarantor being
subordinated to the payment of the Notes, shall be paid by the liquidating
trustee or agent or other person making such payment or distribution directly
to the holders of Senior Debt of a Guarantor or their representative(s), or to
the trustee under any indenture under which Senior Debt of a Guarantor may have
been issued (pro rata as to each such holder, representative or trustee on the
basis of the respective amounts of unpaid Senior Debt of a Guarantor held or
represented by each), to the extent necessary to make payment in full of all
Senior Debt of a Guarantor remaining unpaid after giving effect to any
concurrent payment or distribution or provision therefor to the holders of such
Senior Debt of a Guarantor; and

 

(c)                        in the event that
notwithstanding the foregoing provisions of this Section 12.03, any
payment or distribution of assets of a Guarantor of any kind or character,
whether in cash, property or securities shall be received, pursuant to the
Guarantee, by the Trustee or the Holders of the Notes on account of principal
or interest on the Notes before all Senior Debt of a Guarantor is paid in full,
or effective provisions made for its payment, such payment or distribution
(subject to the provisions of Sections 12.05 and 12.06) shall be received and
held in trust for and shall be paid over or delivered to the liquidating
trustee, agent or other person making such payment or distribution or to the
holders of the Senior Debt of a Guarantor remaining unpaid or unprovided for or
their representative, or to the trustee under any indenture under which Senior
Debt of a Guarantor may have been issued (pro rata as provided in subsection (b)
above), for application to the payment of such Senior Debt of a Guarantor until
all such Senior Debt of a Guarantor shall have been paid in full, after giving
effect to any concurrent payment or distribution or provision therefor to the
holders of such Senior Debt of a Guarantor.

 

95

 

If a Guarantor effects a
transaction permitted by Section 4.14, such transaction shall not be deemed to
be a dissolution, winding up, liquidation or reorganization of a Guarantor for
purposes of this Section 12.03.

 

A Guarantor shall give
prompt written notice to the Trustee of any dissolution, winding up,
liquidation or reorganization of such Guarantor, assignment for the benefit of
creditors by such Guarantor or any other marshalling of assets of such
Guarantor.

 

Section 12.04.  Holders to Be Subrogated to
Rights of Holders of Senior Debt of a Guarantor.

 

Subject to the payment in
full of all Senior Debt of a Guarantor, the Holders of the Notes shall be
subrogated to the rights of the holders of Senior Debt of a Guarantor to
receive payments or distributions of assets of a Guarantor applicable to the
Senior Debt of a Guarantor until all amounts owing under the Guarantee shall be
paid in full and for the purpose of such subrogation no payments or
distributions to the holders of Senior Debt of a Guarantor by virtue of this
Article 12 which otherwise would have been made to the Holders of the Notes,
shall, as between a Guarantor, its creditors other than holders of its Senior
Debt of a Guarantor and the Holders, be deemed to be a payment by such
Guarantor to or on account of the Senior Debt of a Guarantor, it being
understood that the provisions of this Article 12 are intended solely for the
purpose of defining the relative rights of the holders of Senior Debt of a
Guarantor on the one hand and the Holders on the other hand.

 

If any payment or
distribution to which the Holders would otherwise have been entitled but for
the provisions of this Article 12 shall have been applied, pursuant to the
provisions of this Article 12, to the payment of all amounts payable under the
Senior Debt of a Guarantor, then and in such case, the Holders shall be
entitled to receive from the holders of such Senior Debt of a Guarantor at the
time outstanding any payments or distributions received by such holders of such
Senior Debt of a Guarantor in excess of the amount sufficient to pay all
amounts payable under or in respect of such Senior Debt of a Guarantor in full.

 

Section 12.05.  Obligations of the Guarantors
Unconditional.

 

Nothing contained in this
Article 12 or elsewhere in this Indenture or in any Note is intended to or
shall impair, as between the Guarantors and the Holders, the obligations of
each Guarantor, which are absolute and unconditional, to pay to the Holders the
principal of and interest on the Notes as and when the same shall become due
and payable in accordance with the provisions of the Guarantees or is intended
to or shall affect the relative rights of the Holders and creditors of a
Guarantor other than the holders of the Senior Debt of a Guarantor, nor shall
anything herein or therein prevent the Trustee or any Holder from

 

96

 

exercising all
remedies otherwise permitted by applicable law upon the occurrence of a Default
under this Indenture, subject to the rights, if any, under this Article 12 of
the holders of Senior Debt of a Guarantor in respect of cash, property or
securities of a Guarantor received upon the exercise of any such remedy.

 

Upon any distribution of
assets of a Guarantor referred to in this Article 12, the Trustee, subject to
the provisions of Article 7, and the Holders of the Notes 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 Trustee or to the Holders of the Notes,
for the purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Senior Debt and 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
12.

 

Section 12.06.  Trustee Entitled to Assume
Payments Not Prohibited in Absence of Notice.

 

The Trustee shall not at
any time be charged with knowledge of the existence of any facts which would
prohibit the making of any payment to or by the Trustee, and the Trustee shall
not be required to withhold payment to the Holders of Notes as provided in
Section 12.02(d), unless and until the Trustee shall have received written
notice thereof at its Corporate Trust Office from a Guarantor or from one or
more holders of Senior Debt of a Guarantor or from any representative thereof
or trustee therefor identifying the specific sections of this Indenture
involved and describing in detail the facts that would obligate the Trustee to
withhold payments to Holders of Notes, as well as any other facts required by
the next succeeding paragraph of this Section 12.06; and, prior to the receipt
of any such written notice, the Trustee, subject to the provisions of Article
7, shall be entitled to assume conclusively that no such facts exist.

 

The Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person representing
himself to be a holder of Senior Debt of a Guarantor (or a trustee on behalf of
such holder) to establish that such notice has been given by a holder of Senior
Debt of a Guarantor or a trustee on behalf of any such holder.  In the event that the Trustee determines in
good faith that further evidence is required with respect to the right of any
Person as a holder of Senior Debt of a Guarantor to participate in any payment
or distribution pursuant to this Article 12, the Trustee may request such Person
to furnish evidence to the reasonable satisfaction of the Trustee as to the
amount of Senior Debt of a Guarantor held by such person, the extent to which
such person is entitled to participate in such payment or distribution and any
other facts pertinent to the rights of such person under this Article 12, and
if such evidence is not furnished the Trustee may defer

 

97

 

any payment to
such person pending judicial determination as to the right of such person to
receive such payment.

 

Section 12.07.  Application by Trustee of
Monies Deposited With it.

 

Except as provided in
Section 8.04, any deposit of monies by a Guarantor with the Trustee or any
Paying Agent (whether or not in trust) for the payment of the principal of or
interest on any Notes shall be subject to the provisions of Sections 12.01,
12.02, 12.03 and 12.04, except that, if prior to the opening of business on the
date on which by the terms of this Indenture any such monies may become payable
for any purpose (including, without limitation, the payment, pursuant to this
Guarantee, of either the principal or the interest on any Note), the Trustee
shall not have received with respect to such monies the notice provided for in
Section 12.06, then the Trustee shall have full power and authority to receive
such monies and to apply the same to the purpose for which they were received
and shall not be affected by any notice to the contrary which may be received
by it on or after such date, without, however, limiting any rights that holders
of Senior Debt of a Guarantor may have to recover any such payments from the
Holders in accordance with the provisions of this Article 12.

 

Section 12.08.  Subordination Rights Not
Impaired by Acts or Omissions of Any Guarantor or Holders of Senior Debt of a
Guarantor.

 

No right of any present
or future holders of any Senior Debt of a Guarantor to enforce subordination as
provided herein shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of any Guarantor or by any act or failure to
act, in good faith, by any such holder, or by any noncompliance by any
Guarantor with the terms of this Indenture, regardless of any knowledge thereof
which any such holder may have or be otherwise charged with.  The holders of Senior Debt of a Guarantor may
extend, renew, modify or amend the terms of the Senior Debt of a Guarantor or
any security therefor and release, sell or exchange such security and otherwise
deal freely with any Guarantor, all without affecting the liabilities and
obligations of the parties to this Indenture or the Holders.

 

Section 12.09.  Holders Authorize Trustee to
Effectuate Subordination of Notes.

 

Each Holder of the Notes
by his acceptance thereof authorizes and expressly directs the Trustee (subject
to Sections 7.02(d) and (g) hereof) on his behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article 12 and appoints the Trustee his attorney-in-fact for such purpose, including,
in the event of any dissolution, winding up, liquidation or reorganization of a
Guarantor (whether in bankruptcy, insolvency or receivership proceedings,
voluntary liquidation or upon assignment for the

 

98

 

benefit of
creditors or otherwise) tending towards liquidation of the business and assets
of such Guarantor, the timely filing of a claim for the unpaid balance,
pursuant to the relevant Guarantee, of its Notes in the form required in said
proceedings and cause said claim to be approved.  If the Trustee does not file a proper claim
or proof of debt in the form required in such proceeding on or prior to 30 days
before the expiration of the time to file such claim or claims, then the
holders of Senior Debt of a Guarantor have the right to file and are hereby
authorized to file an appropriate claim for and on behalf of the Holders of
said Notes.

 

Section 12.10.  Right of Trustee to Hold
Senior Debt of a Guarantor.

 

The Trustee in its
individual capacity, shall be entitled to all of the rights set forth in this
Article 12 in respect of any Senior Debt of a Guarantor at any time held by it
to the same extent as any other holder of such Senior Debt of a Guarantor, and
nothing in this Indenture shall be construed to deprive the Trustee of any of
its rights as such holder.

 

Section 12.11.  Trustee Not Fiduciary for
Holders of Senior Debt of a Guarantor.

 

With respect to the
holders of Senior Debt of a Guarantor, the Trustee undertakes to perform or to
observe only such of its covenants and obligations as are specifically set
forth in this Article 12, and no implied covenants or obligations with respect
to the holders of Senior Debt of a Guarantor shall be read into this Indenture
against the Trustee.  The Trustee shall
not be deemed to owe any fiduciary duty to the holders of Senior Debt of a
Guarantor and the Trustee shall not be liable to any holder of Senior Debt of a
Guarantor if it shall pay over or deliver to Holders of Notes, the relevant
Guarantor or any other person monies or assets to which any holder of Senior
Debt of a Guarantor shall be entitled by virtue of this Article 12 or
otherwise.

 

Section 12.12.  Article 11 Not to Prevent
Events of Default.

 

The failure to make a
payment on account of principal or interest on the Notes by reason of any
provision in this Article 12 shall not be construed as preventing the
occurrence of an Event of Default under Section 5.01.

 

Section 12.13.  Subordination of Indebtedness
Owed by the Issuer to a Guarantor.

 

Any indebtedness owed by
the Issuer to a Guarantor shall be subordinate to all obligations of the Issuer
with respect to the Notes and this Indenture to the same extent as the Notes
are subordinated to Senior Debt of the Issuer.

 

99

 

Section 12.14.  Officers’ Certificate.

 

If there occurs an event
referred to in the first sentence of Section 12.02(c) or the first sentence of
Section 12.03, the relevant Guarantor shall promptly give to the Trustee an
Officers’ Certificate (on which the Trustee may conclusively rely) identifying
all holders of Senior Debt of a Guarantor and the principal amount of Senior
Debt of a Guarantor then outstanding held by each such holder and stating the
reasons why such Officers’ Certificate is being delivered to the Trustee.

 

ARTICLE 13

MISCELLANEOUS

 

Section 13.01.  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 13.02.  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
Trustee shall comply with the requirements of Trust Indenture Act Section
312(a).  Neither the Company, the Issuer
nor the 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 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 Trustee deems sufficient.

 

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

 

100

 

(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 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 13.03.  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 Issuer. 
Any notice to the Trustee will be effective only upon receipt.  In each case the notice or communication
should be addressed as follows:

 

if to the
Issuer:

 

K. Hovnanian Enterprises, Inc.

10 Highway 35

P.O. Box 500

Red Bank, NJ 07701

Facsimile: (732) 747-7159

 

if to the
Trustee:

 

Wachovia Bank, National Association

21 South Street

Morristown, NJ 07960

ATTN: Corporate Trust Administration

(K. Hovnanian Enterprises, Inc. Senior Subordinated Notes due 2010)

Facsimile: (973) 682-4531

 

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

 

(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

 

101

 

by the Issuer, the 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 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 Trustee, but such filing is not a condition precedent to the validity
of any action taken in reliance upon such waivers.

 

Section 13.04.  Certificate and Opinion as to
Conditions Precedent.  Upon
any request or application by the Issuer or the Company to the Trustee to take
any action under the Indenture, the Issuer or the Company will furnish to the
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 13.05.  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

 

(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.

 

Section 13.06.  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

 

102

 

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.

 

Section 13.07.  Governing Law.  The Indenture, including any Note
Guaranties, and the Notes shall be governed by, and construed in accordance
with, the laws of the State of New York.

 

Section 13.08.  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 13.09.  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
Trustee in the Indenture will bind its successor.

 

Section 13.10.  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 13.11.  Separability.  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 13.12.  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 13.13.  No Liability of Directors,
Officers, Employees, Incorporators and Stockholders.  No director, officer, employee,
incorporator, member or stockholder of the Issuer, the Company or any
Guarantor, as such, will have any liability for any obligations of the Issuer,
the Company or such Guarantor under the Notes, any Note Guaranty or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations.  Each Holder of Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes.

 

103

 

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

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  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 Trustee

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ Stephanie Roche

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Stephanie Roche

  
	
   

  	
  Title:

  	
  Vice President

  
									

 

104

 

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.

 

A- 1

 

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.

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.

 

A- 2

 

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.

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.

 

A- 3

 

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.

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.

A- 4

 

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.

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.

 

A- 5

 

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.

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.

A- 6

 

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.

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.

A- 7

 

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.

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.

A- 8

 

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.

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.

A- 9

 

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.

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.

 

6% Senior Subordinated Notes Due 2010

 

	
   

  	
  [CUSIP] [ISIN] 

  	
   

  
	
   

  	
   

  	
   

  
	
  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 ($          ) on
January 15, 2010

 

Initial Interest
Rate:    6% per annum.

 

Interest Payment Dates:
January 15 and July 15, commencing January 15, 2005.

 

Regular 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.

 

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 Trustee’s
Certificate of Authentication)

 

This is one of the 6% Senior Subordinated Notes Due
2010 described in the Indenture referred to in this Note.

 

	
   

  	
  WACHOVIA BANK, NATIONAL

  ASSOCIATION, as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  	
  Authorized Signatory

  

 

A- 3

 

[REVERSE SIDE OF NOTE]

 

K. HOVNANIAN ENTERPRISES,
INC.

 

6% Senior Subordinated
Note Due 2010

 

1.                                       Principal
and Interest.

 

The Issuer promises to pay the principal of this Note
on January 15, 2010.

 

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 6% 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.](1)

 

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.

 

The Issuer will pay interest on overdue principal,
premium, if any, and, to the extent lawful, interest and Additional Interest,
if any, at a rate per annum that is 1% in excess of 6%.  Interest and Additional Interest not paid
when due and any interest on principal, premium or interest not paid when due
will be paid to the Persons that are Holders on a special record date, which
will be the 15th day preceding the date fixed by the Issuer for the payment of
such interest, whether or not such day is a Business Day.  At least 15 days before a special record
date, the 

 

(1)           For
Initial Notes and Initial Additional Notes only

 

A-4

 

Issuer will send to each Holder and to the Trustee a notice that sets
forth the special record date, the payment date and the amount of interest to
be paid.

 

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.                                       Indentures;
Subordination; Note 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 Wachovia Bank, National Association, as Trustee.  Capitalized terms used herein are used as
defined in the Indenture unless otherwise indicated.  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 to $100,000,000, 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 subordinated
as set forth in the Indenture. This Note is guaranteed, on a subordinated
basis, by the Guarantors as set forth in the Indenture and the Guarantee
endorsed hereon.

 

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 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 Trustee will select Notes for redemption on a pro rata basis, by lot or by such other method as the
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 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 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 Trustee may require a Holder 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
Trustee will not be required to issue, register the transfer of or exchange any
Note or certain portions of a Note.

 

8.             Defaults and Remedies.

 

If an Event of Default, as defined in the Indenture,
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the Notes may declare all the Notes to be due and
payable.  If a bankruptcy or insolvency
default with respect to the Issuer occurs and is continuing, the Notes
automatically become due and payable. 
Holders may not enforce the Indenture or the Notes except as provided in
the Indenture.  The 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 Trustee in its exercise of remedies.

 

9.             Amendment and Waiver.

 

Subject to certain exceptions, the Indenture and the
Notes may be amended, or default 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 and the Trustee may amend or supplement the Indenture or the
Notes to, among other things, cure any ambiguity, defect or inconsistency.

 

10.           Authentication.

 

This Note is not valid until the Trustee (or
Authenticating Agent) signs the certificate of authentication on the other side
of this Note.

 

A-7

 

11.           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-8

 

[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 on the Notes,
whether at maturity, by acceleration or otherwise, the due and punctual payment
of interest on the overdue principal and interest, if any, on the Notes, to the
extent lawful, and the due and punctual performance of all other obligations of
the Issuer to the Holders or the 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.

 

The obligations of the Guarantors under this Guarantee
are subordinated to all Senior Debt of a Guarantor, as set forth in Article 12
of the Indenture.

 

No past, present or future stockholder, officer,
director, employee or incorporator, as such, of any of the Guarantors shall
have any liability under the Guarantee by reason of such person’s status as
stockholder, officer, director, employee 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 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 Trustee under the Indenture
by the manual signature of one of its authorized officers.

 

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.

CONDOMINIUM COMMUNITY (QUAIL RUN), INC.

CONDOMINIUM COMMUNITY (TRUMAN DRIVE), INC.

 

A-9

 

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.

K. HOVNANIAN AT EAST WHITELAND I, INC.

K. HOVNANIAN AT EXETER HILLS, INC.

 

A-10

 

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.

K. HOVNANIAN AT MONTCLAIR, INC.

K. HOVNANIAN AT MONTGOMERY I, INC.

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

 

A-11

 

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.

K. HOVNANIAN AT UPPER MAKEFIELD I, INC.

K. HOVNANIAN AT VAIL RANCH, INC.

K. HOVNANIAN AT WALL TOWNSHIP VI, INC.

 

A-12

 

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.

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.

 

A-13

 

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.

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

K. HOVNANIAN AT ARBOR HEIGHTS, LLC

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

 

A-14

 

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.

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.

 

A-15

 

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.

K. HOVNANIAN AT SOUTH AMBOY, L.L.C.

K. HOVNANIAN AT SOUTH BANK, L.L.C.

K. HOVNANIAN AT SOUTH BRUNSWICK, L.L.C.

 

A-16

 

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.

K. HOVNANIAN SOUTHERN NEW JERSEY, L.L.C.

K. HOVNANIAN SUMMIT HOLDINGS, L.L.C.

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

 

A-17

 

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.

WASHINGTON HOMES AT CAMP SPRINGS, L.L.C.

WASHINGTON HOMES AT FOREST RUN, L.L.C.

WASHINGTON HOMES AT LAUREL HIGHLANDS, L.L.C.

 

A-18

 

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 Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
    By:

  
	
   

  	
    Title:

  
					

 

A-19

 

[FORM OF TRANSFER NOTICE]

 

FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto

 

Insert 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

  
	
   

  
	
   

  
	
  attorney to transfer
  said Note on the books of the Issuer with full power of substitution in the
  premises.

  

 

 

 

A-20

 

[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 undersigned confirms that such transfer is made without utilizing any
general solicitation or general advertising 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 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 which comply with the conditions of transfer set forth in this Note
and the Indenture.

 

If none of the foregoing boxes is checked, the 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.

 

 

	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Seller

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  
	
   

  	
  NOTICE:
  The signature to this assignment must correspond with the name as written
  upon the face of the within-mentioned instrument in every particular, without
  alteration or any change whatsoever.

  
						

 

A-21

 

	
  Signature Guarantee:(2)

  	
   

  	
   

  
	
   

  
	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  To be executed by an executive officer

  
				

 

(2)           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-22

 

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:(1)

  	
   

  	
   

  
							

 

(1)           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-23

 

SCHEDULE OF EXCHANGES OF
NOTES(3)

 

The following exchanges of a part of this Global Note
for Physical Notes or a part of another 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

  Trustee

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

(3)           For
Global Notes

 

A-24

 

EXHIBIT B

 

SUPPLEMENTAL INDENTURE

 

dated as of               ,
      

 

among

 

K. HOVNANIAN ENTERPRISES,
INC.

 

HOVNANIAN ENTERPRISES,
INC.

 

The Guarantors Party
Hereto

 

and

 

WACHOVIA BANK, NATIONAL
ASSOCIATION

as Trustee

 

6% Senior Subordinated
Notes due 2010

 

B-1

 

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
trustee (the “Trustee”).

 

RECITALS

 

WHEREAS, the Issuer, Company, the Guarantors party
thereto and the Trustee entered into the Indenture, dated as of November 30,
2004 (the “Indenture”), relating to the
Company’s 6% Senior Subordinated Notes due 2010 (the “Notes”);

 

WHEREAS, as a condition to the Trustee entering into
the Indenture and 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 Guaranties.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and
mutual covenants herein contained and intending to be legally bound, the
parties the Indenture 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 and Article
12 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-2

 

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 Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

B-3

 

EXHIBIT C

 

RESTRICTED LEGEND

 

THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED
UNDER THE 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) 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 COMPANY 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 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 CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”),
TO THE COMPANY OR ANY OF ITS SUBSIDIARIES OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE 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.

 

TRANSFERS OF THIS GLOBAL NOTE ARE LIMITED TO TRANSFERS
IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR’S NOMINEE 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.

6% Senior Subordinated Notes due 2010 (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 executed in, on or through the facilities of a designated offshore
securities market, and neither we nor any person acting on our

 

E-1

 

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.

 

3.                  The
proposed exchange of Notes is not part of a plan or scheme to evade the
registration requirements of the Securities Act.

 

E-2

 

You and the Company 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:

  	
   

  	
   

  	
   

  
						

 

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.

6% Senior Subordinated Notes due 2010 (the “Notes”)

Issued under the Indenture (the “Indenture”)
dated as

as of November 30, 2004 relating to the Notes

 

Ladies and
Gentlemen:

 

TO BE COMPLETED BY PURCHASER IF (1) ABOVE IS CHECKED.

 

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
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.

 

F-1

 

You and the Company 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:

  	
   

  	
   

  	
   

  	
   

  
						

 

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.

6% Senior Subordinated Notes due 2010 (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 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” within the meaning of Rule 501(a)(1),
(2), (3) or (7) 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.

 

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.

 

G-1

 

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 Company, 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 company or any of its subsidiaries, (B) to a person whom the
we 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 less than $250,000, an opinion of counsel
acceptable to the company 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 Company) 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.

 

Prior to the registration of any transfer, we
acknowledge that the Company 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 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 Trustee will not be required to
accept for registration of transfer any Notes acquired by us, except upon
presentation of evidence satisfactory to the Company and the Trustee that the
foregoing

 

G-2

 

restrictions on
transfer have been complied with.  We
further agree to provide to any 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 Company 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:

  	
   

  	
   

  	
   

  	
   

  
						

 

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.

6% Senior Subordinated Notes due 2010 (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).

 

We hereby certify as follows:

 

[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 Company 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

 

Re:                               K.
Hovnanian Enterprises, Inc.

6% Senior Subordinated Notes due 2010 (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 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

 

H-2

 

Temporary Global
Note submitted herewith for exchange are no longer true and cannot be relied
upon as of the date hereof.

 

You and the Company 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 PHYSICAL 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-1Exhibit
10.12(j)

 

CERTAIN PORTIONS OF
THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT
UNDER RULE 406 OF THE SECURITIES ACT OF 1933. 
THE OMITTED MATERIALS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.

 

CONFIDENTIAL

 

AMENDMENT NUMBER 9 TO AMENDED AND

RESTATED PURCHASE AGREEMENT GCT-025/98

 

This Amendment Number 9 to Amended and Restated Purchase Agreement
GCT-025/98, dated as of May 24, 2004 (“Amendment No. 9”) relates to the Amended
and Restated Purchase Agreement GCT-025/98 (the “Purchase Agreement”) between
Embraer - Empresa Brasileira de Aeronáutica S.A. (“Embraer”) and Republic
Airways Holdings Inc. (“Buyer”) dated April 19, 2002 as amended from time
to time (collectively referred to herein as “Agreement”). This Amendment No. 9
is between Embraer and Buyer, collectively referred to herein as the “Parties”.

 

This Amendment No. 9 constitutes an amendment and modification to the
Purchase Agreement. All terms defined in the Purchase Agreement shall have the
same meaning when used herein and in case of any conflict between this
Amendment No.9 and the Purchase Agreement, conditions and provisions of this
Amendment No. 9 shall control.

 

Whereas, the [*] in the
escalation formula [*] are longer [*].

 

Now, therefore, for good and valuable consideration which is hereby
acknowledged Embraer and Buyer hereby agree as follows:

 

1.
Changes in the Escalation [*]

 

Since [*], the Purchase
Price for [*] shall be calculated
as described below.

 

1.1 [*]

 

The [*] shall be [*][*].

 

Any references to Attachment
D-1 shall be deemed references to Attachments D-1 and D-1A, collectively, and
any application of the Escalation Formula required under the Purchase Agreement
shall follow the procedure described in [*].

 

* Confidential

 

 

2. Miscellaneous:

 

All other provisions of the
Purchase Agreement, which have not been specifically amended or modified by
this Amendment No. 9 shall remain valid in full force
and effect without any change.

 

In witness whereof, Embraer and Buyer, by their duly authorized
officers, have entered into and executed this Amendment No. 9 to Amended and
Restated Purchase Agreement to be effective as of the date first written above.

 

 

	
  EMBRAER –
  Empresa Brasileira de

  Aeronáutica S.A.

  	
   

  	
  Republic Airways Holdings Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
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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"}]]