Document:

Exhibit 4.2

 

SENIOR SUBORDINATED NOTES

A/B EXCHANGE

REGISTRATION RIGHTS
AGREEMENT

 

Dated as of May 9, 2003

by and among

 

K. Hovnanian Enterprises,
Inc.

Hovnanian Enterprises, Inc.

And certain of its
Subsidiaries

 

and

 

Credit Suisse First Boston
LLC

Citigroup Global Markets
Inc.

Deutsche Bank Securities
Inc.

Fleet Securities, Inc.

SunTrust Capital Markets,
Inc.

Wachovia Securities, Inc.

 

 

This Registration Rights
Agreement (this “Agreement”)
is made and entered into as of May 9, 2003, by and among K. Hovnanian
Enterprises, Inc., a California corporation (the “Company”), Hovnanian Enterprises, Inc., a Delaware
corporation (“Hovnanian”),
and certain subsidiary guarantors of Hovnanian party hereto (together with
Hovnanian, the “Guarantors”)
and Credit Suisse First Boston LLC, Citigroup Global Markets Inc., Deutsche
Bank Securities Inc., Fleet Securities, Inc., SunTrust Capital Markets, Inc.
and Wachovia Securities, Inc. (each an “Initial
Purchaser” and, collectively, the “Initial Purchasers”), each of whom has agreed to
purchase the Company’s 7  3/4% Series A Senior Subordinated
Notes due 2013 (the “Series A Notes”)
pursuant to the Purchase Agreement (as defined below).

 

This Agreement is made
pursuant to the Purchase Agreement, dated May 2, 2003 (the “Purchase Agreement”), by and among
the Company, the Guarantors and the Initial Purchasers. In order to induce the
Initial Purchasers to purchase the Series A Notes, the Company has agreed to
provide the registration rights set forth in this Agreement. The execution and
delivery of this Agreement is a condition to the obligations of the Initial
Purchasers set forth in Section 9 of the Purchase Agreement. Capitalized terms
used herein and not otherwise defined shall have the meaning assigned to them
by the Indenture, dated May 9, 2003 by and among the Company, the Guarantors
and Wachovia Bank, National Association, as Trustee, relating to the Series A
Notes (the “Indenture”).

 

The parties hereby agree as
follows:

 

SECTION 1.         DEFINITIONS

 

As used in this Agreement,
the following capitalized terms shall have the following meanings:

 

Act:  The Securities Act of 1933, as
amended.

 

Affiliate:            As
defined in Rule 144 of the Act.

 

Broker-Dealer:  Any broker or dealer registered under the
Exchange Act.

 

Certificated
Securities:  Certificated
Notes, as defined in the Indenture.

 

Closing
Date:  The date
hereof.

 

Commission:  The Securities and Exchange Commission.

 

Consummate:  An Exchange
Offer shall be deemed “Consummated” for purposes of this Agreement upon the
occurrence of (a) the filing and effectiveness under the Act of the Exchange
Offer Registration Statement relating to the Series B Notes to be issued in the
Exchange Offer, (b) the maintenance of such Exchange Offer Registration
Statement continuously effective and the keeping of the Exchange Offer open for
a period not less than the period required pursuant to Section 3(b) hereof and
(c) the delivery by the Company to the Registrar under the Indenture of Series
B Notes in the same aggregate principal amount as the aggregate principal
amount of Series A Notes tendered by Holders thereof pursuant to the Exchange
Offer.

 

Consummation
Deadline:  As defined in Section 3(b) hereof.

 

Effectiveness
Deadline:  As defined in Sections 3(a) and 4(a) hereof.

 

Exchange
Act:  The Securities Exchange Act of 1934, as
amended.

 

1

 

Exchange
Offer:  The exchange and issuance by the Company of
a principal amount of Series B Notes (which shall be registered pursuant to the
Exchange Offer Registration Statement) equal to the outstanding principal
amount of Series A Notes that are tendered by such Holders in connection with
such exchange and issuance.

 

Exchange
Offer Registration Statement:  The Registration Statement relating to the
Exchange Offer, including the related Prospectus.

 

Filing
Deadline:  As defined in Sections 3(a) and 4(a) hereof.

 

Holders:  As
defined in Section 2 hereof.

 

Prospectus:  The
prospectus included in a Registration Statement at the time such Registration
Statement is declared effective, as amended or supplemented by any prospectus
supplement and by all other amendments thereto, including post-effective
amendments, and all material incorporated by reference into such Prospectus.

 

Recommencement
Date:  As defined in Section 6(d) hereof.

 

Registration
Default:  As defined in Section 5 hereof.

 

Registration
Statement:  Any registration statement of the Company
and the Guarantors relating to (a) an offering of Series B Notes pursuant to an
Exchange Offer or (b) the registration for resale of Transfer Restricted
Securities pursuant to the Shelf Registration Statement, in each case, (i) that
is filed pursuant to the provisions of this Agreement and (ii) including the
Prospectus included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.

 

Regulation
S:  Regulation S promulgated under the Act.

 

Rule 144:  Rule
144 promulgated under the Act.

 

Series B
Notes:  The Company’s 73⁄4% Series B Senior Subordinated Notes due 2013
to be issued pursuant to the Indenture: (i) in the Exchange Offer or (ii) as
contemplated by Section 4 hereof.

 

Shelf
Registration Statement:  As defined in Section 6(b) hereof.

 

Suspension
Notice:  As defined in Section 6(d) hereof.

 

TIA:  The
Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on
the date of the Indenture.

 

Transfer
Restricted Securities:  Each Series A Note, until the earliest to
occur of (a) the date on which such Series A Note is exchanged in the Exchange
Offer for a Series B Note which is entitled to be resold to the public by the
Holder thereof without complying with the prospectus delivery requirements of
the Act, (b) the date on which such Series A Note has been disposed of in accordance
with a Shelf Registration Statement (and the purchasers thereof have been
issued Series B Notes), or (c) the date on which such Series A Note is
distributed to the public pursuant to Rule 144 or Regulation S under the Act
(and purchasers thereof have been issued Series B Notes) and each Series B Note
issued to a Broker-Dealer until the date on which such Series B Note is
disposed of by such Broker-Dealer pursuant to the “Plan of Distribution”
contemplated by the Exchange Offer Registration Statement (including the
delivery of the Prospectus contained therein).

 

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SECTION 2.         HOLDERS

 

A Person is deemed to be a
holder of Transfer Restricted Securities (each, a “Holder”) whenever such Person owns
Transfer Restricted Securities.

 

SECTION 3.         REGISTERED EXCHANGE OFFER

 

(a) Unless the Exchange
Offer shall not be permitted by applicable federal law (after the procedures
set forth in Section 6(a)(i) below have been complied with), the Company and
the Guarantors shall (i) cause the Exchange Offer Registration Statement to be
filed with the Commission as soon as practicable after the Closing Date, but in
no event later than 90 days after the Closing Date (such 90th day being the “Filing Deadline”), (ii) use their reasonable
best efforts to cause such Exchange Offer Registration Statement to become
effective at the earliest possible time, but in no event later than 150 days
after the Closing Date (such 150th day being the “Effectiveness Deadline”), (iii) in connection with
the foregoing, (A) file all pre-effective amendments to such Exchange Offer
Registration Statement as may be necessary in order to cause it to become
effective, (B) file, if applicable, a post-effective amendment to such Exchange
Offer Registration Statement pursuant to Rule 430A under the Act and (C) cause
all necessary filings, if any, in connection with the registration and
qualification of the Series B Notes to be made under the Blue Sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer,
and (iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and Consummate the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting (i) registration of the Series B Notes to be
offered in exchange for the Series A Notes that are Transfer Restricted
Securities and (ii) resales of Series B Notes by Broker-Dealers that tendered
into the Exchange Offer Series A Notes that such Broker-Dealer acquired for its
own account as a result of market making activities or other trading activities
(other than Series A Notes acquired directly from the Company or any of its
Affiliates) as contemplated by Section 3(c) below.

 

(b) The Company and the
Guarantors shall use their respective reasonable best efforts to cause the
Exchange Offer Registration Statement to be effective continuously for the
period specified in Section 3(c) below, and shall keep the Exchange Offer open
for a period of not less than the minimum period required under applicable
federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall
such period be less than 20 Business Days. The Company and the Guarantors shall
cause the Exchange Offer to comply with all applicable federal and state
securities laws. No securities other than the Series B Notes and the guarantees
thereof shall be included in the Exchange Offer Registration Statement. The
Company and the Guarantors shall use their reasonable best efforts to cause the
Exchange Offer to be Consummated on or prior to 30 Business Days after the
Exchange Offer Registration Statement has become effective, but in no event
later than 40 Business Days thereafter (such 40th
day being the “Consummation Deadline”).

 

(c) The Company shall include
a “Plan of Distribution” section in the Prospectus contained in the Exchange
Offer Registration Statement and indicate therein that any Broker-Dealer who
holds Transfer Restricted Securities that were acquired for the account of such
Broker-Dealer as a result of market-making activities or other trading
activities (other than Series A Notes acquired directly from the Company or any
Affiliate of the Company), may exchange such Transfer Restricted Securities
pursuant to the Exchange Offer. Such “Plan of Distribution” section shall also
contain all other information with respect to such sales by such Broker-Dealers
that the Commission may require in order to permit such sales pursuant thereto,
but such “Plan of Distribution” shall not name any such Broker-Dealer or
disclose the amount of Transfer Restricted Securities held by any such
Broker-Dealer, except to the extent required by the Commission as a result of a
change in policy, rules or regulations after the date of this Agreement. See
the Shearman & Sterling no-action letter (available July 2, 1993).

 

Because such Broker-Dealer
may be deemed to be an “underwriter” within the meaning of the Act and must,
therefore, deliver a prospectus meeting the requirements of the Act in
connection with its initial sale of any Series B Notes received by such
Broker-Dealer in the Exchange Offer, the Company and Guarantors shall permit
the use of the Prospectus contained in the Exchange Offer Registration
Statement by such Broker-Dealer to satisfy such prospectus delivery
requirement. To the extent necessary to ensure that the prospectus contained in
the Exchange Offer Registration Statement is available for sales of Series B
Notes by Broker-Dealers, the Company and

 

3

 

the Guarantors agree to use
their respective best efforts to keep the Exchange Offer Registration Statement
continuously effective, supplemented, amended and current as required by and
subject to the provisions of Sections 6(a) and (c) hereof and in conformity
with the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of
one year from the Consummation Deadline or such shorter period as will
terminate when all Transfer Restricted Securities covered by such Registration
Statement have been sold pursuant thereto. The Company and the Guarantors shall
provide sufficient copies of the latest version of such Prospectus to such
Broker-Dealers, promptly upon request, and in no event later than one day after
such request, at any time during such period.

 

SECTION 4.         SHELF REGISTRATION

 

(a)  Shelf Registration. If (i) the
Exchange Offer is not permitted by applicable law (after the Company and the
Guarantors have complied with the procedures set forth in Section 6(a)(i)
below) or (ii) if any Holder of Transfer Restricted Securities shall notify the
Company within 20 Business Days following the Consummation Deadline that (A)
based on an opinion of counsel, such Holder was prohibited by law or Commission
policy from participating in the Exchange Offer or (B) such Holder is a
Broker-Dealer and holds Series A Notes acquired directly from the Company or
any of its Affiliates, then the Company and the Guarantors shall:

 

(x) cause to be filed, on or
prior to 30 days after the earlier of (i) the date on which the Company
determines that the Exchange Offer Registration Statement cannot be filed as a
result of clause (a)(i) above and (ii) the date on which the Company receives
the notice specified in clause (a)(ii) above, (such earlier date, the “Filing Deadline”), a shelf
registration statement pursuant to Rule 415 under the Act (which may be an
amendment to the Exchange Offer Registration Statement (the “Shelf Registration Statement”)),
relating to all Transfer Restricted Securities, and

 

(y) shall use their
respective reasonable best efforts to cause such Shelf Registration Statement
to become effective on or prior to 60 days after the Filing Deadline for the
Shelf Registration Statement (such 60th day, the “Effectiveness Deadline”).

 

If, after the Company has
filed an Exchange Offer Registration Statement that satisfies the requirements
of Section 3(a) above, the Company is required to file and make effective a
Shelf Registration Statement solely because the Exchange Offer is not permitted
under applicable federal law (i.e., clause (a)(i) above), then the filing of
the Exchange Offer Registration Statement shall be deemed to satisfy the
requirements of clause (x) above; provided
that, in such event, the Company shall remain obligated to meet the
Effectiveness Deadline set forth in clause (y).

 

To the extent necessary to
ensure that the Shelf Registration Statement is available for sales of Transfer
Restricted Securities by the Holders thereof entitled to the benefit of this
Section 4(a) and the other securities required to be registered therein
pursuant to Section 6(b)(ii) hereof, the Company and the Guarantors shall use
their respective reasonable best efforts to keep any Shelf Registration Statement
required by this Section 4(a) continuously effective, supplemented, amended and
current as required by and subject to the provisions of Sections 6(b) and (c)
hereof and in conformity with the requirements of this Agreement, the Act and
the policies, rules and regulations of the Commission as announced from time to
time, for a period of at least two years (as extended pursuant to Section 6(d))
following the Closing Date, or such shorter period as will terminate when all
Transfer Restricted Securities covered by such Shelf Registration Statement
have been sold pursuant thereto.

 

(b) Provision by Holders
of Certain Information in Connection with the Shelf Registration Statement.
No Holder of Transfer Restricted Securities may include any of its Transfer Restricted
Securities in any Shelf Registration Statement pursuant to this Agreement
unless and until such Holder furnishes to the Company in writing, within 20
days after receipt of a request therefor, the information specified in Item 507
or 508 of Regulation S-K, as applicable, of the Act for use in connection with
any Shelf Registration Statement or Prospectus or preliminary Prospectus
included therein. No Holder of Transfer Restricted Securities shall be entitled
to additional

 

4

 

interest pursuant to Section
5 hereof unless and until such Holder shall have provided all such information.
Each selling Holder agrees to promptly furnish additional information required
to be disclosed in order to make the information previously furnished to the
Company by such Holder not materially misleading.

 

SECTION 5.         ADDITIONAL INTEREST

 

If (i) any Registration
Statement required by this Agreement is not filed with the Commission on or
prior to the applicable Filing Deadline, (ii) any such Registration Statement
has not been declared effective by the Commission on or prior to the applicable
Effectiveness Deadline, (iii) the Exchange Offer has not been Consummated on or
prior to the Consummation Deadline or (iv) any Registration Statement required
by this Agreement is filed and declared effective but shall thereafter cease to
be effective or fail to be usable for its intended purpose without being
succeeded immediately by a post-effective amendment to such Registration Statement
that cures such failure and that is itself declared effective within 5 days of
filing such post-effective amendment to such Registration Statement (each such
event referred to in clauses (i) through (iv), a “Registration Default”), then the Company and the
Guarantors hereby jointly and severally agree to pay to each Holder of Transfer
Restricted Securities affected thereby additional interest in an amount equal
to $.05 per week per $1,000 in principal amount of Transfer Restricted
Securities held by such Holder for each week or portion thereof that the
Registration Default continues for the first 90-day period immediately
following the occurrence of such Registration Default. The amount of the
additional interest shall increase by an additional $.05 per week per $1,000 in
principal amount of Transfer Restricted Securities with respect to each
subsequent 90-day period until all Registration Defaults have been cured, up to
a maximum amount of additional interest of $.25 per week per $1,000 in
principal amount of Transfer Restricted Securities; provided that the Company and the Guarantors shall in no
event be required to pay additional interest for more than one Registration
Default at any given time. Notwithstanding anything to the contrary set forth
herein, (1) upon filing of the Exchange Offer Registration Statement (and/or,
if applicable, the Shelf Registration Statement), in the case of (i) above, (2)
upon the effectiveness of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of (ii) above, (3)
upon Consummation of the Exchange Offer, in the case of (iii) above, or (4)
upon the filing of a post-effective amendment to the Registration Statement or
an additional Registration Statement that causes the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration
Statement) to again be declared effective or made usable in the case of (iv)
above, the additional interest payable with respect to the Transfer Restricted
Securities as a result of such clause (i), (ii), (iii) or (iv), as applicable,
shall cease.

 

All accrued additional
interest shall be paid to the Holders entitled thereto, in the manner provided
for the payment of interest in the Indenture, on each Interest Payment Date, as
more fully set forth in the Indenture and the Notes. Notwithstanding the fact
that any securities for which additional interest are due cease to be Transfer
Restricted Securities, all obligations of the Company and the Guarantors to pay
additional interest with respect to securities shall survive until such time as
such obligations with respect to such securities shall have been satisfied in
full.

 

SECTION 6.         REGISTRATION PROCEDURES

 

(a) Exchange Offer
Registration Statement. In connection with the Exchange Offer, the Company
and the Guarantors shall (x) comply with all applicable provisions of Section
6(c) below, (y) use their respective reasonable best efforts to effect such
exchange and to permit the resale of Series B Notes by Broker-Dealers that
tendered in the Exchange Offer Series A Notes that such Broker-Dealer acquired
for its own account as a result of its market making activities or other
trading activities (other than Series A Notes acquired directly from the
Company or any of its Affiliates) being sold in accordance with the intended
method or methods of distribution thereof, and (z) comply with all of the
following provisions:

 

5

 

(i) If, following the date
hereof there has been announced a change in Commission policy with respect to
exchange offers such as the Exchange Offer, that in the reasonable opinion of
counsel to the Company raises a substantial question as to whether the Exchange
Offer is permitted by applicable federal law, the Company and the Guarantors
hereby agree to seek a no-action letter or other favorable decision from the
Commission allowing the Company and the Guarantors to Consummate an Exchange
Offer for such Transfer Restricted Securities. The Company and the Guarantors
hereby agree to pursue the issuance of such a decision to the Commission staff
level. In connection with the foregoing, the Company and the Guarantors hereby
agree to take all such other actions as may be requested by the Commission or
otherwise required in connection with the issuance of such decision, including
without limitation (A) participating in telephonic conferences with the
Commission, (B) delivering to the Commission staff an analysis prepared by
counsel to the Company setting forth the legal bases, if any, upon which such
counsel has concluded that such an Exchange Offer should be permitted and (C)
diligently pursuing a resolution (which need not be favorable) by the
Commission staff.

 

(ii) As a condition to its
participation in the Exchange Offer, each Holder of Transfer Restricted
Securities (including, without limitation, any Holder who is a Broker Dealer)
shall furnish, upon the request of the Company, prior to the Consummation of
the Exchange Offer, a written representation to the Company and the Guarantors
(which may be contained in the letter of transmittal contemplated by the
Exchange Offer Registration Statement) to the effect that (A) it is not an
Affiliate of the Company, (B) it is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the Series B Notes to be issued in the
Exchange Offer and (C) it is acquiring the Series B Notes in its ordinary
course of business. As a condition to its participation in the Exchange Offer
each Holder using the Exchange Offer to participate in a distribution of the
Series B Notes shall acknowledge and agree that, if the resales are of Series B
Notes obtained by such Holder in exchange for Series A Notes acquired directly
from the Company or an Affiliate thereof, it (1) could not, under Commission
policy as in effect on the date of this Agreement, rely on the position of the
Commission enunciated in Morgan Stanley and Co., Inc. (available June 5,
1991) and Exxon Capital Holdings Corporation (available May 13, 1988),
as interpreted in the Commission’s letter to Shearman & Sterling
dated July 2, 1993, and similar no-action letters (including, if applicable,
any no-action letter obtained pursuant to clause (i) above), and (2) must
comply with the registration and prospectus delivery requirements of the Act in
connection with a secondary resale transaction and that such a secondary resale
transaction must be covered by an effective registration statement containing
the selling security holder information required by Item 507 or 508, as
applicable, of Regulation S-K.

 

(iii) Prior to effectiveness
of the Exchange Offer Registration Statement, the Company and the Guarantors
shall provide a supplemental letter to the Commission (A) stating that the
Company and the Guarantors are registering the Exchange Offer in reliance on
the position of the Commission enunciated in Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan Stanley and Co., Inc.
(available June 5, 1991) as interpreted in the Commission’s letter to Shearman
& Sterling dated July 2, 1993, and, if applicable, any no-action letter
obtained pursuant to clause (i) above, (B) including a representation that
neither the Company nor any Guarantor has entered into any arrangement or
understanding with any Person to distribute the Series B Notes to be received
in the Exchange Offer and that, to the best of the Company’s and each
Guarantor’s information and belief, each Holder participating in the Exchange
Offer is acquiring the Series B Notes in its ordinary course of business and
has no arrangement or understanding with any Person to participate in the
distribution of the Series B Notes received in the Exchange Offer and (C) any
other undertaking or representation required by the Commission as set forth in
any no-action letter obtained pursuant to clause (i) above, if applicable.

 

(b) Shelf Registration
Statement. In connection with the Shelf Registration Statement, the Company
and the Guarantors shall:

 

(i) comply with all the
provisions of Section 6(c) below and use their respective reasonable best
efforts to effect such registration to permit the sale of the Transfer
Restricted Securities being sold in accordance

 

6

 

with the intended method or
methods of distribution thereof (as indicated in the information furnished to
the Company pursuant to Section 4(b) hereof), and pursuant thereto the Company
and the Guarantors will prepare and file with the Commission a Registration
Statement relating to the registration on any appropriate form under the Act,
which form shall be available for the sale of the Transfer Restricted
Securities in accordance with the intended method or methods of distribution
thereof within the time periods and otherwise in accordance with the provisions
hereof.

 

(ii) issue, upon the request
of any Holder or purchaser of Series A Notes covered by any Shelf Registration
Statement contemplated by this Agreement, Series B Notes having an aggregate
principal amount equal to the aggregate principal amount of Series A Notes sold
pursuant to the Shelf Registration Statement and surrendered to the Company for
cancellation; the Company shall register Series B Notes on the Shelf
Registration Statement for this purpose and issue the Series B Notes to the
purchaser(s) of securities subject to the Shelf Registration Statement in the
names as such purchaser(s) shall designate.

 

(c) General Provisions.
In connection with any Registration Statement and any related Prospectus
required by this Agreement, the Company and the Guarantors shall:

 

(i) use their respective
reasonable best efforts to keep such Registration Statement continuously
effective and provide all requisite financial statements for the period
specified in Section 3 or 4 of this Agreement, as applicable. Upon the
occurrence of any event that would cause any such Registration Statement or the
Prospectus contained therein (A) to contain an untrue statement of material
fact or omit to state any material fact necessary to make the statements
therein not misleading or (B) not to be effective and usable for resale of
Transfer Restricted Securities during the period required by this Agreement,
the Company and the Guarantors shall file promptly an appropriate amendment to
such Registration Statement curing such defect, and, if Commission review is
required, use their respective best efforts to cause such amendment to be
declared effective as soon as practicable.

 

(ii) prepare and file with
the Commission such amendments and post-effective amendments to the applicable
Registration Statement as may be necessary to keep such Registration Statement
effective for the applicable period set forth in Section 3 or 4 hereof, as the
case may be; cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under the
Act, and to comply fully with Rules 424, 430A and 462, as applicable, under the
Act in a timely manner; and comply with the provisions of the Act with respect
to the disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended method or methods
of distribution by the sellers thereof set forth in such Registration Statement
or supplement to the Prospectus;

 

(iii) advise each Holder
promptly and, if requested by such Holder, confirm such advice in writing, (A)
when the Prospectus or any Prospectus supplement or post-effective amendment
has been filed, and, with respect to any applicable Registration Statement or
any post-effective amendment thereto, when the same has become effective, (B)
of any request by the Commission for amendments to the Registration Statement
or amendments or supplements to the Prospectus or for additional information
relating thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement under the Act or of
the suspension by any state securities commission of the qualification of the
Transfer Restricted Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes, and (D) of the
existence of any fact or the happening of any event that makes any statement of
a material fact made in the Registration Statement, the Prospectus, any
amendment or supplement thereto or any document incorporated by reference
therein untrue, or that requires the making of any additions to or changes in
the Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes in the
Prospectus in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. If at any time the
Commission shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other regulatory
authority shall issue an order suspending the qualification or exemption from
qualification of

 

7

 

the Transfer Restricted
Securities under state securities or Blue Sky laws, the Company and the
Guarantors shall use their respective reasonable best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time;

 

(iv) subject to Section
6(c)(i), if any fact or event contemplated by Section 6(c)(iii)(D) above shall
exist or have occurred, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of Transfer Restricted Securities, the Prospectus
will not contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;

 

(v) in the case of a Shelf
Registration, furnish to each Holder, before filing with the Commission, copies
of any Registration Statement or any Prospectus included therein or any
amendments or supplements to any such Registration Statement or Prospectus
(including all documents incorporated by reference after the initial filing of
such Registration Statement), which documents will be subject to the review and
comment of such Holders in connection with such sale, if any, for a period of
at least five Business Days, and the Company will not file any such
Registration Statement or Prospectus or any amendment or supplement to any such
Registration Statement or Prospectus (including all such documents incorporated
by reference) to which such Holders shall reasonably object within five
Business Days after the receipt thereof. A Holder shall be deemed to have
reasonably objected to such filing if such Registration Statement, amendment,
Prospectus or supplement, as applicable, as proposed to be filed, contains an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading or fails to comply with
the applicable requirements of the Act;

 

(vi) in the case of a Shelf
Registration, promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus, provide
copies of such document to each Holder, if any, make the Company’s and the
Guarantors’ representatives available for discussion of such document and other
customary due diligence matters, and include such information in such document
prior to the filing thereof as such Holders may reasonably request;

 

(vii) in the case of a Shelf
Registration, make available, at reasonable times, for inspection by each
Holder and any attorney or accountant retained by such Holders, all financial
and other records, pertinent corporate documents of the Company and the
Guarantors and cause the Company’s and the Guarantors’ officers, directors and
employees to supply all information reasonably requested by any such Holder,
attorney or accountant in connection with such Registration Statement or any post-effective
amendment thereto subsequent to the filing thereof and prior to its
effectiveness;

 

(viii) if requested by any
Holders, promptly include in any Registration Statement or Prospectus, pursuant
to a supplement or post-effective amendment if necessary, such information as
such Holders may reasonably request to have included therein, including,
without limitation, information relating to the “Plan of Distribution” of the
Transfer Restricted Securities; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after the Company
is notified of the matters to be included in such Prospectus supplement or
post-effective amendment;

 

(ix) in the case of a Shelf
Registration, furnish to each Holder, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference therein
and all exhibits (including exhibits incorporated therein by reference);

 

(x) deliver to each Holder
without charge, as many copies of the Prospectus (including each preliminary
prospectus) and any amendment or supplement thereto as such Persons reasonably
may request; the Company and the Guarantors hereby consent to the use (in
accordance with law) of the Prospectus and any

 

8

 

amendment or supplement thereto by each selling Holder in connection
with the offering and the sale of the Transfer Restricted Securities covered by
the Prospectus or any amendment or supplement thereto;

 

(xi) upon the request of any
Holder, enter into such agreements (including underwriting agreements) and make
such representations and warranties and take all such other actions in
connection therewith in order to expedite or facilitate the disposition of the
Transfer Restricted Securities pursuant to any applicable Registration
Statement contemplated by this Agreement as may be reasonably requested by any
Holder in connection with any sale or resale pursuant to any applicable
Registration Statement. In such connection, the Company and the Guarantors
shall:

 

(A) upon request of any
Holder, furnish (or in the case of paragraphs (2) and (3), use its best efforts
to cause to be furnished) to each Holder, upon Consummation of the Exchange
Offer or upon the effectiveness of the Shelf Registration Statement, as the
case may be:

 

(1) a certificate, dated
such date, signed on behalf of the Company and each Guarantor by (x) the
President or any Vice President and (y) a principal financial or accounting
officer of the Company and such Guarantor, confirming, as of the date thereof,
the matters set forth in Sections 6(v), 6(w) and 9(a) of the Purchase Agreement
and such other similar matters as such Holders may reasonably request;

 

(2) an opinion, dated the
date of Consummation of the Exchange Offer or the date of effectiveness of the
Shelf Registration Statement, as the case may be, of counsel for the Company
and the Guarantors covering matters similar to those set forth in paragraphs
(e) and (f) of Section 9 of the Purchase Agreement and such other matter as
such Holder may reasonably request, and in any event including a statement to
the effect that such counsel has participated in conferences with officers and
other representatives of the Company and the Guarantors, representatives of the
independent public accountants for the Company and the Guarantors and have
considered the matters required to be stated therein and the statements
contained therein, although such counsel has not independently verified the
accuracy, completeness or fairness of such statements; and that such counsel
advises that, on the basis of the foregoing (relying as to materiality to the
extent such counsel deems appropriate upon the statements of officers and other
representatives of the Company and the Guarantors and without independent check
or verification), no facts came to such counsel’s attention that caused such
counsel to believe that the applicable Registration Statement, at the time such
Registration Statement or any post-effective amendment thereto became effective
and, in the case of the Exchange Offer Registration Statement, as of the date
of Consummation of the Exchange Offer, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or that the
Prospectus contained in such Registration Statement as of its date and, in the
case of the opinion dated the date of Consummation of the Exchange Offer, as of
the date of Consummation, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading.
Without limiting the foregoing, such counsel may state further that such
counsel assumes no responsibility for, and has not independently verified, the
accuracy, completeness or fairness of the financial statements, notes and
schedules and other financial data included in any Registration Statement
contemplated by this Agreement or the related Prospectus; and

 

(3) a customary comfort
letter, dated the date of Consummation of the Exchange Offer, or as of the date
of effectiveness of the Shelf Registration Statement, as the case may be, from
the Company’s independent accountants, in the customary form and covering
matters of the type customarily covered in comfort letters to underwriters in
connection with underwritten offerings, and affirming the matters set forth in
the comfort letter delivered pursuant to Section 9(h) of the Purchase
Agreement; and

 

9

 

(B) deliver such other
documents and certificates as may be reasonably requested by the selling Holders
to evidence compliance with the matters covered in clause (A) above and with
any customary conditions contained in any agreement entered into by the Company
and the Guarantors pursuant to this clause (xi);

 

(xii) prior to any public
offering of Transfer Restricted Securities, cooperate with the selling Holders
and their counsel in connection with the registration and qualification of the
Transfer Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all other acts
or things necessary or advisable to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the applicable
Registration Statement; provided, however,
that neither the Company nor any Guarantor shall be required to register or
qualify as a foreign corporation or other entity, as applicable, where it is
not now so qualified or to take any action that would subject it to the service
of process in suits or to taxation, other than as to matters and transactions
relating to the Registration Statement, in any jurisdiction where it is not now
so subject;

 

(xiii) in connection with
any sale of Transfer Restricted Securities that will result in such securities
no longer being Transfer Restricted Securities, cooperate with the Holders to
facilitate the timely preparation and delivery of certificates representing
Transfer Restricted Securities to be sold and not bearing any restrictive
legends; and to register such Transfer Restricted Securities in such
denominations and such names as the selling Holders may request at least two
Business Days prior to such sale of Transfer Restricted Securities;

 

(xiv) use their respective
reasonable best efforts to cause the disposition of the Transfer Restricted
Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof to consummate the disposition of such
Transfer Restricted Securities, subject to the proviso contained in clause
(xii) above;

 

(xv) provide a CUSIP number
for all Transfer Restricted Securities not later than the effective date of a
Registration Statement covering such Transfer Restricted Securities and provide
the Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with the
Depository Trust Company;

 

(xvi) otherwise use their
respective reasonable best efforts to comply with all applicable rules and
regulations of the Commission, and make generally available to its security
holders with regard to any applicable Registration Statement, as soon as
practicable, a consolidated earnings statement meeting the requirements of Rule
158 (which need not be audited) covering a twelve-month period beginning after
the effective date of the Registration Statement (as such term is defined in
paragraph (c) of Rule 158 under the Act);

 

(xvii) cause the Indenture
to be qualified under the TIA not later than the effective date of the first
Registration Statement required by this Agreement and, in connection therewith,
cooperate with the Trustee and the Holders to effect such changes to the
Indenture as may be required for such Indenture to be so qualified in
accordance with the terms of the TIA; and execute and use its best efforts to
cause the Trustee to execute, all documents that may be required to effect such
changes and all other forms and documents required to be filed with the
Commission to enable such Indenture to be so qualified in a timely manner; and

 

(xviii) provide promptly to
each Holder, upon request, each document filed with the Commission pursuant to
the requirements of Section 13 or Section 15(d) of the Exchange Act.

 

(d) Restrictions on Holders.
Each Holder agrees by acquisition of a Transfer Restricted Security that, upon
receipt of the notice referred to in Section 6(c)(iii)(C) or any notice from
the Company of the existence of any fact of the kind described in Section
6(c)(iii)(D) hereof (in each case, a “Suspension
Notice”), such Holder will

 

10

 

forthwith discontinue
disposition of Transfer Restricted Securities pursuant to the applicable
Registration Statement until (i) such Holder has received copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(iv) hereof, or
(ii) such Holder is advised in writing by the Company that the use of the
Prospectus may be resumed, and has received copies of any additional or supplemental
filings that are incorporated by reference in the Prospectus (in each case, the “Recommencement Date”). Each Holder
receiving a Suspension Notice hereby agrees that it will either (i) destroy any
Prospectuses, other than permanent file copies, then in such Holder’s
possession which have been replaced by the Company with more recently dated
Prospectuses or (ii) deliver to the Company (at the Company’s expense) all
copies, other than permanent file copies, then in such Holder’s possession of
the Prospectus covering such Transfer Restricted Securities that was current at
the time of receipt of the Suspension Notice. The time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4
hereof, as applicable, shall be extended by a number of days equal to the
number of days in the period from and including the date of delivery of the
Suspension Notice to the date of delivery of the Recommencement Date.

 

SECTION 7.         REGISTRATION EXPENSES

 

(a) All expenses incident to
the Company’s and the Guarantors’ performance of or compliance with this
Agreement will be borne by the Company and the Guarantors, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses; (ii) all fees
and expenses of compliance with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing (including printing
certificates for the Series B Notes to be issued in the Exchange Offer and
printing of Prospectuses), messenger and delivery services and telephone; (iv)
all fees and disbursements of counsel for the Company, the Guarantors and the
Holders of Transfer Restricted Securities; (v) all application and filing fees
in connection with listing the Series B Notes on a national securities exchange
or automated quotation system pursuant to the requirements hereof; and (vi) all
fees and disbursements of independent certified public accountants of the
Company and the Guarantors (including the expenses of any special audit and
comfort letters required by or incident to such performance).

 

The Company will, in any
event, bear its and the Guarantors’ internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expenses of any annual audit and the fees and
expenses of any Person, including special experts, retained by the Company or
the Guarantors.

 

(b) In connection with any
Registration Statement required by this Agreement (including, without
limitation, the Exchange Offer Registration Statement and the Shelf
Registration Statement), the Company and the Guarantors will reimburse the
Initial Purchasers and the Holders of Transfer Restricted Securities who are
tendering Series A Notes in the Exchange Offer and/or selling or reselling
Series A Notes or Series B Notes pursuant to the “Plan of Distribution”
contained in the Exchange Offer Registration Statement or the Shelf
Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be Davis Polk &
Wardwell, unless another firm shall be chosen by the Holders of a majority in
principal amount of the Transfer Restricted Securities for whose benefit such
Registration Statement is being prepared. Notwithstanding the foregoing, such
Holders shall be responsible for any and all underwriting discounts and
commissions and prior to employing counsel in connection with an Exchange
Offer, the Initial Purchasers will notify the Company and the Company’s counsel
and provide them reasonable opportunity to discuss the need for separate
counsel; provided, however, the
Initial Purchasers shall at all times retain the sole right to employ separate
counsel.

 

SECTION 8.         INDEMNIFICATION

 

(a) Each of the Company and
the Guarantors agrees, jointly and severally, to indemnify and hold harmless
each Holder, its directors, officers and each Person, if any, who controls such
Holder (within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act), from and against any and all losses, claims, damages,

 

11

 

liabilities, judgments,
(including without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any action
that could give rise to any such losses, claims, damages, liabilities or
judgments) caused by any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement, preliminary prospectus
or Prospectus (or any amendment or supplement thereto) provided by the Company
to any Holder or any prospective purchaser of Series B Notes or registered
Series A Notes, or caused by any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or judgments are caused by an untrue statement or omission
or alleged untrue statement or omission that is based upon information relating
to any of the Holders furnished in writing to the Company by any of the
Holders.

 

(b) Each Holder of Transfer
Restricted Securities agrees, severally and not jointly, to indemnify and hold
harmless the Company and the Guarantors, and their respective directors and
officers, and each person, if any, who controls (within the meaning of Section
15 of the Act or Section 20 of the Exchange Act) the Company, or the Guarantors
to the same extent as the foregoing indemnity from the Company and the
Guarantors set forth in Section 8(a) above, but only with reference to
information relating to such Holder furnished in writing to the Company by such
Holder expressly for use in any Registration Statement. In no event shall any
Holder, its directors, officers or any Person who controls such Holder be
liable or responsible for any amount in excess of the amount by which the total
amount received by such Holder with respect to its sale of Transfer Restricted
Securities pursuant to a Registration Statement exceeds (i) the amount paid by
such Holder for such Transfer Restricted Securities and (ii) the amount of any
damages that such Holder, its directors, officers or any Person who controls
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.

 

(c) In case any action shall
be commenced involving any person in respect of which indemnity may be sought
pursuant to Section 8(a) or 8(b) (the “indemnified
party”), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the “indemnifying person”) in writing and the indemnifying
party shall assume the defense of such action, including the employment of
counsel reasonably satisfactory to the indemnified party and the payment of all
fees and expenses of such counsel, as incurred (except that in the case of any
action in respect of which indemnity may be sought pursuant to both Sections
8(a) and 8(b), a Holder shall not be required to assume the defense of such
action pursuant to this Section 8(c), but may employ separate counsel and
participate in the defense thereof, but the fees and expenses of such counsel,
except as provided below, shall be at the expense of the Holder). Any
indemnified party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing
by the indemnifying party, (ii) the indemnifying party shall have failed to
assume the defense of such action or employ counsel reasonably satisfactory to
the indemnified party or (iii) the named parties to any such action (including
any impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such
action on behalf of the indemnified party). In any such case, the indemnifying
party shall not, in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) for all indemnified parties and all such fees and expenses shall be
reimbursed as they are incurred. Such firm shall be designated in writing by a
majority of the Holders, in the case of the parties indemnified pursuant to Section
8(a), and by the Company and Guarantors, in the case of parties indemnified
pursuant to Section 8(b). The indemnifying party shall indemnify and hold
harmless the indemnified party from and against any and all losses, claims,
damages, liabilities and judgments by reason of any settlement of any action
(i) effected with its written consent or (ii) effected without its written
consent if the settlement is entered into more than twenty business days after
the indemnifying party shall have received a request from the indemnified party
for reimbursement for the fees and expenses of counsel (in any case where such
fees and expenses are at the expense of the indemnifying party) and, prior to
the date of such settlement, the indemnifying party shall have failed to comply
with such reimbursement request. No indemnifying

 

12

 

party shall, without the prior written consent of the indemnified
party, effect any settlement or compromise of, or consent to the entry of judgment
with respect to, any pending or threatened action in respect of which the
indemnified party is or could have been a party and indemnity or contribution
may be or could have been sought hereunder by the indemnified party, unless
such settlement, compromise or judgment (i) includes an unconditional release
of the indemnified party from all liability on claims that are or could have
been the subject matter of such action and (ii) does not include a statement as
to or an admission of fault, culpability or a failure to act, by or on behalf
of the indemnified party.

 

(d) To the extent that the
indemnification provided for in this Section 8 is unavailable to an indemnified
party in respect of any losses, claims, damages, liabilities or judgments
referred to therein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
judgments (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company and the Guarantors, on the one hand, and the
Holders, on the other hand, from their sale of Transfer Restricted Securities
or (ii) if the allocation provided by clause 8(d)(i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause 8(d)(i) above but also the relative
fault of the Company and the Guarantors, on the one hand, and of the Holder, on
the other hand, in connection with the statements or omissions which resulted
in such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative fault of the Company and the
Guarantors, on the one hand, and of the Holder, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company or such
Guarantor, on the one hand, or by the Holder, on the other hand, and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.

 

The Company, the Guarantors
and each Holder agree that it would not be just and equitable if contribution
pursuant to this Section 8(d) were determined by pro rata allocation (even if
the Holders were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The amount paid or payable
by an indemnified party as a result of the losses, claims, damages, liabilities
or judgments referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses incurred by such indemnified party in connection with investigating or
defending any matter, including any action that could have given rise to such
losses, claims, damages, liabilities or judgments. Notwithstanding the
provisions of this Section 8, no Holder, its directors, its officers or any
Person, if any, who controls such Holder shall be required to contribute, in
the aggregate, any amount in excess of the amount by which the total received
by such Holder with respect to the sale of Transfer Restricted Securities
pursuant to a Registration Statement exceeds (i) the amount paid by such Holder
for such Transfer Restricted Securities and (ii) the amount of any damages
which such Holder has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders’ obligations to contribute pursuant
to this Section 8(d) are several in proportion to the respective principal
amount of Transfer Restricted Securities held by each Holder hereunder and not
joint.

 

13

 

SECTION 9.         RULE 144A and RULE 144

 

The Company and each
Guarantor agree with each Holder, for so long as any Transfer Restricted
Securities remain outstanding and during any period in which the Company or
such Guarantor (i) is not subject to Section 13 or 15(d) of the Exchange Act,
to make available, upon request of any Holder, to such Holder or beneficial
owner of Transfer Restricted Securities in connection with any sale thereof and
any prospective purchaser of such Transfer Restricted Securities designated by
such Holder or beneficial owner, the information required by Rule 144A(d)(4)
under the Act in order to permit resales of such Transfer Restricted Securities
pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of the
Exchange Act, to make all filings required thereby in a timely manner in order
to permit resales of such Transfer Restricted Securities pursuant to Rule 144.

 

SECTION 10.
      MISCELLANEOUS

 

(a) Remedies. The
Company and the Guarantors acknowledge and agree that any failure by the
Company and/or the Guarantors to comply with their respective obligations under
Sections 3 and 4 hereof may result in material irreparable injury to the
Initial Purchasers or the Holders for which there is no adequate remedy at law,
that it will not be possible to measure damages for such injuries precisely and
that, in the event of any such failure, the Initial Purchasers or any Holder may
obtain such relief as may be required to specifically enforce the Company’s and
the Guarantor’s obligations under Sections 3 and 4 hereof. The Company and the
Guarantors further agree to waive the defense in any action for specific
performance that a remedy at law would be adequate.

 

(b) No Inconsistent
Agreements. Neither the Company nor any Guarantor will, on or after the
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Holders in this Agreement
or otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company’s and the Guarantors’ securities
under any agreement in effect on the date hereof.

 

(c) Amendments and
Waivers. The provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to or departures from the provisions
hereof may not be given unless (i) in the case of Section 5 hereof and this
Section 10(c)(i), the Company has obtained the written consent of Holders of
all outstanding Transfer Restricted Securities and (ii) in the case of all
other provisions hereof, the Company has obtained the written consent of
Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose Transfer Restricted Securities are being tendered pursuant to
the Exchange Offer, and that does not affect directly or indirectly the rights
of other Holders whose Transfer Restricted Securities are not being tendered
pursuant to such Exchange Offer, may be given by the Holders of a majority of
the outstanding principal amount of Transfer Restricted Securities subject to
such Exchange Offer.

 

(d) Third Party
Beneficiary. The Holders shall be third party beneficiaries to the
agreements made hereunder between the Company and the Guarantors, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right
to enforce such agreements directly to the extent they may deem such
enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder.

 

(e) Notices. All
notices and other communications provided for or permitted hereunder shall be
made in writing by hand-delivery, first-class mail (registered or certified,
return receipt requested), telex, telecopier, or air courier guaranteeing
overnight delivery:

 

(i) if to a Holder, at the
address set forth on the records of the Registrar under the Indenture, with a
copy to the Registrar under the Indenture; and

 

14

 

(ii)    if
to the Company or the Guarantors:

c/o Hovnanian Enterprises,
Inc.

10 Highway 35

P.O. Box 500

Red Bank, NJ 07701

 

Telecopier No.: 732-747-6835

Attention: Corporate
Controller

 

With a copy to:

Simpson Thacher &
Bartlett

425 Lexington Ave.

New York, NY 10017

 

Telecopier No.: 212-455-2502

Attention: Vincent Pagano,
Jr., Esq.

 

All such notices and
communications shall be deemed to have been duly given: at the time delivered
by hand, if personally delivered; five Business Days after being deposited in
the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied;
and on the next business day, if timely delivered to an air courier
guaranteeing overnight delivery.

 

Copies of all such notices,
demands or other communications shall be concurrently delivered by the Person
giving the same to the Trustee at the address specified in the Indenture.

 

(f) Successors and
Assigns. This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of each of the parties, including without limitation
and without the need for an express assignment, subsequent Holders; provided, that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Transfer
Restricted Securities in violation of the terms hereof or of the Purchase
Agreement or the Indenture. If any transferee of any Holder shall acquire
Transfer Restricted Securities in any manner, whether by operation of law or
otherwise, such Transfer Restricted Securities shall be held subject to all of
the terms of this Agreement, and by taking and holding such Transfer Restricted
Securities such Person shall be conclusively deemed to have agreed to be bound
by and to perform all of the terms and provisions of this Agreement, including
the restrictions on resale set forth in this Agreement and, if applicable, the
Purchase Agreement, and such Person shall be entitled to receive the benefits
hereof.

 

(g) Counterparts.
This Agreement may be executed in any number of counterparts and by the parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which taken together shall constitute one and the
same agreement.

 

(h) Headings. The
headings in this Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning hereof.

 

(i) Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK.

 

(j) Severability. In
the event that any one or more of the provisions contained herein, or the
application thereof in any circumstance, is held invalid, illegal or
unenforceable, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions contained herein shall
not be affected or impaired thereby.

 

15

 

(k) Entire Agreement.
This Agreement is intended by the parties as a final expression of their
agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein with respect to
the registration rights granted with respect to the Transfer Restricted
Securities. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.

 

16

 

IN WITNESS WHEREOF, the
parties have executed this Agreement as of the date first written above.

 

	
   

  	
  K. HOVNANIAN ENTERPRISES, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  HOVNANIAN ENTERPRISES, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  On behalf of each entity named in Schedule A hereto

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  
	
   

  	
  Title:

  

 

17

 

Credit Suisse First Boston
LLC

Citigroup Global Markets
Inc.

Deutsche Bank Securities
Inc.

Fleet Securities, Inc.

SunTrust Capital Markets,
Inc.

Wachovia Securities, Inc.

 

By: Credit Suisse First
Boston LLC

 

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

18

 

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.

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,
III, INC.

K. HOV IP,
INC.

K. HOV IP, IV,
INC.

K. HOVNANIAN ACQUISITIONS,
INC.

K. HOVNANIAN AT ASHBURN
VILLAGE, INC.

K. HOVNANIAN AT BALLANTRAE,
INC.

K. HOVNANIAN AT BARRINGTON,
INC.

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 BULL RUN,
INC.

K. HOVNANIAN AT BURLINGTON
III, INC.

K. HOVNANIAN AT BURLINGTON,
INC.

K. HOVNANIAN AT CALABRIA,
INC.

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 CHAPARRAL,
INC.

K. HOVNANIAN AT CLARKSTOWN,
INC.

K. HOVNANIAN AT CRESTLINE,
INC.

K. HOVNANIAN AT DOMINGUEZ,
INC.

K. HOVNANIAN AT DOMINION
RIDGE, INC.

K. HOVNANIAN AT EAST
BRUNSWICK VI, INC.

K. HOVNANIAN AT EAST
WHITELAND I, INC.

 

19

 

K. HOVNANIAN AT EXETER HILLS, INC.

K. HOVNANIAN AT FAIR LAKES GLEN, INC.

K. HOVNANIAN AT FAIR LAKES,
INC.

K. HOVNANIAN AT FREEHOLD TOWNSHIP I, INC.

K. HOVNANIAN AT HACKETTSTOWN, INC.

K. HOVNANIAN AT HAMPTON OAKS, INC.

K. HOVNANIAN AT HERSHEY’S MILL, INC. (a PA
Corp)

K. HOVNANIAN AT HIGHLAND VINEYARDS, INC.

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 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 IV, INC. (Whalepond)

K. HOVNANIAN AT MAHWAH V, INC.

K. HOVNANIAN AT MAHWAH VI, INC. (Norfolk)

K. HOVNANIAN AT MAHWAH VII, INC.

K. HOVNANIAN AT MAHWAH VIII, 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 METRO DC SOUTH, INC.

K. HOVNANIAN AT MONTCLAIR NJ, INC.

K. HOVNANIAN AT MONTCLAIR, INC.

K. HOVNANIAN AT MONTGOMERY I, INC.

K. HOVNANIAN AT NORTHERN WESTCHESTER, INC.

K. HOVNANIAN AT NORTHLAKE, INC.

K. HOVNANIAN AT OCEAN WALK, INC.

K. HOVNANIAN AT P.C. PROPERTIES, INC.

K. HOVNANIAN AT PARK RIDGE, INC.

K. HOVNANIAN AT PEEKSKILL, INC.

K. HOVNANIAN AT PERKIOMEN I, INC.

K. HOVNANIAN AT PERKIOMEN II, INC.

K. HOVNANIAN AT PLAINSBORO III, INC.

K. HOVNANIAN AT PORT IMPERIAL NORTH, INC.

K. HOVNANIAN AT PRINCETON, INC.

K. HOVNANIAN AT RANCHO CHRISTIANITOS, INC.

K. HOVNANIAN AT RESERVOIR RIDGE, INC.

 

20

 

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 SMITHVILLE, INC.

K. HOVNANIAN AT SOUTH BRUNSWICK II, INC.

K. HOVNANIAN AT SOUTH BRUNSWICK III, INC.

K. HOVNANIAN AT SOUTH BRUNSWICK IV, INC.

K. HOVNANIAN AT SOUTH BRUNSWICK V, INC.

K. HOVNANIAN AT STONE CANYON, INC.

K. HOVNANIAN AT STONEGATE, INC. (a VA
Corporation)

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 THE BLUFF, INC.

K. HOVNANIAN AT THE CEDARS, INC.

K. HOVNANIAN AT THE GLEN, INC.

K. HOVNANIAN AT THE RESERVE AT MEDFORD, INC.

K. HOVNANIAN AT THORNBURY, INC.

K. HOVNANIAN AT TIERRASANTA, INC.

K. HOVNANIAN AT TUXEDO, INC.

K. HOVNANIAN AT UNION TOWNSHIP I, INC.

K. HOVNANIAN AT UPPER 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 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 CALIFORNIA, INC.

K. HOVNANIAN DEVELOPMENTS OF MARYLAND, INC.

K. HOVNANIAN DEVELOPMENTS OF METRO
WASHINGTON, INC.

 

21

 

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 ENTERPRISES, INC.

K. HOVNANIAN EQUITIES, INC.

K. HOVNANIAN FORECAST HOMES, INC.

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 NB THEATRE, 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.

K. HOVNANIAN REAL ESTATE INVESTMENT, INC.

KHC ACQUISITION, INC.

KHIP III, INC.

LANDARAMA, INC.

MATZEL & MUMFORD OF DELAWARE, INC.

MCNJ, INC.

MMIP III, INC.

PARTHENON GROUP, 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 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.

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

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

 

22

 

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 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 CRANBURY, L.L.C.

K. HOVNANIAN AT CURRIES WOODS, L.L.C.

K. HOVNANIAN AT DENVILLE, 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 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 KENT ISLAND, L.L.C.

K. HOVNANIAN AT KINCAID, L.L.C.

K. HOVNANIAN AT KING FARM, 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 MANALAPAN III, 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.

 

23

 

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

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

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

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

K. HOVNANIAN AT NORTH WILDWOOD, L.L.C.

K. HOVNANIAN AT NORTHFIELD, L.L.C.

K. HOVNANIAN AT OLD BRIDGE, L.L.C.

K. HOVNANIAN AT 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.

K. HOVNANIAN AT SPRING HILL ROAD, L.L.C.

K. HOVNANIAN AT ST. MARGARETS, 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 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 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.

 

24

 

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 AT WOOLWICH I, 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 EASTERN PENNSYLVANIA, L.L.C.

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

K. HOVNANIAN HOLDINGS NJ, LLC

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’S FOUR SEASONS AT HEMET, L.L.C.

K. HOVNANIAN’S FOUR SEASONS AT PALM SPRINGS,
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, LLC

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

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

M&M AT MORRISTOWN, L.L.C.

M&M AT SHERIDAN, L.L.C.

M&M AT SPARTA, L.L.C.

M&M AT SPINNAKER POINTE, L.L.C.

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

M&M AT SPRUCE MEADOWS, L.L.C.

M&M AT SPRUCE RUN, L.L.C.

M&M AT THE HIGHLANDS, L.L.C.

M&M AT WEST ORANGE, 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.

 

25

 

MATZEL & MUMFORD AT SOUTH BRUNSWICK,
L.L.C.

MATZEL & MUMFORD AT WOODLAND CREST,
L.L.C.

MMIP, L.L.C.

THE LANDINGS AT SPINNAKER POINTE, 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.

 

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Exhibit 10.38  

 
 

ZENITH NATIONAL INSURANCE CORP.
  
    2003 NON-EMPLOYEE DIRECTOR DEFERRED COMPENSATION PLAN    
    

        Zenith National Insurance Corp. (the "Company") hereby establishes, effective July 1, 2003, a nonqualified
deferred compensation plan for the benefit of Non-Employee Directors (defined below) of the Company. This plan shall be known as the Zenith National Insurance Corp. 2003
Non-Employee Director Deferred Compensation Plan (the "Plan"). The Plan was adopted by the Board on May 20, 2003. 

ARTICLE 1.    DEFERRED COMPENSATION ACCOUNTS.  

        SECTION
1.1    ESTABLISHMENT OF ACCOUNTS.    The Company shall establish a "Deferred Cash
Account" and a "Stock Unit Account" (each, an "Account," and collectively,
"Accounts") for each Participant which shall be utilized solely as a device to measure and determine the amount of deferred Director's Compensation to
be paid under the Plan. 

        SECTION
1.2    PROPERTY OF COMPANY.    Any amounts so set aside for Benefits payable under the Plan are the property
of the Company, except, and to the extent, of any assignment of such assets to an irrevocable trust. 

ARTICLE 2.    DEFINITIONS, GENDER, AND NUMBER.  

        SECTION
2.1    DEFINITIONS.    Whenever used in the Plan, the following words and phrases shall have the meanings set
forth below unless the context plainly requires a different meaning, and when a defined meaning is intended, the term is capitalized. 

        (a)   "Administrator" means the Board, or if and to the extent the Board does not administer the Plan, the Committee. 

        (b)   "Beneficiary" or "Beneficiaries" means the individuals, trusts or other
entities designated by a Participant in writing pursuant to Section 7.2(d) of the Plan as being entitled to receive any benefit payable under the Plan by reason of the death of a Participant,
or, in the absence of such designation, the persons specified in Section 7.2(e) of the Plan. 

        (c)   "Benefit" means the amounts credited to a Participant's Accounts pursuant to such Participant's Deferred Compensation
Agreement plus or minus the gains or losses pursuant to Section 4.2. 

        (d)   "Board" means the Board of Directors of the Company as constituted at the relevant time. 

        (e)   "Closing Price" means the closing price, or last reported sales price, as the case may be of the Common Stock on the New
York Stock Exchange, or the primary national securities exchange on which the Common Stock is traded as of the applicable date; provided, however, that if no closing price is available for such date,
"Closing Price" means the closing price or last reported sales price, as the case may be, of the Common Stock as of the next most recent date for which a price is available. 

        (f)    "Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute. References to a
Code Section shall be deemed to be to that section or to any successor to that section. 

        (g)   "Committee" means the Compensation Committee of the Board. 

        (h)   "Common Stock" means the common stock of the Company, par value $1.00 per share, or any successor security. 

 

        (i)    "Company" means Zenith National Insurance Corp., a Delaware corporation. 

        (j)    "Deferred Compensation Agreement" means the agreement to participate and defer compensation between a Participant and the
Company. 

        (k)   "Deferred Stock Unit" means a unit equal in value to one share of Common Stock and posted to a Participant's Stock Unit
Account for the purpose of measuring the Benefits payable under the Plan. The number of Deferred Stock Units in or posted to a Participant's Stock Unit Account shall be rounded to the nearest
one-hundredth. In the event that shares of Common Stock shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or another
corporation (whether by reason of merger, consolidation, recapitalization, split-up, combination of shares or otherwise), or if the number of shares of Common Stock shall be increased
through a stock split or the payment of a stock dividend, then there shall be substituted for or added to each Deferred Stock Unit the number and kind of shares of stock or other securities into which
each outstanding share of Common Stock shall be so changed, or for which each such share shall be exchanged, or to which each such share shall be entitled, as the case may be, in each case as
determined by the Administrator in its sole discretion. 

        (l)    "Director" means an individual serving as a member of the Board of Directors of the Company. 

        (m)  "Director's Compensation" of a Director for any Plan Year means that individual's total annual retainer, and any fees
received for performance of the Director's functions, including fees for attendance or participation at meetings and for serving on a Board Committee or as a Committee or Board Chair. "Director's
Compensation" shall not include expense reimbursements. 

        (n)   "Early Benefit Distribution Date" means a date specified by the Participant and which is at least twenty-four
(24) full calendar months after the date the Participant's Deferred Compensation Agreement is received by the Company. 

        (o)   "Effective Date" means the date on which this Plan became effective, i.e., July 1, 2003. 

        (p)   "Enrollment Period" means the period of December 1 to December 31 prior to the Plan Year to which a
deferral election pursuant to a Deferred Compensation Agreement applies. However, for the first Plan Year, the Enrollment Period shall be June 1, 2003 to June 30, 2003. The Enrollment
Period for any
newly elected Non-Employee Director shall be any time within thirty (30) days before or after the Director takes office. 

        (q)   "Non-Employee Director" means any Director who is not an employee of the Company or any of its subsidiaries. 

        (r)   "Participant" means a Non-Employee Director of the Company who has executed a Deferred Compensation Agreement
and who maintains an Account under the Plan. 

        (s)   "Plan" means this Zenith National Insurance Corp. 2003 Non-Employee Director Deferred Compensation Plan as
set forth herein and as amended or restated from time to time. 

        (t)    "Plan Year" means January 1 through December 31, except that the first Plan Year shall be from
July 1, 2003 through December 31, 2003. 

        (u)   A
"Termination Event" shall be deemed to occur if a Participant ceases being a Non-Employee Director of the
Company for any reason. 

        SECTION
2.2.    GENDER AND NUMBER.    Except as otherwise indicated by context, masculine terminology used herein also
includes the feminine and neuter, and terms used in the singular may also include the plural. 

2

 

ARTICLE 3.    PARTICIPATION.  

        SECTION
3.1    ELIGIBILITY TO PARTICIPATE.    Each Non-Employee Director of the Company may participate in
this Plan. 

        SECTION
3.2    ELECTION TO PARTICIPATE.    Each Non-Employee Director may become a Participant in the Plan
by electing to defer compensation in accordance with the terms of this Plan during an Enrollment Period. An election to defer shall be in writing and shall be made by executing a Deferred Compensation
Agreement. Except for the amounts deferred in 2003 and except with respect to new Non-Employee Directors, all elections to defer amounts under this Plan shall be made pursuant to a
Deferred Compensation Agreement executed and filed with the Company before the year in which the amount deferred is earned. All Deferred Compensation Agreements relating to the deferral of 2003
Director's Compensation shall be executed and filed with the Company no later than June 30, 2003 and shall relate to compensation to be earned after June 30, 2003. A deferral election
made pursuant to a Deferred Compensation Agreement shall remain in effect until modified by the Participant. No modification shall be given effect with respect to a Plan Year to which the modification
is intended to apply unless that modification is made prior to the beginning of that Plan Year. 

        SECTION
3.3    CESSATION OF PARTICIPATION.    Participation in the Plan shall continue until all of the Benefits to
which the Participant is entitled have been paid in full. 

ARTICLE 4.    ENTRIES TO PARTICIPANTS' ACCOUNTS.  

        SECTION
4.1    DEFERRALS.    Pursuant to a Deferred Compensation Agreement in effect for the applicable Plan Year, a
Participant may elect to defer all or a portion of Director's Compensation into his or her Deferred Cash Account, Stock Unit Account, or a combination thereof. 

        (a)    Deferred Cash Account.    A Participant's Deferred Cash Account shall be credited with the dollar amount of
Director's Compensation to be deferred as designated by such Participant in his or her Deferred Compensation Agreement on the date such compensation would otherwise have been payable. 

        (b)    Stock Unit Account.    A Participant's Stock Unit Account shall be credited with a number of Deferred Stock
Units determined by dividing (i) the amount of Director's Compensation to be deferred as designated by such Participant in his or her Deferred Compensation Agreement on the date such
compensation would otherwise have been payable, by (ii) the Closing Price of the Common Stock on the last trading day prior to the date the Deferred Stock Units are credited. 

        SECTION
4.2    CREDITS TO ACCOUNTS.    

        (a)    Deferred Cash Account.    At the end of each calendar quarter, a Participant's Deferred Cash Account shall be
credited by an amount equal to deemed interest, at the prime rate of interest, as reported in the Wall Street Journal on the last day of such calendar quarter (or if not reported on such day, the
latest reported rate preceding the last day of the calendar quarter), upon the average daily balance of such Participant's Deferred Cash Account during such calendar quarter. 

        (b)    Stock Unit Account.    The Participant's Stock Unit Account shall be valued as if his or her Stock Unit Account
were invested in shares of Common Stock equal to the number of Deferred Stock Units posted to his or her Stock Unit Account. The value of a Participant's Stock Unit Account shall vary with the value
of the Common Stock. In addition, a Participant's Stock Unit Account shall be credited, as of the applicable dividend payment date, with additional Deferred Stock Units determined by dividing
(i) the per share dividend declared on the Common Stock multiplied by the number of Deferred Stock Units posted to the Participant's Stock Unit Account as of the record date with respect to the
declaration of such dividend, by (ii) the Closing Price of the Common Stock on the last trading 

3

 

day
prior to the date such dividend is declared. As of any date of valuation, the value of a Participant's Stock Unit Account will be equal to the value (at the Closing Price on such date) of the
number of shares of Common Stock represented by the Deferred Stock Units credited to the Stock Unit Account as of that date. 

        SECTION
4.3    DISTRIBUTIONS.    

        (a)    Deferred Cash Account.    A Participant's Deferred Cash Account shall be debited for the amount of any
distribution from such Account. 

        (b)    Stock Unit Account.    A Participant's Stock Unit Account shall be debited for the amount of any distribution
from such Account by dividing: (i) the dollar amount of the distribution by (ii) the Closing Price of the Common Stock on the last trading day prior to the date the Stock Unit Account is
debited. 

ARTICLE 5.    BENEFITS.  

        SECTION
5.1    TIMING OF DISTRIBUTION.    The amounts credited to a Participant's Accounts shall be paid (or payment
shall commence) within a reasonable time after the earlier of: (i) the Early Benefit
Distribution Date, if the Participant has made a valid election for early distribution of Benefits pursuant to Section 5.2, or (ii) a Termination Event. 

        SECTION
5.2    EARLY BENEFIT DISTRIBUTION.    A Participant may elect an Early Benefit Distribution Date. Such
election shall be made in the Participant's original Deferred Compensation Agreement and shall specify the portion or amount of the Participant's Accounts to be distributed on such Early Benefit
Distribution Date. Any election of an Early Benefit Distribution Date shall be irrevocable, both as to the date of distribution and as to the amount of the distribution. 

        (a)   No
election of an Early Benefit Distribution Date shall be given effect unless such election specifies an Early Benefit Distribution Date that is at least
twenty-four (24) full calendar months after the date the Participant's Deferred Compensation Agreement is received by the Company. With respect to elections relating to Plan Years
subsequent to the Plan Year to which the original election relates, the Company will be deemed to have received the election on December 31 of the prior year. 

        (b)   If
a Participant elects an Early Benefit Distribution Date for less than 100% of each of his or her Accounts (determined as of the Early Benefit Distribution Date), the
balance of such Participant's Account remaining after the Early Benefit Distribution Date (adjusted as provided in Article 4) shall be distributed in accordance with Section 5.1 without
regard to Section 5.1(i). 

        (c)   If
a Participant has a Termination Event prior to his or her Early Benefit Distribution Date, his or her election of an Early Benefit Distribution Date shall not be
given effect and distribution of the Participant's Accounts, shall be made in accordance with Section 5.1 without regard to Section 5.1(i). 

ARTICLE 6.    VESTING.  

        SECTION
6.1    IMMEDIATE VESTING.    Participants shall be fully vested in all Accounts at all times. 

ARTICLE 7.    DISTRIBUTION OF BENEFITS.  

        SECTION
7.1    FORM OF BENEFIT.    Participants may elect in their Deferred Compensation Agreements one of the
following forms of cash payment of Benefits: 

        (a)   annual
installment payments over a five (5) year or a ten (10) year period; or 

4

 

        (b)   a
lump sum distribution. 

        Installment
payments shall be available to a Participant only in the event the Participant elects to receive a distribution on a Termination Event. In the event a Participant has failed
to elect a form of distribution, or if no record of such election can be found, the Participant shall receive annual payments over a five (5) year period. Except for lump sum distributions,
Benefit payments shall be a level annual amount for each calendar year, calculated using the sum of the balances in the Participant's Accounts at the beginning of the calendar year (or, in the case of
the first calendar year, on the Early Benefit Distribution Date or the date of the Termination Event) and dividing it by the total number of annual payments remaining in the entire payment period. The
Benefit payment amount shall be adjusted at the beginning of each calendar year. A Participant's Account shall continue to be credited during the payment period with gains and losses as provided in
Section 4.2. 

        SECTION
7.2    DEATH BENEFITS.    

        (a)   If
a Participant dies after commencement of payment of Benefits, the remaining benefit payments, if any, shall be paid to the Participant's Beneficiary in a lump sum
within a reasonable time following the Participant's death. 

        (b)   If
a Participant dies prior to the time payment of Benefits commence, the Participant's Benefit shall be paid to the Beneficiary in a lump sum within a reasonable time
following the Participant's death. 

        (c)   Any
Benefits that become payable under this Article 7 to the surviving spouse of a Participant shall be paid in a manner that will qualify such Benefits for a
marital deduction in the estate of a deceased Participant under the terms of Section 2056 of the Code, and unless specifically directed by a Participant to the contrary pursuant to an effective
beneficiary designation, any portion of a Participant's Benefit payable to a surviving spouse that remains unpaid at the death of such spouse shall be paid to the spouse's estate. 

        (d)   Each
Participant has the right to designate primary and contingent Beneficiaries for Benefits payable under the Plan. A beneficiary designation by a Participant shall be
in writing on a form acceptable to the Company and shall only be effective upon delivery to the Company. A beneficiary designation may be revoked by a Participant at any time by delivering to the
Company either written notice of revocation or a new beneficiary designation form. The beneficiary designation form last delivered to the Company prior to the death of a Participant shall control. 

        (e)   In
the event there is no beneficiary designation on file with the Company, or all Beneficiaries designated by a Participant have predeceased the Participant, the
Benefits payable by reason of the death of the Participant shall be paid to the Participant's spouse, if living; if the Participant does not leave a surviving spouse, to the Participant's issue by
right of representation; or, if there are no such issue then living, to the Participant's estate. In the event there are Benefits remaining unpaid at the death of a sole Beneficiary and no successor
Beneficiary has been designated, either by the Participant or the Participant's spouse pursuant to Section 7.2(d), the remaining balance of such benefit shall be paid to the deceased
Beneficiary's estate; or, if the deceased Beneficiary is one of multiple concurrent Beneficiaries, such remaining Benefits shall be paid proportionally to the surviving Beneficiaries. 

ARTICLE 8.    FUNDING.  

        SECTION
8.1    SOURCES OF BENEFITS.    All Benefits under the Plan shall be paid when due by the Company out of its
assets or from an irrevocable trust established by the Company for that purpose. 

5

 

        SECTION
8.2    NO CLAIM ON SPECIFIC ASSETS.    No Participant shall be deemed to have, by virtue of being a
Participant in the Plan, any claim on any specific assets of the Company such that the Participant would be subject to income taxation on his Benefits under the Plan prior to distribution and the
rights of Participants and Beneficiaries to Benefits to which they are otherwise entitled under the Plan shall be those of an unsecured general creditor of the Company. 

ARTICLE 9.    ADMINISTRATION OF THE PLAN.  

        SECTION
9.1    ADMINISTRATOR.    The Administrator shall be responsible for the general operation and administration
of this Plan and for carrying out the provisions thereof. 

        SECTION
9.2    GENERAL POWERS OF ADMINISTRATION.    The Plan shall be administered by the Administrator. The
Administrator shall be entitled to rely conclusively upon all tables, valuations, certificates, opinions and reports furnished by any actuary, accountant, controller, counsel or other person employed
or engaged by the Company with respect to this Plan. 

        SECTION
9.3    CLAIMS PROCEDURE.    The Administrator shall notify a Participant in writing within ninety
(90) days of the Participant's written application for Benefits of his eligibility or non-eligibility for Benefits under the Plan. If the Administrator determines that a Participant
is not eligible for Benefits or full Benefits, the notice shall set forth (i) the specific reasons for such denial, (ii) a specific reference to the provision of the Plan on which the
denial is based, (iii) a description of any additional information or material necessary for the claimant to perfect his claim, a description of why it is needed, and an explanation of the
Plan's claims review procedure and other appropriate information as the steps to be taken if the Participant wishes to have his claim reviewed. If the Administrator determines that there are special
circumstances requiring additional time to make a decision, the Administrator shall notify the Participant of the special circumstances and the date by which a decision is expected to be made, and may
extend the time for an additional 90-day period. If a Participant is determined by the Administrator to be not eligible for Benefits, or if the Participant believes that he is entitled to
greater or different Benefits, he shall have the opportunity to have his claim reviewed by the Administrator by filing a petition for review with the Administrator within sixty (60) days after
receipt by him of the notice issued by the Administrator. Said petition shall state the specific reasons the Participant believes he is entitled to Benefits or greater or different Benefits. Within
sixty (60) days after receipt by the Administrator of said petition, the Administrator shall afford the Participant (and his counsel, if any) an opportunity to present his position to the
Administrator orally or in writing, and said Participant (or his counsel) shall have the right to review the pertinent documents, and the Administrator shall notify the Participant of its decision in
writing within said sixty (60) day period, stating specifically the basis of said decision written in a manner calculated to be understood by the Participant and the specific provisions of the
Plan on which the decision is based. If, because of the need for a hearing, the sixty (60) day period is not sufficient, the decision may be deferred for up to another sixty (60) day
period at the election of the Administrator, but notice of this deferral shall be given to the Participant. 

ARTICLE 10.    MISCELLANEOUS.  

        SECTION
10.1    BENEFITS INALIENABLE.    Except as provided in Section 7.2, the right of any Participant, any
Beneficiary, or any other person to the payment of any Benefits under this Plan shall not be assigned, transferred, pledged or encumbered. 

        SECTION
10.2    SUCCESSORS AND ASSIGNS.    This Plan shall be binding upon and inure to the benefit of the Company,
its successors and assigns and the Participant and his or her heirs, executors, administrators and legal representatives. 

        SECTION
10.3    COSTS OF ENFORCEMENT.    If the Company, the Participant, any Beneficiary, or a successor in interest
to any of the foregoing, brings legal action to enforce any of the 

6

 

provisions
of this Plan, the prevailing party in such legal action shall be reimbursed by the other party for the prevailing party's costs of such legal action including, without limitation,
reasonable fees of attorneys, accountants and similar advisors and expert witnesses. 

        SECTION
10.4    DISPUTES.    Any dispute or claim relating to or arising out of this Plan that cannot be resolved
pursuant to the internal dispute resolution processes implemented by the Administrator with respect to the Plan shall be resolved in the following manner. The Participant or Beneficiary, as the case
may be, on the one hand, and the Administrator or its representative, on the other hand (collectively, the "Parties"), shall meet to attempt to resolve
such disputes. If the disputes cannot be resolved by the Parties, either Party may make a written demand for formal dispute resolution and specify therein the scope of the dispute. Within thirty
(30) days after such written notification, the parties agree to meet for one day with an impartial mediator and consider dispute resolution alternatives other than litigation. If an alternative
method of dispute resolution is not agreed upon within thirty (30) days after the one day mediation, either party may begin litigation proceedings. 

        SECTION
10.5    GOVERNING LAW.    This Plan shall be construed in accordance with and governed by the laws of the
State of Delaware, without reference to the principles of conflicts of law thereof, to the extent such construction is not pre-empted by any applicable federal law. 

        SECTION
10.6    ENTIRE AGREEMENT.    This Plan constitutes the entire understanding and agreement with respect to the
subject matter contained herein, and there are no agreements, understandings, restrictions, representations or warranties among any Participant and the Company other than those set forth or provided
for herein. 

        SECTION
10.7    AMENDMENT AND TERMINATION.    

        (a)   This
Plan may be amended by the Board at any time in its sole discretion; provided, however, any amendment that would alter the irrevocable nature of an election or
which would reduce the amount credited to a Participant's Account on the date of such amendment shall not be effective unless consented to in writing by the Participant or, if the Participant has died
or is incompetent, the Participant's Beneficiary or conservator. 

        (b)   Notwithstanding
the foregoing paragraph or any other provision in this Plan to the contrary, the Board may terminate the Plan at any time. Within a reasonable period
following termination of the Plan, Participants shall be distributed all Benefits due them. Any amounts not distributed after payment in full of all Benefits hereunder shall revert to the Company. 

ARTICLE 11.    TERM OF PLAN.  

        The Plan shall remain in effect until terminated by the Board. 

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ZENITH NATIONAL INSURANCE CORP. 2003 NON-EMPLOYEE DIRECTOR DEFERRED COMPENSATION PLAN

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