$600,000,000
K. HOVNANIAN ENTERPRISES, INC.
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11 1 / 2 % Senior
Secured Notes due 2013
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CREDIT SUISSE
SECURITIES (USA) LLC
(" Credit Suisse
")
BANC OF AMERICA
SECURITIES LLC
J.P. MORGAN SECURITIES
INC.
WACHOVIA CAPITAL
MARKETS, LLC
As Representatives of the Several Purchasers (the
“ Representatives
”),
c/o Credit Suisse Securities (USA) LLC
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Eleven Madison Avenue,
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New York, N.Y. 10010-3629
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Dear Sirs:
1. Introductory.
K. Hovnanian Enterprises, Inc., a California
corporation (the “ Company ”), agrees with the
several initial purchasers named in Schedule A hereto (the
“ Purchasers ”) subject to the terms and conditions stated herein, to
issue and sell to the several Purchasers U.S.$600,000,000 principal
amount of its 11 1 / 2 % Senior
Secured Notes due 2013 (“ Offered
Securities ”) to be issued under an
indenture, to be dated as of the Closing Date (the “
Indenture ”),
among the Company, the Guarantors (as defined below) and Deutsche
Bank National Trust Company, a national banking association, as
trustee (the “ Trustee
”). The Offered Securities will be
unconditionally guaranteed on a secured basis as to the payment of
principal and interest by Hovnanian Enterprises, Inc., a Delaware
corporation (“ Hovnanian
”) and the subsidiary guarantors listed on
Schedule B hereto (together with Hovnanian, the “
Guarantors ” and
such guarantees, the “ Guarantees ”). The Offered
Securities and the Guarantees will be secured by a second-priority
lien on the Collateral (as defined in the General Disclosure
Package referred to below). A first-priority lien on the Collateral
will secure the Company’s obligations under the Revolving
Credit Agreement, as amended as of the Closing Date among the
Company, as Borrower, PNC Bank, National Association, as Agent, the
other parties named therein and the Lenders named therein (the
“ New Credit Agreement
”) pursuant to one or more pledge agreements,
one or more mortgages and deeds of trust, security agreements and
an intercreditor agreement. As used herein, the term “
Security Documents ” has the meaning assigned to it in the General
Disclosure Package.
The holders of the Offered Securities (including
subsequent transferees) will be entitled to the benefits of a
Registration Rights Agreement to be dated as of the Closing Date
among the Company, the Guarantors and the Purchasers (the
“ Registration Rights
Agreement ”), pursuant to which the
Company and the Guarantors agree to file with the Commission under
the circumstances set forth therein, (i) a registration statement
under the Securities Act (the “ Exchange Offer Registration Statement ”) relating to the Offered Securities and related
Guarantees in a like aggregate principal amount as the Company
issued under the Indenture, identical in all material respects to
the Offered Securities and registered under the Securities Act (the
“ Exchange Securities
”), to be offered in exchange for the Offered
Securities (such offer to exchange being referred to as the
“ Exchange Offer
”) or, in certain circumstances (ii) a shelf
registration statement pursuant to Rule 415 (the “
Shelf Registration Statement
” and, together with the Exchange Offer
Registration Statement, the “ Registration Statements ”)
relating to the resale by certain holders of the Offered Securities
and Guarantees, and to use its reasonable best efforts to cause
such Registration Statements to be declared and remain effective
and usable for the periods specified in the Registration Rights
Agreement and to consummate the Exchange Offer.
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Each of the Company and each Guarantor hereby agrees
with the several Purchasers as follows:
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2. Representations and
Warranties of the Company and Hovnanian. The Company and Hovnanian represent and warrant to, and agree
with, the several Purchasers that:
(a) Offering Circulars;
Certain Defined Terms . The Company has
prepared or will prepare a Preliminary Offering Circular and a
Final Offering Circular.
For purposes of this Agreement:
“ Applicable
Time ” means 2:45 p.m. (Eastern
time) on the date of this Agreement.
“ Closing
Date ” has the meaning set forth in
Section 3 hereof.
“ Commission ” means the
Securities and Exchange Commission.
“ Exchange
Act ” means the United States
Securities Exchange Act of 1934, as amended.
“ Final Offering
Circular ” means the final offering
circular relating to the Offered Securities to be offered by the
Purchasers that discloses the offering price and other final terms
of the Offered Securities and is dated as of the date of this
Agreement (even if finalized and issued subsequent to the date of
this Agreement).
“ Free Writing
Communication ” means a written
communication (as such term is defined in Rule 405) that
constitutes an offer to sell or a solicitation of an offer to buy
the Offered Securities and is made by means other than the
Preliminary Offering Circular or the Final Offering
Circular.
“ General Disclosure
Package ” means the Preliminary
Offering Circular together with any Issuer Free Writing
Communication existing at the Applicable Time and the information
in which is intended for general distribution to prospective
investors, as evidenced by its being specified in Schedule C
hereto.
“ Issuer Free Writing
Communication ” means a Free
Writing Communication prepared by or on behalf of the Company, used
or referred to by the Company or containing a description of the
final terms of the Offered Securities or of their offering, in the
form retained in the Company’s records.
“ Preliminary
Offering Circular ” means the
preliminary offering circular, dated May 16, 2008, relating to the
Offered Securities to be offered by the Purchasers.
“ Rules and
Regulations ” means the rules and
regulations of the Commission.
“ Securities
Act ” means the United States
Securities Act of 1933, as amended.
“ Securities
Laws ” means, collectively, the
Sarbanes-Oxley Act of 2002 (“ Sarbanes-Oxley ”), the
Securities Act, the Exchange Act, the Rules and Regulations, the
auditing principles, rules, standards and practices applicable to
auditors of “issuers” (as defined in Sarbanes-Oxley)
promulgated or approved by the Public Company Accounting Oversight
Board and, as applicable, the rules of the New York Stock Exchange
and the NASDAQ Stock Market (“ Exchange Rules ”).
“ Supplemental
Marketing Material ” means any
Issuer Free Writing Communication other than any Issuer Free
Writing Communication specified in Schedule C hereto. Supplemental
Marketing Materials include, but are not limited to, the electronic
Bloomberg roadshow slides and the accompanying audio
recording.
Unless otherwise specified, a reference to a
“rule” is to the indicated rule under the Securities
Act.
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(b) Disclosure
. As of the date of this Agreement, the Final
Offering Circular does not, and as of the Closing Date, the Final
Offering Circular will not include any untrue statement of a
material fact or omit to state any material fact necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading. At the Applicable Time,
and as of the Closing Date, neither (i) the General Disclosure
Package, nor (ii) any individual Supplemental Marketing Material,
when considered together with the General Disclosure Package,
included, or will include, any untrue statement of a material fact
or omitted, or will omit, to state any material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The
preceding two sentences do not apply to statements in or omissions
from the Preliminary or Final Offering Circular, the General
Disclosure Package or any Supplemental Marketing Material based
upon written information furnished to the Company by any Purchaser
through the Representatives specifically for use therein, it being
understood and agreed that the only such information is that
described as such in Section 8(b) hereof. The documents
incorporated by reference in the General Disclosure Package and the
Final Offering Circular, at the time they were or hereafter are
filed with the Commission and except as otherwise subsequently
disclosed therein, complied and will comply in all material
respects with the requirements of the Exchange Act and the rules
and regulations of the Commission thereunder and, when read
together and with the other information in the General Disclosure
Package and the Final Offering Circular, did not and will not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances
under which they were or are made, not misleading. Such documents,
when they were filed with the Commission, conformed in all material
respects to the requirements of the Exchange Act and the Rules and
Regulations. The preceding sentence does not apply to statements in
or omissions from the Preliminary or Final Offering Circular based
upon written information furnished to the Company by any Purchaser
through the Representatives specifically for use therein, it being
understood and agreed that the only such information is that
described as such in Section 8(b) hereof. No stop order
preventing the use of the Offering Memorandum, or any amendment or
supplement thereto, or any order asserting that any of the
transactions contemplated by this Agreement are subject to the
registration requirements of the Securities Act, has been
issued.
(c) Good Standing of the
Company, Hovnanian and its Subsidiaries .
Each of the Company, Hovnanian and its subsidiaries has been duly
incorporated or formed, as the case may be, is validly existing as
a corporation, limited liability company or limited partnership, as
the case may be, in good standing under the laws of its
jurisdiction of incorporation or organization and has the corporate
power, or its equivalent in the case of a limited partnership or
limited liability company, and authority to carry on its business
as described in the General Disclosure Package and to own, lease
and operate its properties; and each is duly qualified and is in
good standing as a foreign corporation, limited liability company
or limited partnership, as the case may be, authorized to do
business in each jurisdiction in which the nature of its business
or its ownership or leasing of property requires such qualification
except where the failure to be so qualified would not have a
material adverse effect on the business, prospects, financial
condition or results of operations of Hovnanian and its
subsidiaries, taken as a whole (a “ Material Adverse Effect ”).
(d) Capital
Stock . All outstanding shares of capital
stock of the Company and Hovnanian have been duly authorized and
validly issued and are fully paid, nonassessable and not subject to
any preemptive or similar rights; all of the outstanding shares of
capital stock of each of Hovnanian’s direct and indirect
subsidiaries have been duly authorized and validly issued and are
fully paid and nonassessable and are owned by Hovnanian, directly
or indirectly through one or more subsidiaries, free and clear of
any security interest, claim, lien, encumbrance or adverse interest
of any nature (each, a “ Lien ”) other than Liens
securing obligations under the Offered Securities and the
Guarantees and the New Credit Agreement.
(e) Indenture
. The Indenture has been duly authorized by the
Company and each Guarantor; when the Indenture has been duly
executed and delivered by the Company and each Guarantor, and,
assuming that the Indenture is a valid and binding obligation of
the Trustee, the
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Indenture will be, a valid and binding agreement of
the Company and each Guarantor, enforceable against the Company and
each Guarantor in accordance with its terms except as the
enforceability thereof may be limited by the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors’ rights
generally, general equity principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
(f) Offered
Securities . The Offered Securities have
been duly authorized and, on the Closing Date, will have been
validly executed and delivered by the Company. When the Offered
Securities have been issued, executed and authenticated in
accordance with the provisions of the Indenture and delivered to
and paid for by the Purchasers in accordance with the terms of this
Agreement, the Offered Securities will be entitled to the benefits
of the Indenture, and will be valid and binding obligations of the
Company, enforceable in accordance with their terms except as the
enforceability thereof may be limited by the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors’ rights
generally, general equitable principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good
faith and fair dealing. On the Closing Date, the Offered Securities
will conform as to legal matters to the descriptions thereof
contained in the General Disclosure Package.
(g) Trust Indenture
Act . On the Closing Date, the Indenture
will conform in all material respects to the requirements of the
Trust Indenture Act of 1939, as amended (the “
Trust Indenture Act ”), and the rules and regulations of the Commission
applicable to an indenture which is qualified
thereunder.
(h) Registration Rights
Agreement . The Registration Rights
Agreement has been duly authorized by the Company and each of the
Guarantors; and when duly executed and delivered by the Company and
each of the Guarantors (assuming due authorization, execution and
delivery by the Purchasers), will be a valid and binding obligation
of the Company and each of the Guarantors, enforceable in
accordance with its terms except as the enforceability thereof may
be limited by the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors’ rights generally, general
equity principles (whether considered in a proceeding in equity or
at law) and an implied covenant of good faith and fair dealing. On
the Closing Date, the Registration Rights Agreement will conform as
to legal matters to the descriptions thereof in the General
Disclosure Package.
(i) Security
Documents. Each of the Security Documents
to be entered into on the Closing Date (the “
Existing Security Documents
”) has been duly authorized by the Company (if
it is a party thereto) and the applicable Guarantors that are
parties thereto; and on the Closing Date, the Security Documents
will have been duly executed and delivered by the Company (if it is
a party thereto) and each Guarantor that is a party thereto, will
constitute valid and binding obligations of such parties,
enforceable in accordance with its terms except as the
enforceability thereof may be limited by the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors’ rights
generally, general equity principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good
faith and fair dealing; the Security Documents, when duly executed
and delivered, will create valid and perfected security interests
or mortgage liens in the Collateral to which they relate, subject
to no prior liens other than Permitted Liens (as defined in the
Indenture); and each of the representations and warranties made by
the Company and the Guarantors in each Security Document to which
it is a party will be true and correct in all material respects as
of the Closing Date. On the Closing Date, the Security Documents
will conform in all material respects as to legal matters to the
descriptions thereof in the General Disclosure Package.
(j) Exchange
Securities . On the Closing Date, the
Exchange Securities will have been duly authorized by the Company;
and when the Exchange Securities are issued, executed and
authenticated in accordance with the terms of the Registration
Rights Agreement and the
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Indenture, the Exchange Securities will be entitled
to the benefits of the Indenture and will be a valid and binding
obligation of the Company, enforceable in accordance with its terms
except as the enforceability thereof may be limited by the effects
of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting
creditors’ rights generally, general equity principles
(whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
(k) Guarantees . The Guarantee to be
endorsed on the Offered Securities by each Guarantor has been duly
authorized by such Guarantor; when the Offered Securities have been
issued, executed and authenticated in accordance with the Indenture
and delivered to and paid for by the Purchasers in accordance with
the terms of this Agreement, the Guarantee of each Guarantor
endorsed thereon will be entitled to the benefits of the Indenture
and will be the valid and binding obligation of such Guarantor,
enforceable against such Guarantor in accordance with its terms,
except as the enforceability thereof may be limited by the effects
of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting
creditors’ rights generally, general equity principles
(whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing. The Guarantee to
be endorsed on the Offered Securities by each Guarantor will
conform as to legal matters to the description thereof contained in
the General Disclosure Package.
(l) Exchange Guarantees . The Guarantee
to be endorsed on the Exchange Securities by each Guarantor has
been duly authorized by such Guarantor and, when issued, will have
been duly executed and delivered by such Guarantor. When the
Exchange Securities have been issued, executed and authenticated in
accordance with the Indenture and delivered to and paid for by the
Purchasers in accordance with the terms of the Registration Rights
Agreement and the Indenture, the Guarantee of each Guarantor
endorsed thereon will be entitled to the benefits of the Indenture
and will be the valid and binding obligation of such Guarantor,
enforceable against such Guarantor in accordance with its terms,
except as the enforceability thereof may be limited by the effects
of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting
creditors’ rights generally, general equity principles
(whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing. The Guarantee to
be endorsed on the Exchange Securities by each Guarantor will
conform as to legal matters to the description thereof contained in
the General Disclosure Package.
(m) No Registration
Rights . There are no contracts,
agreements or understandings between the Company or Hovnanian and
any person granting such person the right to require the Company or
Hovnanian to file a registration statement under the Securities Act
with respect to any securities of the Company or Hovnanian or to
require the Company or Hovnanian to include such securities with
the Exchange Securities and the guarantees thereof registered
pursuant to any Registration Statement.
(n) Absence of Further
Requirements . The execution, delivery
and performance of this Agreement, the Indenture, the Registration
Rights Agreement, the New Credit Agreement and the Security
Documents (collectively, the “ Transaction Documents ”) by the
Company and each of the Guarantors, as applicable, compliance by
the Company and each of the Guarantors with all provisions hereof
and thereof and the consummation of the transactions contemplated
hereby and thereby will not require any consent, approval,
authorization or other order of, or qualification with, any court
or governmental body or agency except for (i) such consents as may
be required under the securities or Blue Sky laws of the various
states, (ii) the filing of UCC-1s, the recording of any mortgages
or deeds of trust, and any other filing or recording necessary to
perfect the interest in the Collateral pursuant to the Security
Documents and (iii) the order of the Commission declaring effective
any Registration Statement registering the Exchange Securities
pursuant to the terms of the Registration Rights
Agreement.
(o) Title to
Property . Each of the Company and the
Guarantors has good and marketable title to or a valid leasehold
interest in all properties, assets and other rights which it
purports to
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own or lease or which are reflected as owned or
leased on its books and records, free and clear of all liens and
encumbrances, except Permitted Liens (as defined in the General
Disclosure Package), and subject to the terms and conditions of the
applicable leases. All leases of property are in full force and
effect without the necessity for any consent which has not
previously been obtained upon consummation of the transactions
contemplated hereby.
(p) Absence of Defaults and
Conflicts Resulting from Transaction .
The execution, delivery and performance of the Transaction
Documents by the Company and each of the Guarantors, as applicable,
compliance by the Company and each of the Guarantors with all
provisions hereof and thereof and the consummation of the
transactions contemplated hereby and thereby will not (i) conflict
with or constitute a breach of any of the terms or provisions of,
or a default under, the charter or by-laws or other organizational
documents of the Company or any Guarantor or any indenture, loan
agreement, mortgage, lease or other agreement or instrument that is
material to the Company or Hovnanian and its subsidiaries, taken as
a whole, to which the Company or the Guarantors is a party or by
which the Company or the Guarantors or their respective property is
bound, (ii) violate or conflict with any applicable law or any
rule, regulation, judgment, order or decree of any court or any
governmental body or agency having jurisdiction over the Company,
Hovnanian or any of its subsidiaries or their respective property,
(iii) result in the imposition or creation of (or the obligation to
create or impose) a Lien under, any agreement or instrument to
which the Company, Hovnanian or any of its subsidiaries is a party
or by which the Company, Hovnanian or any of its subsidiaries or
their respective property is bound, other than as contemplated by
the Transaction Documents or (iv) result in the termination,
suspension or revocation of any Authorization (as defined below) of
the Company, Hovnanian or any of its subsidiaries or result in any
other impairment of the rights of the holder of any such
Authorization.
(q) Absence of Existing
Defaults and Conflicts . None of the
Company, Hovnanian or any of their direct or indirect subsidiaries
is in violation of its respective charter or by-laws or applicable
organizational documents, as the case may be, or in default in the
performance of any obligation, agreement, covenant or condition
contained in any indenture, loan agreement, mortgage, lease or
other agreement or instrument that is material to the Company, or
Hovnanian and its subsidiaries, taken as a whole, to which the
Company, Hovnanian or any of its subsidiaries is a party or by
which the Company, Hovnanian or any of its subsidiaries or their
respective property is bound.
(r) Authorization of
Agreement. This Agreement has been duly
authorized, executed and delivered by the Company, Hovnanian and
each other Guarantor.
(s) Possession of Licenses
and Permits . Except as disclosed in the
General Disclosure Package, each of the Company, Hovnanian and its
subsidiaries has such permits, licenses, consents, exemptions,
franchises, authorizations and other approvals (each, an
“ Authorization
”) of, and has made all filings with and
notices to, all governmental or regulatory authorities and
self-regulatory organizations and all courts and other tribunals,
including without limitation, under any applicable Environmental
Laws, as are necessary to own, lease, license and operate its
respective properties and to conduct its business, except where the
failure to have any such Authorization or to make any such filing
or notice would not, singly or in the aggregate, have a Material
Adverse Effect. Each such Authorization is valid and in full force
and effect and each of the Company, Hovnanian and its subsidiaries
is in compliance with all the terms and conditions thereof and with
the rules and regulations of the authorities and governing bodies
having jurisdiction with respect thereto; and no event has occurred
(including, without limitation, the receipt of any notice from any
authority or governing body) which allows or, after notice or lapse
of time or both, would allow, revocation, suspension or termination
of any such Authorization or results or, after notice or lapse of
time or both, would result in any other impairment of the rights of
the holder of any such Authorization; except where such failure to
be valid and in full force and effect or to be in compliance, the
occurrence of any such event or the presence of any such
restriction would not, singly or in the aggregate, have a Material
Adverse Effect.
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(t) Environmental
Laws . Except as disclosed in the General
Disclosure Package, neither the Company, Hovnanian nor any of its
subsidiaries has violated any foreign, federal, state or local law
or regulation relating to the protection of human health and
safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants (“ Environmental Laws ”), any
provisions of the Employee Retirement Income Security Act of 1974,
as amended (“ ERISA
”), or any provisions of the Foreign Corrupt
Practices Act or the rules and regulations promulgated thereunder,
except for such violations which, singly or in the aggregate, would
not have a Material Adverse Effect.
(u) Insurance.
Hovnanian and each of its subsidiaries maintains
insurance covering their properties, assets, operations, personnel
and businesses, and, in the good faith estimate of management, such
insurance is of such type and in such amounts as is in accordance
with customary industry practice in the locations where Hovnanian
and each subsidiary conduct operations, taking into account the
costs and availability of such insurance.
(v) Sarbanes-Oxley . Hovnanian and its
officers and directors, in their capacities as such, are in
compliance in all material respects with the provisions of the
Sarbanes-Oxley Act of 2002 and the rules and regulations
promulgated thereunder.
(w) Internal Control Over
Financial Reporting . Hovnanian maintains
a system of internal control over financial reporting (as such term
is defined in Rule 13a-15(f) under the Exchange Act) that complies
with the requirements of the Exchange Act and has been designed by
Hovnanian’s principal executive officer and principal
financial officer, or under their supervision, to provide
reasonable assurance regarding the reliability of the financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles; and Hovnanian’s internal control over financial
reporting is effective in all material respects to perform the
functions for which it was established and Hovnanian is not aware
of any material weaknesses in its internal control over financial
reporting.
(x) Disclosure
Controls . Hovnanian maintains
“disclosure controls and procedures” (as such term is
defined in Rule 13a-15(e) under the Exchange Act); such disclosure
controls and procedures are effective in all material respects to
perform the functions for which they were established.
(y) Litigation
. Except as disclosed in the General Disclosure
Package, there are no legal or governmental proceedings pending or
threatened to which the Company, Hovnanian or any of its
subsidiaries is or could be a party or to which any of their
respective property is or could be subject, which might result,
singly or in the aggregate, in a Material Adverse
Effect.
(z) Financial
Statements . The historical financial
statements, together with related notes, incorporated by reference
in the General Disclosure Package, present fairly the consolidated
financial position, results of operations and changes in financial
position of Hovnanian and its subsidiaries, on the basis stated in
the documents incorporated by reference in the General Disclosure
Package at the respective dates or for the respective periods to
which they apply; such statements and related notes have been
prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved,
except as disclosed therein; and the other financial and
statistical information and data set forth in the General
Disclosure Package are, in all material respects, accurately
presented and prepared on a basis consistent with such financial
statements and the books and records of Hovnanian.
(aa) No Material Adverse
Change in Business . Since the respective
dates as of which information is given in the General Disclosure
Package, other than as set forth in the General Disclosure Package
(exclusive of any amendments or supplements thereto subsequent to
the date of this Agreement), (i) there has not occurred any
material adverse change or any development involving a prospective
material adverse change in the condition, financial or otherwise,
or the earnings, business, management or operations of Hovnanian
and its subsidiaries, taken as a whole,
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(ii) there has not been any material adverse change
or any development involving a prospective material adverse change
in the capital stock or in the long-term debt of Hovnanian or any
of its subsidiaries and (iii) neither Hovnanian nor any of its
subsidiaries has incurred any material liability or obligation,
direct or contingent.
(bb) Investment Company
Act . Neither the Company nor Hovnanian
is and, after giving effect to the offering and sale of the Offered
Securities and the application of the net proceeds thereof as
described in the General Disclosure Package, neither will be, an
“investment company,” as such term is defined in the
Investment Company Act of 1940, as amended (the “
Investment Company Act ”).
(cc) Regulations T, U,
X . Neither the Company nor any Guarantor
nor any of their respective subsidiaries nor any agent thereof
acting on their behalf has taken, and none of them will take, any
action that might cause this Agreement or the issuance or sale of
the Offered Securities to violate Regulation T, Regulation U or
Regulation X of the Board of Governors of the Federal Reserve
System.
(dd) Ratings
. No “nationally recognized statistical rating
organization” as such term is defined for purposes of Rule
436(g)(2) has indicated to the Company or Hovnanian that it is
considering (A) the downgrading, suspension, or withdrawal of, or
any review for a possible change that does not indicate the
direction of the possible change in, any rating so assigned or (B)
any change in the outlook (other than a positive change) for any
rating of the Company, any Guarantor or any securities of the
Company or Hovnanian.
(ee) Class of Securities
Not Listed . When the Offered Securities
and the Guarantees are issued and delivered pursuant to this
Agreement, none of the Offered Securities or the Guarantees will be
of the same class (within the meaning of Rule 144A) as any security
of the Company or Hovnanian that is listed on a national securities
exchange registered under Section 6 of the Exchange Act or that is
quoted in a United States automated inter-dealer quotation
system.
(ff) No
Registration . No registration under the
Securities Act of the Offered Securities or the Guarantees is
required for the sale of the Offered Securities and the Guarantees
to the Purchasers in the manner contemplated by this Agreement or
the exempt resale thereof on the terms set forth herein and in the
General Disclosure Package, assuming the accuracy of the
Purchasers’ representations and warranties and agreements set
forth in Section 4 hereof; and it is not necessary to qualify an
indenture in respect of the Offered Securities under the Trust
Indenture Act.
(gg) No General
Solicitation; No Directed Selling Efforts . Neither the Company, nor any Guarantor, nor any of their
respective affiliates, nor any person acting on its or their behalf
(other than the Purchasers, as to whom the Company, Hovnanian and
the Guarantors make no representation or warranty) (i) has,
within the six-month period prior to the date hereof, offered or
sold in the United States or to any U.S. person (as such terms are
defined in Regulation S under the Securities Act) the Offered
Securities or any security of the same class or series as the
Offered Securities or (ii) has offered or will offer or sell
the Offered Securities (A) in the United States by means of
any form of general solicitation or general advertising within the
meaning of Rule 502(c) or (B) with respect to any such
securities sold in reliance on Rule 903 of Regulation S
(“ Regulation S
”) under the Securities Act, by means of any
directed selling efforts within the meaning of Rule 902(c) of
Regulation S. The Company, the Guarantors, their respective
affiliates and any person acting on its or their behalf (other than
the Purchasers, as to whom the Company, Hovnanian and the
Guarantors make no representation or warranty) have complied and
will comply with the offering restrictions requirement of
Regulation S applicable to the transactions contemplated
hereby. Neither the Company nor any Guarantor has entered and
neither the Company nor any Guarantor will enter into any
contractual arrangement with respect to the distribution of the
Offered Securities except for this Agreement.
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(hh) Reporting
Status . Hovnanian is subject to Section
13 or 15(d) of the Exchange Act.
(ii) Accountants
. The accountants, Ernst & Young LLP, that have
certified the financial statements incorporated by reference in the
General Disclosure Package and Final Offering Circular are an
independent registered public accounting firm with respect to the
Company and the Guarantors, as required by the Securities Act and
the Exchange Act.
(jj) New Credit
Agreement . The New Credit Agreement has
been duly authorized, and when executed and delivered by the
Company, the Guarantors and the other parties thereto, will
constitute a valid and binding agreement of the Company and the
Guarantors, enforceable against the Company and the Guarantors in
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors’
rights and to general equity principles (whether considered in a
proceeding in equity or at law) and an implied covenant of good
faith and fair dealing. On the Closing Date, the New Credit
Agreement will conform in all material respects as to legal matters
to the descriptions thereof in the General Disclosure
Package.
3. Purchase, Sale and
Delivery of Offered Securities. On the
basis of the representations, warranties and agreements and subject
to the terms and conditions set forth herein, the Company agrees to
sell to the several Purchasers, and each of the Purchasers agrees,
severally and not jointly, to purchase from the Company, at a
purchase price of 98% of the principal amount thereof plus accrued
interest from May 16, 2008 to the Closing Date (as hereinafter
defined), the respective principal amounts of Offered Securities
set forth opposite the names of the several Purchasers in
Schedule B hereto.
The Company will deliver against payment of the
purchase price the Offered Securities to be offered and sold by the
Purchasers in reliance on Regulation S (“
Regulation S Securities ”) in the form of one or more permanent global Securities
in registered form without interest coupons (the “
Regulation S Global Securities
”) which will be deposited with the Trustee as
custodian for The Depository Trust Company (“
DTC ”) for the
respective accounts of the DTC participants for Morgan Guaranty
Trust Company of New York, Brussels office, as operator of the
Euroclear System (“ Euroclear ”), and Clearstream
Banking, société anonyme (“
Clearstream, Luxembourg ”) and registered in the name of Cede & Co., as
nominee for DTC. The Company will deliver against payment of the
purchase price the Offered Securities to be purchased by each
Purchaser hereunder and to be offered and sold by each Purchaser in
reliance on Rule 144A (“ 144A
Securities ”) in the form of one
permanent global security in definitive form without interest
coupons (“ Restricted Global
Securities ”) deposited with the
Trustee as custodian for DTC and registered in the name of Cede
& Co., as nominee for DTC. The Regulation S Global Securities
and the Restricted Global Securities shall be assigned separate
CUSIP numbers. The Restricted Global Securities shall include the
legend regarding restrictions on transfer set forth under
“Transfer Restrictions” in the Final Offering Circular.
Until the termination of the distribution compliance period (as
defined in Regulation S) with respect to the offering of the
Offered Securities, interests in the Regulation S Global Securities
may only be held by the DTC participants for Euroclear and
Clearstream, Luxembourg. Interests in any permanent global
securities will be held only in book-entry form through Euroclear,
Clearstream, Luxembourg or DTC, as the case may be, except in the
limited circumstances described in the Final Offering
Circular.
Payment for the Regulation S Securities and the
144A Securities shall be made by the Purchasers in Federal (same
day) funds by wire transfer to an account at a bank acceptable to
the Representatives drawn to the order of the Company at the office
of Davis Polk & Wardwell, 450 Lexington Avenue, New York, New
York, 10017 at 9:30 a.m., (New York time), on May 27, 2008, or at
such other time not later than seven full business days thereafter
as the Representatives and the Company determine, such time being
herein referred to as the “ Closing
Date ”, against delivery to the
Trustee as custodian for DTC of (i) the Regulation S
Global Securities representing all of the Regulation S Securities
for the respective accounts of the DTC participants for Euroclear
and Clearstream, Luxembourg and (ii) the Restricted Global
Securities representing all of the 144A Securities. The Regulation
S Global Securities and the Restricted Global Securities will be
made available for checking at the above office of Davis Polk &
Wardwell at least 24 hours prior to the Closing Date.
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4. Representations by
Purchasers; Resale by Purchasers. (a) Each Purchaser severally represents and warrants to
the Company and the Guarantors that it is a “qualified
institutional buyer” (as defined in Rule 144A with such
knowledge and experience in financial and business matters as is
necessary in order to evaluate the merits and risks of an
investment in the Offered Securities and Guarantees.
(b) Each Purchaser severally acknowledges that the
Offered Securities have not been registered under the Securities
Act and may not be offered or sold within the United States or to,
or for the account or benefit of, U.S. persons except in accordance
with Regulation S or pursuant to an exemption from the registration
requirements of the Securities Act. Each Purchaser severally
represents and agrees that it has offered and sold the Offered
Securities and Guarantees, and will offer and sell the Offered
Securities and Guarantees (i) as part of its distribution at any
time and (ii) otherwise until 40 days after the later of the
commencement of the offering and the Closing Date, only in
accordance with Rule 903 or Rule 144A. Accordingly, neither such
Purchaser nor its affiliates, nor any persons acting on its or
their behalf, have engaged or will engage in any directed selling
efforts with respect to the Offered Securities or the Guarantees,
and such Purchaser, its affiliates and all persons acting on its or
their behalf have complied and will comply with the offering
restrictions requirement of Regulation S. Each Purchaser severally
agrees that, at or prior to confirmation of sale of the Offered
Securities and Guarantees, other than a sale pursuant to Rule 144A,
such Purchaser will have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration that
purchases the Offered Securities and Guarantees from it during the
restricted period a confirmation or notice to substantially the
following effect:
“The Securities covered hereby have not been
registered under the U.S. Securities Act of 1933 (the
“ Securities Act
”) and may not be offered or sold within the
United States or to, or for the account or benefit of, U.S. persons
(i) as part of their distribution at any time or (ii) otherwise
until 40 days after the later of the date of the commencement of
the offering and the closing date, except in either case in
accordance with Regulation S (or Rule 144A if available) under the
Securities Act. Terms used above have the meanings given to them by
Regulation S.”
Terms used in this subsection (b) have the meanings
given to them by Regulation S.
(c) Each Purchaser severally agrees that it and each
of its affiliates has not entered and will not enter into any
contractual arrangement with respect to the distribution of the
Offered Securities and Guarantees except for any such arrangements
with the other Purchasers or affiliates of the other Purchasers or
with the prior written consent of the Company and the
Guarantors.
(d) Each Purchaser severally agrees that it and each
of its affiliates will not offer or sell the Offered Securities and
Guarantees in the United States by means of any form of general
solicitation or general advertising within the meaning of Rule
502(c), including, but not limited to (i) any advertisement,
article, notice or other communication published in any newspaper,
magazine or similar media or broadcast over television or radio, or
(ii) any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising. Each Purchaser
severally agrees, with respect to resales made in reliance on Rule
144A of any of the Offered Securities and Guarantees, to deliver
either with the confirmation of such resale or otherwise prior to
settlement of such resale a notice to the effect that the resale of
such Offered Securities and Guarantees has been made in reliance
upon the exemption from the registration requirements of the
Securities Act provided by Rule 144A.
(e) Each of the Purchasers acknowledges that the
Company and the Guarantors and, for purposes of the opinions to be
delivered to each Purchaser pursuant to ?Section 7 hereof, counsel
to the Company and the Guarantors and counsel to the Purchasers
will rely upon the accuracy and truth of the foregoing
representations and such Purchaser hereby consents to such
reliance.
-10-
5. Certain Agreements of
the Company and Hovnanian. The Company
and Hovnanian agree with the several Purchasers that:
(a) Amendments and
Supplements to Offering Circulars . The
Company and Hovnanian will promptly advise the Representatives of
any proposal to amend or supplement the Preliminary or Final
Offering Circular and will not effect such amendment or
supplementation without the Representatives’ consent (such
consent not to be unreasonably withheld). If, at any time prior to
the completion of the resale of the Offered Securities and
Guarantees by the Purchasers, there occurs an event or development
as a result of which any document included in the Preliminary or
Final Offering Circular, the General Disclosure Package or any
Supplemental Marketing Material, if republished immediately
following such event or development, included or would include an
untrue statement of a material fact or omitted or would omit to
state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading, the Company and Hovnanian promptly will
notify the Representatives of such event and promptly will prepare
and furnish, at their own expense, to the Purchasers and the
dealers and to any other dealers at the request of the
Representatives, an amendment or supplement which will correct such
statement or omission. Neither the Representatives’ consent
to, nor the Purchasers delivery to offerees or investors of, any
such amendment or supplement shall constitute a waiver of any of
the conditions set forth in Section 7.
(b) Furnishing of Offering
Circulars . The Company and Hovnanian
will furnish to the Representatives copies of the Preliminary
Offering Circular, each other document comprising a part of the
General Disclosure Package, the Final Offering Circular, all
amendments and supplements to such documents and each item of
Supplemental Marketing Material, in each case as soon as available
and in such quantities as the Representatives reasonably request.
At any time when the Offered Securities remain outstanding and the
Company and the Guarantors are not subject to Section 13 or 15(d),
the Company and Hovnanian will make available to any holder in
connection with any sale thereof and prospective purchasers from
such holder of the Offered Securities and Guarantees copies of the
information required to be delivered to holders and prospective
purchasers of the Offered Securities and Guarantees pursuant to
Rule 144A(d)(4) (or any successor provision thereto) in order
to permit compliance with Rule 144A in connection with resales
by such holders of the Offered Securities and Guarantees. The
Company will pay the expenses of printing and distributing to the
Purchasers all such documents.
(c) Blue Sky
Qualifications . Prior to the sale of all
Offered Securities and Guarantees as contemplated hereby, the
Company and the Guarantors will cooperate with the Purchasers and
counsel for the Purchasers to arrange for the qualification of the
Offered Securities for sale and the determination of their
eligibility for investment under the laws of such jurisdictions in
the United States and Canada as the Representatives designate and
to continue such qualifications in effect so long as required for
the resale of the Offered Securities by the Purchasers and to file
such consents to service of process or other documents as may be
necessary in order to effect such registration or
qualification, provided
that neither the Company nor any Guarantor shall be
required in connection therewith to qualify as a foreign
corporation in any jurisdiction in which it is not now so qualified
or to take any action that would subject it to general consent to
service of process or taxation other than as to matters and
transactions relating to the General Disclosure Package and Final
Offering Circular or sale of the Offered Securities and Guarantees
as contemplated hereby, in any jurisdiction in which it is not now
so subject.
(d) Reporting
Requirements . So long as any of the
Offered Securities and Guarantees are outstanding, to furnish to
the Purchasers as soon as available copies of all reports or other
communications furnished by the Company or any of the Guarantors to
its security holders or furnished to or filed with the Commission
or any national securities exchange on which any class of
securities of the Company or any of the Guarantors is listed and
such other publicly available information concerning the Company,
Hovnanian and/or its subsidiaries as the Purchasers may reasonably
request.
-11-
(e) Transfer
Restrictions . During the period of one
year after the Closing Date, the Company will, upon request,
furnish to the Representatives, each of the other Purchasers and
any holder of Offered Securities a copy of the restrictions on
transfer applicable to the Offered Securities.
(f) No Resales by
Affiliates . Until the issuance of the
Exchange Securities and related Guarantees, the Company will not,
and will use its reasonable best efforts not to permit any of its
affiliates (as defined in Rule 144 under the Securities Act) to,
resell any of the Offered Securities and related Guarantees that
have been acquired by any of them, except for Offered Securities
and related Guarantees purchased by the Company or any of its
affiliates and resold in a transaction registered under the
Securities Act.
(g) Payment of
Expenses . The Company and the Guarantors
will pay all expenses incidental to the performance of their
respective obligations under this Agreement, the Indenture, the
Registration Rights Agreement and the Security Documents, including
but not limited to (i) the fees and expenses of the Trustee and its
counsel in connection with the Indenture, the Offered Securities,
the Exchange Securities and the Guarantees; (ii) all fees,
disbursements and expenses of counsel to the Company and Guarantors
and accountants of the Company and Guarantors in connection with
the execution, issue, authentication, packaging and in
