Exhibit 1.7
14,000,000
Shares
HOVNANIAN ENTERPRISES,
INC.
Class A Common
Stock
UNDERWRITING
AGREEMENT
May 8, 2008
CITIGROUP GLOBAL
MARKETS INC.
CREDIT SUISSE
SECURITIES (USA) LLC
WACHOVIA CAPITAL
MARKETS, LLC
As Representatives of
the Several Underwriters,
c/o CITIGROUP GLOBAL
MARKETS INC.
388 Greenwich
Street
New York, New York
10013
Ladies and
Gentlemen:
1.
Introductory . Hovnanian Enterprises, Inc., a Delaware
corporation (the “ Company ”), proposes to issue
and sell to the several Underwriters named in Schedule A hereto
(the “ Underwriters ”) 14,000,000 shares
(“ Underwritten Securities ”) of its
Class A Common Stock, $0.01 par value per share (“
Common Stock ”) and also proposes to issue and sell to
the Underwriters, at the option of the Underwriters, an aggregate
of not more than 2,100,000 additional shares (“ Optional
Securities ”) of its Common Stock as set forth
below. The Underwritten Securities and the Optional
Securities are herein collectively called the “
Securities ”.
2.
Representations and Warranties of the Company . The
Company represents and warrants to, and agrees with the several
Underwriters that:
(a) A registration statement on
Form S-3 (File No. 333-125738) relating to the
Securities, including a base prospectus dated June 28, 2005
(the “ Base Prospectus ”), has been filed with
the Securities and Exchange Commission (the “
Commission ”) under the Securities Act of 1933, as
amended (the “ Act ”) and has been declared
effective under the Act. For purposes of this Agreement, “
Effective Date ” means the “effective date of
the registration statement” (within the meaning of
Rule 158(c) under the Act) of the Registration Statement
or the most recent post-effective amendment thereto (if any) filed
prior to the execution and delivery of this Agreement. Such
registration statement, as amended at the Effective Date, including
the information, if any, deemed pursuant to Rule 430B or 430C
under the Act to be part of the registration statement at the time
of its effectiveness (“ Rule 430 Information
”), is hereinafter referred to as the “ Registration
Statement .” The term “ Preliminary
Prospectus ” means each preliminary prospectus supplement
to the Base Prospectus which is used prior to the filing of the
Prospectus, together with the Base Prospectus, and the term “
Prospectus ” means the prospectus supplement in the
form first used (or made available upon request of purchasers
pursuant to Rule 173 under the Act) in connection with
confirmation of sales of the Securities, together with the Base
Prospectus. Any reference in this Agreement to the
Registration Statement, the Base Prospectus, any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and
include the documents incorporated by reference therein pursuant to
Item 12 of Form S-3 under the Act, as of the effective date of
the Registration Statement or the date of such Base
Prospectus,
Preliminary Prospectus
or the Prospectus, as the case may be and any reference to “
amend ”, “ amendment ” or “
supplement ” with respect to the Registration
Statement, the Base Prospectus, any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include any documents
filed after such date under the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission
thereunder (collectively, the “ 1934 Act ”) that
are deemed to be incorporated by reference therein. As of the
Effective Date, the Company was eligible to use Form S-3 under
the Act. No notice of objection of the Commission to the use of
such registration statement or any post-effective amendment thereto
pursuant to Rule 401(g)(2) under the Act has been
received by the Company. No stop order suspending the effectiveness
of the Registration Statement shall have been issued and no
proceedings for that purpose or pursuant to Section 8A of the
Act against the Company or related to the offering shall have been
instituted or, to the knowledge of the Company, shall be
contemplated by the Commission.
(b) At or prior to the time when sales of
the Securities were first made (the “ Time of Sale
”), the Company had prepared the following information
(collectively, the “ Time of Sale Information
”): a Preliminary Prospectus dated May 5, 2008, and each
“free-writing prospectus” (as defined pursuant to
Rule 405 under the Act) listed on Annex A hereto.
(c) The Time of Sale Information and the
price to the public, the number of Underwritten Securities and the
number of Optional Securities to be included on the cover
page of the Final Prospectus, when taken together as a whole,
at the Time of Sale did not, and at the Closing Date will not,
contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; provided that the Company makes no
representation and warranty with respect to any statements or
omissions made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by
such Underwriter through the Representatives expressly for use in
such Time of Sale Information.
(d) Other than the Preliminary Prospectus
and the Prospectus, the Company (including its agents and
representatives, other than the Underwriters in their capacity as
such) has not made, used, prepared, authorized, approved or
referred to and will not prepare, make, use, authorize, approve or
refer to any “ written communication ” (as
defined in Rule 405 under the Act) that constitutes an offer
to sell or solicitation of an offer to buy the Securities (each
such communication by the Company or its agents and representatives
(other than a communication referred to in clause (i) below)
an “ Issuer Free Writing Prospectus ”) other
than (i) any document not constituting a prospectus pursuant
to Section 2(a)(10)(a) of the Act or Rule 134 under
the Act or (ii) the documents listed on Annex A hereto and
other written communications approved in writing in advance by the
Representatives. Each such Issuer Free Writing Prospectus
complied in all material respects with the Act, has been filed in
accordance with the Act (to the extent required thereby) and, when
taken together with the Preliminary Prospectus accompanying, or
delivered prior to delivery of, such Issuer Free Writing
Prospectus, did not, and at the Closing Date will not, contain any
untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading; provided that the Company makes no
representation and warranty with respect to any statements or
omissions made in each such Issuer Free Writing Prospectus in
reliance upon and in conformity with information relating to any
Underwriter furnished to the Company in writing by such Underwriter
through the Representatives expressly for use in any Issuer Free
Writing Prospectus.
(e) (i) On the Effective Date, the
Registration Statement conformed in all material respects to the
requirements of the Act and the rules and regulations of the
Commission under the Act (“ Rules and Regulations
”) and did not include any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading
and (ii) on the date of this Agreement, the Registration
Statement conforms, and at the time of filing of the Prospectus
pursuant to Rule 424(b), the Registration Statement and the
Prospectus will conform, in all material respects to the
requirements of the Act and the Rules and Regulations, and
neither of such documents includes, or will include, any untrue
statement of a material fact or omits, or will omit, to state any
material fact required to be stated therein or necessary to make
the statements therein (in the case of the Prospectus, in the light
of the circumstances under which they were made) not misleading
except that the foregoing does not apply to
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statements in or
omissions from the Registration Statement or the Prospectus based
upon written information furnished to the Company by any
Underwriter through the Representatives, if any, specifically for
use therein, it being understood and agreed that the only such
information is that described as such in
Section 8(b) hereof.
(f) The documents incorporated by
reference in the Time of Sale Information and the Prospectus, 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
1934 Act and the rules and regulations of the Commission
thereunder and, when read together and with the other information
in the Time of Sale Information and the Prospectus, 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.
(g) Each of the Company 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 Time of Sale Information and the
Prospectus 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 the
Company and its subsidiaries, taken as a whole (a “
Material Adverse Effect ”).
(h) The Securities and all other
outstanding shares of capital stock of the Company have been duly
authorized; the authorized equity capitalization of the Company is
as set forth in the Time of Sale Information; all outstanding
shares of capital stock of the Company are, and, when the
Securities have been delivered and paid for in accordance with this
Agreement on each Closing Date, such Securities will have been,
validly issued, fully paid and nonassessable, will conform to the
description of such Securities contained in the Time of Sale
Information and the Prospectus; and the stockholders of the Company
have no preemptive rights with respect to the
Securities.
(i) All of the outstanding shares of
capital stock of each of the Company’s direct and indirect
subsidiaries have been duly authorized and validly issued and are
fully paid and non-assessable, and are owned by the Company,
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
”)
(j) This Agreement has been duly
authorized, executed and delivered by the Company.
(k) None of the Company or any of its
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 and its subsidiaries, taken as a whole, to
which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries or their respective property
is bound.
(l) The execution, delivery and
performance of this Agreement, compliance by the Company with all
provisions hereof and the consummation of the transactions
contemplated hereby and thereby will not (i) require any
consent, approval, authorization or other order of, or
qualification with, any court or governmental body or agency
(except such consents as have been obtained under the Act and
except as may be required under securities or Blue Sky laws of the
various states), (ii) conflict with or constitute a breach of
any of the terms or provisions of, or a default under, the charter,
by-laws or applicable organizational documents of the Company or
any indenture, loan agreement, mortgage, lease or other agreement
or instrument that is material to the Company and its subsidiaries,
taken as a whole, to which the Company or
3
any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or
their respective property is bound, (iii) 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 or any of its subsidiaries or their
respective property, (iv) 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 or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective property is bound, or
(v) result in the termination, suspension or revocation of any
Authorization (as defined below) of the Company or any of its
subsidiaries or result in any other impairment of the rights of the
holder of any such Authorization.
(m) Except as disclosed in the Time of
Sale Information and the Prospectus, there are no legal or
governmental proceedings pending or threatened to which the Company
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.
(n) Except as disclosed in the Time of
Sale Information and the Prospectus, neither the Company 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.
(o) The Company 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 the Company and each subsidiary conduct operations,
taking into account the costs and availability of such
insurance.
(p) The Company 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.
(q) The Company has not taken, directly or
indirectly, any action designed to or that has constituted or that
might reasonably be expected to cause or result in, under the
Exchange Act or otherwise, stabilization or manipulation of the
price of the Common Stock or any “reference security”
of the Company (as defined in Rule 100) to facilitate the sale
or resale of the Securities in connection with the offering
contemplated hereby.
(r) Except as disclosed in the Time of
Sale Information and the Prospectus, each of the Company 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 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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(s) Ernst & Young LLP, which has
certified the financial statements incorporated by reference in the
Prospectus, is an independent registered public accounting firm
with respect to the Company as required by the Act and the 1934
Act.
(t) The historical financial statements,
together with related notes, incorporated by reference in the
Prospectus, Time of Sale Information and the Registration Statement
(and any amendment or supplement thereto) 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
Prospectus, Time of Sale Information and the Registration Statement
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 or incorporated by reference in the
Prospectus, Time of Sale Information and Registration Statement
(and any amendment or supplement thereto) are, in all material
respects, accurately presented and prepared on a basis consistent
with such financial statements and the books and records of
Hovnanian; and the historical financial statements, together with
related notes incorporated by reference in the Prospectus, Time of
Sale Information and Registration Statement (and any amendment or
supplement thereto) meet the requirements of the Rules and
Regulations promulgated under the Act and the 1934 Act.
(u) The Company is not and, after giving
effect to the offering and sale of the Securities and the
application of the net proceeds thereof as described in the Time of
Sale Information and the Prospectus, will not be, an
“investment company,” as such term is defined in the
Investment Company Act of 1940, as amended.
(v) No “nationally recognized
statistical rating organization” as such term is defined for
purposes of Rule 436(g)(2) under the Act has indicated to the
Company that it is considering (i) 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 (ii) any change in the outlook (other
than a positive change) for any rating of the Company or any
securities of the Company or K. Hovnanian Enterprises, Inc., a
California corporation (“ Hovnanian
”).
(w) No debt of any subsidiary of the
Company (other than Hovnanian) is rated by a nationally recognized
statistical organization.
(x) Since the respective dates as of which
information is given in the Prospectus and Time of Sale Information
other than as set forth in the Prospectus and Time of Sale
Information (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
the Company and its subsidiaries, taken as a whole, (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 the Company or any of its
subsidiaries, and (iii) neither the Company nor any of its
subsidiaries has incurred any material liability or obligation,
direct or contingent.
(y) The Company is not an ineligible
issuer and is a well-known seasoned issuer, in each case as defined
under the Act, in each case at the times specified in the Act in
connection with the offering of the Securities. The Company
has paid the registration fee for this offering as required under
the Act.
(z) The Company 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
the Company’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 the Company’s internal control over financial
reporting is effective in all material respects to
5
perform the functions
for which it was established and the Company is not aware of any
material weaknesses in its internal control over financial
reporting.
(aa) The Company 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.
Any certificate signed
by any officer of the Company and delivered to the Representatives
or counsel for the Underwriters pursuant to the last sentence of
Section 3(d) or Section 7 of this Agreement shall be
deemed a representation and warranty by the Company, as to matters
covered thereby, to each Underwriter.
3. Purchase,
Sale and Delivery of the Securities . (a) On the basis of
the representations, warranties and agreements herein contained,
but subject to the terms and conditions herein set forth, the
Company agrees to sell to the Underwriters the Underwritten
Securities and the Underwriters agree, severally and not jointly,
to purchase from the Company, the respective number of Underwritten
Securities set forth opposite such Underwriter’s name in
Schedule A hereto at a purchase price of $9.0131 per
share.
(b) Subject
to the terms and conditions and in reliance upon the
representations and warranties herein set forth, the Company hereby
grants an option to the several Underwriters to purchase, severally
and not jointly, up to 2,100,000 shares of Optional Securities at
the same purchase price per share as the Underwriters shall pay for
the Underwritten Securities. Said option may be exercised in
whole or in part at any time on or before the 30th day after the
date of the Prospectus upon written or telegraphic notice by the
Representatives to the Company setting forth the number of Optional
Securities as to which the several Underwriters are exercising the
option and the settlement date. The number of Optional
Securities to be purchased by each Underwriter shall be the same
percentage of the total number of Optional Securities to be
purchased by the several Underwriters as such Underwriter is
purchasing of the Underwritten Securities, subject to such
adjustments as you in your absolute discretion shall make to
eliminate any fractional shares.
(c) Delivery
of and payment for the Underwritten Securities and the Optional
Securities (if the option provided for in
Section 3(b) hereof shall have been exercised on or
before the third business day immediately preceding the Closing
Date) shall be made on May 14, 2008 at 10:00 A.M. or at
such time on such later date not more than three business days
after the foregoing date as the Representatives shall designate,
which date and time may be postponed by agreement between the
Representatives and the Company or as provided in Section 9
hereof (such date and time of delivery and payment for the
Securities being herein called the “ Closing Date
”). Delivery of the Securities shall be made to the
Representatives for the respective accounts of the several
Underwriters against payment by the several Underwriters through
the Representatives of the purchase price thereof to or upon the
order of the Company by wire transfer payable in same-day funds to
an account specified by the Company. Delivery of the
Underwritten Securities and the Optional Securities shall be made
through the facilities of The Depository Trust Company unless the
Represent
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